Quarterly Report • Aug 8, 2019
Quarterly Report
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Q1 – Q2 2019 | January 1 – June 30, 2019
Order intake (EUR 1.1 billion) in second quarter down on record prior-year figure; basic business stable, but fewer major orders
Strong revenue (EUR 1.2 billion) in second quarter; both for GEA as a whole and for the two Business Areas above previous year; service up by more than 7 percent
(EUR 111 million) in second quarter impaired by special effects (EUR 30 million compared to previous year)
Decision taken on new organizational structure with five divisions; gradual implementation as of October 1, 2019
| Q2 | Q2 | Change | Q1-Q2 | Q1-Q2 | Change | |
|---|---|---|---|---|---|---|
| (EUR million) | 2019 | 2018 | in % | 2019 | 2018 | in % |
| Results of operations | ||||||
| Order intake | 1,146.8 | 1,383.0 | –17.1 | 2,333.1 | 2,485.6 | –6.1 |
| Book-to-bill ratio | 0.92 | 1.13 | – | 1.01 | 1.10 | – |
| Order backlog | 2,419.8 | 2,554.4 | –5.3 | 2,419.8 | 2,554.4 | –5.3 |
| Revenue | 1,247.3 | 1,227.0 | 1.7 | 2,304.6 | 2,266.4 | 1.7 |
| EBITDA before restructuring measures1 | 111.2 | 141.9 | –21.6 | 185.9 | 218.6 | –15.0 |
| as % of revenue | 8.9 | 11.6 | – | 8.1 | 9.6 | – |
| EBITDA | 101.1 | 122.6 | –17.6 | 170.3 | 179.9 | –5.3 |
| EBIT before restructuring measures1 | 57.5 | 91.4 | –37.1 | 84.5 | 119.5 | –29.3 |
| as % of revenue | 4.6 | 7.4 | – | 3.7 | 5.3 | – |
| EBIT | 38.2 | 87.6 | –56.3 | 59.9 | 111.1 | –46.1 |
| EBT2 | 34.6 | 82.1 | –57.9 | 60.2 | 93.8 | –35.8 |
| Profit for the period2 | 25.4 | 65.1 | –61.0 | 55.6 | 68.5 | –18.9 |
| ROCE in % (goodwill adjusted)3 | 10.5 | 15.5 | – | 10.5 | 15.5 | – |
| Net assets | ||||||
| Net working capital (reporting date) | 906.4 | 847.7 | 6.9 | 906.4 | 847.7 | 6.9 |
| as % of revenue (LTM) | 18.6 | 17.9 | – | 18.6 | 17.9 | – |
| Capital employed (reporting date) | 2,703.6 | 2,533.6 | 6.7 | 2,703.6 | 2,533.6 | 6.7 |
| Equity | 2,317.9 | 2,410.4 | –3.8 | 2,317.9 | 2,410.4 | –3.8 |
| Equity ratio in % | 38.8 | 39.8 | – | 38.8 | 39.8 | – |
| Leverage4 | 1.3 x | 0.7 x | – | 1.3 x | 0.7 x | – |
| Net liquidity (+)/Net debt (-) | –329.5 | –326.9 | –0.8 | –329.5 | –326.9 | –0.8 |
| Financial position | ||||||
| Cash flow from operating activities | 31.8 | 17.4 | 83.2 | –7.2 | –84.4 | 91.5 |
| Cash flow from investing activities | –23.2 | –15.6 | –48.8 | –48.4 | –57.1 | 15.3 |
| Free cash flow | 8.6 | 1.8 | > 100 | –55.5 | –141.5 | 60.8 |
| GEA Shares | ||||||
| Earnings per share (EUR)2 | 0.14 | 0.36 | –61.0 | 0.31 | 0.38 | –18.8 |
| Market capitalization (EUR billion; reporting date) | 4.5 | 5.2 | –13.5 | 4.5 | 5.2 | –13.5 |
| Employees (FTE; reporting date) | 18,892 | 18,287 | 3.3 | 18,892 | 18,287 | 3.3 |
1) Pro-forma figures for 2018 incl. IFRS 16 effects from 2019.
2) 2019 incl. interest income of EUR 32.7 million (of which EUR 7.0 million in the second quarter) due to adjustment of the interest calculation method used to measure provisions for long-term liabilities (see page 36). 3) Capital employed excluding goodwill from the acquisition of the former GEA AG by former Metallgesellschaft AG in 1999 (average of the last 4 quarters); pro-forma figures for 2018 incl. IFRS 16 effects from 2019. 4) Leverage = (Net liquidity (+)/Net debt (-) – lease liabilities) / (EBITDA LTM (incl. discontinued operations) – interest expense from compounding of provisions LTM + expected return of plan assets LTM)
| GEA in the second quarter of 2019 | 5 |
|---|---|
| Report on Economic Position | 8 |
| Report on Risks and Opportunities | 16 |
| Report on Expected Developments | 17 |
Contents
| Consolidated Balance Sheet | 19 |
|---|---|
| Consolidated Income Statement for the period April 1 – June 30, 2019 |
20 |
| Consolidated Statement of Comprehensive Income for the period April 1 – June 30, 2019 |
21 |
| Consolidated Income Statement for the period January 1 – June 30, 2019 |
22 |
| Consolidated Statement of Comprehensive Income for the period January 1 – June 30, 2019 |
23 |
Consolidated Cash Flow Statement 24 Consolidated Statement of Changes in Equity 26
Notes to the condensed interim consolidated financial statements 27
4
Responsibility Statement 45 Review Report 46 Financial Calendar/Imprint 47
The new initiative GEA Advance offers customers digital services such as remote maintenance, data analysis as well as comprehensive e-commerce and enables the seamless integration of all interactions with suppliers in a common platform. »»» Page 15
Condensed Interim Consolidated
Further Information
GEA in the second quarter of 2019 5 Report on Economic Position 8
| Report on Risks and Opportunities | 16 | ||||||
|---|---|---|---|---|---|---|---|
| -- | -- | -- | -- | -- | ----------------------------------- | -- | ---- |
Report on Expected Developments 17
GEA Q2 2019 4
GEA in the second quarter of 2019
With order intake of EUR 1,147 million in the second quarter of 2019, GEA was unable to match the record figure of EUR 1,383 million in Q2 2018, when the company benefited from several major orders worth around EUR 120 million and posted order growth of more than 11 percent. The decline of around 17 percent in the quarter under review was largely the result of customers' deferring mid- and large-scale orders. In contrast, basic business remained on a sound footing. Thanks to a well-filled project pipeline, the company is predicting that order intake will recover in the coming quarters.
With regard to revenue (EUR 1,247 million), GEA posted record values for both the second quarter and the first six months of the year – and that goes for both Business Areas as well as for the group as a whole. The second quarter saw the beverages segment, in particular, perpetuate its strong growth, while dairy processing also grew favorably year on year. GEA also managed to increase revenue from its high-margin service business (EUR 394 million) in the months from April to June, posting marked growth of 7 percent. The drop in order intake coupled with record revenue figures produced a book-to-bill ratio of 0.92 in the quarter under review. The decline in order intake was most noticeable in the area of major, long-term customer projects in the Business Area Solutions, and this is set to have a knock-on effect on consolidated revenue too in the further course of the year. For this reason, GEA is now looking at a moderate fall in revenue for 2019 compared with the figure for the previous year.
As expected, EBITDA before restructuring expenses (EUR 111 million) was below the previous year's level (EUR 142 million; including a proforma IFRS 16 effect of EUR 16 million). Compared to the second quarter 2018, this indicator was impacted by special effects (EUR 30 million) in particular. In the previous year, adjustments in the method of measuring non-current liabilities in the areas of environmental protection and mining had given rise to a one-time improvement of around EUR 9 million in the earnings of "Other companies". Earnings in the second quarter of 2019 received a positive boost of EUR 8 million, largely from other provisions. However, the quarter under review also saw GEA add EUR 16 million to its provision for legal risks emanating from the Business Area Equipment. What is more, GEA was obliged to establish funds of around EUR 13 million to cover exposures arising from customer-specific projects in the Business Area Solutions. In total, provisions in this Business Area amounted to around EUR 23 million in the first half of 2019.
With the aim of counteracting margin erosion and stabilizing earnings in the Business Area Solutions, GEA began to introduce measures at the start of the second quarter. These include measures to address the issue of overcapacity in the short term – notably in the field of dairy processing, and, among other things, an efficiency drive in the underperforming business segments.
Due largely to higher inventories, net working capital as of June 30, 2019 rose to nearly 19 percent of revenue (LTM), after 18 percent a year earlier. In order to reduce net working capital, GEA launched a global optimization project in August.
The group's net financial position (minus EUR 330 million) was virtually unchanged on the prioryear figure (minus EUR 327 million). In the past 12 months, GEA generated cash inflows of almost EUR 230 million when mainly adjusted for payments for dividends (EUR 153 million), restructuring outflows (EUR 67 million) and before payments for discontinued operations (EUR 11 million).
GEA still believes that EBITDA before restructuring expenses will be within the predicted corridor of between EUR 450 and EUR 490 million in the 2019 financial year, with ROCE also remaining within forecasted range of between 8.5 and 10.5 percent.
On April 24, 2019, GEA Group Aktiengesellschaft's Annual General Meeting elected Colin Hall to the Supervisory Board. The American is Head of Investments at Groupe Bruxelles Lambert (GBL) and also CEO of Sienna Capital, a wholly owned subsidiary of GBL. The Düsseldorf District Court appointed Mr Hall to the Supervisory Board in November 2018 following Prof. Dr. Ing. Werner J. Bauer's decision to step down.
Marcus A. Ketter started work as GEA's CFO on May 20, 2019. His predecessor, Dr. Helmut Schmale, left the company on May 17, 2019. An economics graduate, Marcus Ketter joined GEA from steel and metal distributors Klöckner & Co SE, where, over the last six years, he has played a major role in shaping the fortunes of the company in his capacity as CFO. Prior to this, he was CFO at Schuler AG and has occupied various management positions within the thyssenkrupp group. Marcus Ketter's appointment to the GEA Executive Board runs through May 19, 2022.
In June 2019, board member Martine Snels decided not to extend her contract with GEA (due to expire at the end of September 2020) and intends to leave the company at this time. Following her departure, Martine Snels' current sphere of responsibility for GEA's regions and countries will be divided among the remaining board members.
Given the considerable importance of procurement, production, and logistics to GEA's business fortunes, the company is set to create a new, joint executive mandate for these particular areas, and a structured effort to find a suitable candidate for this important position as COO is already under way. In the future, procurement activities – previously managed separately by the Business Areas or countries – will be bundled in a global procurement organization.
Therefore, the Executive Board will continue to comprise four members.
On June 24, 2019, GEA presented the fundamentals of its new organizational structure, which will be rolled out in stages as of October 1, 2019. In the future, GEA will be organized into five divisions, each with up to six business units based on technologies and essentially aligned to the current legal corporate units. GEA's current organizational structure comprises two Business Areas, namely Equipment and Solutions. However, the lines of business combined within these two areas bundle different technologies with limited synergy potential. For this reason, they are to be replaced by a clear divisional structure in which the various operating segments comprise similar or complementary technologies. The new structure will feature the following five divisions:
Separation & Flow Technologies will comprise all activities concerned with the manufacture of process-related components, notably separators, decanters, valves, pumps, and homogenizers.
Liquid & Powder Technologies is a recognized market and technology leader in the design and development of process solutions for the dairy, brewing, food, and chemical industries. Its technological focus is on liquid processing, concentration, industrial drying, powder processing and handling as well as emission control.
The Food & Healthcare Technologies division provides a range of competencies to the pharmaceutical and food industries. These include customer solutions for food processing and packaging, solutions for the baking industry, extrusion and milling equipment, and process technology for the pharmaceutical industry.
Refrigeration Technologies is a market leader in the field of industrial refrigeration technology. The division develops, manufactures, and installs innovative key components and technical solutions such as reciprocating and screw compressors as well as valves.
Farm Technologies bundles together all the activities involved in the development of integrated customer solutions for profitable dairy and livestock farming.
Each of these units will be overseen by a manager directly responsible for the income statement.
In order to ensure that customers still have a central point of contact in their respective localities, GEA intends to preserve its system of bundling activities into country organizations – a tried-andtested approach introduced in 2015. As such, customer-centric sales and local service activities will continue to be unified under the umbrella of a single country organization. The countries will cooperate with the divisions in a matrix and assigned to tailored regions.
Central management and administrative functions, together with standardized administrative processes will continue to be bundled within a Global Corporate Center (GCC). In the future, overarching group functions will focus on the areas with the greatest synergy potential, in particular procurement and production. In addition, GEA will continue to use a Shared Service Center (SSC) for the areas of IT, Finance, and Human Resources. The aim here is to improve these services in the interest of frictionless administrative processes.
Disclosure of the group's course of business, including the comparable prior-year figures, is presented for the two Business Areas (BAs) Equipment and Solutions. All amounts have been rounded using standard rules. Adding together individual amounts may, therefore, result in rounding differences in some cases.
At EUR 1,146.8 million, order intake in the second quarter of 2019 was unable to match the excellent showing of the same quarter of the previous year. Adjusted for positive exchange rate fluctuations of 0.5 percent, order intake fell by 17.6 percent. There were no acquisition effects in the quarter under review. With the exception of Germany, Austria and Switzerland (DACH) & Eastern Europe, all regions recorded a decline in order intake. The slump in volume was most noticeable in large orders, whereas basic business (orders with a volume of under EUR 1 million) remained stable.
In the months April – June of the current financial year, GEA secured one major order (volume in excess of EUR 15 million) for a dairy project in North America. In the comparable prior-year quarter, GEA posted five major orders with a total volume of around EUR 120 million.
| Order intake (EUR million) |
Q2 2019 |
Q2 2018 |
Change in % |
Q1-Q2 2019 |
Q1-Q2 2018 |
Change in % |
|---|---|---|---|---|---|---|
| BA Equipment | 660.5 | 688.3 | –4.0 | 1,343.5 | 1,389.7 | –3.3 |
| BA Solutions | 557.0 | 755.3 | –26.3 | 1,130.4 | 1,217.3 | –7.1 |
| Consolidation/others | –70.7 | –60.6 | –16.7 | –140.8 | –121.4 | –16.0 |
| GEA | 1,146.8 | 1,383.0 | –17.1 | 2,333.1 | 2,485.6 | –6.1 |
In the first six months of the 2019 financial year, order intake was 6.1 percent down on the comparable 2018 figure, which had benefited from a strong second quarter. Adjusted for currency effects (plus 0.5 percent), order intake fell by 6.7 percent in the first six months of 2019. There were no acquisition effects in the first six months of the financial year.
The following is a breakdown of order intake by product group (BA Equipment) and application center (BA Solutions):
| Order intake1 GEA |
Change Q2/2019 to Q2/2018 |
Change Q1–Q2 2019 to Q1–Q2 2018 |
Share2 of order intake in % Q1–Q2 2019 |
|---|---|---|---|
| PG Food Processing & Packaging; Pasta, Extrusion & Milling | 10 | ||
| PG Separation, Homogenizers, Flow Components, Compression | 30 | ||
| PG Milking & Dairy Farming | 15 | ||
| Business Area Equipment | 55 | ||
| APC Dairy | 10 | ||
| APC Beverage | 10 | ||
| APC Food | 5 | ||
| APC Utilities | 10 | ||
| APC Pharma | 5 | ||
| APC Chemical | 5 | ||
| Business Area Solutions | 45 | ||
| GEA | 100 | ||
| > 5 percentage points 1 to 5 percentage points 1 to -1 percentage points |
-1 to -5 percentage points | < -5 percentage points |
1) External business only; PG = Product Group, APC = Application Center 2) Split rounded to nearest 5%
GEA's order backlog of EUR 2,419.8 million was slightly above the value as of December 31, 2018 (EUR 2,416.3 million).
GEA's revenue in the second quarter of 2019 amounted to EUR 1,247.3 million, a slight increase of 1.7 percent compared with the prior-year figure. A 0.5 percent upwards adjustment for exchange rate movements gave rise to 1.1 percent growth in the adjusted revenue figure. There were no acquisition effects in the second quarter. Service revenue increased sharply by 7.1 percent in the quarter under review (6.7 percent when adjusted for currency effects). Its share of total revenue was 31.6 percent (previous year: 30.0 percent).
Revenue growth in the second quarter resulted primarily from the regions of Asia Pacific, North and Central Europe, and Latin America – each recording high single-digit increases.
The book-to-bill ratio, i.e. the ratio of order intake to revenue, was around 0.92 in the quarter under review.
| Revenue (EUR million) |
Q2 2019 |
Q2 2018 |
Change in % |
Q1-Q2 2019 |
Q1-Q2 2018 |
Change in % |
|---|---|---|---|---|---|---|
| BA Equipment | 671.1 | 653.2 | 2.7 | 1,270.8 | 1,245.3 | 2.0 |
| BA Solutions | 642.4 | 633.4 | 1.4 | 1,161.2 | 1,137.4 | 2.1 |
| Consolidation/others | –66.2 | –59.5 | –11.3 | –127.4 | –116.3 | –9.6 |
| GEA | 1,247.3 | 1,227.0 | 1.7 | 2,304.6 | 2,266.4 | 1.7 |
Exchange rate movements served to increase revenue to the tune of 0.6 percent in the first half of the year. Adjusted revenue growth amounted to 1.1 percent. Acquisitions had no effect during the period under review. The record revenue levels recorded in the second quarter and in the first six months of 2019 surpassed the respective peaks of the previous year in respect of both GEA as a whole and the two Business Areas. Service revenue increased sharply by 6.1 percent in the first six months of the year (by 5.6 percent when adjusted for currency effects). Its share of total revenue was 32.1 percent in the first six months (previous year: 30.8 percent.)
The following charts show trends in revenue and a breakdown of this financial indicator by region, product group (BA Equipment), and application centers (BA Solutions):
| Revenue by regions GEA | Change Q2/2019 to Q2/2018 |
Change Q1–Q2 2019 to Q1–Q2 2018 |
Share of revenue in % Q1–Q2 2019 |
|---|---|---|---|
| Asia Pacific | 23 | ||
| DACH & Eastern Europe | 20 | ||
| North America | 18 | ||
| Western Europe, Middle East & Africa | 16 | ||
| North and Central Europe | 15 | ||
| Latin America | 7 | ||
| GEA | 100 | ||
| > 5 percentage points 1 to 5 percentage points |
1 to -1 percentage points -1 to -5 percentage points |
< -5 percentage points |
| Revenue1 GEA |
Change Q2/2019 to Q2/2018 |
Change Q1–Q2 2019 to Q1–Q2 2018 |
Share2 of revenue in % Q1–Q2 2019 |
|---|---|---|---|
| PG Food Processing & Packaging; Pasta, Extrusion & Milling | 15 | ||
| PG Separation, Homogenizers, Flow Components, Compression | 25 | ||
| PG Milking & Dairy Farming | 10 | ||
| Business Area Equipment | 50 | ||
| APC Dairy | 10 | ||
| APC Beverage | 10 | ||
| APC Food | 10 | ||
| APC Utilities | 10 | ||
| APC Pharma | 5 | ||
| APC Chemical | 5 | ||
| Business Area Solutions | 50 | ||
| GEA | 100 |
5 percentage points 1 to 5 percentage points 1 to -1 percentage points -1 to -5 percentage points < -5 percentage points
1) External business only; PG = Product Group, APC = Application Center 2) Split rounded to nearest 5%
Revenue in the Business Area Equipment grew by 2.7 percent in the second quarter. On a constant exchange rate basis, growth amounted to 2.4 percent. With regard only to the first six months of 2019, the corresponding growth rates were 2.0 percent and 1.6 percent respectively.
Growth in revenue by region can be appreciated from the table below:
| Revenue by regions Business Area Equipment |
Change Q2/2019 to Q2/2018 |
Change Q1–Q2 2019 to Q1–Q2 2018 |
Shareof revenue in % Q1–Q2 2019 |
|---|---|---|---|
| Asia Pacific | 21 | ||
| DACH & Eastern Europe | 23 | ||
| North America | 20 | ||
| Western Europe, Middle East & Africa | 16 | ||
| North and Central Europe | 13 | ||
| Latin America | 7 | ||
| Business Area Equipment | 100 | ||
| > 5 percentage points 1 to 5 percentage points |
1 to -1 percentage points -1 to -5 percentage points |
< -5 percentage points |
With growth of 1.4 percent, revenue in the Business Area Solutions in the second quarter of 2019 was also above the prior-year level. Adjusted for exchange rate effects, revenue increased slightly by 0.7 percent. In the first six months of the current financial year, revenue grew by 2.1 percent compared with 2018, or by 1.3 percent when adjusted for the effects of currency translation.
The following table shows a breakdown of revenue by region:
| Revenue by regions Business Area Solutions |
Change Q2/2019 to Q2/2018 |
Change Q1–Q2 2019 to Q1–Q2 2018 |
Shareof revenue in % Q1–Q2 2019 |
|---|---|---|---|
| Asia Pacific | 25 | ||
| DACH & Eastern Europe | 18 | ||
| North America | 15 | ||
| Western Europe, Middle East & Africa | 17 | ||
| North and Central Europe | 18 | ||
| Latin America | 8 | ||
| Business Area Solutions | 100 | ||
| > 5 percentage points 1 to 5 percentage points |
1 to -1 percentage points -1 to -5 percentage points |
< -5 percentage points |
Since the start of 2019 – in line with its internal control system – GEA's management has been using "EBITDA before restructuring measures" as an indication of its operating performance. The adjusted restructuring measures are outlined in terms of content and scope, presented to the Chairman of the Supervisory Board by the CEO and, where required by the Board's rules of procedure, approved and finalized by the Supervisory Board. Only measures requiring funding in excess of EUR 2 million are taken into account. Adjustments are no longer made for expenses incurred in other strategic projects above and beyond restructuring measures (see page 28 f. of the 2018 Annual Report).
In accordance with this definition, EBITDA before restructuring measures for the second quarter of 2019 was adjusted for expenses totaling EUR 10.2 million (previous year: EUR 3.4 million). In the first six months of the business year, these adjustments totaled EUR 15.5 million (previous year EUR 7.0 million).
| Reconciliation of operating EBITDA to EBITDA before restructuring measures (EUR million) |
Q2 2018 |
Q1-Q2 2018 |
|---|---|---|
| Operating EBITDA | 133.0 | 199.5 |
| Strategic projects | –6.5 | –12.2 |
| Realization of step-up amounts on inventories | –0.5 | –0.5 |
| EBITDA before restructuring measures | 126.0 | 186.9 |
| IFRS 16 effect ("Leases") | 15.9 | 31.8 |
| EBITDA before restructuring measures* | 141.9 | 218.6 |
*) Pro-forma figures for 2018 incl. IFRS 16 effects from 2019.
The following table shows EBITDA and the EBITDA margin (before restructuring expenses) for each business area:
| EBITDA before restructuring measures/EBITDA margin before restructuring measures (EUR million) |
Q2 2019 |
Q2 2018* |
Change in % |
Q1-Q2 2019 |
Q1-Q2 2018* |
Change in % |
|---|---|---|---|---|---|---|
| BA Equipment | 79.8 | 97.9 | –18.5 | 162.6 | 170.9 | –4.9 |
| as % of revenue | 11.9 | 15.0 | – | 12.8 | 13.7 | – |
| BA Solutions | 32.6 | 44.4 | –26.6 | 31.2 | 52.0 | –40.0 |
| as % of revenue | 5.1 | 7.0 | – | 2.7 | 4.6 | – |
| Consolidation/others | –1.1 | –0.3 | < -100 | –7.9 | –4.3 | –82.8 |
| GEA | 111.2 | 141.9 | –21.6 | 185.9 | 218.6 | –15.0 |
| as % of revenue | 8.9 | 11.6 | – | 8.1 | 9.6 | – |
*) Pro-forma figures for 2018 incl. IFRS 16 effects from 2019.
In the second quarter, GEA's EBITDA before restructuring was EUR 30.7 million below the comparable prior-year figure (adjusted for effects from the initial application of IFRS 16 "Leases"). The corresponding margin of 8.9 percent was around 270 basis points below the value of the previous year. Positive non-recurring factors in the prior-year quarter and negative effects in the quarter under review hit GEA's earnings performance to the tune of EUR 30.0 million (see page 12).
In the quarter under review, earnings in the Business Area Equipment were impacted by risk provisioning amounting to EUR 15.5 million to cover legal disputes. Adjusted for these negative impacts, earnings in the Business Area would have been just below the level of the previous year.
Higher risk provisioning of EUR 12.8 million, especially in dairy processing projects, conspired with higher selling and R&D costs to hit earnings in the Business Area Solutions in the second quarter of the year.
In 2018, adjustments in the measurement of non-current liabilities in the areas of environmental protection and mining gave rise to a one-time contribution to earnings of EUR 8.8 million in "Other companies" that was absent from the current reporting period.
Condensed Interim Consolidated Financial Statements
Report on Economic Position
| Special effects affecting EBITDA before restructuring measures (EUR million) |
Q2 2019 |
Q2 2018 |
Change in % |
|---|---|---|---|
| EBITDA before restructuring measures* | 111.2 | 141.9 | –21.6 |
| Legal disputes | –16.3 | – | – |
| Projects BA Solutions | –12.8 | – | – |
| Valuation of long-term liabilities | – | 8.8 | – |
| Other special effects | 7.9 | – | – |
| Special effects | –21.2 | 8.8 | – |
| EBITDA before restructuring measures adjusted by special effects* | 132.4 | 133.1 | –0.5 |
*) Pro-forma figures for 2018 incl. IFRS 16 effects from 2019.
EBITDA before restructuring in the first six months of 2019 was EUR 32.8 million below the comparable figure of the previous year. The corresponding margin fell by around 160 basis points to 8.1 percent.
The following table shows the reconciliation of EBITDA before restructuring measures through EBITDA and EBIT to EBIT before restructuring measures:
| Reconciliation of EBITDA before restructuring measures to EBIT before restructuring measures (EUR million) |
Q2 2019 |
Q2 2018 |
Change in % |
Q1-Q2 2019 |
Q1-Q2 2018 |
Change in % |
|---|---|---|---|---|---|---|
| EBITDA before restructuring measures* | 111.2 | 141.9 | –21.6 | 185.9 | 218.6 | –15.0 |
| Restructuring measures | –10.2 | –3.4 | – | –15.5 | –7.0 | – |
| IFRS 16 effect | – | –15.9 | – | – | –31.8 | – |
| EBITDA | 101.1 | 122.6 | –17.6 | 170.3 | 179.9 | –5.3 |
| Depreciation of impairment losses on property, plant, and equipment, and investment property, and amortization of and impairment losses on intangible assets and goodwill, as reported in the statement of changes in non-current assets |
–62.8 | –35.0 | – | –110.4 | –68.8 | – |
| EBIT | 38.2 | 87.6 | –56.3 | 59.9 | 111.1 | –46.1 |
| Restructuring measures | 19.2 | 3.4 | – | 24.6 | 7.0 | – |
| IFRS 16 effect | – | 0.4 | – | – | 1.4 | – |
| EBIT before restructuring measures* | 57.5 | 91.4 | –37.1 | 84.5 | 119.5 | –29.3 |
*) Pro-forma figures for 2018 incl. IFRS 16 effects from 2019.
The following table shows EBITDA and the EBITDA margin (before restructuring measures) for each business area:
| EBIT before restructuring measures/EBIT margin before restructuring measures (EUR million) |
Q2 2019 |
Q2 2018* |
Change in % |
Q1-Q2 2019 |
Q1-Q2 2018* |
Change in % |
|---|---|---|---|---|---|---|
| BA Equipment | 46.3 | 66.7 | –30.5 | 101.3 | 109.1 | –7.2 |
| as % of revenue | 6.9 | 10.2 | – | 8.0 | 8.8 | – |
| BA Solutions | 16.0 | 28.7 | –44.4 | –1.5 | 21.9 | – |
| as % of revenue | 2.5 | 4.5 | – | – | 1.9 | – |
| Consolidation/others | –4.8 | –4.0 | –21.7 | –15.2 | –11.6 | –31.5 |
| GEA | 57.5 | 91.4 | –37.1 | 84.5 | 119.5 | –29.3 |
| as % of revenue | 4.6 | 7.4 | – | 3.7 | 5.3 | – |
*) Pro-forma figures for 2018 incl. IFRS 16 effects from 2019.
The indicators relating to the earnings situation can be appreciated from the table below:
| Key figures: Results of operations (EUR million) |
Q2 2019 |
Q2 2018 |
Change in % |
Q1-Q2 2019 |
Q1-Q2 2018 |
Change in % |
|---|---|---|---|---|---|---|
| Revenue | 1,247.3 | 1,227.0 | 1.7 | 2,304.6 | 2,266.4 | 1.7 |
| EBITDA before restructuring measures* | 111.2 | 141.9 | –21.6 | 185.9 | 218.6 | –15.0 |
| EBITDA | 101.1 | 122.6 | –17.6 | 170.3 | 179.9 | –5.3 |
| EBIT before restructuring measures* | 57.5 | 91.4 | –37.1 | 84.5 | 119.5 | –29.3 |
| EBIT | 38.2 | 87.6 | –56.3 | 59.9 | 111.1 | –46.1 |
| Interest result | –3.7 | –5.5 | 33.0 | 0.3 | –17.3 | – |
| EBT | 34.6 | 82.1 | –57.9 | 60.2 | 93.8 | –35.8 |
| Income taxes | 8.0 | 17.2 | –53.9 | 13.9 | 19.7 | –29.7 |
| Profit after tax from continuing operations | 26.6 | 64.9 | –59.0 | 46.4 | 74.1 | –37.4 |
| Profit/loss after tax from discontinued operations | –1.2 | 0.3 | – | 9.2 | –5.6 | – |
| Profit for the period | 25.4 | 65.1 | –61.0 | 55.6 | 68.5 | –18.9 |
*) Pro-forma figures for 2018 incl. IFRS 16 effects from 2019.
Net interest income increased by EUR 0.3 million in the first half of 2019 after falling by EUR 17.3 million in the comparable prior-year period. This improvement was mainly due to an adjustment to the method of calculating interest when measuring provisions for long-term liabilities in the areas of environmental protection and mining, which generated funds of EUR 11.5 million (see page 36).
Condensed Interim Consolidated Financial Statements
An income tax rate of 23.0 percent is expected for fiscal year 2019 and this figure was also used as the basis for calculating the tax expenditure for the first six months of the year.
In the first half of 2019, earnings from discontinued operations were well into the black at EUR 9.2 million. EUR 21.2 million (before income taxes) of this total was attributable to the above-mentioned adjustment to the method of interest calculation (see page 36). In the previous year, discontinued operations generated a loss of EUR 5.6 million. This was primarily the result of interest rate changes in the measurement of non-current provisions established for the former mining activities of Metallgesellschaft AG.
Earnings per share in the first half of 2019 stood at EUR 0.31 (average of 180,492,172 dividendearning shares in circulation), compared with EUR 0.38 in the previous year (average number of 180,565,353 shares).
Net debt including discontinued operations increased slightly year-on-year from EUR 326.9 million to EUR 329.5 million.
| Overview of net liquidity incl. discontinued operations (EUR million) |
06/30/2019 | 12/31/2018 | 06/30/2018 |
|---|---|---|---|
| Cash and cash equivalents | 230.6 | 247.9 | 269.3 |
| Liabilities to banks | 560.2 | 320.1 | 596.2 |
| Net liquidity (+)/Net debt (-) | –329.5 | –72.2 | –326.9 |
The chart below shows the key factors responsible for the change in the net financial position (including discontinued operations) over the last 12 months:
The chart below shows the development of the Net Working Capital:
*) The purchase price allocation for the Pavan group acquired in 2017 was finalized in the fourth quarter of 2018 resulting in changes to the comparative figures as of June 30, 2018.
Guarantee lines – which are mainly for contract performance, advance payments, and warranties – of EUR 1,330.8 million (December 31, 2018: EUR 1,321.0 million) were available to GEA as of the reporting date, of which EUR 480.8 million (December 31, 2018: EUR 536.1 million) had been utilized.
The consolidated cash flow statement is as follows:
| Overview of cash flow statement (EUR million) |
Q1-Q2 2019 |
Q1-Q2 2018 |
Change absolute |
|---|---|---|---|
| Cash flow from operating activities | –7.2 | –84.4 | 77.2 |
| Cash flow from investing activities | –48.4 | –57.1 | 8.7 |
| Free cash flow | –55.5 | –141.5 | 86.0 |
| Cash flow from financing activities | 45.1 | 168.4 | –123.2 |
| Net cash flow other discontinued operations | –10.0 | –4.9 | –5.1 |
| Change in unrestricted cash and cash equivalents | –16.9 | 19.6 | –36.5 |
Cash flow from operating activities attributable to continuing operations has fallen by EUR 7.2 million since the start of the year and was thus EUR 77.2 million above the previous year's level. The reasons for this development include an increase in provisions and a lower increase in net working capital. Due to the application of IFRS 16 "Leases", outflows for lease liabilities now have to be disclosed under cash flows from financing activities, and this served to increase the cash flow from operating activities by EUR 31.9 million.
Cash flow from investing activities was slightly above the level of the previous year, mainly as a result of the lack of outgoings for company acquisitions in this reporting period compared with last year.
In particular the increased utilization of credit lines (EUR 237.5 million), but also the dividend payout (EUR 153.4 million) and outflows for lease liabilities (EUR 30.6 million) were reflected in the cash flow from financing activities attributable to continuing operations. An identical dividend payout and the increased utilization of credit lines were included in this item in the previous year, too. In addition, new borrower's note loans amounting to EUR 250.0 million were taken out in the second quarter of 2018.
| Condensed balance sheet | as % of | as % of | Change | ||
|---|---|---|---|---|---|
| (EUR million) | 06/30/2019 | total assets | 12/31/2018 | total assets | in % |
| Assets | |||||
| Non-current assets | 3,288.0 | 55.1 | 3,115.3 | 54.5 | 5.5 |
| thereof goodwill | 1,757.1 | 29.4 | 1,755.3 | 30.7 | 0.1 |
| thereof deferred taxes | 337.0 | 5.6 | 306.1 | 5.4 | 10.1 |
| Current assets | 2,679.4 | 44.9 | 2,603.8 | 45.5 | 2.9 |
| thereof cash and cash equivalents | 230.6 | 3.9 | 247.9 | 4.3 | –7.0 |
| thereof assets held for sale | 0.9 | 0.0 | 3.7 | 0.1 | –76.2 |
| Total assets | 5,967.4 | 100.0 | 5,719.1 | 100.0 | 4.3 |
| Equity and liabilities | |||||
| Equity | 2,317.9 | 38.8 | 2,449.4 | 42.8 | –5.4 |
| Non-current liabilities | 1,521.6 | 25.5 | 1,380.9 | 24.1 | 10.2 |
| thereof financial liabilities | 416.1 | 7.0 | 305.2 | 5.3 | 36.3 |
| thereof deferred taxes | 101.7 | 1.7 | 103.0 | 1.8 | –1.3 |
| Current liabilities | 2,127.9 | 35.7 | 1,888.8 | 33.0 | 12.7 |
| thereof financial liabilities | 324.1 | 5.4 | 28.5 | 0.5 | > 100 |
| Total equity and liabilities | 5,967.4 | 100.0 | 5,719.1 | 100.0 | 4.3 |
The marked increase in total assets compared with December 31, 2018 was mainly due to a rise in inventories and fixed assets, the latter increasing in the wake of the initial application of IFRS 16 "Leases" (EUR 169.6 million).
Compared with December 31, 2018, equity fell by EUR 131,5 million to 2,317.9 million. Consolidated earnings of EUR 55.6 million together with currency translation effects (EUR 10.3 million) helped to augment equity, while the dividend payment (EUR 153,4 million) and adjustments to the actuarial measurement of pensions (EUR 46,5 million) served to reduce this key indicator. The equity ratio is now 38.8 percent.
The initial application of IFRS 16 meant that non-current and current lease liabilities grew by EUR 113.7 million and EUR 56.5 million respectively compared with December 31, 2018. Also, because GEA made greater use of its credit lines, current liabilities to banks rose by EUR 241.7 million compared with the position at the end of 2018.
| Return on capital employed (ROCE) in % | 06/30/2019 | 06/30/2018 | 06/30/20181 |
|---|---|---|---|
| EBIT before restructuring measures (last 4 quarters; EUR million) | 273.2 | 368.5 | 369.9 |
| Capital employed (average of the last 4 quarters; EUR million)2 | 2,590.9 | 2,307.6 | 2,393.7 |
| Return on capital employed (ROCE; in %) | 10.5 | 16.0 | 15.5 |
1) Pro-forma figures for 2018 incl. IFRS 16 effects from 2019.
2) Capital employed excluding goodwill from the acquisition of the former GEA AG by former Metallgesellschaft AG in 1999.
| Employees* by region | 06/30/2019 | 12/31/2018 | 06/30/2018 | |||
|---|---|---|---|---|---|---|
| DACH & Eastern Europe | 6,889 | 36.5% | 6,765 | 36.3% | 6,603 | 36.1% |
| North and Central Europe | 3,143 | 16.6% | 3,056 | 16.4% | 2,994 | 16.4% |
| Asia Pacific | 3,075 | 16.3% | 3,049 | 16.4% | 2,949 | 16.1% |
| Western Europe, Middle East & Africa | 3,456 | 18.3% | 3,434 | 18.4% | 3,444 | 18.8% |
| North America | 1,813 | 9.6% | 1,821 | 9.8% | 1,809 | 9.9% |
| Latin America | 516 | 2.7% | 518 | 2.8% | 488 | 2.7% |
| Total | 18,892 | 100.0% | 18,642 | 100.0% | 18,287 | 100.0% |
*) Full-time equivalents (FTE) excluding vocational trainees and inactive employment contracts.
The workforce increased by 605 compared with June 30, 2018. Due to the sale of GEA Westfalia Separator Production France in Château-Thierry and to further changes to the basis of consolidation, the number of employees fell by 105. Adjusted for these effects, the workforce grew by 710 employees. The regional distribution of employees barely changed at all compared with December 31, 2018.
Over the last six months, the workforce increased by 250 employees. GEA's management agreed on various measures in the first half of the year aimed at scaling back the workforce again over the second half of 2019.
| Research and development (R&D) expenses* (EUR million) |
Q2 2019 |
Q2 2018 |
Change in % |
Q1-Q2 2019 |
Q1-Q2 2018 |
Change in % |
|---|---|---|---|---|---|---|
| R&D expenses | 39.1 | 28.9 | 35.1 | 69.4 | 51.9 | 33.8 |
| R&D ratio (as % of revenue) | 3.1 | 2.4 | – | 3.0 | 2.3 | – |
*) Incl. refunded expenses (contract costs).
As a leading technology group, GEA's own culture of innovation is crucial to securing future commercial success and fostering further growth. In the first half of 2019, specific customer solutions boasting trailblazing product and process efficiency were at the forefront of GEA's research and development (R&D) activities. For example, at the leading international trade fair for the meat industry (IFFA) in Frankfurt in May, GEA presented FoodTray – a novel system solution for sustainable food packaging. The company also used the IFFA to introduce GEA Advance – a new, cloud-based initiative for customer-oriented digital service solutions. GEA is also intensifying its R&D activities in the area of alternative raw materials for the food industry.
The increase in R&D expenses includes write-downs on R&D projects, mainly in the Business Area Equipment. The increase caused by these write-downs amounted to EUR 6.0 million in the second quarter and EUR 7.3 million in the first six months of the year.
Aside from the issues explained below, there was no significant change in the overall assessment of risks and opportunities in the reporting period compared with the position presented in the 2018 Annual Report.
The former Metallgesellschaft AG, the legal predecessor to GEA Group Aktiengesellschaft, held an interest in Schiess AG, which later became Dörries Scharmann AG. On the basis of that interest, since 1996 the insolvency administrator has asserted step-by-step various claims under company law, in particular for equity substitution, amounting to approximately EUR 18 million plus interest in the first instance. In the second instance, the Higher Regional Appeal Court of Düsseldorf in its final judicial ruling ordered GEA Group Aktiengesellschaft to pay EUR 3.4 million plus interest (EUR 4.6 million).
In June 2019, jurors at a civil court awarded damages against GEA Mechanical Equipment US, Inc. in the first instance. The plaintiff, a former service technician of a third-party company, alleged that he had been exposed to GEA products containing asbestos. GEA expects that the first instance decision will either be quashed, or the damages awarded will at least be substantially reduced.
All in all, from today's perspective, there are no risks to the continued existence of GEA as a going concern. Sufficient provisions have been recognized for identified risks in line with the relevant requirements.
GEA's Report on Expected Developments takes into account relevant facts and events that were known at the date of preparation of these condensed interim consolidated financial statements and that could influence the future development of its business.
In their most recent publications, the main economic research institutions, i.e. the International Monetary Fund (IMF), the World Bank Group, and the United Nations (UN) revised down all the forecasts for the development of the global economy presented at the start of the year. As such, they predict that global gross domestic product will rise by 3.2 percent (IMF, down from 3.3 percent previously), 2.6 percent (World Bank Group, down from 2.9 percent previously), and 2.7 percent (UN, up from 3.0 percent previously) in 2019. All three institutions refer to growing risks that could pose a threat to global growth; for example, the potential for escalating trade tensions, and increasing political uncertainty. The UN also believes that investment prospects are getting gloomier due to the slow-down in international trade. And the IMF's outlook is similar in tenor: particularly in the industrialized nations and the emerging markets, investments in and demand for consumer durables of the kind manufactured by the mechanical engineering sector would be more cautious as companies continue to put their long-term outgoings on hold. Global trade – for example in machinery – is also set to slow down. A significant slowdown in global economic growth cannot, as yet, be inferred from the modified forecasts provided by the economic research institutions.
The outlook for 2019 published in the 2018 Annual Report is confirmed. The forecast is based, among other things, on the assumption that there will be no significant slowdown in global economic growth. Potential acquisitions and divestments in 2019 have not been factored into the calculation.
With regard to the 2019 fiscal year, GEA is still expecting
Düsseldorf, July 30, 2019
The Executive Board
Stefan Klebert Steffen Bersch Marcus A. Ketter Martine Snels
Condensed Interim Consolidated
| Consolidated Balance Sheet | 19 | Notes to the condensed interim | ||||
|---|---|---|---|---|---|---|
| Consolidated Income Statement | consolidated financial statements | 27 | ||||
| for the period April 1 – June 30, 2019 | 20 | 1. Reporting Principles | 27 | |||
| Consolidated Statement of | 2. Basis of consolidation | 31 | ||||
| Comprehensive Income | 3. Balance sheet disclosures | 31 | ||||
| for the period April 1 – June 30, 2019 | 21 | 4. Consolidated income | ||||
| Consolidated Income Statement | statement disclosures | 37 | ||||
| for the period January 1 – June 30, 2019 | 22 | 5. Statement of comprehensive income |
||||
| Consolidated Statement of | and consolidated statement of | |||||
| Comprehensive Income | changes in equity disclosures | 38 | ||||
| for the period January 1 – June 30, 2019 | 23 | 6. Segment Reporting |
38 | |||
| Consolidated Cash Flow Statement | 24 | 7. Related party transactions |
43 | |||
| Consolidated Statement of | ||||||
| Changes in Equity | 26 | |||||
Consolidated Balance Sheet Interim Group Management Report Further Information Condensed Interim Consolidated Financial Statements
| Assets | Change | ||
|---|---|---|---|
| (EUR thousand) | 06/30/2019 | 12/31/2018 | in % |
| Property, plant and equipment | 682,437 | 518,706 | 31.6 |
| Investment property | 2,415 | 2,354 | 2.6 |
| Goodwill | 1,757,085 | 1,755,290 | 0.1 |
| Other intangible assets | 454,724 | 482,672 | –5.8 |
| Equity-accounted investments | 5,935 | 11,883 | –50.1 |
| Other non-current financial assets | 48,410 | 38,283 | 26.5 |
| Deferred taxes | 336,960 | 306,082 | 10.1 |
| Non-current assets | 3,287,966 | 3,115,270 | 5.5 |
| Inventories | 832,224 | 741,344 | 12.3 |
| Contract assets | 486,994 | 462,787 | 5.2 |
| Trade receivables | 872,998 | 923,884 | –5.5 |
| Income tax receivables | 33,541 | 40,214 | –16.6 |
| Other current financial assets | 222,165 | 183,968 | 20.8 |
| Cash and cash equivalents | 230,647 | 247,900 | –7.0 |
| Assets held for sale | 880 | 3,700 | –76.2 |
| Current assets | 2,679,449 | 2,603,797 | 2.9 |
| Total assets | 5,967,415 | 5,719,067 | 4.3 |
| Equity and liabilities (EUR thousand) |
12/31/2019 | 12/31/2018 | Change in % |
|---|---|---|---|
| Subscribed capital | 520,376 | 520,376 | – |
| Capital reserve | 1,217,861 | 1,217,861 | – |
| Retained earnings | 506,132 | 647,950 | –21.9 |
| Accumulated other comprehensive income | 72,966 | 62,681 | 16.4 |
| Equity attributable to shareholders of GEA Group AG | 2,317,335 | 2,448,868 | –5.4 |
| Non-controlling interests | 571 | 568 | 0.5 |
| Equity | 2,317,906 | 2,449,436 | –5.4 |
| Non-current provisions | 122,519 | 157,235 | –22.1 |
| Non-current employee benefit obligations | 857,097 | 791,262 | 8.3 |
| Non-current financial liabilities | 416,085 | 305,246 | 36.3 |
| Non-current contract liabilities | 282 | 364 | –22.5 |
| Other non-current liabilities | 23,944 | 23,744 | 0.8 |
| Deferred taxes | 101,688 | 103,008 | –1.3 |
| Non-current liabilities | 1,521,615 | 1,380,859 | 10.2 |
| Current provisions | 160,253 | 160,770 | –0.3 |
| Current employee benefit obligations | 153,981 | 164,245 | –6.2 |
| Current financial liabilities | 324,140 | 28,472 | > 100 |
| Trade payables | 648,227 | 723,334 | –10.4 |
| Current contract liabilities | 630,175 | 622,948 | 1.2 |
| Income tax liabilities | 23,518 | 31,152 | –24.5 |
| Other current liabilities | 187,600 | 157,851 | 18.8 |
| Current liabilities | 2,127,894 | 1,888,772 | 12.7 |
| Total equity and liabilities | 5,967,415 | 5,719,067 | 4.3 |
| (EUR thousand) | Q2 2019 |
Q2 2018 |
Change in % |
|---|---|---|---|
| Revenue | 1,247,291 | 1,227,034 | 1.7 |
| Cost of sales | 894,403 | 862,966 | 3.6 |
| Gross margin | 352,888 | 364,068 | –3.1 |
| Selling expenses | 157,044 | 143,664 | 9.3 |
| Research and development expenses | 26,074 | 21,009 | 24.1 |
| General and administrative expenses | 110,721 | 116,415 | –4.9 |
| Other income | 55,873 | 112,743 | –50.4 |
| Other expenses | 70,626 | 106,622 | –33.8 |
| Net result from impairment and reversal of impairment on trade receivables and contract assets | –5,892 | –1,829 | < -100 |
| Share of profit or loss of equity-accounted investments | 250 | –144 | – |
| Other financial income | –142 | 451 | – |
| Other financial expenses | 279 | – | – |
| Earnings before interest and tax (EBIT) | 38,233 | 87,579 | –56.3 |
| Interest income | 2,725 | 1,258 | > 100 |
| Interest expense | 6,385 | 6,718 | –5.0 |
| Profit before tax from continuing operations | 34,573 | 82,119 | –57.9 |
| Income taxes | 7,952 | 17,245 | –53.9 |
| Profit after tax from continuing operations | 26,621 | 64,874 | –59.0 |
| Profit or loss after tax from discontinued operations | –1,220 | 274 | – |
| Profit for the period | 25,401 | 65,148 | –61.0 |
| of which attributable to shareholders of GEA Group AG | 25,398 | 65,205 | –61.0 |
| of which attributable to non-controlling interests | 3 | –57 | – |
| Q2 | Q2 | Change | |
|---|---|---|---|
| (EUR) | 2019 | 2018 | in % |
| Basic and diluted earnings per share from continuing operations | 0.15 | 0.36 | –59.0 |
| Basic and diluted earnings per share from discontinued operations | –0.01 | 0.00 | – |
| Basic and diluted earnings per share | 0.14 | 0.36 | –61.0 |
| Weighted average number of ordinary shares used to calculate basic and diluted earnings per share (million) | 180.5 | 180.5 | – |
Consolidated Statement of Comprehensive Income for the period April 1 – June 30, 2019
| Q2 | Q2 | Change | |
|---|---|---|---|
| (EUR thousand) | 2019 | 2018 | in % |
| Profit for the period | 25,401 | 65,148 | –61.0 |
| Items, that will not be reclassified to profit or loss in the future: | |||
| Actuarial gains/losses on pension and other post-employment benefit obligations | –24,292 | 8 | – |
| Items, that will be reclassified subsequently to profit or loss when specific conditions are met: | |||
| Exchange differences on translating foreign operations | –18,547 | 38,808 | – |
| Other comprehensive income | –42,839 | 38,816 | – |
| Total comprehensive income | –17,438 | 103,964 | – |
| of which attributable to GEA Group AG shareholders | –17,441 | 104,021 | – |
| of which attributable to non-controlling interests | 3 | –57 | – |
| (EUR thousand) | Q1-Q2 2019 |
Q1-Q2 2018 |
Change in % |
|---|---|---|---|
| Revenue | 2,304,604 | 2,266,397 | 1.7 |
| Cost of sales | 1,653,490 | 1,616,162 | 2.3 |
| Gross margin | 651,114 | 650,235 | 0.1 |
| Selling expenses | 300,458 | 269,305 | 11.6 |
| Research and development expenses | 47,893 | 37,268 | 28.5 |
| General and administrative expenses | 226,323 | 242,171 | –6.5 |
| Other income | 136,222 | 246,993 | –44.8 |
| Other expenses | 145,486 | 236,118 | –38.4 |
| Net result from impairment and reversal of impairment on financial assets and contract assets | –7,691 | –2,349 | < -100 |
| Share of profit or loss of equity-accounted investments | 637 | 367 | 73.6 |
| Other financial income | 94 | 726 | –87.1 |
| Other financial expenses | 279 | – | – |
| Earnings before interest and tax (EBIT) | 59,937 | 111,110 | –46.1 |
| Interest income | 13,435 | 2,291 | > 100 |
| Interest expense | 13,148 | 19,576 | –32.8 |
| Profit before tax from continuing operations | 60,224 | 93,825 | –35.8 |
| Income taxes | 13,852 | 19,703 | –29.7 |
| Profit after tax from continuing operations | 46,372 | 74,122 | –37.4 |
| Profit or loss after tax from discontinued operations | 9,213 | –5,600 | – |
| Profit for the period | 55,585 | 68,522 | –18.9 |
| thereof attributable to shareholders of GEA Group AG | 55,586 | 68,519 | –18.9 |
| thereof attributable to non-controlling interests | –1 | 3 | – |
| (EUR) | Q1-Q2 2019 |
Q1-Q2 2018 |
Change in % |
|---|---|---|---|
| Basic and diluted earnings per share from continuing operations | 0.26 | 0.41 | –37.4 |
| Basic and diluted earnings per share from discontinued operations | 0.05 | –0.03 | – |
| Basic and diluted earnings per share | 0.31 | 0.38 | –18.8 |
| Weighted average number of ordinary shares used to calculate basic and diluted earnings per share (million) | 180.5 | 180.6 | –0.0 |
Consolidated Statement of Comprehensive Income for the period January 1 – June 30, 2019
| (EUR thousand) | Q1-Q2 2019 |
Q1-Q2 2018 |
Change in % |
|---|---|---|---|
| Profit for the period | 55,585 | 68,522 | –18.9 |
| Items, that will not be reclassified to profit or loss in the future: | |||
| Actuarial gains/losses on pension and other post-employment benefit obligations | –46,526 | 3,786 | – |
| Items, that will be reclassified subsequently to profit or loss when specific conditions are met: | |||
| Exchange differences on translating foreign operations | 10,285 | 13,953 | –26.3 |
| Other comprehensive income | –36,241 | 17,739 | – |
| Total comprehensive income | 19,344 | 86,261 | –77.6 |
| thereof attributable to GEA Group AG shareholders | 19,345 | 86,258 | –77.6 |
| thereof attributable to non-controlling interests | –1 | 3 | – |
| Q2 | Q2 | |
|---|---|---|
| (EUR thousand) | 2019 | 2018 |
| Profit for the period | 25,401 | 65,148 |
| plus income taxes | 7,952 | 17,245 |
| minus profit or loss after tax from discontinued operations | 1,220 | –274 |
| Profit before tax from continuing operations | 34,573 | 82,119 |
| Net interest income | 3,660 | 5,460 |
| Earnings before interest and tax (EBIT) | 38,233 | 87,579 |
| Depreciation, amortization, impairment losses, and reversal of impairment losses on non-current assets | 62,847 | 34,995 |
| Other non-cash income and expenses | 8,193 | 4,289 |
| Employee benefit obligations from defined benefit pension plans | –10,502 | –10,293 |
| Change in provisions and other employee benefit obligations | 15,059 | –8,977 |
| Losses and disposal of non-current assets | 272 | –105 |
| Change in inventories including unbilled construction contracts* | –83,143 | –47,587 |
| Change in trade receivables | –6,972 | –90,732 |
| Change in trade payables | 10,138 | 54,592 |
| Change in other operating assets and liabilities | 6,291 | 3,112 |
| Tax payments | –8,595 | –9,500 |
| Cash flow from operating activities of continued operations | 31,821 | 17,373 |
| Cash flow from operating activities of discontinued operations | –962 | –3,371 |
| Cash flow from operating activities | 30,859 | 14,002 |
| Proceeds from disposal of non-current assets | 38 | 546 |
| Payments to acquire property, plant and equipment, and intangible assets | –23,434 | –24,558 |
| Payments from non-current financial assets | 6 | –263 |
| Interest income | 115 | 584 |
| Dividend income | 68 | 1,561 |
| Payments to acquire subsidiaries and other businesses | – | 6,530 |
| Cash flow from investing activities of continued operations | –23,207 | –15,600 |
| (EUR thousand) | Q2 2019 |
Q2 2018 |
|---|---|---|
| Cash flow from investing activities of discontinued operations | –7,933 | –244 |
| Cash flow from investing activities | –31,140 | –15,844 |
| Dividend payments | –153,418 | –153,418 |
| Payments for acquisition of treasury shares | – | –3,069 |
| Payments from lease liabilities (Prior year: Payments from finance leases) | –13,914 | –989 |
| Proceeds from finance loans | 177,434 | 206,967 |
| Repayments of finance loans | –1,100 | – |
| Interest payments | –3,505 | –812 |
| Cash flow from financing activities of continued operations | 5,497 | 48,679 |
| Cash flow from financing activities of discontinued operations | – | –14 |
| Cash flow from financing activities | 5,497 | 48,665 |
| Effect of exchange rate changes on cash and cash equivalents | –1,490 | –1,202 |
| Change in unrestricted cash and cash equivalents | 3,726 | 45,621 |
| Free cash and cash equivalents at the beginning of the quarter | 226,858 | 223,491 |
| Unrestricted cash and cash equivalents at end of period | 230,584 | 269,112 |
| Restricted cash and cash equivalents | 63 | 158 |
| Cash and cash equivalents total | 230,647 | 269,270 |
| less cash and cash equivalents classified as held for sale | – | –6 |
| Cash and cash equivalents reported in the balance sheet | 230,647 | 269,264 |
*) Including advanced payments received.
| Q1-Q2 | Q1-Q2 | |
|---|---|---|
| (EUR thousand) | 2019 | 2018 |
| Profit for the period | 55,585 | 68,522 |
| plus income taxes | 13,852 | 19,703 |
| minus profit or loss after tax from discontinued operations | –9,213 | 5,600 |
| Profit before tax from continuing operations | 60,224 | 93,825 |
| Net interest income | –287 | 17,285 |
| Earnings before interest and tax (EBIT) | 59,937 | 111,110 |
| Depreciation, amortization, impairment losses, and reversal of impairment losses on non-current assets | 110,409 | 68,789 |
| Other non-cash income and expenses | 10,923 | 5,843 |
| Employee benefit obligations from defined benefit pension plans | –21,005 | –20,586 |
| Change in provisions and other employee benefit obligations | 17,959 | –15,933 |
| Losses and disposal of non-current assets | –220 | –366 |
| Change in inventories including unbilled construction contracts* | –138,252 | –138,152 |
| Change in trade receivables | 59,470 | –10,140 |
| Change in trade payables | –84,020 | –31,049 |
| Change in other operating assets and liabilities | 4,426 | –26,737 |
| Tax payments | –26,780 | –27,166 |
| Cash flow from operating activities of continued operations | –7,153 | –84,387 |
| Cash flow from operating activities of discontinued operations | –1,790 | –4,532 |
| Cash flow from operating activities | –8,943 | –88,919 |
| Proceeds from disposal of non-current assets | 979 | 773 |
| Payments to acquire property, plant and equipment, and intangible assets | –45,995 | –43,601 |
| Payments from non-current financial assets | –4,245 | –263 |
| Interest income | 679 | 1,263 |
| Dividend income | 199 | 1,622 |
| Payments to acquire subsidiaries and other businesses | – | –16,904 |
| Cash flow from investing activities of continued operations | –48,383 | –57,110 |
| Q1-Q2 | Q1-Q2 | |
|---|---|---|
| (EUR thousand) | 2019 | 2018 |
| Cash flow from investing activities of discontinued operations | –8,163 | –299 |
| Cash flow from investing activities | –56,546 | –57,409 |
| Dividend payments | –153,418 | –153,418 |
| Payments for acquisition of treasury shares | – | –24,022 |
| Payments from lease liabilities (Prior year: Payments from finance leases) | –30,658 | –1,992 |
| Proceeds from finance loans | 237,509 | 206,967 |
| Proceeds from bond issue | – | 249,500 |
| Repayments of finance loans | –1,100 | –107,015 |
| Interest payments | –7,196 | –1,541 |
| Cash flow from financing activities of continued operations | 45,137 | 168,479 |
| Cash flow from financing activities of discontinued operations | –6 | –68 |
| Cash flow from financing activities | 45,131 | 168,411 |
| Effect of exchange rate changes on cash and cash equivalents | 3,467 | –2,464 |
| Change in unrestricted cash and cash equivalents | –16,891 | 19,619 |
| Unrestricted cash and cash equivalents at beginning of period | 247,475 | 249,493 |
| Unrestricted cash and cash equivalents at end of period | 230,584 | 269,112 |
| Restricted cash and cash equivalents | 63 | 158 |
| Cash and cash equivalents total | 230,647 | 269,270 |
| less cash and cash equivalents classified as held for sale | – | –6 |
| Cash and cash equivalents reported in the balance sheet | 230,647 | 269,264 |
*) Including advanced payments received.
Consolidated Statement of Changes in Equity
| Accumulated other comprehensive income | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Translation of | Result from fair value measurement of |
Result of | Equity attributable to shareholders |
Non-controlling | |||||
| (EUR thousand) | Subscribed capital1 | Capital reserves | Retained earnings2 | foreign operations | financial instruments | cash flow hedges | of GEA Group AG | interests | Total |
| Balance at Jan. 1, 2018 (181,026,744 shares) | 489,372 | 1,217,861 | 756,412 | 38,749 | –502 | – | 2,501,892 | 1,191 | 2,503,083 |
| Adjustments IFRS 9 | – | – | –1,032 | – | 502 | – | –530 | – | –530 |
| Adjustments IFRS 153 | – | – | –2,842 | – | – | – | –2,842 | – | –2,842 |
| Adjusted balance at Jan. 1, 20183 | 489,372 | 1,217,861 | 752,538 | 38,749 | – | – | 2,498,520 | 1,191 | 2,499,711 |
| Profit for the period | – | – | 68,519 | – | – | – | 68,519 | 3 | 68,522 |
| Other comprehensive income | – | – | 3,786 | 13,953 | – | – | 17,739 | – | 17,739 |
| Total comprehensive income | – | – | 72,305 | 13,953 | – | – | 86,258 | 3 | 86,261 |
| Purchase of treasury shares | –1,445 | – | –19,508 | – | – | – | –20,953 | – | –20,953 |
| Redemption of shares | 32,449 | – | –32,449 | – | – | – | – | – | – |
| Dividend payment by GEA Group AG | – | – | –153,418 | – | – | – | –153,418 | – | –153,418 |
| Adjustment Hyperinflation | – | – | – | – | – | – | – | – | – |
| Changes in combined Group | – | – | – | – | – | – | – | – | – |
| Change in other non-controlling interests | – | – | – | – | – | – | – | –633 | –633 |
| Balance at June 30, 2018 (180,492,172 shares)3 | 520,376 | 1,217,861 | 619,468 | 52,702 | – | – | 2,410,407 | 561 | 2,410,968 |
| Balance at Jan. 1, 2019 (180,492,172 shares) | 520,376 | 1,217,861 | 647,950 | 62,681 | – | – | 2,448,868 | 568 | 2,449,436 |
| Profit for the period | – | – | 55,586 | – | – | – | 55,586 | –1 | 55,585 |
| Other comprehensive income | – | – | –46,526 | 10,285 | – | – | –36,241 | – | –36,241 |
| Total comprehensive income | – | – | 9,060 | 10,285 | – | – | 19,345 | –1 | 19,344 |
| Purchase of treasury shares | – | – | – | – | – | – | – | – | – |
| Redemption of shares | – | – | – | – | – | – | – | – | – |
| Dividend payment by GEA Group AG | – | – | –153,418 | – | – | – | –153,418 | – | –153,418 |
| Adjustment Hyperinflation4 | – | – | 594 | – | – | – | 594 | – | 594 |
| Changes in combined Group | – | – | 1,946 | – | – | – | 1,946 | – | 1,946 |
| Change in other non-controlling interests | – | – | – | – | – | – | – | 4 | 4 |
| Balance at June 30, 2019 (180,492,172 shares) | 520,376 | 1,217,861 | 506,132 | 72,966 | – | – | 2,317,335 | 571 | 2,317,906 |
1) As of 01/01/2018 issued capital.
2) The purchase price allocation for the Pavan group acquired in the previous year was finalized in the fourth quarter of 2018 resulting in changes to the comparative figures as of December 31, 2017.
3) The first time adoption effect according to IFRS 15 has been adjusted in the fourth quarter of 2018 due to new insights resulting in changes to the comparative figures as of March 31, 2018.
4) Effect of accounting for Hyperinflation in Argentina according to IAS 29.
Notes to the condensed interim consolidated financial statements Condensed Interim Consolidated Financial Statements Further Information
The condensed interim consolidated financial statements of GEA Group Aktiengesellschaft, Düsseldorf/Germany (entry HRB 65691 in the commercial register of the Local Court of Düsseldorf) and the interim financial statements of the subsidiaries included in the condensed interim consolidated financial statements were prepared in accordance with the International Financial Reporting Standards (IFRSs) and related Interpretations issued by the International Accounting Standards Board (IASB), as adopted by the EU for interim financial reporting in accordance with Regulation (EC) No. 1606/2002 of the European Parliament and the Council on the application of international accounting standards. In accordance with IAS 34, the condensed interim consolidated financial statements do not contain all the information and disclosures required by IFRSs for fullyear consolidated financial statements.
The condensed interim consolidated financial statements and Group management report on the second quarter have been reviewed by an auditor. The Executive Board released them for publication on July 30, 2019.
The condensed interim consolidated financial statements were prepared in euros (EUR). All amounts, including the comparative figures, are presented in thousands of euros (EUR thousand), except for the segment information. All amounts have been rounded using standard rounding rules. Adding together individual amounts may therefore result in a difference in the order of EUR 1 thousand in certain cases.
With the exception of the pronouncements applicable for the first time as of January 1, 2019, the accounting policies applied to these condensed interim consolidated financial statements are the same as those applied as of December 31, 2018, and are described in detail on pages 135 to 163 of the Annual Report containing GEA's IFRS consolidated financial statements.
The initial application of the new accounting standard IFRS 16 "Leases" has given rise to changes in accounting methods, and these are described in the following. The initial application of other accounting standards and interpretations had no material effect on the condensed interim consolidated financial statements.
On January 1, 2019, GEA applied the new IFRS 16 standard on lease accounting for the first time. The comparative figures for the previous year are presented in accordance with IAS 17. The new standard introduced a single lessee accounting model in which all leases and the associated contractual rights and obligations are recorded on the balance sheet. This has eliminated the classification of leases as either operating leases or finance leases for a lessee, as so far required under IAS 17. Under the new IFRS 16, a contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. GEA has decided against voluntarily applying IFRS 16 to selected intangible assets.
For lessors, on the other hand, the regulations of the new standard resemble those of the previous standard IAS 17. Leases continue to be classified either as finance or operating leases. Leases which essentially transfer all risks and rewards associated with ownership of the asset are classified as finance leases, while all other leases are classified as operating leases. The IAS 17 criteria have been adopted by IFRS 16 for classification purposes.
In addition, IFRS 16 contains a series of additional regulations regarding reporting and disclosures in the notes, as well as sale and leaseback transactions.
Notes to the condensed interim consolidated financial statements Condensed Interim Consolidated Financial Statements Further Information
IFRS 16 replaces the current rules of IAS 17 "Leases" and the associated interpretations in IFRIC 4 "Determining whether an Arrangement contains a Lease", SIC 15 "Operating Leases – Incentives", and SIC 27 "Evaluating the Substance of Transactions Involving the Legal Form of a Lease".
As GEA is applying IFRS 16 under the "modified retrospective" method, GEA has elected not to restate its prior-period figures. Rather than remeasuring current leases, GEA is applying IFRS 16 as of the transition date only to contracts previously identified as leases under IAS 17 or IFRIC 4. For leases previously classified as operating leases GEA as a lessee has measured the corresponding right-of-use assets at the time of initial application as being equal to the amount of the lease liabilities, with no effect on equity. Material leasing agreements exist primarily in the areas of real estate and vehicles. The exemption which allows for leasing agreements with a residual term of under 12 months to be classified as short-term leases as of the time of initial application will not be used. With regard to leasing arrangements previously treated as finance leases, GEA, as the lessee, has rolled over the carrying amounts as of the transition date. GEA is disclosing right-of-use assets to property, plant, and equipment in the same balance sheet item as the underlying assets, as if they were own property. Right-of-use assets defined as investment property are recognized under that item. GEA is disclosing lease liabilities as part of its financial liabilities.
For every lease agreement, GEA, as the lessee, must recognize a liability equal to the present value of the future lease payments, as well as a right-of-use asset capitalized at the present value of future lease payments, plus directly attributable costs. The lease payments include fixed payments, variable payments that depend on an index or rate, expected payments based on residual value guarantees, and, where applicable, the exercise price of purchase options and penalties for the premature termination of leasing agreements. Essentially, GEA as a lessee is using the incremental borrowing rate for discounting future lease payments. The weighted average interest rate being used as of January 1, 2019 was 2.8 percent. However, the right-of-use asset is depreciated over the term of the leasing agreement (scheduled depreciation). GEA intends to apply the relevant recognition exemption for leased assets of low value and to short-term leases (agreements of 12 months and less), which means that lease expenses will continue to be recognized for such arrangements. Rather than separating leasing from non-leasing components, GEA is accounting for each leasing component and all its associated non-leasing components as a single leasing component.
Due to the initial application of IFRS 16, GEA recognized right-of-use assets arising from leases of EUR 177 million (plus an equal volume of lease liabilities) as of January 1, 2019. In the following, the operating rental and lease obligations as of December 31, 2018 are reconciled with the lease liabilities recognized for the first time on January 1, 2019.
| (EUR thousand) | 01/01/2019 |
|---|---|
| Rental and lease obligations as of 12/31/2018 | 188,251 |
| Liabilities from finance leases as of 12/31/2018 | 6,934 |
| Renewal options reasonably certain to be exercised | 14,090 |
| Recognition exemption for short term leases | –3,953 |
| Recognition exemption for leases of low value assets | –1,464 |
| Lease obligation for assets not yet available for use as of 01/01/2019 | –8,044 |
| Other | 460 |
| Gross lease liabilities as of 01/01/2019 | 196,274 |
| Discounting | –12,664 |
| Total lease liabilities as of 01/01/2019 | 183,610 |
| Present value of finance lease liabilities as of 12/31/2018 | –6,395 |
| Additional lease liability from initial application of IFRS 16 as of 01/01/2019 | 177,215 |
Notes to the condensed interim consolidated financial statements
As of June 30, 2019, the initial application of IFRS 16 had affected the balance sheet as follows:
| (EUR thousand) | 06/30/2019 |
|---|---|
| Assets | |
| Land and buildings | 125,528 |
| Technical equipment and machinery | 845 |
| Other equipment, operating and office equipment | 2,483 |
| Vehicles | 35,468 |
| Computer hardware | 66 |
| Other IT equipment | 5,172 |
| Right-of-use-assets in property, plant and equipment | 169,562 |
| Right-of-use-assets in investment property | 81 |
| Total assets | 169,643 |
| Non-current lease liabilities | 113,672 |
|---|---|
| Current lease liabilities | 56,497 |
| Total liabilities | 170,169 |
In the first half of 2019, the initial application of IFRS 16 lead to an increase in depreciation expenses of EUR 30,485 thousand and interest expenses of EUR 2,360 thousand on the relevant lease agreements instead of rental and leasing expenses. As a result, EBITDA increased by a total of EUR 31,882 thousand.
How certain circumstances and transactions are ultimately treated for tax can depend on whether the relevant financial authority accepts the treatments an entity has used or plans to use in its income tax filing. IFRIC 23 supplements the provisions set out in IAS 12 "Income Taxes" by clarifying the accounting for uncertainties in income taxes with regard to certain circumstances and transactions.
The IASB has published amendments to IFRS 9 in order to address concerns about how IFRS 9 classifies particular prepayable financial assets.
The existing IFRS 9 provisions on termination rights will be modified to allow such financial assets to be measured at amortized cost (or, depending on the business model, at fair value through other comprehensive income) even in the case of negative compensation.
The amendment also serves to clarify an aspect of accounting for financial liabilities: in cases where a financial liability is restructured but not derecognized, its carrying amount must be adjusted immediately through profit and loss. Therefore, accounts may need to be amended retroactively if, in the past, the effective interest rate – rather than the amortized costs – was adjusted subsequent to a modification.
The amendment to IAS 28 clarifies an issue whereby IFRS 9 is applied to long-term interests in associates and joint ventures that form part of the net investment in that associate or joint venture, but are not equity-accounted.
GEA Q2 2019 29
Notes to the condensed interim consolidated financial statements Condensed Interim Consolidated Financial Statements Further Information
The improvements result from the IASB's annual improvements process, which is designed to make minor amendments to standards and interpretations. They comprise minor amendments to four standards in all (IFRS 3, IFRS 11, IAS 12 and IAS 23).
The amendments concern the regulations governing amendments, curtailments and settlements of plans. According to IAS 19, if a plan amendment, curtailment or settlement occurs, it is now mandatory that the net liability arising from defined benefit pension plans be remeasured using the latest actuarial assumptions. The amendments further clarify that in such an event, it is mandatory that the current service cost and the net interest for the period after remeasurement are also determined using the latest assumptions used for the remeasurement.
The following accounting pronouncements had been published by June 30, 2019 but were not yet subject to mandatory application:
The contents of the aforementioned accounting pronouncements are described in the 2018 Annual Report (page 142 ff.).
GEA does not expect the application of these revised accounting pronouncements to materially affect its financial reporting.
These condensed interim consolidated financial statements present a true and fair view of the Company's net assets, financial position, and results of operations in the reporting period.
The preparation of the condensed interim consolidated financial statements requires management to make certain estimates and assumptions that may affect the Company's assets, liabilities, provisions, and deferred tax assets and liabilities, as well as its income and expenses. Although management makes such estimates and assumptions carefully and in good faith, actual amounts may differ from the estimates used in the condensed interim consolidated financial statements.
Factors that may cause amounts to fall below expectations include a deterioration in the global economic situation, movements in exchange rates and interest rates, as well as material litigation and changes in environmental or other legislation. Errors in internal operating processes, the loss of key customers, and rising borrowing costs may also adversely affect the Group's future performance.
2. Basis of consolidation
Notes to the condensed interim Condensed Interim Consolidated Financial Statements Further Information
consolidated financial statements
The cash credit lines were composed of the following items as of June 30, 2019:
| (EUR thousand) | Maturity | 06/30/2019 approved |
06/30/2019 utilized |
12/31/2018 approved |
12/31/2018 utilized |
|---|---|---|---|---|---|
| Bilateral credit lines | until further notice |
312,929 | 259,536 | 73,694 | 18,207 |
| Borrower's note loan (2023) | February 2023 | 128,000 | 128,000 | 128,000 | 128,000 |
| Borrower's note loan (2025) | February 2025 | 122,000 | 122,000 | 122,000 | 122,000 |
| European Investment Bank | December 2025 | 150,000 | 50,000 | 150,000 | 50,000 |
| Syndicated credit line ("club deal") | August 2022 | 650,000 | – | 650,000 | – |
| Total | 1,362,929 | 559,536 | 1,123,694 | 318,207 |
The following tables provide an overview of the composition of financial instruments as of June 30, 2019, by class within the meaning of IFRS 7 as well as by measurement category:
The consolidated group changed as follows in the first half of 2019:
| Number of companies |
|
|---|---|
| Consolidated Group as of December 31, 2018 | 206 |
| German companies (including GEA Group AG) | 29 |
| Foreign companies | 177 |
| Merger | –2 |
| Liquidation | –3 |
| Consolidated Group as of June 30, 2019 | 201 |
| German companies (including GEA Group AG) | 29 |
| Foreign companies | 172 |
A total of 53 subsidiaries (December 31, 2018: 50) were not consolidated since their effect on the Group's net assets, financial position, and results of operations is not material even when viewed in the aggregate.
Notes to the condensed interim consolidated financial statements
| Measurement in accordance with IFRS 9 | ||||||
|---|---|---|---|---|---|---|
| (EUR thousand) | Carrying amount 06/30/2019 |
Amortized cost | Fair value through profit or loss |
Fair value recognized in other comprehensive income |
Measurement in accordance with other IFRSs |
Fair value 06/30/2019 |
| Assets | ||||||
| Trade receivables | 872,998 | 759,461 | – | 113,537 | – | 872,998 |
| Cash and cash equivalents | 230,647 | 230,647 | – | – | – | 230,647 |
| Other financial assets | 270,575 | 97,504 | 14,669 | 245 | 158,157 | 270,575 |
| By IFRS 9 measurement category | ||||||
| Financial assets measured at amortized cost | 1,087,612 | 1,087,612 | – | – | – | 1,087,612 |
| of which trade receivables | 759,461 | 759,461 | – | – | – | 759,461 |
| of which cash and cash equivalents | 230,647 | 230,647 | – | – | – | 230,647 |
| of which other financial assets | 97,504 | 97,504 | – | – | – | 97,504 |
| Financial assets measured at fair value recognized in other comprehensive income | 113,782 | – | – | 113,782 | – | 113,782 |
| of which trade receivables | 113,537 | – | – | 113,537 | – | 113,537 |
| of which other financial assets | 245 | – | – | 245 | – | 245 |
| Financial assets measured at fair value through profit or loss | 14,669 | – | 14,669 | – | – | 14,669 |
| of which other financial assets | 9,258 | – | 9,258 | – | – | 9,258 |
| of which derivatives not included in hedging relationships | 5,411 | – | 5,411 | – | – | 5,411 |
| Liabilities | ||||||
| Trade payables | 648,227 | 648,227 | – | – | – | 648,227 |
| Financial liabilities | 740,225 | 560,608 | 7,366 | – | 172,251 | 747,851 |
| of which lease liabilities | 172,251 | – | – | – | 172,251 | 172,251 |
| Other liabilities | 211,544 | 107,659 | 594 | – | 103,291 | 219,186 |
| By IFRS 9 measurement category | ||||||
| Financial liabilities measured at amortized cost | 1,316,494 | 1,316,494 | – | – | – | 1,331,762 |
| of which trade payables | 648,227 | 648,227 | – | – | – | 648,227 |
| of which bonds and other securitized liabilities | 250,534 | 250,534 | – | – | – | 257,399 |
| of which liabilities to banks | 309,616 | 309,616 | – | – | – | 310,377 |
| of which loan liabilities to unconsolidated subsidiaries | 458 | 458 | – | – | – | 458 |
| of which other liabilities to affiliated companies | 24,834 | 24,834 | – | – | – | 24,834 |
| of which other liabilities | 82,825 | 82,825 | – | – | – | 90,467 |
| Financial liabilities at fair value through profit or loss (derivatives not included in a hedging relationship and contingent consideration) | 7,960 | – | 7,960 | – | – | 7,960 |
Notes to the condensed interim consolidated financial statements
| Measurement in accordance with IFRS 9 | ||||||
|---|---|---|---|---|---|---|
| (EUR thousand) | Carrying amount 12/31/2018 |
Amortized cost | Fair value through profit or loss |
Fair value recognized in other comprehensive income |
Measurement in accordance with other IFRSs |
Fair value 12/31/2018 |
| Assets | ||||||
| Trade receivables | 923,884 | 827,050 | – | 96,834 | – | 923,884 |
| Cash and cash equivalents | 247,900 | 247,900 | – | – | – | 247,900 |
| Other financial assets | 222,251 | 95,000 | 13,115 | 245 | 113,891 | 222,251 |
| By IFRS 9 measurement category | ||||||
| Financial assets measured at amortized cost | 1,169,950 | 1,169,950 | – | – | – | 1,169,950 |
| of which trade receivables | 827,050 | 827,050 | – | – | – | 827,050 |
| of which cash and cash equivalents | 247,900 | 247,900 | – | – | – | 247,900 |
| of which other financial assets | 95,000 | 95,000 | – | – | – | 95,000 |
| Financial assets measured at fair value recognized in other comprehensive income | 97,079 | – | – | 97,079 | – | 97,079 |
| of which trade receivables | 96,834 | – | – | 96,834 | – | 96,834 |
| of which other financial assets | 245 | – | – | 245 | – | 245 |
| Financial assets measured at fair value through profit or loss | 13,115 | – | 13,115 | – | – | 13,115 |
| of which other financial assets | 8,613 | – | 8,613 | – | – | 8,613 |
| of which derivatives not included in hedging relationships | 4,502 | – | 4,502 | – | – | 4,502 |
| Liabilities | ||||||
| Trade payables | 723,334 | 723,334 | – | – | – | 723,334 |
| Financial liabilities | 333,718 | 320,529 | 6,794 | – | 6,395 | 330,292 |
| of which lease liabilities | 6,395 | – | – | – | 6,395 | 6,395 |
| Other liabilities | 181,595 | 96,545 | 594 | – | 84,456 | 187,108 |
| By IFRS 9 measurement category | ||||||
| Financial liabilities measured at amortized cost | 1,140,408 | 1,140,408 | – | – | – | 1,142,495 |
| of which trade payables | 723,334 | 723,334 | – | – | – | 723,334 |
| of which bonds and other securitized liabilities | 251,712 | 251,712 | – | – | – | 247,595 |
| of which liabilities to banks | 68,391 | 68,391 | – | – | – | 69,082 |
| of which loan liabilities to unconsolidated subsidiaries | 426 | 426 | – | – | – | 426 |
| of which other liabilities to affiliated companies | 29,218 | 29,218 | – | – | – | 29,218 |
| of which other liabilities | 67,327 | 67,327 | – | – | – | 72,840 |
| Financial liabilities at fair value through profit or loss (derivatives not included in a hedging relationship and contingent consideration) | 7,388 | – | 7,388 | – | – | 7,388 |
Notes to the condensed interim consolidated financial statements Condensed Interim Consolidated Financial Statements Further Information
Financial assets and liabilities that are measured at fair value, or for which a fair value is disclosed in the notes to the consolidated financial statements, are required to be categorized according to the fair value hierarchy described in the following. Categorization within the levels of the fair value hierarchy is based on the measurement of the underlying inputs:
Level 1 inputs: quoted prices (unadjusted) in active markets for identical financial assets and liabilities.
Level 2 inputs: quoted market prices that are observable as direct (prices) or indirect (derived from prices) inputs used to measure fair value and that are not quoted prices as defined by Level 1.
Level 3 inputs: inputs that are not based on observable market data.
The following table shows the categorization of financial assets and financial liabilities into the three-level fair value hierarchy:
| Recurring fair value measurements | 06/30/2019 | |||||||
|---|---|---|---|---|---|---|---|---|
| (EUR thousand) | Carrying amount | Level 1 | Level 2 | Level 3 | ||||
| Financial assets measured at fair value | ||||||||
| Trade receivables | 113,537 | – | 113,537 | – | ||||
| Derivatives not included in hedging relationships | 5,411 | – | 5,411 | |||||
| Other securities | 8,791 | – | – | 8,791 | ||||
| Other financial assets | 712 | – | – | 712 | ||||
| Financial liabilities measured at fair value | ||||||||
| Derivatives not included in hedging relationships | 7,366 | – | 7,366 | – | ||||
| Contingent consideration | 594 | – | – | 594 | ||||
| Financial liabilities not measured at fair value | ||||||||
| Liabilities to banks | 309,616 | – | 310,377 | – | ||||
| Borrower's note loans | 250,534 | – | 257,399 | – | ||||
| Other financial liabilities | 29,637 | – | 13,483 | 23,796 | ||||
| Recurring fair value measurements | 12/31/2018 | |||||||
| Fair value | ||||||||
| (EUR thousand) | Carrying amount | Level 1 | Level 2 | Level 3 | ||||
| Financial assets measured at fair value | ||||||||
| Trade receivables | 96,834 | – | 96,834 | – | ||||
| Derivatives not included in hedging relationships | 4,502 | – | 4,502 | – | ||||
| Other securities | 8,146 | – | – | 8,146 | ||||
| Other financial assets | 712 | – | – | 712 | ||||
| Financial liabilities measured at fair value | ||||||||
| Derivatives not included in hedging relationships | 6,794 | – | 6,794 | – | ||||
| Contingent consideration | 594 | – | – | 594 | ||||
| Financial liabilities not measured at fair value | ||||||||
| Liabilities to banks | 68,391 | – | 69,082 | – | ||||
| Borrower's note loans | 251,712 | – | 247,595 | – | ||||
| Other financial liabilities | 28,685 | – | 11,331 | 22,867 | ||||
Interim Group Management Report
Notes to the condensed interim consolidated financial statements Condensed Interim Consolidated Financial Statements Further Information
No transfers occurred between the levels of the fair value hierarchy in the first six months of fiscal year 2019.
The fair values of trade receivables, cash and cash equivalents, and other financial receivables and liabilities essentially correspond to the carrying amounts; this is due to the predominantly short remaining maturities.
In the case of certain trade receivables measured at fair value due to existing factoring arrangements, that fair value is calculated on the basis of yield curves observable in the market. These are categorized within Level 2 of the fair value hierarchy.
The fair value of derivatives is determined using quoted exchange rates and yield curves observable in the market. Accordingly, these are categorized within Level 2 of the fair value hierarchy.
A receivable relating to the former raw material activities of Metallgesellschaft AG that had previously been written off was allocated to Level 3 financial instruments; its fair value is determined by means of a present value calculation on the basis of the debtor's payment plan. As the debtor operates a copper mine, its payment plan is influenced by the price of copper. Gains and losses from the subsequent measurement of the receivable are carried in profit or loss from discontinued operations. The following table shows the changes in fair value over the first six months of 2019:
| (EUR thousand) | |
|---|---|
| Fair value 12/31/2018 | 8,146 |
| Interest income | 253 |
| Currency translation | 392 |
| Fair value 06/30/2019 | 8,791 |
As of June 30, 2019, the key, non-observable input factors of the above-mentioned receivable consisted of expected annual cash inflows of between EUR 643 thousand and EUR 2,330 thousand and an average, risk adjusted discount rate of 4.5 percent.
For the fair value of the receivable, reasonably possible changes at June 30, 2019 to one of the significant unobservable inputs, holding other inputs consistent, would have the following effects:
| 06/30/2019 | ||
|---|---|---|
| Profit or loss | ||
| (EUR thousand) | Increase | Decrease |
| Expacted cash flows (10% movement) | 879 | –879 |
| Risk-adjusted discount rate (movement 100 basis points) | –254 | 266 |
Other equity investments, along with certain other financial assets, are also categorized within Level 3 of the hierarchy. The fair value is determined using inputs that are not based on observable market data. No significant changes in the fair value were identified in the first half year.
Financial liabilities resulting from contingent purchase price considerations are assigned to Level 3. The fair value of these liabilities is determined by means of present value calculations, taking into account various inputs that are not observable in the market, and that are based in particular on corporate planning, as specified in the respective purchase price clauses. No significant changes in the fair value were identified in the first half year.
The fair value of borrower's note loans and liabilities to banks is measured on the basis of the yield curve, taking into account credit spreads. Therefore, they are categorized within Level 2 of the fair value hierarchy. The interest deferred as of the reporting date is included in the fair values.
Notes to the condensed interim consolidated financial statements Condensed Interim Consolidated Financial Statements Further Information
Included in other financial liabilities is a contractual obligation undertaken in the context of a company acquisition. The fair value of this instrument is measured using contractual cashflows on the basis of the yield curve, taking into account credit spreads. Accordingly, these are categorized within Level 2 of the fair value hierarchy.
Certain other financial liabilities resulting from the sale of the GEA's former Heat Exchangers Segment are categorized within Level 3 of the fair value hierarchy, since their fair value is measured on the basis of the present value of future cash outflows expected on the basis of contractual obligations associated with the sale.
In the first half of 2019, the method of calculating the rate of interest used to measure certain noncurrent provisions for environmental protection and mining was adjusted. This change in estimate was in particular resulting from a reassessment of the long-term interest rate level.
Thus, as of June 30, 2019, this provision decreased by EUR 26.9 million as compared to December 31, 2018. This development is primarily the result of a change in the derivation of the applicable interest rate, and it resulted in interest income of EUR 32.7 million. Thereof, EUR 11.5 million was attributable to earnings from continuing operations, while EUR 21.2 million affected earnings from discontinued operations. Compared with the method of interest calculation previously applied, the change in estimate resulted in a EUR 63.1 million increase in the profit during the first half-year of 2019. EUR 22.7 million of this amount was attributable to earnings from continuing operations and EUR 40.4 million to earnings from discontinued operations.
With regards to the second quarter of 2019, the above-mentioned change in estimate gave rise to interest income of EUR 7.0 million. Thereof, EUR 1.8 million was attributable to earnings from continuing operations, while EUR 5.2 million affected earnings from discontinued operations. Compared with the method of interest calculation previously applied, the change in estimate resulted in a EUR 13.9 million increase in the profit during the second quarter of 2019. EUR 4.6 million of this amount was attributable to earnings from continuing operations and EUR 9.3 million to earnings from discontinued operations.
The above-mentioned provisions are expected to produce average annual cash outflows of EUR 1.1 million between 2019 and 2021.
The action brought by the insolvency administrator of Dörries Scharmann AG against GEA Group Aktiengesellschaft that was pending before the Higher Regional Appeal Court of Düsseldorf has now been settled with legal effect. The provision set aside for these proceedings was utilized in full. A total of EUR 17.0 million was added to the provisions for two legal risks.
Notes to the condensed interim consolidated financial statements Condensed Interim Consolidated Financial Statements Further Information
As stated in the 2018 Annual Report, EBITDA before restructuring expenses became a key financial performance indicator as of the 2019 financial year. The relevant restructuring measures are outlined in terms of content and scope by the Executive Board. Only measures requiring funding in excess of EUR 2 million are taken into account.
In the first half of 2019, GEA's Executive Board defined the restructuring measures listed below.
In the first half of 2019, expenses of EUR 24.6 million were recognized in respect of restructuring measures defined by the Executive Board. In this context, the term restructuring expenses relates to expenditures directly connected to the restructuring measures (e.g. severance payments) that would therefore qualify as restructuring expenses under IAS 37 too. The restructuring measures defined by the Executive Board also extend to impairment losses on assets, as well as to other expenses arising indirectly from the restructuring measures.
The restructuring expenses incurred up to June 30, 2019 can be allocated to the restructuring measures as follows:
| (EUR thousand) | IAS 37 | Impairments | Others | Total |
|---|---|---|---|---|
| Measures to strengthen profitability BA-S | 3,322 | 10,766 | 5,144 | 19,232 |
| Measures in the course of the new organizational structure |
– | – | 2,555 | 2,555 |
| Manufacturing Footprint | – | – | 2,104 | 2,104 |
| Fit for 2020 | 672 | – | – | 672 |
| Total | 3,994 | 10,766 | 9,803 | 24,563 |
The income taxes disclosed for continuing operations in the interim reporting period were calculated using an estimated tax rate of 23.0 percent (previous year: 21.0 percent).
consolidated financial statements
GEA's business activities are divided into the following two business areas:
The Business Area Equipment brings together all activities ranging from largely standardized to customer-specific equipment offerings. The products are primarily manufactured as part of series production on a standardized and modular basis. Typical products of this business area include separators, valves, pumps, homogenizers and refrigeration equipment such as compressors. The equipment portfolio also includes process technology for food processing and packaging, for example extrusion and milling equipment. The product range also extends to dairy equipment, feeding systems and slurry engineering as well as an entire service portfolio.
The Business Area Solutions encompasses all group activities related to customer-specific products, projects, after-sales and services. These range from small projects to complete systems and facilities tailored to specific applications and customer requirements. The offering primarily includes the engineering, design and delivery of customized process solutions for the dairy, food, beverage, pharma and chemical industries. This business area also provides process-critical, industrial refrigeration and sustainable energy solutions across all markets served.
In the first six months of 2019, GEA paid out dividends of EUR 153,418 thousand on ordinary shares.
The change in exchange differences on translating foreign operations amounted to EUR 10,285 thousand in the first half of 2019 (previous year: EUR 13,953 thousand) and resulted primarily from the rise of the U.S. dollar against the euro.
The actuarial losses on pension and other post-employment benefit obligations of EUR 46,526 thousand (after taxes) recognized in other comprehensive income in the first six months of 2019 were the result of a drop in the discount rates to be used for measuring pension provisions (Germany: fall of 60 basis points since December 31, 2018; UK and USA: fall of 65 basis points, on average, since December 31, 2018).
Condensed Interim Consolidated
Financial Statements Further Information
Notes to the condensed interim consolidated financial statements
| (EUR million) | BA Equipment | BA Solutions | Others | Consolidation | GEA |
|---|---|---|---|---|---|
| Q2 2019 | |||||
| Order Intake | 660.5 | 557.0 | – | –70.7 | 1,146.8 |
| External revenue | 618.0 | 629.3 | – | – | 1,247.3 |
| Intersegment revenue | 53.2 | 13.1 | – | –66.2 | – |
| Total revenue | 671.1 | 642.4 | – | –66.2 | 1,247.3 |
| EBITDA before restructuring measures | 79.8 | 32.6 | –7.8 | 6.7 | 111.2 |
| as % of revenue | 11.9 | 5.1 | – | – | 8.9 |
| EBITDA | 78.4 | 27.3 | –11.3 | 6.7 | 101.1 |
| EBIT before restructuring measures | 46.3 | 16.0 | –11.5 | 6.7 | 57.5 |
| as % of revenue | 6.9 | 2.5 | – | – | 4.6 |
| EBIT | 44.5 | 2.0 | –15.0 | 6.7 | 38.2 |
| as % of revenue | 6.6 | 0.3 | – | – | 3.1 |
| Additions to property, plant and equipment and intangible assets |
18.1 | –2.4 | 3.9 | – | 19.5 |
| Depreciation and amortization | 33.9 | 25.3 | 3.7 | – | 62.8 |
| (EUR million) | BA Equipment | BA Solutions | Others | Consolidation | GEA |
|---|---|---|---|---|---|
| Q2 2018 | |||||
| Order Intake | 688.3 | 755.3 | – | –60.6 | 1,383.0 |
| External revenue | 606.0 | 621.1 | – | – | 1,227.0 |
| Intersegment revenue | 47.2 | 12.3 | – | –59.5 | – |
| Total revenue | 653.2 | 633.4 | – | –59.5 | 1,227.0 |
| EBITDA before restructuring measures | 90.4 | 37.4 | –1.8 | – | 126.0 |
| as % of revenue | 13.8 | 5.9 | – | – | 10.3 |
| EBITDA | 90.0 | 37.3 | –4.7 | – | 122.6 |
| EBIT before restructuring measures | 66.3 | 28.7 | –4.0 | – | 91.0 |
| as % of revenue | 10.2 | 4.5 | – | – | 7.4 |
| EBIT | 66.0 | 28.5 | –6.9 | – | 87.6 |
| as % of revenue | 10.1 | 4.5 | – | – | 7.1 |
| Additions to property, plant and equipment and intangible assets |
14.4 | 32.5 | 2.6 | – | 49.6 |
| Depreciation and amortization | 24.0 | 8.7 | 2.2 | – | 35.0 |
Condensed Interim Consolidated
Financial Statements Further Information
Notes to the condensed interim consolidated financial statements
| (EUR million) | BA Equipment | BA Solutions | Others | Consolidation | GEA |
|---|---|---|---|---|---|
| Q1 - Q2 2019 | |||||
| Order Intake | 1,343.5 | 1,130.4 | – | –140.8 | 2,333.1 |
| External revenue | 1,169.3 | 1,135.3 | – | – | 2,304.6 |
| Intersegment revenue | 101.5 | 25.9 | – | –127.4 | – |
| Total revenue | 1,270.8 | 1,161.2 | – | –127.4 | 2,304.6 |
| EBITDA before restructuring measures | 162.6 | 31.2 | –14.0 | 6.1 | 185.9 |
| as % of revenue | 12.8 | 2.7 | – | – | 8.1 |
| EBITDA | 160.4 | 25.5 | –21.6 | 6.1 | 170.3 |
| EBIT before restructuring measures | 101.3 | –1.5 | –21.3 | 6.1 | 84.5 |
| as % of revenue | 8.0 | –0.1 | – | – | 3.7 |
| EBIT | 98.7 | –15.9 | –29.0 | 6.1 | 59.9 |
| as % of revenue | 7.8 | –1.4 | – | – | 2.6 |
| ROCE in %1 | 14.3 | 8.0 | – | – | 10.5 |
| Segment assets | 4,469.0 | 3,052.8 | 3,237.9 | –4,792.3 | 5,967.4 |
| Segment liabilities | 2,152.7 | 1,813.3 | 2,692.9 | –3,009.4 | 3,649.5 |
| Net Working Capital (reporting date)2 | 697.4 | 199.5 | 12.0 | –2.5 | 906.4 |
| Additions to property, plant and equipment and intangible assets |
105.3 | 117.1 | 19.1 | – | 241.5 |
| Depreciation and amortization | 61.7 | 41.4 | 7.3 | – | 110.4 |
| (EUR million) | BA Equipment | BA Solutions | Others | Consolidation | GEA |
|---|---|---|---|---|---|
| Q1 - Q2 2018 | |||||
| Order Intake | 1,389.7 | 1,217.3 | – | –121.4 | 2,485.6 |
| External revenue | 1,150.5 | 1,115.9 | – | – | 2,266.4 |
| Intersegment revenue | 94.9 | 21.4 | – | –116.3 | – |
| Total revenue | 1,245.3 | 1,137.4 | – | –116.3 | 2,266.4 |
| EBITDA before restructuring measures | 156.5 | 37.4 | –7.1 | – | 186.9 |
| as % of revenue | 12.6 | 3.3 | – | – | 8.2 |
| EBITDA | 155.5 | 37.1 | –12.7 | – | 179.9 |
| EBIT before restructuring measures | 108.5 | 21.3 | –11.7 | – | 118.1 |
| as % of revenue | 8.7 | 1.9 | – | – | 5.2 |
| EBIT | 107.5 | 20.9 | –17.3 | – | 111.1 |
| as % of revenue | 8.6 | 1.8 | – | – | 4.9 |
| ROCE in %1 | 16.8 | 17.1 | – | – | 16.0 |
| Segment assets3 | 4,345.4 | 2,993.1 | 3,335.7 | –4,615.7 | 6,058.6 |
| Segment liabilities3 | 2,066.7 | 1,741.9 | 2,612.5 | –2,772.9 | 3,648.2 |
| Net Working Capital (reporting date)2/3 | 660.6 | 195.1 | –2.5 | –5.6 | 847.7 |
| Additions to property, plant and equipment and intangible assets |
29.4 | 38.0 | 3.9 | – | 71.3 |
| Depreciation and amortization | 48.1 | 16.1 | 4.6 | – | 68.8 |
1) ROCE = EBIT before restructuring measures/capital employed; EBIT before restructuring measures and capital employed both calculated as the average for the last 4 quarters and before effects relating to goodwill from the acquisition of the former GEA AG by the former Metallgesellschaft AG in 1999; capital employed = non-current assets less interest-bearing non-current assets + working capital + non-interest-bearing assets, liabilities and provisions less assets and liabilties in connection with income taxes.
2) Working capital = inventories + trade receivables + contract assets - trade payables - contract liabilities - provisions for anticipated losses (POC).
3) The purchase price allocation for the Pavan group acquired in 2017 was finalized in the fourth quarter of 2018 resulting in changes to the comparative figures as of June 30, 2018.
Notes to the condensed interim consolidated financial statements Condensed Interim Consolidated Financial Statements Further Information
Consolidation comprises the intersegment revenue from transactions between operating segments.
Intersegment revenue is calculated using standard market prices.
| (EUR million) | BA Equipment | BA Solutions | Consolidation | GEA |
|---|---|---|---|---|
| Q2 2019 | ||||
| Revenue by revenue element | ||||
| From construction contracts | 89.3 | 454.7 | –11.8 | 532.2 |
| From sale of goods and services | 326.7 | 34.3 | –40.0 | 321.0 |
| From service agreements | 255.2 | 153.3 | –14.4 | 394.1 |
| Total | 671.1 | 642.4 | –66.2 | 1,247.3 |
| Revenue by geografical region | ||||
| Germany | 74.9 | 36.0 | –4.9 | 106.1 |
| Asia Pacific | 144.0 | 167.0 | –15.6 | 295.4 |
| ACH & Eastern Europe | 75.9 | 73.1 | –9.2 | 139.7 |
| Western Europe, Middle East & Africa | 112.9 | 110.2 | –12.4 | 210.7 |
| North- and Central Europe | 82.9 | 109.7 | –14.4 | 178.3 |
| Latin America | 48.6 | 49.8 | –5.6 | 92.7 |
| North America | 131.9 | 96.7 | –4.1 | 224.4 |
| Total | 671.1 | 642.4 | –66.2 | 1,247.3 |
| (EUR million) Q2 2018 |
BA Equipment | BA Solutions | Consolidation | GEA |
| Revenue by revenue element | ||||
| From construction contracts | 63.5 | 463.6 | –12.9 | 514.2 |
| From sale of goods and services | 352.4 | 25.9 | –33.3 | 345.0 |
| From service agreements | 237.3 | 143.9 | –13.4 | 367.9 |
| Total | 653.2 | 633.4 | –59.5 | 1,227.0 |
| Revenue by geografical region | ||||
| Germany | 71.4 | 40.7 | –4.8 | 107.4 |
| Asia Pacific | 112.1 | 176.0 | –9.7 | 278.3 |
| ACH & Eastern Europe | 68.9 | 85.2 | –6.6 | 147.5 |
| Western Europe, Middle East & Africa | 123.4 | 110.2 | –13.3 | 220.4 |
| North- and Central Europe | 97.6 | 82.7 | –14.7 | 165.6 |
| Latin America | 37.6 | 51.0 | –3.7 | 84.9 |
| North America | 142.1 | 87.6 | –6.8 | 222.9 |
| Total | 653.2 | 633.4 | –59.5 | 1,227.0 |
| (EUR million) | BA Equipment | BA Solutions | Consolidation | GEA |
|---|---|---|---|---|
| Q1 - Q2 2019 | ||||
| Revenue by revenue element | ||||
| From construction contracts | 160.1 | 825.9 | –25.0 | 961.1 |
| From sale of goods and services | 612.8 | 64.8 | –74.1 | 603.5 |
| From service agreements | 497.9 | 270.6 | –28.4 | 740.0 |
| Total | 1,270.8 | 1,161.2 | –127.4 | 2,304.6 |
| Revenue by geografical region | ||||
| Germany | 150.4 | 72.5 | –11.5 | 211.4 |
| Asia Pacific | 261.7 | 288.8 | –27.5 | 523.0 |
| ACH & Eastern Europe | 139.5 | 137.3 | –16.5 | 260.3 |
| Western Europe, Middle East & Africa | 208.4 | 193.7 | –22.9 | 379.3 |
| North- and Central Europe | 168.0 | 206.0 | –32.8 | 341.2 |
| Latin America | 89.1 | 90.7 | –8.0 | 171.8 |
| North America | 253.8 | 172.1 | –8.3 | 417.6 |
| Total | 1,270.8 | 1,161.2 | –127.4 | 2,304.6 |
| (EUR million) | BA Equipment | BA Solutions | Consolidation | GEA |
| Q1 - Q2 2018 | ||||
| Revenue by revenue element | ||||
| From construction contracts | 114.2 | 833.1 | –22.8 | 924.5 |
| From sale of goods and services | 668.9 | 43.9 | –68.1 | 644.7 |
| From service agreements | 462.2 | 260.4 | –25.5 | 697.2 |
| Total | 1,245.3 | 1,137.4 | –116.3 | 2,266.4 |
| Revenue by geografical region | ||||
| Germany | 146.4 | 74.3 | –12.4 | 208.3 |
| Asia Pacific | 207.2 | 298.9 | –19.3 | 486.8 |
| ACH & Eastern Europe | 133.5 | 161.8 | –11.9 | 283.4 |
| Western Europe, Middle East & Africa | 235.0 | 200.7 | –23.0 | 412.7 |
| North- and Central Europe | 182.7 | 159.0 | –30.1 | 311.6 |
| Latin America | 84.7 | 84.9 | –7.7 | 161.9 |
| North America | 255.7 | 157.7 | –11.7 | 401.7 |
| Total | 1,245.3 | 1,137.4 | –116.3 | 2,266.4 |
As stated in the 2018 Annual Report, since the start of the 2019 financial year – in line with its internal control system – GEA's management has been using EBITDA before restructuring expenses as earnings indicator. "EBITDA before restructuring" is an indicator that has been adjusted for earnings effects attributable to restructuring measures outlined in terms of content and scope by the CEO, presented to the Chairman of the Supervisory Board, and – where required by the Board's rules of procedure – approved and finalized by the Supervisory Board. Only measures requiring funding in excess of EUR 2 million are taken into account. A breakdown of the pertinent restructuring expenses can be found in the chapter "Consolidated income statement disclosures". In accordance with the above definition, adjustments for restructuring expenses in the first half of 2019 totaled EUR 24.6 million (previous year: EUR 7.0 million), with EBITDA accounting for EUR 15.5 million (previous year: EUR 7.0 million) of this amount.
In accordance with the internal management system, the profitability of the two business areas is measured using earnings before interest, tax, depreciation and impairment losses/reversals of impairment (EBITDA), along with earnings before interest and tax (EBIT). These indicators correspond to the values shown in the income statement.
Impairment losses include all impairment losses on property, plant, and equipment, intangible assets, and investment property. The rise in depreciation expenses compared with the same periods of the previous year was largely due to the initial application of IFRS 16.
| Reconciliation of EBITDA before restructuring measuresto | ||||||
|---|---|---|---|---|---|---|
| EBIT | Q2 | Q2 | Change | Q1-Q2 | Q1-Q2 | Change |
| (EUR million) | 2019 | 2018 | in % | 2019 | 2018 | in % |
| EBITDA before restructuring measures | 111.2 | 126.0 | –11.7 | 185.9 | 186.9 | –0.5 |
| Depreciation of impairment losses on property, plant, and equipment, and investment property, and amortization of and impairment losses on intangible assets and goodwill, as |
||||||
| reported in the statement of changes in non-current assets | –53.8 | –35.0 | – | –101.3 | –68.8 | – |
| EBIT before restructuring measures | 57.5 | 91.0 | –36.8 | 84.5 | 118.1 | –28.4 |
| Restructuring measures | –19.2 | –3.4 | – | –24.6 | –7.0 | – |
| EBIT | 38.2 | 87.6 | –56.3 | 59.9 | 111.1 | –46.1 |
| Reconciliation EBITDA to EBIT | Q2 | Q2 | Change | Q1-Q2 | Q1-Q2 | Change |
| (EUR million) | 2019 | 2018 | in % | 2019 | 2018 | in % |
| EBITDA | 101.1 | 122.6 | –17.6 | 170.3 | 179.9 | –5.3 |
| Depreciation of impairment losses on property, plant, and equipment, and investment property, and amortization of and impairment losses on intangible assets and goodwill, as reported in the statement of changes in non-current assets |
–62.8 | –35.0 | –79.5 | –110.4 | –68.8 | –60.5 |
| EBIT | 38.2 | 87.6 | –56.3 | 59.9 | 111.1 | –46.1 |
A reconciliation of EBIT to profit or loss before income tax is contained in the income statement.
Since the start of the 2019 financial year, ROCE (Return on Capital Employed) has been deployed as a key financial performance indicator. This strategic indicator measures the relative profitability of a company when compared with the weighted cost of capital used (Weighted Average Cost of Capital, WACC). If the ROCE is above the WACC, this is an indication that the business is gaining in value.
The recognition and measurement policies for assets and liabilities of the business areas, and hence also for working capital, are the same as those used in the group and described in the accounting policies section of the 2018 Annual Report.
Notes to the condensed interim consolidated financial statements
| Reconciliation of working capital to total assets | ||
|---|---|---|
| (EUR million) | 06/30/2019 | 06/30/2018* |
| Working capital (reporting date) | 906.4 | 847.7 |
| Working capital (reporting date) of Ruhr-Zink | –0.7 | –0.4 |
| Non-current assets | 3,288.0 | 3,258.9 |
| Income tax receivables | 33.5 | 32.7 |
| Other current financial assets | 222.2 | 233.1 |
| Cash and cash equivalents | 230.6 | 269.3 |
| Assets held for sale | 0.9 | 15.5 |
| plus trade payables | 648.2 | 691.9 |
| plus contract liabilities | 630.5 | 682.0 |
| plus anticipated losses from construction contracts | 7.9 | 28.0 |
| Total assets | 5,967.4 | 6,058.6 |
*) The purchase price allocation for the Pavan group acquired in 2017 was finalized in the fourth quarter of 2018 resulting in changes to the comparative figures as of June 30, 2018.
There were no material related party transactions with an effect on the net assets, financial position, and results of operations.
Condensed Interim Consolidated
Responsibility Statement 45 Review Report 46
Financial Calendar/Imprint 47
Responsibility Statement
To the best of our knowledge, and in accordance with the applicable reporting principles for interim financial reporting, the interim consolidated financial statements give a true and fair view of the assets, liabilities, financial position, and profit or loss of the group, and the interim management report of the group includes a fair review of the development and performance of the business and the position of the group, together with a description of the material opportunities and risks associated with the expected development of the group for the remaining months of the fiscal year.
Düsseldorf, July 30, 2019
The Executive Board
Stefan Klebert Steffen Bersch Marcus A. Ketter Martine Snels
GEA Q2 2019 45
Review Report
We have reviewed the condensed interim consolidated financial statements of the GEA AG Aktiengesellschaft, Düsseldorf – comprising Income Statement, Statement of Comprehen-sive Income, Balance Sheet, Statement of Changes in Equity, Cash Flow Statement and notes – together with the interim group management report of the GEA Group Aktieng-esellschaft, Düsseldorf for the period from January 1 to June 30, 2019 that are part of the semi annual according to § 115 WpHG ["Wertpapierhandelsgesetz": "German Securities Trading Act"]. The preparation of the condensed interim consolidated financial statements in accordance with International Accounting Standard IAS 34 "Interim Financial Reporting" as adopted by the EU, and of the interim group management report in accordance with the requirements of the WpHG applicable to interim group management reports, is the respon-sibility of the Company's management. Our responsibility is to issue a report on the con-densed interim consolidated financial statements and on the interim group management report based on our review.
We performed our review of the condensed interim consolidated financial statements and the interim group management report in accordance with the German generally accepted standards for the review of financial statements promulgated by the Institut der Wirtschaftsprüfer (IDW). Those standards require that we plan and perform the review so that we can preclude through critical evaluation, with a certain level of assurance, that the condensed interim consolidated financial statements have not been prepared, in material respects, in accordance with IAS 34, "Interim Financial Reporting" as adopted by the EU, and that the interim group management report has not been prepared, in material respects, in accordance with the requirements of the WpHG applicable to interim group management reports. A review is limited primarily to inquiries of company employees and analytical as-sessments and therefore does not provide the assurance attainable in a financial statement audit. Since, in accordance with our engagement, we have not performed a financial state-ment audit, we cannot issue an auditor's report.
Based on our review, no matters have come to our attention that cause us to presume that the condensed interim consolidated financial statements have not been prepared, in mate-rial respects, in accordance with IAS 34, "Interim Financial Reporting" as adopted by the EU, or that the interim group management report has not been prepared, in material re-spects, in accordance with the requirements of the WpHG applicable to interim group management reports.
Düsseldorf, July 30, 2019
KPMG AG Wirtschaftsprüfungsgesellschaft
Lurweg Jessen Wirtschaftsprüfer Wirtschaftsprüfer [German Public Auditor] [German Public Auditor]
Condensed Interim Consolidated Financial Statements
Financial Calendar/Imprint
| Communication, Marketing & Branding | |
|---|---|
| WKN 660 200 ISIN DE0006602006 Reuters code G1AG.DE Bloomberg code G1A.GR Xetra G1A.DE |
The GEA Stock: Key data
| CUSIP 361592108 | |
|---|---|
| Symbol GEAGY | |
| Sponsor Deutsche Bank Trust | |
| Company Americas | |
| ADR-Level 1 | |
| Ratio 1:1 |
| Phone +49 211 9136-1081 | |
|---|---|
| Fax | +49 211 9136-31081 |
| [email protected] |
GEA Group Aktiengesellschaft Peter-Müller-Straße 12 40468 Düsseldorf, Germany gea.com
Christiane Luhmann luhmann & friends
This report includes forward-looking statements on GEA Group Aktiengesellschaft, its subsidiaries and associates, and on the economic and political conditions that may influence the business performance of GEA. All these statements are based on assumptions made by the Executive Board using information available to it at the time. Should these assumptions prove to be wholly or partly incorrect, or should further risks arise, actual business performance may differ from that expected. The Executive Board therefore cannot assume any liability for the statements made.
Due to the commercial rounding of figures and percentages, small deviations may occur.
This half-yearly financial report is the English translation of the original German version. In case of deviations between these two, the German version prevails.
Excellence • Passion • Integrity • Responsibility • GEA-versity
GEA is one of the largest technology suppliers for food processing and a wide range of other industries. The global group specializes in machinery, plants, as well as process technology and components. GEA provides sustainable solutions for sophisticated production processes in diverse end-user markets and offers a comprehensive service portfolio.
The company is listed on the German MDAX (G1A, WKN 660 200), the STOXX® Europe 600 Index and selected MSCI Global Sustainability Indexes.
GEA Group Aktiengesellschaft Peter-Müller-Straße 12 40468 Düsseldorf Germany Phone: +49 211 9136-0
gea.com
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