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 swap and forward contracts, 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 US dollar is the predominant functional currency within the Group and as a result, currency exposures arise from transactions and balances in currencies other than the US dollar. The Group's potential currency exposures that could impact the profit or loss comprise: • translational exposure in respect of non-functional currency monetary items • transactional exposure in respect of non-functional currency expenditure and revenues • translational exposure in respect of non-USD functional currency expenditure and revenues to the Group's presentation currency (USD) The objective of management 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. There are no material outstanding foreign exchange forward contracts at 30 June 2025 and 2024. Translation of non-functional currency monetary items – Profit after tax sensitivity to general movement of 1% Monetary items, including financial asset and liabilities, denominated in currencies other than the functional currency of an operation are revalued at the end of each reporting period to its functional currency and the associated gain or loss is taken to the profit or loss. The following chart is based on depreciation of the actual rate of US dollars to AUD, EUR, CHF, GBP and CNY as at 30 June 2025 and 2024 by 1% and applying these adjusted rates to the net monetary assets/liabilities denominated in non-functional currency of various Group entities. Amounts shown are rounded to the nearest US$m. The below sensitivity analysis is not representative of all the inherent foreign exchange risk as the year end exposure does not reflect the exposure during the year including transactional exposure in respect of non-functional currency revenue and expenses. The movement in the foreign exchange rates could vary from the sensitivity rate used. Further, the Group is exposed to foreign exchange volatility in emerging markets, such as Argentina, Turkey and Mexico. US$m 2025 2024 AUD EUR CHF GBP CNY -5 0 5 Translation of net investments in foreign operations – Equity sensitivity to general movement of 1% Where the functional currency of a subsidiary is not US dollars, the subsidiary’s assets and liabilities are translated on consolidation to US dollars using the exchange rates prevailing at the reporting date, and its profit or loss is translated at average exchange rates. All resulting exchange differences are recognised in the FCTR in equity. The following chart is based on depreciation of the actual exchange rate of US dollars to AUD, EUR, CHF, GBP and CNY as at 30 June 2025 and 2024 by 1% and applying these adjusted rates to the net assets/liabilities (excluding investments in subsidiaries) of the foreign currency denominated financial statements of various Group entities. Amounts shown are rounded to the nearest US$m. US$m 2025 2024 AUD EUR CHF GBP CNY 0 5 10 15 20 b. Interest Rate Risk As at 30 June 2025, 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 $15m (2024: $12m). This calculation is based on applying a 1% movement to the total of the Group’s cash and cash equivalents at year end. As at 30 June 2025, 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 $11m (2024: $16m). This calculation is based on applying a 1% movement to the total of the Group’s floating rate unsecured bank loans (excluding bank overdrafts) at year end. 111 111 CSL Limited Annual Report 2024/25
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