Treasury Information

Corporate financing policy

In order to be able to meet the company’s payment commitments at all times, the major goal of our financial policy is to ensure adidas’ solvency, to limit financing risks, and to balance financing costs with financial flexibility. The operating activities of our segments and the resulting cash inflows represent the company’s main source of liquidity. Liquidity is planned on a rolling monthly basis under a multi-year financial and liquidity plan.

Treasury Policy and responsibilities

Our Treasury Policy governs all treasury-related issues, including banking policy and approval of bank relationships, financing arrangements and liquidity/asset management, currency, interest, equity and commodity risk management, and the management of intercompany cash flows. Responsibilities are arranged in a three-tiered approach:

• The Treasury Committee consists of members of the Executive Board and other senior executives who decide on the Treasury Policy and provide strategic guidance for managing treasury-related topics. Major changes to our Treasury Policy are subject to the prior approval of the Treasury Committee.
• The Treasury department is responsible for specific centralized treasury transactions and for the global implementation of our Treasury Policy.
• On a subsidiary level, where applicable and economically reasonable, local managing directors and finance directors are responsible for managing treasury matters in their respective subsidiaries. Controlling functions on a corporate level ensure that the transactions of the individual business units are in compliance with our Treasury Policy.

Centralized Treasury function

In accordance with our Treasury Policy, all worldwide credit lines are directly or indirectly managed by the central Treasury department. Portions of those lines are allocated to our subsidiaries and sometimes backed by adidas AG guarantees. As a result of this centralized liquidity management, the company is well positioned to allocate resources efficiently throughout the organization. The company’s debt is generally unsecured and may include standard covenants. We maintain good relations with numerous partner banks, thereby avoiding a high dependency on any single financial institution. Banking partners of the company and our subsidiaries are required to have at least a BBB- long-term investment grade rating by Standard & Poor’s or an equivalent rating by another leading rating agency. We authorize our companies to work with banks with a lower rating only in very exceptional cases. To ensure optimal allocation of the company’s liquid financial resources, subsidiaries transfer excess cash to our headquarters in all instances where it is legally and economically feasible. In this regard, the standardization and consolidation of our global cash management and payment processes, including automated domestic and cross-border cash pools, are a key priority for our centrally managed Treasury department. In addition, the department is responsible for effective management of our currency exposure and interest rate risks. SEE NOTE 02

Standard covenants

In the case of our committed credit facilities, we have entered into various legal covenants. These legal covenants may include limits on the disposal of fixed assets, the amount of debt secured by liens, cross-default provisions, and change of control. However, our financial arrangements do not contain any financial covenants. If we fail to meet any covenant and were unable to obtain a waiver, borrowings would become due and payable immediately. As of December 31, 2022, we were in full compliance with all our covenants. We are fully confident we will continue to be compliant with these covenants going forward. We believe that cash generated from operating activities, together with access to internal and external sources of funds, will be sufficient to meet our future operating and capital needs.

Credit Ratings

adidas received strong first-time investment-grade ratings by both Standard & Poor’s and Moody’s in August 2020. Standard & Poor’s gave adidas an ‘A+’ rating, and Moody’s granted the company an ‘A2’ rating. The initial outlook for both ratings was ‘stable’ as both rating agencies recognized the company’s strong credit metrics, robust liquidity profile, and conservative financial policies. In November 2022, both Standard & Poor’s and Moody’s revised their outlook for adidas to ‘negative’ due to a deterioration in credit metrics amid pressure on the company’s operating performance from economic as well as company specific challenges. In February 2023, Standard & Poor’s lowered its rating on adidas to ‘A-‘, while Moody’s downgraded the company to ‘A3’, both with a ‘negative’ outlook. These downgrades reflected a further downward revision of credit metrics following the release of the company’s financial guidance for 2023. Overall, adidas’ investment grade credit ratings continue to ensure an efficient access to capital markets.

Syndicated credit facility

In 2020, adidas took several steps to considerably strengthen its financial profile. In November 2020, adidas entered into a new € 1,500 million syndicated credit facility with twelve of its partner banks. This credit facility agreement was subsequently amended in October 2021 and last in November 2022. The amended and restated credit facility with eleven partner banks has a size of € 2,000 million and runs until November 2027.

Sustainability bond

In September 2020, adidas successfully priced its first sustainability bond as the company continued to execute on its ambitious long-term sustainability roadmap while at the same time further optimizing its capital structure and financing costs. At the time of the issuance, the € 500 million bond had a term of eight years and a coupon of 0.00%. It has been listed on the Luxembourg Stock Exchange and has denominations of € 100,000. Adidas plans to use the proceeds of the sustainability bond to finance and refinance, in whole or in part, eligible sustainable projects, as defined in the sustainability bond framework. As of December 31, 2022, the total amount allocated to eligible sustainable projects was € 432.7 million.

New Bonds

adidas successfully issued two bonds amounting to € 1,000 million in total in November 2022. The three-year bond of € 500 million matures in November 2025 and has a coupon of 3.00%, while the seven-year bond of € 500 million matures in November 2029 and has a coupon of 3.125%. The bonds have been listed on the Luxembourg Stock Exchange and have denominations of € 100,000 each.

Outstanding bonds

On top of the above-mentioned placements, the company has further outstanding bonds: a bond of € 400 million issued in 2014, and one outstanding equity-neutral convertible bond, which was issued in 2018. The bond of € 400 million matures in October 2026 and has a coupon of 2.25%. The equity-neutral convertible bond of € 500 million was issued in September 2018, with a coupon of 0.05%, and is due in September 2023. Additionally, in September 2020, adidas successfully issued two bonds amounting to € 1,000 million in total. The four-year bond of € 500 million matures in September 2024 and has a coupon of 0.00%, while the 15-year bond of € 500 million matures in September 2035 and has a coupon of 0.625%. The bonds have been listed on the Luxembourg Stock Exchange and have denominations of € 100,000 each. see Our Share see Note 17

Maturity profile of borrowings including coupons¹

Additional credit lines

In addition to the syndicated credit facility and access to bond markets, the company’s financial flexibility is ensured by the availability of further credit facilities. At the end of 2022, committed and uncommitted credit lines, including the syndicated loan facility, amounted to € 4,090 million (2021: € 4,169 million), of which € 3,998 million was unutilized (2021: € 4,058 million). Committed and uncommitted credit lines represent approximately 51% and 49% of total credit lines, respectively (2021: 38% and 62%, respectively). In addition, we have an unused multi-currency commercial paper program in the amount of € 2,000 million available (2021: € 2,000 million). We monitor the ongoing need for available credit lines based on the current level of debt and future financing requirements.

Gross borrowings increase

The company’s gross borrowings, the vast majority of which are denominated in euro, are composed of bank borrowings as well as the outstanding bonds and the equity-neutral convertible bond. Gross borrowings increased 39% to € 3,473 million at the end of 2022 from € 2,495 million in the prior year. The total amount of bonds outstanding at the end of 2022 was € 3,381 million (2021: € 2,384 million). Bank borrowings amounted to € 93 million at the end of 2022 compared to € 111 million in the prior year.

As of December 31, 2022, cash and cash equivalents include € 155 million (2021: € 214 million) held by subsidiaries which were subject to foreign exchange control (e.g., Russia, Argentina) or other legal restriction and hence were not anytime available for general use by adidas AG or other subsidiaries.

Debt maturity profile

In 2023, assuming unchanged maturities, debt instruments of € 527 million will mature. This compares to € 29 million that matured in the course of 2022.

Remaining time to maturity of gross borrowings € in millions

Adjusted net borrowings of € 6,047 million

Adjusted net borrowings on December 31, 2022, amounted to € 6,047 million, compared with € 2,082 million on December 31, 2021. This development was mainly due to significantly lower cash and cash equivalents resulting from a negative cash flow from operating activities in 2022.

(Adjusted net borrowings)/net cash^1,2 € in millions

In 2020, the definition of net borrowings was adapted to adjusted net borrowings in order to reflect changes in the company’s Financial Policy. The most significant difference between the previous net borrowings definition and the adjusted net borrowings definition was the inclusion of the present value of future lease and pension liabilities. In 2022, the methodology for calculating adjusted net borrowings was revised to align with broader market practice and the approach of rating agencies. The main change of the methodology revision was the elimination of income tax adjustments from net borrowings. see Note 26

Interest rate increases slightly

The weighted average interest rate on the company’s gross borrowings slightly increased to 0.8% in 2022 (2021: 0.7%). This development was mainly due to the issuance of two new € 500 million bonds with coupons of 3.00% and 3.125% respectively in November 2022. Fixed-rate financing represented 100% of total gross borrowings at the end of 2022 (2021: 100%). There were no variable-rate borrowings at the end of 2022 (2021: 0%).

Interest rate development¹ in %

Effective foreign exchange management is a key priority

As a globally operating company, adidas is exposed to currency risks. Therefore, effective currency management is a key focus of our Treasury department, with the aim of reducing the impact of currency fluctuations on non-euro-denominated net future cash flows. In this regard, hedging US dollars is a central part of our hedging program. This is a direct result of our Asian-dominated sourcing, which is largely denominated in US dollars. In 2022, our Treasury department managed a net deficit of around US $ 7,500 million related to business activities (2021: US $ 7,300 million). Thereof, around US $ 6,100 million was against the euro (2021: US $ 6,000 million). As governed by our Treasury Policy, we have established a hedging program on a rolling basis up to 24 months in advance, under which the vast majority of the anticipated seasonal hedging volume is secured approximately six months prior to the start of a season. In rare instances, hedges are contracted beyond the 24-month horizon. We had largely covered our anticipated hedging needs for 2023 as of the end of 2022. At the same time, we have already started hedging our exposure for 2024. The use or combination of different hedging instruments, such as foreign exchange contracts, currency options, and swaps, protects us against unfavorable currency movements. see Global Operations see Risk and Opportunity Report see Note 29