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purchase price to systematically lag behind changes in the
petroleum price.
More generally, depending on the size and speed of copper
price fluctuations, such fluctuations may have a significant
impact on customers’ buying decisions particularly in the
Trade & Installers business area, the Power Distribution
business line and certain lines in the Industrial area more
exposed to cyclical trends in demand, and on the Group’s
margins and working capital. In particular, (i) significant,
rapid increases and decreases in the copper price may
cause absolute increases and decreases respectively in the
Group’s profit margins due to the nature of the commercial
relationships and mechanisms for determining end product
prices and (ii) increases and decreases in the copper price may
cause increases and decreases respectively in working capital
(with a consequent increase or decrease in the Group’s net
debt).
Risk hedging differs according to the type of business and
supply contract, as shown in the following diagram:
A more detailed analysis of the risk in question can nonetheless be found in the “Financial Risk Management” section of the
Explanatory Notes to the Consolidated Financial Statements.
Supply Contract
Main Application
Metal influence on Cable Price Impact
Hedging of Metal Price
Impact
Fluctuations
Predetermined
Projects (Power
Technology and Design
Princing locked in at order
delivery date
trasmission)
content are the main
intake.
Cables for industrial
elements of the
Profitability protection
applications (eg. OGP)
“solutions” offered.
through systematic hedging
Pricing little affected by
(long order-to-delivery
metals.
cycle).
Frame contracts
Cables for Utlilities
Pricing defined as hollow
Price adjusted through
(eg. power distribution thus automatic price
formulas linked to
cables)
adjustment through
publicly avaible metal
formulas linked to
quatation (avarage last month).
publicly available metal
Profitability protection
quotation.
through systematic
hedging (short
order-to-delivery cycle).
Spot orders
Cables for construction Standard products, high
Princing managed through
and civil engineering
copper content, limited
price lists (frequently
value added.
updated).
Competitive pressure
may result in delayed
price adjustment.
Hedging based on forecasted
volumes rather than orders.
HIGH
LOW
Metal price fluctuations are normally passed through to customers
under supply contracts.
Hedging is used to systematically minimise profitability risks.
