in PLN millions, unless otherwise stated
The following Group companies have significant trade receivables: the KGHM INTERNATIONAL LTD. Group PLN 353 million, KGHM Polska Miedź S.A. PLN 305 million, CENTROZŁOM WROCŁAW S.A. PLN 72 million, NITROERG S.A. PLN 33 million, WPEC w Legnicy S.A. PLN 30 million, „MCZ” S.A. PLN 15 million, and WMN “Łabędy” PLN 10 million.
The Parent Entity limits its exposure to credit risk related to trade receivables by evaluating and monitoring the financial condition of its customers, setting credit limits, requiring collateral, and non-recourse factoring. The terms of factoring agreements entered into meet the criteria of removing receivables from the books at the moment of their purchase by the factor. As at 31 December 2020, the amount of receivables transferred to factoring, for which payment from factors was not received, amounted to PLN 15 million (as at 31 December 2019: PLN 22 million). Information on the amount of revenues from sales subjected to factoring in the financial period is presented in Note 2.4.
An inseparable element of the credit risk management process performed by the Parent Entity is the continuous monitoring of receivables and the internal reporting system.
Buyer’s credit is only provided to proven, long-term customers. In the case of new customers, an effort is made to ensure that sales are based on prepayments or trade financing instruments which wholly transfer the credit risk to financial institutions.
The Parent Entity makes use of the following forms of collateral:
- registered pledges, bank guarantees, promissory notes, notarial enforcement declarations, corporate guarantees, cessation of receivables, mortgages and documentary collection;
- ownership rights to goods to be transferred to the buyer only after payment is received;
- a receivables insurance contract, which covers receivables from entities with buyer’s credit which have not provided strong collateral or have provided collateral which does not cover the total amount of the receivables.
Taking into account the above forms of collateral and the credit limits received from the insurance company, as at 31 December 2020 the Parent Entity had secured 75% of its trade receivables (as at 31 December 2019, 64%).
Moreover, the Parent Entity enters into net settlement framework agreements, when it recognises both receivables and liabilities with the same customer.
Although KGHM INTERNATIONAL LTD. does not use collateral, credit risk connected with trade receivables is subject to monitoring, and the majority of sales are to proven, long-term customers conducting international activities.
Assessment of concentration of credit risk in the Group:
While KGHM Polska Miedź S.A. and KGHM INTERNATIONAL LTD. operate in the same sector, these two companies are different both in terms of their portfolios of products as well as in terms of the geographic location and nature of their customers, and consequently this sector concentration of credit risk is considered to be acceptable.
Other companies of the Group operate in various economic sectors, such as transport, construction, commerce, industrial production and energy. As a consequence, in the case of most Group companies, in terms of sectors, there is no concentration of credit risk.
||As at 31 December 2020 the balance of receivables from the 7 largest customers represented 42% of trade receivables (2019: 29%). Despite the concentration of this type of risk, it is believed that due to the availability of historical data and the many years of experience cooperating with its customers, as well as to the securing used, the level of credit risk is low.
||Companies of the Group have been cooperating for many years with a large number of customers, which affects the geographical diversification of trade receivables. Geographical concentration of credit risk for trade receivables is presented in the table below:
|Trade receivables (net)
31 December 2020
31 December 2019
|European Union (excluding Poland)