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Tiger Brands Limited Integrated Annual Report
2014
Annual financial statements
37 Financial instruments
continued
37.5
Credit risk management
GROUP
Credit risk arises from the risk that a counterparty may default or not meet its obligations timeously.
The group limits its counterparty exposure arising from financial instruments by only dealing with
well-established institutions of high credit standing.
Credit risk, in respect of the group’s customer base, is controlled by the application of credit limits and
credit monitoring procedures. Certain significant receivables are monitored on a daily basis. Where
appropriate, credit guarantee insurance is obtained.
The group’s credit exposure, in respect of its customer base, is represented by the net aggregate
balance of amounts receivable. Concentrations of credit risk are disclosed in note 21.4.
Credit risk exposure at 30 September 2014 in respect of guarantees amounted to R70,8 million
(2013: R78,8 million). Refer to note 36.
COMPANY
Credit risk exposure at 30 September 2014 relating to guarantees amounted to R55,0 million
(2013: R63,0 million). Refer to note 36.
37.6
Capital management
The primary objective of the company and group’s capital management is to ensure that they maintain a
strong credit rating and healthy capital ratios in order to support its business and maximise shareholder value.
The company and group manage their capital structure, calculated as equity plus net debt, and make
adjustments to it in light of changes in economic conditions. To maintain or adjust the capital structure, the
company and group may adjust the dividend payment to shareholders, return capital to shareholders, issue
new shares or increase or decrease levels of debt. No changes were made in the objectives, policies or
processes during the years ended 30 September 2014 and 30 September 2013.
The company and group monitor capital using a gearing ratio, which is net debt divided by total equity.
The company and group target a long-term gearing ratio of 30% to 40%, except when major
investments are made where this target may be exceeded.
GROUP
(R’million)
2014
Restated*
2013
Cash and cash equivalents
(1 160,3)
(632,9)
Long-term borrowings
627,4
1 452,7
Short-term borrowings
4 022,1
3 650,2
Net debt
3 489,2
4 470,0
Total equity
13 947,2
13 815,5
Total capital
17 436,4
18 285,5
Net debt to equity (%)
25,0
32,4
*
The amounts have been restated due to the adoption of IAS 19R.