Return On Average Capital Employed (ROACE)
Return On Average Capital Employed is calculated as the ratio between adjusted net profit before minority interest, plus net finance charges on net borrowings less the related tax effect and net average capital employed. The tax rate applied on finance charges is 27.5%, as per the applicable tax legislation.
Return On Average Operating Capital
To calculate the Return On Average Operating Capital, the average capital employed is netted of investments in progress that did not contribute to net profit for the year, which amounted to €920 million at December 31, 2012 and to €261 million at December 31, 2013.
|2012 approved||2012 restated||2013 consistent||2013|
|Adjusted net profit||(€ million)||956||713||(381)||(136)|
|Exclusion of net finance expense (net of tax effect)||(€ million)||107||112||138||138|
|Unlevered adjusted net profit||(€ million)||1,063||825||(243)||2|
|Capital employed, net:||(€ million)|
|- at the beginning of the year||8,015||8,015||9,831||9,558|
|- at the end of the year||9,831||9,558||9,451||9,451|
|Average capital employed, net||(€ million)||8,923||8,787||9,641||9,505|
|Return On Average Operating Capital||(%)||14.6||10||(2.69)||0.02|
Net borrowings and leverage
Saipem management uses leverage ratios to assess the soundness and efficiency of the Group’s capital structure in terms of an optimal mix between net borrowings and shareholders’ equity, and to carry out benchmark analyses against industry standards. Leverage is a measure of a company’s level of indebtedness, calculated as the ratio between net borrowings and shareholders’ equity, including minority interest.