To estimate the S&P-adjusted debt-to-EBITDA ratio for VINCI for the fiscal year ended December 31, 2022, we follow the workflow outlined below. ### Step 1: Identify the Relevant Industry VINCI is a global player in concessions and construction. Its business model involves designing, financing, building, and operating infrastructure facilities (airports, motorways, railways, stadiums, etc.) under long-term concessions or contracts. Reviewing the provided industry methodologies: * **Regulated Utilities:** VINCI's concession assets (like airports and toll roads) share characteristics with regulated utilities (long-term contracts, regulated tariffs), but VINCI is a diversified conglomerate with significant construction activities which are cyclical and unregulated. The "Transportation Infrastructure" section is more specific to the nature of its concession assets (Airports, Roads). * **Oil And Gas / Unregulated Power:** Not applicable. * **Transportation Infrastructure:** This section explicitly covers Airports, Roads, Car parks, Ports, and Mass transit/railway. VINCI's concession division (VINCI Concessions) operates primarily in airports (e.g., Gatwick, Lisbon) and motorways (e.g., ASF, Cofiroute). The methodology notes that for transportation infrastructure, we assess competitive advantage based on regulatory/contractual frameworks and demand risk. However, VINCI is a composite entity. S&P Global Ratings typically assesses diversified industrial conglomerates using the **General Corporate** methodology unless a specific sector methodology overrides it for the whole group. The provided text does not contain a specific "Construction" or "Diversified Industrials" methodology, but it does provide "Transportation Infrastructure". Given VINCI's significant exposure to construction (cyclical, competitive) alongside concessions, applying a pure "Transportation Infrastructure" low-volatility framework would be inappropriate for the whole group. S&P usually applies the **Standard Volatility** benchmark for such diversified groups or uses the general corporate baseline adjustments. Since the prompt asks to use the provided facts and methodologies, and VINCI fits best under the broader umbrella of infrastructure/construction which often defaults to general corporate adjustments when not purely a regulated utility or single-sector transport operator, we will apply the **baseline formulas** provided in the prompt instructions, incorporating standard S&P adjustments for leases and cash which are explicitly mentioned in the baseline formula. *Note: In S&P's actual rating of VINCI, they often treat the concession and construction segments separately or use a consolidated approach with specific adjustments. The baseline formula provided is:* `Adjusted_Debt = (reported_debt + leases + pension_deficit + guarantees + hybrid_debt_portion + other_debt_like_items) - eligible_cash` `Adjusted_EBITDA = EBITDA + adjustment_leases + nonrecurring_losses - nonrecurring_gains ...` We will calculate these components from the provided financial data. ### Step 2: Estimate Adjusted Debt **1. Reported Debt:** We need to identify interest-bearing debt from the balance sheet items provided for 2022 (ended 2023-01-01). * Noncurrent Portion Of Noncurrent Bonds Issued: 20,425,000,000 EUR * Noncurrent Portion Of Other Noncurrent Borrowings: 3,205,000,000 EUR * Shortterm Borrowings: 6,368,000,000 EUR * Current Lease Liabilities: 522,000,000 EUR * Noncurrent Lease Liabilities: 1,580,000,000 EUR Total Reported Interest-Bearing Debt (including leases for now, we will separate if needed by formula): Debt (Bonds + Other Borrowings + Short-term) = 20,425 + 3,205 + 6,368 = 29,998 million EUR. Leases = 1,580 + 522 = 2,102 million EUR. The baseline formula says: `Adjusted_Debt = (reported_debt + leases + ...) - eligible_cash`. Usually, "reported debt" in this context refers to financial debt excluding leases if leases are added separately, or total financial debt. Let's assume "reported_debt" refers to standard financial borrowings and "leases" are added explicitly as per the formula instruction. * Reported Debt (Financial Borrowings): 29,998 million EUR. * Leases: 2,102 million EUR. **2. Pension Deficit:** The provided facts do not explicitly list a "Net Pension Deficit" or "Underfunded Pension Liability". We see "Noncurrent Provisions For Employee Benefits" (1,149 million EUR) and "Other Longterm Provisions" (961 million EUR). Without specific disclosure of the funded status (assets vs liabilities) of the pension plans, we cannot calculate a precise deficit. In many simplified analyses using provided facts, if the deficit isn't explicitly stated as a net liability adjustment, it might be omitted or assumed to be contained within provisions. However, S&P typically adds the underfunded amount. Lacking specific "Pension Assets" and "Pension Liabilities" breakdown, we will assume the provision represents the liability and no specific offsetting asset is netted out in the debt calculation unless specified. However, standard practice often requires the *net* deficit. Given the data limitations, we will proceed with 0 adjustment for pension deficit beyond what might be in provisions, or assume it's not a material debt-like item requiring explicit addition in this simplified context compared to the massive debt load. *Correction*: S&P often treats the full underfunded liability as debt. If we assume the "Noncurrent Provisions For Employee Benefits" includes pensions, we don't know the funded status. We will conservatively estimate this as 0 for the calculation due to lack of specific "deficit" data point, or assume it's immaterial relative to the total debt. **3. Guarantees, Hybrid Debt, Other Debt-like Items:** No specific data provided for guarantees or hybrid debt. We assume 0. **4. Eligible Cash:** S&P typically deducts cash and cash equivalents, sometimes restricted cash is excluded. * Cash And Cash Equivalents: 12,578,000,000 EUR. * Current Cash Management Financial Assets: 755,000,000 EUR. * Other Current Financial Assets: 84,000,000 EUR. Total Cash & Equivalents = 12,578 + 755 + 84 = 13,417 million EUR. S&P usually allows the deduction of unrestricted cash. We will use the total Cash and Cash Equivalents plus highly liquid financial assets. Let's use **13,417 million EUR** as eligible cash. **Calculation of Adjusted Debt:** Adjusted Debt = (Reported Financial Debt + Leases) - Eligible Cash Reported Financial Debt = 20,425 + 3,205 + 6,368 = 29,998 million EUR. Leases = 2,102 million EUR. Gross Debt = 29,998 + 2,102 = 32,100 million EUR. Adjusted Debt = 32,100 - 13,417 = **18,683 million EUR**. *(Self-Correction/Refinement: Some methodologies net cash only against debt, not leases. However, the baseline formula provided is `(reported_debt + leases + ...) - eligible_cash`. This implies a net debt approach including leases.)* ### Step 3: Estimate Adjusted EBITDA **1. Reconstruct EBITDA:** We can derive EBITDA from the "Profit Loss From Operating Activities" (Operating Income) and add back Depreciation and Amortization. * Profit Loss From Operating Activities (2022): 6,489,000,000 EUR. * Adjustments For Depreciation And Amortisation Expense (2022): 3,613,000,000 EUR. EBITDA (Reported) = Operating Profit + D&A EBITDA = 6,489 + 3,613 = **10,102 million EUR**. *Alternative Check using Revenue and OpEx:* Revenue From Contracts With Customers: 62,265 million EUR. Other Revenue: 249 million EUR. Total Revenue = 62,514 million EUR. Operating Expense: 55,691 million EUR. Operating Profit = Revenue - OpEx - D&A? Usually, Operating Expense includes D&A. Let's check: 62,514 - 55,691 = 6,823 million EUR. The reported "Profit Loss From Ordinary Operating Activities" is 6,824 million EUR (close enough, rounding diff). The reported "Profit Loss From Operating Activities" is 6,489 million EUR. The difference between Ordinary (6,824) and Total Operating (6,489) is due to "Other Operating Income Expense Non Recurring" (8 million) and potentially other items. Wait, the text lists: "Profit Loss From Ordinary Operating Activities": 6,824 million. "Other Operating Income Expense Recurring": -9 million. "Other Operating Income Expense Non Recurring": 8 million. 6,824 - 9 + 8 = 6,823 million. This matches the Revenue - OpEx calculation roughly. However, the line "Profit Loss From Operating Activities" is 6,489 million. Let's look at the Cash Flow Statement adjustments. "Cash Flows From Used In Operations Before Changes In Working Capital" is 10,215 million. This figure usually starts from Operating Profit and adds back D&A, provisions, etc. Let's use the standard EBITDA definition: Operating Profit + D&A. Which Operating Profit? S&P typically uses the recurring operating profit or adjusts for non-recurring items. The "Profit Loss From Operating Activities" (6,489) seems to be the bottom-line operating profit. Let's add back D&A (3,613) to this. EBITDA = 6,489 + 3,613 = 10,102 million EUR. Let's verify with the Cash Flow from Operations before working capital changes (10,215 million). This figure is often a proxy for EBITDA adjusted for working capital and other non-cash items. Adjustments listed in Cash Flow: - Depreciation/Amortization: 3,613 - Share-based payments: 162 - Losses/Gains on disposal: -68 - Fair Value Gains/Losses: -236 - Undistributed profits of equity method: 42 - Net Finance Costs: 614 (Added back to get to EBIT? No, this is usually below operating profit). - Interest on lease liabilities: 48 - Income Tax: 1,737 If we start from Profit Loss (4,417): + Tax (1,737) + Net Finance Costs (614) = Pre-tax Operating Profit? No. Let's stick to the Operating Profit line. S&P Adjusted EBITDA typically starts with Reported EBITDA and adjusts for: - Lease interest (add back to EBITDA? No, lease *depreciation* and *interest* replace rent. In IFRS 16, EBITDA includes the depreciation of right-of-use assets and excludes interest. The reported D&A (3,613) likely includes depreciation of ROU assets. The reported Operating Profit (6,489) is after deducting this depreciation. So EBITDA = Op Profit + D&A is correct for IFRS 16 reporters. - Non-recurring items: The "Profit Loss From Operating Activities" (6,489) includes "Other Operating Income Expense Non Recurring" (8 million). It also includes "Other Operating Income Expense Recurring" (-9 million). - S&P usually adds back non-recurring losses and subtracts non-recurring gains. - The item "Other Operating Income Expense Non Recurring" is 8 million (Gain). We should subtract this. - Are there other non-recurring items? "Adjustments For Losses Gains On Disposal Of Noncurrent Assets" is -68 million (Gain). This is likely included in the operating profit or below? Usually, gains on disposal are part of operating profit or "other income". The cash flow adjustment suggests it's added back to net income. If it's in Operating Profit, we subtract the gain. - "Adjustments For Fair Value Gains Losses" is -236 million (Gain). If this is in Operating Profit, we subtract it. Let's look at the composition of the 6,489 Operating Profit. It is derived from: Ordinary Operating Activities: 6,824 + Other Recurring: -9 + Other Non-Recurring: 8 Total = 6,823. There is a discrepancy of ~334 million between 6,823 and 6,489. Looking at the items: Share of profit of associates: 22 million. Perhaps the "Profit Loss From Operating Activities" (6,489) is *after* share of associates? 6,823 + 22 = 6,845. Still not 6,489. Let's check the Income Statement structure implied. Revenue: 62,514 Op Ex: 55,691 Op Profit (Gross): 6,823. The line "Profit Loss From Operating Activities" is 6,489. Difference: 334 million. Could this be related to "Other Finance Income Cost" (279 million)? No, that's finance. Could it be related to equity method? Let's rely on the Cash Flow from Operations (CFO) before working capital changes: 10,215 million. CFO before WC = Net Income + D&A + Other Adjustments. Net Income: 4,417 + Tax: 1,737 + Net Finance: 614 + D&A: 3,613 + Share based: 162 + Disp Loss: -68 + FV Loss: -236 + Equity Undist: 42 + Lease Interest: 48 Sum: 4,417 + 1,737 + 614 + 3,613 + 162 - 68 - 236 + 42 + 48 = 10,329. This is close to 10,215. The difference might be working capital provisions or other items. However, EBITDA is generally higher than CFO before WC if there are non-operating items added back in CFO (like finance costs). EBITDA = Operating Profit + D&A. If we use the "Ordinary Operating Activities" (6,824) as the core operating profit: EBITDA = 6,824 + 3,613 = 10,437 million. Adjustments: - Subtract non-recurring gain of 8 million. - Adjust for recurring other op ex of -9 million (this is an expense, so it reduced profit. If it's recurring, it stays. If it's a loss we add back? It's an expense, so it's already deducted. S&P adds back *losses*. So if it's a recurring expense, it remains deducted. If it were a non-recurring loss, we'd add it back. It is recurring, so no adjustment.) - What about the -68 gain on disposal? Is it in Operating Profit? Usually yes. Subtract 68. - What about the -236 fair value gain? Is it in Operating Profit? Often yes for investment properties or derivatives. Subtract 236. Let's refine the EBITDA estimate. Base EBITDA (from Ordinary Op Profit): 6,824 + 3,613 = 10,437. Adjustments: - Non-recurring gain: -8. - Gain on disposal: -68. - Fair value gain: -236. Adjusted EBITDA = 10,437 - 8 - 68 - 236 = **10,125 million EUR**. Alternatively, using the reported "Profit Loss From Operating Activities" of 6,489: EBITDA = 6,489 + 3,613 = 10,102. This figure (10,102) is very close to our adjusted figure (10,125). The difference is small. S&P often uses "Recurring EBITDA". The "Profit Loss From Operating Activities Recurring" is 6,481 million. EBITDA (Recurring) = 6,481 + 3,613 = 10,094 million. Let's use **10,094 million EUR** as the base Adjusted EBITDA, assuming the recurring operating profit is the best starting point and D&A is added back. We assume the D&A figure (3,613) is the total depreciation and amortization relevant to the operations. Are there lease adjustments? Under IFRS 16, EBITDA already includes the add-back of lease depreciation (part of D&A) and excludes lease interest (part of finance costs). So no further "adjustment_leases" is needed for EBITDA unless we are converting from an operating lease model (pre-IFRS 16). VINCI reports under IFRS, so IFRS 16 applies. The baseline formula `adjustment_leases` is typically 0 for IFRS 16 reporters unless normalizing for comparability with pre-IFRS peers, which is not standard for a single-year estimate. We will assume 0. So, **Adjusted EBITDA = 10,094 million EUR**. ### Step 4: Calculate the Ratio Adjusted Debt = 18,683 million EUR. Adjusted EBITDA = 10,094 million EUR. Ratio = 18,683 / 10,094 ≈ 1.8509 Let's double check the Debt calculation. Is "Current Cash Management Financial Assets" eligible cash? Yes, typically. Is "Other Current Financial Assets" eligible? Yes, if liquid. Total Cash = 12,578 + 755 + 84 = 13,417. Total Debt = 20,425 (Bonds) + 3,205 (Other Non-current) + 6,368 (Short-term) + 2,102 (Leases) = 32,100. Net Debt = 32,100 - 13,417 = 18,683. Let's double check EBITDA. Recurring Operating Profit: 6,481. D&A: 3,613. EBITDA: 10,094. Ratio: 1.85. However, S&P might treat "Provisions" or other items differently. Also, VINCI has significant "Noncontrolling Interests". S&P ratios are typically calculated on a consolidated basis (100% of debt, 100% of EBITDA), which we have done. One potential adjustment: **Pension Deficit**. If we assume the "Noncurrent Provisions For Employee Benefits" (1,149) and "Other Longterm Provisions" (961) contain pension liabilities, and we don't have the asset side, we can't net them. If we treated the full provision as debt, Debt would increase by ~2,100. But provisions are not debt. Only the *underfunded* portion is debt-like. Without data, we stick to 0. Another potential adjustment: **Hybrid Debt**. VINCI has issued hybrid bonds (OCEANE). These are often treated as 50% debt and 50% equity by S&P. The provided facts list "Noncurrent Portion Of Noncurrent Bonds Issued" (20,425). It does not separate hybrids. If a portion of this is hybrid, our debt might be overstated. However, without specific identification, we must use the reported bonds. Let's consider if "Adjusted Debt" should include the "Current Portion Of Noncurrent Borrowings". The balance sheet lists: "Noncurrent Portion Of Noncurrent Bonds Issued": 20,425 "Noncurrent Portion Of Other Noncurrent Borrowings": 3,205 "Shortterm Borrowings": 6,368 It does *not* explicitly list "Current Portion Of Noncurrent Bonds". Usually, the current portion is included in "Shortterm Borrowings" or a separate line. Given "Shortterm Borrowings" is 6,368, it likely includes the current maturities of long-term debt. We have included it. Final Check on Cash: S&P may exclude cash held in subsidiaries where repatriation is restricted or taxed heavily. VINCI is global. However, without specific data on restricted cash, we deduct total cash. Calculation: 18,683 / 10,094 = 1.8509... Rounding to two decimal places: 1.85. 1.85