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 40 The budget process begins in September each year. Budgets are then submitted to senior management in November and validated in December, before being presented to Compagnie Plastic Omnium’s Board of Directors. The budget package comprises an income statement, cash-flow statement and data concerning return on capital employed for each subsidiary and business for the year N+1. “Revised” forecasts are regularly produced to allow remedial measures to be made with a view to ensuring that initial budget targets are met. They also allow senior management to report reliably on changes in the situation. The budget is based on the rolling strategic and financial plan, approved in July of each year by senior management. It includes Income Statement and Balance Sheet projections for the four years following the year in progress. It also takes into account the sales, industrial and financial strategies of the Group and the businesses. Compagnie Plastic Omnium is responsible for managing the medium-term financing requirements of all the subsidiaries controlled by the Group. Plastic Omnium Finance covers short-term financing needs. Through the latter, the Group centralizes its cash management and has set up a daily cash-pooling and netting system for all Group subsidiaries in all countries where local rules allow this practice. In addition, intragroup receivables and payables are netted monthly. In this way, it manages funding streams and verifies cash positions on a daily basis. In general, subsidiaries cannot negotiate external financing arrangements without the prior authorization of the Group’s Central Treasury. Plastic Omnium Finance is also responsible for controlling all currency and interest rate hedging transactions. Cash reports are sent to the Senior management on a weekly basis. They provide an analysis of the cash position of each Division, and of the Group as a whole, together with comparisons with the prior year and the budget for the current year. No material incidents or significant changes occurred in 2018 that could have compromised the effectiveness of the internal control system described above. WORK PLANNED IN 2019 As part of a process of continuous improvement of its internal control system, Compagnie Plastic Omnium plans to upgrade a number of procedures in order to enhance their relevance and encourage operational staff to appropriate them. This approach, in which the Risk Management Department and the Internal Control Department play an important role, covers internal control procedures, accounting and financial, and risk management procedures. The Internal Audit Department will conduct 29 audits in 2019 (the same number as in 2018). To improve the internal control and risk management system, the Company will continue to apply the procedure for tracking progress on implementing recommendations issued by the Internal Audit Department. FINANCIAL RISKS RELATED TO THE EFFECTS OF CLIMATE CHANGE 1.7.3 For several years, carmakers have been committed to plans aiming at is capable of intensifying its innovative efforts in these very areas, which continuously reducing greenhouse gas emissions for new car launches. should continue to constitute one of the key drivers to achieve the high Compagnie Plastic Omnium anticipated this development very early and growth targets announced for the next few years. has, for several years, made it a key feature of its Research and Development strategy. This strategy resulted in multiple innovations and proven know-how (reducing the weight of the vehicle, improving aerodynamics, fuel systems adapted to the constraints of hybrid vehicles, etc.), which enabled Compagnie Plastic Omnium to offer carmakers products and functions that contribute directly to their emission reduction targets. These innovative products constituted one of the key components of Compagnie Plastic Omnium business growth over the last few fiscal years and contributed to its financial performances. In this context, Compagnie Plastic Omnium considers that market developments related to the low-carbon energy strategy of the automobile sector do not lead to any major financial risk. On the other hand, following the success achieved over the last few years, Compagnie Plastic Omnium As far as its activities are concerned, as described in chapter 3 (Sustainable Development) of this document, as part of its low-carbon emission strategy, Compagnie Plastic Omnium is going to continue developing its Top Planet program launched in 2007, which aims mainly at reducing its energy consumption. Over the next few years, the development of this program should lead to the general implementation of good practices in all its activities and with investments offering quick return on investment based on the energy savings generated. In this respect, Compagnie Plastic Omnium is not exposed to major financial risks. Finally, Compagnie Plastic Omnium believes that it is not exposed to major financial risks that would result from the physical impact of climate change on its facilities.