7 205 204 Notes to the Financial Statements Notes to the Financial Statements 30. FINANCIAL INSTRUMENTS (CONTINUED) 30.6 Market risk Market risk is the risk that changes in market prices, such as foreign exchange rates and interest rates will affect the Group’s and the Company’s financial position or cash flows. 30.6.1 Currency risk The Group and the Company are exposed to foreign currency risk arising from transactions that are denominated in a currency other than the respective functional currencies of the Group entities. The currency giving rise to this risk is primarily US Dollars. The management does not view the exposure to other currencies to be significant. Risk management objectives, policies and processes for managing the risk The Group’s and the Company’s foreign exchange management policies are to minimise exposures arising from currency movements. The Group monitors currency movements closely and may enter into foreign currency swaps, forward foreign currency contracts and options to limit its exposure when the needs arise. Exposure to foreign currency risk The Group’s and the Company’s main exposure to foreign currency (a currency which is other than the functional currency of the Group entities) risk, based on carrying amounts as at the end of the reporting period are as follows: Denominated in USD 2023 RM’000 2022 RM’000 Group Trade receivables 21,236 29,833 Loans and borrowings (542,672) (755,529) Trade payables (176,886) (77,806) Forward exchange contracts 89,977 149,072 Cross currency swap 341,286 549,586 Cash and cash equivalents 71,398 53,573 Net exposure (195,661) (51,271) Company Trade and other receivables 28,628 25,103 Loans and borrowings (423,592) (637,834) Cross currency swap 341,286 549,586 Cash and cash equivalents 10,267 10,548 Net exposure (43,411) (52,597) 30. FINANCIAL INSTRUMENTS (CONTINUED) 30.6 Market risk (continued) 30.6.1 Currency risk (continued) Currency risk sensitivity analysis A 1.50% (2022: 1.50%) strengthening of RM against USD at the end of the reporting period would have increased equity and post-tax profit or loss by the amounts shown below. This analysis assumes that all other variables, in particular interest rates, remained constant and ignores any impact of forecasted sales and purchases. Profit 2023 RM’000 2022 RM’000 Group USD 2,231 584 Company USD 495 600 A 1.50% (2022: 1.50%) weakening of RM against USD at the end of the reporting period would have had equal but opposite effect on the above currencies to the amounts shown above, on the basis that all other variables remained constant. 30.6.2 Interest rate risk The Group’s and the Company’s fixed rate borrowings are exposed to a risk of change in their fair value due to changes in interest rates. The Group’s and the Company’s variable rate borrowings are exposed to a risk of change in cash flows due to changes in interest rates. Short-term receivables and payables are not significantly exposed to interest rate risk. Risk management objectives, policies and processes for managing the risk In managing interest rate risk, the Group and the Company maintain a balanced portfolio of fixed and floating rate instruments. All interest rate exposures are monitored and managed by the Group and the Company on a regular basis.
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