Saint-Gobain // Universal Registration Document 2021

Financial and accounting information 2021 Consolidated Financial Statements

Financial instruments 10.4 The Group uses interest rate, foreign exchange, energy, commodity and equity derivatives to hedge its exposure to changes in interest rates, exchange rates, and energy, commodity and equity prices that may arise in the normal course of business. In accordance with IAS 32 and IFRS 9, all such instruments are recognized in the balance sheet and measured at fair value, irrespective of whether or not they are part of a hedging relationship that qualifies for hedge accounting under IFRS 9. Changes in the fair value of both derivatives that are designated and qualified as fair value hedges and derivatives that do not qualify for hedge accounting during the period are taken to the income statement (in business income and expense for operational foreign exchange derivatives and commodity derivatives not qualifying for hedge accounting, and in financial income and expense for all other derivatives). However, in the case of derivatives that qualify as cash flow hedges, the effective portion of the gain or loss arising from changes in fair value is recognized directly in equity, and only the ineffective portion is recognized in the income statement. Fair value hedges Fair value hedge accounting is applied by the Group mainly for derivative instruments which swap fixed rates against variable rates (fixed-for-floating interest rate swaps). These derivatives hedge fixed-rate debt exposed to a fair value risk. In accordance with hedge accounting principles, debt included in a designated fair value hedging relationship is remeasured at fair value to the extent of the risk hedged. As the loss or gain on the underlying hedged item offsets the effective portion of the gain or loss on the fair value hedge, the income statement is only impacted by the ineffective portion of the hedge.

Cash flow hedges Cash flow hedge accounting is applied by the Group mainly for derivative instruments which fix the cost of future investments (financial assets or property, plant and equipment) and the price of future purchases, mostly gas and fuel oil (commodity swaps) or foreign currencies (foreign exchange forwards). Transactions hedged by these instruments are qualified as highly probable. The application of cash flow hedge accounting allows the Group to defer the impact on the income statement of the effective portion of changes in the fair value of these derivatives by recording them in a hedging reserve in equity. This reserve is reclassified to the income statement when the hedged transaction occurs and the hedged item itself affects income. In the same way as for fair value hedges, cash flow hedging limits the Group’s exposure to changes in the fair value of these derivatives to the ineffective portion of the hedge. Changes in the fair value of derivatives that do not qualify for hedge accounting are recognized in the income statement. The instruments concerned are primarily foreign exchange swaps and foreign exchange forwards. Fair value of financial instruments The fair value of financial assets and financial liabilities corresponds to their quoted price on an active market (if any): this represents level 1 in the fair value hierarchy defined in IFRS 7 and IFRS 13. The fair value of instruments not quoted in an active market, such as derivatives or financial assets and liabilities, is determined by reference to commonly used valuation techniques such as the fair value of another recent and similar transaction, or discounted cash flow analysis based on observable market inputs. This represents level 2 in the fair value hierarchy defined in IFRS 7 and IFRS 13. The fair value of short-term financial assets and liabilities is considered as being the same as their carrying amount due to their short maturities. Derivatives that do not qualify for hedge accounting

The following table presents a breakdown of the main derivatives used by the Group:

8

Fair value

Nominal amount by maturity

Derivatives recorded in liabilities

Derivatives recorded in assets

Dec. 31, 2021

Dec. 31, 2020

Within 1 year

1 to 5 years

Beyond 5 years

Dec. 31, 2021

(in EUR millions)

FAIR VALUE HEDGES

0

0

0

0

0

0

0

0

Cash flow hedges Currency

9 0 6

(3)

6

1

520

12

0

532 473

Interest rate

(60)

(60)

(92)

0

95

378

Energy and commodities

0 0

6

0 0

16

1

0 0

17

Other risks: equities

12

12

5

25

30

CASH FLOW HEDGES – TOTAL Derivatives not qualifying for hedge accounting mainly contracted by Compagnie de Saint-Gobain Currency

27

(63)

(36)

(91)

541

133

378

1,052

18

(4)

14

(4)

3,021

0 0 0

0 0 0

3,021

Interest rate

0 0

0 0

0 0

0 0

0 0

0 0

Energy and commodities

DERIVATIVES NOT QUALIFYING FOR HEDGE ACCOUNTING – TOTAL

18

(4)

14

(4)

3,021 3,562

0

0 3,021

TOTAL

45

(67)

(22)

(95)

133

378

4,073

SAINT-GOBAIN UNIVERSAL REGISTRATION DOCUMENT 2021 325