Annual Report 2012 - Haitian International Holdings Ltd.

Notes to the Consolidated Financial Statements (Continued)
(All amounts in RMB unless otherwise stated)
3. Financial Risk Management (Continued)
3.1 Financial risk factors (Continued)
(a) Foreign exchange risk (Continued)
As at 31 December 2012, if RMB had weakened/strengthened by 1.9% (2011: strengthened/weakened by 7.3%)
against the Euro with all other variables held constant, profit before income tax would have been approximately
RMB3,722 thousand higher/lower (2011: RMB16,144 thousand lower/higher) mainly as a result of foreign
exchange difference on translation of Euro denominated trade receivables, cash and cash equivalents and trade
payables. The ranges of such sensitivity disclosed above were based on the observation on the historical trend of
related exchange rate during the previous year under analysis.
As at 31 December 2012, if RMB had strengthened/weakened by 9.9% (2011: 0.2%) against the JPY with all
other variables held constant, profit before income tax would have been approximately RMB6,910 thousand
(2011: RMB156 thousand) higher/lower mainly as a result of foreign exchange difference on translation of JPY
denominated trade payables and bank borrowings. The ranges of such sensitivity disclosed above were based on
the observation on the historical trend of related exchange rate during the previous year under analysis.
(b)
Fair value and cash flow interest rate risk
The Group’s interest rate risk arises from bank deposits, loans to a distributor, loans to employees and borrowings.
Bank deposits, loans to a distributor and loans to employees at fixed rates expose the Group to fair value interest
rate risk.
Borrowings obtained at variable rates expose the Group to cash flow interest rate risk. The Group has not used
any financial instruments to hedge its exposure to cash flow interest rate risk.
As at 31 December 2012, if interest rates on USD — denominated borrowings had been 0.29 percentage-point
lower/higher (2011: 0.35 percentage-point higher/lower) with all other variables held constant, profit before
income tax would have been RMB844 thousand higher/lower (2011: RMB460 thousand lower/higher), mainly as a
result of lower/higher interest expense on floating rate borrowings.
As at 31 December 2012, if interest rates on JPY — denominated borrowings had been 0.07 percentage-point
(2011: 0.01 percentage-point) lower/higher with all other variables held constant, profit before income tax would
have been RMB50 thousand (2011: RMB79 thousand) higher/lower, mainly as a result of lower/higher interest
expense on floating rate borrowings.
(c)
Credit risk
The Group has policies in place to ensure credit sales are made to customers with an appropriate credit history.
Most of the Group’s sales are covered by guarantees from distributors, credit arrangement from insurance
companies in Mainland China, or letters of credit issued by banks. The Group grants its customers credit terms
ranging from 15 days to 24 months.
The Group provides guarantees to certain banks in connection with banking facilities granted to certain customers
in connection with their purchases of the Group’s plastic injection moulding machines. These customers are
introduced by the Group’s major distributors, which have provided the Group with counter guarantees.
Annual Report 2012 Haitian International Holdings Limited 61