PERNOD RICARD - Universal Registration Document 2019-2020

6. CONSOLIDATED FINANCIAL STATEMENTS Notes to the consolidated financial statements

Analysis of the sensitivity of financial instruments to interest rate risk (impact on the income statement) A 50 basis point increase or decrease in interest rates (USD and EUR) would increase or reduce the cost of net financial debt by €8 million. Analysis of the sensitivity of financial instruments to interest rate risk (impact on shareholders’ equity) A relative fluctuation of +/-50 basis points in interest rates (USD and EUR) would generate an equity gain or loss of approximately €0.5 million as a result of changes in the fair value of the derivatives documented as cash flow hedges (swaps).

Analysis of the sensitivity of financial instruments used to hedge risks related to farm raw materials (impact on shareholders’ equity) At 30 June 2020, the sensitivity of the portfolio was not significant. Counterparty risk in financial transactions The Group could be exposed to counterparty default via its cash investments, hedging instruments or the availability of confirmed but undrawn financing lines. In order to limit this exposure, the Group performs a rigorous selection of counterparties according to several criteria, including credit ratings, and depending on the maturity dates of the transactions. However, no assurance can be given that this rigorous selection will be enough to protect the Group against risks of this type, particularly in the current economic context.

Interest rate, foreign exchange and commodity derivatives Note 4.10

Pursuant to the amended version of IAS 9 (Financial Instruments), all derivative instruments must be recognised in the balance sheet at fair value, determined on the basis of standard market valuation models or external prices issued by financial institutions. Where the derivative has been designated as a fair value hedge, changes in the value of the derivative and of the hedged item are recognised in profit and loss for the same period. If the derivative has been designated as a cash flow hedge, the change in value of the “effective” portion of the hedge is recognised in shareholders’ equity. It is recognised in profit and loss when the hedged item is itself recognised in profit and loss. The change in value of the ineffective component of the derivative is however recognised directly in profit and loss. If the derivative is designated as a hedge of a net foreign currency investment, the change in value of the effective portion of the hedge is recognised in shareholders’ equity and the change in value of the “ineffective” portion is recognised in profit and loss.

Hedging instruments (by risk category and nature of hedge)

Notional amount of contracts

Fair value

Description of financial instrument

> 1 year and < 5 years > 5 years

Type of hedging at 30.06.2019 € million

< 1 year

Total

Assets Liabilities

Fair value hedge

13 13

2 2

Swaps

Interest rate risk hedges

-

879

176

1,054

Cross-currency swaps

Interest rate and currency risk hedges

- -

- - -

- - -

- -

- - -

- - -

Net investment hedge Currency risk hedges

NDF & FX options Cross-currency swaps

130

130

Interest rate and currency risk hedges

- -

- -

- -

- -

- -

- -

Net asset hedging

Cross-currency swaps

Interest rate and currency risk hedges

-

-

-

-

-

-

DERIVATIVE INSTRUMENTS INCLUDED IN NET DEBT

13

2 4 3

Cash flow hedge

3

Swaps

Interest rate risk hedges

-

176

-

176

-

Hedging of currency risk on intragroup financing and operational hedging

Currency swaps

139

38

- - -

177

1

1

Forwards

Commodity risk hedges Non hedge accounting

12

3

15

2 9

0

-

-

-

15

Currency swaps and FX forwards

Hedging of currency risk on intragroup financing and operational hedging

1,424

-

- -

1,424 1,230

4 4

5

Swaps

Interest rate risk hedges

-

1,230

11

TOTAL DERIVATIVE INSTRUMENTS

25 20

21 16

TOTAL NON-CURRENT

TOTAL CURRENT

6

5

Pernod Ricard Universal Registration Document 2019-2020 203