29. FINANCIAL INSTRUMENTS: INFORMATION ON FINANCIAL RISKS AND OTHER EXPLANATORY INFORMATION (CONTINUED) 29G. Foreign currency risk (Continued) The Company’s currency exposure is as follows: Company Exposure in USD Others Total 2024 $ $ $ Financial assets Cash and bank balances 586,709 2,189 588,898 Trade and other receivables 12,397,153 2,420,144 14,817,297 Subtotal 12,983,862 2,422,333 15,406,195 Financial liabilities Trade and other payables 3,224,374 247,832 3,472,206 Borrowings 12,559,173 1,247,430 13,806,603 Subtotal 15,783,547 1,495,262 17,278,809 Net financial (liabilities)/assets (2,799,685) 927,071 (1,872,614) Add: Currency forward contracts 272,140 – 272,140 Net currency exposure (2,527,545) 927,071 (1,600,474) Sensitivity analysis: The effect on pre-tax profit of the Group and Company is not material. The Company has certain investments in foreign operations, whose net assets are exposed to currency translation risk. The Company does not hedge such currency translation risk. 29H. Capital risk The Group’s objectives when managing capital are to safeguard the Group’s ability to continue its business operations as a going concern and to maintain an optimal capital structure so as to maximise shareholders’ value. In order to maintain or achieve an optimal capital structure, the Group may adjust the amount of dividend payment, return capital to shareholders, issue new shares, buy back issued shares, obtain new borrowings or reduce borrowings. Under loans granted by a bank to a subsidiary, the Group is required by bank to observe certain financial covenants such as a minimum consolidated tangible networth of $30 million and a maximum consolidated leverage ratio of 1.0. The Group monitors its capital regularly to ensure these covenants are not breached. In addition, the Group seeks to maintain maximum gearing ratio of 0.6 internally to minimise financial risks. MEGACHEM LIMITED ANNUAL REPORT 2025 169 31 DECEMBER 2025 NOTES TO THE FINANCIAL STATEMENTS
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