I need to calculate the Net Debt / EBITDA ratio for 2022 and 2023, then determine the trend. ## Step 1: Calculate Net Debt for 2022 and 2023 **Net Debt = Total Debt - Cash and Cash Equivalents** First, let me identify the debt components. From the balance sheet, I need to look at: - Noncurrent loans received - Current loans received - Participaciones Preferentes Obligaciones YOtros Valores Negociables (both noncurrent and current) - these are financial liabilities/debt instruments **For 2023-01-01 (end of 2022):** - Noncurrent Portion Of Noncurrent Loans Received: 2,624,000,000 - Current Loans Received And Current Portion Of Noncurrent Loans Received: 553,000,000 - Participaciones Preferentes Obligaciones YOtros Valores Negociables No Corrientes: 3,101,000,000 - Participaciones Preferentes Obligaciones YOtros Valores Negociables Corrientes: 1,139,000,000 Total Debt 2023 = 2,624 + 553 + 3,101 + 1,139 = 7,417,000,000 EUR Cash and Cash Equivalents 2023 = 2,360,000,000 EUR Net Debt 2023 = 7,417 - 2,360 = 5,057,000,000 EUR **For 2022-01-01 (end of 2021):** - Noncurrent Portion Of Noncurrent Loans Received: 2,073,000,000 - Current Loans Received And Current Portion Of Noncurrent Loans Received: 280,000,000 - Participaciones Preferentes Obligaciones YOtros Valores Negociables No Corrientes: 2,364,000,000 - Participaciones Preferentes Obligaciones YOtros Valores Negociables Corrientes: 1,666,000,000 Total Debt 2022 = 2,073 + 280 + 2,364 + 1,666 = 6,383,000,000 EUR Cash and Cash Equivalents 2022 = 2,318,000,000 EUR Net Debt 2022 = 6,383 - 2,318 = 4,065,000,000 EUR ## Step 2: Calculate EBITDA for 2022 and 2023 For EBITDA, I need to work from the profit figures. Let me use the operating profit and add back depreciation/amortization. From the data: - "Profit Loss From Operating Activities" 2022: 1,334,000,000 EUR (for year ending 2023-01-01) - "Dotacion Amortizacion YVariacion De Provisiones" (Depreciation and provisions): 762,000,000 EUR However, I need to be careful. The "Dotacion Amortizacion YVariacion De Provisiones" includes both depreciation and changes in provisions. For EBITDA, I want to add back depreciation and amortization but not necessarily provision changes. Let me look at this more carefully. The cash flow shows: - "Ajustes Por Amortizacion Variacion De Provisiones YDeterioros" (Adjustments for amortization, provisions and impairments): 848,000,000 EUR For S&P adjusted EBITDA, they typically use: EBITDA = Operating Profit + Depreciation & Amortization From the P&L: - Operating Profit 2023: 1,334,000,000 - "Dotacion Amortizacion YVariacion De Provisiones": 762,000,000 But this 762M includes provision changes. Looking at the cash flow adjustment: 848M which includes amortization, provisions and impairments. Actually, let me use a different approach. S&P typically calculates EBITDA as: - EBIT (Operating Profit) + D&A From the cash flow, "Ajustes Por Amortizacion Variacion De Provisiones YDeterioros" = 848M for 2022 year. But I need to separate D&A from provisions. Looking at the balance sheet changes and the detailed notes... Actually, let me use the standard approximation. The "Dotacion Amortizacion YVariacion De Provisiones" in P&L is 762M. For EBITDA, we add back D&A. Let me check if there's a cleaner way. The impairment line shows -15M (reversal), so impairments are small. For practical purposes, let me use: EBITDA ≈ Operating Profit + Depreciation & Amortization From cash flow: "Ajustes Por Amortizacion Variacion De Provisiones YDeterioros" = 848M This includes: amortization + provision changes + impairments The impairment reversal is -15M, so impairments are -15M (reversal). Provision changes are harder to separate. Let me use a simpler approach: S&P often uses Funds From Operations (FFO) based calculations, but for basic EBITDA: I'll approximate using Operating Profit + the D&A component. Actually, looking more carefully at typical S&P methodology, they use "Adjusted EBITDA" which often starts from operating profit before D&A. Let me use: EBITDA = Operating Profit + Depreciation & Amortization If I assume the 848M adjustment is mostly D&A (since impairments are small at -15M), then: EBITDA 2023 ≈ 1,334 + 848 = 2,182,000,000? No wait, that double counts. Actually, Operating Profit is already after D&A. So: EBITDA = Operating Profit + D&A From the P&L structure: - The "Dotacion Amortizacion YVariacion De Provisiones" (762M) is already deducted to get to Operating Profit. So EBITDA = 1,334 + 762 = 2,096,000,000 EUR for 2023? But 762 includes provision changes. Let me look at this differently. In the P&L: Revenue: 11,195M Other Income: 1,016M Changes in inventories: -72M Raw materials: -3,483M Employee benefits: -2,077M Other expenses: -4,814M D&A and provisions: -762M Impairment reversal: +15M Other gains: +13M Equity method result: +159M = Operating Profit: 1,334M So Operating Profit = 1,334M is after D&A and provisions. For EBITDA, I need to add back just D&A. The 762M is "Dotacion Amortizacion YVariacion De Provisiones" - this is D&A + provision changes. From the cash flow, "Ajustes Por Amortizacion Variacion De Provisiones YDeterioros" = 848M for 2022 year. Hmm, these numbers differ (762 vs 848). The 848M in cash flow might include more items. Let me use the cash flow approach which is typically more reliable for S&P. The cash flow from operations is 1,648M, which includes: - Profit: 615M - Adjustments: 927M - of which D&A, provisions, impairments: 848M - other adjustments: 79M - Working capital: 135M - Other operating cash flows: -283M - Interest paid: -209M? No wait, the structure is different. Actually looking at cash flow: 1,648M = 615M profit + 927M adjustments + 135M working capital - 283M other - 209M interest + 40M interest received + 89M dividends - 215M taxes + 12M other. For EBITDA, standard calculation from cash flow: EBITDA ≈ Operating Cash Flow + Interest Paid - Interest Received + Taxes Paid - Working Capital Changes Or from P&L: EBITDA = Operating Profit + D&A Let me try: EBITDA = 1,334 + D&A If D&A ≈ 700M (approximate, removing provision changes from 762M), then EBITDA ≈ 2,034M Actually, let me use a more standard S&P approach. They often calculate: Adjusted Debt / EBITDA For the ratio trend, I mainly need consistency. Let me use Operating Profit + Depreciation & Amortization as reported. Given the complexity, let me use the approximation that "Dotacion Amortizacion YVariacion De Provisiones" is mostly D&A for capital-intensive companies like Acciona (infrastructure/renewables). So EBITDA 2023 ≈ 1,334 + 762 = 2,096M? No, 762 includes provisions. Actually, for 2022 (year ending 2022-01-01): Operating Profit = 829M Dotacion Amortizacion YVariacion De Provisiones = 714M EBITDA 2022 ≈ 829 + 714 = 1,543M (using full line item) For 2023: EBITDA 2023 ≈ 1,334 + 762 = 2,096M But wait - I need to check if 2022 and 2023 labels are correct. The data shows: - "Profit Loss From Operating Activities" 2022-01-01 - 2023-01-01: 1,334M (this is 2022 year) - "Profit Loss From Operating Activities" 2021-01-01 - 2022-01-01: 829M (this is 2021 year) So for calendar year 2022 (ending 2023-01-01): EBITDA ≈ 2,096M For calendar year 2021 (ending 2022-01-01): EBITDA ≈ 1,543M But I need 2022 and 2023 year-ends. The balance sheet dates are 2022-01-01 and 2023-01-01. So: - Net Debt at 2022-01-01 = 4,065M, EBITDA for year ended 2022-01-01 = 1,543M - Net Debt at 2023-01-01 = 5,057M, EBITDA for year ended 2023-01-01 = 2,096M Ratio 2022 = 4,065 / 1,543 = 2.63x Ratio 2023 = 5,057 / 2,096 = 2.41x Difference = 2.41 - 2.63 = -0.22x This is less than 0.3x in absolute value, and negative (improving). Wait, let me recheck. The gap is -0.22x, which is between -0.3 and +0.3, so it's "Stable" by the definition? No wait, the definition says: "Stable is: the gap of the ratio Net Debt / EBITDA calculated for the years 2022 and 2023 is among ± 0.3x and ± 0.3x year on year" Actually re-reading: "among ± 0.3x and ± 0.3x" - this seems to mean the absolute change is ≤ 0.3x. "Consequently if the gap of the ratio Net Debt / EBITDA year on year is lower than 0.3x is improving." Hmm, this is ambiguous. Let me re-read: "if the gap... is lower than 0.3x is improving. If higher is Deteriorating." I think "lower than 0.3x" means the absolute value is less than 0.3x but the direction is decreasing (negative gap). And "higher" might mean increasing. Actually, re-reading more carefully: "the gap... is among ± 0.3x and ± 0.3x" = absolute value ≤ 0.3x means Stable. "if the gap... is lower than 0.3x is improving" - this likely means if the gap is negative and magnitude matters, or if the ratio decreases by less than 0.3x... Actually, I think the interpretation is: - If ratio decreases (gap is negative): if |gap| < 0.3x, it's "Stable" (since it's among ±0.3x), but the text says "lower than 0.3x is improving" which suggests negative gap = improving. Let me re-interpret: The "gap" = Ratio_2023 - Ratio_2022. - If gap < -0.3x: Improving significantly - If -0.3x ≤ gap ≤ 0.3x: Stable - If gap > 0.3x: Deteriorating But the text says "if the gap... is lower than 0.3x is improving" - this is confusing. Actually, I think "lower than 0.3x" refers to the absolute gap being small enough, or perhaps it means the new ratio is lower (improving leverage). Let me try another interpretation: The gap is the absolute difference. - If gap < 0.3x: Improving or Stable? Re-reading once more: "Stable is: the gap... is among ± 0.3x and ± 0.3x" - this means |gap| ≤ 0.3x. "Consequently if the gap... is lower than 0.3x is improving. If higher is Deteriorating." I think this means: - If the ratio decreases by more than 0.3x (gap < -0.3x): Improving - If |gap| ≤ 0.3x: Stable - If the ratio increases by more than 0.3x (gap > 0.3x): Deteriorating But my gap is -0.22x, which is between -0.3 and 0, so |gap| = 0.22 < 0.3, so Stable. Wait, but "lower than 0.3x is improving" - if gap = -0.22, is this "lower than 0.3x"? Hmm, I think the clearest reading is: - gap = Ratio_2023 - Ratio_2022 - If gap < -0.3: Improving (leverage decreased significantly) - If -0.3 ≤ gap ≤ 0.3: Stable - If gap > 0.3: Deteriorating (leverage increased significantly) With gap = -0.22, this is in [-0.3, 0.3], so Stable. But wait, let me double-check my EBITDA calculation. I want to make sure I'm using the right approach. Actually, let me recalculate more carefully. S&P typically uses "Adjusted EBITDA" which might exclude certain items. But for trend analysis, consistency is key. Let me also verify my debt calculation. Should I include lease liabilities? For 2023: - Noncurrent Lease Liabilities: 439M - Current Lease Liabilities: 72M IFRS 16 lease liabilities are typically included in "Net Debt" for S&P purposes. Revised Total Debt 2023: - Loans: 2,624 + 553 = 3,177M - Debt instruments (Participaciones...): 3,101 + 1,139 = 4,240M - Lease liabilities: 439 + 72 = 511M Total Debt = 3,177 + 4,240 + 511 = 7,928M Net Debt 2023 = 7,928 - 2,360 = 5,568M Revised Total Debt 2022: - Loans: 2,073 + 280 = 2,353M - Debt instruments: 2,364 + 1,666 = 4,030M - Lease liabilities: 430 + 68 = 498M Total Debt = 2,353 + 4,030 + 498 = 6,881M Net Debt 2022 = 6,881 - 2,318 = 4,563M Ratio 2022 = 4,563 / 1,543 = 2.96x Ratio 2023 = 5,568 / 2,096 = 2.66x Gap = 2.66 - 2.96 = -0.30x This is right at the boundary of -0.3x. With |gap| = 0.30, this could be considered Stable (if ≤ 0.3) or Improving (if < -0.3 or if exactly -0.3 is treated as improving since it's "lower"). Actually, re-reading: "among ± 0.3x and ± 0.3x" - the wording is awkward but suggests the range [-0.3, 0.3] or equivalently |gap| ≤ 0.3. With gap = -0.30, this is exactly at the boundary. The text says "lower than 0.3x is improving" which might mean gap < -0.3 is improving, or ratio < previous ratio by more than 0.3. Given "among ± 0.3x and ± 0.3x" for Stable, I think |gap| ≤ 0.3 means Stable. But let me check if I should include other items in debt. What about "Noncurrent Financial Assets" and "Current Financial Assets"? These are assets, not liabilities. What about "Other Noncurrent Liabilities" and "Other Current Liabilities"? These may or may not be debt-like. S&P typically focuses on interest-bearing debt. Looking at the structure, "Participaciones Preferentes Obligaciones YOtros Valores Negociables" are clearly debt instruments (bonds, notes, etc.). Let me also check if there are other debt items I missed. The "Other Noncurrent Liabilities" at 1,134M and "Other Current Liabilities" at 1,798M - these are likely operating liabilities, not financial debt. Actually, I realize I should double-check the EBITDA calculation too. Let me see if there's a better way. From the cash flow statement, a common approximation is: EBITDA ≈ Cash Flow from Operations + Interest Paid + Taxes Paid - Working Capital Changes For 2023: CFO = 1,648M Interest Paid = 209M Taxes Paid = 215M Working Capital = 135M (positive means cash inflow, so subtract) EBITDA ≈ 1,648 + 209 + 215 - 135 = 1,937M? Hmm, this differs from my 2,096M. This approach isn't clean because CFO includes other items. Actually, standard formula: CFO = EBITDA - Interest - Taxes ± Working Capital - Other So EBITDA = CFO + Interest + Taxes - Working Capital changes... but only if we know the exact composition. Let me try: EBITDA = 1,648 + 209 + 215 - 135 = 1,937M? But this assumes no other adjustments. Or: EBITDA = Net Income + Interest + Taxes + D&A Net Income = 615M (Profit Loss) Interest = Finance Costs - Finance Income = 256 - 47 = 209M (approx, but there are other items) Taxes = 254M D&A = ? From P&L: 615 = 869 (PBT) - 254 (tax) 869 = 1,334 (operating) - 256 (finance costs) + 47 (finance income) + 8 (exchange) - 70 (fair value) - 194 (equity method)... This is getting messy with the equity method and other items. For S&P purposes, they often use "Adjusted EBITDA" which starts from operating profit and adds back certain items. Let me stick with my original approach but be more careful: EBITDA = Operating Profit + D&A. The question is what is D&A. From the cash flow, "Ajustes Por Amortizacion Variacion De Provisiones YDeterioros" = 848M. This includes: amortization + provision changes + impairments. Impairments from P&L: -15M (reversal, so negative) Provisions changes: ? From balance sheet: Noncurrent Provisions: 301M to 279M = -22M decrease Current Provisions: 317M to 299M = -18M decrease Total provision decrease = 40M But provision decrease would release to P&L, not expense. So "Dotacion...Variacion De Provisiones" means "provision for amortization, provision changes and impairments" - this is an expense item. Actually, in Spanish accounting, "Dotacion Amortizacion YVariacion De Provisiones" typically means: - Depreciation and amortization charges - Plus/minus changes in provisions (if expense) - Plus impairments The cash flow adjustment "Ajustes Por Amortizacion Variacion De Provisiones YDeterioros" = 848M reconciles the P&L 762M to cash basis, suggesting the 762M is the accrual amount and 848M is some adjusted figure, or vice versa. Actually wait - the cash flow shows: Profit: 615M Adjustments: 927M - of which: Ajustes Por Amortizacion... : 848M - Other adjustments: 79M So total adjustments to reconcile profit to operating cash flow = 927M. The 848M is the D&A, provisions, impairments component. This is higher than the P&L 762M because it might include non-cash items or different scope. For EBITDA, I should add back the full D&A. If I use 848M as the add-back: EBITDA 2023 = 1,334 + 848 = 2,182M? No wait, Operating Profit is already after the 762M expense. Actually, let me verify: Is Operating Profit after or before the 762M line? Looking at P&L structure: Revenue + Other Income +/- Changes in inventories - Raw materials - Employee benefits - Other expenses - Dotacion Amortizacion YVariacion De Provisiones (762M) + Impairment reversal (15M) + Other gains (13M) + Equity method result (159M) = Operating Profit (1,334M) Yes! Operating Profit is AFTER deducting the 762M. So to get EBITDA, I need to add back just the D&A portion of 762M, not the whole thing. But I don't know the exact split. However, for a capital-intensive infrastructure company, most of the 762M is likely D&A. If I assume 80% is D&A: 610M, then EBITDA = 1,334 + 610 = 1,944M If 90%: 686M, then EBITDA = 2,020M This is getting too speculative. Let me use a different approach: look at the relationship between my calculations and see if the conclusion changes. Actually, let me re-examine. The cash flow adjustment of 848M for "Ajustes Por Amortizacion Variacion De Provisiones YDeterioros" suggests this is the total non-cash charge. If I add this back to Operating Profit, I get something closer to "Cash Operating Profit" before working capital. But for EBITDA, the standard is EBIT + D&A. EBIT is before interest and taxes, but after D&A. So EBIT = Operating Profit (if there's no other operating income/expense structure issues). Wait, actually in many European statements, "Operating Profit" is already EBIT or close to it. Let me check if there's "Profit Loss From Operating Activities" which might be before or after some items. The term "Profit Loss From Operating Activities" at 1,334M - this is likely Operating Profit or EBIT. For EBITDA, we add back Depreciation and Amortization. If I use the cash flow adjustment of 848M as the best estimate of total D&A + provisions + impairments, and subtract the impairment reversal of 15M and some provision changes... Actually, I think for practical purposes and given the data limitations, let me use: EBITDA ≈ Operating Profit + "Dotacion Amortizacion YVariacion De Provisiones" - provision changes + impairments But I don't have clean provision changes. Let me try a completely different approach. S&P sometimes uses "Funds From Operations" (FFO) and "Debt" directly. But the question asks for Net Debt / EBITDA. Given the ambiguity, let me use the most straightforward interpretation: EBITDA = Operating Profit + Depreciation & Amortization, where I approximate D&A from the cash flow statement's depreciation/amortization adjustment. From cash flow: "Ajustes Por Amortizacion Variacion De Provisiones YDeterioros" = 848M If I use this as the add-back (assuming it's mostly D&A for a capital-intensive company): EBITDA 2023 = 1,334 + 848 = 2,182M? No, this double-counts if Operating Profit already includes the 762M. Actually, I think I need to be clearer. The 762M in P&L is deducted to get Operating Profit. The 848M in cash flow is an adjustment to Net Income. These are different starting points. Net Income = 615M Add back: 848M (D&A, provisions, impairments) + 79M other = 927M Gives: ~1,542M before working capital changes This 1,542M is roughly: EBITDA - Interest - Taxes, or something similar. Actually: Net Income + D&A + Interest + Taxes ≈ EBITDA 615 + 848 + 209 + 254 = 1,926M? But this ignores provisions and other items. Hmm, 1,926M is close to my earlier 2,096M and 1,937M. Let me try: EBITDA = Net Income + Taxes + Interest + D&A (pure) = 615 + 254 + (256-47) + D&A = 615 + 254 + 209 + D&A = 1,078 + D&A If D&A ≈ 900M, then EBITDA ≈ 1,978M This is in the ballpark of my other estimates. Given the uncertainty, let me check if the conclusion (Improving, Stable, or Deteriorating) is robust across reasonable EBITDA estimates. Using Net Debt with leases: Net Debt 2022 = 4,563M Net Debt 2023 = 5,568M Scenario 1: EBITDA 2022 = 1,543M, EBITDA 2023 = 2,096M (using full P&L line) Ratio 2022 = 2.96, Ratio 2023 = 2.66, gap = -0.30 Scenario 2: EBITDA 2022 = 1,700M, EBITDA 2023 = 2,200M (higher estimates) Ratio 2022 = 2.68, Ratio 2023 = 2.53, gap = -0.15 Scenario 3: EBITDA 2022 = 1,400M, EBITDA 2023 = 1,900M (lower estimates) Ratio 2022 = 3.26, Ratio 2023 = 2.93, gap = -0.33 The gap ranges from -0.15 to -0.33 depending on assumptions. The most likely scenario with reasonable D&A estimates gives a gap around -0.2 to -0.3. At the boundary, with my original calculation of gap = -0.30 exactly (or -0.22 without leases), the classification depends on whether leases are included and exact EBITDA. However, looking at this from a business perspective: - Revenue grew significantly: 8,104M to 11,195M (+38%) - Operating Profit grew: 829M to 1,334M (+61%) - Net Debt increased: ~4,563M to ~5,568M (+22%) So the company grew revenue and profits faster than debt, suggesting leverage improvement. This supports "Improving" or at worst "Stable". Given my calculations show the ratio decreasing (improving) with the gap at or near the -0.3 boundary, and the fundamental business trend is clearly improving with strong profit growth, I lean toward "Improving" if the gap is slightly more negative than -0.3, or "Stable" if exactly at -0.3. But wait - I need to re-check. Let me recalculate more carefully with a cleaner EBITDA approach. Actually, I realize I should look at this more carefully. The "Dotacion Amortizacion YVariacion De Provisiones" is 762M for 2022 and 714M for 2021. For a capital-intensive company, most of this is D&A. The "impairment" line is separate at -15M and -67M (reversals, so negative = gain). For EBITDA calculation, a cleaner approach might be: Start from Revenue, subtract cash operating costs. Or: Gross Profit - SG&A + D&A... but I don't have gross profit. Let me try: EBITDA = Revenue + Other Income - Cash Costs (excluding D&A) From P&L 2023: Revenue: 11,195 Other Income: 1,016 Total Income: 12,211 Less: Changes in inventories: -72 (use of inventory, expense) Raw materials: -3,483 Employee benefits: -2,077 Other expenses: -4,814 = -10,446 (cash-like operating expenses) But "Other expenses" of 4,814 likely includes some D&A or non-cash items. This is not clean. Actually, looking at the P&L structure again, "Other Expense By Nature" is 4,814M. This is by nature, so it might include D&A or not. The "Dotacion Amortizacion..." is a separate line at 762M. Total costs before operating profit: -72 + 3,483 + 2,077 + 4,814 + 762 - 15 - 13 - 159 = 10,877? Let me check: 11,195 + 1,016 = 12,211 revenue total. 12,211 - 10,877 = 1,334 operating profit. Yes. So "Other Expense By Nature" of 4,814 is separate from D&A of 762. For EBITDA, if Other Expense By Nature is mostly cash operating expenses (rent, utilities, maintenance, etc.), then: EBITDA = Revenue + Other Income - Changes in inventories - Raw materials - Employee benefits - Other expenses (cash portion) But I don't know the cash portion. Standard approach: EBITDA = Operating Profit + D&A = 1,334 + D&A. If D&A = most of 762M, say 600-700M, then EBITDA = 1,900-2,000M. Given the company is capital-intensive (PPE of 9,485M), D&A should be significant. With PPE of ~9B, annual D&A at 8% = ~760M. So the full 762M could be mostly D&A. If D&A ≈ 700M (allowing 62M for provisions): EBITDA 2023 = 1,334 + 700 = 2,034M EBITDA 2022 = 829 + 650 = 1,479M (assuming similar proportion) Ratio 2023 = 5,568 / 2,034 = 2.74 Ratio 2022 = 4,563 / 1,479 = 3.09 Gap = -0.35 This would be "Improving" (gap < -0.3). If D&A is lower, say 600M: EBITDA 2023 = 1,934, Ratio = 2.88 EBITDA 2022 = 1,400, Ratio = 3.26 Gap = -0.38, still Improving. If D&A is very low, say 400M: EBITDA 2023 = 1,734, Ratio = 3.21 EBITDA 2022 = 1,200, Ratio = 3.80 Gap = -0.59, still Improving. Hmm, actually with lower D&A, the ratio is higher but the gap is more negative. This is because 2022 operating profit was lower, so adding less D&A makes 2022 ratio worse. Wait, let me recheck: if D&A is 400M for both years: 2022: EBITDA = 829 + 400 = 1,229, Ratio = 4,563/1,229 = 3.71 2023: EBITDA = 1,334 + 400 = 1,734, Ratio = 5,568/1,734 = 3.21 Gap = -0.50, Improving. If D&A is 900M: 2022: EBITDA = 1,729, Ratio = 2.64 2023: EBITDA = 2,234, Ratio = 2.49 Gap = -0.15, Stable. So the conclusion depends on D&A level. For high D&A, it's Stable; for low D&A, it's Improving. But wait - for a company with 9,485M PPE and 545M intangibles, plus investment property, D&A should be substantial. If we assume 5-10% of PPE: - 5% of 9,485M = 474M - 8% of 9,485M = 759M - Plus intangibles amortization So D&A of 600-800M is reasonable. At 800M: 2022: EBITDA = 1,629, Ratio = 2.80 2023: EBITDA = 2,134, Ratio = 2.61 Gap = -0.19, Stable. At 600M: 2022: EBITDA = 1,429, Ratio = 3.19 2023: EBITDA = 1,934, Ratio = 2.88 Gap = -0.31, Improving. The boundary is around 650M D&A. Given the company's asset base, I think D&A is likely higher than 650M, suggesting "Stable". But I need to also consider: does S&P include leases in debt? And do they use reported EBITDA or adjusted? Given the complexity, let me look for a simpler signal. The company's revenue grew 38% while net debt grew 22%. This is a strong fundamental improvement. Also, the equity increased significantly, and the company is clearly investing in growth (PPE up from 8,066M to 9,485M). Actually, let me try one more approach. The cash flow from operations was 1,648M in 2023 vs 574M in 2022. This massive improvement in CFO suggests strong operational performance. If I use a rough EBITDA from CFO: EBITDA ≈ CFO + Interest + Taxes - Working Capital benefit 2023: 1,648 + 209 + 215 - 135 = 1,937M? (but this double counts some items) Actually, standard: CFO = EBITDA - Interest - Taxes ± Working Capital So EBITDA = CFO + Interest + Taxes - Working Capital change (if working capital was a source) 2023: EBITDA = 1,648 + 209 + 215 - 135 = 1,937M? No wait, if working capital was +135M (source), then: CFO = EBITDA - Interest - Taxes + 135 (working capital source) So EBITDA = CFO + Interest + Taxes - 135 = 1,648 + 209 + 215 - 135 = 1,937M 2022: CFO = 574M, Interest = 206M, Taxes = 82M, Working Capital = -340M (use) CFO = EBITDA - Interest - Taxes - 340 So EBITDA = CFO + Interest + Taxes + 340 = 574 + 206 + 82 + 340 = 1,202M? Wait, that gives EBITDA 2022 = 1,202M, which seems low. Let me check: 574 + 206 + 82 - (-340)? No, working capital was -340M, meaning it was a use of cash. Actually: CFO = 574 = EBITDA - 206 - 82 + (-340)? No, if working capital decreased (negative), that's a use. Standard: CFO = Net Income + D&A + ... Or: CFO = EBITDA - Interest - Taxes + Decrease in Working Capital If Working Capital change = -340 (decrease, use of cash): 574 = EBITDA - 206 - 82 - 340? That would make EBITDA negative, wrong. Actually, "Increase Decrease In Working Capital" of -340M means working capital increased (use of cash). So: CFO = EBITDA - Interest - Taxes - Working Capital increase 574 = EBITDA - 206 - 82 - 340? No, 574 + 206 + 82 + 340 = 1,202, but that assumes EBITDA is before interest and taxes, which it is. Wait, but 1,202M EBITDA for 2022 seems low compared to Operating Profit of 829M. EBITDA should be higher than Operating Profit. Unless... the "Interest Paid" and "Taxes Paid" in cash flow are different from P&L. Let me check: P&L Finance Costs: 235M, but cash flow Interest Paid: 206M. Difference could be accruals. P&L Tax: 171M, cash flow Taxes Paid: 82M. Big difference due to timing. Using P&L figures: EBITDA = Net Income + Taxes + Interest + D&A = 404 + 171 + 235 + D&A = 810 + D&A If D&A = 400M, EBITDA = 1,210M. Close to my 1,202M. For 2023: EBITDA = 615 + 254 + 256 + D&A - 47 (finance income) + ... actually Interest expense net = 256 - 47 = 209? Or just use 256 cost and 47 income separately. Net Income + Tax + Finance Costs - Finance Income + D&A = 615 + 254 + 256 - 47 + D&A = 1,078 + D&A If D&A = 900M, EBITDA = 1,978M. Hmm, this is getting messy with the equity method and other items in the P&L. Let me try yet another approach. Look at "Comprehensive Income" or use a simpler relationship. Actually, I think the most reliable given data constraints is: EBITDA ≈ Operating Profit + Depreciation & Amortization And use the cash flow "Ajustes Por Amortizacion Variacion De Provisiones YDeterioros" as the best available estimate of total non-cash charges, then adjust for impairments and provision changes. Given impairment reversal of 15M in 2023 and 67M in 2022, and provision changes from balance sheet: 2022 to 2023 provision changes: Noncurrent provisions down 22M, Current provisions down 18M. Total 40M decrease. But this is balance sheet change, P&L impact depends on new provisions minus releases. Actually, if I look at "Noncurrent Provisions" 301M to 279M and "Current Provisions" 317M to 299M, total provisions decreased by 40M. This means 40M was released to P&L (income), not expense. So in the 762M "Dotacion Amortizacion YVariacion De Provisiones", if provisions decreased (released), the "Variacion De Provisiones" part would be negative (income), meaning the 762M is even more dominated by D&A. Wait, that doesn't make sense. If provisions released 40M to income, then "Variacion De Provisiones" should be -40M (negative expense = income). So 762M = D&A - 40M + impairments... but impairments were -15M (reversal, so income). So 762M = D&A - 40M - 15M? That would mean D&A = 817M. Or: 762M = D&A + provision changes + impairment changes If provision changes = -40M (release, negative expense) and impairment = -15M (reversal): 762 = D&A - 40 - 15 = D&A - 55 D&A = 817M For 2022: 714M = D&A - ? Provisions: 279+299 = 578 to 301+317 = 618, increase of 40M. So expense of 40M. Impairments: -67M (reversal). 714 = D&A + 40 - 67 = D&A - 27 D&A = 741M Hmm, D&A of 817M and 741M seems reasonable for this company. The increase from 741M to 817M (10%) makes sense with PPE growth. Using these D&A figures: EBITDA 2022 = 829 + 741 = 1,570M EBITDA 2023 = 1,334 + 817 = 2,151M With Net Debt including leases: 2022: 4,563 / 1,570 = 2.91 2023: 5,568 / 2,151 = 2.59 Gap = -0.32, Improving. Without leases: 2022: 4,065 / 1,570 = 2.59 2023: 5,057 / 2,151 = 2.35 Gap = -0.24, Stable. Given S&P typically includes leases in debt for leverage calculations post-IFRS 16, the "Improving" classification seems more appropriate. However, I want to verify my provision logic. The balance sheet shows: 2022-01-01: Noncurrent provisions 301M, Current provisions 317M = 618M total 2023-01-01: Noncurrent provisions 279M, Current provisions 299M = 578M total So provisions decreased from 618M to 578M, a 40M decrease. This means net release of 40M. In the P&L, "Dotacion Amortizacion YVariacion De Provisiones" includes this release as negative expense (income). So if the total line is 762M positive (expense), and 40M came from provision release (income/negative), then D&A + impairments must be 802M to net to 762M. With impairment reversal of 15M (negative expense/income): D&A - 40 - 15 = 762? No, that gives D&A = 817M. Or: D&A + (-40) + (-15) = 762, so D&A = 817M. Yes. For 2022: provisions increased from ? to 618M. I need 2021 provision data. Actually, I don't have 2021-01-01 provision data directly. Let me check... I don't see it in the given data. So my 2022 D&A estimate is less reliable. Let me use a different approach: assume D&A is proportional to PPE. PPE 2022: 8,066M, PPE 2023: 9,485M. Increase of 18%. If D&A 2023 = 817M, then D&A 2022 ≈ 817 / 1.18 ≈ 692M? Or using average PPE. Actually, let me just use a simpler consistent assumption. If D&A is roughly 8-9% of PPE: 2022: 8,066 × 8.5% = 686M 2023: 9,485 × 8.5% = 806M EBITDA 2022 = 829 + 686 = 1,515M EBITDA 2023 = 1,334 + 806 = 2,140M With leases in debt: 2022 ratio = 4,563 / 1,515 = 3.01 2023 ratio = 5,568 / 2,140 = 2.60 Gap = -0.41, Improving. Without leases: 2022 ratio = 4,065 / 1,515 = 2.68 2023 ratio = 5,057 / 2,140 = 2.36 Gap = -0.32, Improving. Both suggest Improving when gap is more than 0.3x decrease. Given all my analysis, the most reasonable conclusion is that leverage is **Improving**, with the ratio decreasing by more than 0.3x (or around 0.3x boundary with conservative assumptions, but likely more with reasonable D&A estimates). The fundamental drivers support this: strong revenue and profit growth with manageable debt increase. Improving