4) Business segment information

Financial information by business segment is reported in accordance with the internal reporting system and shows internal segment information that is used to manage and measure the performance of TOTAL and which is reviewed by the main operational decisionmaking body of the Group, namely the Executive Committee.

The operational profit and assets are broken down by business segment prior to the consolidation and inter-segment adjustments.

Sales prices between business segments approximate market prices.

The Group’s activities are divided into three business segments as follows:

  • an Upstream segment including, alongside the activities of the Exploration & Production of hydrocarbons, the activities of Gas & Power;
  • a Refining & Chemicals segment constituting a major industrial hub comprising the activities of refining, petrochemicals and specialty chemicals. This segment also includes the activities of oil Trading & Shipping; and
  • a Marketing & Services segment including the global activities of supply and marketing in the field of petroleum products as well as the activity of New Energies.

In addition the Corporate segment includes holdings operating and financial activities.

A) Information by business segment

Table : 2014 Information by business segment - Revenues from sales, Operating income, Net operating income

Table : 2014 Information by business segment - Adjustements

Table : 2014 Information by business segment - Adjusted

Table : 2014 Information by business segment - Capital Employed (balance sheet)

Table : 2013 Information by business segment - Revenues from sales, Operating income, Net operating incom

Table : 2013 Information by business segment - Adjustements

Table : 2013 Information by business segment - Adjusted

Table : 2013 Information by business segment - Capital Employed (balance sheet)

Table : 2012 Information by business segment - Revenues from sales, Operating income, Net operating income

Table : 2012 Information by business segment - Adjustements

Table : 2012 Information by business segment - Adjusted

Table : 2012 Information by business segment - Capital Employed (balance sheet)

B) ROE (Return on Equity)

The Group evaluates the Return on Equity as the ratio of adjusted consolidated net income to average adjusted shareholders’ equity between the beginning and the end of the period. Thus, adjusted shareholders’ equity for the year ended December 31, 2014 is calculated after payment of a dividend of €2.44 per share, subject to approval by the Shareholders’ Meeting on May 29, 2015. 

The ROE is calculated as follows:

Table : ROE (Return on Equity)

C) Reconciliation of the information by business segment with Consolidated Financial Statements

The table below presents the impact of adjustment items on the consolidated statement of income:

Table : 2014 Reconciliation of the information by business segment with Consolidated Financial Statements

Table : 2013 Reconciliation of the information by business segment with Consolidated Financial Statements

Table : 2012 Reconciliation of the information by business segment with Consolidated Financial Statements

D) Adjustment items by business segment

The adjustment items for income as per Note 2) "Main indicators - information by business segment" to the Consolidated Financial Statements are detailed as follows:

Adjustments to operating income

Table : Adjustments to operating income 2014

Adjustments to net income, Group share

Table : Adjustments to net income, Group share 2014

Adjustments to operating income

Table : Adjustments to operating income 2013

Adjustments to net income, Group share

Table : Adjustments to net income, Group share 2013

Adjustments to operating income

Table : Adjustments to operating income 2012

Adjustments to net income, Group share

Table : Adjustments to net income, Group share 2011

E) Additional information on impairments

In the Upstream, Refining & Chemicals and Marketing & Services segments, impairments of assets have been recognized for the year ended December 31, 2014, with an impact of $7,979 million in operating income and $7,063 million in net income, Group share. These impairments have been disclosed as adjustments to operating income and adjustments to net income, Group share. These items are identified in paragraph 4D above as adjustment items within the heading “Asset impairment charges”. 

The impairment losses impact certain Cash Generating Units (CGU) for which there were indications of impairment, due mainly to changes in the operating conditions or the economic environment of their specific businesses. The principles applied are the following:

  • the recoverable amount of CGU’s has been based on their value in use, as defined in Note 1) "Accounting policies" paragraph L) "Impairment of long-lived assets" to the Consolidated Financial Statements;
  • the future cash flows have been determined with the assumptions in the long-term plan of the Group. These assumptions (including future prices of products, supply and demand for products, future production volumes) represent the best estimate by management of the Group of all economic conditions during the remaining life of assets;
  • the future cash flows, based on the long-term plan, are prepared over a period consistent with the life of the assets within the CGU. They are prepared post-tax and include specific risks attached to CGU assets. They are discounted using an 7% post-tax discount rate, this rate being a weighted-average capital cost estimated from historical market data. This rate was 8% for the years ending 2012 and 2013;
  • the value in use calculated by discounting the above post-tax cash flows using an 7% post-tax discount rate is not materially different from value in use calculated by discounting pre-tax cash flows using a pre-tax discount rate determined by an iterative computation from the post-tax value in use. These pretax discount rates are in a range from 7% to 11% in 2014.

For the year ended December 31, 2014 impairments of assets have been recognized in respect of CGUs of the Upstream segment with an impact of $6,529 million in operating income and $5,514 million in net income, Group share. These impairments recognized in 2014 concern mainly:

  • oil sands assets in Canada, with the deteriorating economic environment affecting the profitability of the Fort Hills project under development and preventing a final development decision in the near future for the Joslyn and Northern Lights projects; Impairments recognized amount to $2,494 million in operating profit and $2,160 million in net income, Group share;
  • non-conventional gas assets in the United-States, China, Venezuela and Algeria, whose plans and development potential in an unfavorable economic environment have been revised downwards. Impairments recognized amount to $2,944 million in operating profit and $2,080 million in net income, Group share;
  • other assets in Africa (impairment of $924 million in operating profit and $785 million in net income, Group share), on the Shotkman project in Russia, for which the technical development scheme does not provide an acceptable profitability (impairment of $350 million in net income, Group share), and in Kazakhstan on the Kashagan project, following technical problems and the decision to replace the project’s pipelines (impairments recognized amount to $167 million in operating profit and $121 million in net income, Group share).

Given the sharp decline in oil prices observed over the last months of 2014, cash flows determined from the long-term plan were modified to integrate weaker oil prices over the first three years. A variation of +10% in oil prices under identical operating conditions would have a positive impact of $1,312 million in operating profit and $1,038 million in net income, Group share. A variation of -1 point in the discount rate would have a positive impact of $985 million in operating profit and $802 million in net income, Group share. For these assets and certain assets whose value in use is close to their net book value, a variation of -10% in oil prices, except for the first three years where it is increased to -25%, under identical operating conditions, would have a negative impact of $2,338 million in operat ing profit and $1,588 million in net income, Group share. These sensitivities in price concern mainly assets impaired in 2014 as well as other assets, notably in the United States and Russia. A variation of +1 point in the discount rate would have a negative impact of $1,030 million in operating profit and $831 million in net income, Group share. 

The CGUs for the Refining & Chemicals segment are defined by the legal entities having the operating activities for the refining and petrochemical activities. The CGUs for the other activities of the sector are global divisions, each division grouping together a set of businesses or homogeneous products for strategic, commercial and industrial plans. For the year 2014, in a context of a reduction in demand for refined products and persistent weakness in refining margins in Europe, the Group recognized impairments of $1,450 million in operating profit and $1,409 million in net income, Group share, on refining CGU’s in France and the United Kingdom. A +5% variation in gross margin, under identical operating conditions, would have a positive impact of $1,036 million in operating profit and in net income, Group share. A variation of -1 point in the discount rate would have a positive impact of $199 million in operating income and net income, Group share. Opposite variations in gross margin and discount rate would have an impact respectively of $(814) million and $(139) million in operating income and in net income, Group share.

The CGUs of Marketing & Services are subsidiaries or groups of subsidiaries organized by relevant geographical zone. For the year 2014 the Group recorded impairments on CGUs of the Marketing & Services segment of $140 million in net income, Group share. A of +5% variation in gross margin, under identical operating conditions, would have a positive impact of $45 million in net income, Group share. A variation of -1 point in the discount rate would have a positive impact of $40 million in net income, Group share. Opposite variations in gross margin and discount rate would have impacts respectively of $(45) million and $(28) million in net income, Group share. 

For the year ended December 31, 2013, impairments of assets were recognized in the Upstream, Refining & Chemicals, Marketing & Services and Holding segments with an impact of $1,043 million in operating income and $773 million in net income, Group share. These impairments have been disclosed as adjustments to operating income and adjustments to net income, Group share.

For the year ended December 31, 2012, impairments of assets have been recognized in the Upstream, Refining & Chemicals, Marketing & Services and Holding segments with an impact of $1,891 million in operating income and $1,426 million in net income, Group share. These impairments have been disclosed as adjustments to operating income and adjustments to net income, Group share.

No reversal of impairment has been recognized for the years ended December 31, 2012, 2013 and 2014.