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152 Notes to the Financial Statements
39. CREDIT RISK AND CONCENTRATIONS OF CREDIT RISK
Credit risk represents the accounting loss that would be recognised at the reporting date if counter parties fail completely to perform as contracted.
To mitigate the credit risk, the Company has a system of assigning credit limits to its customers. The Company endeavors to cover the credit risks
on government sector trade receivables by restricting credit facility to the projects which are financed by multilateral financial institutions and / or
financed by special allocation of funds by the provincial / federal governments. Business with government sector customers is also secured by way
of inland letters of credit where possible. Credit risk on private sector is covered to the maximum extent possible through letters of credit or legally
binding contracts with availability of adequate finance for the project from the sponsors and lenders.
The sector wise analysis of receivables including trade receivables, advances to suppliers and trade deposits is given below:
2008 2007
(Rupees in ‘000) % (Rupees in ‘000) %
Government sector
Energy 4,352,294 31 5,687,562 68
Communication 179,103 1 293,869 3
Health 87,249 1 37,301 -
Aviation 1,144,262 8 6,476 -
Others 1,012,178 8 537,131 6
Sub-total 6,775,086 49 6,562,339 77
Private sector
Energy 5,601,235 40 415,985 5
Communication 62,767 1 22,685 -
Cement Industry 17,160 - 16,855 -
Dealers and agents 31,305 - 49,266 1
Aviation 25,285 - 51,326 1
Others 1,401,403 10 1,323,779 16
Sub-total 7,139,155 51 1,879,896 23
Total 13,914,241 100 8,442,235 100
40. FOREIGN EXCHANGE RISK MANAGEMENT
Foreign currency risk arises mainly where receivables and payables exist due to transactions with foreign undertakings, especially group
companies. In respect of anticipated future transactions, the following forward exchange contracts have been taken at the balance sheet date to
hedge the foreign currency liabilities to group companies and others.
2008 2007
(Rupees in ‘000)
Forward exchange contracts
- Purchased value 7,917,909 5,103,222
- Fair value 7,797,659 5,208,536
41. CAPITAL RISK MANAGEMENT
The Company's objectives when managing capital is to safeguard the Company's ability to continue as a going concern in order to provide returns
for shareholders and benefits for other stakeholders and to maintain a strong capital base.
The Company manages its capital structure by monitoring return on net assets and makes adjustment to it in the light of changes in economic
conditions. In order to maintain or adjust the capital structure, the Company may adjust the amount of dividends paid to shareholders or issue new
shares.
The Company is not subject to externally imposed capital requirements.