CSL Ltd Annual Report 2021

Risk management approach The Group uses sensitivity analysis (together with other methods) to measure the extent of financial risks and decide if they need to be mitigated. If so, the Group’s policy is to use derivative financial instruments, such as foreign exchange contracts and interest rate swaps, to support its objective of achieving financial targets while seeking to protect future financial security. The aim is to reduce the impact of short-term fluctuations in currency or interest rates on the Group’s earnings. Derivatives are exclusively used for this purpose and not as trading or other speculative instruments. a. Foreign Exchange Risk The objective is to match the contracts with committed future cash flows from sales and purchases in foreign currencies to protect the Group against exchange rate movements. The Group reduces its foreign exchange risk on net investments in foreign operations by denominating external borrowings in currencies that match the currencies of its foreign investments. The total value of forward exchange contracts in place at reporting date is nil (2020: nil). Sensitivity analysis – USD values Profit after tax – sensitivity to general movement of 1% A movement of 1% in the USD exchange rate against AUD, EUR, CHF and GBP would not generate a material impact to profit after tax. Equity – sensitivity to general movement of 1% Any change in equity is recorded in the Foreign Currency Translation Reserve. FX Sensitivity on Equity (US$m) -6 -4 -2 0 2 4 6 8 10 12 GBP CHF EUR AUD This calculation is based on changing the actual exchange rate of US Dollars to AUD, EUR, CHF and GBP as at 30 June 2021 by 1% and applying these adjusted rates to the net assets (excluding investments in subsidiaries) of the foreign currency denominated financial statements of various Group entities. b. Interest Rate Risk At 30 June 2021, it is estimated that a general movement of one percentage point in the interest rates applicable to investments of cash and cash equivalents would have changed the Group’s profit after tax by approximately $12.7m (2020: $8.1m). This calculation is based on applying a 1%movement to the total of the Group’s cash and cash equivalents at year end. At 30 June 2021, it is estimated that a general movement of one percentage point in the interest rates applicable to floating rate unsecured bank loans would have changed the Group’s profit after tax by approximately $3.9m (2020: $6.7m). This calculation is based on applying a 1%movement to the total of the Group’s floating rate unsecured bank loans at year end. As at 30 June 2021, the Group had the following bank facilities, unsecured notes and other secured borrowings: • Five revolving committed bank facilities totalling $1,613.6m are available. Of these facilities $77.4m expires in the twelve months, $36.2m in November 2022 and $1.5b in February 2025. Interest on the facilities is paid quarterly in arrears at a variable rate. As at the reporting date the Group had $1,546.8m in undrawn funds available under these facilities; • US$750m uncommitted Commercial Paper Program. As at the reporting date there was $750.0m in undrawn funds available under this facility; • EUR184.7m committed bank facility (the KfW loan) with quarterly repayments commenced in September 2021 through to September 2027; • US$2,900m of Senior Unsecured Notes in the US Private Placement market. The notes mature in November 2021 (US$250m), March 2023 (US$150m), November 2023 (US$200m), March 2025 (US$100m), October 2025 (US$100m), October 2026 (US$150m), November 2026 (US$100m), May 2027 (US$100m), October 2027 (US$250m), October 2028 (US$200m), October 2029 (US$200m), August 2030 (US$300m), October 2031 (US$200m), May 2032 (US$150m), October 2032 (US$150m), May 2035 (US$200m) and October 2037 (US$100m). The weighted average interest rate on the notes is fixed at 3.23%; • EUR350m of Senior Unsecured Notes in the US Private Placement market. The Notes mature in November 2022 (EUR100m), November 2024 (EUR150m) and November 2026 (EUR100m). The weighted average interest rate on the notes is fixed at 1.90%; • CHF400m of Senior Unsecured Notes in the US Private Placement market. The notes mature in October 2023 (CHF150m) and October 2025 (CHF250m). The weighted average interest rate on the notes is fixed at 0.88%; • US$500m of Unsecured Floating Rate Notes (the QDI Bond) in the Hong Kongmarket. The notes mature in October 2023; • Other borrowings with a weighted average term of 4 years (2020: 5 years). The weighted average discount rate implicit in these liabilities is 5.18% (2020: 5.24%). The Group’s other borrowings are secured by assets of $13.1m (2020: $13.1m). In the event of default, the assets securities revert to the lender. The Group is in compliance with all debt covenants. CSL Limited Annual Report 2020/21 128 Notes to the Financial Statements