FGV Annual Report 2013

Felda Global Ventures Holdings Berhad 212 NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2013 4 FINANCIAL RISK MANAGEMENT (Cont’d.) (a) Financial risk management policies (Cont’d.) Market risk (Cont’d.) (ii) Price risk (Cont’d.) Commodity price risk The Group is exposed to commodity price risk since the prices crude palm oil (“CPO”), sugar, soy bean and their derivatives are subject to fluctuations due to unpredictable factors such as weather, change of global demand, global production, crude oil prices and global production of similar and competing crops. Revenue of the Group is therefore subject to price fluctuations in the commodity market. The Group uses derivative contracts to mitigate a portion of such risks. As at 31 December 2013, a sensitivity analysis has been performed based on the Group’s exposure to commodity prices as at settlement date for the Group’s LLA liability and commodity derivative portfolios. A 10% increase in certain commodity price indexes or a RM100 increase in CPO prices assumed in calculating the LLA liability, with all other variables being held constant, would increase or decrease the Group’s profit after tax, by type of commodity and financial liability, by approximately: 2013 2012 RM’000 RM’000 - Palm oil (8,163) (1,483) - Sugar - 971 - LLA liability (181,000) (108,750) (189,163) (109,262) A 10% decrease in certain commodity price indexes or a RM100 decrease in CPO prices assumed in calculating the LLA liability, with all other variables being held constant, would increase or decrease the Group’s profit after tax, by type of commodity and financial liability, by approximately: 2013 2012 RM’000 RM’000 - Palm oil 8,163 1,483 - Sugar - (971) - LLA liability 193,000 117,750 201,163 118,262