124 / 364
4.1 CONSOLIDATED FINANCIAL STATEMENTS AND NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note 10. Financing and financial security, net debt and cost of net debt
DANONE
REGISTRATION DOCUMENT 2015
124
Change in net debt in 2015
Danone's net debt was stable relative to 2014, as operating cash
flows made it possible to finance the acquisitions carried out in 2015.
Net debt includes €862million in put options granted to non-control-
ling interests. The liability related to these options decreased by
€1,696 million relative to December 31, 2014. This change reflects
in particular the acquisition of 15.7% of Danone Spain's share capi-
tal and the exercise of put options by certain shareholders of the
Danone-Unimilk combined entity.
Change in net debt in 2014
Net debt stood at €7,764 million as of December 31, 2014, including
€2,558million in put options granted to non-controlling shareholders.
The debt represented by these options was down €686 million from
December 31, 2013 due in particular to Danone's increased equity
interest in Centrale Danone (Morocco) in 2014.
Excluding put options for non-controlling shareholders, the Group's
net financial debt stood at €5,206 million, up €484 million from
December 31, 2013. The rise was linked mainly to acquisitions made
by Danone in the course of 2014, including its increased stake in
Centrale Danone (Morocco) and Mengniu (China), and its acquisition
of an interest in Brookside (Kenya).
Note 10.6. Cost of net debt
Accounting principles
Cost of net debt comprises mainly interest charges (calculated at
the effective interest rate) on current and non-current financing and
the effects of the derivatives relating to said financing.
Interest income comprises mainly interest received and, if appli-
cable, the effects of the measurement at fair value through profit or
loss of the short-term investments and cash and cash equivalents.
The related cash flows are presented within Cash flows provided
by (used in) operating activities.
Cost of net debt in 2015
Cost of net debt declined despite higher net financial debt than in
2014. This decline was linked in particular to lower interest rates
and the benefits of bond issues that enabled Danone to extend the
average maturity of its debt at favorable market conditions.
Cost of net debt in 2014
Cost of net debt declined despite higher net financial debt than in
2013. This decline was linked in particular to lower interest rates
and the benefits of bond issues that enabled the Group to extend
the average maturity of its debt at favorable market conditions.
Note 10.7. Financial risks associated with the financing activity
Interest rate risk
Interest rate risk exposure
The Group is exposed to interest rate risk on its financial liabilities as
well as its cash and cash equivalents. Through its interest-bearing
debt, the Group is exposed to the risk of interest rate fluctuations
that affect the amount of its financial expense.
In addition, in accordance with IAS 39,
Financial Instruments: Reco-
gnition and Measurement
, interest rate fluctuations may have an
impact on the Group's consolidated results and consolidated equity.
The Group has implemented a policy to monitor and manage this
interest rate risk for the purpose of limiting the volatility of its net
financial income or expense through the use of hedging instruments.
These derivatives are mainly interest rate swaps and sometimes
collars. All these instruments are plain vanilla. The interest rate
derivatives are contracted for the purpose of managing interest
rate risk and are either eligible to be used as hedges or not in
accordance with IAS 39.
Sensitivity of net income to changes in the cost of net debt
resulting from changes in the short-term interest rate
Sensitivity to interest rate changes reflects the following factors:
•
financial debt net of short-term investments, cash and cash
equivalents. It excludes the financial liabilities related to put
options granted to non-controlling interests as these are not
interest-bearing;
•
active interest rate hedges as of December 31.