Volvo Treasury stood out as the only large corporation on the panel that does not hedge any FX exposures. Explaining that the decision was taken “a number of years ago”, John Simonsson, the firm’s senior dealer foreign exchange said, “The main reason behind that was to make everyone in the organisation that is exposed to FX stay alert at all times – not hide behind any old FX hedges, believing that the market will correct itself and we will be able to sell our exposures at a better rate.”
Contrary to Volvo Treasury, Volvo Cars, since becoming a separate entity following its acquisition by Ford in 1999 and then Geely in 2010, has a very different strategy and does hedge. Marcus Alfredson, senior dealer at the firm said, “From a historical perspective, the automotive industry in Europe has always had large FX exposures and low margins, so I think that is the main reason for hedging. We also see that our competitors or our peers in Europe – the Germans – historically hedged long-term as well.”
For energy company Stockholm Exergi, hedging is a must. Niklas Muhrbeck, the firm’s head of Treasury, revealed that this is due to fuel purchases made in euros, pound sterling and “a small portion in US dollars”.
Currently, however, Stockholm Exergi’s biggest FX exposures come from Beccs Stockholm, a project to build one of the world’s largest carbon capture facility in Stockholm. “This is a €1.2 billion investment over four years with the majority of the cost base in euros,” Muhrbeck shared. “We took the decision to completely hedge all FX exposures in this huge project.”
Getting all on board
Perhaps one of the most challenging aspects of hedging in large corporations is to get everyone on the same page. Agricultural cooperative Lantmännen has several different business areas related to grain purchase, energy, food, and feed. Marie-Therese Bäcknäs, the firm’s front office and sustainable finance manager described the structure as “many different areas, and different business models within these areas”.
“It is complex for treasury as a central function to work in a very decentralised organisation,” she said. At Lantmännen, the responsibility for currency risk is owned by each individual business area and it is up to the individual entity to identify these risks and bring them to treasury for hedging. “Treasury has to reach out and make every unit and responsible person understand what a FX hedge is, what constitutes a risk, and that what is hidden in a contract or a currency clause could also be an FX risk. Putting all of this information from small entities together into one big net exposure for treasury to handle – that’s maybe the biggest challenge that I see in Lantmännen.”
Panellists:
Marcus Alfredson, Senior Dealer, Volvo Cars
Marie-Therese Bäcknäs, Front Office and Sustainable Finance manager, Lantmännen
Niklas Muhrbeck, Head of Treasury, Stockholm Exergi
John Simonsson, Senior Dealer Foreign Exchange, Volvo Treasury AB
Moderator:
Johan Trocmé, Strategic Partner & Thematic Research, Nordea
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