KUB Malaysia Berhad Annual Report 2021

38. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (cont’d) (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 is exposed to transactional currency risk primarily through sales and purchases that are denominated in a currency other than the functional currency of the operations to which they relate. The currency giving rise to this risk is primarily United States Dollar. Foreign exchange exposures in transactional currencies other than functional currencies of the operating entities are kept at an acceptable level. The Group has entered into forward currency contracts for certain transactions to manage the exposures in foreign currencies as disclosed in Note 29. The Board is of the opinion that the unhedged foreign currencies exposures are minimal and can be efficiently managed. The amounts of trade payables denominated in foreign currencies as at the end of the reporting period is as follows: Group 30.6.2021 31.12.2019 RM’000 RM’000 Trade payables hedged using forward currency contracts 18,001 22,309 39. CAPITAL MANAGEMENT The primary objectives of the Group’s and the Company’s capital management is to ensure that they maintain healthy capital ratios in order to support their business and maximise shareholders value. The Group and the Company manage their capital structure and makes adjustments to it, in light of changes in economic conditions by maintaining or adjusting the capital structure, i.e., the Company may issue new shares, adjust the dividend payment to shareholders or obtain funding through external borrowings. No changes were made in the objectives, policies or processes during the period ended 30 June 2021 and year ended 31 December 2019. The Group and the Company monitor their capital using a gearing ratio, which is total borrowings divided by shareholders’ fund. The Group’s and the Company’s gearing ratio as at 30 June 2021 and 31 December 2019 are as follows: Group Company 30.6.2021 31.12.2019 30.6.2021 31.12.2019 RM’000 RM’000 RM’000 RM’000 Borrowings - long-term 1,076 71,033 - 24 Borrowings - short-term 37,638 33,169 - 92 Total borrowings 38,714 104,202 - 116 Total shareholders’ fund 483,519 335,132 505,176 350,324 Gearing ratio 8.00% 31.09% N/A 0.03% NOTES TO THE FINANCIAL STATEMENTS 134 KUB MALAYSIA BERHAD