enl commercial limited annual report 2011 - Investing In Africa

Notes to the Financial Statements
Year ended June 30, 2011
(a)
Market Risk
(i) Currency risk
Several of the company’s subsidiaries deal in foreign currency transactions and are exposed to foreign
exchange risk arising from various currency exposures, primarily with respect to the Euro, the US dollar,
Japanese Yen and South African Rands (ZAR). Foreign exchange risk arises from future commercial
transactions and recognised assets and liabilities.
The group
At June 30, 2011, if the Rupee had weakened/strengthened by 5% against the ZAR/US dollar/Euro
with all other variables held constant, post-tax profit for the year would have been Rs 6,295,861 (2010:
Rs.599, 040) higher/ lower, mainly as a result of foreign exchange gains/losses on translation of US
dollar/Euro denominated trade receivables, trade payables and borrowings.
(ii) Price risk
The group is exposed to equity securities price risk because of investments held by the group and
classified on the consolidated statement of financial position as investments in financial assets.
To manage its price risk arising from investments in equity securities, the group diversifies its portfolio.
Diversification of the portfolio is done in accordance with the limits set by the group.
Sensitivity analysis
The table below summarises the impact of increases/decreases in the fair value of the investments on
the group’s profit and equity. The analysis is based on the assumption that the fair value had increased/
decreased by 5%.
THE GROUP AND THE COMPANY
Impact on
Impact on other
profit comprehensive income
2011 2010 2011 2010
Rs’000 Rs’000 Rs’000 Rs’000
Available-for-sale investments in
financial assets - - 41,150 6,791
Held for trading securities 423 - - -
(iii) Cash flow and fair value interest risk
The group’s interest rate risk arises from long term borrowings.
At June 30, 2011, if interest rates on borrowings had been 50 basis points higher/lower with all other
variables held constant, post-tax profit for the year would have been lower/higher mainly as a result of
higher/lower interest expense on floating rate borrowings as shown below:
Rupee-denominated borrowings
THE GROUP
THE COMPANY
2011 2010 2011 2010
Rs’000 Rs’000 Rs’000 Rs’000
Effect higher/lower interest expense on
post tax profit 1,403 975 103 44
(b)
Credit Risk
Credit risk is the risk that an issuer or counterparty will be unable or unwilling to meet a commitment that
it has entered into with the group. The company’s credit risk concentration is spread between interest rate
and equity securities. All transactions in listed securities are settled/paid for upon delivery using approved
brokers. The risk of default is considered minimal since delivery of securities sold is only made once the
broker has received payment. On a purchase, payment is made once the securities have been received
by the broker. If either party fails to meet their obligations, the trade will fail.
The subsidiaries’ credit risk is primarily attributable to their trade receivables. The amounts presented on
the statement of financial position are net of allowances for doubtful receivables, estimated by the group’s
management based on prior experience and current economic environment. The subsidiaries have no
significant concentration of credit risk, with exposure spread over a large number of counterparties and
customers.
ENL Commercial Limited
Annual Report 2011
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