notes to the financial statements for the year ... - Investing In Africa

NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2009 (continued)38. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued)Market risk (continued)(ii)Cement price riskThe company derives its income mainly from the sale of its cement and prices though fairly stable can be infl uencedby market forces.The following sensitivity analysis shows how profi t and equity would change if the cement price had been differentwith all other variables held constant.East African Portland Cement Co. Ltd Annual Report and Financial Statements FY 2008/200966(iii)Interest rate risk2009 2008KShs’000KShs’000Effect on Effect on Effect on Effect onProfit equity Profit equityCement price+ 1% movement 81,014 56,710 74,586 52,210- 1% movement (81,014) (56,710) (74,586) (52,210)Interest rate risks arise from fl uctuations in the bank borrowing rates. The interest rates vary from time to timedepending on the prevailing economic circumstances. To minimise the exposure, the company has negotiated a fi xedinterest rate on the borrowings. The company closely monitors the interest rate trends to minimize the potentialadverse impact of interest rate changes. The table below summarises the exposure to interest rate risk at thebalance sheet date.Included in the table are the company’s fi nancial instruments at carrying amounts, categorized by the earlier ofcontractual repricing or maturity dates.Up to 1-3 3-12 1-5 Over1month months months years 5 years TotalKShs’000 KShs’000 KShs’000 KShs’000 KShs’000 KShs’000At 30 June 2009AssetsCash and bank balances 286,512 - - - - 286,512Deposits - 1,225,450 - - 55,933 1,281,383At 30 June 2008AssetsCash and bank balances 490,670 - - - - 490,670Deposits - 497,939 - - 54,163 552,102