15. Net finance costs
(a) Net finance costs included in profit before tax
2022 US$m | 2021 US$m | |
Interest income: | ||
Bank deposits, short-term investments and loan notes | (14) | (11) |
Interest on pension plan assets | (1) | (1) |
Interest income | (15) | (12) |
Net non-benchmark finance income (note 15(c)) | (169) | — |
Finance income | (184) | (12) |
Finance expense: | ||
Eurobonds and notes | 95 | 102 |
Bank loans, commercial paper, overdrafts and other | 6 | 8 |
Commitment and facility fees | 7 | 6 |
Interest on leases | 8 | 10 |
Interest differentials on derivatives | 9 | 7 |
Interest expense | 125 | 133 |
Net non-benchmark finance expense (note 15(c)) | — | 6 |
Finance expense | 125 | 139 |
Net finance (income)/costs included in profit before tax | (59) | 127 |
(b) Net interest expense included in Benchmark PBT
2022 US$m | 2021 US$m | |
Interest income | (15) | (12) |
Interest expense | 125 | 133 |
Net interest expense included in Benchmark PBT | 110 | 121 |
(c) Analysis of net non-benchmark finance (income)/expense
2022 US$m | 2021 US$m | |
Fair value gains on borrowings – attributable to interest rate risk | (69) | (35) |
Fair value (gains)/losses on borrowings – attributable to currency risk | (77) | 114 |
Losses on interest rate swaps – fair value hedges | 19 | 31 |
Losses/(gains) on cross-currency swaps – fair value hedges | 98 | (75) |
Foreign currency loss/(gain) on cross-currency swaps designated as a cashflow hedge – transfer from OCI | 26 | (33) |
(Gains)/losses on items in hedging relationships – hedge ineffectiveness | (3) | 2 |
Fair value gains on non-hedging derivatives | (88) | (16) |
Foreign exchange (gains)/losses on Brazilian real intra-Group funding | (43) | 16 |
Other foreign exchange (gains)/losses on financing activities | (3) | 9 |
Decrease in present value of put options | (29) | (13) |
Movement in Other financial assets at FVPL | — | (3) |
Movement in connection with commitments to purchase own shares | (2) | — |
Net credit for financing fair value remeasurements | (168) | (5) |
Interest on uncertain tax provisions | (1) | 11 |
(169) | 6 |
(d) Interest rate risk
The following table shows the sensitivity to interest rate risk, on the basis of the profile of Net debt at the balance sheet dates and an assessment of reasonably possible changes in the principal interest rates, with all other variables held constant. In making this assessment, actual movements in relevant interest rates over the most recent three-year period have been considered and a consistent methodology applied. An indication of the primary cause of the reported sensitivity is included.
Gain/(loss) | 2022 US$m | 2021 US$m |
Impact on profit for the financial year: | ||
Effect of an increase of 0.8% (2021: 1.1%) on US dollar-denominated Net debt: | ||
Due to fair value gains on interest rate swaps offset by higher interest on floating rate borrowings | 42 | 19 |
Effect of an increase of 0.3% (2021: 0.3%) on pound sterling-denominated Net debt: | ||
Due to the revaluation of borrowings and related derivatives | 1 | 2 |
Effect of an increase of 3.0% (2021: 2.1%) on Brazilian real-denominated Net debt: | ||
Due to higher interest income on cash and cash equivalents | 1 | 1 |
Effect of an increase of 0.1% (2021: 0.1%) on euro-denominated Net debt: | ||
Due to the revaluation of borrowings and related derivatives | — | — |
Impact on other components of equity: | ||
Effect of an increase of 0.8% (2021: 1.1%): | ||
On the fair value of the US dollar leg of cross-currency swaps treated as a cash flow hedge | 11 | 20 |
Effect of an increase of 0.3% (2021: 0.3%): | ||
On the fair value of the pound sterling leg of cross-currency swaps treated as a cash flow hedge | (4) | (6) |