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Glorious Property
Annual Report 2011
Management Discussion and Analysis -
Financial Review
(Continued)
Financial Review (Continued)
FOREIGN EXCHANGE RISK (Continued)
During the year ended 31 December 2011, the Group had not entered into any foreign currency hedging arrangements.
Management of the Group monitors foreign exchange exposure and will consider hedging significant foreign currency
exposure should the need arise. As at 31 December 2011, if RMB had strengthened/weakened by 5% against other
currencies with all other variables held constant, pre-tax profit for the year ended 31 December 2011 would have been
RMB187.2 million higher/lower (2010: RMB96.5 million higher/lower).
INTEREST RATE RISK
The Group is exposed to interest rate risks resulting from fluctuations in interest rates on its borrowings. Certain of the
Group’s bank loans bear interest rates that are subject to adjustment by the lenders in accordance with changes made
by the People’s Bank of China (“PBOC”). If the PBOC raises interest rates, the Group’s interest cost with respect to
variable rate borrowings will increase. In addition, to the extent that the Group may need to raise debt financing in the
future, upward fluctuations in interest rates will increase the cost of new debt. An increase in interest rates may also
adversely affect the Group’s prospective purchasers’ ability to obtain financing and depress overall housing demand
in China. The Group currently does not use any derivative instruments to modify the nature of the Group’s debts to
manage the Group’s interest rate risks.
PLEDGE OF ASSETS
As at 31 December 2011, the Group had the following categories of properties which had been pledged for the Group’s
borrowings:
RMB’000
2011
2010
Construction in progress
563,384
476,469
Investment properties
2,918,325
2,463,980
Properties under development
5,219,284
3,624,025
Completed properties held for sale
1,750,637
942,530
Total
10,451,630
7,507,004
As at 31 December 2011, equity interests of certain of the Company’s subsidiaries and a jointly controlled entity and
certain bank deposits had been pledged for the Group’s borrowings.
As at 31 December 2011, properties under development of the Group with a carrying value of RMB421.2 million were
being pledged as collateral for certain borrowings of a non-controlling shareholder of a subsidiary (2010: Nil).