Groupe Renault - 2019 Universal Registration Document

04

CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL STATEMENTS

The Sales Financing segment has low exposure to foreign exchange risks due to the management principles applied. No position can be taken under the central management framework for refinancing; the trading room hedges all flows concerned. Residual, temporal positions in foreign currencies related to the time differences in cash flow inherent to multi-currency cash management may still remain. They are monitored daily and the same hedging policy applies. The sales financing subsidiaries are obliged to obtain refinancing in their own currency and as a result are not exposed. In exceptional circumstances, limits are assigned to subsidiaries where sales financing activities or refinancing take place in several different currencies, and to subsidiaries authorized to invest some of their cash surpluses in a currency other than their local currency. At December 31, 2019 RCI Banque’s consolidated foreign exchange position reached €6.3 million. In preparation for the consequences of Brexit, all the activities of RCI Bank UK Branch were transferred from March 14, 2019 to a new entity, the credit institution RCI Services UK Limited, which is a fully-owned subsidiary of RCI Banque SA. The Automotive (excluding AVTOVAZ) and Sales Financing segments made no major changes to their foreign exchange risk management policy in 2019.

ANALYSIS OF FINANCIAL INSTRUMENTS’ SENSITIVITY TO FOREIGN EXCHANGE RISKS IN THE AUTOMOTIVE (EXCLUDING AVTOVAZ) SEGMENT This analysis concerns the sensitivity to foreign exchange risks of monetary assets and liabilities (including intra-Group balances) and derivatives denominated in a currency other than the currency of the entity that holds them. However, it does not take into items (hedged assets or liabilities and derivatives) concerned by fair value hedging, for which changes in fair value of the hedged item and the hedging instrument totally offset each other in the income statement. The impact on shareholders’ equity (before tax) of a 1% rise in the euro against other currencies is assessed by converting financial assets, cash flow hedges and the partial hedge of the investment in Nissan. For the Automotive (excluding AVTOVAZ) segment, this impact would be a favourable €10 million at December 31, 2019, explained by the yen bond issues that make up the partial hedge of the investment in Nissan (see note 12-G) and the partial hedge set up for future cash flows in sterling in 2020. The impact on net income of a 1% rise in the euro against other currencies would be an unfavourable €7 million at December 31, 2019, mainly attributable to unhedged operating assets and liabilities denominated in a currency that is not the functional currency of the entity that holds them.

CURRENCY DERIVATIVES

December 31, 2019

December 31, 2018

Nominal

<1 yr 1 to 5 yrs

>5 yrs Nominal

<1 yr 1 to 5 yrs

>5 yrs

(€ million)

Currency swaps – purchases

724 720

436 434

288 286

- - - -

3,101 3,092

1,408 1,393

1,693 1,699 1,669 1,669

- - - -

Currency swaps – sales

Forward purchases

25,539 25,603

23,567 23,631

1,972 1,972

30,089 30,105

28,420 28,436

Forward sales

Each entity’s position with regard to its limit is checked daily, and immediate hedging directives are issued to the subsidiaries if circumstances require. The results of the checks are reported monthly to the Sales Financing segment’s Finance Committee, which checks that the positions comply with the Group’s financial strategy and current procedural instructions. Analysis of the Sales Financing segment’s structural interest rate risk shows the following: virtually all loans to customers by sales financing subsidiaries bear P interest at a fixed rate and have terms from one to 72 months. These loans are hedged by fixed-rate resources with the same structure. They are covered by macro-hedging and only generate a residual interest rate risk. In subsidiaries where the financing bears interest at a floating rate, the interest rate risk is hedged by macro-hedging using interest rate swap; the main activity of the Sales Financing segment’s Central P Refinancing department is refinancing the segment’s commercial subsidiaries. The outstanding credit issued by sales financing subsidiaries is backed by fixed-interest resources, some of which are micro-hedged by interest rate swaps, and floating-rate resources. Macro-hedging transactions in the form of interest rate swaps keep the sensitivity of the refinancing holding company below the defined limit.

Interest rate risks B3 MANAGEMENT OF INTEREST RATE RISKS

The Groupe Renault’s exposure to interest rate risks mainly concerns the Sales Financing segment’s activity exercised by RCI Banque and its subsidiaries. The overall interest rate risk represents the impact of fluctuating rates on the future gross financial margin. The Sales Financing segment’s aim is to limit these risks as far as possible in order to protect its margin on sales. To take account of the difficulty of precisely matching the structure of borrowings with the structure of loans, a limited amount of flexibility is allowed in each subsidiary’s interest rate hedging. This flexibility is reflected in a sensitivity limit assigned to each subsidiary and validated by the Finance Committee, in an individual adaptation of part of the limit Renault assigns to the Sales Financing segment. Sensitivity is calculated daily for each currency and each management entity (central refinancing office, French and foreign sales financing subsidiaries), for overall management of interest rate risks across the consolidated scope of the Sales Financing segment.

404 GROUPE RENAULT I UNIVERSAL REGISTRATION DOCUMENT 2019

Find out more at www.groupe.renault.com