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Financial Reports &
Governance HENGYUAN REFINING COMPANY BERHAD l ANNUAL REPORT 2023 123
Other Information

NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2023

4 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued)
(b) Credit risk (continued)
(ii) Deposits with licensed banks, bank balances and favourable derivative financial instruments

The Company seeks to invest cash assets safely and profitably. Deposits, forward contracts and interest rate swaps
entered into are placed only with financial institutions with strong long-term credit ratings based on independent
rating agencies. The likelihood of non-performance by these financial institutions is remote based on their high
credit ratings.
For other favourable derivative financial instruments such as refining margin swaps, commodity swaps, commodity
options and forward priced commodity contracts, these are also entered into with counterparties with strong
long-term credit ratings based on independent agencies. In addition, the Company may obtain security which can be
called upon if the counterparty is in default under terms of agreement.
None of the financial assets have been renegotiated in the current financial year.
(c) Liquidity and cash flow risks
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Company’s
exposure to liquidity risk arises principally from its payables and borrowings. The Company ensures that cash is available to
meet working capital and other financing obligations, and that cash flows are managed efficiently. This is done through
cash flows forecasts to achieve optimal cash management planning. The Company sets a minimum level of cash to be held
on a daily basis in order to meet both firm commitments and forecast obligations. The Company has sufficient facilities
from the banks to meet its liabilities when they fall due. The revolving credit facilities will be reviewed and renewed
annually by the banks.

As at 31 December 2023, the Company has a net current liabilities position of RM435,770,000. The Company’s net
current liabilities position is mainly contributed by short term borrowings and trade and other payables. Based on the cash
flows forecast for the next twelve months from the date of approval of the financial statements, the Directors are of the
view that the Company is able to generate sufficient cash flows for the next twelve months from the date of approval of
the financial statements to meet their operation requirements as and when falls due.
As at 31 December 2023, there are outstanding borrowings amounting to RM1,720,881,000 (2022: RM1,608,947,000)
as disclosed in Note 26.