Groupe Renault - 2020 Universal Registration Document

403 GROUPE RENAULT I UNIVERSAL REGISTRATION DOCUMENT 2020 04 CONSOLIDATED FINANCIAL STATEMENTS GROUPE RENAULT GROUPE RENAULT: A COMPANY THAT ACTS RESPONSIBLY CORPORATE GOVERNANCE FINANCIAL STATEMENTS RENAULT AND ITS SHAREHOLDERS ANNUAL GENERAL MEETING OF RENAULT ON APRIL 23, 2021 ADDITIONAL INFORMATION In 2020, to limit the foreign exchange risk exposure of its net operating income and working capital, the Automotive (excluding AVTOVAZ) segment set up foreign exchange hedges of the pound sterling, Argentinian peso and Turkish lira. Financial income (expenses) To avoid any exchange-related distortion of net financial income, it is the Automotive segment’s policy to minimize the foreign exchange risk affecting financing and investment items in foreign currencies. All Automotive (excluding AVTOVAZ) segment’s exposures to foreign exchange risks on financial income and expense items are aggregated and monitored by the central Cash Management team, with monthly reporting to the Chief Financial Officer. Financing flows in foreign currency originating from Renault entities are hedged in the same currency. If a subsidiary needs external financing in a currency other than the local currency, the parent company monitors the operations closely. Cash surpluses in countries that are not part of the parent company’s centralized cash management are generally invested in local currency, under the supervision of the Group’s central Cash Management department. The subsidiary Renault Finance can undertake foreign exchange operations on its own behalf, within strictly defined risk limits. Its foreign exchange positions are monitored and valued in real time. This activity is chiefly intended to maintain the Group’s expertise on the financial markets. It generates very short exposures and does not exceed some tens of millions of euros, so that it cannot have a significant impact on Renault’s consolidated results. Share in the net income of associates and joint ventures The share in the net income of associates and joint ventures is exposed to foreign exchange risks. On the basis of its contribution to 2020 net income, a 1% rise in the euro against the Japanese yen would have decreased Nissan’s contribution by €49 million. This impact corresponds only to the impact of the euro on the translation of Nissan’s contribution to the consolidated statements of Groupe Renault; it does not reflect the inherent impact of euro fluctuations on Nissan’s own accounts, given that Nissan does varying levels of business in the euro zone and Renault has no control over this. Equity investments The foreign exchange risk exposure of equity investments (in currencies other than the euro) is not generally hedged. However, due to its size, the investment in Nissan is subject to a partial foreign exchange hedge amounting to ¥18 billion at December 31, 2020 (note 12-G). To limit liquidity risks in yen, the Group has set itself the rule of not hedging this net investment above an amount equal to its best estimate of the next three years’ dividends in yen to be received from Nissan. Net cash position For the purposes of the partial hedge of the investment in Nissan, some of Renault’s net financial indebtedness is denominated in yen. At December 31, 2020 a 1% rise in the euro against the yen would increase the net cash position of the Automotive segments by €1.4 million. This net cash position may also be impacted by changes in exchange rates concerning subsidiaries’ financial assets and liabilities in their local currency. Analysis of financial instrument sensitivity to foreign exchange risks This analysis concerns the sensitivity to foreign exchange risks of monetary assets and liabilities (including intra-Group balances) and derivatives denominated in a currency other than the currency of the entity that holds them. However, it does not cover items (hedged assets or liabilities and derivatives) concerned by fair value hedging, for which changes in fair value of the hedged item and the hedging instrument offset each other in the income statement. The impact on shareholders’ equity (before tax) of a 1% rise in the euro against other currencies is assessed by converting financial assets, cash flow hedges and the partial hedge of the investment in Nissan. For the Automotive segment, this impact would be a favorable €6 million at December 31, 2020 (€10 million at December 31, 2019), explained by the yen bond issues that make up the partial hedge of the investment in Nissan (see note 12-G) and the partial hedge set up for future cash flows in pounds sterling in 2020. The impact on net income of a 1% rise in the euro against other currencies would be an unfavourable impact of €14 million at December 31, 2020 (€7 million at December 31, 2019 excluding AVTOVAZ), mainly attributable to unhedged operating assets and liabilities denominated in a currency that is not the functional currency of the entity that holds them. Foreign exchange risk – Sales Financing segment The Sales Financing segment has low exposure to foreign exchange risks due to the management principles applied. No position can be taken under the central management framework for refinancing; the trading room hedges all flows concerned. Residual and temporal positions in foreign currencies related to the time differences in cash flows inherent to multi-currency cash management may still remain. They are monitored daily and the same hedging policy applies. The sales financing subsidiaries are obliged to obtain refinancing in their own currency and as a result are not exposed. In exceptional circumstances, limits are assigned to subsidiaries where sales financing activities or refinancing take place in several different currencies, and to subsidiaries authorized to invest some of their cash surpluses in a currency other than their local currency. At December 31, 2020 the RCI Banque group’s consolidated foreign exchange position reached €5.8 million. The United Kingdom’s departure from the European Union did not lead to the recognition of any provisions by the RCI Banque group at December 31, 2020. In preparation for the consequences of Brexit, all the activities of RCI bank UK branch were transferred on March 14, 2019 to a new entity, RCI Bank UK PLC, a credit institution that is a fully-owned subsidiary of RCI Holding. No further operation was necessary in 2020. Interest rate risks B3 The Group made no major changes to its interest rate risk management policy in 2020. The Group’s exposure to interest rate risk principally concerns the Sales Financing segment.