Financial performance 2024 consolidated financial statements 05 RISK MANAGEMENT RESPONSE The objective of interest rate management is to minimize financing costs whilst protecting future cash flows against unfavorable movements in interest rates. For this purpose, the Group uses various derivative instruments available in the market, but restricts itself to the use of "plain vanilla" instruments (mainly interest rate swaps). Interest rate exposure is analyzed and monitored by the Financial Risks Committee using monthly performance indicators and management reports. The interest rate position is centralized by currency by the Corporate Financing Department, which is the only department permitted to undertake hedging operations. Interest rate hedging is concentrated on the main currencies. The Financial Risks Committee sets hedging limits by currency, taking into consideration the Group's gearing as hedging needs change in line with this ratio. Interest rate risk - Quantitative and qualitative data Net debt at December 31, 2024 breaks down as follows by type of hedge and by currency: (in € millions) Net debt before hedging Currency hedging Net debt after currency hedging but before interest rate hedging Interest rate hedging Net debt after hedging Fixed Variable Total Fixed Variable Total Fixed Variable Fixed Variable Total USD 289 80 369 2,714 289 2,794 3,083 800 (800) 1,089 1,994 3,083 THB 49 80 129 279 49 359 408 254 (254) 303 105 408 GBP 34 (5) 29 366 34 361 395 142 (142) 176 219 395 CAD 20 167 187 111 20 278 298 52 (52) 72 226 298 AUD 39 (5) 34 207 39 202 241 93 (93) 132 109 241 EUR 5,899 (3,509) 2,390 (3,991) 5,899 (7,500) (1,601) - - 5,899 (7,500) (1,601) Other currencies 111 (147) (36) 314 111 167 278 183 (183) 294 (16) 278 Total before derivatives 6,441 (3,339) 3,102 - 6,441 (3,339) 3,102 1,524 (1,524) 7,965 (4,863) 3,102 Fair value of derivatives included in net debt 10 10 10 NET DEBT (NOTE 9.3) 3,112 3,112 3,112 The main reference rates to which the Group is exposed are Euribor, ESTR and SOFR. Financial instruments that are backed by a benchmark rate subject to the Libor reform have no significant impact on the Group’s consolidated financial statements. A 1-point parallel shift in the yield curves applied to the net debt components would have the following impact at December 31, 2024: (in € millions) Annualized cash impact recognized in the income statement Fair value impact Recognized in the income statement(1) Recognized in other comprehensive income(2) Not recognized(3) Total equity 1-point downward shift (49) (15) - (343) (358) 1-point increase 49 14 - 343 357 (1) The Group interest rate policy aims at hedging perfectly identified future cash flows. However, some derivative instruments do not qualify for hedge accounting under IFRS and are measured at fair value through profit or loss. (2) For derivatives qualifying for hedge accounting (cash flow hedges). (3) Some fair value impacts are not accounted for since the underlying net debt component is not booked at fair value but at amortized cost. 420 2024 UNIVERSAL REGISTRATION DOCUMENT_MICHELIN
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