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RISKS AND CONTROL
1. Risk factors
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SAINT-GOBAIN
- REGISTRATION DOCUMENT 2016
FINANCIAL RISKS
1.3
Liquidity risk
1.3.1
a) Liquidity risk on financing
plans on the credit or capital markets, or to obtain such
the financing or refinancing needed to cover its investment
financing or refinancing on acceptable terms.
In a crisis environment, the Group might be unable to raise
de Saint-Gobain or with the National Delegations’ cash pools.
long-term financing arrangements with Compagnie
managed by the Treasury and Financing Department of
The Group’s overall exposure to liquidity risk on its net debt is
Except in special cases, the subsidiaries enter into short- or
Compagnie de Saint-Gobain, the Group’s parent company.
percentage of overall debt. At the same time, the maturity
Long-term debt therefore systematically represents a high
be rolled over at maturity and to optimize borrowing costs.
The Group’s policy is to ensure that the Group’s financing will
schedules of long-term debt are set in such a way that
replacement capital market issues are spread over time.
bank borrowings and lease financing.
participating securities, a long-term securitization program,
The Group’s main source of long-term financing is bonds,
program. Saint-Gobain also uses perpetual bonds,
which are generally issued under the Medium Term Notes
occasionally Euro Commercial Paper and US Commercial
Negotiable European Commercial Paper (NEU CP), and
Short-term debt is composed of borrowings under
Paper, but also includes receivables securitization programs
securities and cash and cash equivalents.
and bank financing. Financial assets comprise marketable
two confirmed syndicated lines of credit (see chapter 9,
Compagnie de Saint-Gobain’s liquidity position is secured by
section 1).
A breakdown of long-and short-term debt by type and
Statements, which also details the main characteristics of the
maturity is provided in Note 8.3 to the Consolidated Financial
Group’s financing programs and confirmed credit lines.
with a stable outlook by Standard & Poor’s since December 9,
Saint-Gobain’s long-term debt issues have been rated BBB
2014.
with a stable outlook by Moody’s since December 9, 2014.
Saint-Gobain’s long-term debt issues have been rated Baa2
There is no guarantee that the Company will be in a position
deterioration in the Group’s credit risk rating could limit its
to maintain its credit risk ratings at current levels. Any
interest on future borrowings.
capacity to raise funds and could lead to higher rates of
b) Liquidity risk on investments
fund units. To reduce liquidity and volatility risk, whenever
Short-term investments consist of bank deposits and mutual
funds.
possible, the Group invests in money market and/or bond
Market risks
1.3.2
a) Interest rate risks
consolidated debt is managed by the Treasury and Financing
The Group’s overall exposure to interest rate risk on
Department of Compagnie de Saint-Gobain. Where
Group’s parent company.
counterparty is generally Compagnie de Saint-Gobain, the
subsidiaries use derivatives to hedge interest rate risks, their
interest rate swaps, cross-currency swaps, options – including
financial instruments used to hedge these risks can include
caps, floors and swaptions – and forward rate agreements.
The Group’s policy is aimed at fixing the cost of its
borrowing costs. According to Group policy, the derivative
medium-term debt against interest rate risk and optimizing
The table below shows the sensitivity at December 31, 2016 of
pre-tax income and pre-tax equity to fluctuations in the
interest rate on the Group’s net debt after hedging:
(in € millions)
Impact on
pre-tax income
pre-tax equity
Impact on
of 50 basis points
Interest rate increase
12
1
of 50 basis points
Interest rate decrease
(12)
(1)
(fixed or variable) after hedging.
risk hedging instruments and of gross debt by rate type
chapter 9, section 1) provides a breakdown of interest rate
Note 8.4 to the Consolidated Financial Statements (see
b) Foreign exchange risk
sharper than expected fluctuations in exchange rates
insufficient to protect the Group against unexpected or
resulting from economic and financial market conditions.
The currency hedging policies described below could be
from current and forecast transactions.
forward contracts and options to hedge exposures arising
transactions entered into by Group entities in currencies
Foreign exchange risks are managed by hedging virtually all
Compagnie de Saint-Gobain and its subsidiaries may use
other than the functional currency of the particular entity.