MSM Malaysia Holdings Berhad Annual Report 2020

4 FINANCIAL RISK MANAGEMENT (CONTINUED) (a) Financial risk management policies (continued) Market risk (i) Foreign currency exchange risk The Group operates internationally and is exposed to foreign currency exchange risk arising from various currency exposures, primarily with respect to the United States Dollar (“USD”). The Group manages its currency exposure through foreign currency forward contracts. As at 31.12.2020, a 10% weakening of the USD against Malaysia Ringgit (“RM”) at the date of statement of financial position would increase the Group’s loss after tax of approximately RM5,536,000. As at 31.12.2019, a 10% weakening of the USD against Malaysia Ringgit (“RM”) at the date of statement of financial position would reduce the Group’s profit after tax of approximately RM2,992,000. 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 New York 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 RM6,845,000 (2019: profit after tax and equity would decrease or increase by RM4,803,000). MSM MALAYSIA HOLDINGS BERHAD Annual Repor t 2020 165 NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2020 SUSTAINABILITY REPORT EFFECTIVE LEADERSHIP CORPORATE GOVERNANCE FINANCIAL STATEMENTS ADDITIONAL INFORMATION DETAILS OF THE ANNUAL GENERAL MEETING