Liquidity and refinancing risk management
Liquidity or refinancing risk arises when a company is not able to arrange funding at terms and conditions corresponding to its creditworthiness. Cautious maturity distribution of debt portfolio and sufficient cash, short-term investments and committed and uncommitted credit facilities are maintained to protect short-term liquidity and to manage refinancing risk.
Diversification of funding among different markets and an adequate number of financial institutions are used to safeguard the availability of liquidity at all times. The Treasury monitors bank account structures, cash balances and forecasts of the subsidiaries and manages the utilization of the consolidated cash resources.
At the end of 2016 ‘Cash and cash equivalents’ amounted to EUR 240 million (EUR 165 million) and available-for-sale interest bearing financial assets to EUR 1 million (EUR 7 million). In addition, Valmet had a committed revolving credit facility of EUR 200 million which matures in 2022, committed overdraft limits of EUR 14 million and uncommitted domestic commercial paper program of EUR 200 million which were all unused at the end of the reporting period.
Net working capital management is an integral part of the liquidity risk management. The Treasury monitors and forecasts net working capital fluctuations in close co-operation with the subsidiaries. Net working capital decreased to EUR -294 million (EUR -238 million) due to e.g. impact of the large capital projects’ milestone payment schedules on net working capital.
Valmet’s refinancing risk is managed by balancing the proportion of ‘Current and non-current debt’ and average maturity of ‘Non-current debt’ including committed undrawn credit facility. The average maturity of ‘Non-current debt’ including ´Current portion of non-current debt´ and committed undrawn credit facility was 3.9 years (3.4 years). The amount of ‘Current debt’ including ‘Current portion of non-current debt’ was 15 percent (17%) of total debt portfolio. The tables below present undiscounted cash flows on the repayments and interests on Valmet’s debt by the remaining maturities from the balance sheet date to the contractual maturity date. The maturities of the derivatives are presented in Financial Statements 2016 Note 8.
As at December 31, 2016 there were no material liabilities under finance lease obligations and other debt.