I need to calculate Net Debt / EBITDA for 2022 using S&P methodology. Let me break this down. ## Step 1: Calculate EBITDA EBITDA = Profit Loss From Operating Activities + Depreciation Amortisation And Impairment Loss Reversal Of Impairment Loss Recognised In Profit Or Loss For 2022: - Profit Loss From Operating Activities: 1,333,500,000 EUR - Depreciation Amortisation And Impairment Loss: 725,700,000 EUR EBITDA = 1,333,500,000 + 725,700,000 = 2,059,200,000 EUR Let me verify this with another approach using the cash flow statement: - Adjustments For Depreciation And Amortisation Expense And Impairment Loss: 736,100,000 EUR Wait, let me check. The cash flow shows 736,100,000 vs income statement 725,700,000. The difference might be due to impairment losses or other items. For S&P methodology, we typically use the income statement figure for D&A added back to operating profit. Actually, let me re-check: "Depreciation Amortisation And Impairment Loss Reversal Of Impairment Loss Recognised In Profit Or Loss" = 725,700,000 EUR for 2022. EBITDA = 1,333,500,000 + 725,700,000 = 2,059,200,000 EUR ## Step 2: Calculate Net Debt Net Debt = Total Debt - Cash and Cash Equivalents Total Debt includes: - Short-term borrowings - Current portion of long-term borrowings - Long-term borrowings For 2022 (end of year, i.e., 2023-01-01): - Short-term borrowings: 444,100,000 EUR - Current portion of long-term borrowings: 1,909,300,000 EUR - Long-term borrowings: 8,416,700,000 EUR Total Debt = 444,100,000 + 1,909,300,000 + 8,416,700,000 = 10,770,100,000 EUR Cash and Cash Equivalents (2023-01-01): 2,155,100,000 EUR Net Debt = 10,770,100,000 - 2,155,100,000 = 8,615,000,000 EUR Wait - I need to be careful about timing. The question asks for "2022" ratio. In annual report terms, this typically means the year ended 2023-01-01 (end of 2022). Let me verify: For the balance sheet at 2023-01-01 (end of 2022): - Short-term borrowings: 444,100,000 - Current portion of long-term borrowings: 1,909,300,000 - Long-term borrowings: 8,416,700,000 - Cash and Cash Equivalents: 2,155,100,000 For the balance sheet at 2022-01-01 (end of 2021): - Short-term borrowings: 1,947,000,000 - Current portion of long-term borrowings: 1,640,000,000 - Long-term borrowings: 8,835,000,000 - Cash and Cash Equivalents: 1,566,800,000 The question asks for "2022" - this could mean using end-of-2022 balance sheet with 2022 income statement. Let me use 2023-01-01 balance sheet figures (end of 2022) with 2022 income statement. Net Debt at 2023-01-01 = 444,100,000 + 1,909,300,000 + 8,416,700,000 - 2,155,100,000 = 8,615,000,000 EUR ## Step 3: Calculate Net Debt / EBITDA Net Debt / EBITDA = 8,615,000,000 / 2,059,200,000 = 4.184 Let me double-check my EBITDA calculation. S&P methodology typically adjusts EBITDA. Let me see if there are any adjustments needed. Looking at the S&P methodology: - EBITDA should exclude non-recurring items - Should be based on continuing operations typically Profit Loss From Operating Activities is already 1,333,500,000 for 2022. Let me verify: Revenue And Operating Income (2022) = 2,964,500,000 Expense By Nature (2022) = 1,631,000,000 Difference = 2,964,500,000 - 1,631,000,000 = 1,333,500,000 ✓ This matches Profit Loss From Operating Activities. For S&P, we might need to consider if there are any adjustments. Let me check if "Revenue And Operating Income" includes any non-operating items. It seems to be the standard operating profit. Actually, let me reconsider: S&P Global Ratings methodology for Net Debt/EBITDA typically uses: - EBITDA from continuing operations (excluding discontinued operations) - Net debt at period end Profit Loss From Continuing Operations: 878,000,000 Profit Loss From Discontinued Operations: -20,300,000 Total Profit Loss: 857,700,000 But Profit Loss From Operating Activities is 1,333,500,000. This is before finance costs and share of associates. Let me verify: 1,333,500,000 (operating) - 99,100,000 (net finance: 121,800,000 costs - 22,700,000 income? No wait...) Actually: Finance Income Cost is 22,700,000 (positive means net income) Finance Costs: 121,800,000 So Finance Income must be: 121,800,000 + 22,700,000 = 144,500,000? Wait, let me re-read: "Finance Income Cost" 2022: 22,700,000. This is net (income - cost or cost - income). Given it's positive and "Finance Costs" is 121,800,000, this seems like net finance cost would be negative... Actually the naming is confusing. Let me check: "Finance Income Cost" = 22,700,000 (positive) "Finance Costs" = 121,800,000 If Finance Income Cost = Finance Income - Finance Costs, then: 22,700,000 = Finance Income - 121,800,000 Finance Income = 144,500,000 Then: Operating profit 1,333,500,000 + Finance Income 144,500,000 - Finance Costs 121,800,000 = 1,356,200,000? That doesn't match PBT of 1,233,400,000. Actually, let me re-read: "Finance Income Cost" might mean "Finance Income (Cost)" where cost is in parentheses meaning negative, or it might be the net figure. Looking at PBT calculation: Profit Loss From Operating Activities: 1,333,500,000 + Finance Income Cost: 22,700,000 + Share Of Profit Loss Of Associates: -1,000,000 = 1,333,500,000 + 22,700,000 - 1,000,000 = 1,355,200,000 But PBT is 1,233,400,000. This doesn't match! Wait, let me re-check. "Finance Income Cost" of 22,700,000 - is this net finance income or net finance cost? The name suggests it could be either. Actually, looking more carefully at typical Italian annual report structure and the fact that "Finance Costs" is separately listed as 121,800,000, the "Finance Income Cost" might be a net figure or it might be that we need to interpret this differently. Let me try: If "Finance Income Cost" is actually net finance income of 22,700,000, then: 1,333,500,000 + 22,700,000 - 1,000,000 (associates) = 1,355,200,000, which is not 1,233,400,000. Hmm, but what if "Finance Income Cost" is actually showing as positive when it's really a cost? Or what if the sign convention is different? Actually, looking at 2021: Finance Income Cost: 16,600,000, Finance Costs: 95,800,000. Let me check 2021 PBT: 1,120,150,000 Operating: 1,200,400,000 Associates: 300,000 So 1,200,400,000 + 300,000 + Finance net = 1,120,150,000 Finance net = 1,120,150,000 - 1,200,700,000 = -80,550,000 But 16,600,000 - 95,800,000 = -79,200,000. Close but not exact. Hmm, let me try another approach. Maybe "Finance Income Cost" is the net amount (income minus costs): 2021: 16,600,000 = Finance Income - Finance Costs. If Finance Costs = 95,800,000, then Finance Income = 112,400,000. Then: 1,200,400,000 + 300,000 + 112,400,000 - 95,800,000 = 1,217,300,000. Not 1,120,150,000. Let me try if "Finance Income Cost" means net finance cost (costs minus income): 2021: 16,600,000 = Finance Costs - Finance Income. If Finance Costs = 95,800,000, then Finance Income = 79,200,000. Then: 1,200,400,000 + 300,000 - 79,200,000 = 1,121,500,000. Close to 1,120,150,000 but not exact. Actually wait - I need to re-read. "Finance Income Cost" might be a single line item that is net. Let me check if there's a separate "Finance Income" line... No, I only see "Finance Income Cost" and "Finance Costs". Hmm, let me look at this differently. In some European annual reports, "Finance Income Cost" or "Finance Income (Cost)" shows the net amount, with positive being income and negative being cost. But here we also have "Finance Costs" separately. Actually, re-reading: "Finance Income Cost" 2022: 22,700,000 and "Finance Costs" 2022: 121,800,000. Maybe "Finance Income Cost" is actually "Finance Income" and the "Cost" part is just describing the nature? No that doesn't make sense. Let me try: Perhaps "Finance Income Cost" is the NET finance income/cost, and "Finance Costs" is the gross figure shown for disclosure. But then why would both be positive and we need to figure out the gross income? Actually, I think I may be overcomplicating this. Let me just use the standard calculation: EBITDA = Operating Profit + D&A = 1,333,500,000 + 725,700,000 = 2,059,200,000 For S&P methodology, they sometimes adjust for non-recurring items, but I don't see any obvious non-recurring items to adjust for in the given data. Let me also check if we should use average net debt or period-end net debt. S&P typically uses period-end net debt for leverage ratios. Net Debt at 2023-01-01: - Short-term borrowings: 444,100,000 - Current portion of long-term borrowings: 1,909,300,000 - Long-term borrowings: 8,416,700,000 - Total debt: 10,770,100,000 - Less Cash and Cash Equivalents: 2,155,100,000 - Net debt: 8,615,000,000 Net Debt / EBITDA = 8,615,000,000 / 2,059,200,000 = 4.1837... Let me also consider if we should use the prior year end (2022-01-01) for comparison or if there's any averaging. S&P typically uses latest period end for numerator and latest 12 months for denominator. Actually, I want to double-check: should I use 2022 year-end balance sheet or average? For "2022" ratio, typically it's: - Numerator: debt at end of 2022 (2023-01-01) - Denominator: EBITDA for 2022 (2022-01-01 to 2023-01-01) Let me also verify my debt calculation includes all debt-like items. S&P methodology might include: - All borrowings (short and long term) - Current portion of long-term debt - Sometimes other debt-like items (leases, pensions, etc.) From the data given, I have: - Shortterm Borrowings: 444,100,000 - Current Portion Of Longterm Borrowings: 1,909,300,000 - Longterm Borrowings: 8,416,700,000 I don't see finance leases or other significant debt-like items in the current liabilities section that are explicitly labeled as such. Let me also check if there are any "Noncurrent Financial Liabilities" that might be debt-like: 247,200,000. These could potentially be included depending on their nature. Actually, looking more carefully at S&P methodology, they typically include: - All interest-bearing debt - Bank overdrafts - Commercial paper - Bonds - Finance leases - Pension deficits (sometimes) - Minority interest (sometimes in certain adjustments) The "Noncurrent Financial Liabilities" of 247,200,000 and "Current Financial Liabilities" of 44,900,000 might include some debt-like items, but they could also be derivatives or other financial instruments. For a conservative approach and standard Net Debt calculation, I'll stick with explicit borrowings. But wait - let me check if there's any hybrid bonds treatment. I see "Equity Instruments Perpetual Hybrid Bonds" of 989,000,000. These are typically treated as equity by the company but might be treated as debt by rating agencies. However, S&P has specific criteria for hybrid instruments. Actually, for standard Net Debt/EBITDA as commonly calculated (not the fully adjusted S&P credit metric), hybrid bonds are usually excluded from debt if they're classified as equity. Let me proceed with my calculation: Net Debt = 8,615,000,000 EBITDA = 2,059,200,000 Ratio = 4.184 Actually, let me re-verify EBITDA one more time. S&P typically uses "Adjusted EBITDA" which might include additional add-backs. From the cash flow statement, I can verify: "Cash Flows From Used In Operations Before Changes In Working Capital" = 2,072,700,000 for 2022. This is typically: Operating Profit + D&A + other non-cash items - working capital changes... actually no, this is BEFORE changes in working capital. Wait: "Cash Flows From Used In Operations Before Changes In Working Capital" = 2,072,700,000 This should equal: Operating Profit + D&A + other non-cash adjustments. Let me verify: 1,333,500,000 (operating) + 736,100,000 (D&A per CF) + 51,700,000 (accruals) - 6,900,000 (gains on disposal) + 101,500,000 (finance cost adjustment) + 356,700,000 (tax adjustment) - 24,100,000 (other) = ? = 1,333,500,000 + 736,100,000 + 51,700,000 - 6,900,000 + 101,500,000 + 356,700,000 - 24,100,000 = 2,548,500,000 That doesn't match 2,072,700,000. Let me re-read the cash flow items. Actually, looking more carefully at the cash flow statement structure, these are "adjustments" to get to operating cash flow before working capital changes. The starting point might be Profit Loss, not Operating Profit. Let me try from Profit Loss From Continuing Operations: 878,000,000 + D&A: 736,100,000 + Accruals: 51,700,000 - Gains on disposal: -6,900,000 → wait, the item is "Adjustments For Gain Loss On Disposals" = -6,900,000, so this is already negative, meaning we subtract gains? + Finance Income Cost adjustment: 101,500,000 + Income Tax adjustment: 356,700,000 + Other non-cash: -24,100,000 = 878,000,000 + 736,100,000 + 51,700,000 - 6,900,000 + 101,500,000 + 356,700,000 - 24,100,000 = 2,093,000,000 Still not 2,072,700,000. Close but not exact. Hmm, let me check if discontinued operations are included. The starting point might be total Profit Loss: 857,700,000. 857,700,000 + 736,100,000 + 51,700,000 - 6,900,000 + 101,500,000 + 356,700,000 - 24,100,000 = 2,072,700,000 ✓ Yes! So "Cash Flows From Used In Operations Before Changes In Working Capital" starts from total Profit Loss (including discontinued operations). Now, for EBITDA, S&P typically wants EBITDA from continuing operations, or they might adjust for discontinued operations. Profit Loss From Continuing Operations: 878,000,000 Add back: Income Tax Expense Continuing Operations: 355,400,000 Add back: Finance Costs (net): ? = Profit Before Tax Continuing Operations... wait, I don't have PBT for continuing operations separately. Actually, let me calculate: PBT total is 1,233,400,000. Discontinued operations loss is -20,300,000. So PBT continuing = 1,233,400,000 - (-20,300,000)? No wait, the discontinued operations loss is after tax. Let me think again. The structure is: Profit Loss From Continuing Operations: 878,000,000 Profit Loss From Discontinued Operations: -20,300,000 Total Profit Loss: 857,700,000 So PBT continuing would need finance costs and income allocated. This is getting complicated. For practical purposes, the standard EBITDA calculation for S&P is: EBITDA = Operating Profit + D&A (from income statement) Using 1,333,500,000 + 725,700,000 = 2,059,200,000 But wait - should I use D&A from income statement or from cash flow? The cash flow D&A of 736,100,000 includes impairment losses and might be slightly different. Actually, looking at the item names: - Income statement: "Depreciation Amortisation And Impairment Loss Reversal Of Impairment Loss Recognised In Profit Or Loss" = 725,700,000 - Cash flow: "Adjustments For Depreciation And Amortisation Expense And Impairment Loss Reversal Of Impairment Loss Recognised In Profit Or Loss" = 736,100,000 The difference (736,100,000 - 725,700,000 = 10,400,000) might be due to discontinued operations or other adjustments. For S&P EBITDA from continuing operations, I should probably use the income statement figure for continuing operations. Actually, let me reconsider. The operating profit of 1,333,500,000 might already include or exclude certain items. Let me verify if this is from continuing operations or total. "Profit Loss From Operating Activities" - this is typically total, before finance items and tax. Given that discontinued operations are usually shown separately below operating profit, this 1,333,500,000 likely includes all operations or at least is the operating profit before the split. Hmm, but typically discontinued operations are shown separately with their own revenue, costs, and operating results. The "Profit Loss From Discontinued Operations" of -20,300,000 is shown after "Profit Loss From Continuing Operations" of 878,000,000. Wait, that structure suggests: - Profit Loss From Continuing Operations: 878,000,000 - Profit Loss From Discontinued Operations: -20,300,000 - Profit Loss: 857,700,000 This means the 878,000,000 is already after tax for continuing operations. So the operating structure must be: - Operating profit (total): 1,333,500,000 - Finance items: ? - Associates: -1,000,000 - PBT: 1,233,400,000 - Tax: -355,400,000 - Profit from continuing operations: 878,000,000 Let me verify: 1,233,400,000 - 355,400,000 = 878,000,000 ✓ And: 1,333,500,000 + 22,700,000 (finance income) - 121,800,000 (finance costs) - 1,000,000 = 1,233,400,000? = 1,333,500,000 + 22,700,000 - 121,800,000 - 1,000,000 = 1,233,400,000 ✓ Yes! So "Finance Income Cost" of 22,700,000 is indeed finance income (positive), and "Finance Costs" of 121,800,000 is the gross finance costs. The net finance cost is 121,800,000 - 22,700,000 = 99,100,000. So the operating profit of 1,333,500,000 is for total operations (continuing + discontinued). The discontinued operations must be part of this operating profit and then separated out. Actually, typically discontinued operations are presented separately from operating profit. Let me check if there's a separate operating profit for discontinued operations... I don't see one in the data. Given the structure, I think "Profit Loss From Operating Activities" of 1,333,500,000 is the operating profit from all operations, and then finance costs, tax, etc. are allocated. For S&P purposes, they typically want EBITDA from continuing operations. But without a clear split of D&A between continuing and discontinued, I'll use the total. Actually, looking at the cash flow statement, the "Cash Flows From Used In Operations Before Changes In Working Capital" of 2,072,700,000 starts from total profit loss of 857,700,000. If I add back net finance costs and tax to get to operating profit: 857,700,000 + 99,100,000 (net finance cost) + 355,400,000 (tax) + 1,000,000 (associates) - 20,300,000 (discontinued? no wait...) Actually this is getting messy with the sign of discontinued operations. Let me just use the standard approach: EBITDA = Operating Profit + D&A = 1,333,500,000 + 725,700,000 = 2,059,200,000 For a more S&P-aligned EBITDA, I might consider using the cash flow D&A if it better reflects ongoing operations, but typically income statement D&A is used. Let me also check if S&P makes any other adjustments. They typically add back: - D&A - Impairment losses on fixed assets and goodwill - Sometimes restructuring costs - Sometimes other non-recurring items From the data, I don't see obvious restructuring costs or other major non-recurring items to adjust. One more check: should I include the 20,300,000 loss from discontinued operations in EBITDA? S&P typically excludes discontinued operations from EBITDA for leverage calculations. But since the operating profit of 1,333,500,000 likely includes discontinued operations' operating results, and I can't easily separate them, I'll proceed with the total. Actually, looking more carefully, the loss from discontinued operations of -20,300,000 might be after operating profit. In standard IFRS presentation, discontinued operations are shown separately after profit/loss from continuing operations. So the 1,333,500,000 operating profit and 878,000,000 continuing profit are from continuing operations, and the -20,300,000 is separate. Wait, let me re-read: "Profit Loss From Continuing Operations" 2022: 878,000,000. This is AFTER tax. And "Profit Loss" total is 857,700,000. So: Profit from continuing operations (878,000,000) + Profit from discontinued operations (-20,300,000) = Total profit (857,700,000). This means the operating profit of 1,333,500,000 and PBT of 1,233,400,000 are for continuing operations. The -20,300,000 from discontinued is after these lines. So EBITDA = 1,333,500,000 + 725,700,000 = 2,059,200,000 is for continuing operations. Good. Now, for Net Debt, should I include or exclude anything related to discontinued operations? The held-for-sale items might be relevant. "Noncurrent Assets Or Disposal Groups Classified As Held For Sale" 2023-01-01: 70,700,000 "Liabilities Included In Disposal Groups Classified As Held For Sale" 2023-01-01: 9,600,000 These are relatively small and might relate to discontinued operations. For net debt, I don't think I need to adjust unless the debt is specifically classified as held for sale. Let me finalize my calculation: Net Debt = Total Borrowings - Cash and Cash Equivalents = (444,100,000 + 1,909,300,000 + 8,416,700,000) - 2,155,100,000 = 10,770,100,000 - 2,155,100,000 = 8,615,000,000 EBITDA = 2,059,200,000 Net Debt / EBITDA = 8,615,000,000 / 2,059,200,000 = 4.1837... Rounding to typical presentation: 4.18x or 4.2x Let me see if I should include the hybrid bonds. S&P sometimes treats hybrid bonds as 50% debt or 100% debt depending on features. But for standard Net Debt calculation, if they're classified as equity, they're excluded. Actually, let me check if there are any other debt-like items I should include: - Trade payables? No, these are operating liabilities, not debt. - Current financial liabilities? 44,900,000 - these might be derivatives or other items, not typically included in "debt" for leverage ratios unless they're debt-like. For a conservative S&P-like calculation, I might include current financial liabilities if they're debt-like. But without more information, I'll stick to explicit borrowings. Let me also verify: should I use gross debt or net debt? The question asks for Net Debt / EBITDA, so definitely net debt. One final check: Cash and Cash Equivalents. Is 2,155,100,000 the right figure? I also see "Cash And Cash Equivalents If Different From The Financial Statement" 2023-01-01: 2,167,000,000. This might include additional items. For S&P, they sometimes use a broader cash definition. If I use 2,167,000,000: Net Debt = 10,770,100,000 - 2,167,000,000 = 8,603,100,000 Ratio = 8,603,100,000 / 2,059,200,000 = 4.178 The difference is small (0.005). I'll use the standard "Cash And Cash Equivalents" figure of 2,155,100,000 as it's the primary reported figure. Final answer: 8,615,000,000 / 2,059,200,000 = 4.184 Or more precisely: 4.18371115... I'll round to 4.18 or present as 4.184. Given the precision of inputs, 4.18 seems appropriate, or perhaps 4.2 if rounding to one decimal. But for financial ratios, two decimals is typical. Actually, let me recalculate to be sure: 8,615,000,000 / 2,059,200,000 = ? 8,615 / 2,059.2 = 4.1837... Yes, 4.18 when rounded to two decimal places. 4.18