Bahri Annual Report-2017

Annual Report 2017

194

195

Notes to the Consolidated Financial Statements (continued) December 31, 2017 (In Thousands Saudi Riyal) 28. FINANCIAL INSTRUMENTS (continued) 28.4 Financial Risk Management (continued) 28.4.3 Market risk (continued) Commission rate risk (continued) Sensitivity analysis for variable rate financial instruments

11 Consolidated Financial Statements

Notes to the Consolidated Financial Statements (continued) December 31, 2017 (In Thousands Saudi Riyal)

28. FINANCIAL INSTRUMENTS (continued) 28.4 Financial Risk Management (continued) 28.4.2. Liquidity risk (continued)

The following table demonstrates the sensitivity of income to reasonably possible changes in commission rate on Sukuk and long-term loans, with all variables held constant.

2016

Within 3 months

3 to 12 months

1 to 5 years

More than 5 years

No fixed maturity

2017

2016

Total

Profit rate Increase by 100 base points

Long term loans

182,338

818,807

2,901,463

1,862,095

5,764,703

99,602

85,702

Sukuk

3,900,000

Trade payable and other current liabilities

37,432

(85,702 )

Decrease by 100 base points

(99,602 )

641,068

94,337

27,582

800,419

Other price risk Price risk is the risk that the value of a financial instrument will fluctuate due to changes in market prices, whether those changes are due to factors related to the instrument or its source, or which affect all instruments traded in the market. The Group diversifies its investment portfolio to manage price risk arising from its equity investments. 28.4.4 Capital management For the purpose of the Group’s capital management, capital includes issued capital, share premium and all other equity reserves attributable to the equity holders of the parent. The primary objective of the Group’s capital management is to ensure that it maintains a strong credit rating and healthy capital ratios in order to support its business and maximize shareholder value. The Group manages its capital structure and makes adjustments in light of changes in economic conditions and the requirements of the financial covenants. To maintain or adjust the capital structure, the Group may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares. The Group monitors capital using a debt ratios, which is net debt divided by total capital plus net debt. The Group includes within net debt, Sukuk and long term loans, trade and other payables, less cash and short-term deposits.

Employees’ benefits

- 65,482 823,406 913,144 2,929,045 5,762,095 102,914 10,530,604 - - - 65,482

1 January 2016

Within 3 months

3 to 12 months

1 to 5 years

More than 5years

No fixed maturity

Total

Long-term loans

168,742

378,274

1,552,447

2,022,769

4,122,232

Sukuk

3,900,000

Trade payable and other current liabilities

62,186

840,334

74,382

21,691

998,593

Employees benefit’s

- 65,349 1,009,076 452,656 1,574,138 5,922,769 127,535 9,086,174 - - - 65,349

The Company has unutilized credit facilities of SR 2,154 million as at December 31, 2017 (2016: SAR 3,145 million, January 1, 2016: 713 million) to meet liquidity requirements.

1 January 2016

2017

2016

28.4.3 Market risk Market risk is the risk that the fair value or the future cash flows of a financial instrument may fluctuate as a result of changes in market prices. Market risk comprises of three types of risk: currency risk, commission rate risk and other price risk. Currency risk Currency risk is the risk that the fair value or the future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The Group’s principal transactions are carried in Saudi Riyal, United States Dollar, and United Arab Emirates Dirham. The Group’s management believes that currency risk is not significant since the exchange rate of Saudi Riyal is pegged against those currencies. Commission rate risk Commission rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in the market commission rates. The Group is subject to commission rate risk on its commission rate bearing assets and liabilities, including bank deposits and loans. The Group manages its exposure to commission rate risk by continuously monitoring movements in commission rates. The Group had executed CAP commission options to hedge the fluctuation in the commission rates.

Sukuk and long term loan (note 18)

10,332,082 9,746,588 8,052,863

800,419

Trade payables and other current liabilities (note 20)

694,947

998,593

(2,079,993)

Less: Cash and cash equivalent (note 15)

(1,190,441)

(1,239,862)

Net Debt

9,836,588 8,467,014 7,811,594 9,918,031 10,087,097 9,319,179 9,918,031 10,087,097 9,319,179 19,754,619 18,554,111 17,130,773 49.79% 45.63% 45.60%

Total equity Total capital

Capital and net debt

Gearing ratio

29. CAPITAL COMMITMENTS AND CONTINGENCIES

Capital commitments The Group’s capital commitment related to the ships under construction and the purchase of property and equipment SR 927 million as of December 31, 2017 (2016: SR 2.3 billion, 1 January 2016: SR3.3 billion) (note 7).