NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2024 (CURRENCY – SINGAPORE DOLLARS UNLESS OTHERWISE STATED) C14 Financial risk management objectives and policies (continued) Interest rate risk (continued) Hedge ineffectiveness/discontinuation of cash flow hedge for interest rate swaps is assessed using the same principles as for hedges of foreign currency purchases. It may occur due to: • the credit value/debit value adjustment on the interest rate swaps which is not matched by the loan; • differences in critical terms between the interest rate swaps and loans; • early repayment of loans. Gain on ineffective portion/discontinuation of cash flow hedge of $2,914,000 has been recognised in relation to the interest rate swaps in finance income or finance costs in profit or loss for 2024 (2023: $9,734,000). Information relating to the Group's interest rate risk exposure is also disclosed in the notes on the Group's borrowings, investments and loans receivable, where applicable. Foreign exchange risk The Group is exposed to foreign exchange risk from its global operations and revenues, costs and borrowings denominated in a currency other than the respective entities’ functional currencies. The Group’s foreign exchange exposures are primarily from USD and EUR and manages its exposure through forward currency contracts and embedded derivatives. The Group’s centralised Treasury Unit monitors the current and projected foreign currency cash flows within the Group and aims to reduce the exposure of the net position by transacting with the banks where appropriate. No foreign exchange sensitivity analysis was disclosed as a reasonable change in the exchange rates would not result in any significant impact on the Group’s results. Market risk The Group has strategic investments in unquoted equity shares. The market value of these investments will fluctuate with market conditions. No sensitivity analysis was disclosed as a reasonable change in the market value of these investments would not result in any significant impact on the Group's results. Liquidity risk To manage liquidity risk, the Group monitors its net operating cash flows and maintains an adequate level of cash and cash equivalents and secured committed funding facilities from financial institutions. In assessing the adequacy of these funding facilities, management reviews its working capital requirements regularly. Notwithstanding the Group’s net current liabilities position of $915 million as at 31 December 2024, it has available financial resources to meet its obligations as and when they fall due. To ensure that the Group is not exposed to short-term liquidity risk, its outstanding USCP of $1.8 billion are backstopped by a committed revolving credit facility (RCF) of $2.0 billion. The RCF remained undrawn as at 31 December 2024 and was more than enough to refinance all the outstanding USCP, if needed, and to cover the Group’s net current liabilities position. The Group has very strong credit ratings (Aaa by Moody's and AA+ by S&P) which provide it ready access to additional borrowings as necessary. The Group’s medium-term notes, USCP and committed credit facilities do not have any financial covenants. 186 ST ENGINEERING | ANNUAL REPORT 2024
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