Treasury
Corporate Financial 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, 2024, we were in full compliance with all our covenants. We are fully confident that we will continue to be in compliance with these covenants in the future. 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. Due to adidas showing strong improvements in revenue growth and financial performance, Standard & Poor’s revised adidas’ outlook to ‘stable’ in October 2024, acknowledging significantly better-than-expected operating performance and credit metrics. In December 2024, Moody’s also changed the outlook to ‘stable’ from ‘negative’, reflecting the ongoing improvements in the company’s financial performance. Overall, adidas’ investment-grade credit ratings continue to ensure an efficient access to capital markets.
Syndicated credit facility
adidas entered into a € 1,500 million syndicated credit facility with twelve of its partner banks in November 2020. This credit facility agreement was subsequently amended in October 2021 and in November 2022. The amended and restated credit facility with then eleven partner banks had a size of € 2,000 million. In December 2023, adidas reduced the size of the syndicated credit facility, which runs until November 2027, to € 1,864 million and the number of lending banks to ten partner banks.
Outstanding bonds
adidas currently has five bonds outstanding. Most recently, in 2022, the company issued a three-year bond of € 500 million maturing in November 2025 with a coupon of 3.00%, in addition to a seven-year bond of € 500 million that matures in November 2029 and has a coupon of 3.125%. In September 2020, adidas successfully priced its first sustainability bond. At the time of the issuance, the € 500 million bond had a term of eight years until October 2028 and a coupon of 0.00%. adidas planned 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 September 2023, the total amount of net proceeds of € 500 million was fully allocated to eligible sustainable projects. Also in September 2020, adidas issued a 15-year bond of € 500 million which matures in September 2035 and has a coupon of 0.625%. Lastly, the company has a further outstanding bond of € 400 million issued in 2014 which matures in October 2026 with a coupon of 2.25%. All bonds have been listed on the Luxembourg Stock Exchange and have denominations of € 100,000 each, except for the bond that matures in October 2026 with a denomination of € 1,000 each. SEE NOTE 16
Maturity profile and coupons of adidas bonds1
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 2024, committed and uncommitted credit lines, including the syndicated loan facility, amounted to € 3,656 million (2023: € 3,648 million), of which € 3,560 million was unutilized (2023: € 3,556 million). Committed and uncommitted credit lines represent approximately 52% and 48% of total credit lines, respectively (2023: 53% and 47%, respectively). In addition, we have an unused multi-currency commercial paper program in the amount of € 2,000 million available (2023: € 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 decrease
The company’s gross borrowings, the vast majority of which are denominated in euro, are composed of bank borrowings as well as outstanding bonds. Gross borrowings decreased 17% to € 2,485 million at the end of 2024 from € 2,979 million in the prior year, mainly due to the repayment of the € 500 million eurobond in September 2024. The total amount of bonds outstanding at the end of 2024 was € 2,389 million (2023: € 2,886 million). Bank borrowings amounted to € 96 million at the end of 2024 compared to € 93 million in the prior year.
|
|
2024 |
|
2023 |
---|---|---|---|---|
Cash and cash equivalents |
|
2,455 |
|
1,431 |
Bank borrowings |
|
96 |
|
93 |
Eurobonds |
|
2,389 |
|
2,886 |
Gross total borrowings |
|
2,485 |
|
2,979 |
Net (borrowings)/cash |
|
(30) |
|
(1,548) |
As of December 31, 2024, cash and cash equivalents include € 325 million (2023: € 211 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 2025, assuming unchanged maturities, debt instruments of € 570 million will mature. This compares to € 549 million that matured in the course of 2024.
Remaining time to maturity of gross borrowings € in millions
Adjusted net borrowings of € 3,622 million
Adjusted net borrowings on December 31, 2024, amounted to € 3,622 million, compared to € 4,518 million on December 31, 2023. This development was mainly due to significantly higher cash and cash equivalents resulting from a positive cash flow from operating activities and lower long-term borrowings, which have been slightly offset by higher current and non-current lease liabilities in 2024.
Adjusted (net borrowings)/net cash1,2 € in millions
2 2021 figure reflects the reclassification of the Reebok business to assets or liabilities held for sale.
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 25
|
|
2024 |
|
2023 |
---|---|---|---|---|
Short-term borrowings |
|
570 |
|
549 |
Long-term borrowings |
|
1,915 |
|
2,430 |
Current and non-current lease liabilities |
|
3,102 |
|
2,584 |
Pensions and similar obligations |
|
144 |
|
139 |
Factoring |
|
21 |
|
70 |
Subtotal |
|
5,752 |
|
5,772 |
|
|
|
|
|
Cash and cash equivalents |
|
2,455 |
|
1,431 |
Short-term financial assets |
|
0 |
|
34 |
Less trapped cash |
|
325 |
|
211 |
Less accessible cash and cash equivalents |
|
2,130 |
|
1,254 |
|
|
|
|
|
Adjusted net borrowings |
|
3,622 |
|
4,518 |
Leverage ratio improves significantly
The company remains committed to an adjusted net borrowings below two times EBITDA (Earnings before interests, taxes, depreciation and amortization and impairment losses and reversals) over the long term. This ratio amounted to 1.5 at the end of December 2024 (2023: 3.3). The strong deleveraging relates to the significantly lower adjusted net borrowings and the higher EBITDA compared to the prior year period. SEE INCOME STATEMENT SEE STATEMENT OF FINANCIAL POSITION AND STATEMENT OF CASH FLOWS SEE NOTE 25
Adjusted net borrowings/EBITDA
1.5
Interest rate increases
The weighted average interest rate on the company’s gross borrowings increased to 2.5% in 2024 (2023: 1.6%). This development was mainly due to higher financing needs in some subsidiaries in markets with high interest rates. Fixed-rate financing represented 98% of total gross borrowings at the end of 2024 (2023: 99%). Variable-rate financing accounted for 2% of total gross borrowings at the end of 2024 (2023: 1%).
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 2024, our Treasury department managed a net deficit of around US $ 5.0 billion related to business activities (2023: US $ 4.1 billion). Thereof, around US $ 3.6 billion was against the euro (2023: US $ 3.0 billion). 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 2025 as of the end of 2024. At the same time, we have already started hedging our exposure for 2026. The use of different hedging instruments, such as foreign exchange contracts, currency options, and swaps, or the combination of different instruments protect us against unfavorable currency movements. SEE SOURCING AND SUPPLY CHAIN SEE RISK AND OPPORTUNITY REPORT SEE NOTE 28