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Financing risks

Interest rate risk

Significant changes in market interest rates and margins may have a negative effect on Sponda’s financial result and contribute to slower growth in the property business. Despite the weaker business environment, the average interest rate of the company’s debts remained largely unchanged in 2011.

For more information on financing risks and their management, please refer to the section on Financing and financial risks in this annual report.

Exchange rate risk

The cash flow from Sponda’s Russian operations is subject to exchange rate risk. Sponda receives half of its revenue from Russia in US dollars and half in roubles. The rouble risk is reduced by a significant proportion of the rouble-denominated revenues being tied to a fixed dollar or euro exchange rate and by the fact that a major part of the Russian business unit’s expenses are denominated in roubles. Sponda hedges the cash flow from its Russian operations for six months in advance. Risks arising from exchange rate fluctuations may have a negative effect on Sponda’s profit.