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Change in value used for calculating hedge ineffectiveness NZ$M
Hedging (gain) or loss recognised in other comprehensive income NZ$M
Hedging (gain) or loss recognised in income statement NZ$M
Carrying amount – derivative assets/ (liabilities) NZ$M
Nominal amount of the hedging instrument NZ$M
Hedge type
Cash flow hedging Interest rate swaps – NZD borrowings Maturity: 17-45 months Weighted average interest rate: 5.98% Interest rate swaps – AUD borrowings Maturity: 10-12 months Weighted average interest rate: 4.13% Fair value hedging Interest rate swaps – USD borrowings Maturity: 15 months Weighted average interest rate: Floating
150
(1)
(1)
1
141
(2)
3
2
118
4 1
(5) (3)
5 5
3
There was no hedge ineffectiveness recognised in profit or loss during the year.
Interest rate repricing The following tables set out the interest rate repricing profile of interest bearing financial assets and liabilities. The Group's overall weighted average interest rate (based on year end borrowings) excluding fees is 6.23% (June 2017: 4.76%).
June 2018 NZ$M
June 2017 NZ$M
Fletcher Building Group
Floating
831 242 278 376 150
1,192
Fixed up to 1 year Fixed 1-2 years Fixed 2-5 years Fixed over 5 years
100 237 462 139
Total financial liabilities Floating financial assets
1,877
2,130
(665)
(219)
(c) Commodity price risk Commodity price risk arises from committed or highly probable trade and capital expenditure transactions that are linked to traded commodities. Where possible the Group manages its commodity price risks through negotiated supply contracts and, for certain commodities, by using commodity price swaps and options. The Group manages its commodity price risk depending on the underlying exposures, economic conditions and access to active derivatives markets. There is a hedge ratio of 1:1 for commodity hedges. Cash flow hedge accounting is applied to commodity derivative contracts. Ineffectiveness is only expected to arise where the index of the hedging instrument differs to that of the underlying hedged item. The average hedge price for 2018 was NZ$/MWh 75 (June 2017: NZ$/MWh 77). (d) Credit risk Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations. To the extent the Group has a receivable from another party, there is a credit risk in the event of non-performance by that counterparty and arises principally from receivables from customers, derivative financial instruments and the investment of cash. (i) Trade receivables The Group has a credit policy in place under which customers are individually analysed for credit worthiness and assigned a purchase limit. If no external ratings are available, the Group reviews the customer's financial statements, trade references, bankers' references and/or credit agencies' reports to assess credit worthiness. These limits are reviewed on a regular basis. Owing to the Group’s industry and geographical spread at balance date, there were no significant concentrations of credit risks in respect of trade receivables. Refer to Note 9 for debtor balances and ageing analysis. Most goods are sold subject to retention of title clauses, so that in the event of non-payment the Group may have a secured claim. Credit risks may be further mitigated by registering an interest in the goods sold and the proceeds arising from that supply. The Group does not otherwise require collateral in respect of trade receivables. In assessing credit losses for trade receivables, the Group applies the simplified approach and records lifetime expected credit losses (“ECLs”) on trade receivables. Lifetime ECLs result from all possible default events over the expected life of a trade receivable. The Group considers the probability of default upon initial recognition of the trade receivable, based on reasonable and available information on the customers.
81 Fletcher Building Limited Annual Report 2018
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