Carrefour - 2017 Registration Document

MANAGEMENT’S DISCUSSION AND ANALYSIS AS OF DECEMBER 31, 2017 Risk management 2017 REGISTRATION DOCUMENT | CARREFOUR 4. 198 Financial risk management 4.7.1.4 The main risks associated with the financial instruments used by the Group are liquidity, interest rate, currency, credit and equity risks. They are described in detail in Note 12.7 to the Consolidated Financial Statements. Due to the differing natures of the various businesses, financial risks arising from the bancassurance business (including Carrefour Banque in particular) are managed separately from those related to the retail business. An organisation has been set up around a cash-pooling system to track financial risks. A reporting system ensures that Group Executive Management can oversee the department’s implementation of the approved management strategies. The risks associated with the consumer credit business are managed and tracked directly by the entities concerned. Corporate Treasury and Financing oversees the proper implementation of the rules governing the consumer credit business, jointly with the other investors in the business, where applicable. A reporting system is in place between local teams and Corporate Treasury and Financing. Liquidity risk A schedule of borrowings by maturity and detailed information on liquidity risk appear in Note 12.7 to the Consolidated Financial Statements. Liquidity risk is the risk that Carrefour will be unable to settle its financial liabilities when they fall due. The Group manages its liquidity risk by ensuring, to the extent possible, that it has sufficient liquid assets at all times to settle its liabilities when they fall due, whatever the market conditions. A Liquidity Committee meets at monthly intervals to check that the Group’s financing needs are covered by its available resources. Corporate Treasury and Financing’s liquidity management strategy consists of: promoting conservative financing strategies in order to ensure ● that the Group’s credit rating allows it to raise funds on the bond and commercial paper markets; maintaining a presence in the debt market through regular debt ● issuance programmes, mainly in euros, in order to create a balanced maturity profile. The Group’s issuance capacity under its Euro Medium-Term Notes (EMTN) programme totals 12 billion euros; using the 5 billion-euro commercial paper programme on ● Euronext Paris, described in a prospectus filed with Banque de France; maintaining undrawn medium-term bank facilities that can be ● drawn down at any time according to the Group’s needs. At December 31, 2017, the Group had two undrawn syndicated lines of credit obtained from a pool of leading banks, for a total of 3.9 billion euros. restriction on substantial asset sales and cross default. The pricing grid may be adjusted up or down to reflect changes in the long-term credit rating. Group policy consists of keeping these facilities on stand-by to support the commercial paper programme. The loan agreements for the syndicated lines of credit include the usual clauses, such as pari passu, negative pledge, change of control, In Brazil, money market instruments (notas promissórias) with maturities of six to 19 months were issued by Atacadão SA in the second half of 2017, as presented in Note 12.2.2 to the Consolidated Financial Statements. The Group considers its liquidity position to be robust. It has sufficient cash reserves to meet its debt repayment obligations in the coming year. The Group’s debt profile is balanced, with no peak in refinancing needs across the remaining life of bond debt, which averages three years and nine months. Carrefour Banque’s liquidity risk is monitored within the framework of an Executive Management-approved liquidity strategy that is part of the Group’s overall strategy. Carrefour Banque’s refinancing situation is assessed based on internal standards, early warning indicators and regulatory ratios. The objectives of liquidity risk management are to: ensure that refinancing needs are met, based on monthly ● assessments of projected cash surpluses or shortfalls over a three-year period performed by comparing static forecasts of committed financing facilities with dynamic lending forecasts; gradually achieve compliance with the new Basel III liquidity ● coverage ratios, through a process that is designed to deliver a sustainable improvement in asset quality by investing in a dedicated fund eligible for inclusion in the ratio calculation and extending the maturity of liabilities in order to improve the net stable funding ratio; diversify refinancing sources to include bank lines of credit, bond ● issues, securitisation programmes, money market issues and customer deposits. During 2017, Carrefour Banque took out a 400 million-euro loan from the European Central Bank to support the financing and development of its businesses (see Note 5.5.2 to the Consolidated Financial Statements). The master trust structure allows Carrefour Banque to dynamically manage series of asset-backed securities issued by the securitisation fund. Within this structure, the 110 million-euro series was renewed for a two-year period, as from June 2016. In November 2014, Carrefour Banque secured its refinancing sources by rolling over its 750 millioneuro five-year syndicated line of credit and negotiating two one-year extension options, the second of which was exercised in 2016, extending the facility’s maturity to November 2021. Interest rate risk Interest rate risk is the risk of a change in interest rates leading to an increase in the Group’s net borrowing costs. Detailed information on interest-rate risk appears in Note 12.7 to the Consolidated Financial Statements. Interest rate risk is managed at headquarters level by Corporate Treasury and Financing, which reports monthly to an Interest Rate Risk Committee responsible for recommending hedging strategies and methods to be used to limit interest rate exposures and optimise borrowing costs.