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. METRO AG centrally performs and monitors these activities for the group. 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.

Cash pooling allows the surplus liquidity of individual group companies to be used for internal funding of group companies that participate in cash pooling. This reduces the group’s debt volume and thus its interest expenses. 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– and short-term rating of A-3 by Standard & Poor’s support access to capital markets.

In addition, an intensive dialogue with bond investors and credit analysts facilitates capital market access. Our Creditor Relations team also presents our company to all key European financial markets during its annual roadshow. Moreover, 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 obtains better terms on financial markets.

Financial scope

In our relationships with banks and other business partners in the financial arena, we consistently maintain our scope of action in order to remain 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 only be concluded after the Management Board of METRO AG has granted the appropriate approval.

Exclusively authorised contractual partners

METRO GROUP only conducts financial transactions 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. 44 – 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 providers. In addition, ratings facilitate access to international capital markets. METRO AG has commissioned Standard & Poor’s – a leading international rating agency – to continuously analyse METRO GROUP’s creditworthiness.

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

The current METRO GROUP rating awarded by Standard & Poor’s is as follows:

 Download XLS (21KB)

Category

2016

Non-current

BBB–

Current

A-3

Outlook

stable

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

Financing measures

The company’s medium-term and long-term financing needs are covered by an ongoing capital market issuance programme with a maximum volume of €6 billion. The €50 million bond with a coupon of 3.1 per cent that was due on 25 January 2016 and the €60 million bond with a coupon of 3 per cent that was due on 1 February 2016 were repaid on time, as was the CHF 225 million bond with a coupon of 1.875 per cent that was due on 2 May 2016. In addition, an early repayment of €128 million from a €750 million bond with a coupon of 4.25 per cent maturing on 22 February 2017 was made in September 2016.

By 30 September 2016, €3.1 billion had been utilised from the ongoing issuance programme.

In addition, promissory note loans totalling €158 million and €134 million, respectively, were repaid on time on 21 December 2015 and 14 March 2016, respectively, and promissory note loans totalling €55 million were partially repaid early in September 2016.

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 €334 million. As of 30 September 2016, no use was made of these programmes (30/9/2015: €941 million).

In addition, METRO GROUP used bilateral credit facilities totalling €276 million as of 30 September 2016. Existing syndicated credit facilities totalling €2,525 million were not utilised.

For more information about financing programmes and credit facilities, see the notes to the consolidated financial statements in no. 37 – financial liabilities.

Aside from the established issuance programmes, the group had access to sufficient liquidity via comprehensive, generally multi-year credit facilities at all times. These are listed in the following table.

Unutilised credit facilities of METRO GROUP

 Download XLS (24KB)

 

30/9/2015

30/9/2016

 

 

 

 

 

Remaining term

 

Remaining term

€ million

Total

up to 1 year

over 1 year

Total

up to 1 year

over 1 year

Bilateral credit facilities

1,719

962

757

681

437

244

Utilisation

−1,189

−932

−257

−276

−132

−144

Unutilised bilateral credit facilities

530

30

500

405

305

100

Syndicated credit facilities

2,525

0

2,525

2,525

0

2,525

Utilisation

0

0

0

0

0

0

Unutilised syndicated credit facilities

2,525

0

2,525

2,525

0

2,525

Total credit facilities

4,244

962

3,282

3,206

437

2,769

Total utilisation

−1,189

−932

−257

−276

−132

−144

Total undrawn credit facilities

3,055

30

3,025

2,930

305

2,625