26. Financial risk management
Galenica is exposed to various financial risks and liquidity requirements. Galenica's financing and financial risk management activities are centralised into Group Treasury, which manages financial exposures of Galenica on account of changes in interest rates, currency risks, credit risks and liquidity in a manner that is consistent with underlying business risks and in line with the treasury policy approved by the Board of Directors as well as internal guidelines on cash and liability management. In addition, capital management of Galenica is also mainly exercised and monitored at Group level.
It is Galenica's policy not to enter into any speculative financial arrangements and to ensure matching maturities. Together, the risk management and monitoring measures described below are designed to limit negative impact on the financial statements.
26.1 Liquidity risk
Liquidity risk management
The aim of liquidity risk management is to provide sufficient cash to meet Galenica's financial liabilities on time while maintaining the flexibility to take advantage of market opportunities and optimum investment conditions. Group Treasury is responsible for raising current and non-current loans as well as for decisions on investments. Apart from financing operations, Galenica's credit standing enables it to borrow funds at an advantageous rate. To ensure that Galenica can meet its payment obligations in good time, liquidity is monitored centrally. Group Treasury monitors the cash flows using rolling liquidity planning. This takes into account the maturities of the financial instruments as well as the cash flows from operating activities.
Maturity profile of financial liabilities 2022
|
in thousand CHF |
Carrying amount |
Total undiscounted cash flows |
up to 3 months |
3 to 12 months |
1 to 5 years |
Maturities more than 5 years |
|
Trade and other payables |
346,083 |
346,083 |
345,855 |
228 |
– |
– |
|
Current financial liabilities |
18,431 |
18,431 |
18,422 |
9 |
– |
– |
|
Current lease liabilities |
50,173 |
52,710 |
13,371 |
39,339 |
– |
– |
|
Non-current financial liabilities |
54,688 |
57,366 |
– |
– |
57,366 |
– |
|
Bonds |
380,194 |
388,200 |
– |
202,800 |
185,400 |
– |
|
Non-current lease liabilities |
183,005 |
189,530 |
– |
– |
138,693 |
50,837 |
|
Total |
1,032,573 |
1,052,320 |
377,648 |
242,376 |
381,459 |
50,837 |
Maturity profile of financial liabilities 2021
|
in thousand CHF |
Carrying amount |
Total undiscounted cash flows |
up to 3 months |
3 to 12 months |
1 to 5 years |
Maturities more than 5 years |
|
Trade and other payables |
356,067 |
356,282 |
353,850 |
2,432 |
– |
– |
|
Current financial liabilities |
43,052 |
43,052 |
42,500 |
552 |
– |
– |
|
Current lease liabilities |
49,717 |
51,720 |
13,279 |
38,441 |
– |
– |
|
Non-current financial liabilities |
26,238 |
26,238 |
– |
– |
26,088 |
150 |
|
Bonds |
380,306 |
391,000 |
– |
2,800 |
388,200 |
– |
|
Non-current lease liabilities |
173,334 |
179,407 |
– |
– |
130,522 |
48,885 |
|
Total |
1,028,714 |
1,047,699 |
409,629 |
44,225 |
544,810 |
49,035 |
The values presented above are contractually agreed undiscounted cash flows including interest. Wherever the contractually agreed payment amount is liable to change before maturity as a result of variable interest rates, the payment amounts based on the interest rates at the reporting date are disclosed.
26.2 Credit risk
Credit risk management
Credit risk arise when a customer or a third party fails to meet its contractual obligations and causes Galenica a financial loss. Credit risk are minimised and monitored by restricting business relations to known, reliable partners.
Corporate policy ensures that credit checks are performed for customers who are supplied on credit. Trade receivables are subject to active risk management procedures. They are continually monitored and credit risk is reviewed in the process of reporting to management. Allowances for expected credit losses are made in accordance with uniform guidelines on the measurement of outstanding receivables.
In addition, credit risk arise in relation to financial assets, comprising cash and cash equivalents, securities, loans and certain derivative financial instruments. The creditworthiness of the counterparties is regularly monitored and reported to management.
Financial assets subject to credit risk
|
in thousand CHF |
2022 |
2021 |
|
Cash and cash equivalents (without cash on hand) |
92,377 |
163,336 |
|
Trade and other receivables |
529,479 |
461,108 |
|
Loans and other financial assets |
14,632 |
13,719 |
|
Financial assets subject to credit risk |
636,488 |
638,164 |
The financial assets subject to credit risk are primarily receivables.
Galenica applies internal risk management guidelines to identify concentrations of credit risk.
Galenica's financial assets are not exposed to a concentration of credit risk.
No past due financial assets have been renegotiated. Based on past experience, Galenica considers the creditworthiness of non-past due trade receivables to be good. Trade receivables past due are analysed on an ongoing basis. These receivables are accounted for using individual bad debt allowances, adjusted for forward-looking factors specific to the debtors and the economic environment.