125
HG METAL MANUFACTURING LIMITED
ANNUAL REPORT 2014
NOTES TO THE
FINANCIAL STATEMENTS
for the financial year ended 31 December 2014
34.
FINANCIAL RISK MANAGEMENT (CONT’D)
(c)
Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of the Group’s and the
Company’s financial instruments will fluctuate because of changes in market interest rates.
The Group’s and the Company’s exposure to interest rate risk arises primarily from finance
lease payables and bank borrowings. All of the Group’s and the Company’s financial assets
and liabilities at floating rates are contractually re-priced at intervals of less than 3 months
from the balance sheet date.
The Group’s and Company’s exposure to interest rate risk relate primarily to interest-bearing
fixed deposits and debt obligations with financial institutions.
Sensitivity analysis for interest rate risk
At the balance sheet date, if interest rates had been 50 (2013: 50) basis points lower/higher
with all other variables held constant, the Group’s income and equity would have been
approximately $64,000 (2013: $307,000) higher/lower, arising mainly as a result of lower/
higher interest expense on debt obligations with financial institutions.
A similar change in interest rates would have increased/decreased the Company’s income
and equity by approximately $64,000 (2013: $279,000).
(d)
Foreign currency risk
The Group has transactional currency exposures arising from sales or purchases that are
denominated in a currency other than the respective functional currencies of the Group
entities, primarily the Singapore Dollar (“SGD”), United States Dollar (“USD”), Malaysian Ringgit
(“MYR”) and Indonesia Rupiah (“IDR”).
The Group is exposed to currency translation risk arising from its net investments in foreign
operations, including Malaysia and Indonesia. The Group’s net investments in Malaysia and
Indonesia are not hedged as currency positions in MYR and USD are considered to be
long-term in nature.
