NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED 20. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (CONTINUED) The principle currency risk faced by the business is the exchange rate between the Australian dollar and the US dollar. The Group holds cash denominated in US dollars and Australian dollars and has material revenue and expenditure in each of these currencies. Where possible, the Group matches foreign currency income and foreign currency expenditure as a natural hedge, holding foreign currency cash to facilitate this natural hedge. When foreign currency expenditure exceeds foreign currency revenue and foreign currency cash, the group purchases foreign currency to meet anticipated requirements under spot and forward contracts. The Group does not designate formal hedges. At 31 December 2024, there were three forward contracts to convert Australian dollars to US dollars outstanding. Adjustment of these financial instruments to fair value as measured at 31 December 2024 resulted in a gain of $3.6 million. This fair value measurement is categorised within Level 2 of the fair value hierarchy. A summary of the forward contracts outstanding at 31 December 2024 is as follows: Buy USD $’000 Sell AUD $’000 Term Weighted average exchange rate Buy US dollar / sell AU dollar 28,315 44,175 3 months or less 0.6410 During the year, the US dollar fluctuated against the Australian dollar. A net foreign exchange loss of $7.2 million is included in results for the year ended 31 December 2024 (2023: $2.4 million gain), this includes a $nil gain on the milestone revenue from Acadia (2023: $1.9 million gain). The carrying amounts of Australian dollar (2023: US dollar) denominated financial assets and liabilities are as follows: Year ended Dec 2024 $’000 Year ended Dec 2023 $’000 Assets US dollars – 168,688 Australian dollars 104,030 – 104,030 168,688 Liabilities US dollars – 2,760 Australian dollars 230 – 230 2,760 For the prior period, an increase of 10% in the rate of the Australian dollar against the US dollar as at the reporting date would have decreased the consolidated profit after income tax by $18,418,196. A decrease of 10% in the rate of the Australian dollar against the US dollar as at the reporting date would have increased the consolidated profit after income tax by $22,511,129. An increase of 10% in the rate of the Australian dollar against the US dollar as at the reporting date would have decreased equity by $51,743. A decrease of 10% in the rate of the Australian dollar against the US dollar as at the reporting date would have increased equity by $63,242. During the current period the functional currency of the Group changed from Australian dollars to US dollars. An increase of 10% in the rate of the Australian dollar against the US dollar as at the reporting date would have increased the consolidated profit after income tax by $5,428,109. A decrease of 10% in the rate of the Australian dollar against the US dollar as at the reporting date would have decreased the consolidated profit after income tax by $6,639,911. An increase of 10% in the rate of the Australian dollar against the US dollar as at the reporting date would have decreased equity by $36,280,789. A decrease of 10% in the rate of the Australian dollar against the US dollar as at the reporting date would have increased equity by $44,142,672. Neuren Pharmaceuticals Limited Annual Report 2024 45
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