Saint Gobain - Registration document 2016

9 FINANCIAL AND ACCOUNTING INFORMATION 1. 2016 Consolidated Financial Statements

NOTE 8

FINANCING AND FINANCIAL INSTRUMENTS

Risk factors: financial risks 8.1 Liquidity risk 8.1.1 Liquidity risk on financing a) In a crisis environment, the Group might be unable to raise 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. managed by the Treasury and Financing Department of Except in special cases, the subsidiaries enter into short- or Compagnie de Saint-Gobain, the Group’s parent company. The Group’s overall exposure to liquidity risk on its net debt is de Saint-Gobain or with the National Delegations’ cash pools. long-term financing arrangements with Compagnie be rolled over at maturity and to optimize borrowing costs. The Group’s policy is to ensure that the Group’s financing will percentage of overall debt. At the same time, the maturity Long-term debt therefore systematically represents a high schedules of long-term debt are set in such a way that replacement capital market issues are spread over time. 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 bank borrowings and lease financing. participating securities, a long-term securitization program, Negotiable European Commercial Paper (NEU CP), and Short-term debt is composed of borrowings under Paper, but also includes receivables securitization programs occasionally Euro Commercial Paper and US Commercial and bank financing. Financial assets comprise marketable securities and cash and cash equivalents. Compagnie de Saint-Gobain’s liquidity position is secured by confirmed syndicated lines of credit. characteristics of the Group’s financing programs and maturity is provided in Note 8.3, which also details the main confirmed credit lines. A breakdown of long- and short-term debt by type and Saint-Gobain’s long-term debt issues have been rated BBB with a stable outlook by Standard & Poor’s since December 9, 2014.

Saint-Gobain’s long-term debt issues have been rated Baa2 with a stable outlook by Moody’s since December 9, 2014. 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

Liquidity risk on investments b)

fund units. To reduce liquidity and volatility risk, whenever funds. possible, the Group invests in money market and/or bond Short-term investments consist of bank deposits and mutual

Market risks 8.1.2 Interest rate risks a)

subsidiaries use derivatives to hedge interest rate risks, their Department of Compagnie de Saint-Gobain. Where counterparty is generally Compagnie de Saint-Gobain, the consolidated debt is managed by the Treasury and Financing The Group’s overall exposure to interest rate risk on Group’s parent company. 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 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. interest rate on the Group’s net debt after hedging: pre-tax income and pre-tax equity to fluctuations in the The table below shows the sensitivity at December 31, 2016 of

Impact on pre-tax income

equity Impact on pre-tax

(in € millions)

50 basis points Interest rate increase of 50 basis points Interest rate decrease of

12

1

(12)

(1)

Note 8.4 to the consolidated financial statements provides a gross debt by rate type (fixed or variable) after hedging. breakdown of interest rate risk hedging instruments and of

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SAINT-GOBAIN - REGISTRATION DOCUMENT 2016