127
ANNUAL REPORT 2015
Notes to the Financial Statements (cont’d)
for the financial year ended 30 June 2015
36. Financial risk management objectives and policies (cont’d)
(c)
Interest rate risk (cont’d)
Sensitivity analysis for interest rate risk
At the reporting date, it is estimated that a 20 basis points increase in interest rate, with all other variables held
constant, would decrease the Group’s and the Company’s profit net of tax by approximately RM1,227,503
and RM318,704 (2014: RM1,195,970 and RM87,679) respectively, arising mainly as a result of higher interest
expense on net floating borrowing position. A decrease in interest rate would have had the equal but opposite
effect on the aforesaid amount, on the basis that all other variables remain constant.
(d) Foreign currency risk
Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate
because of changes in foreign exchange rates.
The Group and the Company have exposure to foreign exchange risk as a result of transactions denominated
in foreign currencies, arising from normal trading activities. It is the Group’s policy to hedge these risks where
the exposures are certain and cost-efficient.
The currency giving rise to this risk is primarily United States Dollars (USD). Exposure to foreign currency risk
is monitored on an on-going basis to ensure that the exposure is at an acceptable level.
The Group and the Company use forward currency contracts to minimise the currency exposures arising
from sales and purchases after a firm commitment has been entered. It is the Group’s policy not to enter into
forward contracts until firm commitment is in place.
Sensitivity analysis for foreign currency risk
The following table demonstrates the sensitivity of the Group’s and the Company’s profit net of tax to a
reasonably possible strengthening/weakening of the United States Dollars (“USD”) exchange rates against
the functional currency of the Group and of the Company, with all other variables held constant.
Group
Company
Profit net of tax
Profit net of tax
2015
2014
2015
2014
RM’000
RM’000
RM’000
RM’000
USD - Strengthen 20% (2014: 5%)
9,680
3,012
2,831
601
USD - Weaken 5% (2014: 5%)
(2,986)
(3,012)
(708)
(601)
