I need to estimate the FFO / Net debt ratio for 2022 based on S&P methodology. First, let me understand S&P's FFO (Funds From Operations) methodology: - FFO = Net Income + Depreciation & Amortization + Deferred Income Taxes + Other Non-Cash Items Or more specifically for S&P: FFO = Profit Loss + Depreciation Amortization + Deferred Taxes + Other non-cash adjustments (like provisions, impairment, etc.) Let me identify the relevant figures for 2022 (period 2022-01-01 to 2023-01-01): From the income statement: - Profit Loss (Net Income): 448,000,000 EUR - Depreciation Amortization Provisions And Writedowns: 818,000,000 EUR From cash flow adjustments, I can break this down: - Depreciation Expense: 491,000,000 EUR - Amortisation Expense: 233,000,000 EUR - Total D&A = 491 + 233 = 724,000,000 EUR But "Depreciation Amortization Provisions And Writedowns" is 818,000,000 EUR, which includes more than just D&A. For S&P FFO, the standard formula is: FFO = Net Income + D&A + Deferred Income Taxes + Other non-cash items + Interest Expense (sometimes) Actually, let me use a more standard S&P approach: FFO = Profit before tax + Interest expense - Current tax + D&A + Other non-cash items Or more commonly for S&P: FFO = Net Income + D&A + Deferred Tax + Other non-cash items - Gains on asset sales + Interest expense Let me look at this more carefully. S&P's FFO typically includes: - Net income + Depreciation and amortization + Deferred income taxes + Other non-cash items (provisions, impairments, etc.) + Interest expense (since we want pre-interest coverage) Actually, for FFO/Net Debt, S&P uses: FFO = Funds from operations = Net income from continuing operations + D&A + Deferred taxes + Other non-cash items Let me calculate using the cash flow statement approach: From operating cash flow adjustments: - Profit Loss: 448,000,000 EUR + Depreciation Expense: 491,000,000 EUR + Amortisation Expense: 233,000,000 EUR + Adjustments For Impairment Loss: 10,000,000 EUR + Adjustments For Provisions: 92,000,000 EUR + Adjustments For Undistributed Profits Of Associates: -2,000,000 EUR + Adjustments For Losses Gains On Disposal Of Noncurrent Assets: -191,000,000 EUR (this is a gain, so subtract) + Other Adjustments For Noncash Items: -512,000,000 EUR Wait, let me reconsider. The "Other Adjustments For Noncash Items" is negative 512,000,000. This seems large and negative. Let me think about this differently. S&P FFO is typically calculated as: FFO = Net Income + D&A + Deferred Income Tax + Other non-cash expenses - Gain on sale of assets From the data: - Net Income (Profit Loss): 448,000,000 - D&A: 724,000,000 (491 + 233) - Deferred tax change: Net Deferred Tax Assets went from 424,000,000 to 363,000,000, so decrease of 61,000,000. This means deferred tax benefit was recognized. Actually, looking at the income statement: - Income Tax Expense Continuing Operations: 344,000,000 EUR For deferred taxes, I need to look at the balance sheet change: - Net Deferred Tax Assets 2022: 424,000,000 - Net Deferred Tax Assets 2023: 363,000,000 - Decrease of 61,000,000 means deferred tax expense of 61,000,000 (reduction in asset) Wait, if deferred tax assets decrease, that's a use/expense. So deferred tax expense = 61,000,000. But actually, the tax expense includes current and deferred. Let me think... For S&P FFO, a common formula is: FFO = Profit Loss From Operating Activities + Interest Expense + D&A - Current Tax + Other non-cash items Or: FFO = EBITDA - Interest - Current taxes + Interest (to get pre-interest) + some adjustments Let me use a cleaner approach. S&P Global Ratings defines FFO as: FFO = Net income + Depreciation & amortization + Deferred income taxes + Other non-cash items Where "Other non-cash items" includes things like provisions, impairment, stock-based comp, gains/losses on asset sales, etc. From our data for 2022: - Net Income (Profit Loss): 448,000,000 + D&A: 724,000,000 (491 + 233) + Deferred tax expense: ? Looking at taxes: - Income Tax Expense Continuing Operations: 344,000,000 - Current Tax Assets decreased from 68,000,000 to 35,000,000 = 33,000,000 use - Current Tax Liabilities increased from 21,000,000 to 134,000,000 = 113,000,000 source Tax paid in cash: 201,000,000 (from cash flow) Tax expense: 344,000,000 So deferred tax movement = 344,000,000 - 201,000,000 = 143,000,000 (deferred tax expense) But also looking at balance sheet deferred tax assets: decreased by 61,000,000 This suggests deferred tax expense of about 61,000,000 (if no reclassifications) Actually, let me use a simpler S&P approach. FFO can also be estimated from EBITDA: FFO = EBITDA - Interest - Cash taxes Or: FFO = EBIT + D&A - Cash taxes From data: - Gross Operating Income EBITDA: 1,505,000,000 - Finance Costs (Interest): 125,000,000 - Finance Income: 35,000,000 - Net interest paid in operating activities: 75,000,000 For S&P FFO, typically: FFO = EBITDA - Cash Interest - Cash Taxes Cash taxes paid: 201,000,000 Cash interest paid: 75,000,000 (classified as operating) So FFO = 1,505,000,000 - 75,000,000 - 201,000,000 = 1,229,000,000 But wait, this might not be right. Let me check another approach. Actually, standard S&P FFO formula: FFO = Net income + D&A + Deferred tax + Other non-cash items - Working capital changes No wait, that's not right either. FFO is before working capital. Let me use: FFO = Net income from continuing operations + D&A + Deferred taxes + Other non-cash items Net income from continuing operations: 412,000,000 + D&A: 724,000,000 + Deferred tax expense: Need to calculate From tax expense 344,000,000 and cash taxes 201,000,000, the difference is 143,000,000. But this includes changes in current tax assets/liabilities too. Current tax assets decreased by 33,000,000 (expense) Current tax liabilities increased by 113,000,000 (benefit) Net current tax balance change = 80,000,000 benefit So: Tax expense 344,000,000 = Current tax expense + Deferred tax expense - Current tax benefit from balance sheet changes? This is getting complex. Let me try: Cash taxes = Current tax expense + Current tax asset/liability changes 201,000,000 = Current tax expense - 80,000,000 (approx) Current tax expense ≈ 281,000,000 Deferred tax expense = 344,000,000 - 281,000,000 = 63,000,000 This roughly matches the deferred tax asset decrease of 61,000,000. So deferred tax expense ≈ 63,000,000 Now for other non-cash items in S&P FFO: - Provisions adjustments: 92,000,000 - Impairment: 10,000,000 - Undistributed profits of associates: -2,000,000 (subtract as it's equity pickup) - Gain on disposal: -191,000,000 (this is a gain, so we subtract it from FFO as it's non-cash/non-recurring) - Other adjustments: -512,000,000 (this is large negative, need to understand) Wait, the "Other Adjustments For Noncash Items" of -512,000,000 is suspicious. Let me check if this includes working capital or other items. Actually, looking at the cash flow statement structure: - It starts with some base - Adds back adjustments - Then working capital changes - Then other operating items Let me try to reconstruct operating cash flow: Profit Loss: 448,000,000 + D&A: 724,000,000 (491+233) + Impairment: 10,000,000 + Provisions: 92,000,000 + Undistributed profits of associates: -2,000,000 + Losses/gains on disposal: -191,000,000 (gain, so negative adjustment) + Other noncash items: -512,000,000 + Interest paid (operating): 75,000,000? No, this is a use + Income taxes paid: 201,000,000? No, this is a use + Dividends paid (operating): 302,000,000? No, this is financing or operating use Actually, let me look at this more carefully. The cash flow items listed are adjustments, not cash flows themselves. Standard indirect method cash flow: Start with Net Income + D&A + Other non-cash expenses - Gain on sale +/- Working capital changes = Cash from operations before interest and tax - Interest paid - Taxes paid - Dividends paid = Net cash from operating activities From the data: Cash Flows From Used In Operating Activities = 1,260,000,000 Let me verify: Starting point might be Profit Loss From Continuing Operations = 412,000,000 Or Profit Loss From Operating Activities = 687,000,000 Actually, looking at "Profit Loss From Operating Activities" = 687,000,000 This is EBIT essentially. Then adjustments: + Depreciation Amortization Provisions And Writedowns = 818,000,000 But wait, this already includes provisions and writedowns, not just D&A. Hmm, let me use a different approach. Let me calculate FFO as S&P typically does: FFO = Net Income + D&A + Deferred Income Taxes + Other Non-Cash Items - Gain on Asset Sales + Interest Expense Where: - Net Income = 448,000,000 - D&A = 724,000,000 (491 + 233) - Deferred taxes = 63,000,000 (estimated from above) - Other non-cash = provisions 92,000,000 + impairment 10,000,000 - undistributed profits 2,000,000 = 100,000,000 - Gain on asset sales = 191,000,000 (from adjustments, this is a gain so subtract) - Interest expense = 125,000,000 (finance costs) - 35,000,000 (finance income) + 2,000,000 (share of profit) = 92,000,000? Or just use 90,000,000 net financial interests? Actually "Net Financial Interests" = 90,000,000 Let me recalculate: FFO = 448,000,000 + 724,000,000 + 63,000,000 + 100,000,000 - 191,000,000 + 90,000,000 Wait, S&P FFO typically does NOT add back interest because FFO is used with Net Debt, and we want to see coverage. Actually, let me check... For FFO/Net Debt ratio, S&P uses: FFO = Funds from operations (after interest, before working capital changes) Net Debt = Total debt - Cash So FFO is typically: Net Income + D&A + Deferred taxes + Other non-cash items - Gain on sales Let me recalculate without interest: FFO = 448,000,000 + 724,000,000 + 63,000,000 + 100,000,000 - 191,000,000 = 1,144,000,000 But I need to be more careful about "Other non-cash items". The large negative -512,000,000 in "Other Adjustments For Noncash Items" is puzzling. Let me look at this from the cash flow statement perspective. The operating cash flow is 1,260,000,000. If I work backwards from operating cash flow: Cash from operations = 1,260,000,000 + Interest paid (operating) = 75,000,000 + Income taxes paid = 201,000,000 + Dividends paid (operating) = 302,000,000? Wait, dividends paid classified as operating activities = 302,000,000. But dividends are typically financing. If they're in operating, I need to add back for FFO. Actually for S&P, dividends received are part of FFO, but dividends paid are not (they're uses of cash after FFO). Let me try: FFO before working capital changes and interest/tax From EBITDA: 1,505,000,000 - Cash interest: 75,000,000? No, this is paid interest classified as operating - Cash taxes: 201,000,000? No, this is paid taxes Actually, a better approach: FFO = Operating Cash Flow + Working Capital Changes + Cash Interest + Cash Taxes - Dividends Received + ... No, that's messy. Let me use the standard S&P formula more carefully. S&P Global Ratings FFO definition: "Funds from operations (FFO) is a measure of cash generation. We define FFO as net income from continuing operations adjusted for depreciation and amortization, deferred income taxes, and other non-cash items." FFO = Net income from continuing operations + D&A + Deferred income taxes + Other non-cash items Other non-cash items typically include: - Gain/loss on asset sales - Impairment charges - Provisions - Stock-based compensation - Equity in earnings of affiliates From our data: - Net income from continuing operations: 412,000,000 - D&A: 724,000,000 (491 + 233) - Deferred income taxes: 63,000,000 (estimated) - Other non-cash items: - Impairment: 10,000,000 - Provisions: 92,000,000 - Undistributed profits of associates: -2,000,000 (this is equity method income, so subtract as it's not cash) - Gain on disposal of noncurrent assets: -191,000,000 (gain, so subtract) - Other adjustments: -512,000,000 The -512,000,000 is problematic. Let me see if this includes working capital or other items. Actually, looking more carefully at the cash flow adjustments, I see working capital is listed separately: - Trade receivables: -1,420,000,000 - Trade payables: +2,587,000,000 - Inventories: -332,000,000 So "Other Adjustments For Noncash Items" of -512,000,000 is indeed a separate non-cash adjustment. What could this be? It might include: - Fair value changes - Foreign exchange differences - Reclassification adjustments - Other accruals For S&P FFO, we typically include these if they're non-cash. But -512,000,000 is very large and negative. Let me check if this makes sense with the operating cash flow. Let me try to verify the operating cash flow calculation: Starting point: Let's say Profit Loss From Operating Activities = 687,000,000 + Depreciation Amortization Provisions And Writedowns = 818,000,000 = 1,505,000,000 (matches EBITDA) Then adjustments: + Interest expense? No, already in operating profit + Other non-cash = ? Actually, Profit Loss From Operating Activities (687M) + D&A etc (818M) = 1,505M = EBITDA. Correct. Now from EBITDA to operating cash flow: EBITDA: 1,505,000,000 - Interest paid: 75,000,000 - Taxes paid: 201,000,000 - Dividends paid (operating): 302,000,000? This seems odd for operating +/- Working capital: - Receivables: -1,420,000,000 - Payables: +2,587,000,000 - Inventories: -332,000,000 - Other: ? Other adjustments for noncash: -512,000,000 Let me try: 1,505,000,000 - 75,000,000 - 201,000,000 - 302,000,000 - 1,420,000,000 + 2,587,000,000 - 332,000,000 - 512,000,000 + other = ? = 1,505 - 75 - 201 - 302 - 1,420 + 2,587 - 332 - 512 = 1,505 - 1,078 - 1,420 + 2,587 - 332 - 512 = 427 - 1,420 + 2,587 - 332 - 512 = -993 + 2,587 - 332 - 512 = 1,594 - 332 - 512 = 1,262 - 512 = 750 This doesn't match 1,260. So my assumptions about what's included are wrong. Let me try starting from Net Income: Net Income: 448,000,000 + D&A: 724,000,000 + Impairment: 10,000,000 + Provisions: 92,000,000 - Undistributed profits of associates: 2,000,000 (this reduces net income, so add back? No, it's already in net income as negative) - Gain on disposal: 191,000,000 (this increased net income, so subtract) + Other noncash: -512,000,000? (if negative, it reduced net income, so add back the negative = subtract) Wait, let me think about "Adjustments For Losses Gains On Disposal Of Noncurrent Assets" = -191,000,000 In cash flow statement, if there's a gain, we subtract it (because it's non-cash income). So -191,000,000 means subtract 191M. Similarly, "Other Adjustments For Noncash Items" = -512,000,000 means subtract 512M. So: 448 + 724 + 10 + 92 - 2 - 191 - 512 = 569 Then working capital: - Receivables: -1,420 - Payables: +2,587 - Inventories: -332 = +835 569 + 835 = 1,404 Then interest and taxes: - Interest paid: -75 - Taxes paid: -201 - Dividends paid: -302? 1,404 - 75 - 201 = 1,128 1,128 - 302 = 826 Still not matching 1,260. Maybe dividends paid are not in operating? Or maybe the starting point is different. Let me try starting from Profit Loss From Continuing Operations: 412,000,000 + Discontinued operations: 36,000,000 = 448,000,000 net income. OK. Or maybe start from Profit Loss Before Tax: 756,000,000 - Tax expense: 344,000,000 = 412,000,000 continuing + 36,000,000 discontinued = 448,000,000 Hmm, let me try another approach for FFO. Maybe use EBITDA-based: S&P FFO = EBITDA - Cash Interest - Cash Taxes + Dividends Received from investments Or: FFO = EBIT + D&A - Cash taxes (approximation) Actually, a common S&P shortcut: FFO ≈ EBITDA - Net Interest - Cash Taxes Where: EBITDA = 1,505,000,000 Net Interest = Finance Costs - Finance Income = 125 - 35 = 90,000,000 (or Net Financial Interests = 90,000,000) Cash Taxes = 201,000,000 FFO = 1,505,000,000 - 90,000,000 - 201,000,000 = 1,214,000,000 But this includes working capital implicitly? No, EBITDA is before working capital. Wait, EBITDA doesn't include working capital. So FFO from this should be before working capital. Let me verify: 1,214,000,000 vs my earlier estimate of 1,144,000,000. Close but different. Actually, let me look at this more carefully. The "Net Financial Interests" is 90,000,000, and "Total Financial Balance" is -88,000,000. These are close but not exact. Finance Costs: 125,000,000 Finance Income: 35,000,000 Net = 90,000,000 Total Financial Balance: -88,000,000 (includes share of profit 2M, so 90 - 2 = 88) For S&P FFO, I should use the more comprehensive approach. Let me try: FFO = Net Income + D&A + Deferred Tax + Other Non-Cash - Gain on sales + Interest Expense Actually no, for FFO/Net Debt, we want FFO after interest (since Net Debt includes interest-bearing debt, and we want to see if FFO can cover the debt). Standard S&P FFO: FFO = Net income + D&A + Deferred income tax + Other non-cash items Where "Other non-cash items" includes: - Increase/decrease in provisions - Impairment losses - Gain/loss on disposal of assets - Equity in earnings of affiliates (subtract) - Other non-cash revenues/expenses Let me calculate carefully: Net income: 448,000,000 + D&A: 724,000,000 + Deferred tax: 63,000,000 + Provisions: 92,000,000 + Impairment: 10,000,000 - Gain on disposal: -191,000,000 (this is a gain, so we need to subtract it; the adjustment is -191M which means subtract) - Undistributed profits of associates: -2,000,000 (equity method income, not cash, so subtract) + Other non-cash: -512,000,000? Hmm, the sign convention is confusing me. Let me think again. In the cash flow statement, "Adjustments For Losses Gains On Disposal Of Noncurrent Assets" = -191,000,000. This means in the indirect method, we subtract 191M. Since gain on disposal increased net income, we subtract it to get to cash. So the gain itself is +191M (income), and the adjustment is -191M. Similarly, if "Other Adjustments For Noncash Items" = -512,000,000, this means we subtract 512M in the cash flow reconciliation. This could mean there was 512M of non-cash income that we need to remove, or it could be a net figure. For FFO, we want to add back non-cash expenses and subtract non-cash income. If -512M is the adjustment (meaning subtract), then there was 512M of non-cash income or benefit to remove. So FFO = 448 + 724 + 63 + 92 + 10 - 191 - 2 - 512 = 732,000,000? That seems low. Let me check: 448+724 = 1,172; +63 = 1,235; +92 = 1,327; +10 = 1,337; -191 = 1,146; -2 = 1,144; -512 = 632. Hmm, 632M seems low for FFO when EBITDA is 1,505M. Alternatively, maybe -512M means there was a non-cash expense of 512M that reduced net income, so we add it back? But the negative sign suggests it's a subtraction in the cash flow statement. Let me look at this from the perspective of operating cash flow being 1,260M. If FFO (before working capital, interest, taxes) is what we want: Operating CF = 1,260M + Working capital changes: -835M (net of receivables, payables, inventories) + Interest paid: 75M + Taxes paid: 201M + Dividends paid (if in operating): 302M? = 1,260 - 835 + 75 + 201 + 302 = 1,003? No wait: 1,260 + (-835) + 75 + 201 + 302 = 1,003 Hmm, or: 1,260 - (-835) if working capital was source... Working capital: receivables increased 1,420 (use), payables increased 2,587 (source), inventories increased 332 (use). Net = 2,587 - 1,420 - 332 = 835 (source). So to get from operating CF to pre-working capital: 1,260 - 835 = 425? No, if working capital was source, we subtract it to get to pre-working capital. Wait: Operating CF includes working capital sources. So pre-working capital CF = Operating CF - Working capital sources = 1,260 - 835 = 425? That seems too low. Actually, let me think: If payables increased (source), that means we had more cash because we didn't pay bills. In the indirect method, this is added. So to remove working capital effects, we subtract the sources and add the uses. Working capital adjustments in cash flow: - Receivables increase: -1,420 (use, subtracted in indirect method) - Payables increase: +2,587 (source, added) - Inventories increase: -332 (use, subtracted) Net working capital adjustment: +835 (source) So: Pre-working capital cash flow = Operating CF - 835 = 1,260 - 835 = 425? But we also need to add back interest and taxes paid (since FFO is before these in some definitions). 425 + 75 + 201 = 701 + 302 (dividends?) = 1,003 This is getting messy. Let me try a completely different approach using the standard S&P formula as I understand it. Actually, I recall that S&P FFO is often approximated as: FFO = EBIT + D&A - Cash taxes Or more precisely: FFO = Net income + D&A + Deferred tax + Other non-cash - Gain on asset sales And "Other non-cash" includes things like provisions, impairment, FX changes, fair value changes, etc. Let me look at what makes up the -512M "Other Adjustments For Noncash Items". This is large and could include: - Fair value gains on derivatives (cash flow hedges?) - Pension remeasurements? - Other accruals? Actually, looking at comprehensive income: - Cash flow hedge reserve changed from 28M to 30M (increase of 2M, but with -1M OCI and +3M from perimeter change) - IAS19 reserve changed by 22M These are in equity, not P&L typically. Let me try yet another approach. S&P sometimes publishes FFO formula as: FFO = Operating cash flow before working capital changes - Dividends received + Interest received - Interest paid (if starting from pre-interest) Or simply use the cash flow from operations before changes in working capital, which is sometimes disclosed. Actually, let me look for "Cash Flows From Used In Operating Activities" = 1,260,000,000 and work backwards more carefully. The adjustments listed include: - Decrease Increase in Trade Receivable: -1,420,000,000 - Increase Decrease in Trade Payable: +2,587,000,000 - Decrease Increase in Inventories: -332,000,000 These sum to +835,000,000 If operating cash flow is 1,260,000,000, and working capital contributed +835,000,000, then cash flow before working capital was 1,260 - 835 = 425,000,000? But this 425 seems too low. Let me check if there are other working capital items. "Other Current Nonfinancial Assets" went from 4,051M to 3,289M = decrease of 762M (source) "Other Current Nonfinancial Liabilities" went from 4,487M to 3,006M = decrease of 1,481M (use) These are working capital too! But they're not in the "Adjustments For..." list explicitly. Unless they're in "Other Adjustments For Noncash Items" of -512M? Actually, looking at the balance sheet: Other Current Nonfinancial Assets: 4,051 → 3,289 = -762 (source, would be +762 in CF) Other Current Nonfinancial Liabilities: 4,487 → 3,006 = -1,481 (use, would be -1,481 in CF) Net of these two: -719 (use) Hmm, -719 is somewhat close to -512 but not exact. Could include other items. Actually, I think "Other Adjustments For Noncash Items" = -512M might include these other working capital changes, or it might be something else entirely. Let me try a different, simpler approach. I'll use the most standard S&P FFO definition and be transparent about my assumptions. Standard S&P FFO: FFO = Net Income + Depreciation & Amortization + Deferred Income Taxes + Other Non-Cash Items Where I'll define "Other Non-Cash Items" as: + Provisions adjustments: 92M + Impairment: 10M - Gain on disposal: -191M (subtract the gain) - Equity in earnings of associates: -2M (subtract as non-cash) And I'll exclude the mysterious -512M unless I can understand it. FFO = 448 + 724 + 63 + 92 + 10 - 191 - 2 = 1,144,000,000 Or if I use the balance sheet deferred tax change directly: 424 - 363 = 61 decrease, so deferred tax expense = 61M. FFO = 448 + 724 + 61 + 92 + 10 - 191 - 2 = 1,142,000,000 Now for Net Debt. S&P defines Net Debt as: Total Debt - Cash and Cash Equivalents Total Debt = Current Financial Liabilities + Noncurrent Financial Liabilities = Other Current Financial Liabilities + Other Noncurrent Financial Liabilities From balance sheet: Other Current Financial Liabilities: 1,022,000,000 Other Noncurrent Financial Liabilities: 5,867,000,000 Total Debt = 6,889,000,000 Cash and Cash Equivalents: 2,584,000,000 Net Debt = 6,889 - 2,584 = 4,305,000,000 Wait, I need to check if there are other debt items. Let me look at "Other Current Financial Liabilities" - this might include more than just debt. Actually, looking more carefully, "Other Current Financial Liabilities" = 1,022M and "Other Noncurrent Financial Liabilities" = 5,867M. These seem to be the financial liabilities. But are there "Trade And Other Current Payables To Trade Suppliers" that include debt? No, trade payables are operating liabilities, not debt. However, S&P might include other items in debt. Let me check if there are lease liabilities or other debt-like items. Looking at the cash flow: "Payments Of Lease Liabilities Classified As Financing Activities" = 11M. This suggests there are lease liabilities. Are lease liabilities included in "Other Noncurrent Financial Liabilities" or "Other Current Financial Liabilities"? Probably yes, under IFRS 16. Also, I need to check if there are other financial liabilities not captured. Looking at the balance sheet, I don't see separate line items for lease liabilities. Let me also check "Current Liabilities Other Than..." = 9,686M. This includes: - Trade payables: 5,524M - Other current nonfinancial liabilities: 3,006M - Other current financial liabilities: 1,022M - Current tax liabilities: 134M Total = 5,524 + 3,006 + 1,022 + 134 = 9,686M. ✓ And noncurrent liabilities = 7,214M: - Other noncurrent financial liabilities: 5,867M - Noncurrent provisions for employee benefits: 248M - Other long-term provisions: 729M - Other noncurrent liabilities: 370M Total = 5,867 + 248 + 729 + 370 = 7,214M. ✓ So total debt = 1,022 + 5,867 = 6,889M But wait - are provisions and employee benefits considered debt? No, these are operating/non-financial. However, S&P might consider some of these as debt-like, particularly pension provisions. Actually, S&P typically includes in Total Debt: - Short-term borrowings - Long-term borrowings - Finance lease obligations - Pension obligations (sometimes, if unfunded) - Preferred stock (sometimes) For a standard approach, I'll use financial liabilities as debt. Net Debt = 6,889 - 2,584 = 4,305M But I need to check 2022 vs 2023 dates. The question asks for "2022", which typically means the year ended 2022-12-31, which corresponds to the start of 2023 (2023-01-01 balances). Wait, the data labels are confusing. "2023-01-01" means the balance at the start of 2023, which is the same as end of 2022. And "2022-01-01 - 2023-01-01" means the period from start of 2022 to start of 2023, i.e., the year 2022. So for 2022 ratios: - Use 2022 income statement figures (period 2022-01-01 to 2023-01-01) - Use 2022 balance sheet figures (point 2023-01-01 for end of year, or 2022-01-01 for start) For Net Debt at end of 2022, use 2023-01-01 balances: - Total Debt = 1,022 + 5,867 = 6,889M - Cash = 2,584M - Net Debt = 4,305M Or should I use average net debt? S&P typically uses end-of-period or average. For FFO/Net Debt, it's usually end-of-period Net Debt. Now, let me recalculate FFO more carefully. I want to use a standard S&P approach. Actually, I found that S&P Global Ratings often uses this formula: FFO = Net income from continuing operations + Depreciation & amortization + Deferred income taxes + Other non-cash items Where "Other non-cash items" includes: - Increase in long-term provisions - Impairment losses - Losses/gains on disposal of fixed assets - Share of profit of associates (subtract) - Other non-cash items From cash flow adjustments, let me identify: - Depreciation Expense: 491M - Amortisation Expense: 233M - Total D&A: 724M - Adjustments For Impairment Loss: 10M - Adjustments For Provisions: 92M - Adjustments For Undistributed Profits Of Associates: -2M (subtract from net income, so add back 2M? No, this adjustment is negative, meaning subtract. Since undistributed profits increased net income, we subtract them.) Wait, "Adjustments For Undistributed Profits Of Associates" = -2M. This means in the indirect cash flow, we subtract 2M. This is because the equity method income of 2M (from "Share Of Profit Loss Of Associates") was included in net income but not received as cash. - Adjustments For Losses Gains On Disposal: -191M. This is subtracting a gain of 191M. - Other Adjustments For Noncash Items: -512M. This is subtracting 512M. Now, what is this 512M? Let me investigate the balance sheet changes more carefully. Looking at "Other Current Nonfinancial Assets" and "Other Current Nonfinancial Liabilities": Other Current Nonfinancial Assets: - 2022: 4,051M - 2023: 3,289M - Change: -762M (decrease, source of cash) Other Current Nonfinancial Liabilities: - 2022: 4,487M - 2023: 3,006M - Change: -1,481M (decrease, use of cash) Net: -719M (use) This doesn't match -512M. But there are other changes: - Current Tax Assets: 68 → 35 = -33M (use, but this is in tax) - Other Noncurrent Assets: 25 → 86 = +61M (increase, use) Actually, the -512M might include various accruals and other non-cash items that I can't easily identify. For S&P FFO, the question is whether to include this -512M. If it's truly non-cash and recurring, yes. If it includes working capital or one-time items, maybe not. Given the uncertainty, let me try two approaches: Approach 1: Standard S&P FFO with identifiable items only FFO = Net Income + D&A + Deferred Tax + Provisions + Impairment - Gain on disposal - Equity earnings = 448 + 724 + 61 + 92 + 10 - 191 - 2 = 1,142M Approach 2: Include the -512M if it's non-cash FFO = 1,142 - 512 = 630M? Or 1,142 + (-512 as adjustment) = 630M? Actually, if -512M is "other adjustments for noncash items" and it's negative (subtracted in cash flow), this means it was income or a benefit that needs to be removed. So FFO would be lower: 1,142 - 512 = 630M? No wait, let me think again. If net income includes some non-cash benefit of 512M, and the cash flow adjustment is -512M (subtract), then to get FFO we should also subtract this non-cash benefit. So FFO = 1,142 - 512 = 630M? That seems very low. Alternatively, maybe -512M is an add-back (expense), not a subtraction. Let me re-read: "Other Adjustments For Noncash Items" 2022-01-01 - 2023-01-01: -512000000 EUR In the context of cash flow adjustments, a negative number means subtract. This is consistent with a gain or non-cash income that needs to be removed. But 512M is very large. What could it be? Looking at "Other Current Nonfinancial Assets" decrease of 762M: this could be collection of receivables or use of prepayments. If this is working capital, it should not be in FFO. Actually, I think I need to reconsider. The -512M might include working capital changes that are not separately identified. Or it might be non-recurring. Given the ambiguity, let me try a third approach: use EBITDA as a starting point. S&P sometimes uses a simplified FFO: FFO = EBITDA - Cash Interest - Cash Taxes + Dividends Received From data: EBITDA = 1,505M Cash Interest paid (operating) = 75M Cash Taxes paid = 201M Dividends received (investing) = 2M (not in operating) FFO = 1,505 - 75 - 201 = 1,229M Or if using accrual interest: Net Financial Interests = 90M FFO = 1,505 - 90 - 201 = 1,214M This is close to my 1,142M estimate. The difference is about 87M, which could be due to deferred taxes, provisions, and other items. Actually, let me verify: 1,214 + 63 (deferred tax) - 191 (gain) + ... Hmm, this doesn't reconcile easily. Let me try yet another formula. S&P also defines FFO as: FFO = Operating cash flow + Working capital changes - Dividends received + Interest paid + Taxes paid Wait, that's backwards. Let me think: Operating cash flow = FFO - Working capital changes - Interest paid - Taxes paid + Dividends received So: FFO = Operating CF + Working capital changes + Interest paid + Taxes paid - Dividends received = 1,260 + 835 + 75 + 201 - 0 (dividends received in operating? Not listed) = 2,371M? That seems way too high. Hmm, I think I'm confusing myself with signs. Let me be very careful. In indirect method: Net Income + Non-cash adjustments (D&A, etc.) +/- Working capital changes - Interest paid (if not already in net income) - Taxes paid (if not already in net income) = Operating cash flow Actually, interest and taxes are usually already deducted in net income. So: Operating CF = Net Income + Non-cash adjustments + Working capital sources/uses - Cash interest - Cash taxes + ... Wait, no. In the standard indirect method: Start with Net Income + D&A + Other non-cash expenses - Other non-cash income +/- Working capital changes = Cash from operations before interest and taxes? No, net income already includes interest and tax expense. Actually, standard indirect method: Net Income (includes interest and tax expense) + D&A + Other non-cash items +/- Working capital changes = Cash from operating activities But this assumes net income is after interest and tax. The resulting operating CF is after interest and tax. However, some companies report operating CF before interest and tax, then subtract interest and tax paid. Looking at the data, "Interest Paid Classified As Operating Activities" = 75M and "Income Taxes Paid" = 201M are listed as separate items. This suggests they might be adjustments to get to operating CF. So perhaps: Net Income or starting point + Adjustments = Subtotal - Interest paid - Taxes paid - Dividends paid (if operating) = Operating CF Let me try starting from Profit Loss From Operating Activities = 687M: This is EBIT essentially (operating profit). 687 + D&A and other adjustments - Interest paid - Taxes paid = Operating CF? 687 + 818 (D&A etc) = 1,505 = EBITDA - Interest? Not yet, interest is below operating - Working capital? Actually, Profit Loss From Operating Activities should be before interest but after D&A? No, it's after D&A. Wait: "Profit Loss From Operating Activities" = 687M "Gross Operating Income EBITDA" = 1,505M Difference = 818M = "Depreciation Amortization Provisions And Writedowns" So 1,505 - 818 = 687. Correct. Now from EBITDA to Operating CF: EBITDA 1,505 - Interest paid 75? (but interest is not in EBITDA) - Taxes paid 201? (taxes not in EBITDA) +/- Working capital +/- Other Actually, EBITDA is before interest, taxes, and working capital. So: EBITDA - Interest expense (accrual or cash) - Tax expense (accrual or cash) +/- Working capital changes - Cash interest? No, already in interest = Operating CF This is getting too confusing. Let me use a much simpler approach. I'll calculate FFO using the most standard S&P formula with the most reasonable interpretation: FFO = Net Income + D&A + Deferred Tax + Other recurring non-cash items Where I'll interpret "Other recurring non-cash items" as provisions and impairment (recurring), but NOT gains on disposal (non-recurring) and NOT the mysterious -512M (unknown). FFO = 448 + 724 + 63 + 92 + 10 = 1,337M Then subtract gain on disposal (non-recurring): FFO = 1,337 - 191 = 1,146M This is very close to my earlier 1,142M. Or, if we use the cash flow approach and include the -512M as some kind of non-cash adjustment: FFO = 448 + 724 + 63 + 92 + 10 - 191 - 2 - 512 = 632M? No, that seems wrong. Actually, let me try to understand the -512M by looking at the relationship between EBITDA and operating CF more carefully. From EBITDA 1,505M to Operating CF 1,260M: Difference = 245M What explains this 245M? - Interest paid: 75M - Taxes paid: 201M - Working capital sources: 835M - Other: ? 1,505 - 75 - 201 + 835 + Other = 1,260 1,229 + 835 + Other = 1,260 2,064 + Other = 1,260 Other = -804M Hmm, this doesn't match -512M. Let me recheck. Actually, maybe the starting point for operating CF is not EBITDA. Let me try with Profit Loss Before Tax = 756M. 756 + D&A 724 + other non-cash - Interest paid - Taxes paid + Working capital = 1,260 1,480 + other non-cash - 75 - 201 + 835 = 1,260 1,480 + other non-cash + 559 = 1,260 2,039 + other non-cash = 1,260 Other non-cash = -779M Still not matching. Let me try with Net Income 448M: 448 + 724 + 10 + 92 - 2 - 191 - 512 + other WC - 75 - 201 = 1,260 448 + 724 = 1,172 + 10 = 1,182 + 92 = 1,274 - 2 = 1,272 - 191 = 1,081 - 512 = 569 + 835 (WC) = 1,404 - 75 = 1,329 - 201 = 1,128 Not 1,260. Difference of 132M. Maybe dividends paid of 302M are not in operating? Or maybe they're subtracted elsewhere. 1,128 - 302 = 826. Still not matching. Hmm, I think the issue is that my working capital of 835M might not be complete, or the -512M includes some working capital items. Let me try without the -512M: 448 + 724 + 10 + 92 - 2 - 191 + 835 - 75 - 201 = 1,640 1,640 - 302 (dividends) = 1,338. Not matching. Or if gain on disposal is not 191 but something else... Let me look at "Disposal Of Fixed Assets And Shareholdings" = 413M (cash inflow from investing) And "Adjustments For Losses Gains On Disposal" = -191M (negative adjustment) The gain on disposal would be: Cash proceeds 413M - Book value of assets sold = Gain If gain is 191M, then book value was 413 - 191 = 222M. This seems reasonable. Given the difficulty in reconciling, let me use a pragmatic approach. I'll calculate FFO using the standard S&P components that are clearly identifiable, and note that there may be other items. For the ratio FFO/Net Debt, S&P typically wants: - FFO: Funds from operations (annual) - Net Debt: End of period or average Let me use: FFO = EBITDA - Cash Interest - Cash Taxes + Deferred Tax - Gain on disposal + Other non-cash (provisions, impairment) = 1,505 - 75 - 201 + 63 - 191 + 92 + 10 = 1,505 - 276 + 63 - 191 + 102 = 1,229 + 63 - 191 + 102 = 1,203M Or using accrual interest (90M) instead of cash interest (75M): = 1,505 - 90 - 201 + 63 - 191 + 102 = 1,214 + 63 - 191 + 102 = 1,188M Hmm, these are close to my 1,142M estimate. Let me settle on: FFO ≈ 1,140M to 1,200M I'll use 1,144M as my best estimate from the direct formula: Net Income 448 + D&A 724 + Deferred Tax 63 + Provisions 92 + Impairment 10 - Gain 191 - Equity earnings 2 = 1,144M Actually, I want to double-check the deferred tax. Let me use the cash flow approach: Tax expense: 344M Tax paid: 201M Difference: 143M This 143M includes: - Deferred tax expense/benefit - Changes in current tax assets/liabilities Current tax assets: 68 → 35 = 33 decrease (meaning we used these assets, so tax benefit or just timing) Current tax liabilities: 21 → 134 = 113 increase (meaning we accrued more tax payable, so expense) Net current tax balance change: -33 asset + 113 liability = 80M source (benefit to cash flow) So: Tax expense 344 = Current tax expense + Deferred tax expense Cash taxes 201 = Current tax expense - 80 (current tax balance benefit) Current tax expense = 281M Deferred tax expense = 344 - 281 = 63M This matches my earlier estimate. Deferred tax expense = 63M. But wait, deferred tax assets decreased by 61M (424 → 363). This is close to 63M, with small difference likely due to FX or other items. So FFO = 448 + 724 + 63 + 92 + 10 - 191 - 2 = 1,144M Now for Net Debt: Total Debt = Current Financial Liabilities + Noncurrent Financial Liabilities = 1,022 + 5,867 = 6,889M Less: Cash and Cash Equivalents = 2,584M Net Debt = 4,305M But I need to check if there are other cash-like items or debt-like items. "Other Current Financial Assets" = 14M - this might be short-term investments or receivables. If liquid, could be deducted from debt. S&P typically uses "Cash and Cash Equivalents" only, or sometimes includes liquid investments. If I include Other Current Financial Assets as cash-like: Adjusted Cash = 2,584 + 14 = 2,598M Net Debt = 6,889 - 2,598 = 4,291M But standard is to use just Cash and Cash Equivalents. Also, are there restricted cash? Not mentioned. So Net Debt = 4,305M FFO / Net Debt = 1,144 / 4,305 = 0.266 or 26.6% But wait, I need to check if I should use end-of-period or average. For 2022, using end-of-period is standard for S&P ratios. Actually, let me also check 2022 beginning balances: Debt at 2022-01-01: Current 746 + Noncurrent 4,322 = 5,068M Cash at 2022-01-01: 964M Net Debt at start: 4,104M Average Net Debt = (4,305 + 4,104) / 2 = 4,204.5M FFO / Average Net Debt = 1,144 / 4,204.5 = 27.2% Or using end-of-period: 1,144 / 4,305 = 26.6% S&P typically uses end-of-period for this ratio, or sometimes average. I'll use end-of-period as it's more common for published ratios. But I want to reconsider my FFO. Let me see if I should include the -512M "Other Adjustments For Noncash Items". If this is truly a non-cash item that affects FFO, and it's negative (meaning it reduced net income or was a benefit), then: - If it reduced net income (expense), we add it back for FFO - If it was income (benefit), we subtract it from FFO The cash flow adjustment is -512M, meaning subtract. This suggests it was income/benefit included in net income that needs to be removed. So for FFO, we should also subtract it. But 512M is huge. What could it be? Looking at the balance sheet, "Other Current Nonfinancial Assets" decreased by 762M and "Other Current Nonfinancial Liabilities" decreased by 1,481M. The net is -719M. Could -512M be related to these working capital changes? If so, it shouldn't be in FFO. Actually, I think the -512M might be the net effect of various accruals and other items that are NOT working capital. For example: - Fair value changes on derivatives - FX translation differences - Pension service costs - Other Given the difficulty, and since S&P FFO is meant to be a sustainable measure, I'll exclude the -512M if it's unclear or potentially non-recurring. However, let me try one more approach. Let me see if I can derive FFO from the operating cash flow and known adjustments. Operating CF = 1,260M Add back: Interest paid 75M (if we want pre-interest FFO) Add back: Taxes paid 201M (if we want pre-tax FFO) Add back: Working capital sources 835M? No, FFO is before working capital, so we SUBTRACT working capital sources. Wait: If operating CF includes working capital sources of 835M, then pre-working capital CF = Operating CF - Working capital sources = 1,260 - 835 = 425M? That seems very low. But then add interest 75 and taxes 201: 425 + 75 + 201 = 701M. This 701M is much lower than my 1,144M FFO estimate. What's wrong? Ah, I think I have the sign wrong. In the indirect method, working capital sources are ADDED to net income. So if operating CF is 1,260 and this includes +835 from working capital, then the pre-working capital amount is 1,260 - 835 = 425. But this 425 is after interest and taxes. Pre-interest and tax: 425 + 75 + 201 = 701M. This 701M should equal: Net Income + D&A + Other non-cash - Working capital excluded items. 448 + 724 + 10 + 92 - 2 - 191 - 512 + ? = 701 569 + ? = 701? No, 448 + 724 = 1,172; +10 = 1,182; +92 = 1,274; -2 = 1,272; -191 = 1,081; -512 = 569. 569 is not 701. Difference is 132M. Hmm, maybe the -512M is not all non-cash for FFO purposes, or maybe my working capital is incomplete. Actually, I realize I didn't include all working capital changes. Let me check: From balance sheet changes (2022 to 2023): - Inventories: 204 → 536 = +332 (use, matches -332 in CF) - Trade Receivables: 3,291 → 4,680 = +1,389 (use, but CF says -1,420). Close but not exact. - Trade Payables: 2,894 → 5,524 = +2,630 (source, but CF says +2,587). Close. Other items: - Other Current Nonfinancial Assets: 4,051 → 3,289 = -762 (decrease, source) - Other Current Nonfinancial Liabilities: 4,487 → 3,006 = -1,481 (decrease, use) These are NOT in the explicit working capital adjustments. So the "Other Adjustments For Noncash Items" = -512M might include these or part of these. If Other Current Nonfinancial Assets decreased 762 (source) and Other Current Nonfinancial Liabilities decreased 1,481 (use), net = -719 (use). But -512 is not -719. Could there be other offsets? Actually, looking more carefully, maybe some of these are in "Other Adjustments" or elsewhere. Given the complexity, let me use a simpler and more robust approach. I'll calculate FFO using the EBITDA-based method which is commonly used by S&P when detailed cash flow adjustments are unclear: FFO = EBITDA - Cash Interest - Cash Taxes = 1,505 - 75 - 201 = 1,229M Or with accrual interest: = 1,505 - 90 - 201 = 1,214M I'll use 1,229M as it uses actual cash interest paid. Net Debt = 4,305M (end of 2022) FFO / Net Debt = 1,229 / 4,305 = 0.2855 or 28.6% But wait, I want to check if S&P uses Net Debt or Gross Debt. It's Net Debt. Also, I should verify if I need to include dividends received. S&P sometimes adds dividends received to FFO. Dividends received (investing activities) = 2M. Small, can ignore. Let me also consider if I should use the more comprehensive FFO formula. S&P's detailed FFO includes: - Net income from continuing operations + D&A + Deferred income taxes + Other non-cash items (provisions, impairment, etc.) - Gain/loss on asset sales Using this: Net income from continuing operations: 412M + D&A: 724M + Deferred tax: 63M + Provisions: 92M + Impairment: 10M - Gain on disposal: 191M = 1,110M Then add discontinued operations if included in FFO? S&P usually uses continuing operations. 412 + 724 + 63 + 92 + 10 - 191 = 1,110M Or if using total net income 448M: 448 + 724 + 63 + 92 + 10 - 191 = 1,146M The difference is 36M from discontinued operations. For consistency with S&P, I'll use continuing operations: 1,110M But I also need to subtract equity in earnings of associates if included in net income: - Share of profit of associates: 2M FFO = 1,110 - 2 = 1,108M? Or is this already in the "Other non-cash items"? Actually, looking at cash flow adjustments: "Adjustments For Undistributed Profits Of Associates" = -2M. This means we subtract 2M in the cash flow reconciliation. Since this profit was included in net income but not received as cash, we subtract it. For FFO, since we want funds from operations (not necessarily cash), and the associate's profits are part of ongoing operations, S&P might or might not adjust for this. Typically, equity earnings are subtracted from FFO because they're not cash and not from core operations. So FFO = 1,110 - 2 = 1,108M (using continuing operations) Or with total net income: 1,146 - 2 = 1,144M I'll use 1,144M as my best estimate, as it uses total net income which is more standard for quick calculations. Actually, I want to double-check one thing. The "Result From Nonrecurring Transactions" = 157M. Should this be included in FFO? S&P FFO typically EXCLUDES nonrecurring items. So if this 157M is included in net income, I should subtract it. Where is this 157M in the income statement? Profit Loss From Operating Activities: 687M + Result From Nonrecurring Transactions: 157M + Finance Income: 35M - Finance Costs: 125M + Share Of Profit Of Associates: 2M = Profit Loss Before Tax: 756M 687 + 157 + 35 - 125 + 2 = 756. ✓ So nonrecurring transactions of 157M are included in pre-tax profit. For S&P FFO, we typically exclude nonrecurring items. So adjusted FFO = 1,144 - 157 = 987M? Or if starting from a cleaner base: Operating profit ex-nonrecurring = 687 - 157 = 530M? No, 687 is already operating profit. The nonrecurring is separate. Actually, looking at this: "Profit Loss From Operating Activities" = 687M. This might already include or exclude nonrecurring. The structure suggests: Operating profit (recurring): ? + Nonrecurring: 157M = Total operating-related: ? But 687M is labeled "From Operating Activities", which might include everything operating. Then "Result From Nonrecurring Transactions" = 157M is added separately to get to pre-tax profit. So: 687 + 157 = 844? But pre-tax is 756. Hmm, 687 + 157 + 35 - 125 + 2 = 756. So 687 is operating profit, 157 is nonrecurring, and then financial items get us to 756. For FFO, S&P would typically: - Start with operating profit or EBITDA - Exclude nonrecurring items - Make other adjustments So if I use EBITDA 1,505M, does this include nonrecurring? Probably yes, since nonrecurring is often part of operating activities. To get "recurring EBITDA": 1,505 - 157 = 1,348M? Then FFO = 1,348 - 75 - 201 = 1,072M (using cash interest and taxes) Or using the net income approach: Net income 448 - nonrecurring 157 = 291M (recurring net income) + D&A 724 + Deferred tax 63 + Provisions 92 + Impairment 10 - Gain 191 = 989M This is close to my 987M estimate above. For S&P, the treatment of nonrecurring items depends on whether they're truly one-time or not. "Result From Nonrecurring Transactions" suggests they're nonrecurring, so S&P would typically exclude them from FFO. However, in practice, S&P sometimes includes items if they're expected to recur or if they're part of normal business activities. Given the label explicitly says "Nonrecurring", I'll exclude it for a purist S&P approach. Revised FFO = 1,144 - 157 = 987M (using total net income and excluding nonrecurring) Or more precisely: Recurring Net Income = 448 - 157 = 291M + D&A 724M + Deferred Tax 63M + Provisions 92M + Impairment 10M - Gain on disposal 191M - Equity earnings 2M = 987M FFO / Net Debt = 987 / 4,305 = 0.229 or 22.9% Hmm, but wait. Is the gain on disposal of 191M related to nonrecurring transactions? If so, maybe I shouldn't subtract it separately. Looking at cash flow: "Disposal Of Fixed Assets And Shareholdings" = 413M (cash inflow) And "Adjustments For Losses Gains On Disposal" = -191M (gain) The nonrecurring transactions of 157M might include this gain or part of it. If the 157M nonrecurring includes the 191M gain, then I shouldn't subtract both. Actually, let me think: "Result From Nonrecurring Transactions" = 157M (positive, so income) "Adjustments For Losses Gains On Disposal" = -191M (negative adjustment, meaning gain of 191M) These could be related. The 157M might be the net nonrecurring result, which includes the 191M gain and some offsetting losses or expenses. If I exclude nonrecurring items from FFO, I should use the 157M figure, not the 191M gain separately. But in my FFO calculation, I'm using the cash flow adjustments which include the -191M gain. This might double-count with the nonrecurring exclusion. Let me try a different approach. Let me calculate FFO starting from a "clean" recurring base. Recurring EBITDA = 1,505 - 157 = 1,348M - Cash interest 75M - Cash taxes 201M = Recurring FFO = 1,072M Or using accrual interest: 1,348 - 90 - 201 = 1,057M This seems cleaner. And I don't need to worry about the gain on disposal separately if it's part of the nonrecurring. But wait, the 157M "Result From Nonrecurring Transactions" - is this pre-tax or after-tax? It's in the income statement before tax, so pre-tax. After-tax nonrecurring = 157 * (1 - tax rate) ≈ 157 * 0.55 ≈ 86M? Or using actual tax rate. Tax rate = 344 / 756 = 45.5%? That seems high. Actually, tax expense 344M on pre-tax profit 756M = 45.5%. This includes current and deferred, and might be affected by non-deductible items or different jurisdictional rates. If I apply 45.5% to 157M: tax = 71M, after-tax = 86M. So recurring net income = 448 - 86 = 362M? Or 448 - 157 + 71 = 362M. Then FFO = 362 + 724 + 63 + 92 + 10 = 1,251M? This is getting too complicated with tax allocations. Let me use a simpler and more standard approach: S&P FFO typically starts from reported net income and adds back D&A, deferred taxes, and other non-cash items. Nonrecurring items are usually identified and treated case by case. For this exercise, I'll use: FFO = Net Income + D&A + Deferred Tax + Provisions + Impairment - Gain on disposal = 448 + 724 + 63 + 92 + 10 - 191 = 1,146M And I'll note that this includes nonrecurring items. If I want to exclude them: FFO ex-nonrecurring ≈ 1,146 - 157 = 989M Given that S&P is somewhat flexible on nonrecurring items, and the question asks for an "estimate", I'll use the reported-based FFO of 1,146M or the EBITDA-based FFO of 1,229M. Let me go with 1,144M as my best detailed estimate (including equity earnings adjustment): 448 + 724 + 63 + 92 + 10 - 191 - 2 = 1,144M Or rounded: 1,144M Net Debt = 4,305M Ratio = 1,144 / 4,305 = 0.2657 or 26.6% Let me also check if I should use Gross Debt instead. No, S&P uses Net Debt. Or if I should include other debt-like items: - Noncurrent provisions for employee benefits: 248M (pension-like, sometimes included) - Other long-term provisions: 729M (not typically debt) If I include pension provisions as debt-like: Adjusted Debt = 6,889 + 248 = 7,137M Net Debt = 7,137 - 2,584 = 4,553M Ratio = 1,144 / 4,553 = 25.1% But standard S&P Net Debt usually just uses financial liabilities. Let me verify my debt figure once more. "Other Noncurrent Financial Liabilities" = 5,867M. This seems to include long-term debt. "Other Current Financial Liabilities" = 1,022M. This seems to include short-term debt. Is there any other debt? Looking at the balance sheet, I don't see separate "Loans" or "Bonds" line items. They're all under "Other Financial Liabilities". Total Debt = 6,889M seems correct. Cash = 2,584M Net Debt = 4,305M Final calculation: FFO = 1,144M Net Debt = 4,305M FFO / Net Debt = 0.266 or 26.6% Expressed as a ratio (not percentage): 0.266 Or if using the EBITDA-based FFO = 1,229M: Ratio = 1,229 / 4,305 = 0.285 or 28.5% The difference is about 0.02, which is material. Let me think about which is more appropriate. The detailed FFO formula (1,144M) is more aligned with S&P's stated methodology. The EBITDA-based approach (1,229M) is a shortcut. However, I realize I may have made an error. Let me recheck the detailed FFO. Net Income: 448M + D&A: 724M + Deferred Tax: 63M + Provisions: 92M + Impairment: 10M - Gain on disposal: 191M - Equity earnings: 2M = 1,144M But wait, is "Provisions" of 92M a non-cash expense that should be added back? Yes, provisions are typically added back in FFO as they're non-cash. However, looking at the cash flow: "Adjustments For Provisions" = 92M. This is the net change in provisions. If provisions increased (expense), this is added back. If decreased (release), this is subtracted. Actually, the sign is positive 92M, meaning add back. This suggests provisions increased (non-cash expense). Similarly, "Adjustments For Impairment Loss" = 10M, positive, so add back impairment. These seem correct for FFO. Now, one issue: the "Depreciation Amortization Provisions And Writedowns" = 818M. This includes provisions and writedowns as well as D&A. But in the separate adjustments, D&A is 491 + 233 = 724M, and provisions are 92M, and impairment is 10M. Total = 826M, close to 818M. The difference of 8M might be rounding or different classification. For FFO, I should be careful not to double-count. Let me use the separate items: D&A: 724M Provisions: 92M Impairment: 10M Total non-cash charges: 826M But "Depreciation Amortization Provisions And Writedowns" = 818M. There's a discrepancy of 8M. I'll use the separate items as they're more detailed. Actually, let me recalculate: 491 + 233 + 92 + 10 = 826. But the total line is 818. Maybe "writedowns" of 8M is included in impairment or elsewhere. I'll stick with 724 for D&A and add provisions and impairment separately. Final FFO = 448 + 724 + 63 + 92 + 10 - 191 - 2 = 1,144M Actually, I want to verify one more thing. Should I include "Other Adjustments For Noncash Items" = -512M? If this is a true non-cash item affecting FFO, and it's negative (meaning it was income or benefit), then I should subtract it. But I don't know what it is. Let me see if I can estimate it from the cash flow reconciliation. From Net Income 448M: + 724 (D&A) + 10 (impairment) + 92 (provisions) - 2 (equity earnings) - 191 (gain) - 512 (other) = 569M Then working capital: - 1,420 (receivables) + 2,587 (payables) - 332 (inventories) = 835M 569 + 835 = 1,404M Then: - 75 (interest paid) - 201 (taxes paid) - 302 (dividends paid, if operating) = 1,404 - 75 - 201 - 302 = 826M But operating CF is 1,260M, not 826M. Difference is 434M. Hmm, this doesn't work. Let me try without dividends: 1,404 - 75 - 201 = 1,128M. Still not 1,260M. Difference 132M. Maybe there's another item I'm missing, or the -512M is partially offset by something else. Actually, I wonder if "Other Adjustments For Noncash Items" = -512M includes the working capital changes from "Other Current Nonfinancial Assets" and "Other Current Nonfinancial Liabilities" that I identified earlier. If Other Current Nonfinancial Assets decreased 762M (source) and Other Current Nonfinancial Liabilities decreased 1,481M (use), net = -719M (use). But -512M is not -719M. Unless there's an offset of 207M somewhere. Alternatively, maybe the -512M is the net of various items including some working capital, some non-cash, etc. Given the inability to reconcile precisely, I'll use my FFO estimate of 1,144M and note that there may be other items. However, I want to try one more thing. Let me see if the operating CF of 1,260M can help me derive FFO. If Operating CF = 1,260M, and this is after: - Interest paid: 75M - Taxes paid: 201M - Dividends paid: 302M (if in operating) Then pre-interest, pre-tax, pre-dividend cash flow = 1,260 + 75 + 201 + 302 = 1,838M? No, that seems too high. Actually, dividends paid are typically financing, not operating. Let me assume they're not in operating CF. Pre-interest, pre-tax operating CF = 1,260 + 75 + 201 = 1,536M This is close to EBITDA of 1,505M. Difference is 31M. 1,536 - 1,505 = 31M. This could be due to working capital or other items. If I subtract working capital sources 835M: 1,536 - 835 = 701M. This should be pre-working capital, pre-interest, pre-tax CF. But 701M is much lower than EBITDA 1,505M. Something is wrong. Wait, I think I have the signs confused. Let me restart. Operating CF 1,260M INCLUDES working capital sources. To get pre-working capital, I need to REMOVE working capital sources. If working capital contributed +835M (source), then pre-working capital CF = 1,260 - 835 = 425M? No, that removes the source, leaving less. Actually, yes: if operating CF is 1,260 and 835 of that came from working capital (not operations), then the "true" operating cash generation before working capital is 1,260 - 835 = 425M. But this 425M is after interest and taxes. Pre-interest and tax: 425 + 75 + 201 = 701M. This 701M is what I might call "FFO" in a cash sense. But it's much lower than my 1,144M accrual-based FFO. The difference (1,144 - 701 = 443M) could be due to: - Non-cash items that are not yet cash (like provisions that haven't been paid) - Timing differences - The mysterious -512M Actually, provisions of 92M were added back in accrual FFO but may not be cash. If provisions increased, no cash was paid. So cash FFO should be higher, not lower. I'm getting confused with signs. Let me stop trying to reconcile and use my best accrual-based FFO estimate. Final decision: FFO = 1,144M (using standard S&P components) Net Debt = 4,305M FFO / Net Debt = 1,144 / 4,305 = 0.2657 Rounded to reasonable precision: 0.27 or 26.6% Let me also consider if I should use the 2022 beginning or end debt. For ratios, end-of-period is standard. Actually, I want to double-check one thing. Is "Cash And Cash Equivalents" at 2023-01-01 = 2,584M the right figure? Yes, this is end of 2022. And debt at 2023-01-01: Current 1,022 + Noncurrent 5,867 = 6,889M. Yes. Net Debt = 6,889 - 2,584 = 4,305M. Yes. One final check: should I include "Other Current Financial Assets" = 14M as cash? S&P sometimes includes liquid investments if they're readily convertible to cash. But "Other Current Financial Assets" could be derivatives, restricted cash, or other items. I'll exclude them for conservatism. If included: Net Debt = 6,889 - 2,584 - 14 = 4,291M. Ratio = 1,144 / 4,291 = 0.267. Very similar. I'll use 4,305M. Final answer: 1,144 / 4,305 = 0.266 or 26.6% = 0.27 Actually, let me express as a decimal ratio: 0.27 Or more precisely: 0.266 Hmm, but looking at this again, I want to make sure about the FFO. Let me try the EBITDA-based approach once more as a sanity check. EBITDA = 1,505M Less: Cash Interest = 75M Less: Cash Taxes = 201M = 1,229M This is "cash-based FFO" or approximate FFO. My accrual-based FFO was 1,144M. The difference is 85M. This could be due to: - Non-cash items in net income (provisions, impairment, gain on sale, etc.) net of their cash impact - Working capital embedded in cash taxes vs tax expense Actually, 1,229M (EBITDA-based) is higher than 1,144M (accrual-based). The difference is 85M. If I look at the non-cash adjustments: - Provisions 92M: non-cash expense, so accrual FFO is lower by 92M (because net income already deducted it, we add back, so FFO higher... wait, no. Net income includes provisions expense. We add it back for FFO. So FFO should be HIGHER.) Hmm, let me think. Net income 448 includes all expenses. If provisions expense of 92M was included, and we add it back, FFO increases by 92M. So accrual FFO should be higher than cash flow, not lower. But 1,144 < 1,229. So cash-based FFO is higher. This suggests there are cash outflows not captured in my accrual FFO, or income items that are non-cash. The gain on disposal of 191M is non-cash income in net income. We subtract it for FFO. This reduces FFO by 191M. So: 1,229 - 191 = 1,038M. Then add provisions 92 and impairment 10: 1,038 + 92 + 10 = 1,140M. Close to 1,144M. The remaining difference is 4M, likely due to deferred taxes and other items. So my accrual FFO of 1,144M seems reasonable. I'll finalize with FFO = 1,144M and Net Debt = 4,305M. Ratio = 1,144 / 4,305 = 0.2657 As a percentage: 26.6% I'll express as decimal: 0.27 (rounded) or 0.266 (more precise). Given this is an estimate, I'll use 0.27. Wait, I want to check one more thing. Should I use average net debt or end-of-period? S&P typically uses end-of-period for published ratios, but sometimes mentions average for growth companies. For a utility/energy company like A2A, end-of-period is standard. Also, I should verify the year. "2022" in the annual report context means the year ended December 31, 2022, which corresponds to balances at 2023-01-01 and flows for 2022-01-01 to 2023-01-01. Everything checks out. Final answer: 0.27 (or 0.266 if more precise) Let me use 0.27 as a reasonable rounded estimate, or calculate more precisely: 1144/4305 = 0.26574... I'll provide 0.27. Actually, reconsidering, I think I should be more precise. The ratio is 0.266. Let me use 0.27 rounded to two decimal places, or 0.266 to three. For financial ratios, two decimal places is common: 0.27. But let me also consider: should I express this as a percentage (26.6%) or decimal (0.266)? The question asks for "FFO / Net debt ratio", which is typically expressed as a decimal or percentage. S&P typically expresses this as a percentage in their reports, but mathematically it's a ratio (decimal). I'll provide as decimal: 0.27 Hmm, but looking at my calculation again, I want to verify the net debt one more time. Total Debt: - Other Current Financial Liabilities: 1,022M - Other Noncurrent Financial Liabilities: 5,867M Total: 6,889M Cash: 2,584M Net Debt: 4,305M Is there any other debt? Let me check if "Trade And Other Current Payables To Trade Suppliers" includes any debt. Typically trade payables are operating, not debt. What about "Current Tax Liabilities"? These are operating, not debt. "Other Current Nonfinancial Liabilities"? These might include accrued expenses, deferred revenue, etc. Not debt. "Noncurrent Provisions For Employee Benefits"? These are pension/post-employment benefits. S&P sometimes includes the unfunded portion as debt-like, but here we don't know the funded status. "Other Longterm Provisions"? These are typically operating (environmental, restructuring, etc.). Not debt. "Other Noncurrent Liabilities"? These might include deferred revenue, grants, etc. Not typically debt. So 6,889M seems correct for total debt. One more check: is "Other Noncurrent Financial Liabilities" = 5,867M gross or net? It's gross. And "Other Current Financial Liabilities" = 1,022M. Total: 6,889M. Yes. Net Debt = 4,305M. FFO / Net Debt = 1,144 / 4,305 = 0.266 I'll provide 0.27 as my final rounded answer, or should I be more precise? Given the estimation involved, 0.27 seems appropriate. But let me also provide 0.266 as a more precise alternative. Actually, I'll use 0.27. Wait, I want to make one final check. Is my FFO too low or too high? For a utility company, FFO/Net Debt of 26-27% is reasonable. Investment grade utilities typically have 15-25%, so this is slightly strong but plausible given the high cash generation in 2022 (energy crisis, high prices). Actually, looking at the revenue: 23,166M in 2022 vs 11,549M in 2021. Revenue doubled! This is likely due to high energy prices in 2022. EBITDA went from 1,428M to 1,505M, only a 5% increase. So margins compressed significantly. Net Income went from 550M to 448M, down 19%. So FFO of 1,144M seems reasonable given the profit decline but stable D&A. Net Debt increased from 4,104M to 4,305M, up 5%. FFO/Net Debt of 26.6% seems reasonable. I'll finalize with 0.27. Actually, let me recalculate 1144/4305 precisely: 1144 / 4305 = 0.2657375145... Rounded to 2 decimal places: 0.27 Rounded to 3 decimal places: 0.266 I'll use 0.27. Hmm, but I want to double-check my FFO one more time. I used net income 448. But S&P sometimes uses "Profit Loss From Continuing Operations" = 412M as the starting point. If I use 412M: 412 + 724 + 63 + 92 + 10 - 191 - 2 = 1,108M Then FFO/Net Debt = 1,108 / 4,305 = 0.257 or 25.7% ≈ 0.26 The difference is small (0.01). I'll stick with total net income 448M as it's more standard for quick estimates, giving 0.27. Final answer: 0.27 0.27