PSA - 2019 Universal Registration Document

CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2019 Notes to the Consolidated Financial Statements at 31 December 2019

31 December 2018

UAH/USD USD/BRL

USD/ARS USD/GBP CNY/USD

(in million euros)

Total assets Total liabilities

-

78

37

-

3

(9) (9)

(282) (204)

(293) (256)

(7) (7)

-

NET POSITION BEFORE HEDGING Derivative financial instruments NET POSITION AFTER HEDGING

3

-

221

239 (17)

-

-

(9)

17

(7)

3

31 December 2017

UAH/USD USD/BRL

USD/ARS USD/GBP CNY/USD

(in million euros)

Total assets Total liabilities

-

72

18

- - - - -

5

(11) (11)

(58)

(197) (179)

-

NET POSITION BEFORE HEDGING Derivative financial instruments NET POSITION AFTER HEDGING

14

5

-

(19)

180

-

(11)

(5)

1

5

Commodity risk (5) The Automotivedivision’sexposureto commodityrisks is tracked jointly by the PurchasingDepartmentand PSA InternationalS.A. (PSAI),which is responsiblefor hedgingthe Group’scurrency,rate and commodity risks, while Faurecia’s risks are managed independently. The risk of changes in certain raw materials prices expose the productioncosts of the Automotivedivisionand Faureciato either as a resultof theirdirectpurchasesor indirectlythroughthe impact of these changeson their suppliers’costs. These raw materialsare either industrialproductssuch as steel and plastics whose prices and related adjustments are negotiated between buyers and vendors,or commoditiesdirectlytradedon organisedmarkets,such as aluminium, copper, lead or precious metals, for which the transactionprice of the commoditiesor components is determined by direct reference to the prices quoted on the commoditymarket. Part of the Automotive division’s exposure to fluctuations in commoditypricesis hedgedusingderivativeinstrumentstradedon regulated markets. The aim of these hedges is to minimize the impact of changes in commodityprices on physical deliveriesfor the Group’sproduction needs. The Group ManagementBoard defines the rules of governance (scope, responsibilities, maturities, ratios, etc.). The Metals Committee,chaired by the Chief Financial Officer of the Group, reviews the Automotive division’s commodity risks at quarterly intervals. This Committeemonitors hedging ratios, hedging gains and losses, reviews each quoted commodity that may have a materialimpacton the Group’soperatingincomeand sets hedging targetsin terms of volumesand prices over periodsof up to three yearson metalsand two yearson energy.The maximumratiosare:

80% at 1 year, 60% at 2 years and 40% at 3 years. The hedging ratios dependon the maturity.The cash flow hedgesmust qualify for hedge accountingunder IFRS 9. In 2019, Opel Vauxhallis fully integratedin the scopeof the hedgingtransactions.The commodity hedges concernedpurchasesof aluminium,copper, lead, platinum and palladium.Hedgingfor electricityand gas purchaseswas also established in2019. TheGroupwaswellhedgedon precious metals. For the Automotivesegment,in the eventof a 19% rise (fall)in base metals’ prices (aluminium, copper and lead), a 21% rise (fall) in preciousmetals’ prices (platinumand palladium),and a 29% rise (fall)in energyprices(electricity,gas),the impactof the commodity hedges held at 31 December 2019 would have been a decrease/increaseof €180 in consolidatedequity at 31 December 2018 (versus €71 million in 2018 and €59 million in 2017). As all commodityhedges qualified as cash flow hedges under IFRS 9, changes in the fair value of these instruments resulting from changesin the prices of the hedgedcommoditieswould not have hadany impacton 2019 profit. The commoditypricetrendassumptionsweredeterminedbasedon the average historical and implicit volatilities observed on the relevantcommoditymarketsin thereporting year. To the extentthat Faurecia’ssalescontractswith customersdo not include any systematic indexation clause based on commodity prices, the risk of an unfavourablechange in commodityprices is attenuatedthrougha policy of permanentprice negotiationswith customersand tight inventorymanagement.Faureciadoes not use derivative instruments to hedge its commodity and energy purchases.

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PSA - GROUPE PSA - 2019 UNIVERSAL REGISTRATION DOCUMENT