NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2024 (CURRENCY – SINGAPORE DOLLARS UNLESS OTHERWISE STATED) C14 Financial risk management objectives and policies (continued) The policies for managing each of these risks are broadly summarised below: Interest rate risk As at reporting date, the interest rate profile of the interest-bearing financial instruments is: Group 2024 2023 $’000 $’000 Fixed rate instruments Financial assets 72,254 61,148 Financial liabilities (4,027,016) (3,764,106) (3,954,762) (3,702,958) Variable rate instruments Financial liabilities (1,798,519) (2,349,558) (1,798,519) (2,349,558) The Group has cash balances placed with reputable banks and financial institutions. The Group manages its interest rate risk on its interest income by placing the cash balances in varying maturities and interest rate terms with due consideration to operating cash flow requirements and optimising yield. The Group’s debts include bank loans, medium-term notes, commercial papers and lease liabilities (2023: bank loans, medium-term notes, commercial papers and lease liabilities). The Group seeks to minimise its interest rate risk exposure through tapping different sources of funds to refinance the debt instruments and/or enter into interest rate swaps. An increase/decrease of 50 basis points in interest rate, with all other variables being held constant, would lead to a reduction/increase of the Group’s profit or loss by approximately $9.0 million (2023: $11.7 million). The Group’s policy is to maintain at least 50% of its borrowings at fixed rate, using floating-to-fixed interest rate swaps to achieve this when necessary. During 2024 and 2023, the Group’s borrowings at variable rate were mainly denominated in USD. Included in the variable rate borrowings is United States Commercial Papers (USCP) of $1.8 billion (2023: $1.9 billion) whose interest rate on each rollover correlates with Secured Overnight Financing Rate (SOFR). To hedge the variability of the cash flows of the USCP, the Group has entered into a 5-year interest rate swap of notional amount of $54.4 million as at 31 December 2024 (2023: $92.4 million) with key terms that match part of the outstanding USCP on which it pays a fixed rate and receives a variable rate. The Group’s borrowings and receivables are carried at amortised cost. The borrowings are periodically contractually repriced and to that extent are also exposed to the risk of future changes in market interest rates. 185 CORPORATE OVERVIEW PERFORMANCE REVIEW SUSTAINABILITY FINANCIAL REPORT
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