285 NOTES TO THE FINANCIAL STATEMENTS (CONT’D) For the financial year ended 31 January 2023 ACCOUNTABILITY (FINANCIAL STATEMENTS) 41. Financial risk management objectives and policies (continued) (a) Market risk (continued) (i) Interest rate risk (continued) Effects of hedge accounting on the financial position and performance (continued) The effects of the above-mentioned interest rate swaps on the Group’s financial position and performance are as follows: (continued) 2022 LIBOR RM million Total RM million Interest rate swaps Carrying amount (current and non-current liability) (23) (23) Notional amount 3,759 3,759 Hedge ratio of project financing loans 100% 100% Change in fair value of outstanding hedging instruments since 1 February (72) (72) Change in value of hedged item used to determine hedge effectiveness (72) (72) Weighted average hedged rate for the year 3.89% to 5.55% 3.89% to 5.55% The maturity period of interest rate swaps ranges from August 2026 to December 2031 (2022: November 2027 to December 2031). Sensitivity Profit or loss is sensitive to higher/lower interest expenses from unhedged floating term loans as a result of changes in interest rates. An increase/decrease in interest rates by 10 (2022: 10) basis points would result in RM3 million (2022: RM4 million) decrease/increase in post-tax profit. (ii) 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’s exposure to the risk of changes in foreign exchange rates relates primarily to the Group’s operating activities and the Group’s net investments in foreign subsidiaries. The Group has transactional currency exposures arising from sales or purchases that are denominated in a currency other than the respective functional currencies of Group entities, primarily RM, USD, INR, Brazilian Reias (“BRL”) and Norwegian Krone (“NOK”). The Group holds cash and cash equivalents denominated in foreign currencies for working capital purposes. The other financial instruments denominated in foreign currencies include finance lease receivables, trade and other receivables, trade and other payables, loans and borrowings and lease liabilities. The Group is also exposed to currency translation risk arising from its net investment in foreign operations primarily in Labuan, Singapore, Norway, Republic of the Marshall Islands, British Virgin Islands, Brazil, India and Netherlands. Except as disclosed in Note 42(a)(ii), the Group’s investments in its foreign subsidiaries, joint ventures and associates are not hedged as the currency position in these investments is considered to be long term in nature.
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