66 2016 ANNUAL REPORT 2016 ANNUAL REPORT 67

GOVERNANCE AND RESULTSGOVERNANCE AND RESULTS

CONTROL PHILOSOPHY The Group s internal control and enterprise risk management procedures reflect its policy of subsidiarity and operating autonomy of its various units, as well as the description of its risks. The parent company controls the operations of its sub- sidiaries via:

Specialized departments responsible for providing guid- ance and supervision;

The Finance Department which assesses their results and the Group s levels of borrowing.

The Board of Directors Audit and Risks Committee assesses the effectiveness of the controls in place based on the work performed by Internal Audit and by the Group s statutory auditors.

In the framework of a multi-annual plan the Internal Audit Department, which reports to Group general management, assesses the level of internal control prevailing at each entity using for that purpose the framework of reference defined by the Autorité des Marchés Financiers (AMF), France s financial markets oversight board. Its assignments contribute to identifying the major risks associated with each entity s operations, in conjunction with the Group s risk description prepared in the framework of the Group-wide enterprise risk management approach currently under deployment. The report prepared at the end of each assignment highlights points for improvement of internal control. The entities involved are then required to prepare and implement action plans and report periodically on the progress achieved. These action plans are supervised by the directors responsible for each of the Group s businesses and monitored annually by the Internal Audit Department.

With regard to financial reporting, the preparation of each subsidiary s financial statements involves:

Use of a Group-wide chart of accounts; Reference to an accounting manual designed to harmonize the Group s accounting policies.

Subsidiaries prepare monthly reports, including prior year comparatives, as well as annual profit forecasts. The Group s Finance Department monitors performance actively and validates the information received from the finance directors responsible for each of the Group s businesses.

Each subsidiary s statutory accounts, as well as the restat- ing entries for the purposes of the Group s half-yearly and

annual consolidated financial statements, are also subject to statutory audit at the level of each subsidiary. Subsidiaries statutory auditors are appointed on a coordinated basis with the parent company s auditors. The directors of each subsid- iary sign a letter of representation, addressed to the Board of Directors, as to the quality and content of their financial statements.

The process of preparation of the Group s consolidated finan- cial statements is underpinned by an information system enabling the collection of subsidiaries statutory accounts as adjusted for Group reporting purposes, plus the additional information required for the consolidated financial state- ments.

In order to provide optimal internal control over the consol- idation process and data used, the abovementioned system is a unique one the access to which is strictly controlled. The reliability of the consolidation processing and the faithful- ness of the resulting consolidated financial statements are guaranteed by appropriate segregation of duties and super- vision.

As part of their verification of the consolidated finan- cial statements, the statutory auditors perform an annual review of the procedures contributing to their preparation and issue appropriate recommendations for their improve- ment which are acted on in order regularly to improve our existing procedures.

WORK PERFORMED FOR THE PURPOSES OF PREPARATION OF THIS REPORT The preparation of this report has been based both on the internal control arrangements just described, on work per- formed by the Group s risk management functions at the request of Group Management and in particular, of the Chair- man, and on the preparatory work performed by the Audit and Risks Committee which prepared a report on its activity in 2016 that was presented and discussed at the meeting of the Board of Directors held on March 9, 2017.

The same Committee met on March 8, 2017 to interview the persons responsible for preparing the Group s financial and accounting information. The results of those interviews were equally presented and discussed at the meeting of the Board of Directors held on March 9, 2017.

CONSOLIDATED INCOME STATEMENT In thousands of euro

12 months 2016 2015

NET SALES 4,418,361 4,441,853 Purchases adjusted for changes in inventory -2,763,912 -2,858,157

Personnel costs -839,169 -820,190

Depreciation and amortization -125,267 -119,372

Other current operating expense -502,910 -492,269 CURRENT OPERATING PROFIT 187,103 151,865

Other operating expense -18,626 -40,904 Other operating income 12,516 7,681 TOTAL OPERATING PROFIT 180,993 118,642

Financial expense -38,278 -35,704 Financial income 10,210 9,349

Group share of results of associates 6,715 8,936 PROFIT BEFORE TAX 159,640 101,223

Income tax expense -47,693 -39,203 Net income from continuing operations 111,947 62,020 Net income from discontinued operations - 41 NET INCOME 111,947 62,061

Net income attributable to equity holders of the parent company 104,494 57,020 Non-controlling interests 7,453 5,041

EARNINGS PER SHARE Attributable to equity holders of the parent company : basic 7.48 4.07

diluted 7.30 3.97

For continuing operations : basic 7.48 4.06

diluted 7.30 3.96

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

In thousands of euro 12 months

2016 2015

NET INCOME 111,947 62,061

Other comprehensive income: Foreign exchange differences(1) 22,078 8,007 Change in fair value of available-for-sale financial assets -946 5,256 Change in fair value of cash flow hedges, net of taxes(2) -2,837 2,511 Other changes -468

Share of associates and joint ventures in recyclable components -97 258 Total recyclable components of other comprehensive income 17,730 16,032 Actuarial gains and losses relating to employment benefit plans -7,678 8,100 Share of associates and joint ventures in non-recyclable components 23 234 Total non-recyclable components of other comprehensive income -7,655 8,334 Total other comprehensive income net of tax 10,075 24,366 TOTAL COMPREHENSIVE INCOME NET OF TAXE 122,022 86,427 Group share 115,092 77,201 Non-controlling interests 6,930 9,226

(1) Mainly relating to the following foreign currencies: USD, EGP, BRL, CNY, ARS. (2) Mainly relating to hedging of interest rates and raw materials.