Cathay Pacific 2007 Annual Report Download - page 84

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Notes to the Accounts
Supplementary Information
28. Financial risk management (continued)
2006
Within
one year
HK$M
After one
year but
within two
years
HK$M
After two
years but
within
five years
HK$M
After five
years
HK$M
Total
HK$M
Comany
Bank and other loans (3,472) (1,268) (5,420) (1,953) (12,113)
Obligations under finance leases (4,296) (3,561) (12,162) (12,963) (32,982)
Trade and other payables (8,498) – (4) – (8,502)
Derivative financial liabilities at
notional value (196) (64) (103) (8) (371)
Total (16,462) (4,893) (17,689) (14,924) (53,968)
(c) Market risk
(i) Foreign currency risk
The Group’s revenue streams are denominated in a number of foreign currencies resulting in exposure to
foreign exchange rate fluctuations. The currencies giving rise to this risk are primarily US dollars, Euros, New
Taiwan dollars, Singapore dollars, Renminbi and Japanese yen. Foreign currency risk is measured by
employing sensitivity analysis, taking into account current and anticipated exposures. To manage this
exposure assets are, where possible, financed in those foreign currencies in which net operating surpluses
are anticipated, thus establishing a natural hedge. In addition, the Group uses currency derivatives to reduce
anticipated foreign currency surpluses. The use of foreign currency borrowings and currency derivatives to
hedge future operating revenues is a key component of the financial risk management process, as exchange
differences realised on the repayment of financial commitments are effectively matched by the change in
value of the foreign currency earnings used to make those repayments.
At the reporting date, the balance sheet exposure to foreign currency risk was as follows:
2007
USD
HK$M
EUR
HK$M
TWD
HK$M
SGD
HK$M
RMB
HK$M
JPY
HK$M
Group
Trade and other receivables 6,396 626 340 29 449 355
Liquid funds 12,391 664 49 657 2,200 119
Long-term loans (6,107) (559) – (3,390) – –
Obligations under finance leases (16,367) (2,879) – – – –
Trade and other payables (5,714) (294) (82) (66) (153) (199)
Currency derivatives at
notional value 10,636 (345) (1,778) 1,101 (3,817) (929)
Net balance sheet exposure 1,235 (2,787) (1,471) (1,669) (1,321) (654)
Cathay Pacific Airways Limited Annual Report 2007
82