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METRO GROUP : ANNUAL REPORT 2010 : BUSINESS → GROUP MANAGEMENT REPORT : 4. FINANCIAL ANd ASSET POSITION 4. Financial and asset position Financial management Principles and objectives of financial activities The financial management of METRO GROUP ensures the permanent liquidity supply of the Company, reduces financial risks where economically feasible and grants loans to Group companies as well as financial support in the form of guarantees and letters of comfort for Group units. All activities are monitored and performed centrally by METRO AG. The main objective is to ensure that Group companies have access to the necessary financing for their operating and investment activities at all times and in the most cost-efficient manner possible. As a matter of principle, the selection of the financial products is based on the maturities of the underlying transactions. To ensure access to capital markets even in a tense economic environment, a long-term investment grade credit rating of at least BBB/Baa2 and a short-term rating of A-2/P-2 are required. METRO GROUP’s financial activities are based on a financial budget for the Group, which covers all relevant companies and is updated monthly. In addition, METRO AG provides 14-day liquidity plans. The following principles apply to all Group-wide financial activities: Financial unity By presenting one face to the financial markets, the Group can optimise its financial market conditions. Financial leeway In its relationships with banks and other business partners in the financial arena, METRO GROUP consistently maintains its leeway with regard to financial decisions to stay independent. In the context of our bank policy, limits have been defined to ensure that the Group can replace one financing partner with another at any time. Centralised risk management METRO GROUP’s financial transactions serve to cover financing requirements and are concluded to hedge risks related to underlying business transactions. METRO GROUP’s total financial portfolio is centrally controlled by METRO AG. → p. 090 Centralised risk monitoring Changes in financial parameters, such as interest rate or exchange rate fluctuations, can impact the financing activities of METRO GROUP. Associated risks are regularly quantified in the context of scenario analyses. Open risk positions – for example financial transactions without an underlying business transaction - may be concluded only after the appropriate approval has been granted by the Management Board of METRO AG. Exclusively authorised contractual partners METRO GROUP conducts financial transactions only with contractual partners who have been authorised by METRO AG. The creditworthiness of these contractual partners is tracked on a daily basis based on their ratings. In addition, the risk controlling unit of METRO AG’s finance department continuously monitors the relevant limits. Approval requirement As a matter of principle, all financial transactions of METRO GROUP are concluded with METRO AG. In cases where this is not possible for legal reasons, these transactions are concluded directly between a Group company and a financial partner after METRO AG has given its approval. Audit security The two-signature principle applies within METRO GROUP. All processes and responsibilities are laid down in Groupwide guidelines. The conclusion of financial transactions is separated from settlement and controlling in organisational terms. Ratings Ratings evaluate the ability of a company to meet its financial obligations. They communicate the creditworthiness of a company to potential debt capital investors. In addition, ratings facilitate access to international capital markets. METRO GROUP is continuously monitored by two leading international rating agencies - Moody’s and Standard & Poor’s. The following table illustrates the development of long- and short-term ratings over the past five years:
METRO GROUP : ANNUAL REPORT 2010 : BUSINESS → GROUP MANAGEMENT REPORT : 4. FINANCIAL ANd ASSET POSITION Rating development and outlook Baa1 BBB+ Baa2 BBB Moody’s Standard & Poor’s stable stable Moody’s and Standard & Poor’s currently rate METRO GROUP as follows: 2010 Category Moody’s Standard & Poor’s Long-term Baa2 BBB Short-term P–2 A–2 Outlook negative stable Based on these ratings, METRO GROUP has access to all financial markets. Credit facilities of METRO GROUP stable short-term P-2 A-2 stable stable stable stable negative negative negative 2006 2007 2008 2009 2010 → p. 091 Financing measures The debt Issuance Programme serves as a source of longterm financing. In 2010, we conducted the following transactions in the context of this programme: Type of transaction New issue Redemption Issue date Term Maturity February 2010 7 years 31/12/2010 31/12/2009 February 2017 September 2006 4 years September 2010 Nominal volume Coupon €750 million 4.25% fixed €200 million variable For short- and medium-term financing, METRO GROUP uses ongoing capital market issuance programmes, amongst others. These include the Euro Commercial Paper Programme and a Commercial Paper Programme geared especially to French investors. The average amount utilised from both programmes in 2010 was €687 million. In addition, METRO GROUP used bilateral bank facilities and syndicated credit lines totalling €1,211 million as per the balance sheet date. For further information on financing programmes and credit lines, see the notes to the consolidated financial statements in no. 36 “Financial liabilities”. Aside from the established issuance programmes, the Company had access to sufficient liquidity via comprehensive, generally multi-year credit lines at all times. These are listed in the table below € million Total Up to 1 year Over 1 year Total Up to 1 year Over 1 year Bilateral lines of credit 2,204 1,006 1,198 2,467 1,246 1,221 Utilisation –1,211 –375 –836 –1,214 –534 –680 Unutilised lines of credit 993 631 362 1,253 712 541 Syndicated lines of credit 2,475 0 2,475 2,975 0 2,975 Utilisation 0 0 0 0 0 0 Unutilised lines of credit 2,475 0 2,475 2,975 0 2,975 Total lines of credit 4,679 1,006 3,673 5,442 1,246 4,196 Total utilisation –1,211 –375 –836 –1,214 –534 –680 Total unutilised lines of credit 3,468 631 2,837 4,228 712 3,516
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