MSM Malaysia Holdings Berhad Annual Report 2019

NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2019 4 FINANCIAL RISK MANAGEMENT (CONTINUED) (a) Financial risk management policies (continued) Market risk (continued) (i) Foreign currency exchange risk (continued) As at 31.12.2018, a 5% weakening of the USD against Malaysia Ringgit (“RM”) at the date of statement of financial position would increase the Group’s profit after tax of approximately RM2,598,000. The above exposure mainly as a result of foreign exchange gains/losses on translation of payables. The analysis assumes that all other variables remain constant. (ii) Commodity price risk The Group is exposed to raw sugar prices which are subject to fluctuations due to unpredictable factors such as weather, change of global demand and global production. Management is responsible for managing the Group’s exposure to raw sugar input cost against selling prices of refined sugar set by the Government. Management meets regularly to review their raw sugar requirements and price trends and then decides when to buy and price raw sugar consignments so that a refining margin is locked to ensure budgeted profits are met. In addition, the Group enters into NewYork 11 raw sugar future contracts to manage its raw sugar purchase cost. A sensitivity analysis has been performed based on the Group’s exposure to sugar futures as at year end. If price of raw sugar increases or decreases by 10% with all other variables held constant, the Group’s loss after tax and equity would increase or decrease by RM4,803,000 (2018: profit after tax and equity would decrease or increase by RM5,301,000). (iii) Finance rate risk The Group’s finance rate risk mainly arises from term loans. Term loans issued at variable rates expose the Group to cash flow finance rate risk. The finance rate profile of the Group’s finance bearing financial assets, based on carrying amounts as at the end of the financial year was: Group Company 2019 2018 2019 2018 RM’000 RM’000 RM’000 RM’000 Financial assets At fixed rate: Fixed deposits 143,652 148,786 29,282 115,071 At floating rate (exposed to cash flow finance rate risk): Loans to subsidiaries - - 1,059,698 1,083,989 143,652 148,786 1,088,980 1,199,060 MSM Malaysia Holdings Berhad | Annual Report 2019 148