Principles and objectives of financial activities

The financial management of METRO GROUP ensures the permanent liquidity of the Company, reduces financial risks where economically feasible and grants loans to Group companies. These activities are monitored and performed centrally by METRO AG for the Group through guarantees and letters of comfort. The objective is to ensure that Group companies can cover their funding requirements in a cost-efficient manner and, where possible, via the international capital markets. This applies to the operating activities as well as to investments. As a matter of principle, METRO AG bases its selection of financial products on the maturities of the underlying transactions.

Intra-Group cash pooling reduces the amount of debt and optimises the money market and capital market investments of METRO GROUP, which has a positive effect on net interest income. Cash pooling allows the surplus liquidity of individual Group companies to be used to fund other Group companies internally. METRO GROUP’s financial activities are based on a financial budget for the Group, which covers all relevant companies and is updated monthly. In addition, METRO AG provides 14-day liquidity plans.

METRO AG’s current long-term investment grade rating of BBB–/Baa3 and short-term rating of A‑3/P‑3 support access to capital markets.

The following principles apply to all Group-wide financial activities:

Financial unity

By presenting a single face to the financial markets, the Group can optimise financial market conditions.

Financial leeway

In our relationships with banks and other business partners in the financial arena, we consistently maintain our leeway with regard to financial decisions in order to stay independent. In the context of our bank policy, limits have been defined to ensure that the Group can replace one financing partner with another at any time.

Centralised risk management

METRO GROUP’s financial transactions serve to cover our financing requirements and are concluded to hedge risks related to underlying business transactions. METRO GROUP’s total financial portfolio is centrally controlled by METRO AG.

Centralised risk monitoring

Changes in financial parameters, such as interest rate or exchange rate fluctuations, can impact the financing activities of METRO GROUP. Associated risks are regularly quantified in the context of scenario analyses. Open risk positions – for example financial transactions without an underlying business transaction – may be concluded only after the appropriate approval has been granted by the Management Board of METRO AG.

Exclusively authorised contractual partners

METRO GROUP conducts financial transactions only with contractual partners who have been authorised by METRO AG. The creditworthiness of these contractual partners is tracked on a daily basis based on their ratings and the monitoring of their credit risk ratios (essentially credit default swap analyses). On this basis, the treasury controlling unit of METRO AG’s treasury continuously monitors adherence to the authorised limits.

Approval requirement

As a matter of principle, all financial transactions of METRO Group companies are conducted with METRO AG. In cases where this is not possible for legal reasons, these transactions are concluded on behalf of the Group company or directly between the Group company and an external financial partner in coordination with METRO AG.

Audit security

The 2-signature principle applies within our Company. All processes and responsibilities are laid down in Group-wide guidelines. The conclusion of financial transactions is separated from settlement and controlling in organisational terms.

Ratings

Ratings evaluate the ability of a company to meet its financial obligations. They communicate the creditworthiness of a company to potential debt capital investors. In addition, ratings facilitate access to international capital markets. METRO AG has commissioned the 2 leading international rating agencies – Moody’s and Standard & Poor’s – to continuously analyse METRO GROUP’s creditworthiness.

Development of METRO GROUP’s long- and short-term ratings over the past 5 years:

Rating development and outlook

Current METRO GROUP ratings awarded by Moody’s and Standard & Poor’s:

Based on these ratings, METRO GROUP has access to all financial markets.

Financing measures

The Company’s medium- and long-term financing needs are covered by an on-going capital market issuance programme with a maximum volume of €6 billion. In 2012, we conducted the following transactions in the context of this programme:

At year-end, a total of €4.5 billion was utilised from the on-going issuance programme.

In addition, promissory note loans totalling €550 million were redeemed in 2012, and new promissory note loans totalling €254 million with maturities between 2016 and 2022 were issued.

Short-term financing requirements are covered through the Euro Commercial Paper Programme and a commercial paper programme geared especially to French investors. Both programmes have a maximum volume of €2 billion each. The average amount utilised from both programmes in 2012 was €1,629 million. At the end of the year, the used volume totalled approximately €587 million.

In addition, METRO GROUP used credit lines totalling €1,305 million as of the end of the year.

For further information on financing programmes and credit lines, see the notes to the consolidated financial statements in no. 36 “Borrowings”.

Aside from the established issuance programmes, the Company had access to sufficient liquidity via comprehensive, generally multi-year credit lines at all times. These are listed in the table below.