I need to calculate the Net Debt / EBITDA ratio for 2022 and 2023 to determine the leverage trend. First, let me identify the Net Debt figures: - Net Debt 2022-01-01: 941,000,000 EUR - Net Debt 2023-01-01: 7,440,000,000 EUR Now I need to find EBITDA. S&P typically uses "Cash Flow After Cost Of Net Debt Interest Expense On Lease Obligations And Income Taxes Paid" as a proxy for operating cash flow, but for EBITDA I need to work from the profit figures. Let me calculate EBITDA from the income statement items. EBITDA is typically: Profit Loss From Operating Activities + Depreciation And Amortisation Expense + Depreciation Rightofuse Assets + Impairment Loss Reversal Of Impairment Loss Recognised In Profit Or Loss And Provision Expense (or adjustments) Actually, let me use a more standard approach. S&P adjusted EBITDA typically starts from operating profit and adds back depreciation, amortization, and other non-cash items. From the data: - Profit Loss From Operating Activities 2022: 1,872,000,000 EUR (for period 2022-01-01 to 2023-01-01) - Profit Loss From Operating Activities 2021: 1,733,000,000 EUR (for period 2021-01-01 to 2022-01-01) Wait - I need to be careful about the dates. The period "2022-01-01 - 2023-01-01" represents the year 2022 (ending Jan 1, 2023), and "2021-01-01 - 2022-01-01" represents the year 2021. For EBITDA calculation, S&P typically uses: - Operating profit before depreciation and amortization Let me calculate EBITDA by adding back D&A to operating profit: For 2022 (year ending 2023-01-01): - Profit Loss From Operating Activities: 1,872,000,000 EUR - Depreciation And Amortisation Expense: 2,228,000,000 EUR - Depreciation Rightofuse Assets: 446,000,000 EUR EBITDA 2022 = 1,872,000,000 + 2,228,000,000 + 446,000,000 = 4,546,000,000 EUR For 2021 (year ending 2022-01-01): - Profit Loss From Operating Activities: 1,733,000,000 EUR - Depreciation And Amortisation Expense: 2,065,000,000 EUR - Depreciation Rightofuse Assets: 353,000,000 EUR EBITDA 2021 = 1,733,000,000 + 2,065,000,000 + 353,000,000 = 4,151,000,000 EUR Wait - I need to check if S&P includes other items. Let me reconsider. Actually, looking more carefully at S&P methodology, they often use "adjusted EBITDA" which might include additional adjustments. But based on standard definition, let me proceed with this. However, I need to check: the Net Debt at 2022-01-01 corresponds to the start of 2022, and Net Debt at 2023-01-01 corresponds to end of 2022. For leverage ratios, we typically compare year-end net debt to that year's EBITDA. So: - Net Debt at end of 2022 (2023-01-01): 7,440,000,000 EUR with EBITDA for 2022: 4,546,000,000 EUR - Net Debt at end of 2021 (2022-01-01): 941,000,000 EUR with EBITDA for 2021: 4,151,000,000 EUR Leverage ratio 2022 = 7,440,000,000 / 4,546,000,000 = 1.64x Leverage ratio 2021 = 941,000,000 / 4,151,000,000 = 0.23x Change = 1.64 - 0.23 = 1.41x This is much higher than 0.3x, so this would be Deteriorating. But wait - let me double check. The dates are confusing. Let me re-read: "Net Debt" 2023-01-01: 7440000000 EUR - this is net debt at beginning of 2023, i.e., end of 2022 "Net Debt" 2022-01-01: 941000000 EUR - this is net debt at beginning of 2022, i.e., end of 2021 The period "2022-01-01 - 2023-01-01" is the year 2022. The period "2021-01-01 - 2022-01-01" is the year 2021. So my calculation is correct for year-end leverage ratios. However, I want to verify my EBITDA calculation. Let me check if there's a better way. Actually, S&P sometimes uses a different EBITDA definition. Let me look at "Cash Flow After Cost Of Net Debt Interest Expense On Lease Obligations And Income Taxes Paid" which is 3,324,000,000 for 2022 and 3,165,000,000 for 2021. This is after interest and taxes, so to get to EBITDA we'd need to add those back. Let me try another approach. S&P adjusted EBITDA often includes: - Operating profit + D&A + Other adjustments (impairments, etc.) Looking at "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 for 2022 This seems to combine several items. Let me recalculate more carefully using the cash flow statement approach to verify: From "Cash Flows From Used In Operating Activities" = 2,978,000,000 for 2022 This is after working capital changes. To get to EBITDA, we'd need to reverse working capital and other items. Actually, let me stick with my original EBITDA calculation but verify with another method. From the income statement approach: EBITDA = Revenue - Operating expenses (excluding D&A) Revenue 2022 = 44,322,000,000 + 76,000,000 = 44,398,000,000 Operating expenses 2022 (excluding D&A): - Raw Materials And Consumables Used: 19,372,000,000 - Employee Benefits Expense: 10,381,000,000 - Services Expense: 10,572,000,000 - Tax Expense Other Than Income Tax Expense: 639,000,000 - Changes In Inventories: -61,000,000 - Other Income Recurring: -2,565,000,000 (income, so subtract) - Other Expense By Nature Recurring: 1,252,000,000 - Other Operating Income Non Recurring: -93,000,000 - Other Operating Expense Non Recurring: 183,000,000 Wait, this is getting complicated with the signs. Let me use a cleaner approach. Actually, "Profit Loss From Operating Activities" already includes all operating items. So: EBITDA = Profit Loss From Operating Activities + Depreciation And Amortisation Expense + Depreciation Rightofuse Assets + any other D&A-like items For 2022: 1,872,000,000 + 2,228,000,000 + 446,000,000 = 4,546,000,000 But I should check if impairment is already in operating profit or needs to be added back. Looking at "Impairment Loss Reversal Of Impairment Loss Recognised In Profit Or Loss And Provision Expense" = 172,000,000 for 2022. This is likely already included in operating profit. Let me verify by checking if the numbers tie. The operating profit of 1,872,000,000 = 1,962,000,000 (recurring) - 183,000,000 (non-recurring expense) + 93,000,000 (non-recurring income) = 1,872,000,000. Yes, that checks out. Actually wait: 1,962,000,000 - 183,000,000 + 93,000,000 = 1,872,000,000. Yes correct. Now for recurring operating profit: Revenue 44,398,000,000 - Raw materials 19,372,000,000 - Employee benefits 10,381,000,000 - Services 10,572,000,000 - Tax other than income tax 639,000,000 - Change in inventories -61,000,000 (negative means benefit) + Other income 2,565,000,000 - Other expense 1,252,000,000 - D&A 2,228,000,000 - Depreciation ROU 446,000,000 - Impairment 172,000,000 = ? Let me check: 44,398 - 19,372 - 10,381 - 10,572 - 639 + 61 + 2,565 - 1,252 - 2,228 - 446 - 172 = 1,962. Yes! That matches the recurring operating profit. So my EBITDA calculation is correct: 1,962 + 2,228 + 446 = 4,636 for recurring, or using total operating profit: 1,872 + 2,228 + 446 = 4,546. Actually, S&P typically uses total EBITDA including non-recurring items. So 4,546 is correct. Wait, I want to double-check: is 4,546 correct, or should I use 4,636 (recurring EBITDA)? S&P usually adjusts for non-recurring items, so they might use recurring EBITDA. Let me check both: Total EBITDA 2022 = 4,546 Recurring EBITDA 2022 = 1,962 + 2,228 + 446 = 4,636 Total EBITDA 2021 = 1,733 + 2,065 + 353 = 4,151 Recurring EBITDA 2021 = 1,693 + 2,065 + 353 = 4,111 Using recurring EBITDA: 2022 leverage = 7,440 / 4,636 = 1.60x 2021 leverage = 941 / 4,111 = 0.23x Difference = 1.37x Using total EBITDA: 2022 leverage = 7,440 / 4,546 = 1.64x 2021 leverage = 941 / 4,151 = 0.23x Difference = 1.41x Both give approximately the same result: the leverage ratio increased by about 1.4x, which is much more than 0.3x. Therefore, the trend is Deteriorating. But wait - I need to be more careful. The question asks about "S&P's adjusted leverage trend for 2022". This means comparing 2022 vs 2021. Actually, re-reading: "the gap of the ratio Net Debt / EBITDA calculated for the years 2022 and 2023". Hmm, but we only have data through 2022 (periods ending 2023-01-01). We don't have 2023 data (which would be period ending 2024-01-01). Wait, let me re-read the dates more carefully. The data has: - "2023-01-01" as a point in time (balance sheet date) - "2022-01-01 - 2023-01-01" as a period (year 2022) - "2021-01-01 - 2022-01-01" as a period (year 2021) So the most recent data is for year 2022. The question mentions "2022 and 2023" but we don't have 2023 data. Actually, re-reading the question: "estimate S&P's adjusted leverage trend for 2022: Improving, Stable, or Deteriorating." I think this means: based on the 2022 annual report data, what is the trend? The trend would be comparing 2022 vs 2021 (the previous year). The definition says: "the gap of the ratio Net Debt / EBITDA calculated for the years 2022 and 2023 is among ± 0.3x and ± 0.3x year on year." But we only have data for 2021 and 2022. Perhaps the question means comparing the two most recent years available, which would be 2022 vs 2021. Actually, looking more carefully at the data format: "2022-01-01 - 2023-01-01" represents fiscal year 2022, and the balance sheet date "2023-01-01" is the end of fiscal year 2022. So "2022" in the question refers to the fiscal year ending 2023-01-01, and "2023" would refer to fiscal year ending 2024-01-01, which we don't have. But wait - the question says "for 2022" which suggests it's asking about the trend as of 2022. Perhaps it's comparing 2022 year-end vs 2021 year-end? Let me re-interpret: The trend "for 2022" means comparing the 2022 ratio to the 2021 ratio. Given my calculations: - 2021 leverage (end of 2021): 0.23x - 2022 leverage (end of 2022): 1.64x - Change: +1.41x Since +1.41x > +0.3x, this is Deteriorating. The massive increase in net debt from 941 million to 7,440 million (almost 8x increase) while EBITDA only grew modestly from 4,151 million to 4,546 million (about 10% increase) clearly shows deteriorating leverage. Let me verify the net debt increase is correct by checking balance sheet items: Net Debt = Debt - Cash 2022 end: - Longterm Borrowings: 11,586,000,000 - Current Borrowings And Current Portion Of Noncurrent Borrowings: 1,361,000,000 - Current Overdrafts And Short Term Borrowings From Banks: 418,000,000 Total Debt = 13,365,000,000 - Cash And Cash Equivalents: 5,736,000,000 Net Debt = 13,365 - 5,736 = 7,629,000,000 But reported Net Debt is 7,440,000,000. There's a slight difference of 189 million, possibly due to other cash items or adjustments. 2021 end: - Longterm Borrowings: 5,805,000,000 - Current Borrowings And Current Portion Of Noncurrent Borrowings: 1,324,000,000 - Current Overdrafts And Short Term Borrowings From Banks: 351,000,000 Total Debt = 7,480,000,000 - Cash And Cash Equivalents: 6,501,000,000 Net Debt = 7,480 - 6,501 = 979,000,000 But reported Net Debt is 941,000,000. Close enough. The reported net debt figures are what we should use. So my final answer is: Deteriorating, as the leverage ratio increased by approximately 1.4x, far exceeding the 0.3x threshold for Stable. Deteriorating