I need to estimate the Net Debt / EBITDA ratio for 2022 based on S&P methodology. First, let me understand what data I have and what I need: **Net Debt for 2022 (which is 2023-01-01 in the data, i.e., end of 2022):** - Net Debt 2023-01-01: 7,440,000,000 EUR Wait, let me re-read. The dates are confusing. Looking at the data: - "Net Debt" 2023-01-01: 7440000000 EUR - "Net Debt" 2022-01-01: 941000000 EUR Since the reporting period is 2022-01-01 to 2023-01-01, the 2023-01-01 values represent end of 2022 (closing balances), and 2022-01-01 represents end of 2021. So for 2022 (end of year 2022): - Net Debt = 7,440,000,000 EUR **Now for EBITDA, I need to calculate it using S&P methodology.** S&P typically calculates EBITDA as: - Operating Profit (EBIT) + Depreciation & Amortization + other adjustments From the income statement data for 2022-01-01 - 2023-01-01 (year 2022): 1. **Profit Loss From Operating Activities (EBIT)**: 1,872,000,000 EUR But wait, I need to check if this is recurring or total. Let me look: - "Profit Loss From Operating Activities Recurring": 1,962,000,000 EUR - "Profit Loss From Operating Activities": 1,872,000,000 EUR S&P typically uses recurring operating profit or adjusts for non-recurring items. Let me think about this more carefully. Actually, S&P methodology for EBITDA typically uses: - Operating profit before depreciation and amortization Or equivalently: - Revenue - Operating expenses (before D&A) = EBITDA Let me try another approach using the data available: From the P&L for 2022: - Revenue From Contracts With Customers: 44,322,000,000 EUR - Other Revenue: 76,000,000 EUR - Total Revenue: 44,398,000,000 EUR Operating expenses by nature: - Raw Materials And Consumables Used: 19,372,000,000 EUR - Employee Benefits Expense: 10,381,000,000 EUR - Services Expense: 10,572,000,000 EUR - Tax Expense Other Than Income Tax Expense: 639,000,000 EUR - Depreciation And Amortisation Expense: 2,228,000,000 EUR - Depreciation Rightofuse Assets: 446,000,000 EUR - Impairment Loss...: 172,000,000 EUR - Changes In Inventories: -61,000,000 EUR - Other Income Recurring: -2,565,000,000 EUR (this is income, not expense) - Other Expense By Nature Recurring: 1,252,000,000 EUR Let me verify using the operating profit: Profit Loss From Operating Activities = 1,872,000,000 EUR This includes D&A. So EBIT = 1,872,000,000 EUR. Wait, let me check: "Profit Loss From Operating Activities" - is this before or after D&A? Looking at typical French reporting and the nature of the items: - "Profit Loss From Operating Activities" is typically after D&A (i.e., EBIT) But let me verify by looking at the recurring version: - "Profit Loss From Operating Activities Recurring": 1,962,000,000 EUR - Then "Other Operating Income Non Recurring": 93,000,000 EUR - "Other Operating Expense Non Recurring": 183,000,000 EUR - Net non-recurring: -90,000,000 EUR - So 1,962,000,000 - 90,000,000 = 1,872,000,000 EUR ✓ So EBIT = 1,872,000,000 EUR Now for EBITDA, I need to add back D&A and impairments: - Depreciation And Amortisation Expense: 2,228,000,000 EUR - Depreciation Rightofuse Assets: 446,000,000 EUR - Impairment Loss Reversal...: 172,000,000 EUR (this is a net expense) Wait, the impairment line says "Impairment Loss Reversal Of Impairment Loss Recognised In Profit Or Loss And Provision Expense" = 172,000,000 EUR. This is an expense. But I need to be careful about what's already included in operating profit. Actually, let me recalculate EBITDA from the cash flow statement approach, which is often clearer: From cash flow adjustments to reconcile profit to operating cash flow: - Adjustments For Depreciation And Amortisation Expense And Impairment...: 2,261,000,000 EUR - Adjustments For Depreciation And Other Adjustments Right Of Use Assets: 424,000,000 EUR Total D&A type adjustments: 2,261,000,000 + 424,000,000 = 2,685,000,000 EUR Wait, let me check: "Adjustments For Provisions And Adjustments For Depreciation And Amortisation Expense And Impairment Loss Reversal Of Impairment Loss Recognised In Profit Or Loss" = 2,261,000,000 EUR This seems to include provisions, D&A, and impairment. Let me look more carefully. Actually, looking at the cash flow reconciliation: - Profit Loss From Continuing Operations: 1,131,000,000 EUR (this is after finance costs and tax) Hmm, that's not right for starting point. Let me look for operating profit in cash flows. Actually, the cash flow statement starts from: - "Cash Flow After Cost Of Net Debt Interest Expense On Lease Obligations And Income Taxes Paid" = 3,324,000,000 EUR This is already after tax and interest. Not helpful for EBITDA. Let me try another approach. The standard formula: EBITDA = Operating Profit + D&A + Impairment losses (if not already added back) From the P&L by nature: Total expenses by nature = Raw Materials + Employee + Services + Tax other than income tax + D&A + Impairment + Other expenses - Other income - Change in inventories Let me try: Revenue - (expenses excluding D&A and impairment) Actually, let me use a cleaner approach. In French GAAP/IFRS, "Profit Loss From Operating Activities" is EBIT (operating profit). From the detailed data: - Depreciation And Amortisation Expense: 2,228,000,000 EUR - Depreciation Rightofuse Assets: 446,000,000 EUR But wait - is "Depreciation Rightofuse Assets" already included in "Depreciation And Amortisation Expense" or separate? Looking at the balance sheet: - Rightofuse Assets 2023-01-01: 2,472,000,000 EUR - Rightofuse Assets 2022-01-01: 1,741,000,000 EUR And PPE: - 9,187,000,000 EUR vs 8,048,000,000 EUR The D&A expense of 2,228,000,000 EUR likely includes PPE depreciation and intangible amortization. The Right-of-use assets depreciation of 446,000,000 EUR is likely separate. Total D&A = 2,228,000,000 + 446,000,000 = 2,674,000,000 EUR But wait, let me check if the 2,228 already includes RoU. Looking at typical IFRS 16 presentation, RoU depreciation is often shown separately. So EBIT = 1,872,000,000 EUR Add back: D&A (2,228,000,000 + 446,000,000) = 2,674,000,000 EUR Add back: Impairment expense 172,000,000 EUR EBITDA = 1,872,000,000 + 2,674,000,000 + 172,000,000 = 4,718,000,000 EUR? Wait, but "Impairment Loss Reversal Of Impairment Loss Recognised In Profit Or Loss And Provision Expense" - the name suggests this could be net of reversals. Let me check if this is already in operating profit. Actually, looking more carefully at the P&L structure: - "Profit Loss From Operating Activities Recurring" = 1,962,000,000 EUR - This is before non-recurring items The items that make up operating profit recurring: Revenue (44,322 + 76) - Raw materials (19,372) - Employee (10,381) - Services (10,572) - Tax other than income tax (639) - D&A (2,228 + 446 = 2,674) - Impairment (172) - Change in inventories (-61, i.e., benefit) + Other income recurring (2,565) - Other expense recurring (1,252) Let me verify: 44,398 - 19,372 - 10,381 - 10,572 - 639 - 2,674 - 172 + 61 + 2,565 - 1,252 = ? 44,398 - 19,372 = 25,026 25,026 - 10,381 = 14,645 14,645 - 10,572 = 4,073 4,073 - 639 = 3,434 3,434 - 2,674 = 760 760 - 172 = 588 588 + 61 = 649 649 + 2,565 = 3,214 3,214 - 1,252 = 1,962 ✓ Great! So "Profit Loss From Operating Activities Recurring" = 1,962,000,000 EUR Then non-recurring: + Other Operating Income Non Recurring: 93 - Other Operating Expense Non Recurring: 183 = -90 Total operating profit = 1,962 - 90 = 1,872 ✓ Now for S&P EBITDA, they typically use: - Recurring operating profit (or total operating profit) + D&A + impairment losses Actually, S&P typically calculates Adjusted EBITDA as: - Recurring operating profit before D&A, or - Operating profit + D&A + certain adjustments But there's a question of whether to use recurring or total. S&P Global Ratings methodology typically focuses on "adjusted" figures that normalize for one-time items. However, for the standard Net Debt/EBITDA, they often use: - EBITDA = Operating profit + D&A Let me check both approaches: **Approach 1: Using total operating profit (1,872) + D&A** EBITDA = 1,872 + 2,228 + 446 = 4,546 million EUR But wait, I need to check if impairment is included. The impairment of 172 is part of operating expenses, so it's already deducted to get to operating profit. If we add back D&A only, we get EBIT before D&A but after impairment. Actually, standard EBITDA = EBIT + D&A (where D&A includes all depreciation and amortization, including RoU assets) So EBITDA = 1,872 + 2,228 + 446 = 4,546 million EUR But some methodologies also add back impairment. Let me think... S&P methodology specifically: They often calculate "adjusted EBITDA" which may include add-backs for restructuring, one-time items, etc. But for a basic calculation, EBITDA = operating profit + D&A. Actually, looking more carefully at S&P's corporate methodology, they define EBITDA as earnings before interest, taxes, depreciation and amortization. It's typically: - Operating profit + depreciation + amortization Or from the bottom up: - Recurring operating profit before depreciation and amortization Let me recalculate using recurring operating profit: Recurring operating profit before D&A = 1,962 + 2,228 + 446 = 4,636 million EUR Or if we start from total operating profit: 1,872 + 2,228 + 446 = 4,546 million EUR The difference is the non-recurring items (net -90 million). For S&P methodology, they typically prefer "adjusted" or "recurring" figures. So they might use: - Recurring EBITDA = 4,636 million EUR But actually, let me reconsider. The term "EBITDA" in S&P methodology for leverage ratios typically uses reported EBITDA with certain adjustments. Let me look at this from another angle. The cash flow adjustments give us: - "Adjustments For Provisions And Adjustments For Depreciation And Amortisation Expense And Impairment Loss Reversal Of Impairment Loss Recognised In Profit Or Loss" = 2,261 million This is starting from profit after tax and adding back. Let me see if I can trace this. Actually, let me try to verify my D&A calculation. The balance sheet changes: PPE: 9,187 - 8,048 = +1,139 million (increase) But with D&A and additions/disposals... Actually, the cash flow shows: - Purchase Of PPE And Intangible Assets: 2,625 million - Proceeds From Sales: 404 million - Net liabilities related: 105 million This doesn't directly help with D&A. Let me trust the P&L figures. Total D&A = 2,228 + 446 = 2,674 million. Now, what about impairment? The 172 million impairment expense - is this already in operating profit? Yes. For EBITDA, do we add back impairment? Strictly speaking, EBITDA is before depreciation AND amortization. Impairment is neither depreciation nor amortization - it's a separate item. However, some practitioners include impairment add-backs in "adjusted EBITDA." S&P methodology: Looking at typical S&P adjustments, they calculate EBITDA as: - Operating profit + depreciation + amortization They may or may not add back impairment depending on whether it's considered recurring. For asset impairments, S&P sometimes treats these as non-recurring and may adjust them. But for a standard calculation, let me use: EBITDA = Operating profit + D&A = 1,872 + 2,674 = 4,546 million EUR Or using recurring operating profit: 1,962 + 2,674 = 4,636 million EUR Hmm, but I need to be more careful. Let me re-read the S&P methodology. Actually, S&P Global Ratings typically defines EBITDA in their leverage calculations as: - EBITDA = operating profit + depreciation and amortization And "operating profit" is typically before exceptional items, or they may use "reported EBITDA" and then adjust. For a practical approach with the data given, let me calculate both ways and see which makes more sense. Wait - I need to re-check. Is "Profit Loss From Operating Activities" the same as EBIT? In IFRS, yes, this is operating profit/EBIT. But let me verify: does it include the impairment? Yes, because we verified the calculation above. Now, one more thing: S&P typically uses "adjusted EBITDA" which may include add-backs for certain items. But without specific S&P adjustment details, I'll use standard EBITDA. Let me also consider: should I use recurring or total operating profit? For the year 2022, the company had: - Recurring operating profit: 1,962 million - Non-recurring: net expense of 90 million - Total operating profit: 1,872 million For credit analysis, S&P typically looks at sustainable earnings. They might use recurring operating profit + D&A. But actually, for Net Debt/EBITDA, the standard practice in credit markets is to use reported EBITDA (which would include non-recurring items if they're part of operating profit). Let me try a different verification. Looking at the cash flow: "Cash Flow After Cost Of Net Debt Interest Expense On Lease Obligations And Income Taxes Paid" = 3,324 million This is: Operating cash flow after interest and tax? No wait, let me read carefully. Actually this seems to be: Cash generated from operations after paying interest on leases and income taxes. Hmm, the structure is unusual. Let me look at the full cash flow. From the cash flow statement: - Cash Flows From Used In Operating Activities: 2,978 million This is standard operating cash flow. The line "Cash Flow After Cost Of Net Debt Interest Expense On Lease Obligations And Income Taxes Paid" = 3,324 million is before working capital changes. Let me verify: 3,324 - adjustments for working capital and other items = 2,978? Actually: "Increase Decrease In Working Capital" = 606 million 3,324 + 606 = 3,930? No, that doesn't equal 2,978. Wait, let me look more carefully: - Cash Flow After Cost Of Net Debt...: 3,324 - Adjustments For Cost Of Net Debt...: 260 - Increase Decrease In Working Capital: 606 3,324 - 260 + 606? = 3,670? Not 2,978. Hmm, the signs are confusing. Let me re-read: "Adjustments For Cost Of Net Debt And Interest Expense On Lease Obligations" = 260 million. This is an adjustment to reconcile profit to cash flow, so it's added back. Actually, looking at typical cash flow presentation: Profit before tax and interest: X + D&A, impairments, etc. -/+ Working capital changes - Interest paid - Tax paid = Operating cash flow But the structure here is different. Let me try to reconstruct. "Cash Flow After Cost Of Net Debt Interest Expense On Lease Obligations And Income Taxes Paid" = 3,324 This suggests it's after interest and tax. Then: + Adjustments For Cost Of Net Debt... (260) - this seems to be adding back interest? + Increase Decrease In Working Capital (606) If 3,324 is after interest and tax, and we add back interest (260), we get 3,584 before interest but after tax and working capital? No wait, working capital is also added. Actually, I think "Increase Decrease In Working Capital" = 606 is positive, meaning decrease in working capital (source of cash). Let me try: 3,324 + 260 + 606 = 4,190? Not matching 2,978. Hmm, perhaps the 3,324 already includes some adjustments. Let me not get bogged down in cash flow reconstruction. Back to EBITDA calculation. Let me use a cleaner approach. From the P&L by nature, I can calculate EBITDA as: Revenue - (operating expenses excluding D&A) Revenue: 44,322 + 76 = 44,398 Operating expenses excluding D&A: - Raw materials: 19,372 - Employee: 10,381 - Services: 10,572 - Tax other than income tax: 639 - Impairment: 172 - Change in inventories: -61 (benefit, so subtract from expenses) + Other income recurring: -2,565 (income, so subtract) - Other expense recurring: 1,252 Wait, let me be careful. "Other Income Recurring" is income, not expense. So in the expense section, I should subtract it. Total "operating outflows" excluding D&A: 19,372 + 10,381 + 10,572 + 639 + 172 - 61 + 1,252 - 2,565 = 39,762 Let me verify: 19,372 + 10,381 = 29,753 29,753 + 10,572 = 40,325 40,325 + 639 = 40,964 40,964 + 172 = 41,136 41,136 - 61 = 41,075 41,075 + 1,252 = 42,327 42,327 - 2,565 = 39,762 Then EBITDA = Revenue - these outflows = 44,398 - 39,762 = 4,636 million EUR This matches: Recurring operating profit (1,962) + D&A (2,674) = 4,636 million EUR! Great, so EBITDA = 4,636 million EUR if we use recurring operating profit + D&A. But wait, this excludes non-recurring items. If we include non-recurring: Total operating profit (1,872) + D&A (2,674) = 4,546 million EUR Or from revenue: 44,398 - (39,762 - 90 non-recurring net) = 44,398 - 39,672 = 4,726? No wait. Actually, non-recurring items: +93 income - 183 expense = -90 net expense. So total expenses including non-recurring = 39,762 + 90 = 39,852? No, the 39,762 already includes the recurring items only. Let me recalculate with non-recurring. Total with non-recurring: - Other Operating Income Non Recurring: 93 (reduce expenses) - Other Operating Expense Non Recurring: 183 (add to expenses) So total outflows = 39,762 + 183 - 93 = 39,852? No wait, I need to think about this more carefully. Actually, in my calculation above, I used "Other Income Recurring" and "Other Expense Recurring". The non-recurring versions are separate. So total operating outflows excluding D&A and including non-recurring: 19,372 + 10,381 + 10,572 + 639 + 172 - 61 + 1,252 - 2,565 + 183 - 93 = 39,852 Then EBITDA = 44,398 - 39,852 = 4,546 million EUR Yes! This matches: 1,872 + 2,674 = 4,546. So we have two EBITDA figures: - "Recurring EBITDA" = 4,636 million - "Reported EBITDA" = 4,546 million For S&P methodology, which do they use? S&P Global Ratings typically uses "adjusted EBITDA" which often starts from reported EBITDA and makes adjustments. However, for their standard leverage metrics published in reports, they may use reported figures or make their own adjustments. Actually, looking more carefully at S&P's methodology for corporate issuers, they define EBITDA as: - EBITDA = operating profit + depreciation + amortization And "operating profit" is typically the reported figure (after non-recurring items). However, for leverage calculations, S&P may adjust for non-recurring items if they're deemed one-time. Given the data, let me use the standard calculation: EBITDA = Operating profit + D&A = 1,872 + 2,674 = 4,546 million EUR. But wait - I need to double check the D&A figure. Is the 2,228 "Depreciation And Amortisation Expense" inclusive or exclusive of the 446 "Depreciation Rightofuse Assets"? Looking at the labels: - "Depreciation And Amortisation Expense" = 2,228 - "Depreciation Rightofuse Assets" = 446 These are listed as separate line items. In IFRS 16, depreciation of right-of-use assets is often presented separately from depreciation of PPE and amortization of intangibles. So total D&A = 2,228 + 446 = 2,674. Let me verify with balance sheet changes if possible. PPE: 9,187 - 8,048 = +1,139 RoU: 2,472 - 1,741 = +731 Intangibles other than goodwill: 3,969 - 2,774 = +1,195 Goodwill: 12,626 - 7,446 = +5,180 (likely acquisition-related) The PPE and RoU increases include additions and disposals. From cash flow: - Purchase of PPE and intangibles: 2,625 - Proceeds from sales: 404 - Net liabilities: 105 This doesn't directly give us D&A, but the large goodwill increase suggests an acquisition. Actually, let me verify D&A another way. The intangible assets other than goodwill increased by 1,195 despite amortization. With purchases of PPE and intangibles at 2,625 and proceeds of 404, net additions are about 2,221. But this includes PPE. I think my D&A calculation is correct: 2,228 + 446 = 2,674. Now for S&P Net Debt/EBITDA: Net Debt = 7,440 million EUR (end of 2022) EBITDA = ? Actually, I realize I need to re-check what "Net Debt" means in the data. The company reports: - "Net Debt" 2023-01-01: 7,440,000,000 EUR But let me verify this calculation from the balance sheet: - Cash And Cash Equivalents: 5,736 million - Current Overdrafts And Short Term Borrowings From Banks: 418 million - Current Borrowings And Current Portion Of Noncurrent Borrowings: 1,361 million - Longterm Borrowings: 11,586 million Total borrowings = 418 + 1,361 + 11,586 = 13,365 million Less cash = 5,736 million Net debt = 13,365 - 5,736 = 7,629 million? Hmm, this doesn't match 7,440. Let me check if there are other cash items or other borrowings. Actually, "Cash And Cash Equivalents" might differ from what's used in net debt. The company also reports: - "Cash And Cash Equivalents If Different From Statement Of Financial Position" 2023-01-01: 5,318 million Maybe net debt uses this figure? 13,365 - 5,318 = 8,047? No. Or perhaps there are other financial assets/liabilities included in net debt. Actually, looking at typical corporate net debt definitions, they may include: - All interest-bearing debt - Less cash and cash equivalents - Plus/minus certain other items The reported "Net Debt" of 7,440 is likely the company's own calculation, which I should use. But wait - I need to check if this is average or year-end. For Net Debt/EBITDA, S&P typically uses year-end net debt (point in time) and full year EBITDA. However, some methodologies use average net debt for the year. Given the data, I only have year-end figures, so I'll use year-end net debt. Actually, looking more carefully, I have: - Net Debt 2023-01-01 (end 2022): 7,440 million - Net Debt 2022-01-01 (end 2021): 941 million For 2022 ratio, should I use end-2022 net debt? Yes, typically. But wait - I also need to check if EBITDA should be for 2022 or some average. Standard is full year 2022 EBITDA. Now, one more consideration: S&P methodology might adjust EBITDA for certain items. Let me think about what S&P typically does: 1. They may use "adjusted EBITDA" excluding non-recurring items 2. They may include the full D&A add-back 3. They may make other adjustments for pensions, leases, etc. For IFRS 16, there's a question of whether to include RoU depreciation in EBITDA or not. Pre-IFRS 16, operating leases were off-balance sheet and lease payments were part of operating expenses. Post-IFRS 16, RoU depreciation and interest replace lease expenses. For comparability, some analysts calculate "EBITDA excluding IFRS 16 effects" or make adjustments. However, S&P has generally adapted to IFRS 16 and includes RoU depreciation in the D&A add-back for EBITDA calculations. Actually, let me reconsider. S&P's standard EBITDA calculation post-IFRS 16 typically: - Includes RoU depreciation in D&A - But may adjust the net debt to include lease liabilities or not, depending on the purpose For leverage ratios, S&P sometimes calculates "debt including leases" vs "debt excluding leases." The "Net Debt" reported by the company (7,440 million) - does this include lease liabilities? Looking at the balance sheet: - Noncurrent Lease Liabilities: 2,107 million - Current Lease Liabilities: 498 million - Total lease liabilities: 2,605 million If net debt includes all borrowings minus cash, and lease liabilities are included in borrowings, then yes. But typically "net debt" in European usage often excludes lease liabilities (reporting "net financial debt" or "net bank debt"). Let me check: Total borrowings from my earlier calculation = 13,365 million. If we add lease liabilities (2,605), we get 15,970. Less cash (5,736) = 10,234. This doesn't match 7,440. Alternatively, if net debt = borrowings + lease liabilities - cash = 13,365 + 2,605 - 5,736 = 10,234? No. Or if net debt includes only certain borrowings... Actually, let me try: Long-term borrowings (11,586) + Current borrowings and current portion (1,361) + Current overdrafts (418) = 13,365. This is total interest-bearing debt. 13,365 - 5,736 = 7,629. Close to 7,440 but not exact. Difference = 189 million. Could be due to: - Other current financial assets or liabilities - Hedging instruments - Cash equivalents definition - Or the 5,318 "different" cash figure Actually, 13,365 - 5,318 = 8,047. Not matching. Let me try with other financial items: - Other Noncurrent Financial Assets: 584 - Other Current Financial Assets: 32 - Hedging Instrument Assets: 193 - Other Current Financial Liabilities: 13 - Hedging Instrument Liabilities: 4 Net financial assets excluding cash = 584 + 32 + 193 - 13 - 4 = 792 So adjusted net debt might be: 13,365 - 5,736 - 792 = 6,837? No. Actually, I think the company's reported "Net Debt" of 7,440 is the authoritative figure, and I should use it. The discrepancy might be due to: - Different cash figure used (5,318 vs 5,736) - Or certain borrowings being excluded - Or netting of certain items Actually, let me try: 13,365 - 5,318 = 8,047. Still not 7,440. Hmm, 7,440 + 5,318 = 12,758. So debt per this calculation = 12,758, which is 607 less than 13,365. Or 7,440 + 5,736 = 13,176. Debt = 13,176, which is 189 less than 13,365. I think I should just use the reported Net Debt of 7,440 million. Now, back to EBITDA. Let me think about S&P methodology more carefully. S&P Global Ratings' corporate methodology defines EBITDA in their key financial metrics. For industrial companies, they typically use: EBITDA = Operating profit + depreciation + amortization Where operating profit is "reported operating profit" (not adjusted for non-recurring items in the base calculation, though they may make adjustments in their analysis). Actually, I found that S&P often uses "adjusted EBITDA" which may: - Start from recurring operating profit - Add back D&A - Add back other non-cash items - Make adjustments for non-recurring items For a standard calculation with the data provided, let me use: **EBITDA = Recurring operating profit + D&A = 1,962 + 2,228 + 446 = 4,636 million EUR** Or should I use total operating profit? Actually, for credit ratios, using recurring figures is often preferred as they represent sustainable earnings. The non-recurring items (net -90 million) are one-time. But let me check: S&P's published financial data for companies often uses "reported EBITDA" which includes all items. For their own credit analysis, they may adjust. Given the ambiguity, let me calculate both and see which seems more standard: Option A: Reported EBITDA = 1,872 + 2,674 = 4,546 million Option B: Recurring EBITDA = 1,962 + 2,674 = 4,636 million Net Debt / Reported EBITDA = 7,440 / 4,546 = 1.64x Net Debt / Recurring EBITDA = 7,440 / 4,636 = 1.60x Hmm, these are quite close. The difference is small because the non-recurring items are relatively small. But wait - I need to re-check my understanding of the dates. The data says "2022-01-01 - 2023-01-01" for P&L items, which is the year 2022. And "2023-01-01" for balance sheet items means end of 2022. Actually, I want to double-check: is "2023-01-01" the beginning of 2023 or end of 2022? In accounting, balance sheet dates are point-in-time. So "2023-01-01" is January 1, 2023, which is the end of fiscal year 2022. And "2022-01-01" is January 1, 2022, which is the end of fiscal year 2021. So yes, for 2022 ratios: - Net Debt = 7,440 million (at 2023-01-01, i.e., end of 2022) - EBITDA = for the period 2022-01-01 to 2023-01-01 (year 2022) Now, one more important point: S&P methodology for EBITDA might include or exclude certain items. Let me think about whether to include the impairment. Strictly, EBITDA = Earnings Before Interest, Taxes, Depreciation and Amortization. Impairment is not depreciation or amortization - it's a separate item. So strictly, we should NOT add back impairment to calculate EBITDA. Wait, but impairment losses on fixed assets and intangibles are economically similar to depreciation - they represent a write-down of asset values. In practice, many analysts and rating agencies add back impairment losses to calculate "adjusted EBITDA." However, for standard EBITDA, the formula is: EBITDA = EBIT + Depreciation + Amortization Not + Impairment. So if Operating Profit (EBIT) = 1,872 already includes the impairment of 172, then: EBITDA = 1,872 + 2,228 + 446 = 4,546 But wait - is the impairment included in operating profit? Let me verify. From my earlier verification: Revenue (44,398) - expenses = 1,962 recurring operating profit. The expenses included: - Raw materials: 19,372 - Employee: 10,381 - Services: 10,572 - Tax other than income tax: 639 - D&A: 2,674 - Impairment: 172 - Change in inventories: -61 - Other expense recurring: 1,252 - Other income recurring: -2,565 Total: 44,398 - 39,762 = 4,636? No wait, that's not right. Let me recalculate: 44,398 - 19,372 - 10,381 - 10,572 - 639 - 2,674 - 172 + 61 - 1,252 + 2,565 = ? Actually I had this wrong. Let me be more careful. Revenue: 44,398 Less expenses: - Raw materials: 19,372 - Employee: 10,381 - Services: 10,572 - Tax other than income tax: 639 - D&A: 2,674 (2,228 + 446) - Impairment: 172 - Other expense recurring: 1,252 Plus: - Change in inventories: 61 (positive means reduction in inventory, which is income-like) - Other income recurring: 2,565 So: 44,398 - 19,372 - 10,381 - 10,572 - 639 - 2,674 - 172 - 1,252 + 61 + 2,565 = 44,398 - 44,062 + 2,626 = 336 + 2,626 = 2,962? That's wrong. Let me try again more carefully: 44,398 - 19,372 = 25,026 - 10,381 = 14,645 - 10,572 = 4,073 - 639 = 3,434 - 2,674 = 760 - 172 = 588 - 1,252 = -664 + 61 = -603 + 2,565 = 1,962 Yes! Recurring operating profit = 1,962. ✓ Then with non-recurring: + 93 (other operating income non-recurring) - 183 (other operating expense non-recurring) = 1,962 - 90 = 1,872. ✓ Great. So the impairment of 172 is included in operating profit. Now, for EBITDA, if we add back D&A to operating profit: EBITDA = 1,872 + 2,674 = 4,546 This is "reported EBITDA" including non-recurring items and impairment. If we want "recurring EBITDA" excluding non-recurring items: Recurring EBITDA = 1,962 + 2,674 = 4,636 For S&P methodology, I need to decide which to use. Looking at S&P's published methodology and typical practice: - They often use "adjusted EBITDA" for their credit analysis - Adjusted EBITDA typically excludes non-recurring items that are truly one-time - But includes items that are recurring in nature For this calculation, given that: 1. The non-recurring items are relatively small (90 million net) 2. S&P's standard published ratios often use reported figures or make specific adjustments I'll use **recurring EBITDA** as it's more representative of sustainable earnings, which is what S&P focuses on for credit analysis. Actually, let me reconsider once more. The term "EBITDA" without qualification typically means reported EBITDA. S&P's "adjusted EBITDA" is a specific analytical construct. For the standard "Net Debt / EBITDA" ratio that S&P publishes, they might use: - Reported EBITDA, or - Their own adjusted EBITDA Given the data and typical European corporate reporting, let me check if there's a standard interpretation. Actually, I realize I should look at this more practically. The question asks for "Net Debt / EBITDA ratio for 2022, based on the S&P methodology." S&P methodology specifically: 1. Uses "adjusted" figures where adjustments are made for non-recurring items, pension costs, etc. 2. For EBITDA, they typically calculate it as operating profit before depreciation and amortization, with certain adjustments One key S&P adjustment is for operating leases. Under IFRS 16, S&P may or may not include RoU depreciation and lease liability interest in their adjustments. Actually, S&P has adapted their methodology for IFRS 16. They generally: - Include lease liabilities in debt - Include RoU depreciation in D&A for EBITDA - This maintains comparability with pre-IFRS 16 treatment where lease payments were in operating expenses So my calculation including RoU depreciation is correct. Let me finalize my EBITDA calculation: - Recurring operating profit: 1,962 million - Add: Depreciation and amortization (including RoU): 2,228 + 446 = 2,674 million - Recurring EBITDA: 4,636 million Or using reported operating profit: - Reported EBITDA: 4,546 million For S&P's standard leverage ratio, I'll use **recurring EBITDA** = 4,636 million, as this is closer to S&P's "adjusted EBITDA" concept. Wait, but I need to check if S&P would include the impairment in their EBITDA. Impairment is not D&A, but it's a non-cash write-down. S&P might adjust for it if it's non-recurring. Actually, looking at the impairment more carefully: "Impairment Loss Reversal Of Impairment Loss Recognised In Profit Or Loss And Provision Expense" = 172 million. This is net of reversals. If this includes both impairments and reversals, and is a net expense of 172, S&P might view this as somewhat recurring (provisions and impairments happen every year). In fact, looking at 2021: the same line item was 405 million. So it does recur, just varying amounts. For S&P adjusted EBITDA, they might: - Exclude unusual impairments - But include recurring provision charges Given the ambiguity, and that this is an estimate based on limited data, I'll use the standard calculation: **EBITDA = Operating profit + D&A = 1,872 + 2,674 = 4,546 million EUR** This is the most defensible "reported EBITDA" figure. But actually, for credit ratios, using recurring EBITDA is more standard for forward-looking analysis. Let me see... Hmm, I think I need to make a decision. Let me use **recurring EBITDA = 4,636 million** because: 1. S&P focuses on sustainable earnings 2. The non-recurring items are clearly identified 3. This is closer to "adjusted EBITDA" that S&P would calculate Actually, no. Let me reconsider. "Recurring operating profit" is already a sub-total in the P&L. The total operating profit includes non-recurring items. For a standard EBITDA calculation, we typically start from total operating profit. But S&P specifically says they adjust for non-recurring items. Let me check their methodology document if I can recall... S&P's corporate methodology states they calculate "EBITDA" as: - Revenues less operating expenses (excluding D&A but including the impact of recurring restructuring charges) They adjust for non-recurring items in their "adjusted" metrics. For a practical approach with the given data, I'll calculate both and see: Net Debt / EBITDA (reported) = 7,440 / 4,546 = 1.64x Net Debt / EBITDA (recurring) = 7,440 / 4,636 = 1.60x These are very close. Given typical rounding in financial reporting, either could be reported as ~1.6x. But wait - I need to re-check my net debt figure. Is 7,440 the correct figure for end-2022? Looking back: "Net Debt" 2023-01-01: 7440000000 EUR Yes, this is end of 2022 (January 1, 2023). And for 2021: "Net Debt" 2022-01-01: 941000000 EUR The massive increase from 941 million to 7,440 million suggests a major acquisition or event in 2022. Looking at the balance sheet, goodwill increased from 7,446 to 12,626 million (by 5,180 million), and there was a large cash outflow for acquisitions in investing activities (6,269 million for obtaining control of subsidiaries). This confirms 2022 was a transformational year with major M&A. For the Net Debt/EBITDA ratio at end of 2022, using the elevated year-end net debt is appropriate (point-in-time leverage). However, some methodologies use average net debt for the year, especially when there's been a major acquisition. If we use average: Average net debt = (941 + 7,440) / 2 = 4,190.5 million Average Net Debt / EBITDA = 4,190.5 / 4,546 = 0.92x Or if the acquisition happened mid-year, perhaps a more complex average. But standard S&P methodology uses year-end net debt for leverage ratios, not average. So I'll stick with 7,440. Actually, let me reconsider one more time. The question asks for "Net Debt / EBITDA ratio for 2022." This could mean: - Using 2022 year-end net debt and 2022 full year EBITDA (most common) - Or using average net debt during 2022 Standard practice is year-end net debt and full year EBITDA. Let me finalize my calculation: **Net Debt (end 2022) = 7,440 million EUR** **EBITDA (2022) = 4,636 million EUR (recurring) or 4,546 million EUR (reported)** For S&P methodology, I'll use **recurring EBITDA = 4,636 million** because S&P adjusts for non-recurring items. Net Debt / EBITDA = 7,440 / 4,636 = 1.605... Or with reported EBITDA: 7,440 / 4,546 = 1.637... Hmm, but I want to double-check if S&P would include the impairment in their operating profit adjustment. The impairment is part of "recurring" operating profit in my calculation. But is it truly recurring? Looking at the line item: "Impairment Loss Reversal Of Impairment Loss Recognised In Profit Or Loss And Provision Expense" - this includes both impairments and reversals, and provisions. It's a net expense of 172 in 2022 and 405 in 2021. This seems like a normal business expense, not necessarily non-recurring. So including it in recurring operating profit seems correct. Actually, wait. I need to re-examine. Is this impairment included in the recurring or non-recurring operating profit? From the P&L structure: - "Profit Loss From Operating Activities Recurring" = 1,962 - Then "Other Operating Income Non Recurring" and "Other Operating Expense Non Recurring" = net -90 - Then "Profit Loss From Operating Activities" = 1,872 The impairment of 172 is included in the 1,962 recurring operating profit. It's part of "recurring" results. So my calculation is correct: recurring EBITDA = 1,962 + 2,674 = 4,636. But let me think once more about whether S&P would use recurring or reported. Actually, I realize I should check if "recurring operating profit" is a subtotal before or after certain items. Looking at the naming: - "Profit Loss From Operating Activities Recurring" - vs "Profit Loss From Operating Activities" The "recurring" version is before non-recurring items. This is a common French reporting practice (Résultat opérationnel récurrent / courant). For S&P, which focuses on sustainable earnings, using the recurring figure makes sense. However, I want to verify: is the D&A of 2,228 + 446 already reflected in the operating profit? Yes, because we verified that operating profit = Revenue - all expenses including D&A. So EBITDA = Operating profit + D&A is correct. Final calculation: Net Debt / EBITDA = 7,440 / 4,636 = 1.6048... ≈ 1.60x Or if using reported EBITDA: 7,440 / 4,546 = 1.6366... ≈ 1.64x Given typical S&P practice of using adjusted/recurring figures, I'll go with **1.60x** or about **1.6x**. But let me also consider: should I use the exact figure or rounded? The question asks for an estimate, so some precision is expected. Actually, I want to re-verify one thing. Looking at the cash flow statement: "Adjustments For Provisions And Adjustments For Depreciation And Amortisation Expense And Impairment Loss Reversal Of Impairment Loss Recognised In Profit Or Loss" = 2,261 million This is for cash flow reconciliation. It includes D&A, impairment, and provisions. This is close to my 2,674 + 172 = 2,846, but not exact. The difference might be due to: - Provisions expense/reversal - Different starting point (profit after tax vs operating profit) Actually, the cash flow starts from "Profit Loss From Continuing Operations" = 1,131 million, not operating profit. So the adjustments include interest, tax, and other items too. Let me not get confused by the cash flow. My P&L-based calculation is more direct. One more verification: let me check if 4,636 is reasonable. Revenue: 44,398 million EBITDA margin: 4,636 / 44,398 = 10.4% For a construction/telecom conglomerate like Bouygues, this seems reasonable. Their margins are typically in the single digits to low double digits. Actually, Bouygues has multiple divisions: construction, telecom (Bouygues Telecom), media (TF1). Telecom margins are higher, construction is lower. Blended 10% EBITDA margin seems plausible. Let me also check the 2021 comparison: - Revenue 2021: 37,589 + 55 = 37,644 million - Operating profit 2021: 1,733 million - D&A 2021: 2,065 + 353 = 2,418 million - EBITDA 2021: 1,733 + 2,418 = 4,151 million - EBITDA margin 2021: 4,151 / 37,644 = 11.0% So EBITDA margin declined slightly from 11.0% to 10.4%, which could be due to the acquisition changing the mix. This seems reasonable. Final answer: Net Debt / EBITDA = 7,440 / 4,636 = 1.60 Wait, I want to double-check one more thing. Should I use 4,636 or 4,546? Let me think about what "S&P methodology" means specifically. S&P Global Ratings has a document "Corporate Methodology" that defines their financial ratios. In their methodology, S&P calculates: - EBITDA = Operating profit + Depreciation + Amortization Where "operating profit" is typically the reported operating profit before exceptional items, or adjusted operating profit. Actually, I recall that S&P uses "reported EBITDA" for their published ratios, but then makes adjustments in their credit analysis. For the standard "Net Debt / EBITDA" ratio used in leverage calculations, they might use: Reported EBITDA = EBIT + D&A = 1,872 + 2,674 = 4,546 But they also calculate "Funds From Operations (FFO)" and other metrics that use adjusted figures. For the specific ratio "Net Debt / EBITDA", S&P typically uses: - Debt including leases (or excluding, depending on context) - EBITDA as reported, possibly adjusted Given the ambiguity, and that both 1.60 and 1.64 are close, let me see if there's a way to determine which is more standard. Actually, I just realized: in European corporate reporting, "current operating income" (résultat opérationnel courant) is a standard subtotal that excludes non-recurring items. This is exactly what "Profit Loss From Operating Activities Recurring" represents. For credit analysis, this is often preferred because: 1. It's more comparable year-to-year 2. It reflects sustainable earnings 3. Non-recurring items by definition don't recur So S&P would likely use recurring operating profit + D&A = 4,636. But wait - is the impairment of 172 included in recurring or non-recurring? Looking at the data, it's included in recurring (part of the 1,962). But is that correct? Actually, looking more carefully at French GAAP/IFRS practice: - "Résultat opérationnel courant" (recurring operating profit) typically excludes items that are unusual, infrequent, or non-recurring - Impairment losses might be included or excluded depending on whether they're considered recurring The fact that the impairment is included in "recurring" suggests the company considers it part of normal operations. For S&P, they might adjust this if they disagree with the company's classification. Given the data and the company's own classification, I'll use the company's recurring operating profit figure. So: EBITDA = 1,962 + 2,228 + 446 = 4,636 million EUR Net Debt / EBITDA = 7,440 / 4,636 = 1.6048... Rounding: 1.60 or 1.61? Typically ratios are reported to one or two decimal places. Let me provide 1.60 or perhaps 1.6. Actually, let me calculate more precisely: 7,440 / 4,636 = 1.604831... If I use reported EBITDA: 7,440 / 4,546 = 1.6366... The difference is about 0.03x, which is small but potentially meaningful for precise ratio reporting. Given that S&P typically uses "adjusted" figures, and the company's own "recurring" figure is closer to adjusted, I'll use **1.60x**. But I want to reconsider one more time. Let me check if there's any other interpretation. Some S&P methodology documents define EBITDA as: - Revenue - Cash operating costs Or equivalently: - Operating profit + All non-cash expenses (D&A, impairment, etc.) If we add back impairment too: EBITDA = 1,872 + 2,674 + 172 = 4,718 Net Debt / EBITDA = 7,440 / 4,718 = 1.58 This is even lower. But strictly, EBITDA doesn't include impairment add-backs. Actually, some practitioners do calculate "EBITDA including impairment" or "Adjusted EBITDA" with impairment. But standard EBITDA excludes it. I think my range is 1.60-1.64 depending on adjustments. For S&P methodology, I'll use the recurring figure: **1.60**. Wait, I just need to make absolutely sure about the net debt figure. Let me re-read: "Net Debt" 2023-01-01: 7440000000 EUR Is this in millions? The format shows 7440000000, which is 7,440,000,000 or 7.44 billion EUR. And EBITDA: 4,636,000,000 or 4.636 billion EUR. Ratio: 7,440 / 4,636 = 1.6048 I'll round to 1.60 or perhaps 1.6. Given that this is an estimate based on reported data, and S&P might make additional adjustments, I'll provide 1.60. Actually, let me see if I should express this as a multiple (1.60x) or just the number. The question asks for "Net Debt / EBIDTA ratio" - typically expressed as a multiple like "1.6x" or just "1.6". The answer format says "no units" so I should just provide the number, like 1.6 or 1.60. Let me provide 1.60 for more precision, or 1.6 if rounding to one decimal place. Actually, looking at typical S&P reporting, they often report to one decimal place (e.g., "1.6x"). But for calculation purposes, two decimal places is also common. I'll provide 1.60 as my best estimate. Hmm, but let me reconsider once more whether to use recurring or reported EBITDA. Looking at this from a different angle: S&P's "Corporate Methodology" document (which I've seen in the past) defines key metrics. For "Debt/EBITDA", they typically use: - Total debt / EBITDA - Where EBITDA is "adjusted EBITDA" in their analytical tools But for the standard "Net Debt/EBITDA" ratio that's commonly cited, it's often based on reported figures. Actually, I realize I should check what "Net Debt" means in S&P context. S&P might define net debt differently from the company. S&P typically defines net debt as: - Short-term debt + Long-term debt + Current portion of long-term debt - Cash and cash equivalents - Marketable securities They may or may not include lease liabilities, depending on the context. The company's reported "Net Debt" of 7,440 might differ from S&P's calculation. However, without S&P's specific adjustments, I should use the company's reported net debt figure. Given all this analysis, my final answer is: **Net Debt / EBITDA = 7,440 / 4,636 = 1.60** Or using reported EBITDA: 7,440 / 4,546 = 1.64 I'll go with **1.60** as my best estimate based on S&P's preference for adjusted/recurring earnings. Actually, one last check: I want to verify that 4,636 is indeed the right EBITDA figure. Recurring operating profit: 1,962 Add: Depreciation and amortization: 2,228 Add: Depreciation of right-of-use assets: 446 Total: 4,636 Yes. Is there any other amortization? Goodwill is not amortized under IFRS. Other intangibles are amortized. The 2,228 likely includes PPE depreciation and intangible amortization. So total D&A = 2,228 + 446 = 2,674. EBITDA = 1,962 + 2,674 = 4,636. Final ratio: 7,440 / 4,636 = 1.6048... I'll round to two decimal places: 1.60. 1.60