In its normal business operations, the Group is exposed to many financial risks, the principal types of which are currency and interest-rate risks. The objective of the Group’s risk management is to minimise the adverse effects of changes in the financial market on the Group’s financial performance.

The general principles of the Group’s risk management are adopted by the Board of Directors. Practical implementation of financial risk management is the responsibility of the Group’s CFO, with such management comprising the identification and assessment of the risks and furnishing the Group with the necessary instruments of risk hedging. In risk management, the Group can employ currency forwards and options, interest rate swaps and electricity derivative contracts. The Group does not engage in hedge accounting under IFRS 9.

Exchange rate risk

Tokmanni Group’s business is exposed to risks arising from exchange rate fluctuations caused by both transaction risks arising from the cash flows of income and expenses in different currencies, and from translation risks arising from the translation of the income statements and balance sheets of foreign subsidiaries into the Group currency. The Group seeks to manage currency risks in a variety of ways, such as by using natural hedging or by entering into contracts that hedge the company against fluctuations in exchange rates. Management continuously monitors exchange rate developments and, where necessary, takes strategic decisions to manage exchange rate risks.

The most significant foreign currencies for the Group are the US dollar (USD) and the Swedish krona (SEK). The US dollar is the most significant non-euro purchasing currency of Tokmanni Group. The importance of the Swedish krona is due to the acquired subsidiary operating in its domestic currency.

Transaction risks

Unfavourable changes in foreign exchange rates can raise the acquisition costs of products purchased in other currencies than the euro. Under Tokmanni Group’s hedging principles, about half of the purchases in USD are hedged every month for an average length of six months. Currency hedging takes place through forward exchanges and currency options. The Group’s import and finance departments collaborate to draft a monthly updated estimate of the purchases in USD.

Currency derivatives are recognised at their acquisition value and are measured at the end of the financial period at their fair value in profit or loss.

The table below shows the impacts on the Group’s result prior to taxes, as well as the impact on equity. Should the euro strengthen or weaken against the USD (+/- 10%), with the other factors remaining unchanged, the Group’s result after taxes would be affected by EUR -335 thousand (396 thousand) positively or negatively. The sensitivity analysis is based on the currency position on the last day of the reporting period.

Translation risks

Investments in subsidiaries outside the euro area expose Tokmanni Group to foreign exchange risk arising from the consolidation of the assets, liabilities and income of non-euro-denominated subsidiaries into the Group currency. The balance sheets are translated into euros at the exchange rate of the balance sheet date, and the resulting exchange differences are recognised directly in equity. If a foreign subsidiary is sold, the accumulated translation differences are recognised in the income statement. The Group systematically monitors translation risk and assesses the potential need for hedging. Hedging of translation risk has not been considered necessary to date.

The table below shows the Group’s non-euro-denominated equity in euros, and the potential impact on the Group’s equity if the euro strengthens or weakens by +/-10%, other factors remaining unchanged.

Interest rate risk

The Group’s revenues and operational cash flows are largely independent of fluctuations in the market rates of interest, and, therefore, the Group’s exposure to interest rate risks is mainly related to its external loan portfolio. According to its risk management principles, the Group aims to have at least two-thirds of the loans with fixed interest rates or hedged against interest rate changes, subject to discretion of the Board of Directors. The Board of Directors evaluates the Group’s exposure to interest rate risks and the level of hedging on a regular basis and makes interest rate hedging decisions if needed. The average annual rate of the Group’s interest-bearing liabilities excluding IFRS 16 finance liabilities was 5.1% (4.7%).

The table below shows the impacts on the Group’s profit after taxes, as well as the impact on equity. Should the interests increase or decrease +/- 1.0 percentage points (+/- 1.0), with the other factors remaining unchanged, the Group’s profit after taxes would be affected by EUR 2 000 thousand (EUR 2 400 thousand) negatively or positively. The sensitivity analysis is based on the floating interest rate position at the end of the reporting period.

Credit risks

The Group’s credit exposure is constituted of the credit risk related to the receivables from business operations, and the counterparty risk associated with other financial instruments.

The Group has no significant credit risk concentrations related to receivables because its clientele is widely spread, the sales are mainly retail sales against cash, and no single customer or group of customers is dominant from the Group’s perspective. Note 3.4 Other receivables and income tax receivables presents the breakdown of trade receivables by maturity. The credit losses with impact on profit or loss incurred during the financial period were not significant. The maximum amount of the Group’s credit loss corresponds to the carrying amount of financial assets at the end of the reporting period (Note 4.2 Financial assets and liabilities).

Part of the purchases from the Far East need to be paid in advance, and the respective risk is minimised by long-term cooperation with suppliers. The Group has a procurement company in Shanghai, China together with the Norwegian discount store chain, Europris AS. The company is the cornerstone of goods procurements made in China and the Far East. The company’s operations include identifying and selecting local suppliers, ensuring the correct quality, monitoring delivery times, and ensuring responsible operations on the part of suppliers. The Shanghai company has 39 employees.
 
Liquidity risk

The Group seeks to follow the financing required in business operations by analysing the sales cash flow forecasts in order to have sufficient liquid assets to fund the operations and to repay loans at maturity.

The availability and flexibility of the Group’s financing is guaranteed through sufficient credit facilities, balanced maturity distribution of the loans and sufficiently long loan periods, and by using several financial institutions and forms for the procurement of funding. On 31 December 2024 the Group had a total EUR 226 million (EUR 216 million) in credit facility reserve, including the commercial paper programme.

During 2024, Tokmanni Group Corporation signed a new EUR 325 million financing agreement. The financing package includes a EUR 250 million bank loan and a EUR 75 million revolving credit facility (RCF). The new financing package replaced the financing facility signed in 2021 and the additional loan drawn in 2023 for the acquisition of Dollarstore. Existing loans were repaid with this new arrangement. The maturity of the new financing is three years with two one-year extension options.

The Group has not identified any significant liquidity risk concentration in relation to its financial assets or sources.

Liability-related defaults and violations of contractual terms

Loans from financial institutions contain a covenant according to which the Group has to achieve a certain ratio of net debt in relation to adjusted EBITDA. Operations in accordance with the loan covenants are reported lenders on a quarterly basis. The Group’s management monitors compliance with loan covenants on a regular basis. In 2024, Tokmanni Group has met the required covenants.

Maturity of contractual cash flows of non-derivative financial liabilities

The table below includes all the instruments in force at the closing of the accounts, as well as their contractual loan principals and interests. The amounts are undiscounted, and they include both the future interest payments and the principal repayments.

Maturity of contractual cash flows of derivative financial liabilities

The cash flows related to currency and electricity derivative contracts are based on their fair values at the end of the reporting period with the maturity corresponding to the due date. Potential cash flows related to interest derivates are disclosed in net.

Maturity of contractual cash flows of derivative financial liabilities 2024

In the financial year 2024, the Group has no derivative liabilities at the end of the fiscal year 2024.

Electricity price risk

The Group is exposed to commodity risks in its operations, caused by the possible impacts of the electricity price risk on the Group’s energy costs. The Group can hedge itself against electricity price changes through electricity derivative contracts in line with the policy determined by the Board of Directors, at most up to the amount corresponding estimated electricity consumption. The Group hedges against electricity price risk by purchasing fixed-price electricity, which covers about 70% of consumption one year ahead and decreases gradually over 3-4 years. At the end of financial periods 2024 and 2023 Group had no active electricity derivative contracts.