Financial management

Principles and objectives of financial activities

The financial management of METRO GROUP ensures the permanent liquidity of the company, reduces financial risks where economically feasible and grants loans to group companies. These activities are monitored and performed centrally by METRO AG for the group through guarantees and letters of comfort. The objective is to ensure that group companies can cover their funding requirements in a cost-efficient manner and, where possible, via the international capital markets. This applies to operating activities as well as to investments. As a matter of principle, METRO AG bases its selection of financial products on the maturities of the underlying transactions.

Intra-group cash pooling reduces the amount of debt and optimises the money market and capital market investments of METRO GROUP, which has a positive effect on the interest result. Cash pooling allows the surplus liquidity of individual group companies to be used to internally fund other group companies. 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 a 14-day liquidity plan.

METRO AG’s current long-term investment grade rating of BBB–/Baa3 and short-term rating of A-3/P-3 support access to capital markets.

Capital market access is supported by an intensive dialogue with bond investors and credit analysts. Our Creditor Relations team also presents our company to all key European financial markets during its annual roadshow. In addition, investors and analysts can learn about METRO GROUP’s high-performance capabilities in face-to-face meetings and tours.

The following principles apply to all group-wide financial activities:

Financial unity

By presenting a single face to the financial markets, the group can optimise financial market conditions.

Financial leeway

In our relationships with banks and other business partners in the financial arena, we consistently maintain our leeway with regard to financial decisions in order 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

We conduct financial transactions to cover our financing requirements and hedge risks related to underlying business transactions. METRO GROUP’s total financial portfolio is centrally controlled by METRO AG.

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 and the monitoring of their credit risk ratios (essentially credit default swap analyses). On this basis, the Treasury Controlling unit of METRO AG continuously monitors adherence to the authorised limits.

Approval requirement

As a matter of principle, all financial transactions of METRO GROUP companies are conducted with METRO AG. In cases where this is not possible for legal reasons, these transactions are concluded on behalf of the group company or directly between the group company and an external financial partner in coordination with METRO AG.

Audit security

The two-signature principle applies within our company. All processes and responsibilities are laid down in group-wide guidelines. The conclusion of financial transactions is separated from settlement and controlling in organisational terms.

For more information about the risks stemming from financial instruments and hedge accounting, see the notes to the consolidated financial statements in no. 43 Management of financial risks.

Ratings

Rating development and outlook

Rating development and outlook (graphic)

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 AG has commissioned the two leading international rating agencies – Moody’s and Standard & Poor’s – to continuously analyse METRO GROUP’s creditworthiness.

The development of METRO GROUP’s long- and short-term ratings over the past five years is depicted in the graph Rating development and outlook.

The current METRO GROUP ratings awarded by Moody’s and Standard & Poor’s are as follows:

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2014

 

 

 

Category

Moody's

Standard & Poor's

Long-term

Baa3

BBB–

Short-term

P-3

A-3

Outlook

stable

stable

Based on these ratings, METRO GROUP has access to all financial markets.

Financing measures

The company’s medium- and long-term financing needs are covered by an ongoing capital market issuance programme with a maximum volume of €6 billion. In financial year 2013/14, we conducted no new transactions in the context of this programme. The €500 million bond that matured in November 2013 and the €600 million bond that matured in July 2014 were repaid according to schedule.

As of 30 September 2014, a total of €3.4 billion was utilised from the ongoing issuance programme.

Short-term financing requirements are covered through the Euro Commercial Paper Programme and a commercial paper programme geared especially to French investors. Both programmes have a maximum volume of €2 billion each. The average amount utilised from both programmes during the reporting period was €782 million. As of 30 September 2014, the used volume totalled approximately €938 million.

In addition, METRO GROUP used bilateral lines of credit totalling €865 million as of 30 September 2014.

For more information about financing programmes and lines of credit, 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 lines of credit at all times. These are listed in the following table.

Unutilised lines of credit of METRO GROUP

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30/9/2013

30/9/2014

 

 

 

 

 

Remaining term

 

Remaining term

€ million

Total

up to 1 year

over 1 year

Total

up to 1 year

over 1 year

Bilateral lines of credit

1,826

405

1,421

1,430

300

1,130

Utilisation

−1,096

−310

−787

−865

−260

−604

Unutilised bilateral lines of credit

730

95

634

565

40

526

Syndicated lines of credit

2,500

0

2,500

2,525

0

2,525

Utilisation

0

0

0

0

0

0

Unutilised syndicated lines of credit

2,500

0

2,500

2,525

0

2,525

Total lines of credit

4,326

405

3,921

3,955

300

3,655

Total utilisation

−1,096

−310

−787

−865

−260

−604

Total unutilised lines of credit

3,230

95

3,134

3,090

40

3,051