I need to calculate the Net Debt / EBITDA ratio for 2022 and 2023 to determine the trend. First, let me identify the relevant data from the annual report. **For 2022 (period 2021-01-01 to 2022-01-01):** - Total Assets: 206,940,000,000 EUR - Cash and Cash Equivalents: 8,858,000,000 EUR - Total Liabilities: 164,598,000,000 EUR - Equity: 42,342,000,000 EUR **For 2023 (period 2022-01-01 to 2023-01-01):** - Total Assets: 219,618,000,000 EUR - Cash and Cash Equivalents: 11,041,000,000 EUR - Total Liabilities: 177,536,000,000 EUR - Equity: 42,082,000,000 EUR **Net Debt Calculation:** Net Debt = Total Debt - Cash and Cash Equivalents I need to find total debt. From the balance sheet, I can identify borrowings: - Long-term borrowings + Short-term borrowings + Current portion of long-term borrowings For 2022 (at 2022-01-01): - Long-term borrowings: 54,500,000,000 EUR - Short-term borrowings: 13,306,000,000 EUR - Current portion of long-term borrowings: 4,031,000,000 EUR - Total Debt = 54,500 + 13,306 + 4,031 = 71,837,000,000 EUR - Net Debt = 71,837 - 8,858 = 62,979,000,000 EUR For 2023 (at 2023-01-01): - Long-term borrowings: 68,191,000,000 EUR - Short-term borrowings: 18,392,000,000 EUR - Current portion of long-term borrowings: 2,835,000,000 EUR - Total Debt = 68,191 + 18,392 + 2,835 = 89,418,000,000 EUR - Net Debt = 89,418 - 11,041 = 78,377,000,000 EUR **EBITDA Calculation:** EBITDA = Profit/Loss from Operating Activities + Depreciation/Amortization + Impairment losses - Reversals For 2022 (period 2021-01-01 to 2022-01-01): - Profit Loss From Operating Activities: 7,551,000,000 EUR - Depreciation Amortisation And Impairment Loss: 8,507,000,000 EUR - Impairment Loss Reversal (trade receivables): -1,175,000,000 EUR (this is a reversal, so subtract) - EBITDA = 7,551 + 8,507 - 1,175 = 14,883,000,000 EUR Wait, let me reconsider. The "Depreciation Amortisation And Impairment Loss Reversal Of Impairment Loss Recognised In Profit Or Loss" is 8,507,000,000 EUR. This already includes impairment losses and reversals. Looking at the cash flow statement adjustments: - Adjustments For Depreciation And Amortisation Expense And Impairment Loss: 8,691,000,000 EUR for 2022 period For EBITDA, standard approach is: EBITDA = Operating Profit + Depreciation + Amortization Using the income statement approach: For 2022 period (2021-01-01 to 2022-01-01): - Profit Loss From Operating Activities: 7,551,000,000 EUR - Add back: Depreciation Amortisation And Impairment Loss: 8,507,000,000 EUR - But need to adjust for impairment reversal on trade receivables: 1,175,000,000 EUR (this is a positive in P&L, so it's already in operating profit) Actually, let me use a cleaner approach. Operating profit already includes the net effect of impairments and reversals. So: EBITDA = Profit Loss From Operating Activities + Depreciation Amortisation (excluding impairment/reversal effects) But the line item "Depreciation Amortisation And Impairment Loss Reversal Of Impairment Loss Recognised In Profit Or Loss" is 8,507,000,000 EUR. This is the total D&A including impairments. Looking at cash flow adjustments: - Adjustments For Depreciation And Amortisation Expense And Impairment Loss: 8,691,000,000 EUR (2022 period) - Adjustments For Impairment Loss Reversal: 1,196,000,000 EUR (2022 period) For 2023 period (2022-01-01 to 2023-01-01): - Profit Loss From Operating Activities: 11,193,000,000 EUR - Adjustments For Depreciation And Amortisation: 8,809,000,000 EUR - Adjustments For Impairment Loss Reversal: 1,288,000,000 EUR So EBITDA for 2023 period = 11,193 + 8,809 - 1,288 = 18,714,000,000 EUR? Wait, let me think more carefully. The cash flow adjustment for impairment reversal is added back because it reduced operating profit. So: Operating profit includes the reversal as a positive. So to get from operating profit to EBITDA, I add D&A. Actually, standard formula: EBITDA = Operating Profit + D&A expense (the expense amount, not net of reversals) Let me use: EBITDA = Profit Loss From Operating Activities + Depreciation Amortisation And Impairment Loss Reversal line item For 2022 period: 7,551 + 8,507 = 16,058,000,000 EUR For 2023 period: 11,193 + 7,447 = 18,640,000,000 EUR But wait, the 8,507 and 7,447 include impairment losses net of reversals. Let me check if this is correct. Actually, looking more carefully at the line item: "Depreciation Amortisation And Impairment Loss Reversal Of Impairment Loss Recognised In Profit Or Loss" This seems to be: Depreciation + Amortization + Impairment Losses - Reversals of Impairment Losses For EBITDA, we want to add back D&A and impairment losses, but subtract reversals (since they benefited operating profit). Hmm, actually the standard is: EBITDA = EBIT + D&A. Impairment losses are part of EBIT calculation. Reversals of impairment also affect EBIT. Let me use a different approach. From the cash flow statement: - Cash Flows From Used In Operating Activities: 9,915,000,000 EUR (2022 period) and 8,674,000,000 EUR (2023 period) But this includes working capital changes, so not directly helpful for EBITDA. Let me try: EBITDA can be approximated from the income statement as: Revenue - Operating Expenses + D&A (since operating expenses include D&A) Revenue 2022: 85,719,000,000 EUR Operating Expense 2022: 80,691,000,000 EUR Operating profit 2022: 7,551,000,000 EUR So D&A embedded in operating expenses = 85,719 - 80,691 - 7,551? No wait, there's also other income and commodity contracts. Let me look at the structure: Revenue = 85,719 Operating Expenses = 80,691 But we also have: - Net Results From Commodity Contracts: 2,523 - Other Work Performed By Entity And Capitalised: -3,041 (this is capitalized, so reduces costs) Actually, looking at the P&L structure more carefully: Revenue: 85,719 Other Income: 3,819 Total income: 89,538 Operating Expenses: 80,691 But this includes various items. The operating profit is 7,551. Let me verify: 89,538 - 80,691 + 2,523 (commodity) - other adjustments = 7,551? This is getting complex. Actually, let me re-read: "Operating Expense" is given as 80,691 for 2022 period. And "Profit Loss From Operating Activities" is 7,551. If Operating Expense includes D&A, then: EBITDA = Revenue + Other Income + Net Results from Commodity Contracts - Operating Expenses + D&A But we don't know D&A separately from the operating expense line. Let me use the cash flow approach. The cash flow from operations before working capital changes is: Profit Loss From Operating Activities: 7,551 + Adjustments For Depreciation And Amortisation: 8,691 - Adjustments For Impairment Loss Reversal: 1,196 (wait, this is subtracted because it was added to profit) Actually in cash flows, the adjustments are: + Depreciation and amortization (add back expense) + Impairment losses (add back expense) - Reversals of impairment (subtract because it was income) Looking at the data: "Adjustments For Impairment Loss Reversal": 1,196,000,000 for 2022 period - this is positive number in cash flow, meaning it's subtracted from profit? Or is it added? Actually, in standard cash flow presentation: - Start with profit before tax - Add back: depreciation, amortization, impairment losses - Subtract: gains on disposal, reversals of impairment So if "Adjustments For Impairment Loss Reversal" is 1,196,000,000, this would be subtracted (negative adjustment to profit). And "Adjustments For Depreciation And Amortisation" is 8,691,000,000 - this is added back. So: EBITDA ≈ Profit Loss From Operating Activities + 8,691 - 1,196 = 7,551 + 8,691 - 1,196 = 15,046? No wait, that's not right either. Let me think again. The cash flow starts with profit before tax, not operating profit. For 2022 period: Profit Loss Before Tax: 5,378 + Adjustments For Depreciation And Amortisation: 8,691 - Adjustments For Impairment Loss Reversal: 1,196? Actually, looking at standard IFRS cash flow: Profit before tax: 5,378 Adjustments to reconcile: + Depreciation and amortization: 8,691 + Impairment losses on trade receivables: need to find - Reversal of impairment: 1,196 (this would reduce profit, so we subtract it? No, reversal increases profit, so to get to cash basis we subtract it) Wait, I need to be more careful. Reversal of impairment increases accounting profit but doesn't generate cash. So in cash flow, we subtract it from profit to get to operating cash flow before working capital. So: 5,378 + 8,691 - 1,196 = 12,873, then other adjustments... But for EBITDA, we want Earnings BEFORE Interest, Tax, Depreciation and Amortization. From operating profit: 7,551 Add back: D&A (including impairment losses, excluding reversals) The total D&A adjustment in cash flow is 8,691. But this includes impairment losses and excludes reversals? Or is it pure D&A? Looking at the line: "Adjustments For Depreciation And Amortisation Expense And Impairment Loss" - this is 8,691. This suggests it includes both D&A and impairment losses. And "Adjustments For Impairment Loss Reversal" is 1,196 separately. So to get from Operating Profit to EBITDA: Operating Profit already includes the effect of: - D&A expense (subtracted) - Impairment losses (subtracted) - Reversal of impairments (added) So EBITDA = Operating Profit + D&A expense + Impairment losses - Reversal of impairments = Operating Profit + (D&A + Impairment losses - Reversal of impairments) + Reversal of impairments - Reversal of impairments? Hmm, let me try: The cash flow adjustment "Depreciation And Amortisation Expense And Impairment Loss" of 8,691 includes D&A and impairment losses. This is added back in cash flow. And "Impairment Loss Reversal" of 1,196 is subtracted in cash flow (because it increased profit but not cash). So from Operating Profit to EBITDA: - Operating Profit = Revenue - Costs including D&A and impairments, plus reversals - EBITDA = Revenue - Costs excluding D&A and impairments, plus reversals? No... Actually: EBITDA = Operating Profit + D&A expense + Impairment losses - Reversal of impairments If the cash flow add-back is 8,691 (D&A + impairments) and we need to also adjust for reversals... From the P&L line: "Depreciation Amortisation And Impairment Loss Reversal Of Impairment Loss Recognised In Profit Or Loss" = 8,507 for 2022 period. This = D&A + Impairment Losses - Reversal of Impairment Losses = 8,507 So: D&A + Impairment Losses = 8,507 + Reversal of Impairment Losses = 8,507 + 1,175 = 9,682? Wait, the cash flow adjustment is 8,691, not 9,682. There's a discrepancy. Let me check: Impairment Loss Reversal in P&L is 1,175, but in cash flow adjustments it's 1,196. These are slightly different periods or classifications. Actually, the P&L line is "Impairment Loss Reversal Of Impairment Loss Recognised In Profit Or Loss Trade Receivables" = 1,175 for 2022 period. And cash flow has "Adjustments For Impairment Loss Reversal Of Impairment Loss Recognised In Profit Or Loss Trade And Other Receivables" = 1,196 for 2022 period. These are close but not identical. The cash flow might include other receivables beyond trade receivables. For simplicity, let me use the P&L figures for EBITDA calculation: EBITDA = Profit Loss From Operating Activities + Depreciation Amortisation And Impairment Loss Reversal line item + Impairment Loss Reversal (since the line item subtracts reversals, but we want to add back gross D&A and impairments, not net) Actually, the line "Depreciation Amortisation And Impairment Loss Reversal Of Impairment Loss" = D&A + Impairment losses - Reversal of impairments. So: D&A + Impairment losses = this line + Reversal of impairments = 8,507 + 1,175 = 9,682 for 2022 period. But wait, for EBITDA, do we add back impairments? Usually yes, because EBITDA is before "extraordinary" items. But impairments are operating items... Standard EBITDA typically excludes impairment losses as they are non-cash and often considered non-recurring. So: EBITDA = Operating Profit + D&A + Impairment losses - Reversal of impairments? No, that's wrong. Let me think: Operating Profit = EBIT = Revenue - Costs - D&A - Impairment losses + Reversal of impairments So: EBITDA = EBIT + D&A + Impairment losses - Reversal of impairments? No wait: EBIT = Revenue - Operating Costs - D&A - Impairment losses + Reversal of impairments To get EBITDA, we add back D&A and impairments, and subtract reversals: EBITDA = EBIT + D&A + Impairment losses - Reversal of impairments = (Revenue - Operating Costs - D&A - Impairment losses + Reversal of impairments) + D&A + Impairment losses - Reversal of impairments = Revenue - Operating Costs That makes sense! EBITDA is essentially revenue minus cash operating costs. But using: EBITDA = EBIT + D&A + Impairments - Reversals For 2022 period: EBIT = 7,551 D&A + Impairments - Reversals = 8,507 (from the P&L line) So: D&A + Impairments = 8,507 + 1,175 = 9,682 EBITDA = 7,551 + 9,682 - 1,175 = 16,058? Or = 7,551 + 8,507 = 16,058? Wait: EBIT + (D&A + Impairments - Reversals) = 7,551 + 8,507 = 16,058 But this equals EBIT + the net line item. Is this EBITDA? If the line item is D&A + Impairments - Reversals, then: EBITDA = EBIT + D&A + Impairments - Reversals = 7,551 + 8,507 = 16,058 Yes! Because EBIT already has -D&A - Impairments + Reversals. So adding back (D&A + Impairments - Reversals) gives us EBITDA. For 2023 period: EBIT = 11,193 D&A + Impairments - Reversals = 7,447 EBITDA = 11,193 + 7,447 = 18,640 Now, Net Debt / EBITDA: For 2022 (using 2022 period data, balance at 2022-01-01): Net Debt = 62,979 EBITDA = 16,058 Ratio = 62,979 / 16,058 = 3.92x For 2023 (using 2023 period data, balance at 2023-01-01): Net Debt = 78,377 EBITDA = 18,640 Ratio = 78,377 / 18,640 = 4.20x Change = 4.20 - 3.92 = 0.28x Wait, this is less than 0.3x, so it would be "Improving" or "Stable"? The definition says gap among ±0.3x is Stable. So 0.28x gap is Stable. But wait, I need to double-check my calculations. The ratio increased from 3.92 to 4.20, which is deterioration, but the gap is 0.28x which is within the ±0.3x stable range. Actually, let me re-check: "if the gap of the ratio Net Debt / EBITDA year on year is lower than 0.3x is improving. If higher is Deteriorating." Wait, this wording is confusing. Let me re-read: - "Stable": gap among ±0.3x and ±0.3x year on year (so absolute value ≤ 0.3x) - "Improving": gap lower than 0.3x (does this mean negative gap, i.e., ratio decreased? Or absolute value < 0.3x?) - "Deteriorating": higher than 0.3x (absolute value > 0.3x?) Actually, re-reading more carefully: "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." This seems to mean: if |Ratio_2023 - Ratio_2022| ≤ 0.3x, then Stable. "Consequently if the gap of the ratio Net Debt / EBITDA year on year is lower than 0.3x is improving." Hmm, "lower than 0.3x" - does this mean the gap is negative (ratio decreased)? Or less than 0.3x in absolute terms? I think "lower than 0.3x" means a negative gap (2023 ratio < 2022 ratio), i.e., leverage decreased = improving. And "higher" means gap > 0.3x, i.e., leverage increased significantly = deteriorating. But with gap = 0.28x, this is positive and less than 0.3x, so it's in the "Stable" range. Wait, but 0.28x is positive (ratio increased), which is technically deterioration, but within the stable band. Let me re-verify my net debt calculation. I need to be more careful about what constitutes "debt." Looking at the balance sheet items: - Longterm Borrowings: 54,500 (2022), 68,191 (2023) - Shortterm Borrowings: 13,306 (2022), 18,392 (2023) - Current Portion Of Longterm Borrowings: 4,031 (2022), 2,835 (2023) Are there other debt-like items? Lease liabilities? The problem doesn't mention them explicitly. Also, I should check if there are other financial liabilities that should be included. Looking at: "Other Noncurrent Financial Liabilities" = 120 (2022), 0 (2023) "Other Current Financial Liabilities" = 625 (2022), 853 (2023) These might include debt-like items. Also, derivative financial liabilities? These are typically not debt but hedging instruments. For S&P adjusted leverage, typically included debt items are: - Borrowings (short and long term) - Lease liabilities - Pension deficits (sometimes) - Other debt-like items Since we don't have lease liabilities explicitly, let me stick with borrowings. But wait - I need to check if the "Longterm Borrowings" and "Shortterm Borrowings" include lease liabilities or are pure financial debt. Given the data available, let me recalculate more carefully: **2022 Balance Sheet (at 2022-01-01):** - Longterm Borrowings: 54,500 - Shortterm Borrowings: 13,306 - Current Portion Of Longterm Borrowings: 4,031 - Other Noncurrent Financial Liabilities: 120 - Other Current Financial Liabilities: 625 Total Debt-like = 72,582 Less: Cash and Cash Equivalents = 8,858 Net Debt = 63,724 Actually, let me check if Other Financial Liabilities should be included. These could be things like derivative payables, accrued interest, etc. Not all are necessarily "debt." For conservative approach, let me just use borrowings: Total Borrowings = 54,500 + 13,306 + 4,031 = 71,837 Net Debt = 71,837 - 8,858 = 62,979 **2023 Balance Sheet (at 2023-01-01):** Total Borrowings = 68,191 + 18,392 + 2,835 = 89,418 Net Debt = 89,418 - 11,041 = 78,377 Now EBITDA again. Let me verify using another approach. From the cash flow statement, we can work backwards: Cash Flow From Operating Activities = 9,915 (2022 period) This includes working capital changes and other items. The adjustments to get from profit to operating cash flow: - Depreciation and amortization: +8,691 - Finance income/cost: -2,751 - Undistributed profits of equity method investments: +571 - Income tax expense: +1,643 - Working capital changes: +1,097 - Other items... This is getting messy. Let me use the direct EBITDA = EBIT + D&A approach. For 2022 period: EBIT = 7,551 D&A (from P&L line, net of reversals) = 8,507 But this includes -reversals. So gross D&A + impairments = 8,507 + 1,175 = 9,682 EBITDA = 7,551 + 9,682 - 1,175? No, that's wrong. EBIT = Revenue - Costs - D&A - Impairments + Reversals So EBIT + D&A + Impairments - Reversals = Revenue - Costs = EBITDA And D&A + Impairments - Reversals = 8,507 (from P&L line) So EBITDA = 7,551 + 8,507 = 16,058 For 2023 period: EBIT = 11,193 D&A + Impairments - Reversals = 7,447 EBITDA = 11,193 + 7,447 = 18,640 Wait, I need to check if the 7,447 includes reversals. The line is "Depreciation Amortisation And Impairment Loss Reversal Of Impairment Loss Recognised In Profit Or Loss" = 7,447 for 2023 period. And "Impairment Loss Reversal Of Impairment Loss Recognised In Profit Or Loss Trade Receivables" = 1,278 for 2023 period. So yes, 7,447 = D&A + Impairments - 1,278 Thus EBITDA = 11,193 + 7,447 = 18,640 But wait, is this correct? Let me verify with the cash flow: "Adjustments For Depreciation And Amortisation Expense And Impairment Loss" = 8,809 for 2023 period "Adjustments For Impairment Loss Reversal" = 1,288 for 2023 period So D&A + Impairments = 8,809 Reversals = 1,288 Net = 8,809 - 1,288 = 7,521? But P&L line says 7,447. Small discrepancy of 74, likely due to different classifications or rounding. Using cash flow figures: EBITDA = 11,193 + 8,809 - 1,288 = 18,714? Hmm, no. If EBIT includes -D&A - Impairments + Reversals, then: EBITDA = EBIT + D&A + Impairments - Reversals = 11,193 + 8,809 - 1,288 = 18,714 Or using the net adjustment: EBIT + (D&A + Impairments - Reversals) = 11,193 + 7,521 = 18,714 But the P&L line says 7,447 not 7,521. Let me use P&L figures for consistency. Actually, I realize the cash flow "Adjustments For Depreciation And Amortisation Expense And Impairment Loss" might include only certain items, while the P&L line is the total expense. Let me stick with: EBITDA = EBIT + (Depreciation Amortisation And Impairment Loss Reversal line from P&L) = 11,193 + 7,447 = 18,640 for 2023. For 2022: 7,551 + 8,507 = 16,058 Ratios: 2022: 62,979 / 16,058 = 3.92x 2023: 78,377 / 18,640 = 4.20x Gap: 4.20 - 3.92 = 0.28x Since 0.28x is within ±0.3x, this is "Stable." But wait, I want to double-check my net debt. Let me see if there's a better way to calculate it. Actually, looking at S&P methodology, they might include more items in debt. But with the data given, I should use what's available. Let me also verify: is 2022 the period ending 2022-01-01 or 2023-01-01? The periods are labeled: - "2022-01-01 - 2023-01-01" = 2022 fiscal year - "2021-01-01 - 2022-01-01" = 2021 fiscal year And balance sheet dates: - "2023-01-01" = end of 2022 - "2022-01-01" = end of 2021 So for "2022" ratio, I should use: - Net Debt at 2022-01-01 (start of 2022, which is end of 2021) - EBITDA for 2021-01-01 to 2022-01-01 (2021 fiscal year) Wait, this doesn't make sense. Usually we use year-end debt with that year's EBITDA. Actually, for leverage ratios, common practice is: - Debt at year-end / EBITDA for the year So for 2022 leverage: Debt at 2023-01-01 / EBITDA for 2022-01-01 to 2023-01-01 For 2021 leverage: Debt at 2022-01-01 / EBITDA for 2021-01-01 to 2022-01-01 But the question asks for "2022" trend, comparing 2022 and 2023. This likely means: - 2022 ratio = Net Debt at end of 2022 / EBITDA for 2022 - 2023 ratio = Net Debt at end of 2023 / EBITDA for 2023 Wait, but we only have data through 2023-01-01. The balance sheet at 2023-01-01 is the end of 2022. And the income statement for 2022-01-01 to 2023-01-01 is the 2022 fiscal year. So "2022" in the question refers to the fiscal year 2022, with balance at 2023-01-01. And "2023" would be... but we don't have 2023 fiscal year data (that would end 2024-01-01). Hmm, re-reading the question: "estimate S&P's adjusted leverage trend for 2022: Improving, Stable, or Deteriorating." And "the gap of the ratio Net Debt / EBITDA calculated for the years 2022 and 2023" But we only have data for periods ending 2022-01-01 and 2023-01-01. These are fiscal years 2021 and 2022. Wait, let me re-read the data labels. The periods are: - "2022-01-01 - 2023-01-01" - "2021-01-01 - 2022-01-01" These are fiscal years. The balance sheet dates are: - "2023-01-01" = end of fiscal year 2022 - "2022-01-01" = end of fiscal year 2021 So when the question asks about "2022" and "2023", it might mean: - 2022 = fiscal year 2022 (period 2022-01-01 to 2023-01-01, balance at 2023-01-01) - 2023 = fiscal year 2023... but we don't have this! Actually, I think the question might be using calendar years differently. Let me re-read: "facts from the annual report for 'ENEL - SPA' at the end of 2022." So this is the 2022 annual report, covering fiscal year 2022 (2022-01-01 to 2023-01-01). The comparison year is 2021 (2021-01-01 to 2022-01-01). But the question mentions "2022" and "2023" as the years to compare. This is confusing. Perhaps "2022" in the question means the fiscal year 2022 (period ending 2023-01-01), and "2023" is a typo or they mean the prior year? Actually, re-reading: "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." I think this is a poorly worded question, but they likely mean: - Compare the ratio for fiscal year 2022 vs fiscal year 2021 - But they wrote "2022 and 2023" meaning the years labeled in the data (2022-01-01 and 2023-01-01 as balance sheet dates) Actually, looking at standard terminology: "Net Debt / EBITDA for 2022" typically means using 2022 year-end debt and 2022 full year EBITDA. In our data: - Fiscal year 2022 = period 2022-01-01 to 2023-01-01, with balance at 2023-01-01 - Fiscal year 2021 = period 2021-01-01 to 2022-01-01, with balance at 2022-01-01 So I'll calculate: - Ratio for fiscal year 2022: Net Debt at 2023-01-01 / EBITDA for 2022-01-01 to 2023-01-01 - Ratio for fiscal year 2021: Net Debt at 2022-01-01 / EBITDA for 2021-01-01 to 2022-01-01 Then the gap is Ratio_FY2022 - Ratio_FY2021. Let me recalculate: **FY2021 (period 2021-01-01 to 2022-01-01):** - EBIT = 7,551 - D&A + Impairments - Reversals = 8,507 - EBITDA = 7,551 + 8,507 = 16,058 - Total Borrowings = 54,500 + 13,306 + 4,031 = 71,837 - Cash = 8,858 - Net Debt = 62,979 - Ratio = 62,979 / 16,058 = 3.92x **FY2022 (period 2022-01-01 to 2023-01-01):** - EBIT = 11,193 - D&A + Impairments - Reversals = 7,447 - EBITDA = 11,193 + 7,447 = 18,640 - Total Borrowings = 68,191 + 18,392 + 2,835 = 89,418 - Cash = 11,041 - Net Debt = 78,377 - Ratio = 78,377 / 18,640 = 4.20x Gap = 4.20 - 3.92 = 0.28x Since |0.28| < 0.3, this is **Stable**. But wait - I want to verify if I should include other items in debt. Let me check if there are lease liabilities or other debt-like items. Looking through the data, I don't see explicit lease liabilities. In modern IFRS, these would be in "Lease Liabilities" but I don't see that line item. Let me also check: "Noncurrent Contract Liabilities" and "Current Contract Liabilities" - these are liabilities to customers (deferred revenue), not debt. "Trade And Other Payables" - these are operating payables, not debt. So my debt calculation seems reasonable. However, I want to double-check one thing. S&P adjusted leverage might use "adjusted" EBITDA, which could include things like equity income, dividends from affiliates, etc. But with the data given, I'll use standard EBITDA. Actually, let me also consider: should I use average net debt or year-end net debt? S&P typically uses year-end debt for their published ratios, but adjusted leverage might use average or adjusted figures. Given the instruction says "estimate" and the data available, year-end net debt is the practical choice. Let me also verify my EBITDA calculation one more time. I'll use an alternative approach. From the cash flow statement: "Cash Flows From Used In Operating Activities" = 8,674 for FY2022 "Increase Decrease In Working Capital" = 3,961 for FY2022 Roughly: Operating Cash Flow before working capital = 8,674 - 3,961 = 4,713? No, working capital changes can be positive or negative. Actually: Cash Flow from Operations = Profit + Adjustments + Working Capital Changes So: Profit + Adjustments = Cash Flow - Working Capital Changes = 8,674 - 3,961 = 4,713? That seems low. Let me check: Adjustments include D&A, finance costs, tax, etc. These are added back to get to cash basis. Actually, the typical cash flow format is: Profit before tax: 8,741 + Depreciation and amortization: 8,809 + Other non-cash adjustments - Working capital changes: -3,961 (or +3,961 depending on sign) Looking at "Increase Decrease In Working Capital" = 3,961. If this is positive, it means working capital decreased (source of cash), so it's added. Hmm, but 8,741 + 8,809 + ... other adjustments + 3,961 = much higher than 8,674. Let me trace through more carefully using the adjustments listed: - Adjustments For Impairment Loss Reversal: 1,288 - Adjustments For Depreciation And Amortisation: 8,809 - Adjustments For Finance Income Cost: -2,499 - Adjustments For Undistributed Profits Of Equity Method: 23 - Adjustments For Income Tax Expense: 3,470 - Increase Decrease In Working Capital: 3,961 - Adjustments For Decrease Increase In Inventories: -2,166 - Adjustments For Decrease Increase In Trade Account Receivable: -2,783 (-242 related party) - Adjustments For Increase Decrease In Trade Account Payable: 1,333 (-1,272 related party) - Adjustments For Decrease Increase In Contract Assets: 15 - Adjustments For Increase Decrease In Contract Liabilities: 254 (31 related party) - Adjustments For Decrease Increase In Other Assets Liabilities: 614 (783 related party) - Adjustments For Accruals To Provisions: 803 - Adjustments For Utilization From Provisions: -1,521 - Finance Income Received: 2,622 (154 related party) - Finance Costs Paid: -5,016 (-34 related party) - Other Adjustments For Noncash Items: -927 - Income Taxes Paid: -1,934 - Adjustments For Losses Gains On Disposal: -355 This is getting very complex. The sum of these should equal the difference between profit and operating cash flow. Let me try: Start with Profit Loss = 2,920 for FY2022. Add back: Income Tax Expense = 3,523 → Profit before tax = 6,443? But we have Profit Loss Before Tax = 8,741. Wait, Profit Loss = 2,920 is after tax. Profit Loss Before Tax = 8,741. So tax = 8,741 - 2,920 = 5,821? But Income Tax Expense = 3,523. Hmm, there's discontinued operations. Profit Loss From Continuing Operations = 5,218. Plus Discontinued = -2,298 = Total 2,920. And Profit Loss Before Tax = 8,741 includes both continuing and discontinued. Tax on continuing = 3,523. So PBT continuing = 5,218 + 3,523 = 8,741. Yes! And PBT total = 8,741 (since discontinued loss is after tax? No, the line "Profit Loss From Discontinued Operations" = -2,298 might be after tax or before tax?). Actually, "Profit Loss Before Tax" = 8,741. Then "Income Tax Expense Continuing Operations" = 3,523. So PBT - Tax on continuing = 8,741 - 3,523 = 5,218 = Profit From Continuing Operations. Then Discontinued = -2,298. Total = 2,920. But where is tax on discontinued? It seems the -2,298 is after tax, or there's no tax. The total tax is just 3,523. Anyway, back to EBITDA. Let me use a cleaner approach from the income statement: For FY2022 (2022-01-01 to 2023-01-01): Revenue = 140,517 Other Income = 4,864 Total Income = 145,381 Operating Expenses by nature: Raw Materials And Consumables Used = 96,896 Services And Other Materials = 20,228 Employee Benefits Expense = 4,570 Depreciation Amortisation And Impairment = 7,447 Other Expense By Nature = 4,685 Other Work Performed By Entity And Capitalised = -3,415 (negative because it's capitalized, not expensed) Total Operating Expenses = 96,896 + 20,228 + 4,570 + 7,447 + 4,685 - 3,415 = 130,411 But "Operating Expense" line is 131,689. Difference of 1,278 = Impairment Loss Reversal! So: Operating Expense = 131,689 includes the reversal as a negative expense (i.e., income). Thus: Total costs = 131,689 - 3,415 (capitalized) + ... hmm, this is confusing. Let me try: Operating Profit = Revenue + Other Income - Operating Expenses + Net Results From Commodity Contracts? Revenue = 140,517 Other Income = 4,864 Operating Expense = 131,689 Net Results From Commodity Contracts = 2,365 140,517 + 4,864 - 131,689 + 2,365 = 16,057? But Operating Profit is 11,193. Difference of 4,864. Hmm, maybe "Operating Expense" includes everything except commodity contracts? Let me check: 140,517 - 131,689 + 2,365 = 11,193. Yes! That matches. So: Operating Profit = Revenue - Operating Expense + Net Results From Commodity Contracts = 140,517 - 131,689 + 2,365 = 11,193 And Operating Expense includes: Raw Materials, Services, Employee Benefits, D&A, Other Expenses, minus Capitalized costs, minus Impairment Reversal. To get EBITDA: We need to add back D&A and impairments, and subtract reversals from Operating Profit. From the components: D&A + Impairments - Reversals = 7,447 Reversal = 1,278 (trade receivables) So D&A + Impairments = 7,447 + 1,278 = 8,725 EBITDA = Operating Profit + D&A + Impairments - Reversals? No wait. Operating Profit = Revenue - (Raw Materials + Services + Employee Benefits + D&A + Impairments - Reversals - Capitalized + Other Expenses) + Commodity Results Actually, let me use: Operating Expense = 131,689. This includes D&A of 7,447 (which includes -1,278 reversal). So cash operating costs excluding D&A but including reversal benefit = 131,689 - 7,447 = 124,242? No, that's not right because 7,447 includes the reversal. If D&A expense gross = X, impairments = Y, reversal = Z, then: 7,447 = X + Y - Z And Z = 1,278 So X + Y = 8,725 Operating Expense includes -X - Y + Z (as expenses are subtracted) = -(X + Y) + Z = -8,725 + 1,278 = -7,447? No, expenses are positive numbers in the expense line. Actually, Operating Expense is a positive number representing costs. So it includes +X + Y - Z for the D&A/impairment/reversal line. Thus: Operating Expense = Other Costs + X + Y - Z Where X + Y - Z = 7,447 Other Costs = 131,689 - 7,447 = 124,242 EBITDA = Revenue + Other Income - Other Costs + Commodity Results = 140,517 + 4,864 - 124,242 + 2,365 = 23,504? But that doesn't match 18,640. What's wrong? Ah, I forgot Other Income! Let me check if Other Income is included in Operating Profit. Actually, looking at standard P&L: Operating Profit = Revenue - Operating Costs + Other Operating Income If "Other Income" of 4,864 is not in "Operating Expense", then: Operating Profit = Revenue + Other Income - Operating Expense + Commodity Results = 140,517 + 4,864 - 131,689 + 2,365 = 16,057 But actual Operating Profit is 11,193. Difference of 4,864. Hmm, so maybe Operating Expense already nets against Other Income? Or Other Income is not part of operating activities? Looking at the line "Profit Loss From Operating Activities" = 11,193. This is clearly EBIT. Let me try: Revenue - Operating Expense + Net Results From Commodity Contracts = 140,517 - 131,689 + 2,365 = 11,193. Yes! So Other Income of 4,864 is NOT included in this calculation. It's perhaps financial or non-operating. But wait, "Other Income" is typically operating. Let me re-check: maybe it's included in Operating Expense as a negative? If Operating Expense = 131,689 includes -4,864 from Other Income, then gross costs = 136,553. Then: Revenue - Gross Costs + Commodity = 140,517 - 136,553 + 2,365 = 6,329. Not 11,193. I'm getting confused by the presentation. Let me just trust the explicit EBIT line and add back D&A. EBITDA = EBIT + (D&A + Impairments - Reversals) = 11,193 + 7,447 = 18,640 for FY2022. For FY2021: 7,551 + 8,507 = 16,058. These seem consistent with the cash flow add-back approach. Now, one more check: should I use continuing operations or total? S&P typically uses total EBITDA including discontinued if it's still part of the group. But for 2022, discontinued operations were being sold, so maybe adjusted EBITDA excludes them? Actually, looking at the data, "Profit Loss From Operating Activities" likely includes all operations (continuing and discontinued, or just continuing). The discontinued operations are shown separately below operating profit. So EBIT = 11,193 is from continuing operations. Discontinued operations loss = -2,298 is below the line. For leverage purposes, S&P might use total EBITDA or continuing EBITDA. If excluding discontinued: EBITDA continuing = 18,640 (approx) EBITDA discontinued? We don't have explicit, but the loss was -2,298 after some adjustments. Given the complexity, I'll stick with total EBITDA as derived. Final calculation: FY2021 ratio: 62,979 / 16,058 = 3.92x FY2022 ratio: 78,377 / 18,640 = 4.20x Gap: 0.28x Since 0.28x < 0.3x in absolute value, and it's positive (increasing leverage), but within the stable band. Wait, I need to re-read the definition once more: "Consequently if the gap of the ratio Net Debt / EBITDA year on year is lower than 0.3x is improving. If higher is Deteriorating." "lower than 0.3x" - could mean: - Negative gap (ratio decreased) = improving - Gap < 0.3x (including negative and small positive) = improving? No, that would overlap with stable. I think the intended interpretation is: - |gap| ≤ 0.3x: Stable - gap < -0.3x (ratio decreased by more than 0.3x): Improving - gap > 0.3x (ratio increased by more than 0.3x): Deteriorating But the wording says "lower than 0.3x is improving" not "lower than -0.3x". This is ambiguous. Alternative interpretation: - gap < 0 (any decrease, no matter how small): Improving - 0 ≤ gap ≤ 0.3x: Stable - gap > 0.3x: Deteriorating But then what about gap between 0 and 0.3x? The first part said "among ±0.3x and ±0.3x" is stable. Actually, re-reading: "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." This is very poorly worded. I think they mean: - If |Ratio_2023 - Ratio_2022| ≤ 0.3x: Stable - If Ratio_2023 - Ratio_2022 < -0.3x: Improving - If Ratio_2023 - Ratio_2022 > 0.3x: Deteriorating With my calculated gap of +0.28x, this is within ±0.3x, so **Stable**. But let me also consider: if they mean "lower than 0.3x" as in the ratio itself is lower than 0.3x... no, that makes no sense for a leverage ratio. Or if they mean "the gap is lower than 0.3x" = |gap| < 0.3x is improving? No, that contradicts "among ±0.3x is stable." I think the most logical interpretation is: - |gap| ≤ 0.3: Stable - gap < -0.3: Improving (leverage decreased significantly) - gap > 0.3: Deteriorating (leverage increased significantly) With gap = 0.28, this is Stable. However, I want to double-check one thing. The question mentions "2022" and "2023" but the data has periods ending 2023-01-01 and 2022-01-01. Could "2022" mean the balance at 2022-01-01 with EBITDA from 2022-01-01 to 2023-01-01? That would be mismatched (start of year debt with full year EBITDA). Or could "2023" mean using balance at 2023-01-01 with some partial year EBITDA? No, we don't have partial year data. I think the standard approach is: - For fiscal year 2022 (period 2022-01-01 to 2023-01-01): use year-end debt at 2023-01-01 and full year EBITDA - For fiscal year 2021 (period 2021-01-01 to 2022-01-01): use year-end debt at 2022-01-01 and full year EBITDA And the question's "2022" and "2023" refers to these fiscal years, despite the confusing date notation. Actually, wait. Could the question mean: - "2022" = data at 2022-01-01 (balance sheet) and period 2021-01-01 to 2022-01-01 (income) - "2023" = data at 2023-01-01 and period 2022-01-01 to 2023-01-01 So they're using the balance sheet date year to label the fiscal year. This is common in some regions. Given all this, my calculation stands: - FY2021 (labeled "2022" in balance sheet date): 3.92x - FY2022 (labeled "2023" in balance sheet date): 4.20x - Gap: 0.28x → Stable Actually, re-reading the question one more time: "the gap of the ratio Net Debt / EBITDA calculated for the years 2022 and 2023" If 2022 means period ending 2022-01-01 and 2023 means period ending 2023-01-01, then: - 2022 ratio = Net Debt at 2022-01-01 / EBITDA for 2022-01-01 to 2023-01-01? That would be mismatched. No, I think it's: - 2022 ratio = Net Debt at 2023-01-01 / EBITDA for 2022-01-01 to 2023-01-01 - 2023 ratio would need 2024-01-01 data which we don't have Unless they're asking to compare the two years of data we have, calling them "2022" and "2023" based on the end date. I think the safest interpretation is: compare the two fiscal years available, using year-end debt and annual EBITDA for each. Let me also verify my EBITDA one more time with a sanity check. Revenue grew from 85,719 to 140,517, a 64% increase. EBITDA grew from 16,058 to 18,640, a 16% increase. Net debt grew from 62,979 to 78,377, a 24% increase. The ratio increased from 3.92 to 4.20 because debt grew faster than EBITDA. This makes sense given the energy crisis and investment needs. But wait, let me check if I should include "Other Income" in EBITDA. Standard EBITDA includes operating income, and "Other Income" is typically operating. Let me see if my calculation already includes it. From: Operating Profit = Revenue - Operating Expense + Commodity Results = 11,193 And Revenue = 140,517 If "Revenue" here means only sales revenue, and Other Income is separate, then: Total Operating Income = 140,517 + 4,864 = 145,381 But Operating Profit = 11,193 = Total Operating Income - Operating Costs So Operating Costs = 145,381 - 11,193 = 134,188 And EBITDA = Operating Costs + D&A - Other Income? No... Actually: EBITDA = EBIT + D&A = 11,193 + 7,447 = 18,640 But if EBIT excludes Other Income, then EBITDA also excludes it. Let me check if EBIT includes Other Income. Looking at: "Revenue" = 140,517. This is total revenue including sales and services. "Other Income" = 4,864 is separate. Standard P&L: Revenue: 140,517 Other Income: 4,864 Total Income: 145,381 Operating Costs: (134,188) including D&A of 7,447 Operating Profit: 11,193 Check: 145,381 - 134,188 = 11,193. Yes! So EBIT includes Other Income. And EBITDA = EBIT + D&A = 11,193 + 7,447 = 18,640 also includes Other Income. For FY2021: Revenue: 85,719 Other Income: 3,819 Total: 89,538 Operating Costs: 81,987 (including D&A of 8,507) EBIT: 7,551 EBITDA: 7,551 + 8,507 = 16,058 Check: 89,538 - 81,987 = 7,551. Yes. So my EBITDA calculations are correct. One final check: should I use total debt or only borrowings? Let me see if there are other significant debt items. "Noncurrent Contract Liabilities" = 6,214 (2022), 5,747 (2023) - these are deferred revenue, not debt "Current Contract Liabilities" = 1,433 (2022), 1,775 (2023) - also deferred revenue "Trade And Other Payables" = 16,959 (2022), 17,641 (2023) - operating payables "Other Current Liabilities" = 12,959 (2022), 11,713 (2023) - likely operating accruals None of these are debt in the financial sense. What about "Other Noncurrent Financial Liabilities" = 120 (2022), 0 (2023)? Small, likely not material. And "Other Current Financial Liabilities" = 625 (2022), 853 (2023)? Also relatively small. So total borrowings approach is reasonable. Final answer: Gap of 0.28x is within ±0.3x, so **Stable**. Stable