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SUN INTERNATIONAL ANNUAL REPORT ’10
182
NOTES TO THE GROUP FINANCIAL STATEMENTS CONTINUED
for the year ended 30 June
29. FINANCIAL INSTRUMENTS (continued)
(a) Foreign currency risk (continued)
Foreign currency sensitivity (continued)
A 10% strengthening in the Rand against the US Dollar and Sterling at 30 June 2010 would decrease profit before tax by the amounts
shown below. This analysis assumes that all other variables, in particular interest rates, remain constant. The analysis is performed on
the same basis for 2009.
US Dollar (32) (14)
Sterling (1) (3)
A 10% weakening in the Rand against these currencies at 30 June 2010 would have an equal but opposite effect to the amounts shown
above, on the basis that all other variables remain constant.
A 10% strengthening in the Chilean Peso against the US Dollar at 30 June 2010 would decrease profit before tax by the amount shown
below. This analysis assumes that all other variables, in particular interest rates and the Rand/Chilean Peso exchange rate, remain
constant. The group discontinued hedge accounting in the current year, as a result the impact will only be on profit before tax.
2010
Rm
2010
Profit
before tax
Rm
2009
Rm
2009
Hedging
reserve
Rm
US Dollar (15) (11)
A 10% weakening in the Chilean Peso against the US Dollar would have an equal but opposite effect to the amounts shown above, on
the basis that all other variables remain constant.
(b) Cash flow interest rate risk
The group’s cash flow interest rate risk arises from cash and cash equivalents and variable rate borrowings. The group is not exposed to
fair value interest rate risk as the group does not have any fixed interest bearing financial instruments carried at fair value.
The group manages interest rate risk by entering into short and long term debt instruments with a combination of fixed and variable
interest rates. It also uses floating-to-fixed interest rate swaps and interest rate cross currency swaps to hedge its foreign currency and
interest rate cash flow risk. At 30 June 2010, the following derivative financial instruments were in place:
SISA interest
rate swap
SIL interest
rate swap
SFIR interest
rate cross
currency swaps
Notional amount R644 million R1 285 million US$120 million
Fixed rate 9.22% 9.71%
Fixed rate expiry date 1 September 2010 30 September 2010
Variable rate 63% of prime 67% of prime Linked to USD Libor
Fixed exchange rates (Chilean Pesos to US Dollar) 526 – 591
Fair value liability at 30 June R9 million R19 million R4 million
Transfer of loss from hedging reserve to interest expense R13 million R24 million R10 million
Transfer of profit from hedging reserve to foreign
exchange profits – – R40 million
The period of when the cash flows are expected to occur and impact on profit and loss is the same as those set out for the derivatives in
the maturity analysis.
The interest rate characteristics of new and refinanced debt instruments are restructured according to expected movements in interest
rates (refer note 24).