Annual Report 2012 - IOI Group

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41. CAPITAL MANAGEMENTThe primary objective of the Group’s capital management is to ensure that entities of the Group are able to continue as goingconcerns while maximising the return to shareholders through the optimisation of the debt and equity mix. The overall strategy ofthe Group remains unchanged from that in financial year ended 30 June 2011.The Group manages its capital structure and makes adjustments to it, in light of changes in economic conditions. Capital of theGroup comprises equity, borrowings and other long term liabilities. To maintain or adjust the capital structure, the Group mayadjust the dividend payment to shareholders, return capital to shareholders, buy back shares or issue new shares. No changes weremade in the objectives, policies or processes during the financial years ended 30 June 2012 and 30 June 2011.The Group monitors capital using a gearing ratio, which is net debt divided by equity attributable to owners of the parent. TheGroup’s net debt includes borrowings less cash and cash equivalents. The Group has an appropriate target gearing ratio, which ismonitored by the Group on an ongoing basis.GroupCompany2012RM’0002011RM’0002012RM’0002011RM’000Borrowings 8,121,678 5,397,758 1,906,275 2,106,990Less: Cash and cash equivalents (4,360,747) (2,785,526) (1,257,294) (1,629,887)Net debt 3,760,931 2,612,232 648,981 477,103Equity 12,627,923 11,999,177 6,593,005 7,027,176Gearing ratio (%) 29.78 21.77 9.84 6.7942. FINANCIAL INSTRUMENTSFinancial risk management objectives and policiesThe Group’s activities expose it to a variety of financial risks, including foreign currency risk, interest rate risk, price fluctuation risk,credit risk, liquidity and cash flow risk. The Group’s overall financial risk management objective is to ensure that the Group createsvalue for its shareholders whilst minimising potential adverse effects on its financial performance and positions. The Group operateswithin an established risk management framework and clearly defined guidelines that are approved by the Board of Directors.The Group operates within an established Enterprise Risk Management framework with clearly defined policies and guidelines, whichare administered via divisional Risk Management Committees. Divisional Risk Management Committees report regularly to the Auditand Risk Management Committee which oversees the management of risk in the Group on behalf of the Board of Directors.Annual Report 2012IOI CORPORATION BERHAD 213
NOTES TO THEFINANCIAL STATEMENTS42. FINANCIAL INSTRUMENTS (Continued)42.1 Foreign currency riskThe Group operates internationally and is exposed to various currencies, mainly US Dollar (“USD”), Euro (“EUR”), SingaporeDollar (“SGD”) and Japanese Yen (“JPY”). Foreign currency denominated assets and liabilities together with expected cashflows from committed purchases and sales give rise to foreign currency exposures.The Group’s foreign currency risk management objective is to minimise foreign currency exposure that gives rise to economicimpact, both at transaction and reporting period translation levels.42.1.1 Risk management approachThe Group maintains a natural hedge, whenever possible, by borrowing in the currency of the country, in which theproperty or investment is located or by borrowing in currencies that match the future revenue stream to begenerated from its investments.Foreign currency exposures in transactional currencies other than functional currencies of the operating entities arekept to an acceptable level. Material foreign currency transaction exposures are hedged with derivative financialinstruments such as forward foreign exchange contracts and options on a back-to-back basis.The downstream segment’s forward contractual commitments intended to be physically settled are fully hedged of itscurrency risk on a back-to-back basis with currency forward contracts. Where the netting of forward sales againstforward purchases with matching currency risk characteristics is possible, these would first be netted before hedging thenet currency exposure with forward contracts. Currency risk on forward contractual commitments with clear intentionfor net-cash settlement (i.e. paper trading) are not considered for hedging until the exercising of the net settlement.The hedging methods that the Group adopts in managing its currency risk depend on the principal forms of foreigncurrency exposure, as discussed below:i. Structural foreign currency exposure from its net investment in foreign operations (subsidiaries, associates,and joint ventures)BackgroundThe Group’s foreign operations of various functional currencies when translated into its parent’s reporting currencybased on closing rates (for assets and liabilities) and average transaction rates (for income and expenses) at eachconsolidation, gives rise to foreign currency translation gain or loss that will be recognised in other comprehensiveincome. Intragroup transactions with foreign operations involving monetary financial instruments will also result inforeign currency translation gain or loss that cannot be eliminated on consolidation, but has to be recognisedeither in profit or loss or in other comprehensive income. However, non-monetary financial items translated athistorical exchange rates will not give rise to foreign currency risk. Resulting from its net investment in foreignoperations, the Group’s current and future profit stream in various foreign currencies will also be exposed toforeign currency risk.Hedging methodWhere feasible the Group would match its foreign currency borrowing with the functional currency of its foreignoperations. Nevertheless, the Group considers such foreign currencies’ overall fiscal position and borrowing costsbefore deciding on the currency major to be carried as debt in its book. In this regard, the Group has major foreigncurrency borrowings denominated in USD, EUR, SGD and JPY, which do not necessarily match all the functionalcurrencies of its foreign operations. Where appropriate, exposures from mismatch in foreign currency borrowingsare hedged with Cross Currency Swap.214IOI CORPORATION BERHADAnnual Report 2012
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IOI CORPORATION BERHAD (9027-W)IOI
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KEYINDICATORS20%15105IOI CORPORATIO
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OUR VISIONOUR COREVALUESCONTENTSIOI
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CHAIRMAN’SSTATEMENT
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CONTRIBUTION TO SEGMENT RESULTS2012
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Sustainability andCORPORATE SOCIALR
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GROUP FINANCIALOVERVIEWCASH FLOWFOR
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GROUP PERFORMANCEHIGHLIGHTS2012RM
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FIVE-YEAR FINANCIALHIGHLIGHTS2012RM
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MANAGEMENT’SDISCUSSION AND ANALYS
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• Pre-tax Earnings decreased by 1
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20181614121086420-2%Cost of Equity
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plantationAchievements in productiv
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PLANTATION
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PLANTATION STATISTICSCROP STATEMENT
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OPERATIONS REVIEWFor the financial
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esource-based manufacturingThe succ
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RESOURCE-BASED MANUFACTURING
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OLEOCHEMICALSMANUFACTURINGThe princ
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Bottom: IOI Loders CroklaanAmericas
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PROPERTYA green building comprises
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Property
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Left: The new Palm GardenGolf Cours
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OUTLOOK & PROSPECTSThe local proper
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sustainability andCORPORATE SOCIAL
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Top: Beneficial plants.Bottom: Buff
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Operating under the Institute of Sh
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CORPORATE SOCIALRESPONSIBILITYSocia
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SEPTEMBER 2011Palm Garden Hotel, to
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DECEMBER 2011IOI Mall Puchong offer
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APRIL 2012Yayasan TSLSC donated RM2
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BOARD OF DIRECTORS3 4211. DATO’ L
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PROFILE OFDIRECTORSWhen others seet
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Lee Cheng Leang was first appointed
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Quah Poh Keat was first appointed t
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SeniorManagement TeamGroup Chief Ex
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GLOBALPRESENCECANADAONTARIOCANADAON
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LOCATION OFOPERATIONS IN MALAYSIAPe
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CORPORATECALENDARJULY 2011IOI Corpo
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JANUARY 2012IOIP, through its subsi
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MAY 2012IOI Oleochemical’s Penang
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Audit and Risk ManagementCommittee
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x. To review any related party tran
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STATEMENT ONCORPORATE GOVERNANCEInt
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Training and Development of Directo
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Cheah Tek Kuang 2011 Forbes Global
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SHAREHOLDERSDialogue Between the Co
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STATEMENT ONINTERNAL CONTROLINTRODU
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MONITORING• The Group’s policie
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STATEMENT OF DIRECTORS’ INTERESTS
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Notes:(1) Details of the transactin
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DIRECTORS’REPORTThe Directors of
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DIRECTORS’REPORTUSD600 Million Ze
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DIRECTORS’REPORTExecutive Share O
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DIRECTORS’REPORTDirectors’ Inte
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DIRECTORS’REPORTSignificant Event
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INCOMESTATEMENTSFor The Financial Y
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STATEMENTS OFFINANCIAL POSITIONAs A
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STATEMENTS OFCHANGES IN EQUITYFor T
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STATEMENTS OFCHANGES IN EQUITYFor T
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STATEMENTS OFCASH FLOWSFor The Fina
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STATEMENTS OFCASH FLOWSFor The Fina
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NOTES TO THEFINANCIAL STATEMENTS3.
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Page 163 and 164: NOTES TO THEFINANCIAL STATEMENTS13.
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INDEPENDENTAUDITORS’ REPORTTo The
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GROUPPROPERTIESA. PLANTATIONS ESTAT
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GROUPPROPERTIESB. DEVELOPMENT PROPE
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GROUPPROPERTIESB. DEVELOPMENT PROPE
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GROUPPROPERTIESC. INVESTMENT PROPER
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GROUPPROPERTIESD. INDUSTRIAL PROPER
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GROUPPROPERTIESE. OTHER PROPERTIES
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NOTICE ofAnnual general MeetingAGEN
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NOTICE ofAnnual general MeetingNote
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SHAREHOLDERSINFORMATIONAs At 30 Aug
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SHAREHOLDERSINFORMATIONAs At 30 Aug
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1st fold heresTAMPThe Company Secre
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Annual Report 2012 - IOI Group

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