Plastic Omnium - 2018 Registration Document

1 PRESENTATION OF PLASTIC OMNIUM AND ITS BUSINESSES Risk factors and control www.plasticomnium.com PLASTIC OMNIUM 2018 REGISTRATION DOCUMENT 34 Risk management With regard to health, safety and the environment, Compagnie Plastic Omnium has introduced a policy that is described in the “Sustainable development” section of this document. Rolled out worldwide, this policy is based on a shared vision, a structured management system, regular reporting and an ongoing certification program. It is overseen by Compagnie Plastic Omnium’s Executive Committee, which examines individual subsidiaries’ performance every month, via the specific reporting system set up to help drive continuous improvement. A dedicated organization comprised of front-line Health, Safety and Environment HSE facilitators is responsible for supporting and coordinating its deployment. This network of experts is led by Compagnie Plastic Omnium’s HSE Department, backed by central HSE managers at the Division level. Final responsibility for managing health, safety and environment risks lies with the Division senior management. Ongoing corrective and improvement action plans have been introduced and included in the programs to obtain ISO 14001 and OHSAS 18001 certification for industrial facilities. These plans foster wider adoption of best practices. They include training on ergonomics, the Man-Machine interface and the tools of the in-house Top Safety program, along with compliance for machinery and equipment. In 2018, OHSAS 18001 certification was renewed for Compagnie Plastic Omnium’s system for “centrally managing the safety of people and property”. CREDIT AND/OR COUNTERPARTY RISK Liquidity risk Identification of risk Compagnie Plastic Omnium must have access, at all times, to adequate financial resources not only to finance operations and the investments required to support its growth, but also to withstand the effects of any exceptional developments. Risk management Since 2012, Plastic Omnium has raised funds from the market on various occasions with the situation at December 31, 2018 as follows: a public bond offering of €500 million issued in 2013 and maturing in ● May 2020; a Schuldschein (private placement) of €300 million in 2016, and ● maturing in June 2023; a public debt placement of €500 million issued in 2017 and maturing ● in June 2024. a Schuldschein (private placement) of €300 million in 2018, and ● maturing in December 2025. In addition, Compagnie Plastic Omnium has confirmed unsecured medium-term bank lines of credit that are not subject to any financial covenants. At December 31, 2018, the average maturity of these lines of credit was three years. Moreover, Compagnie Plastic Omnium has entered into commercial receivables assignment agreements with an average term of 1 year. At December 31, 2018, available medium-term facilities covered Plastic Omnium’s financing needs through 2023. Lastly, Compagnie Plastic Omnium has a commercial paper program. All of the medium-term and short-term lines of credit are with leading banking institutions. The breakdown of financial assets and liabilities is shown in Note 6.4.2 to the consolidated financial statements. The cash positions of Compagnie Plastic Omnium and its businesses are monitored daily and a report is submitted once a week to Senior management. Compagnie Plastic Omnium has performed a specific review of its liquidity risk and considers that it is in a position to meet its upcoming debt maturities. Customer risk Identification of risk Compagnie Plastic Omnium cannot rule out the fact that one of its customers could find itself in financial difficulty that prevents it from respecting certain commitments. Risk management A balanced Division of revenues by carmaker has improved in recent years. In 2018 the breakdown was as follows (published data): German carmakers: 38% of revenue; ● Asian carmakers: 24% of revenue; ● American carmakers: 22% of revenue; ● French carmakers: 15% of revenue; ● The breakdown of the customer base is shown in Note 3.1.4.3 to the consolidated financial statements (page 164). In terms of risk management, the Group’s businesses have set up structured customer-risk monitoring and debt collection processes. The DSO ratio was 46 days in 2018. Receivables over six months past due amounted to €12 million net of provisions. Lastly, in all businesses, review procedures are carried out before the results of bids are issued, in particular to ensure a balanced portfolio of customer receivables, in line with a target profile defined and continually monitored by Compagnie Plastic Omnium senior management. At December 31, 2018 the risk of non-recovery was low and involved only a non-material amount of receivables more than twelve months past due (see Note 6.3.1 to the consolidated financial statements page 206). Supplier risk Identification of risk Default by a major supplier, in particular a supplier of specific components for which rapid substitution is difficult, given the work and time necessary to accredit a new supplier, could entail a change in production for Compagnie Plastic Omnium or generate additional costs impacting Compagnie Plastic Omnium’s operating margin.