Cocoa Manufacturing and Processing Industry Sdn. Bhd. (CMP) is a manufacturing company dealing in global cocoa processing (from cocoa beans) and chocolate confectionery manufacturing with also downstream activities involved in retailing in different parts of the world. Being an integrated global business, over the years CMP has offered an increasingly wide range of products appealing to differing market segments based on both socio-demographic and geographic criteria through adaptation to the local culture and tastes. The advantage of this wide array of chocolate and chocolate related products has undoubtedly increased the sales volume. Nevertheless, this industry is a highly competitive industry with other global players involved in the whole supply chain. One of the financial characteristics of this industry is its highly-geared balance sheet.

CMP is relying heavily on information and communication technology to conduct its cross- border businesses with its trading partners.

To achieve what it is today, CMP has to involve itself in various economic activities that would bring along with them the inherent risks involved. CMP needs to engage with counterparties by entering into derivatives to hedge prices of commodities such as cocoa bean which has a very volatile price history. CMP also at times needs to make advance payment to suppliers for raw materials that are in high demand. On top of all these, some of the buyers and suppliers are from countries that are politically unstable that could at times result in payments by their buyers being stopped by the buyers' government due to deficit balance of payment positions.

CMP has the following foreign currency liabilities profile as at 31-3-2015: (all figures have been translated into million Ringgit Malaysia i.e. RM)

Total Liabilities Floating rate Fixed rate

Liabilities Liabilities

198 198

US$ 141 18 133

EURO 14 14

• Weighted average interest rate (borrowing): 7.25% (Liabilities, both fixed and floating rates, were incurred two (2) years ago.) Interest rate (borrowing) now averages around 5%.
• Weighted average number of years for fixed rate liabilities: 5 years.
• Sales are conducted in the respective currencies of the export market e.g. , US$ and Euro.

Required:

Calculate the impact of a movement in the following foreign currencies on the financial position of Cocoa Manufacturing and Processing Industry Sdn. Bhd., the holding company, if the foreign currency liabilities are converted into RM:

i. US$ depreciates 10% against RM;

ii. appreciates by 10 % against RM;

iii. Euro depreciates by 5% against RM