Annual Report • Apr 3, 2017
Annual Report
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ANNUAL REPORT 2016
EUR million
| 2016 | 2015 | 2014 | 2013 | 2012 | |
|---|---|---|---|---|---|
| Sales | 1,042.0 | 1,060.7 | 959.7 | 857.0 | 859.6 |
| Gross profi t | 206.5 | 202.9 | 174.6 | 155.6 | 156.2 |
| Gross profi t margin in % | 19.8 | 19.1 | 18.2 | 18.2 | 18.2 |
| EBIT | 78.4 | 81.6 | 56.7 | 49.3 | 46.8 |
| EBIT margin in % | 7.5 | 7.7 | 5.9 | 5.8 | 5.4 |
| Adjusted EBIT | 90.4 | 94.0 | 70.7 | 59.3 | 58.2 |
| Adjusted EBIT margin in % | 8.7 | 8.9 | 7.4 | 6.9 | 6.8 |
| Result for the period | 43.5 | 51.7 | 32.7 | 24.4 | 7.4 |
| Adjusted result for the period | 53.7 | 62.2 | 43.7 | 28.8 | 28.4 |
| Undiluted earnings per share | 0.98 | 1.14 | 0.72 | 0.54 | 0.18 |
| Adjusted undiluted earnings per share | 1.18 | 1.37 | 0.96 | 0.63 | 0.68 |
| Dividend per share | 0.44 1 | 0.40 | 0.32 | 0.27 | n / a |
| EUR million | |||||
|---|---|---|---|---|---|
| 2016 | 2015 | 2014 | 2013 | 2012 | |
| Balance sheet total | 1,014.7 | 888.5 | 645.2 | 536.4 | 536.7 |
| Equity | 305.6 | 287.8 | 248.6 | 222.2 | 197.9 |
| Equity rati o in % | 30.1 | 32.4 | 38.5 | 41.4 | 36.9 |
| Cash and cash equivalents | 344.6 | 145.7 | 44.2 | 23.9 | 18.6 |
| Net debt | 97.1 | 122.4 | 137.1 | 123.0 | 141.8 |
| Net Working Capital | 111.9 | 116.6 | 102.7 | 76.1 | 82.4 |
| Net Working Capital / sales | 11.1 | 12.0 | 10.9 | 9.4 | 10.2 |
| EUR million | |||||
|---|---|---|---|---|---|
| 2016 | 2015 | 2014 | 2013 | 2012 | |
| Cash fl ow from operati ng acti viti es before income tax paid | 106.4 | 79.5 | 48.8 | 63.0 | 59.5 |
| Cash Conversion Rate2 in % |
117.7 | 84.6 | 69.0 | 106.2 | 102.2 |
| Net cash fl ow from operati ng acti viti es | 92.7 | 63.1 | 36.0 | 54.0 | 54.0 |
| Cash fl ow from investi ng acti viti es | 89.8 | – 139.1 | – 29.5 | – 23.5 | – 21.3 |
| Purchase of property, plant and equipment and intangible assets | – 25.0 | – 28.1 | – 30.1 | – 23.2 | – 22.3 |
| Free Cash Flow3 | 67.7 | 35.0 | 11.3 | 30.8 | 31.7 |
| in % | |||||
|---|---|---|---|---|---|
| 2016 | 2015 | 2014 | 2013 | 2012 | |
| Dividend yield | 3.2 | 3.2 | 2.9 | 2.5 | n / a |
| Return on Capital Employed (ROCE) 4 |
9.1 | 10.7 | 11.0 | 11.7 | 10.9 |
| 2016 | 2015 | 2014 | 2013 | 2012 | |
|---|---|---|---|---|---|
| Employees (on average) | 3,259 | 3,325 | 3,346 | 3,106 | 3,118 |
| Sales per employee (kEUR) | 319.7 | 319.1 | 286.8 | 275.9 | 275.7 |
1 To be proposed at Annual General Meeti ng 2017
Cashfl ow from operati ng acti viti es before income tax paid divided by adjusted EBIT
Net cash fl ow from operati ng acti viti es less investments in property, plant and equipment and intangible assets
4 ROCE= EBIT / (Total assets-current liabiliti es)
MAGAZINE 2016 SAF-HOLLAND
The merger of European-based SAF and North Americanbased Holland in 2006 created SAF-HOLLAND with operati ons spanning over six conti nents.
Our reliable network of roughly 9,000 spare parts and service stati ons ensures the rapid supply of spare parts to our end customers
9,000Spare Parts and Service Stati ons
EUR1,042.0 million
With sales of EUR 1,042.0 million in 2016, we are among the world's leading manufacturers of chassis-related modules and components for trailers, trucks, buses and recreati onal vehicles.
19Producti on Locati ons
The majority of our producti on plants are traditi onally located in North America and Europe.
worldwide.
3,259Employees
Over 3,000 employees make SAF-HOLLAND one of the largest suppliers to the commercial vehicle industry today.
SAF-HOLLAND is the largest independent, listed supplier for commercial vehicles in Europe. We develop soluti ons for the global truck, trailer and bus industries. Our innovati ve components and systems are our contributi on to our customers' global success. In the original equipment business, we supply the major truck, trailer and bus manufacturers. Our extensive, global spare parts and service network ensures customers receive their spare parts quickly. We are one of the few suppliers in our industry that has a broad internati onal footprint in almost all markets worldwide.
"Whether through our organic growth with new products and services, the development of new locati ons in important future markets or targeted anti cyclical acquisiti ons: 2016 was a year in which we laid the groundwork to set and achieve our 'Strategy 2020' growth targets. The new organizati on, aligned with our customers' local needs, allows us to profi t even more from the growing worldwide demand for transportati on. Our aim is to keep moving forward in what we do best without losing our focus."
Detlef Borghardt, Chief Executi ve Offi cer (CEO)
A conversati on with CEO Detlef Borghardt on implementi ng "Strategy 2020".
The constructi on of a new plant to promote future business in the Middle East.
14An Extra Boost
A powered axle for trailers receives the award "Trailer Innovati on 2017".
SAF-HOLLAND expands its product portf olio in South America with its acquisiti on of KLL.
Equipping 1,800 trailers from U.S. Xpress with axle systems featuring disc brakes.
SAF-HOLLAND employees are driving the trend in digiti zati on forward.
Our annual report is now also available online at ar2016.corporate. safh olland.com
Right aft er our meeti ng, I will be fl ying to our branch offi ce in Beijing. As you know, we intend to boost our growth, not only within, but also outside of our core markets of Europe and North America. As CEO, this means consistently being available locally to talk to our customers and business partners. Despite today's modern means of communicati on, faceto-face meeti ngs are sti ll the best.
2020." What progress did you make in 2016? In 2016, we were able to maintain our level of sales amid a fairly diffi cult market environment. We were one of the few companies in our industry to achieve this. Even the North American market, which is a very important for us, declined by more than 30 % for trucks and almost 10 % for trailers. We were, however, able to largely compensate for this slump with the very favorable performance in Europe. The development in a number of signifi cant markets such as Brazil, China and Russia was also very modest. Nevertheless, in 2016, we were sti ll able to lay the groundwork for our "Strategy 2020" in some regions – which is an important step in seizing att racti ve opportuniti es and generati ng future growth.
This questi on can only be answered for each region individually, since our growth target is based on a regionally diff erenti ated strategy. Let's start with Europe. Here we added capacity by building a new plant in Düzce, Turkey. Now, not only do we have some added fl exibility to respond to order peaks in Europe, but we can now bett er serve emerging regional markets in Turkey, the Middle East and North Africa, where we have won some major customers. The eff ects of this will already become
Profi table growth with a focus on new regions – this is the most important goal of SAF-HOLLAND's "Strategy 2020". Before catching a fl ight at the Frankfurt Airport, CEO Detlef Borghardt explains where the Company stands in the implementati on of its strategy and the steps to come.
evident in 2017 in the form of additi onal sales. The North American market, on the other hand, will remain challenging. We are responding to this by expanding our structural growth drivers to raise our value added per vehicle, or what we refer to as "content per vehicle."
More and more we are delivering not only the axle but the complete overall system consisti ng mainly of axles, hubs and suspension system that include the brakes. Unti l now, most of our U.S. customers have been purchasing these components separately. How ever, with a system approach, customers reap signifi cant benefi ts not only when it comes to assembly but also in terms of service. And, at the same ti me, we increase our value added per vehicle by up to 50 percent. The order from U.S. Xpress won in 2016 was a landmark order for the enti re market. We will equip 1,800 trailers with an integrated axle and suspension system that includes our latest generati on of disc brakes. The transiti on to this excepti onally high-performance brake technology is now also getti ng underway in the United States. In Europe today, already more than 80 percent of our axle systems are equipped with disc brakes.
Detlef Borghardt, Chief Executi ve Offi cer (CEO)
Not at all. We prepared very well for a potenti al takeover and calculated precisely what we would pay for it. Our off er of 94.42 Swedish krona per Haldex share would have been a fair price. As a bidding war started to emerge, we knew right away that we were not going to join in and could bett er use our shareholders' funds elsewhere and maintain fi nancial discipline. We emerged from the situati on with our heads held high. At the same ti me, we gained some valuable experience, polished our internal processes and now have something of a blueprint for future large M&A acti viti es.
We do not see M&A as a standalone strategy in itself. We have a strategy that can be accelerated through acquisiti ons when an opportunity presents itself. We use a matrix that defi nes the eight product lines and eight regions where we intend to acti vely grow. This results in a total of 64 areas. We also consider acquisiti ons in those areas where organic growth alone is not strong enough or fast enough for what we want to achieve. But we are not in a hurry. Acquisiti ons need to pay off .
Precisely. We took an anti cyclical approach when we did this acquisiti on. The suspension specialist KLL completes our portf olio in the South American market where the trailer business is in the process of transiti oning from mechanical to air suspensions. KLL also enhances our product range in the truck and bus segments. KLL had the right products, but aft er years of market weakness in Brazil, it needed a strong partner. This is when we came into play and ulti mately scored.
Restraints in free trade would result in a drop in the share of sea transportati on. If domesti c producti on were then to rise, we would see an increase in demand for road transportati on which would be positi ve for our business. In fact, SAF-HOLLAND itself wouldn't feel much of an eff ect from trade restricti ons because we have local producti on in our sales regions and purchase most of our key supply components in those same markets. In the United States, for example, SAF-HOLLAND is oft en perceived as a U.S. company. Essenti ally, I am not too concerned.
Well, fi rst let's agree that we have signifi cantly expanded our product portf olio in several regions outside of our core markets and are now able to off er the right products in these markets. A prerequisite for doing this was to strengthen our local development teams. For example, we established our own test center in China. I am very confi dent that with this approach we will be able to achieve our organic growth target of EUR 1.25 billion in sales by the year 2020.
Overall I am very sati sfi ed. Now the regions have a voice, which means we can make bett er decisions when it comes to our strategy in the growth markets. For example, I travel a lot in Asia but it sti ll makes a diff erence whether you are coming from abroad or have years of local hands-on experience. Our new structure has made us signifi cantly faster, and we have been able to increase the amount and intensity of our customer contacts. At the same ti me our business units have overcome their silo mentality and are profi ti ng tremendously from common structures for purchasing and engineering.
I have learned that, in China, in additi on to the volume segment which primarily competes on price, there is a growing premium segment for vehicle manufacturers and truckload carriers alike. Their demands are similar to ours: procuring the lightest, safest and best system. Our product range should naturally mirror the segmentati on of the market. And this is where we see our strengths.
How do you keep the Company together as a global unit when it has a regional structure? As part of our regional organizati on, we have purposely globalized specifi c functi ons such as purchasing. This yields synergies, some of which can already be seen in our 2016 results. Other functi ons such as producti on and quality assurance are also now operati ng globally. Our customer base, however, consists of hundreds of companies, most of which are regionally acti ve. Our strength is our diversity. In engineering, this means developing numerous customer-specifi c applicati ons so that we are also able to meet very individual customer requests. In that sense, we will be expanding our modular system in the future even more.
Certainly not. Digiti zati on will progress rapidly in the transportati on sector and reach a point where there is no turning back. What this implies for SAF-HOLLAND is fi rst that we will need to equip all of our mechanical components with linked up sensors. One example is the fi ft h wheel assistant for the U.S. market, which gives the driver an optoelectronic signal when the trailer is improperly coupled. In the future, digiti zati on will mean much more. For example, when we can predict in advance when components will wear out, we will be able to opti mally manage our enti re aft ermarket network and off er valuable added benefi ts from our data. And we will make a key contributi on to lowering the truckload carriers' total cost of ownership – which is really the ulti mate success factor in the transportati on industry.
Mr Borghardt, thank you for your ti me – and have a good fl ight!
CEO Detlef Borghardt meeti ng customers: Face-to-face meeti ngs count
The Turkish city of Düzce, between Ankara and Istanbul, is the locati on of SAF-HOLLAND's latest plant built in 2016. The constructi on of this plant represents another step on the way to achieving the "Strategy 2020" goal of taking advantage of the transportati on sector's growth in emerging markets. Despite the currently challenging situati on and more pronounced market fl uctuati ons in some regional markets of the Middle East, there are some interesti ng opportuniti es waiti ng in this highly populated region that are worth preparing for.
Turkey's Managing Director Bilal Azizoglu We don't have any problem fi nding qualifi ed employees
DÜZCE-INSTANBUL Turkey Producti on locati on the fi rst quarter of 2017. A total of 35,000 axle systems are expected to leave this plant every year by 2018.
Hazelnut plantati ons, as far as the eye can see. Three out of four of the world's hazelnuts are harvested in Turkey. Ten kilometers from the Black Sea, the region around the city of Düzce is one of the preferred areas for agriculture with its very hot summers and icy cold winters. Yet, it's not the climate that brought Bilal Azizoglu here but the strategic locati on halfway between Ankara and Istanbul. Under his directi on, SAF-HOLLAND's fi rst plant in Turkey, directly at the traffi c artery, was established in 2016 and will start producti on in SAF-HOLLAND's investment in this new plant is also an investment in a growing market. Since the arrival of the new millennium, Turkey has become one of the most vital producti on centers for Europe's commercial vehicle industry. First came the bus and coach manufacturers, whose fi nal assembly was very labor intensive due to the diff erent confi gurati ons. In the meanti me, a growing number of heavyduty commercial vehicles and their trailers are being manufactured in Turkey. In 2015, which was a record year, a total of 275,000 commercial vehicles and roughly 25,000 trailers left producti on plants. "The Turkish government has invested massively in infrastructure in the past ten years," off ered Azizoglu
Bilal Azizoglu, Managing Director of SAF-HOLLAND in Turkey
explaining his customers' investment decisions. "From communicati on networks to highways, the enti re country went through a wave of modernizati on." Sti ll, the favorable conditi ons, which include the direct support of the ministry of economy, were just one aspect. "Turkey is Europe's bridge to the Middle East," says Azizoglu. This statement is especially true for vehicle original equipment manufacturers who deliver from Turkey to the Arab peninsula – a region that experienced a constructi on boom unti l 2015 that boosted the demand for commercial vehicles. The Iranian market may have a greater role to play in the future. "Of course growth in Iran also depends on future politi cal developments," says Azizoglu. "The potenti al for recovery in this country, with more than 75 million inhabitants, is enormous." This outlook is also refl ected in the World Bank's forecast for economic growth in Iran of 4.6 % in 2017. The Iranian government's fi ve-year plan even shows a targeted annual growth rate of 8 %. Turkey is also an internati onal hub for the transportati on industry. "The food produced in Turkey, for example, is distributed throughout the enti re region," explained Azizoglu. "And, of course, it needs to be transported – preferably by land." Currently, however, trade is suff ering because the war in Syria is blocking one
of the most important routes. "It's only a matt er of ti me before this problem is solved," says Azizoglu opti misti cally.
SAF-HOLLAND, on the other hand, wasted no ti me constructi ng its new plant, which only took about a year to complete. "We Turks are quick and pragmati c," says Azizoglu, who himself was born in Schleswig-Holstein, Germany, and later studied in Ankara. It wasn't only a questi on of mentality, but also the smooth cooperati on between the headquarters in Bessenbach and the colleagues locally that made it possible to work quickly. "We were able to simply 'copy and paste' the whole producti on concept used in Bessenbach," explained Arne Jörn, Chief Operati ng Offi cer responsible for SAF-HOLLAND's global producti on system. The machines and equipment for Düzce were newly purchased and con fi gured for producti on use in Germany. Experienced workers from Bessenbach, some who were even originally from Turkey, came to Düzce to help set up the new plant and training for the new staff . Some of this new staff will also spend ti me at the Spessart locati on. Jörn and Azizoglu shared the project management
Customer discussion Turkey has grown into a center for the commercial vehicle industry
and every week discussed all of the pending issues in detail, for example, the renovati on of the rented, three-year-old plant hall, which at one point had failed to meet all of SAF-HOLLAND's requirements. One of the biggest challenges was a process step integrated into the axle producti on process in Germany: the cathodic dip-paint coati ng, which is the basis for anti -corrosion protecti on. Because the necessary equipment ti es up a relati vely high amount of capital, it was not feasible to set up a duplicate process in Düzce. Aft er conducti ng a search together, Jörn and Azizoglu fi nally found a suitable provider in the region.
Finding employees, on the other hand, was actually not that diffi cult. "In Turkey, the commercial vehicle industry is seen as a growing, future-oriented industry," explained Azizoglu. SAF-HOLLAND, as a multi -nati onal company, is parti cularly att racti ve for workers." Just one week aft er publishing the fi rst online job adverti sements, there were already 150 applicants. Although not all were qualifi ed, aft er
Arne Jörn, Chief Operati ng Offi cer of SAF-HOLLAND
a strict interview process an initi al team was quickly assembled. Experienced people from the automoti ve industry were hired for key positi ons in areas such as producti on and quality management.
Word had spread among the Turkish customer base that SAF-HOLLAND was now producing locally. "The initi al reacti on was 'When can you start delivering?'", described Azizoglu. Shorter transportati on distances greatly increase delivery fl exibility, which can be an important advantage, especially in the trailer business. Whereas, previously, two to three weeks would pass between the receipt of an order in Bessenbach and delivery in Turkey, now the ti me is projected to fall to just two to three days. "We also were able to increase our overall capacity for the European market and thereby reduce the delivery ti mes to our European customers," added Jörn. The service business with Turkish customers is also benefi ti ng from the new locati on, which has a developed area totaling roughly 1.3 hectares and has signifi cantly more room than the previous locati on in Istanbul. The Aft ermarket warehouse has already moved to the new locati on. "This is now another area where we
The new plant:
35,000axles
per year is the future target for the plant in Düzce.
2-3days
delivery ti mes help increase the fl exibility for our regional customers.
Faster delivery Porti ons of the aft ermarket business will also be located in Düzce
can respond more fl exibly to our customer requests," promises Azizoglu.
Like the days of incredible treasures that made the Ott oman empire into a world trade center, this is how Turkey intends to be the bridge for the exchange of goods between Europe and the Middle East today. Be it gold, machine parts or simply hazelnuts. What these goods have in common is that they must be transported – on axles, of course. Good prerequisites for SAF-HOLLAND's new plant.
Only
200 kg
of added weight is contributed by the drive system. The weight of the axle drive is negligible because it is based on SAF-HOLLAND's existi ng suspension system technology.
Expanding market share in axle and suspension systems for trailers is a key component of "Strategy 2020". This is why SAF-HOLLAND is concentrati ng on growth through innovati on and new soluti ons for special customer requirements in its core market of Europe. In 2016, the axle specialist developed its fi rst hydraulically driven trailer axle. These axles help ti ppers, which oft en fi nd themselves on rough terrain, gain signifi cant tracti on, which can otherwise only be achieved with the help of tractors with more than one driven axle line.
A compact hydraulic motor in the inner wheel provides an extra boost – in this case for the rearmost trailer axle.
For added thrust, SAF TRAK uses the hydraulic power available, which is being held ready for use for the ti pping cylinder.
pull-away assist functi on. The drive then switches off , and a freewheel functi on minimizes the drag losses of the hydraulic motors. SAF-HOLLAND's developers are currently working on opti mizing the threshold speed which is also depending on the system components.
The driver can turn the pullaway assist on and off using a simple switch in the cab.
The hydraulic motors are fi tt ed on the inside of the wheels, usually on the rearmost axle of the trailer. If the ti pper is fully loaded, then this axle must endure a parti cularly high amount of weight. This allows the trailer driver to push the enti re vehicle in order to make it up a slope or to free the vehicle from muddy terrain.
Dr Stefan Wallmeier, Vice President Engineering at SAF-HOLLAND
A gravel pit in the Spessart hills. It's autumn. A drizzle falls over the countryside soft ening the soil. Several engineers watch a ti pper drive slightly uphill. The drive axle of the tractor starts to slip. The vehicle slows down and eventually gets stuck. "Usually at this point, the driver would ask for help, possibly opti ng to be towed by a wheel loader," said Dr Stefan Wallmeier, Vice President of Engineering at SAF-HOLLAND. But in this case, Dr Wallmeier and his team have equipped the ti pper with the SAF TRAK. At the push of a butt on, the driver can acti vate the wheels rotati ng on the trailer's rear axle and boost the vehicle almost eff ortlessly out of the mud.
The crucial extra boost is ensured by two hydraulic radial piston motors located in the wheel hub of the powered trailer axle. The drive system uses the same hydraulic pressure already provided by the tractor to raise the cart body. A valve block disperses the hydraulic fl uid as required either for ti pping or powering.
If the driver chooses the trailer's drive, then hydraulic fl uid is directed to a second valve block. This valve block synchronizes the directi on of the axle drive with the tractor's engine control. It can also power the right or the left wheel of the trailer axle separately if required – known as the diff erenti al lock functi on. This functi on is important if one of the wheels is on a slippery terrain and not able to transmit torque.
Hydraulic motors are well-suited for providing a boost in diffi cult terrain because of their very high torque. SAF-HOLLAND's axle drive supplies up to 14,000 Newton meters of additi onal torque depending on the system pressure. If this force is no longer needed at a speed of roughly 10 km / h aft er the start-up, SAF TRAK will then proceed to acti vate a freewheeling functi on in which a spring pulls the pistons back in the hydraulic motor to minimize drag losses.
"The core element of the hydraulic trailer drive is our proven INTRA CD suspension system equipped with disc brake technology," explains Wallmeier. "The unit only needs to be extended at the ends of the axle by adding another stub axle, hub unit prepared to receive the motor, a sealing system and controls." This is why the hydraulic drive, which won the "Trailer Innovati on 2017" award at last year's IAA, can also be retrofi tt ed onto existi ng trailers and combined with numerous tractors. Another plausible use for these drives, aside from their use in ti ppers, is their use in other vehicles that provide a high level of hydraulic power – for example, agricultural machinery, forestry vehicles and vehicles with moving fl oor.
"More value added per vehicle" is one of the stated objecti ves of SAF-HOLLAND in order to increase organic sales as part of "Strategy 2020" – parti cularly when it comes to the North American trailer market. The beginning switch from drum to disc brake technology off ers a substanti al opportunity to increase the value added per vehicle. SAF-HOLLAND received its fi rst major order in 2016: a total of 1,800 U.S. Xpress trailers were equipped with complete axle and suspension systems including disc brakes, representi ng a landmark order for the market.
XPRESS
BRAKING
CHATTANOOGA Tennessee U.S. Xpress headquarters
In Chatt anooga, Tennessee, we meet with Gerry Mead, Senior Vice President of Maintenance at U.S. Xpress. He shares with us his views about innovati on, specifi cally disc brake technology that has generated more and more interest in the North American trailer market. During our visit at U.S. Xpress headquarters, Mead is not going to miss the chance to personally showcase the new trailer equipped with SAF-HOLLAND's new P89 disc brakes. He has been in the business for over 27 years and oversees the fl eet of logisti cs company U.S. Xpress in Chatt anooga – a fl eet consisti ng of over 15,000 trailers and almost 7,000 tractors on the move across North America. In March 2016, Mead was honored as Truck Fleet Innovator by the renowned magazine Heavy Duty Trucking. This award was for effi ciency and the use of solar technology. Now Mead, together with SAF-HOLLAND, is onto the next innovati on breakthrough: disc brakes for U.S. Xpress' fl eet of trailers. Though air disc brakes are the standard in Europe, it's sti ll not a large percentage of the market in the United States. Disc brake technology introduced to North America in the early 1970's, suff ered from substandard materials and braking equipment
Established trust Gerry Mead, U.S. Xpress (right) and Pat McNamara of SAF-HOLLAND in conversati on
that was the wrong size. As a result, the industry stayed with drum brakes which, despite their moderate performance and diffi cult maintenance, has conti nued to be the predominate brake technology used in North America.
But not at U.S. Xpress: Mead has 1,800 trailers equipped with disc brakes and each and every brake came from SAF-HOLLAND. U.S. Xpress is now no longer ordering drum brakes for its trailers, and its enti re fl eet is expected to be converted within the next six years. That's good news in terms of traffi c safety:
Gerry Mead, Senior Vice President Maintenance, U.S. Xpress
The fl eet U.S. Xpress has over 15,000 trailers on the road
Gerry Mead is certain that disc brakes are the right choice
Mike Colaccino Senior Nati onal Account Manager SAF-HOLLAND Inc.
Pat McNamara Director Nati onal Accounts SAF-HOLLAND Inc.
"The time has come, and we are well positioned to further the conversations with the key fleets in North America with regards to the P89 disc brake."
Pat McNamara, Director Nati onal Accounts at SAF-HOLLAND Inc.
Working behind the scenes Disc brakes provide more safety
"The braking distance with disc brakes is signifi cantly shorter than with drum brakes, which is an invaluable advantage," said Mead adding: "The advantages are there from day one, of which safety plays a key factor in choosing air disc brakes. The benefi ts of this technology need to be seen from a holisti c perspecti ve."
The fact that the breakthrough for trailer disc brakes is now imminent can be traced to the long-term cost advantage for the fl eet operators. The purchase price of disc brakes is higher than that of drum brakes. Yet, disc brakes feature a higher degree of effi ciency and durability and require less ti me for maintenance – ti me that can be used with the vehicles to earn more money.
Gerry Mead, Senior Vice President Maintenance, U.S. Xpress
Sti ll, it took a very North American approach to persuade Mead even though a European disc brake for trailer axles has been on the US market in a slightly modifi ed form for a long ti me. The breakthrough at U.S. Xpress can be attributed to the entry cost of the P89 disc brake that is perfectly tailored to customers' needs. The P89 is part of a complete single source axle and suspension system that SAF-HOLLAND off ers and a key reason for Mead's choice because it gives him a single point of contact and access to SAF-HOLLAND's close-knit service network. "The right package for the new technology was simply not available unti l we sat down together in Nashville a year ago. We talked through the project and then sealed it with a handshake," Mead remembers. SAF-HOLLAND Director of Nati onal Accounts, Pat McNamara expects that a number of fl eet operators will follow the example of U.S. Xpress. "The ti me has come", says McNamara adding, "We are well positi oned and excited to further the conversati ons with the key fl eets in North America with regards to the P89 disc brake.
The US market is diff erent and, in many ways, harder – the romanti cism of the trucker lifestyle sti ll plays a larger role here than in many countries. When Mead and McNamara talk about future challenges it becomes obvious that the industry won't run out of ideas. "Telemati cs soluti ons for trailers will be the next big trend," says Mead. And he wants to be there to help shape it: "At U.S. Xpress, we are proud of our willingness to try new things."
SAF's P89 disc brake systems are on the rise
less weight per axle is possible with the special lightweight design.
30 %
longer maintenance intervals due to opti mized pads.
5- year
comprehensive warrenty which puts the P89 at the forefront of the competi ti on.
Through its "Strategy 2020", SAF-HOLLAND is targeti ng a combinati on of organic and external growth. Joint ventures, cooperati ons and acquisiti ons will be some of the measures taken to boost growth in new regions and with new products. By acquiring KLL, SAF-HOLLAND took an anti cyclical approach to its strategy in South America. Although this region, with more than 400 million inhabitants, is struggling with a crisis, it will sti ll be one of the fastest-growing transportati on markets for the next several years.
RIO GRANDE DO SUL Brazil KLL Equipamentos para Transporte Ltda
Anyone fl ying into São Paulo can noti ce immediately that there is something amiss in Brazil's transportati on sector: the parking lots of the airport-based freight forwarders are fi lled with trucks lined up closely together. On weekdays, these parking lots are usually empty because all of the vehicles are in use. Even people leaving São Paulo for the port city of Santos can see signs of crisis everywhere. Although São Paulo's Anchieta freeway runs through Brazil's highest industrialized region, many companies are closed with For Sale signs posted on their factory gates. Automakers such as Volkswagen and Mercedes have factory yards fi lled with unsold vehicles. Even traffi c jams are rare. Brazil is in a severe economic crisis. The country's gross domesti c product has declined by 7 % since 2014. The transportati on sector is also feeling the recession. While in 2011, a total of 207,400 trucks and buses were sold in Brazil, fi ve years later the manufacturers associati on Anfavea esti mates only 67,000 have been sold – a drop of 67 %.
Air suspensions and axles Complete systems now also supplied out of Brazil
Anti cipati ng the upswing Long-term demand is set to rise
Juarez Keiserman, Managing Director of KLL
One might conclude that the land of the Amazon may have lost its lure for investors in the transportati on sector. Not true in the case of SAF-HOLLAND who has acquired a 57.5 % stake in the Brazilian company KLL Equipamentos para Transporte Ltda in 2016. The manufacturer of suspension systems for trucks, buses and trailers is based in Alvorada, Rio Grande do Sul – right next to the headquarters of Brazil's large freight forwarders and several truck suppliers. Rogério Ramos, Managing Director of SAF-HOLLAND's Brazilian subsidiary, believes this crisis off ers a perfect opportunity to strengthen the Group's market positi on in South America: "We are deliberately making an anti -cyclical investment in the largest transportati on market in South America boasti ng more than 200 million inhabitants."
By acquiring KLL, SAF-HOLLAND has gained much broader access to the Brazilian market than it could have achieved alone. "With KLL, we can enter into business with truck manufacturers directly," explains Ramos. KLL's long track record in the industry means it can deliver straight to leading bus and truck manufacturers. Both suppliers are planning a joint expansion, especially in the market for air suspension systems for trucks and buses. "The market for air suspensions in Brazil is sti ll at a very early stage," noted Juarez Keiserman, founder of KLL 28 years ago, and now a top executi ve of the combined enti ty of KLL and SAF-HOLLAND Group. Trucks with squeaky
A brand with traditi on KLL has been operati ng in Brazil for 28 years
Producti on in Alvorada Capacity for future growth
fl at springs are sti ll commonplace on Brazil's highways. Only around 16 % of Brazil's trucks are currently equipped with air suspensions. In the European Union, this fi gure is 95 %. Sti ll, Keiserman is opti misti c: "The trend is not reversible, even in Brazil."
Keiserman and Ramos are currently examining how SAF-HOLLAND and KLL in Brazil can integrate their producti on and raise effi ciency. SAF-HOLLAND has had its own producti on plant in Brazil for the past ten years. At the locati on in Jaguariúna, 130 kilometers from São Paulo, the Group has mainly been producing axles. KLL is signifi cantly larger: The producti on plant in Southern Brazil is located on a campus the size of seven soccer fi elds. The locati on had 340 employees unti l 2013. Now there are just 200. KLL has also been caught up in the crisis. The producti on of suspensions for trailer axles has dropped almost two-thirds. "At the same ti me, we even managed to increase our market share," says Keiserman.
Now, with the companies' combined product portf olio, Ramos hopes that market share will increase signifi cantly faster with the next economic recovery. "We can off er our enti re U.S. and European product range in Brazil", says Ramos. "We can now tailor our product range to meet the demands of the local market." Because the conditi ons in Brazil are diff erent from those in Europe: The roads are far worse. Large parts of the Brazilian highway network consist of two-lane roads full of potholes. Many routes are on unpaved roads. Because of the country's size, quality service in repair shops is ensured only in coastal urban areas. "We have to 'tropicalize' the products
Rogério Ramos, Managing Director of SAF-HOLLAND do Brasil
Precision counts Automated measurement of component quality
A standard at KLL: robust air suspensions
from Europe," says Keiserman. This opens up additi onal market potenti al for SAF-HOLLAND in Brazil given the Group's plans to develop products in Brazil, which could also be sold in other emerging markets with similar requirements and infrastructure.
Aft er years of crisis, the Brazilian market may also see a recovery soon thanks to falling interest rates. In 2017, the economy is expected to grow again slightly. The crisis has led to a percepti ble increase in the average age of the truck fl eet. Ramos predicts: "Truck operators will start investi ng in their fl eets again at the fi rst hint of stabilizati on." Experts from the Anfavea vehicle associati on expect growth in the commercial vehicle market to sharply outpace that of the economy as a whole. The industry is looking for 10 % growth in the commercial vehicle market in 2017. "We are opti misti c," said one dealer from a large commercial vehicle brand. "For the fi rst ti me in a long ti me, we are receiving customer inquiries."
The digital networking of commercial vehicles and complete logisti cs chains has revoluti onized the transportati on industry. SAF-HOLLAND's ability to uti lize this trend and achieve its growth targets as part of its "Strategy 2020" can be illustrated by three of the Company's current projects. Behind each project is a team of dedicated employees, who are already working on making future ideas a reality.
In the eyes of Alex Schöpf, an app is never complete. With his specially designed 'SAF-HOLLAND Connect' app, he off ers fl eet operators, repair shops and spare parts dealers real added value. All of whom can use the app to register for repair workshops and spare parts sales training, retrieve spare parts catalogs and mainte nance instructi ons, and receive the latest news feeds. His goal is to further minimize the downti me for trucks and trailers through digiti zati on and faster processes. Since all service processes are linked together, Schöpf's app pays special att enti on to interlinking the individual functi ons.
Alex Schöpf Team Leader Backoffi ce Sales Fleets DACH Region Bessenbach, Germany
"I see moving ahead as designing the digitally networked future. The continued development of the 'SAF-HOLLAND Connect' app is an important element in making sure we profit from the changing world of digitization."
SERVICE
Andrew Wallner and Rich Sibley
Holland (MI), USA
Senior Project Engineer & Senior Project Manager
"We see moving ahead as driving forward tomorrow's technologies. With new ideas and new digital approaches, we strive to exceed our customer expectations. One example is the Holland ELI-teTM system, which makes coupling safer for the driver."
If a trailer is not correctly coupled to a tractor, it greatly endangers the other drivers on the road. This is the reason drivers are required to check the fi ft h-wheel coupling to make sure the trailer is att ached properly before driving off . Andrew Wallner and Rich Sibley intermeshed mechanical and optoelectronic sensors to an eff ecti ve digital soluti on which now supports the driver with the new ELI-teTM (Electronic Lock Indicatortechnology enhanced). When the trailer is coupled safely, the sensor system gives a signal, and four white LED lamps light up, making it much easier to do a visual inspecti on; when not, red lights fl ash a warning. The two developers placed a high value on simple installati on, which is why they deliberately avoided putti ng the display in the cab and opted instead to place it near the fi ft h-wheel coupling for an on-site check – a precauti on that is already legally required in the United States.
Thomas Holy Project Manager Operati ons / Industrial Engineering Bessenbach, Germany
"To me, moving ahead means moving the Company forward competitively and thereby making a contribution to the future. To achieve this, we have optimized the availability of materials in the axle system assembly process, streamlined and digitized this process and in doing so we have noticeably raised the productivity."
There were just ten days to completely dismantle the old assembly lines and set up an all new line based on "lean" principles. When looking back, this is what Thomas Holy believes was the biggest challenge in redesigning the axle system assembly line and the process opti mizati on at Plant 03 in Bessenbach. For this foreman and quality specialist with a Six Sigma black belt, it was the structured preparati on and intense team work that made the project a success. The result has been much more effi cient processes and cost savings leading to a step up in the locati on's competi ti veness. Producti on data are now transmitt ed directly to Radio Frequency Identi fi cati on (RFID) tags and att ached to the axle digitally as it moves its way through assembly. There is a permanent exchange of data among the IT systems ensuring that all the important informati on is available at all ti mes on the assembly line.
PUBLISHED BY
SAF-HOLLAND S.A. 68 – 70 Boulevard de la Pétrusse L–2320 Luxembourg Luxembourg
EDITOR-IN-CHIEF Stephan Haas, SAF-HOLLAND GmbH Christi na Hütt ner, SAF-HOLLAND GmbH
CONCEPT AND DESIGN 3st kommunikati on GmbH
CONTENT AND EDITORIAL Redakti onsbüro delta eta
IMAGES Bernd Bodtländer Fotografi e Studio Dino Eisele
This report is available in German and English. Both versions can be downloaded from www.gb2016.corporate.safh olland.com (German) and www.ar2016.corporate.safh olland.com (English).
Our annual report is now also available online at www.ar2016.corporate.safh olland.com www.safh olland.com
121 SAF-HOLLAND S.A. Annual Financial Statements Detlef Borghardt, Chief Executi ve Offi cer (CEO)
Management Report / Sustainability
To our shareholders
Consolidated Financial Statements / Additi onal Informati on
60 Sustainability at SAF-HOLLAND group
66 Consolidated Statement of Comprehensive Income 68 Consolidated Statement of Changes in Equity 69 Consolidated Statement of Cash Flows 28 Managers' transacti ons 28 Informati on according to Arti cle 11 (1) and (3) of the Luxembourg Takeover Law from May 19, 2006 Our annual report is now also available online at ar2016.corporate. safh olland.com
Management Report / Sustainability
Detlef Borghardt, Chief Executi ve Offi cer (CEO)
In my message to you one year ago, I indicated that 2016 would be a challenging year. At that ti me we expected the North American truck and trailer market to normalize in 2016 aft er three record years in a row. As you know, there was more than just a correcti on: the North American market, measured by the producti on of heavy Class 8 trucks, suff ered a sharp decline of almost 30 %. Other important transportati on markets, such as those in Australia, Russia, Brazil, and Turkey in the second half-year, were also weak in the 2016 fi nancial year for very diff erent reasons. Given the diffi cult market environment, we are sati sfi ed with our business performance. Taking into account the sale of our Aerway product line and excluding currency eff ects, we managed to maintain our level of sales. With an adjusted EBIT margin of 8.7 %, we not only reached our target for the 2016 fi nancial year, but our performance set us apart from others in our industry. We want to ensure that our shareholders parti cipate appropriately in the company's success and are therefore proposing a 10 % higher dividend of 0.44 Euro to the Annual General Meeti ng on April 27, 2017.
What is the key to our success? For years, SAF-HOLLAND has consistently focused on cost leadership and structural growth by positi oning the Group in the market early on with soluti ons such as axle systems with disc brake technology, lightweight constructi on and special soluti ons such as SAF TRAK all with the intenti on of steadily expanding our sales per vehicle while gaining market share at the same ti me.
Management Report / Sustainability
Consolidated Financial Statements / Additi onal Informati on
CONSOLIDATED 66 Consolidated Statement of Comprehensive Income 67 Consolidated Balance Sheet 68 Consolidated Statement of Changes in Equity 16 SAF-HOLLAND at a Glance 16 Company profi le 16 Business model: Direct access to end Step-by-step, we are also opti mizing our internal processes and structures. Aft er successfully completi ng the consolidati on of the European plant network in the previous year, our focus in 2016 was on implementi ng the Group's new structure by region and the bundling of the Group's purchasing acti viti es. In additi on, our bett er management of working capital, among other measures, allowed us to signifi cantly increase our free cash fl ow and reduce our net debt to less than EUR 100 million, despite the takeover of the Brazilian specialist for suspension systems KLL and the payment of a 25 % higher dividend for the year 2015.
70 Notes to the Consolidated Financial Statements 70 Corporate Informati on 70 Accounti ng and Valuati on Principles 83 Scope of Consolidati on 84 Segment Informati on 87 Notes to the Consolidated Statement of Comprehensive Income 92 Notes to the Consolidated Balance Sheet 108 Other Disclosures 121 SAF-HOLLAND S.A. Annual Financial Statements 121 Income Statement of SAF-HOLLAND S.A. 122 Balance Sheet of SAF-HOLLAND S.A. 124 Independent Auditor's Report 126 Responsibility Statement 16 Locati ons and markets: Global presence in all major markets 16 Products and customers: Customized products to meet the specifi c needs of customers 18 Leading market positi on 18 Organizati onal structure 18 Legal Group structure 19 Economic and legal infl uences 20 Strategy and Objecti ves 20 Growth "Strategy 2020" 21 Performance Indicators 21 Financial performance indicators 21 Non-fi nancial performance indicators 21 Internal Group control system 21 Industry and company-specifi c early indicators 23 Research and Development 23 Innovati ve soluti ons to extend our technological leadership 23 Our goal: Opti mizing our fl eet customers' total cost of ownership 23 Wide range of innovati ve soluti ons at the IAA Commercial Vehicles 2016 23 SAF TRAK 24 INTRA Light & INTRA CD Light 24 The P89 disc brake In last year's message, I also introduced our "Strategy 2020" which includes our goal to expand sales to around EUR 1.5 billion by the year 2020. A key element of this strategy is generati ng external growth through joint ventures, collaborati ons and acquisiti ons. Last year, we made a takeover off er for Haldex AB, the Swedish supplier of brake systems and modules for air suspensions. The aim of this off er was to create an integrated champion for chassis-related commercial vehicle components. Shortly thereaft er, two more bidders appeared with signifi cantly higher off ers for Haldex. We decided to maintain our fi nancial discipline and refused to parti cipate in a bidding war. We choose not to increase our off er and eventually withdrew it enti rely. This decision was an expression of our strong convicti on that takeovers should not only be appropriate in the strategic sense but also pay off from a fi nancial perspecti ve. The fact that we were not able to acquire Haldex is unsati sfying but will not stop us from reaching our 2020 targets. We took our fi rst step in this directi on with the aforementi oned acquisiti on of KLL in Brazil – and there is more to come. We will conti nue to diligently work on these steps in 2017. I can assure you that, in any future acquisiti ons, we will not lose sight of our M&A principles and will conti nue to act in the best interests of our shareholders.
applicati ons in the 2016 fi nancial year 25 Corporate Governance 25 Management and control 25 Board of Directors 25 Management Board 26 Personnel changes to the Management Board during the 2016 fi nancial year 26 Basic elements of the remunerati on system 26 Declarati on of Conformity with the German Corporate Governance Code 26 Compliance is based on a comprehensive code of conduct Another focal point of our acti viti es in 2017 will be the restructuring of our acti viti es in North America. We want to be more effi cient, more fl exible and, above all, in closer proximity to our customers to improve our delivery ti mes. To achieve this, we will be centralizing our structures and consolidati ng the producti on capaciti es at our seven existi ng producti on locati ons into fi ve producti on locati ons. With the completi on of the restructuring measures already under way, we will reduce our direct cost base by a mid-single-digit million US dollar amount annually, thereby ensuring the long-term competi ti veness of the North American producti on network.
management positi ons 27 Annual General Meeti ng 27 Transparency In 2017, we expect vastly diff erent market performance on a regional basis with some markets being dominated by politi cal uncertainti es that are diffi cult to assess. The
FINANCIAL STATEMENTS 69 Consolidated Statement of Cash Flows MANAGEMENT REPORT 28 Managers' transacti ons 28 Informati on according to Arti cle 11 (1) and (3) of the Luxembourg Takeover Law from May 19, 2006 30 Economy and Industry Environment 30 Overall economic development: World economy conti nues to grow moderately 30 Industry development: Strong regional developmental diff erences; Europe shines as a pillar of growth market environment in North America, Brazil and parts of the Middle East should conti nue to be challenging in 2017 with an improvement expected only in the second halfyear. The tax cuts and infrastructure packages currently in discussion in the United States government could certainly have a positi ve eff ect on our business. In Europe, we expect the solid development to conti nue. All in all, we are confi dent that we will be able to grow the Group's sales this year to between EUR 1,060 and 1,090 million based on constant currency rates and no change in the scope of consolidati on supported by market share gains, the introducti on of new products and the start of some interesti ng large orders. The EBIT margin adjusted for special items should again be within the range of 8 % to 9 % in the 2017 fi nancial year. However, from today's standpoint and in light of the anti cipated upfront investments necessary to achieve the goals of our "Strategy 2020", we expect the margin to tend towards the middle of this range.
123 Mandates of the Board of Directors / Management Boards commercial vehicle market 30 Market correcti on in North America 31 Market developments in APAC / China vary 32 Key events during the 2016 Financial Year 32 Cash off er to acquire Haldex 32 Groundbreaking order for disc brake technology in North America 32 Majority takeover of Brazilian company KLL 33 Sales and Earnings Performance, On behalf of my colleagues on the Management Board I would like to take this opportunity to thank our shareholders and bondholders for their confi dence in our company. I would also like to express our sincere grati tude to all our employees and employee representati ves and especially to our customers, suppliers and technology partners for the good and successful cooperati on, which makes SAF-HOLLAND's long-term success possible. We would be very pleased if you would conti nue to accompany us on the road ahead and in writi ng the next chapter of the Company's history.
33 Forecast versus Actual Business Sincerely,
fi nancial year 46 Risk and Opportuniti es Report 46 Risk management system
46 Internal control and risk management systems with respect to the Group Detlef Borghardt CEO / Member of the Board of Directors
DETLEF BORGHARDT Chief Executi ve Offi cer (CEO) & President Region APAC / China
WILFRIED TREPELS Chief Financial Offi cer (CFO) unti l December 31, 2016
ARNE JÖRN Chief Operati ng Offi cer (COO)
19 Economic and legal infl uences ALEXANDER GEIS President Region EMEA / India
87 Notes to the Consolidated Statement of Comprehensive Income 92 Notes to the Consolidated Balance Sheet 30 Strong growth in the European commercial vehicle market STEFFEN SCHEWERDA President Region Americas
26 Basic elements of the remunerati on system 26 Declarati on of Conformity with the President Region China
Management Report / Sustainability
Bernhard Schneider, Chairman of the Board of Directors
The global commercial vehicle markets remained challenging in the 2016 fi nancial year. Especially in North America, the extent of the market's decline was unexpected compared to the forecasts at the start of the year. In such an environment, SAF-HOLLAND's ability to stay on course was all the more grati fying. Excluding currency eff ects and taking into account the sale of Aerway in the previous year we managed to maintain our level of sales on an organic basis. Having achieved an adjusted EBIT margin of 8.7 % we reached our earnings target. In keeping with our established dividend policy, we will propose a 10.0 % higher dividend of EUR 0.44 per share for 2016 at our Annual General Meeti ng on April 27, 2017.
The Board of Directors carefully carried out its duti es in accordance with the law and the Company's Arti cles of Associati on during the 2016 fi nancial year. In doing so, the Board of Directors advised the Management Board regularly on the operati onal management of the business and monitored the executi on of transacti ons. The Management Board informed the Board of Directors of all important events and developments in writi ng, as well as verbally, on a regular, ti mely and comprehensive basis. The development of orders, sales and earnings were the focus of these communicati ons. The Board of Directors and the Management Board also consulted closely with one another on the strategic orientati on of the SAF-HOLLAND Group. Market developments, aspects of risk management and compliance and the fi nancial positi on were also discussed and debated with the Management Board. Matt ers requiring the Board of Directors' approval were submitt ed by the Management Board on a ti mely basis and approved following a detailed examinati on by the Board of Directors.
Management Report / Sustainability
Consolidated Financial Statements / Additi onal Informati on
66 Consolidated Statement of Comprehensive Income 67 Consolidated Balance Sheet 68 Consolidated Statement of Changes in Equity 69 Consolidated Statement of Cash Flows 70 Notes to the Consolidated Financial Statements 70 Corporate Informati on 70 Accounti ng and Valuati on Principles 16 SAF-HOLLAND at a Glance 16 Company profi le 16 Business model: Direct access to end customers 16 Locati ons and markets: Global presence in all major markets 16 Products and customers: Customized products to meet the specifi c needs of customers 18 Leading market positi on The topic of acquisiti ons was a focal point of the Board of Director's discussions in the reporti ng year, parti cularly the cash off er for Haldex announced in July 2016 and the necessary fi nancing arrangements. The Board of Directors also discussed how to proceed aft er another bidder had announced a higher off er for Haldex. In August, aft er careful deliberati on, SAF-HOLLAND decided not to raise its off er for Haldex and instead withdrew its off er in the best interest of its shareholders. The Haldex shares acquired ahead of the takeover off er were sold on the stock exchange. The acquisiti on of the Brazilian suspension specialist KLL was also the subject of intense discussion within the Board of Directors. The acquisiti on of KLL was announced in September of 2016 and completed in October.
84 Segment Informati on 87 Notes to the Consolidated Statement of Comprehensive Income 92 Notes to the Consolidated Balance Sheet 108 Other Disclosures 121 SAF-HOLLAND S.A. Annual Financial Statements 121 Income Statement of SAF-HOLLAND S.A. 122 Balance Sheet of SAF-HOLLAND S.A. 123 Mandates of the Board of Directors / Management Boards 124 Independent Auditor's Report 126 Responsibility Statement 18 Legal Group structure 19 Economic and legal infl uences 20 Strategy and Objecti ves 20 Growth "Strategy 2020" 21 Performance Indicators 21 Financial performance indicators 21 Non-fi nancial performance indicators 21 Internal Group control system 21 Industry and company-specifi c early indicators 23 Research and Development Personnel decisions were also a key topic of the Board of Directors' discussions and included, among others, the succession arrangements for former chief fi nancial offi cer Wilfried Trepels, who resigned eff ecti vely at the end of 2016. A decision was made in October to appoint Dr Matt hias Heiden as the new chief fi nancial offi cer starti ng as of March 1, 2017. In the interim period, the role of CFO has been assumed by Dr Marti n Kleinschmitt , a member of the Board of Directors of SAF-HOLLAND S.A. In October, the Board of Directors also appointed Arne Jörn as chief operati ng offi cer to succeed Mike Kamsickas who stepped down in May 2016.
customers' total cost of ownership 23 Wide range of innovati ve soluti ons at the IAA Commercial Vehicles 2016 23 SAF TRAK 24 INTRA Light & INTRA CD Light 24 The P89 disc brake 24 Persistent high number of priority The Board of Directors met regularly during the 2016 fi nancial year. Four of the meeti ngs were held in person, one meeti ng was in the form of a conference call, and a resoluti on was made using the circular resoluti ons procedure. Meeti ngs were held at least once per quarter, and all meeti ngs were fully att ended by the Board of Directors.
25 Corporate Governance 25 Management and control 25 Board of Directors 25 Management Board 26 Personnel changes to the Management Board during the 2016 fi nancial year 26 Basic elements of the remunerati on system 26 Declarati on of Conformity with the German Corporate Governance Code 26 Compliance is based on a comprehensive code of conduct 27 Target for the share of women in The focus of the meeti ng on March 9, 2016 was the consolidated fi nancial statements and the Group management report for the 2015 fi nancial year. The Board of Directors approved the fi nancial statements on the recommendati on of the Audit Committ ee following a detailed examinati on. The Board of Directors also adopted the agenda for the 2016 Annual General Meeti ng, which included the proposal that the Annual General Meeti ng elects a new external auditor. The Board also elected Marti na Merz as the new deputy chairman of the Board of Directors to take eff ect at the close of the 2016 Annual General Meeti ng.
CONSOLIDATED FINANCIAL STATEMENTS MANAGEMENT REPORT 28 Managers' transacti ons The Board of Directors' second meeti ng on May 5, 2016, was conducted in the form of a conference call. Agenda items included the report on the business development for the fi rst quarter of 2016 and the appointments of Steff en Schewerda and Alexander Geis as interim-COOs aft er the departure of Mike Kamsickas. The Board also discussed the reorganizati on of the corporate structure in China and the formati on of a holding company that would combine all of SAF-HOLLAND's subsidiaries in China.
and (3) of the Luxembourg Takeover Law from May 19, 2006 30 Economy and Industry Environment 30 Overall economic development: World economy conti nues to grow moderately 30 Industry development: Strong regional developmental diff erences; Europe shines The Board of Directors meeti ng on August 8 – 9 dealt with the report for the second quarter of 2016 and specifi cally the plans to build a new producti on facility for axle systems in Turkey. The Board of Directors also resolved a change in the management in China and appointed Guoxin Mao as the managing director of SAF-HOLLAND (Xiamen) Co., Ltd and Corpco Beijing Technology and Development Co., Ltd.
commercial vehicle market 30 Market correcti on in North America 31 Market developments in APAC / China vary 32 Key events during the 2016 Financial Year 32 Cash off er to acquire Haldex 32 Groundbreaking order for disc brake technology On October 7, 2016, the Board of Directors appointed Dr Matt hias Heiden as the new CFO, eff ecti ve March 1, 2017, and Arne Jörn as the new COO of the SAF-HOLLAND Group, eff ecti ve October 17, 2016, through a circular resoluti on. Both were also made managing directors of SAF-HOLLAND GmbH.
in North America 32 Majority takeover of Brazilian company KLL 33 Sales and Earnings Performance, Net Assets and Cash Flows 33 Forecast versus Actual Business Development 34 Sales and Earnings Performance 42 Net Assets 44 Financial positi on: Cash fl ows 45 Management's general statement on the fi nancial situati on in the 2016 The two-day meeti ng of the Board of Directors held on November 8 – 9, 2016, discussed the report on the business development for the third quarter and the possibility of plant consolidati ons in North America and especially the related capacity adjustments and potenti al cost reducti ons. Other topics discussed at the meeti ng included the redistributi on of responsibiliti es at the management level as a result of the appointment of the new COO, as well as proposals for the forthcoming 2017 Annual General Meeti ng with respect to the electi on of new members to the Board of Directors.
46 Risk and Opportuniti es Report 46 Risk management system 46 Internal control and risk management systems with respect to the Group accounti ng process 46 Overall risk assessment 47 Risk overview 51 Opportuniti es overview In the year's fi nal meeti ng on December 6, 2016, in which associate member Jack Gisinger also took part, the Board of Directors resolved to propose to the Annual General Meeti ng of 2017 the electi on of not only Jack Gisinger but also Carsten Reinhardt to the Board of Directors. The Board also dealt in depth with the 2017 budget, the mediumterm plan unti l 2021 and the performance targets for the Management Board for the year 2017.
54 Outlook 54 Economic and industry Environment 56 Company outlook: Solid sales and earnings development The work of the Board of Directors is supported by the Audit Committ ee, which met twice during the reporti ng year. The Committ ee dealt in detail with the annual fi nancial statements, quarterly fi gures, risk management and the results of the audit and compliance reviews. The content of these meeti ngs was presented to the Board of Directors and submitt ed for the Board's approval when necessary.
In the reporti ng year, the Board of Directors once again dedicated itself intensively to the topic of corporate governance. The 2016 Declarati on of Conformity on the recommendati ons of the German Corporate Governance Code was submitt ed by the Board of Directors of SAF-HOLLAND in March 2016. The current Declarati on of Conformity submitt ed in March 2017 can be found on the Company's homepage.
PricewaterhouseCoopers (PWC) audited the December 31, 2016 consolidated fi nancial statements and Group management report prepared by SAF-HOLLAND S.A. The auditor issued an unqualifi ed audit opinion and found that the consolidated fi nancial statements give a true and fair view of the results of operati ons, net assets, fi nancial positi on of the SAF-HOLLAND Group. The auditor confi rmed that the Group management report, including the Declarati on of Conformity on the German Corporate Governance Code, is consistent with the consolidated fi nancial statements.
The consolidated fi nancial statements, Group management report and auditor's reports and documentati on were promptly submitt ed to the members of the Board of Directors. Together with the Audit Committ ee, the fi nancial statements, reports and documentati on were thoroughly reviewed by the Board of Directors. The Board of Directors discussed the results of the audit at its meeti ng on March 14, 2017. Representati ves of the auditi ng company were present for porti ons of that meeti ng and presented their key audit fi ndings and answered board members' questi ons. The Board of Directors approved both PWC's audit results and the consolidated fi nancial statements as submitt ed. The Board of Directors endorsed the Management Board's proposal for the appropriati on of retained earnings and recommended proposing a 10.0 % higher dividend of EUR 0.44 per share for the 2016 fi nancial year at the Annual General Meeti ng on April 27, 2017.
The Annual General Meeti ng on April 28, 2016 elected PricewaterhouseCoopers Société coopérati ve, Luxembourg, as the auditor for the 2016 fi nancial year. By changing the auditor, SAF-HOLLAND is implementi ng in advance the EU directi ve that took eff ect in 2016 requiring auditors of capital market-oriented companies to rotate aft er ten years. Previously, Ernst & Young S.A., Luxembourg, had been the auditor for SAF-HOLLAND as a listed company for nine years.
Several members of the Board of Directors had their terms of offi ce confi rmed and extended by the Annual General Meeti ng on April 28, 2016. The terms of offi ce of Anja Kleyboldt and Dr Marti n Kleinschmitt , which expired at the end of the 2016 Annual General Meeti ng, were extended unti l the end of the Annual General Meeti ng for the 2018 fi nancial year. Marti na Merz's term of offi ce was also prematurely extended unti l the end of the Annual General Meeti ng for the 2018 fi nancial year.
As of December 31, 2016, Wilfried Trepels, the SAF-HOLLAND Group's long-standing chief fi nancial offi cer, left the Company on the best of terms with both the Board of Directors and the Management Board to pursue new challenges outside of the Group. On behalf of the enti re Board of Directors, I would like to thank him for his many years of outstanding work and parti cularly for his major contributi on to structuring the Group and preparing it for conti nued profi table growth under our "Strategy 2020". We wish him all the best and every success in his future endeavors.
The Board of Directors would also like to thank all of the employees, the employee representati ves and the Management Board for their tremendous dedicati on and successful contributi on during the 2016 fi nancial year.
Luxembourg, March 2017
Bernhard Schneider Chairman of the Board of Directors
Management Report / Sustainability
Consolidated Financial Statements / Additi onal Informati on
66 Consolidated Statement of Comprehensive Income 67 Consolidated Balance Sheet 68 Consolidated Statement of Changes in Equity 69 Consolidated Statement of Cash Flows 70 Notes to the Consolidated Financial Statements 70 Corporate Informati on 70 Accounti ng and Valuati on Principles 83 Scope of Consolidati on 84 Segment Informati on 92 Notes to the Consolidated Balance Sheet 108 Other Disclosures 121 SAF-HOLLAND S.A. Annual Financial Statements 121 Income Statement of SAF-HOLLAND S.A. 122 Balance Sheet of SAF-HOLLAND S.A. 124 Independent Auditor's Report 126 Responsibility Statement 16 SAF-HOLLAND at a Glance 16 Company profi le 16 Business model: Direct access to end customers 16 Locati ons and markets: Global presence in all major markets 16 Products and customers: Customized products to meet the specifi c needs of customers 18 Leading market positi on 18 Organizati onal structure 18 Legal Group structure 19 Economic and legal infl uences 20 Strategy and Objecti ves 20 Growth "Strategy 2020" 21 Performance Indicators 21 Financial performance indicators 21 Non-fi nancial performance indicators 21 Internal Group control system 21 Industry and company-specifi c early indicators 23 Research and Development 23 Innovati ve soluti ons to extend our technological leadership 23 Our goal: Opti mizing our fl eet In the year 2016, the German stock market was overshadowed by politi cal events and economic crises for extended periods. Worries of a strong, uncontrolled slowdown in the Chinese economy (a "hard landing") were already growing as the year began. Internati onal capital markets took a sharp fall with the DAX dropping roughly 18 %, marking its year low of 8,750 points in February. This was followed by a recovery which was abruptly interrupted by Great Britain's surprising vote to leave the EU ("Brexit"). This downturn, however, was relati vely short-lived and the market quickly regained lost ground. Markets became highly volati le in their initi al reacti on to the unexpected result of the U.S. Presidenti al electi on towards the year's end. The infrastructure program and signifi cant tax reducti ons announced for businesses and individuals in the United States set the stage for a year-end rally starti ng in the second week of November and led to a renewed sharp rise in the DAX and especially the US indices. The DAX ended the year at 11,481 points, or 6.9 % above the prior year's close. The 2016 performance of the SDAX, the selecti on index of the Deutsche Börse AG containing 50 smaller companies ("small caps") below the DAX and MDAX, was somewhat lower, and the index climbed 4.6 % for the year.
23 SAF TRAK 24 INTRA Light & INTRA CD Light 24 The P89 disc brake 24 Persistent high number of priority applicati ons in the 2016 fi nancial year 25 Corporate Governance 25 Management and control 25 Board of Directors 25 Management Board 26 Personnel changes to the Management Board during the 2016 fi nancial year 26 Basic elements of the remunerati on system 26 Declarati on of Conformity with the German Corporate Governance Code 26 Compliance is based on a comprehensive code of conduct 27 Target for the share of women in management positi ons 27 Annual General Meeti ng 27 Transparency In the fi rst half of the year, SAF-HOLLAND's share price came under pressure despite the Company developing signifi cantly bett er than its end markets. Aside from the overall dismal mood on the capital markets, news of a strong decline in new orders and producti on fi gures for heavy trucks and trailers in North America brought added pressure, as did as the weak market performance in key regions such as Brazil, Australia and Russia. These events drove SAF-HOLLAND's shares to a year low of EUR 9.00 in early July with intraday prices that were even lower. The Company's share price began a sharp turnaround following the release of solid business fi gures for the fi rst half of 2016 and the announcement of a takeover bid for Haldex. SAF-HOLLAND's bid for Haldex unleashed a new wave of consolidati on in the industry. At the same ti me, there was a clear increase in internati onal investor interest in SAF-HOLLAND, its business model and its shares – which were a bett er value relati ve to competi tors. The initi ati on of research coverage by three banks / brokers also helped
28 Managers' transacti ons 28 Informati on according to Arti cle 11 (1) and (3) of the Luxembourg Takeover Law from May 19, 2006 30 Economy and Industry Environment 30 Overall economic development: World economy propel SAF-HOLLAND further into the spotlight of large insti tuti onal investors. SAF-HOLLAND shares climbed almost 52 % from their year low and reached their high for the year of EUR 13.64 on December 30, the last trading day of the year. As a result, SAF-HOLLAND's shareholders enjoyed a grati fying 9.2 % increase for the year and an att racti ve 12.4 % total return when including the dividend of EUR 0.40. The outperformance of SAF-HOLLAND's shares was even more evident in comparison to the DAXsector Automobile industry index, which suff ered a decline of 5.6 % in 2016.
87 Notes to the Consolidated Statement of Comprehensive Income 30 Industry development: Strong regional developmental diff erences; Europe shines as a pillar of growth 30 Strong growth in the European SAF-HOLLAND's market capitalizati on on December 30, 2016 was roughly EUR 619 million based on the shares' year-end closing price of EUR 13.64 and a total of 45,361,112 outstanding shares.
123 Mandates of the Board of Directors / Management Boards 32 Key events during the 2016 Financial Year 32 Cash off er to acquire Haldex 32 Groundbreaking order for disc brake technology in North America 32 Majority takeover of Brazilian company KLL 33 Sales and Earnings Performance, Net Assets and Cash Flows 33 Forecast versus Actual Business Development 34 Sales and Earnings Performance 42 Net Assets SAF-HOLLAND's share liquidity – an essenti al investment criteria especially for large insti tuti onal investors such as banks, pension funds and asset managers – remained at a high level in the 2016 reporti ng year, but was sti ll somewhat lower than in the previous year. The decline refl ects both the general downward trend in stock exchange volumes and the longer holding periods for major investors. Shares in SAF-HOLLAND had an average daily turnover of 148,600 shares (previous year: 209,500 shares) on all German stock exchanges in 2016. This is equivalent to an average trading volume of EUR 1.6 million (previous year: EUR 2.8 million), which is impressive for a small-cap.
44 Financial positi on: Cash fl ows 45 Management's general statement on the fi nancial situati on in the 2016 fi nancial year 46 Risk and Opportuniti es Report 46 Risk management system 46 Internal control and risk management systems with respect to the Group accounti ng process 46 Overall risk assessment In 2016, SAF-HOLLAND shares were again strongly traded on alternati ve trading platf orms, or dark pools (including BATS Chi-X Europe, Turquoise and Chi-X), recording an additi onal trading volume of 179,100 shares on average in 2016 (previous year: 211,900). As a result, the trading volume in SAF-HOLLAND shares on the traditi onal stock exchanges in the past year was lower than on the alternati ve platf orms, where primarily investment banks, brokerage companies and insti tuti onal investors trade directly with one another.
In Deutsche Börse AG's most recent index ranking dated December 31, 2016, which determines the compositi on of the MDAX and SDAX indices, SAF-HOLLAND was ranked 68 (previous year: 66) in terms of free fl oat market capitalizati on and 67 (previous year: 57) in terms of trading volume. SAF-HOLLAND is, therefore, one of the larger companies in the SDAX. The fact that SAF-HOLLAND did not move up in the ranking despite its bett er share price performance relati ve to the DAX and SDAX was due to the high number of stock exchange newcomers (IPOs) and spin-off s of large companies, which moved in ahead of SAF-HOLLAND in the course of 2016.
SAF-HOLLAND share price DAX SDAX DAXsector Automobile
As part of our investor relati ons acti viti es, we provide comprehensive, ti mely and transparent informati on about our strategic objecti ves, the Company's ongoing development, current market trends and emerging technologies. In additi on to the investor and analyst conference regarding our annual fi nancial statements and regular conference calls on our quarterly results, the focus of our acti viti es is our contact with investors, analysts and other capital market parti cipants at several investor conferences and roadshows. In the year 2016, a number of investors and potenti al investors alike accepted our invitati on to visit our producti on and engineering faciliti es to form their own impressions.
SAF-HOLLAND conti nued to expand its investor relati ons acti viti es during the 2016 fi nancial year. In a total of eight roadshows and ten investor conferences held in Germany and abroad, the Management Board and IR team presented the Company's current business performance, growth outlook and strategic goals. As in the previous year, the focus of acti viti es was not only in Germany but also other internati onal fi nancial centers such as London, Paris and the United States. Other roadshow locati ons in 2016, parti cularly in the context of the takeover off er for Haldex, included the Scandinavian fi nancial markets of Denmark, Sweden and Finland. Roadshows were also held in Geneva, Zurich, Dublin and the Benelux countries. Investor interest in SAF-HOLLAND shares was evident by the high number of company visits. The individual and group discussions with investors and analysts focused on questi ons about the development of the end markets, the Company's future prospects and current technology trends, especially those related to the issues of weight reducti on and digiti zati on in the transport industry.
CONSOLIDATED MANAGEMENT REPORT 16 SAF-HOLLAND at a Glance A further highlight of last year's acti viti es was the Capital Markets Day in September, which took place during the IAA Commercial Vehicles trade fair. The event's new format was very well received. Aft er an extensive tour of the booth and a technology briefi ng, visitors had the opportunity to pose questi ons in individual and small group discussions not only to the CEO and CFO but also to members of the Management Board with regional responsibiliti es.
68 Consolidated Statement of Changes in Equity 69 Consolidated Statement of Cash Flows 70 Notes to the Consolidated Financial Statements 70 Corporate Informati on 70 Accounti ng and Valuati on Principles 83 Scope of Consolidati on 16 Business model: Direct access to end customers 16 Locati ons and markets: Global presence in all major markets 16 Products and customers: Customized products to meet the specifi c needs of customers 18 Leading market positi on 18 Organizati onal structure Detailed and up-to-date informati on on the Company's shares and corporate and converti ble bonds can be found on SAF-HOLLAND's Investor Relati ons website at htt p://corporate.safh olland.com/en/investor-relati ons. The website provides key fi gures and current fi nancial news, as well as the ability to download reports, presentati ons and conference call recordings.
92 Notes to the Consolidated Balance Sheet 108 Other Disclosures 121 SAF-HOLLAND S.A. Annual Financial Statements 121 Income Statement of SAF-HOLLAND S.A. 20 Strategy and Objecti ves 20 Growth "Strategy 2020" 21 Performance Indicators 21 Financial performance indicators SAF-HOLLAND is covered by both nati onal and internati onal banks and research fi rms who regularly publish research reports on the Company. As in the prior year, three new banks / brokers initi ated coverage of the Company raising the total number to 14.
124 Independent Auditor's Report 126 Responsibility Statement 21 Non-fi nancial performance indicators 21 Internal Group control system 21 Industry and company-specifi c early indicators 23 Research and Development 23 Innovati ve soluti ons to extend our At the end of 2016, eleven of the fourteen analysts either recommended buying the shares or expected the shares to outperform the overall market. Three analysts recommended holding the shares. The corresponding price targets ranged between EUR 11.00 and EUR 18.00.
| FINANCIAL STATEMENTS | |||
|---|---|---|---|
| 12 / 21 / 2016 | Bankhaus Lampe | Buy | |
| 10 / 19 / 2016 | Berenberg | Buy | |
| 11 / 14 / 2016 | Commerzbank | Hold | |
| 12 / 07 / 2016 | Deutsche Bank | Hold | |
| 11 / 10 / 2016 | equinet | Buy | |
| 05 / 09 / 2016 | Exane BNP Paribas | Outperform | |
| 66 Consolidated Statement of Comprehensive Income |
11 / 10 / 2016 | Hauck & Aufh äuser 28 Managers' transacti ons |
Buy |
| 67 Consolidated Balance Sheet |
08 / 15 / 2016 | HSBC 28 Informati on according to Arti cle 11 (1) |
Hold |
| 68 Consolidated Statement of Changes in Equity |
09 / 23 / 2016 | Kepler Cheuvreux and (3) of the Luxembourg Takeover Law |
Buy |
| 69 Consolidated Statement of Cash Flows |
11 / 10 / 2016 | from May 19, 2006 Macquarie Capital |
Outperform |
| 11 / 10 / 2016 | M.M. Warburg | Buy | |
| 70 Notes to the Consolidated Financial Statements |
30 11 / 10 / 2016 |
Economy and Industry Environment Montega |
Buy |
| 70 Corporate Informati on | 11 / 11 / 2016 | 30 Overall economic development: World economy ODDO Seydler |
Buy |
| 70 Accounti ng and Valuati on Principles | 07 / 26 / 2016 | conti nues to grow moderately Quirinbank |
Buy |
| 30 Industry development: Strong regional |
122 Balance Sheet of SAF-HOLLAND S.A. 123 Mandates of the Board of Directors / Management Boards commercial vehicle market 30 Market correcti on in North America 31 Market developments in APAC / China vary 32 Key events during the 2016 Financial Year 32 Cash off er to acquire Haldex 32 Groundbreaking order for disc brake technology in North America 32 Majority takeover of Brazilian company KLL 33 Sales and Earnings Performance, Net Assets and Cash Flows 33 Forecast versus Actual Business Development 34 Sales and Earnings Performance 42 Net Assets 44 Financial positi on: Cash fl ows 45 Management's general statement on the fi nancial situati on in the 2016 SAF-HOLLAND's shares are widely held. According to the defi niti on of Deutsche Börse AG, 100 % of the Company's shares are freely fl oati ng. The shareholders base consists primarily of insti tuti onal investors such as fund managers, asset managers, banks, insurance companies and private investors from both Germany and abroad. Major shareholders are primarily capital investment companies from Great Britain, the United States, France, Scandinavia and the Benelux countries, whereby the proporti on of North American and Scandinavian investors has increased the most this past year. The Company noti ced a growing interest from long-term investors such as insurance companies. At the end of 2016, fund managers Delta Lloyd Asset Management N.V. as well as FMR LLC both held stakes of more than 5 % in SAF-HOLLAND S.A.'s share capital. Members of the Management Board and the Board of Directors of SAF-HOLLAND S.A. together held 1.6 % of the outstanding shares.
56 Company outlook: Solid sales and Status: December 31, 2016
Management Report / Sustainability
Consolidated Financial Statements / Additi onal Informati on
The Annual General Meeti ng of SAF-HOLLAND S.A. on April 28, 2016 resolved to pay a dividend in the amount of EUR 0.40 per share for 2015 (previous year: EUR 0.32). Shareholders accepted the Board of Directors' proposal to increase the dividend payment by 25 %. The total dividend payout of EUR 18.1 million (previous year: EUR 14.5 million) represented a payout rati o of almost 39 % (previous year: 44 %) of the available net earnings generated in the 2015 fi nancial year. The available net earnings were determined by adjusti ng the result for the period by accounti ng-related and non-cash income from the valuati on of intercompany foreign currency loans in the amount of EUR 4.7 million aft er taxes that occurred in the 2015 fi nancial year. This payout rati o essenti ally met the general target of distributi ng 40 % to 50 % of the available net earnings as a dividend. The dividend yield based on the year-end closing price for SAF-HOLLAND shares in 2015 was 3.2 % (previous year: 2.9 %).
The Annual General Meeti ng elected Pricewaterhouse-Coopers Société coopérati ve, Luxembourg, as the new auditor for the 2016 fi nancial year aft er ERNST & YOUNG S.A. had served as the auditor of the listed company SAF-HOLLAND for nine years. In changing its auditor, SAF-HOLLAND has opted for the early implementati on of the EU directi ve that entered into force in 2016, which amends the current auditor guidelines and instructs capital market-oriented companies to change their auditor at least every ten years.
The Annual General Meeti ng also decided to extend the Board of Directors mandates of Anja Kleyboldt, Marti na Merz and Dr Marti n Kleinschmitt unti l the end of the Annual General Meeti ng that resolves on the adopti on of the fi nancial results for the 2018 fi nancial year.
| WKN / ISIN | A0MU70 / LU0307018795 |
|---|---|
| Ticker symbol | SFQ |
| Number of shares | 45,361,112 |
| Designated sponsors | Commerzbank AG, ODDO SEYDLER BANK AG, Kepler Cheuvreux |
| Year high / low 1 | EUR 13.64 / EUR 9.00 |
| Year-end closing price 1 | EUR 13.64 |
| Market capitalizati on | EUR 618.7 million |
1 XETRA closing price
Since 2012, SAF-HOLLAND has listed a corporate bond in the Prime Standard segment for corporate bonds of the Frankfurt Stock Exchange. The bond has a total nominal value of EUR 75.0 million, a coupon of 7.0 % and matures on April 26, 2018.
In the year 2014, SAF-HOLLAND also issued converti ble bonds with a total nominal amount of EUR 100.2 million as a private placement. The converti ble bonds, which are traded in the open market on the Frankfurt Stock Exchange, mature on September 12, 2020 and have an annual interest rate of 1.0 %. No bonds were converted during the 2016 fi nancial year.
The corporate and converti ble bonds' prices, most important key fi gures and terms and conditi ons are available on the Company's investor relati ons website under the menu item "Share and Bonds".
In 2016, the rati ng agency Euler Hermes reconfi rmed SAF-HOLLAND's "BBB" investment grade rati ng. In an analysis dated April 6, 2016, Euler Hermes also said it expects SAF-HOLLAND to maintain this rati ng over the coming twelve months. The Euler Hermes assessment assumes slightly higher business risk caused by cyclical fl uctuati ons in the commercial vehicle sector, but also highlights that the high barriers to market entry and the more economically stable spare parts business parti ally compensate for this risk. The rati ng agency assessed the Group's fi nancial risk as low given its solid capital structure and fi nancial fl exibility.
66 Consolidated Statement of Comprehensive Income 28 Managers' transacti ons
Management Report / Sustainability
Consolidated Financial Statements / Additi onal Informati on
The SAF-HOLLAND Group, located in Luxembourg, is the largest independent, listed commercial vehicle supplier in Europe that is focused on the trailer markets. With sales of approximately EUR 1,042.0 million in 2016 and on average more than 3,200 employees, the Company is one of the world's leading manufacturers of chassis-related systems and components, primarily for trailers, trucks and buses. The product range comprises axle and suspension systems, fi ft h wheels, kingpins and landing gear and is marketed under the SAF, Holland and Neway brands. SAF-HOLLAND sells its products to Original Equipment Manufacturers (OEMs) on six conti nents. The aft ermarket business delivers the Group's spare parts to the service networks of Original Equipment Suppliers (OES) as well as to end customers and service centers through its extensive global parts distributi on network. SAF-HOLLAND is one of the few suppliers in the truck and trailer industry that is broadly positi oned internati onally in almost all markets worldwide.
SAF-HOLLAND's business model is disti nguished by its focus on products that are crucially important to truck and trailer manufacturers in terms of quality, performance, innovati on and standard of safety. SAF-HOLLAND's trailer products contribute roughly one-third of the total value of a standard trailer. SAF-HOLLAND's lightweight components and their inherent weight savings are setti ng industry standards and allowing end customers to opti mize their total cost of ownership.
SAF-HOLLAND sells not only to vehicle manufacturers but also has direct access to its end customers – the fl eet operators. For many products, it is the fl eet operators themselves who determine the majority of trailer specifi cati ons, such as those for axle and suspension systems and choose their own suppliers at the same ti me. The direct contact is what keeps SAF-HOLLAND close to customers so that it can off er the right soluti ons for the customers' ever-changing demands.
Apart from the original equipment business, another key component of the Company's business model is the aft ermarket business. With around 9,000 spare parts and service stati ons worldwide, SAF-HOLLAND possesses the largest and densest spare parts and service network in both Europe and North America. The guaranteed, rapid supply of spare parts is one of the main criteria sought by fl eet operators when selecti ng suppliers and also represents a high barrier to entry for potenti al competi tors. Because the demand in the aft ermarket business lags that of the original equipment business, cyclical fl uctuati ons in the original equipment business can be smoothed out to help keep SAF-HOLLAND's business model in balance.
SAF-HOLLAND is present in all of the major truck and trailer markets worldwide. The Company has 19 producti on locati ons on six conti nents. The focus of producti on has traditi onally been in the entrenched markets of North America and Europe. SAF-HOLLAND has also established producti on faciliti es in Brazil, South Africa, Turkey, India, China, Australia and the United Arab Emirates. This structure has made the Company one of the most geographically diverse suppliers in its sector.
SAF-HOLLAND also has one of the broadest spare parts and service networks of most of its competi tors comprising around 9,000 spare parts and service stati ons as well as dealers and repair shops in over 80 countries. SAF-HOLLAND is densely represented throughout its core markets of Europe and North America.
The Group's key sales markets are sti ll in Europe and North America. SAF-HOLLAND's acti viti es outside of these established markets are mainly concentrated in the BRIC countries and Australia. In China and Brazil, SAF-HOLLAND is not only acti ve in the truck and trailer sector but also in the growing segment for bus suspensions.
SAF-HOLLAND's key products include axle and suspension systems, landing gear, kingpins for trailers, fi ft h wheels for trucks and suspension systems for vocati onal trucks and buses. While the trailer business spans several hundred original equipment manufacturers and a number of fl eet operators, the customer base for truck components consists of a much lower number of large, globally operati ng truck manufacturers as well as smaller regional providers and manufacturers of vocati onal trucks.
SAF-HOLLAND markets its products for original equipment manufacturers under three umbrella brands worldwide: SAF, Holland and NEWAY. The SAF brand features axle and
suspension systems for trailers, the Holland logo is used on products with coupling and lift ing technology, and NEWAY is the brand for suspensions for trucks and buses. At the local level and mainly in the Middle East and East Africa, SAF-HOLLAND also uses the TRILEX brand.
SAF-HOLLAND supplies spare parts dealers and repair shops as well as large fl eet operators from its global spare parts and service network. The product range includes original spare parts for trucks and trailers as well as products from the brands SAUER GERMANY QUALITY PARTS and GoldLine. These brands are designed parti cularly for markets with a high share of older vehicles where customers focus mainly on durability and low prices. Spare parts from third parti es are also sold.
technology
suspension systems
Innovati ve fl eet-opti mized trailer axles, brakes and suspension systems to maximize transport effi ciency
Reliable, proven fl eet soluti ons for safe and effi cient coupling and lift ing using innovati ve technology and global experti se
Durable, tested for fl eet use and extremely powerful air suspensions with outstanding design features and broad operati onal usage in vocati onal trucks and buses
vocati onal trucks and buses
SAF-HOLLAND faces oligopolisti c competi ti ve structures in both Europe and North America – its two most important sales markets today. The three largest suppliers hold roughly 80 – 90 % of the market share in nearly all product segments.
In Europe, SAF-HOLLAND is a leader in all of the relevant market segments and ranks as one of the top three suppliers in each of these markets. SAF-HOLLAND is a leader in axle and suspension systems for trailers in Europe. In North America, SAF-HOLLAND holds leading positi ons for fi ft h wheels, landing gear and kingpins.
Since the 2016 fi nancial year, SAF-HOLLAND has had a regionally focused Group structure comprised of the three regions EMEA / India, Americas and APAC / China, each consisti ng both of the original equipment and aft ermarket businesses. Each division is fully responsible for its own results and controls all the necessary resources. Cross-unit functi ons and key tasks to support the business units are centrally organized within the Group.
The Management Board's responsibiliti es are organized accordingly. In additi on to the three members with functi onal responsibility (CEO, CFO and COO), the Americas and EMEA / India regions are each represented by their own board members. The APAC / China region will be directed by the chief executi ve offi cer unti l further noti ce. The plan over the medium term is to break down the Group's acti viti es further and expand the Management Board to a total of eight members. Each of the fi ve core regions would then have their own members representi ng them on the Management Board (Americas, Europe, Middle East / Africa / India, APAC and China).
SAF-HOLLAND S.A. is a company incorporated under the laws of Luxembourg, whose shares are listed exclusively in Germany. As the parent company of the Group, it holds all shares in SAF-HOLLAND GmbH, which in turn holds the interests in all of the local subsidiaries.
in %
FINANCIAL STATEMENTS One of the main factors infl uencing SAF-HOLLAND's business is the development of global transportati on volumes. Cargo volumes are conti nuously growing worldwide driven by rapid populati on growth and the economy's growing urbanizati on and globalizati on. In emerging countries, the expansion of road networks is also driving excepti onally strong growth in the transportati on of goods. These demographic and economic developments are leading to higher demand for tractors, trailers and buses, which in turn benefi ts SAF-HOLLAND.
87 Notes to the Consolidated Statement of Comprehensive Income Legal and regulatory requirements can promote higher product sales. For example, fuel consumpti on and emissions requirements for commercial vehicles are conti nually increasing worldwide. This increases the need for weightreduced components – a development that benefi ts SAF-HOLLAND because its components are among the lightest on the market. Similar considerati ons apply in relati on to the safety requirements. This area is also seeing more stringent regulati ons internati onally, which again opens up att racti ve opportuniti es for SAF-HOLLAND because its products can help meet the more stringent safety standards.
In additi on to the investments in the respecti ve local subsidi aries, SAF-HOLLAND holds a strategic equity interest of over one-third of the French company Castmetal FWI S.A. since 2006. The other shares in the joint venture are held by the SAFE-Group, a producer of technical components made of cast steel and plasti c injecti on molding for various industrial applicati ons. The joint venture supplies SAF-HOLLAND with cast components for fi ft h wheels and suspension systems for the North American market. In additi on, SAF-HOLLAND has held 57.5 % of the shares in the Brazilian suspension specialist KLL Equipamentos para Transporte Ltda. since October 2016. The remaining 42.5 % of the shares can be purchased through a put- / call-opti on at a later ti me.
With the introducti on of Growth "Strategy 2020" in 2015, SAF-HOLLAND has aligned its business to the global megatrends. The world's growing populati on and increase in purchasing power – especially in the middle class – are the key drivers for the expected increase in consumpti on. Rising demand for goods leads to steadily increasing transportati on volumes and requires a substanti al investment in transportati on equipment, parti cularly in trucks and trailers, which are found at the beginning and end of every supply chain. This market growth is mainly seen in the emerging economies, parti cularly in the Asia Pacifi c, Middle Eastern and African markets.
In anti cipati on of this development, SAF-HOLLAND laid the groundwork early on in order to transform itself from an internati onal company to a global group. The objecti ve is to signifi cantly expand the Group's presence in the emerging markets by expanding the product portf olio and entering new regional markets outside of the core markets of Europe and North America. A further strategic objecti ve is the expansion of the aft ermarket business across all regions. Over the medium term, this business is expected to consti tute at least one-quarter of the Group's sales.
Based on sales of around EUR 960 million in fi nancial year 2014, SAF-HOLLAND is targeti ng organic Group sales in 2020 of approximately EUR 1,250 million, representi ng organic sales growth of a good 4 % p.a. on average. Complementary collaborati ons, joint ventures and acquisiti ons are expected to add sales of roughly EUR 250 million and should boost total Group sales to an esti mated EUR 1,500 million. The share of sales generated outside of today's core markets of Europe and North America is expected to rise from its current level of around 10 % to a total of 30 % under Growth "Strategy 2020". SAF-HOLLAND has already taken an important step in this directi on by completi ng its acquisiti on of KLL in 2016, a leading supplier in Brazil of air suspension systems for trucks and buses as well as axles and mechanical and air suspension systems for trailers. We see tremendous medium-term sales potenti al in Brazil – a country with more than 200 million people and the largest economy and transportati on market in South America.
The adjusted EBIT margin is expected to reach an average level of at least 8 % by the year 2020. SAF-HOLLAND expects earnings per share to rise around 75 % compared to its level in 2014 and reach about EUR 1.20 by 2020. This target fully takes into account the higher number of shares resulti ng from the conversion rights of converti ble bonds issued in 2014.
The Group plans to retain its high level of capital effi ciency despite strong growth. The annual investment volume in the coming years is expected to hold steady at 2.5 % of sales with the rati o of net working capital to sales largely stable at around 12 %. The Group will conti nue to strive for a maximum leverage rati o (net debt / EBITDA) of 2.0, whereby a level of approximately 2.5 would be tolerated temporarily for larger acquisiti ons.
66 Consolidated Statement of Comprehensive Income 67 Consolidated Balance Sheet 68 Consolidated Statement of Changes in Equity 69 Consolidated Statement of Cash Flows Achieving profi table growth and a sustainable rise in the Group's enterprise value is the focus of the Group's corporate management. Financial indicators are the primary tools used to assess current business development, determine the future strategy and make investment decisions. The following are the key fi nancial performance indicators for the management of the SAF-HOLLAND Group:
plant and equipment and intangible assets from purchase price allocati on, impairment reversals on intangible assets as well as restructuring and integrati on costs) or derived from it the adjusted EBIT margin
| EUR million | 92 Notes to the Consolidated Balance Sheet | |||||
|---|---|---|---|---|---|---|
| 108 Other Disclosures Target 2020 |
2016 | 2015 | 2014 | 2013 | 2012 | |
| Sales | 1,250 – 1,500 | 1,042.0 | 1,060.7 | 959.7 | 857.0 | 859.6 |
| 121 Adjusted EBIT |
≥ 100 – 120 | 90.4 | SAF-HOLLAND S.A. Annual Financial Statements 94.0 |
70.7 | 59.3 | 58.2 |
| in % of sales | 121 Income Statement of SAF-HOLLAND S.A. ≥ 8 % |
8.7 | 8.9 | 7.4 | 6.9 | 6.8 |
| Diluted earnings per share in EUR | 122 Balance Sheet of SAF-HOLLAND S.A. ~ 1.20 |
0.85 | 0.99 | 0.69 | 0.54 | 0.18 |
| Net working capital | 150 – 180 | 111.9 | 116.6 1 | 102.7 | 76.1 | 82.4 |
| 123 in % of sales |
12 | 11.1 | Mandates of the Board of Directors / Management Boards 12.0 |
10.9 | 9.4 | 10.2 |
| 124 | Independent Auditor's Report |
126 Responsibility Statement 1 Excluding receivables of EUR 2.0 million from the sale of a property in Wörth, Germany.
SAF-HOLLAND budgets, calculates and monitors the sales, adjusted EBIT and adjusted EBIT margin at both the Group and segment levels. The calculati on of earnings per share and net working capital, however, is conducted only at the Group level.
Other important fi nancial performance indicators considered in corporate management are the investment volumes, leverage rati o, equity rati o, liquidity, cash fl ow from operati ng acti viti es and return on investment (ROI).
As non-fi nancial performance indicators, SAF-HOLLAND relies primarily on data such as delivery reliability, quality, sales volume, personnel, customer structure and sati sfacti on and market share development. The parameters gathered are recorded separately for the diff erent regions and product groups. This makes it not only possible to recognize developments at an early stage but also to address them specifi cally.
Every year, SAF-HOLLAND prepares a medium-term plan for the forthcoming fi ve years in additi on to a yearly budget. A quarterly forecast is also prepared for the respecti ve fi nancial year based on the Group's current business development.
The Management Board and the Board of Directors monitor the achievement of fi nancial performance indicators using a target / actual comparison. The progress made in achieving the strategic objecti ves is reviewed and analyzed regularly in the meeti ngs of the Management Board and the Board of Directors.
The primary company-specifi c early indicators are order intake and order backlog. These indicators are gathered for the respecti ve Group companies and indicate the level of capacity uti lizati on to be expected and the likely development of sales and earnings.
Management also conti nuously monitors and analyzes the stati sti cs and forecasts for the overall economic development of the relevant countries and regions and the developments in the global truck and trailer markets – especially incoming orders and registrati on fi gures.
66 Consolidated Statement of Comprehensive Income 67 Consolidated Balance Sheet 68 Consolidated Statement of Changes in Equity We consider ourselves as one of the technological leaders in our industry. We rely on innovati ve technologies and soluti ons to secure our long-term competi ti ve positi on and increase our development edge. Our research and development acti viti es are of signifi cant strategic importance.
70 Notes to the Consolidated Financial Statements Our research and development expenses in the reporti ng year amounted to EUR 19.7 million (previous year: EUR 20.9 mil-
69 Consolidated Statement of Cash Flows lion). We also capitalized development costs of EUR 3.7 million (previous year: EUR 3.7 million), which resulted in a capitalizati on rati o of 15.8 % (previous year: 15.0 %). These were off set by the amorti zati on of capitalized development costs in the amount of EUR 0.7 million (previous year: EUR 0.5 million). The R&D rati o based on Group sales amounted to 2.2 % (previous year: 2.3 %). At the end of the 2016 fi nancial year, there was a total of 192 (previous year: 191) employees in the development, design and testi ng areas.
| 70 Accounti ng and Valuati on Principles Multi -year overview of research and development |
|---|
| ---------------------------------------------------------------------------------------------- |
| 83 Scope of Consolidati on 84 Segment Informati on |
2016 | 2015 | 2014 | 2013 | 2012 |
|---|---|---|---|---|---|
| 87 Notes to the Consolidated Statement of Comprehensive Income R&D expenses including capitalized development costs |
|||||
| 92 Notes to the Consolidated Balance Sheet (EUR million) |
23.4 | 24.6 | 21.9 | 19.1 | 19.4 |
| 108 Other Disclosures R&D rati o (expenses as a percentage of sales) |
2.2 | 2.3 | 2.3 | 2.2 | 2.3 |
| Number of employees in the area of development, | |||||
| design and testi ng 121 |
192 SAF-HOLLAND S.A. Annual Financial Statements |
191 | 171 | 164 | 160 |
123 Mandates of the Board of Directors / Management Boards 124 Independent Auditor's Report 126 Responsibility Statement Our development acti viti es are not only focused on developing new products but also on adapti ng existi ng soluti ons to customer-specifi c or regional market requirements. This is why our teams of developers and engineers are not only located in our centers in Germany and the United States but are present worldwide. Direct proximity to our customers ensures that the specifi c market knowledge of the local units fl ows directly into our products.
The goal of our research and development acti viti es is to off er our customers innovati ve products that ensure their fl eets operate effi ciently while opti mizing their total cost of ownership. To achieve this goal, we have made the following areas the focus of our R&D acti viti es:
During the reporti ng year, SAF-HOLLAND presented a large number of development-stage product innovati ons at trade fairs in both Germany and abroad. Some of the most important trade fair appearances included the Mid-America Trucking Show in Louisville, Kentucky; the IANA Intermodal Expo in Houston, Texas; Automechanika in Frankfurt, Germany; and above all the IAA Commercial Vehicles fair in Hanover, Germany. SAF-HOLLAND presented a total of 14 new soluti ons from the product, component and services area at the IAA alone. These soluti ons were largely related to the Company's core products such as axles, suspensions, brakes and fi ft h-wheel couplings. New functi onaliti es were also presented, specifi cally those off ering added value to our end customers.
One of the many highlights at the IAA included the trailer axle concept SAF TRAK for which SAF-HOLLAND received the coveted "Trailer Innovati on 2017" award for the chassis category. SAF TRAK is a hydraulically driven trailer axle. As a start assistant, the SAF TRAK System assists tractors on gradients and diffi cult road surfaces, especially at constructi on sites and landfi lls, using a hydraulically driven motor. Details on how the SAF TRAK operates can be found in the image secti on of this annual report.
Aft er the SAF TRAK concept was presented for the fi rst ti me in April 2016 at the bauma trade fair, a leading trade fair for constructi on machinery, SAF TRAK was subsequently presented to several customers who made valuable suggesti ons for the product's further development. The concept was also well-received by trade publicati ons. With SAF TRAK, SAF-HOLLAND is able to give an impressive demonstrati on of its system capabiliti es beyond those related to mechanical components. Series producti on of SAF TRAK is scheduled to start at the end of 2017.
We presented further groundbreaking product innovati ons at the IAA Commercial Vehicles fair with the introducti on of two new axle systems from the INTRA series. Axle systems for use in curtainsiders (INTRA light) or ti ppers (INTRA CD Light) are impressive due to their signifi cantly lower weight, which allows an even higher payload with less fuel consumpti on. The INTRA Light adds additi onal weight savings of up to 20 kilograms per axle, or 60 kilograms per trailer, compared to a standard INTRA system. The INTRA CD Light, which is especially designed for diffi cult terrain and emphasizes durability, off ers additi onal weight savings of up to 11 kilograms per axle, or 33 kilograms per trailer, compared to a standard INTRA CD. These products are scheduled to launch in Europe in 2018.
Another highlight in the reporti ng year was the North American introducti on of our latest generati on of disc brake technology, the P89 disc brake. SAF-HOLLAND's P89 trailer disc brake stands out due to its sharply improved braking performance, high running performance, long life and ease of maintenance. At the same ti me, it off ers a price advantage of up to 40 % compared to the market's other currently available disc brakes and therefore represents a compelling alternati ve to drum brakes, also in terms of price. In July 2016, SAF-HOLLAND received the fi rst large order to equip 1,800 trailers with this new generati on of disc brakes from U.S. Xpress, one of the largest truckload carriers in the United States. In the image secti on of this annual report, we provide further informati on about this order and show the importance U.S. Xpress believes brake disc technology has for the North American market.
The number of priority applicati ons validates our innovati ve strength and the eff ecti veness of our research and development acti viti es. With 36 new internati onal applicati ons acquired in the reporti ng year, we have conti nued to expand our portf olio of priority applicati ons. Since a priority applicati on always signifi es an initi al fi ling of a patent family, the increase described was also accompanied by a number of related sub-applicati ons and extensions.
| 2016 | 2015 | 2014 | 2013 | 2012 | |
|---|---|---|---|---|---|
| Number of priority applicati ons | 36 | 30 | 41 | 26 | 20 |
66 Consolidated Statement of Comprehensive Income 67 Consolidated Balance Sheet 68 Consolidated Statement of Changes in Equity 69 Consolidated Statement of Cash Flows SAF-HOLLAND is a Société Anonyme (S.A.) under Luxembourg law. Management and control of the Company are organized diff erently than in the case of German stock corporati ons. Whereas corporate law in Germany calls for a two-ti er model with a Management Board and Supervisory Board, the management structure of an S.A. follows the single-ti er principle of the Anglo-American board system.
70 Accounti ng and Valuati on Principles 83 Scope of Consolidati on 84 Segment Informati on 92 Notes to the Consolidated Balance Sheet The business of SAF-HOLLAND S.A., a holding company without its own operati ng business, is managed by the Board of Directors. The focus of the Board of Directors' acti viti es is fi rst and foremost the SAF-HOLLAND Group's strategic directi on and the supervision of the business acti viti es of the operati ng companies.
121 SAF-HOLLAND S.A. Annual Financial Statements 121 Income Statement of SAF-HOLLAND S.A. 122 Balance Sheet of SAF-HOLLAND S.A. 123 Mandates of the Board of Directors / Management Boards 124 Independent Auditor's Report 126 Responsibility Statement The Board of Directors may consist of external members (non-executi ve directors) and the Company's operati ng managers (executi ve directors). The Board elects a chairperson and deputy chairperson from its own members as appropriate. In accordance with the Arti cles of Associati on, the Board's decisions are made with a simple majority. To carry out its duti es, the Board of Directors sets up an Audit Committ ee, similar to the Audit Committ ee of the Supervisory Board.
At SAF-HOLLAND, the Board of Directors currently consists of seven members. Five of these members, including the Chairman Bernhard Schneider, are non-executi ve directors. The sixth member is Chief Executi ve Offi cer Detlef Borghardt (CEO) of SAF-HOLLAND. By having this structure, there is one member of the Board directly involved in the Company's day-to-day business. In additi on, Jack Gisinger, who has been an associate member of the Board of Directors since December 6, 2016, will be nominated to the Board of Directors at the Annual General Meeti ng on April 27, 2017. Unti l December 31, 2015, Jack Gisinger had been a member of SAF-HOLLAND's Management Board and the president of the Powered Vehicle Systems business unit.
At the end of the Annual General Meeti ng on April 28, 2016, Ms Marti na Merz took over the offi ce of deputy chairman of the Board of Directors from Mr Sam Marti n.
Further informati on on the acti viti es of the Board of Directors during the 2016 fi nancial year can be found in the corresponding report on page 123.
| 68 Consolidated Statement of Changes in Equity |
as of December 31, 2016 | |
|---|---|---|
| 69 Consolidated Statement of Cash Flows |
Bernhard Schneider | Chairman of the Board of Directors |
| Marti na Merz | Deputy Chairman of the Board of Directors | |
| 70 Notes to the Consolidated Financial Statements |
Detlef Borghardt | Member of the Board of Directors |
| 70 Corporate Informati on | Jack Gisinger | Associate Member of the Board of |
| 70 Accounti ng and Valuati on Principles | Directors | |
| 83 Scope of Consolidati on | Dr Marti n Kleinschmitt | Member of the Board of Directors |
| 84 Segment Informati on | Anja Kleyboldt | Member of the Board of Directors |
| 87 Notes to the Consolidated Statement of Comprehensive Income | Sam Marti n | Member of the Board of Directors |
The executi ve board of SAF-HOLLAND GmbH is the top operati onal management body of the SAF-HOLLAND Group. It acts like the management board of a German stock cooperati on (Vorstand) and is responsible for the operati onal management of the Group. The worldwide Group acti viti es are further coordinated by the Management Board in which, besides the members of the executi ve board of SAF-HOLLAND GmbH, also further members of the management from the diff erent regions of the Group are represented. The members of the Management Board are appointed by SAF-HOLLAND S.A. The Board of Directors, the executi ve board of SAF-HOLLAND GmbH and the Management Board respecti vely maintain a close, conti nuous and faithful working relati onship.
At the beginning of the year 2016, the Management Board was reconfi gured to refl ect the change in SAF-HOLLAND Group´s organizati onal structure according to regions. In additi on to the three members with functi onal responsibility (CEO, CFO and COO), the Americas and EMEA / India regions are now each represented by their own presidents. The APAC / China region will be directed by the CEO unti l further noti ce. At the end of 2016, SAF-HOLLAND's Management Board consisted of the following six members:
as of December 31, 2016
| Detlef Borghardt | Chief Executi ve Offi cer |
|---|---|
| President Region APAC / China | |
| Wilfried Trepels | Chief Financial Offi cer |
| (unti l December 31, 2016) | |
| Arne Jörn | Chief Operati ng Offi cer |
| Alexander Geis | President Region EMEA / India |
| Guoxin Mao | President Region China |
| Steff en Schewerda | President Region Americas |
In May 2016, Mike Kamsickas resigned from his positi on as chief operati ng offi cer for personal reasons. In October 2016, the Board of Directors appointed Arne Jörn as his successor. Guoxin Mao, President of the Region China, was appointed as a member of the Management Board on August 9, 2016. Wilfried Trepels gave noti ce of his resignati on from SAF-HOLLAND in September 2016 to take eff ect as of the end of that year. On March 1, 2017, Dr Matt hias Heiden assumed the positi on of chief fi nancial offi cer. In the interim period, Dr Marti n Kleinschmitt temporarily assumed the functi on of CFO.
Members of the Board of Directors receive remunerati on for their service and additi onal payment for assuming additi onal tasks such as chairing the Audit Committ ee. The CEO of the Management Board does not receive additi onal compensati on for his work on the Board of Directors.
The Management Board's performance-related remunerati on system is based on agreed short- and medium-term targets. Management Board members also have a sharebased compensati on component that is based on the Company's medium- to long-term success. Further details on sharebased compensati on for Management Board members can be found in the notes to this annual report on page 71.
As a Luxembourg société anonyme (S.A.) listed solely in Germany, SAF-HOLLAND is neither subject to the Luxembourg nor the German standards for corporate governance. Nevertheless, the Board of Directors, the Management Board and the executi ve board of SAF-HOLLAND GmbH are committ ed to responsible and transparent corporate governance, business integrity, sustainability and compliance with ethical values. Therefore, SAF-HOLLAND complies with the recommendati ons and suggesti ons of the German Corporate Governance Code on a voluntary basis to the extent allowed by Luxembourg corporate law and the Company's single-ti er board structure. The existi ng limitati ons are refl ected in the Declarati on of Conformity pursuant to Secti on 161 AktG, which we submit on a voluntary basis.
The Declarati on of Conformity submitt ed by the Board of Directors in March 2017 is permanently available on our website at htt p://corporate.safh olland.com/en/company/ about-us/corporate-governance/corporate-governance.
Corporate integrity has the highest priority at SAF-HOLLAND. Therefore, we believe the concept of compliance refers not only to compliance with the applicable nati onal and internati onal laws and regulati ons but also signifi es a commitment to ethical and moral values. We have therefore set up a compliance organizati on to support our employees in meeting these requirements.
The head of the Compliance & Legal Aff airs department oversees the compliance management and reports directly to the chief fi nancial offi cer. The Internal Audit department supports the head of the Compliance & Legal Aff airs department in carrying out her duti es.
Our Code of Conduct combines the compliance requirements that are binding for SAF-HOLLAND as a company, our management as well as for each individual employee.
The Code of Conduct includes but is not limited to regulati ons on
The Code of Conduct is available to our employees in our Group languages of English and German. In the event of questi ons or suspected cases, employees can contact the head of the Compliance & Legal Aff airs department at any ti me.
CONSOLIDATED Other compliance issues, such as the handling of receiving benefi ts and insider informati on are regulated by Groupwide binding guidelines and memorandums. If there were any changes in the legal framework, such as the implementati on of the European Union regulati on on market abuse (MAR) during the 2016 fi nancial year, the corresponding informati on is updated, and the employees aff ected are informed.
70 Notes to the Consolidated Financial Statements 70 Corporate Informati on 70 Accounti ng and Valuati on Principles 83 Scope of Consolidati on 84 Segment Informati on 92 Notes to the Consolidated Balance Sheet 108 Other Disclosures The law for the equal parti cipati on of women and men in executi ve positi ons has been in force in Germany since May 2015. As a company incorporated under Luxembourg law, SAF-HOLLAND S.A. is not subject to the provisions of German law. Only the German locati ons of SAF-HOLLANDGmbH fall under the scope of German law. Nevertheless, the Group is committ ed to the principle of diversity when fi lling management positi ons at the Company and especially strives to increase the level of female representati on in various areas of the Group.
121 Income Statement of SAF-HOLLAND S.A. 122 Balance Sheet of SAF-HOLLAND S.A. 123 Mandates of the Board of Directors / Management Boards 124 Independent Auditor's Report 126 Responsibility Statement With female representati on on the Board of Directors of roughly 29 % on December 31, 2016, SAF-HOLLAND S.A. nearly meets the female quota for supervisory boards of a minimum 30 % required under German law. SAF-HOLLAND has also set targets at its German locati ons for female representati on in the second and third management levels below the Management Board (Vice Presidents and Directors). The Company is striving to reach a female quota of 12.5 % at each of these management levels by mid-2022. The quota among directors is expected to reach 9 % as early as mid-2017. This target compares with the level of female representati on in Germany's overall workforce of currently just under 12 %. At the end of 2016, the level of female representati on in management positi ons was 5.6 %.
The shareholders of SAF-HOLLAND exercise their voti ng rights at the Annual General Meeti ng. Each share is enti tled to one vote. The Annual Ordinary General Meeti ng takes place each year within the fi rst six months of the fi nancial year on the fourth Thursday in April. The Board of Directors presents the annual and consolidated fi nancial statements to the shareholders. The Annual General Meeti ng decides on the adopti on of the SAF-HOLLAND S.A. annual fi nancial statements, the appropriati on of profi ts, as well as the discharge of the members of the Board of Directors and the auditor, who is in fact appointed by the Annual General Meeti ng. The Annual General Meeti ng resolves changes to
FINANCIAL STATEMENTS the Arti cles of Associati on and important corporate acti ons including, among others, the electi on of members to the Board of Directors and extensions in terms of offi ce.
66 Consolidated Statement of Comprehensive Income The convening of the Annual General Meeti ng, the meeting's agenda, and related documents are published on the company's website. The relevant deadline for shareholder verifi cati on is the end of the 14th day prior to the Annual General Meeti ng (the record date). Shareholders may exercise their voti ng rights through a proxy of their choice, a company-appointed proxy or in writi ng.
87 Notes to the Consolidated Statement of Comprehensive Income 121 SAF-HOLLAND S.A. Annual Financial Statements SAF-HOLLAND is committ ed to providing its shareholders and the public equal access to comprehensive and ti mely communicati on. All annual and quarterly reports, ad hoc announcements, press releases, investor presentati ons and any noti fi able changes in voti ng rights are on SAF-HOLLAND's newly designed website in the German and English languages. The Company's website also provides informati on on the Group and its organizati onal structure, the fi nancial structure, the Arti cles of Associati on, the members of the Board of Directors and Management Board and upcoming and past Annual General Meeti ngs. The regular fi nancial reporti ng dates are available in the fi nancial calendar. Conference calls for analysts, investors and journalists are held for important events.
The consolidated fi nancial statements and interim reports of SAF-HOLLAND S.A. are prepared by the Management Board in accordance with Internati onal Financial Reporti ng Standards (IFRS), as applicable in the European Union.
The consolidated fi nancial statements have been audited by PricewaterhouseCoopers Société coopérati ve, Luxembourg, who was selected by the 2016 Annual General Meeti ng. The consolidated fi nancial statements were audited in accordance with the provisions of the Internati onal Standards on Auditi ng adopted for Luxembourg by the Commission de Surveillance du Secteur Financier. The auditors assured the Board of Directors of their independence and objecti vity prior to accepti ng the audit mandate. The fi nancial statements are reviewed, approved and published by the Board of Directors no longer than 90 days aft er the end of the fi nancial year.
Managers of the Company are obliged under Arti cle 19 of Regulati on (EU) No. 596 / 2014 on market abuse (Market Abuse Regulati on) to disclose to SAF-HOLLAND S.A. and the CSSF (Commission du Surveillance du Secteur Financier) transacti ons for their own account in shares or debt instruments of SAF-HOLLAND S.A., related derivati ves or other related fi nancial instruments if the value of the purchase or sale reaches or exceeds EUR 5,000 within one calendar year. This obligati on also applies to persons closely related to managers. SAF-HOLLAND reports these transacti ons immediately following their disclosure to the Company.
We did not receive any noti fi cati ons of transacti ons concluded by managers during the 2016 reporti ng year. All current and past noti fi cati ons are available on our website at http://corporate.safholland.com/en/investor-relations/ publicati ons/announcements.
| Name of the shareholder | Shares 1, 2 | % share of voti ng rights 1 |
|---|---|---|
| Delta Lloyd Asset Management N.V. | 2,297,665 | 5.07 % |
| Fidelity Management and Re search Limited Liability Company |
2,283,397 | 5.03 % |
1 As of December 31, 2016
2 Total number of SAF-HOLLAND shares: 45,361,112
Any amendment to the Company's Arti cles of Associati on made by the general meeti ng of shareholders shall require a two-thirds majority of the voti ng rights present or represented at the meeti ng provided there is a quorum of 50 % of the share capital at the general meeti ng of shareholders. Should the quorum requirement not be met in the initi al general meeti ng of shareholders, a second general meeti ng of shareholders may be convened for the same purposes for which there is no quorum requirement.
CONSOLIDATED right to declare due any or all of the bonds plus the interest accrued up to the chosen redempti on date. Aft er a change of control, the chosen redempti on date is specifi ed by the Company and communicated in an announcement to the bondholders. The redempti on date is a business day between at least 60 to not more than 90 calendar days following the announcement's publicati on.
66 Consolidated Statement of Comprehensive Income 67 Consolidated Balance Sheet 68 Consolidated Statement of Changes in Equity 69 Consolidated Statement of Cash Flows 70 Notes to the Consolidated Financial Statements 70 Corporate Informati on 70 Accounti ng and Valuati on Principles The Company issued a converti ble bond with a nominal value of EUR 100.2 million, a coupon of 1 % and maturing in 2020. As described in greater detail in Arti cle 10 (7) of the converti ble bond's terms and conditi ons, in the event of a change of control, each holder of such a converti ble bond may exercise the discreti onary right to declare due on the eff ecti ve date all or a part of the holder's convertible bonds not previously converted or repurchased.
84 Segment Informati on 87 Notes to the Consolidated Statement of Comprehensive Income 92 Notes to the Consolidated Balance Sheet 108 Other Disclosures 121 SAF-HOLLAND S.A. Annual Financial Statements 121 Income Statement of SAF-HOLLAND S.A. 122 Balance Sheet of SAF-HOLLAND S.A. 123 Mandates of the Board of Directors / Management Boards 124 Independent Auditor's Report Aft er a change of control, the eff ecti ve date is specifi ed by the Company and communicated in an announcement to the bondholders. The eff ecti ve date is a business day between at least 40 to not more than 60 calendar days following the announcement's publicati on. The Company will redeem the converti ble bonds declared due by the bondholder on the eff ecti ve date at their nominal value plus any interest that may have accrued. The conversion price will be adjusted by the calculati on agent for each conversion right exercised on or before the eff ecti ve date in accordance with Arti cle 10 (3) of the converti ble bond's terms and conditi ons.
The Company has issued several tranches of a promissory note totaling EUR 200 million with diff ering maturiti es. In the case of a change of control, the contractual terms of the respecti ve notes, as described in detail in Arti cle 13 (3) and (4) of the respecti ve contractual terms and conditi ons, grant each noteholder the right to declare due in whole the noteholder's porti on of the note and to demand immediate repayment at the nominal value plus any interest that may have accrued and any other amounts owed in accordance with the respecti ve promissory note agreement.
The current credit agreements with various banks (syndicated loans) relati ng to drawn and undrawn lines of credit in a total volume of EUR 156 million also include provisions in the event of a change of control. Following a change of control, the Company must immediately inform the agent of that event. The creditors have the discreti onary right to declare due via the agents all outstanding credit lines plus any interest that may have accrued and all other amounts owed in accordance with the respecti ve loan agreements, provided they noti fy the agents within a period of 30 days. The agent is obliged to inform the Company of this noti fi cati on within ten days.
FINANCIAL STATEMENTS Under two loan agreements dated June 13, 2016, the Company, together with SAF-HOLLAND Inc., is acti ng as a guarantor to IKB Deutsche Industriebank AG with SAF-HOLLAND GmbH as the borrower. Each of the loans amount to EUR 25 million and are to be repaid no later than June 26, 2026.
The Company is not party to any other important agreements that take eff ect, change or terminate upon a change of control in the Company following a takeover bid.
k) There are no agreements between the Company and members of the Board of Directors or employees that provide for compensati on arrangements for the members of the Board of Directors or the employees in the event of a takeover off er if the employment relati onship is terminated without good cause or as a result of a takeover off er.
The world economy conti nued its moderate recovery in 2016. At 3.1 %, global growth remained close to the previous year's level (3.2 %). Although the accelerati on in growth projected at the start of the year by the Internati onal Monetary Fund (IMF) failed to materialize, several uncertainti es did fade throughout the course of the year. Fears of a growth slump in the emerging markets were left unvalidated. The commodity markets experienced a signifi cant recovery, and concerns about potenti al added pressure on the world economy from the politi cal crises in the Middle East and the Ukraine and the forthcoming Brexit have decreased. Even a second interest rate increase by the U.S. Federal Reserve was not enough to cause any upset.
Economic development was stable in the eurozone where growth – supported by the ultra-loose monetary policy of the European Central Bank and the low oil price – reached 1.7 % and was exactly in line with the IMF's expectati ons at the start of the year. Growth in the United States, on the other hand, was muted at just 1.6 % compared to the IMF's expectati on of 2.6 % as the year began. The United States was burdened by the slow recovery in the manufacturing industry and especially the weakness in the energy sector from falling commodity prices. The economic performance of the large emerging markets was varied. Whereas the Chinese economy was able to achieve growing stability over the course of the year, Brazil and Russia conti nued to struggle with a recession.
The development of the global commercial vehicle markets varied greatly in 2016. The Western European truck and trailer market provided the largest growth sti mulus while the North American heavy truck (Class 8) market underwent a correcti on that was stronger than expected and had an increasing impact on the trailer market as the year progressed. The development in the emerging markets was also mixed. China reported positi ve growth rates while the important Brazilian market remained under pressure. Russia, on the other hand, saw the fi rst signs of recovery. Australia, another important market for SAF-HOLLAND, also started to stabilize in mid-2016.
According to esti mates by the market research insti tute CLEAR, the Western European trailer market raised producti on by 8.0 % in 2016, marking the fourth consecuti ve year of growth. Growth in Germany, which is by far the single largest market, amounted to 9.3 %. Double-digit growth rates were achieved in both the Italian and Spanish trailer markets, whereas momentum in the Eastern European trailer market was more subdued. CLEAR esti mates producti on in Eastern Europe grew by 2.8 %. Poland conti nued its upward trend of the past few years and registered an increase of 18.5 %. Trailer producti on in Russia grew 17.1 %, but started from a very low level. Producti on in this market was just half of the level recorded in 2011.
The European truck market also achieved grati fying growth rates this past year. According to the European Automobile Manufacturers Associati on (ACEA) trade associati on, new registrati ons of commercial vehicles of all types increased by 11.6 % across the European Union in 2016. In the heavy-duty truck segment (over 16 t), which is the relevant vehicle category for SAF-HOLLAND, new registrati ons increased an impressive 12.3 %. Momentum normalized in the course of the year as expected and aft er an increase of 17.8 % in heavy truck registrati ons in the fi rst half of the year, growth in the second half amounted to just 7.1 %.
Aft er several years of declining registrati on fi gures, the Russian market for heavy trucks managed to stabilize in 2016 at a low level. Aft er getti ng off to a weak start in the year, the decline in registrati ons was off set in the months that followed with registrati ons for the year 4.2 % higher year-on-year.
The correcti on expected for heavy trucks in North America materialized in 2016 with Class 8 producti on fi gures falling 29.4 % to roughly 228,000 units. According to market research insti tute ACT Research, the correcti on was even stronger than had been expected at the start of the year (250,000 to 270,000 units expected). The correcti on resulted from excess capacity aft er the record numbers of new registrati ons in the past several years. Growth was also held back by the reluctance of many of the fl eet operators to invest as a result of the relati vely slow momentum of the U.S. manufacturing
CONSOLIDATED FINANCIAL STATEMENTS industry. New orders for Class 8 trucks fell by roughly 35 %, whereby this fi gure is exaggerated due to the high number of cancellati ons. In additi on, incoming orders have been bott oming out at a low level since the second quarter.
66 Consolidated Statement of Comprehensive Income New orders for trailers only started to weaken in early 2016 and ended up falling around 30 % for the full year. High order backlogs have allowed trailer manufacturers to limit producti on declines to 7.1 %, or approximately 358,000 units.
68 Consolidated Statement of Changes in Equity 69 Consolidated Statement of Cash Flows 70 Notes to the Consolidated Financial Statements The Brazilian market remained weak in 2016. Despite the insignifi cant absolute levels reached aft er years of decline, the Brazilian market for heavy trucks recorded another 18.5 % drop in registrati ons in 2016.
84 Segment Informati on 87 Notes to the Consolidated Statement of Comprehensive Income 92 Notes to the Consolidated Balance Sheet 108 Other Disclosures 121 SAF-HOLLAND S.A. Annual Financial Statements 121 Income Statement of SAF-HOLLAND S.A. The situati on in most of the truck and trailer markets in the ASEAN countries remained challenging in the year 2016. The development of the single largest market, China, was diff erent with truck sales increasing last year by 8.8 %, according to data from the manufacturers associati on CAAM. Heavy trucks even registered a rise of 33.1 %. The bus segment, on the other hand, recorded a year-on-year sales decline of 8.7 %.
123 Mandates of the Board of Directors / Management Boards 124 Independent Auditor's Report 126 Responsibility Statement Due to the beginning of a gradual recovery in commodity prices, the Australian market, which is an important market for SAF-HOLLAND, stabilized in the course of 2016 aft er getti ng off to a slow start. Registrati on fi gures for heavy trucks for the full year were at the prior year's level. Registrati on fi gures in Australia, however, are sti ll around 20 % below their level prior to the fi nancial market crisis.
In July 2016, SAF-HOLLAND S.A. announced a cash off er for the acquisiti on of all issued and outstanding shares of the publicly listed Swedish company Haldex AB through its wholly owned subsidiary SAF-HOLLAND GmbH. The objecti ve of the takeover off er was to create an integrated provider for chassis-related components for commercial vehicles. The total value of the off er for the Haldex shares was approximately EUR 442.1 million. The off er's acceptance period was August 1 – 24, 2016.
Following the announcement of a higher off er for Haldex from another bidder in early August, SAF-HOLLAND disclosed on August 11, 2016 that it will not increase its bid in response and decided to withdraw its off er. This decision refl ects SAF-HOLLAND's clear M&A principles, one of which is that acquisiti ons must add both strategic and fi nancial value. SAF-HOLLAND is committ ed to these principles because it believes they are in the best interest of its shareholders.
SAF-HOLLAND secured a groundbreaking order in July from U.S. Xpress, one of the largest truckload carriers in the United States. For the fi rst ti me, U.S. Xpress will equip 1,800 of its newly ordered trailers with the latest SAF-HOLLAND P89 disc brake technology marking its change to disc brakes from drum brakes, which are sti ll widely used in the United States. SAF-HOLLAND has been a pioneer in disc brake technology in Europe for many years and possesses extensive know-how in this area. The Company expects this structurally expanding market segment to increase the sales potenti al in North America in the next few years, parti cularly in light of the fact that the use of disc brake technology in SAF-HOLLAND's axle systems can also increase the value sold-in per vehicle. More informati on on the order from U.S. Xpress can be found in the image secti on of this annual report.
In early September, SAF-HOLLAND signed the agreements to acquire a 57.5 % stake in the Brazilian suspension specialist KLL Equipamentos para Transporte Ltda. (KLL). The acquisiti on was completed on October 5, 2016 and, since that date, KLL has been included in the scope of consolidati on. The remaining 42.5 % stake will conti nue to be held by the founding family. SAF-HOLLAND can purchase these shares at a later ti me through a put- / call-opti on.
KLL is one of Brazil's leading suppliers of air suspension systems for trucks and buses as well as mechanical and air suspensions and axles for trailers. KLL currently employs around 200 staff . The customer base includes nearly all major manufacturers of trucks, buses and trailers in Brazil. This acquisiti on gives SAF-HOLLAND direct access to key truck customers for its truck-related product range and at the same ti me positi ons SAF-HOLLAND as a market leader for air suspension systems for buses. SAF-HOLLAND is also expanding its market share in trailer axle and suspension systems and is enhancing its technology portf olio through the additi on of mechanical suspension systems. In the course of the acquisiti on, SAF-HOLLAND is consolidati ng its existi ng acti viti es in Brazil yielding both cost savings and effi ciency gains.
68 Consolidated Statement of Changes in Equity 69 Consolidated Statement of Cash Flows 70 Notes to the Consolidated Financial Statements 70 Corporate Informati on 70 Accounti ng and Valuati on Principles 83 Scope of Consolidati on 84 Segment Informati on 87 Notes to the Consolidated Statement of Comprehensive Income 92 Notes to the Consolidated Balance Sheet 108 Other Disclosures 121 SAF-HOLLAND S.A. Annual Financial Statements 121 Income Statement of SAF-HOLLAND S.A. 122 Balance Sheet of SAF-HOLLAND S.A. 123 Mandates of the Board of Directors / Management Boards 124 Independent Auditor's Report 126 Responsibility Statement In the 2016 fi nancial year, SAF-HOLLAND successfully countered many of the eff ects of the weak environment in several of the transportati on markets worldwide. The Group's positi ve development in Europe, market share gains and the increase in the aft ermarket business enabled SAF-HOLLAND to maintain essenti ally stable organic sales. As a result, organic sales – representi ng sales excluding negati ve currency eff ects of EUR 12.7 million and the contributi on to sales from the purchase of KLL – reached a level of EUR 1,052.9 million. This amount represents a marginal year-on-year decline of 0.1 %. Important to note is that the AerWay product line, which sti ll contributed about EUR 6.8 million to Group sales in 2015, was sold at the end of 2015. The acquired suspension specialist KLL contributed EUR 1.8 million to Group sales in the fourth quarter of 2016. Based on the above, SAF-HOLLAND reached the lower end of its Group sales target range of EUR 1,050 to EUR 1,070 million. Initi ally, the Company had forecast steady to slightly higher organic sales in the range of EUR 1,050 to EUR 1,070 million. SAF-HOLLAND gave a more specifi c forecast with the publicati on of the half-year results in August 2016 stati ng it expected to reach to the lower end of the forecast range as a result of the progressively weaker-than-expected market environment in North America in 2016.
| Sales by quarter 2016 | ||||||||
|---|---|---|---|---|---|---|---|---|
| EUR million | ||||||||
| 0 | 50 | 100 | 150 | 200 | 250 | 300 | ||
| Q1 | 259.9 | |||||||
| Q2 | 273.7 | |||||||
| Q3 | 255.8 | |||||||
| Q4 | 252.6 | |||||||
Sales by quarter (YoY) 2016
The SAF-HOLLAND Group's regional sales development refl ected the market's development as a whole. Although SAF-HOLLAND's development in the Americas region was signifi cantly bett er than the market in terms of truck and trailer producti on, the performance sti ll did not sati sfy the Company's own expectati ons. The Group was able to off set some of the pronounced weakness in North America with strong demand in Europe. In the APAC / China region, sales were slightly bett er than expected but had litt le eff ect on the Group's sales overall.
Q3 Q4
8.4 7.8
SAF-HOLLAND's adjusted EBIT margin of 8.7 % for the 2016 fi nancial year meant it had also achieved its target for an adjusted EBIT margin tending rather towards the upper half of the range of 8 – 9 %. Aft er announcing the original 8 – 9 % target range, the Group gave a more specifi c target in August 2016 stati ng it expected to reach the upper half of that range. In achieving its earnings target, the Group was faced not only with a diffi cult market environment but also several unexpected factors. For example, typhoon damage and the introducti on of SAP in China, which resulted in the recogniti on of extraordinary write-downs on inventories and old stock, as well as one-ti me expenses from warranti es, together amounted to a total charge of EUR 1.6 million and brought down earnings.
In North America, the Group was confronted not only with a steep decline in producti on rates for trucks and trailers but also a steady rise in steel prices during the year. This development adversely aff ected earnings because price increases are typically only passed on to customers aft er a certain ti me period.
| Actual 2015 |
Forecast 2016 (March 2016) |
Revision August 2016 |
Actual business development 2016 |
|
|---|---|---|---|---|
| Sales | Between | EUR 1,042.0 million | ||
| EUR 1,050 and | Lower end of range | (reported) | ||
| EUR 1,070 million | of EUR 1,050 and | EUR 1,052.9 million | ||
| EUR 1,060.7 million | (organic) | EUR 1,070 million | (organic) | |
| Adjusted EBIT margin | ||||
| Upper half of the | ||||
| 8.9 % | 8 – 9 % | 8 – 9 % range | 8.7 % | |
| Net working capital rati o | 12.0 % | 12 – 13 % | – | 11.1 % |
We exceeded our target for capital effi ciency in the 2016 fi nancial year. Due to the planned increase in sales contributi ons from new regions, we were projecti ng a slight rise in the net working capital rati o limited to a range of 12 to 13 % aft er amounti ng to 12.0 % in the 2015 fi nancial year. With our achievement of 11.1 % as of the end of 2016, we not only reached this target but also managed to substanti ally improve this rati o compared to the end of 2015. By tying up less working capital and making lower payments for investments compared to the prior year, the Group was able to achieve signifi cantly higher free cash fl ow in 2016.
Despite declines in most of the commercial vehicle markets worldwide in 2016, Group sales held steady at a high level. Sales in 2016 reached EUR 1,042.0 million (previous year: EUR 1,060.7 million), or 1.8 % lower than the previous year. Items aff ecti ng sales included negati ve currency eff ects of EUR 12.7 million and the absence of sales and earnings contributi ons from the divested AerWay product line, which had a slightly lower margin than the Group's average and had sti ll contributed EUR 6.8 million to sales in the Americas region in 2015. The fi rst-ti me consolidati on of the Brazilian suspension specialist KLL Equipamentos para Transporte Ltda. in October (sales contributi on of EUR 1.8 million) could only parti ally compensate for the AerWay eff ect. Organic sales, which do not include negati ve currency eff ects or the contributi on to sales from the purchase of KLL, nearly matched last year's level and amounted to EUR 1,052.9 million in the 2016 fi nancial year.
Aft er a decline in sales in the fi rst nine months of 3.4 %, SAF-HOLLAND achieved organic sales growth in the fourth quarter of 2016 of 3.9 % for a total of EUR 252.6 million (previous year: EUR 243.2 million), despite clear weakness in the US market in the same period. On an organic basis, sales grew 4.0 %. The negati ve currency eff ects of EUR 0.6 million and slightly positi ve eff ect of EUR 0.3 million from the change in the scope of consolidati on had litt le impact on a quarterly basis.
| EUR million | ||||
|---|---|---|---|---|
| FINANCIAL STATEMENTS | 2016 | 2015 | ||
| Original equipment | 772.2 | 74.1 % | 792.7 | 74.7 % |
| Spare parts | 269.8 | 25.9 % | 268.0 | 25.3 % |
| Total | 1,042.0 | 100.0 % | 1,060.7 | 100.0 % |
CONSOLIDATED
70 Notes to the Consolidated Financial Statements 70 Corporate Informati on 70 Accounti ng and Valuati on Principles 83 Scope of Consolidati on 84 Segment Informati on 92 Notes to the Consolidated Balance Sheet 108 Other Disclosures Sales in the original equipment business resumed growth in the fourth quarter, marking the fi rst ti me in the 2016 fi nancial year. Sales rose by 3.5 % to EUR 187.9 million (previous year: EUR 181.5 million). A chief contributor was the doubledigit growth in the APAC/ China region. The recent entry into force of the GB 1589 standard in China triggered a disti nct accelerati on in demand in the fourth quarter, parti cularly for trailer components. Further informati on on the eff ects of this standard is presented in the secti on on the development of the APAC / China segment on page 41.
121 Income Statement of SAF-HOLLAND S.A. 122 Balance Sheet of SAF-HOLLAND S.A. 123 Mandates of the Board of Directors / Management Boards 124 Independent Auditor's Report 126 Responsibility Statement Sales in the original equipment business for the full year declined 2.6 % to EUR 772.2 million (previous year: EUR 792.7 million) mainly due to negati ve currency and consolidati on eff ects (e.g., absence of the AerWay product line). SAF-HOLLAND achieved solid growth in the EMEA / India region where demand for truck and trailer components remained robust. Worth menti oning is the positi ve development in Eastern Europe outside of the Russian Federati on. Markets in the Middle East such as Turkey and Saudi Arabia, on the other hand, were signifi cantly weaker in the second half of the year.
In the Americas region, the original equipment business experienced a decline throughout the whole of 2016. Although the orders for trailers and Class 8 trucks increased in the fourth quarter of 2016, customer call orders were weaker again toward the end of the year in North America. Some of the major US truck and trailer manufacturers halted producti on longer than usual over the holidays.
Sales in the spare parts business in the 2016 fi nancial year were 0.7 % higher amounti ng to EUR 269.8 million (previous year: EUR 268.0 million). Sales growth stemmed primarily from the EMEA / India region. This rise was the result of the higher demand from fl eet operators for spare parts following the rise in transportati on volumes in a majority of the region's core markets, as well as higher sales of products under the SAUER GERMANY QUALITY PARTS brand for older trucks and trailers in their "second life." The APAC / China
87 Notes to the Consolidated Statement of Comprehensive Income region even achieved double-digit growth in 2016, albeit starti ng from a very low level. This region's acti viti es are currently focused on establishing a base of installed products and customers to provide a foundati on for the aft ermarket business. The spare parts business in the Americas regions, in contrast, performed in line with the market for commercial vehicle spare parts and declined by a mid singledigit percentage amount in 2016. Demand for spare parts was very restrained aft er record new registrati ons in 2014 and 2015, parti cularly in the heavy Class 8 truck segment. As a rule, demand for service and spare parts increases only two to three years aft er the new vehicles are registered.
121 SAF-HOLLAND S.A. Annual Financial Statements In the fourth quarter of 2016, sales of the spare parts business increased 4.9 % to EUR 64.7 million (previous year: EUR 61.7 million). The bett er sales development in comparison to the fi rst nine months (– 0.6 %) was not only the result of solid demand from the EMEA / India region but also a slight pickup in the spare parts business in the Americas region.
| EUR million | ||||
|---|---|---|---|---|
| 2016 | 2015 | |||
| Sales | 1,042.0 | 100.0 % | 1,060.7 | 100.0 % |
| Cost of sales | – 835.5 | – 80.2 % | – 857.8 | – 80.9 % |
| Gross profi t | 206.5 | 19.8 % | 202.9 | 19.1 % |
| Other operati ng income | 1.2 | 0.1 % | 3.3 | 0.4 % |
| Selling expenses | – 60.7 | – 5.8 % | – 61.4 | – 5.8 % |
| Administrati ve expenses | – 50.9 | – 4.9 % | – 44.6 | – 4.2 % |
| Research and development costs | – 19.7 | – 1.9 % | – 20.9 | – 2.0 % |
| Operati ng result | 76.4 | 7.3 % | 79.3 | 7.5 % |
| Finance result | – 13.51 | – 1.3 % | – 4.02 | – 0.4 % |
| Share of net profi t of investments accounted for using the equity method |
2.1 | 0.2 % | 2.3 | 0.2 % |
| Result before taxes | 65.0 | 6.2 % | 77.6 | 7.3 % |
| Income taxes | – 21.5 | – 2.1 % | – 25.9 | – 2.3 % |
| Result for the period | 43.5 | 4.2 % | 51.7 | 4.9 % |
| Number of shares 3 | 45,361,112 | 45,361,112 | ||
| Basic earnings per share in EUR | 0.98 | 1.14 | ||
| Diluted earnings per share in EUR | 0.85 | 0.99 |
1 As of 2016, the vast majority of unrealized exchange gains and losses from the valuati on of intercompany foreign currency loans is no longer recognized in the fi nance result. Accordingly, unrealized exchange gains from the valuati on of intercompany foreign currency loans of EUR 1.0 million in 2016 (Q4 / 2016: unrealized exchange gains of EUR 2.7 million) were recognized directly in other comprehensive income at the rate on the reporti ng date.
2 The fi nance result for the 2015 fi nancial year includes unrealized exchange gains from the valuati on of intercompany foreign currency loans at the rate on the reporti ng date of EUR 6.8 million (Q4 / 2015: unrealized exchange gains of EUR 1.8 million).
3 Weighted average number of ordinary shares.
Earnings development in 2016 was strongly infl uenced by one-ti me expenses for the Haldex takeover bid that was ulti mately withdrawn, the acquisiti on of KLL and a change in the recogniti on of unrealized exchange gains and losses from the valuati on of the predominant porti on of the intercompany foreign currency loans, which have been accounted for as part of a net investment in a foreign operati on since the beginning of the 2016 fi nancial year. Since that ti me, they have been directly recognized under other comprehensive income (OCI). Transacti on-related costs brought down the result before taxes by an amount of EUR 4.1 million. In the previous year, unrealized exchange gains from the valuati on of intercompany foreign currency loans totaling EUR 6.8 million were recognized in the fi nance result. In 2016, however, this positi on no longer had any signifi cant eff ect. The above factors, which signifi cantly burdened the Group's earnings, were parti ally off set by a EUR 3.6 million improvement in gross profi t.
Despite a EUR 18.7 million decline in Group sales, gross profi t rose to EUR 206.5 million (previous year: EUR 202.9 million), representi ng a gross margin improvement of 70 basis points in the 2016 fi nancial year to 19.8 % (previous year: 19.1 %). This increase resulted mainly from savings generated from the plant consolidati on in the EMEA region, process improvements, bett er producti on network effi ciency and lower costs from the greater bundling of purchasing acti viti es within the Group. Some of this improvement was off set by the insuffi cient market-related uti lizati on of the producti on capacity in North America. The company managed to curtail the impact of this factor on profi ts, however, because we had started to adjust our capacity at an early stage. The problems with capacity uti lizati on in Brazil were similar to those in North America. A negati ve eff ect on gross margins resulted from a gradual rise in steel prices in North America during the year, which typically can only be passed on to customers at a later stage. In China, we were also required to recognize extraordinary write-downs on inventories and old stock due to typhoon damage and valuati on adjustments made in the course of introducing SAP, as well as one-ti me expenses from warranti es, which together totaled EUR 1.6 million. These write-downs had a negati ve impact on the gross margin.
The gross margin in the fourth quarter of 2016 was signifi cantly higher year-on-year and reached 19.2 % (previous year: 18.1 %). This rise was due not only to the eff ects already described but also to a favorable product mix.
Stringent cost controls were responsible for limiti ng the overall rise in operati ng expenses, parti cularly in the case of selling expenses, which declined slightly in the 2016 fi nancial year to EUR 60.7 million (previous year: EUR 61.4 million). Selling expenses as a percentage of Group sales remained stable at 5.8 %.
67 Consolidated Balance Sheet 68 Consolidated Statement of Changes in Equity 69 Consolidated Statement of Cash Flows 70 Notes to the Consolidated Financial Statements 70 Corporate Informati on 70 Accounti ng and Valuati on Principles 83 Scope of Consolidati on 84 Segment Informati on 92 Notes to the Consolidated Balance Sheet 108 Other Disclosures 121 SAF-HOLLAND S.A. Annual Financial Statements SAF-HOLLAND's Group-wide research and development costs were slightly lower than in the previous year amounting to EUR 19.7 million (previous year: EUR 20.9 million). The fact that a high number of development projects were completed helped reduce these costs. The R&D expense rati o excluding capitalized development costs was 1.9 % (previous year: 2.0 %). Development costs in the amount of EUR 3.7 million (previous year: EUR 3.7 million) were capitalized while scheduled amorti zati on of development costs amounted to EUR 0.7 million (previous year: EUR 0.5 million). Including capitalized development expenses, R&D costs in 2016 amounted to EUR 23.4 million (previous year: EUR 24.6 million) yielding an R&D rati o of 2.2 % (previous year: 2.3 %).
122 Balance Sheet of SAF-HOLLAND S.A. 123 Mandates of the Board of Directors / Management Boards 124 Independent Auditor's Report 126 Responsibility Statement The sharp rise in administrati ve expenses in the 2016 fi nancial year to EUR 50.9 million (previous year: EUR 44.6 million) is mainly due to one-ti me eff ects from the takeover bid for the Swedish company Haldex AB and the acquisiti on of the Brazilian suspension specialist KLL (legal and consulti ng costs and brokerage fees, among others). In calculati ng the adjusted earnings fi gures, an adjustment was made for one-ti me transacti on costs that came to a total of about EUR 4.1 million. Subsequent transacti on costs of EUR 0.7 million were recognized in the fourth quarter along with EUR 0.9 million in transacti on costs initi ally recognized under fi nance expenses in the third quarter and later reclassifi ed to administrati ve expenses in the fourth quarter.
Other operati ng income declined to EUR 1.2 million in 2016 (previous year: EUR 3.3 million). This decline was largely a result of posted income of EUR 1.4 million from fi xed asset disposals in the prior year 2015 resulti ng from the sale of the AerWay product line and real estate at the former locati on in Wörth am Main, Germany, that was no longer needed as a result of plant consolidati on.
The total of these factors more than off set the improvement in the gross margin. The operati ng result came in at EUR 76.4 million in the 2016 fi nancial year (previous year: EUR 79.3 million). The operati ng income margin was almost unchanged at 7.3 % (previous year: 7.5 %). The slight decline in the margin compared to the prior year was mainly the result of lower other operati ng income in the amount of EUR 1.2 million (previous year: EUR 3.3 million) and the
CONSOLIDATED FINANCIAL STATEMENTS 66 Consolidated Statement of Comprehensive Income one-ti me transacti on expenses for Haldex and KLL totaling EUR 4.1 million. Results also came under pressure from the aforementi oned extraordinary write-downs on inventories and old stock, as well as from one-ti me expenses for warranti es in China. Despite their one-ti me nature, these charges were not adjusted in the calculati on of adjusted earnings. In the fourth quarter of 2016, the operati ng result reached EUR 16.1 million (previous year: EUR 14.6 million), which was 10.3 % above the prior year's level.
87 Notes to the Consolidated Statement of Comprehensive Income 121 Income Statement of SAF-HOLLAND S.A. The fi nance result in 2016 was EUR – 13.5 million (previous year: EUR – 4.0 million). This decline largely resulted from the change in the accounti ng of unrealized and non-cash exchange gains and losses from the valuati on of intercompany foreign currency loans. The fi nance result in the previous year sti ll included an exchange gain of EUR 6.8 million. Since the beginning of the 2016 fi nancial year, translati on eff ects from the valuati on of the predominant porti on of the intercompany foreign currency loans are accounted for as part of a net investment in a foreign operati on and directly recognized in other comprehensive income (OCI). Consequently, this item no longer had an appreciable eff ect on results in 2016.
The eff ects resulti ng from the takeover off er for Haldex are fully recognized in the fi nancial statements for the year 2016 and resulted in a slightly positi ve eff ect on the fi nance result. The Group had acquired approximately 3.6 % of the Haldex shares before issuing the takeover bid. The Group sold all of these shares on the stock market in the fourth quarter because the positi on was no longer of strategic importance and due to the potenti al risk of anti trust issues, which was to be eliminated in accordance with the Group's risk management system. The sale resulted in a gain of EUR 5.7 million. This gain was partly off set by transacti on expenses of EUR 5.1 million incurred to hedge the potenti al purchase price in Swedish krona of the planned acquisiti on of Haldex for the purpose of transacti on security.
In 2015, SAF-HOLLAND created the fi nancing basis for the acquisiti ons planned under "Strategy 2020" and specifi cally for the fi nancing of the takeover bid for Haldex by issuing a promissory note. This issue caused a rise in net interest income and expenses in the 2016 fi nancial year to EUR – 11.7 million (previous year: EUR – 8.8 million). Important to note is that only a very minimal amount of interest was generated from investi ng the liquid assets from the promissory note.
The fi nance result in the fourth quarter of 2016 was EUR – 3.2 million (previous year: EUR – 1.5 million). This yearon-year decline largely resulted from the change in the accounti ng treatment of unrealized and non-cash exchange gains and losses from the valuati on of intercompany foreign currency loans menti oned above. The fourth quarter of 2015 sti ll contained a gain of EUR 1.8 million versus an insignifi cant amount of income in the fourth quarter of 2016. The sale of the Haldex shares in the fourth quarter of 2016 also generated a fi nance expense of EUR 0.9 million because the average price of the shares sold was below the price used to measure the shares' value on the September 30, 2016 reporti ng date. These expenses compare to a positi ve eff ect of EUR 0.9 million from the reclassifi cati on of transacti on costs contained in the third quarter's fi nance result to administrati ve costs. Net interest income and expenses in the fourth quarter amounted to EUR – 3.2 million (previous year: EUR – 2.5 million).
The result before taxes in 2016 decreased to EUR 65.0 million (previous year: EUR 77.6 million). This decline was higher on a percentage basis than the decline in the operati ng result and was the outcome of the eff ects on the fi nance result already described.
The tax rate for the whole of 2016 remained essenti ally unchanged at 33.1 % (previous year: 33.4 %). The Group tax rate in the fourth quarter was disproporti onately high as a result of the earnings development at some of the subsidiaries and the recogniti on of trade taxes on the gain from the sale of the Haldex shares.
The result for the period fell accordingly by 15.9 % in the 2016 fi nancial year to EUR 43.5 million (previous year: EUR 51.7 million). It is important to note that the previous year's result sti ll included roughly EUR 4.5 million in noncash exchange gains (aft er taxes) from the valuati on of intercompany foreign currency loans.
Based on an unchanged number of ordinary shares outstanding of 45.4 million, basic earnings per share for the 2016 fi nancial year were EUR 0.98 (previous year: EUR 1.14), and diluted earnings per share amounted to EUR 0.85 (previous year: EUR 0.99).
SAF-HOLLAND's dividend policy provides for a dividend distributi on to shareholders of generally 40 to 50 % of the available net earnings. Available net earnings do not take into account purely accounti ng and non-cash eff ects such as the gain from the valuati on of intercompany foreign currency loans in the 2015 fi nancial year. Accordingly and taking into account the strong development of free cash fl ow, the Board of Directors will propose a 10.0 % higher dividend of EUR 0.44 per share (previous year: EUR 0.40) to the Annual General Meeti ng on April 27, 2017. This amount is equivalent to a total distributi on of around EUR 20.0 million (previous year: EUR 18.1 million) and a payout rati o of 46.4 % (previous year: 38.6 %) of available net earnings. Based on SAF-HOLLAND's 2016 year-end share price of EUR 13.64, the dividend represents an att racti ve dividend yield of 3.2 % (previous year: 3.2 %).
| EUR million | |||
|---|---|---|---|
| FINANCIAL STATEMENTS | 2016 | 20152 | 2015 |
| Result for the period | 43.5 | 51.7 | 51.7 |
| Income taxes | 21.5 | 25.9 | 25.9 |
| Finance result | 13.51 | 4.0 | 4.03 |
| Depreciati on and amorti zati on from PPA | 5.3 | 7.0 | 7.0 |
| Restructuring and transacti on costs | 6.6 | 5.4 | 5.4 |
| 66 Adjusted EBIT |
Consolidated Statement of Comprehensive Income 90.4 |
94.0 | 94.0 |
| 67 Consolidated Balance Sheet in % of sales |
8.7 | 8.9 | 8.9 |
| 68 Consolidated Statement of Changes in Equity Depreciati on and amorti zati on |
17.3 | 15.3 | 15.3 |
| 69 Consolidated Statement of Cash Flows Adjusted EBITDA |
107.7 | 109.3 | 109.3 |
| in % of sales | 10.3 | 10.3 | 10.3 |
| 70 Depreciati on and amorti zati on |
Notes to the Consolidated Financial Statements – 17.3 |
– 15.3 | – 15.3 |
| 70 Corporate Informati on Finance result |
– 13.51 | – 10.7 | – 4.03 |
| 70 Accounti ng and Valuati on Principles Adjusted result before taxes |
76.9 | 83.3 | 90.0 |
| 83 Scope of Consolidati on Income taxes |
– 23.2 | – 25.7 | – 27.8 |
| 84 Segment Informati on Adjusted result for the period |
53.74 | 57.65 | 62.25 |
| in % of sales | 87 Notes to the Consolidated Statement of Comprehensive Income 5.2 |
5.4 | 5.9 |
| 92 Notes to the Consolidated Balance Sheet Number of shares 6 |
45,361,112 | 45,361,112 | 45,361,112 |
| 108 Other Disclosures Adjusted basic earnings per share in EUR7 |
1.18 | 1.27 | 1.37 |
| Adjusted diluted earnings per share in EUR8 | 1.03 | 1.10 | 1.18 |
121 SAF-HOLLAND S.A. Annual Financial Statements 121 Income Statement of SAF-HOLLAND S.A. 122 Balance Sheet of SAF-HOLLAND S.A. 1 As of the 2016 fi nancial year, the vast majority of unrealized exchange gains and losses from the valuati on of intercompany foreign currency loans are no longer recognized in the fi nance result. Accordingly, unrealized exchange gains from the valuati on of intercompany foreign currency loans of EUR 1.0 million in 2016 (Q4 / 2016: unrealized exchange gains of EUR 2.7 million) were recognized directly in other comprehensive income at the rate on the reporti ng date.
2 For bett er comparability, the 2015 fi nance result – as of the line item adjusted EBITDA – is presented in accordance with the method used in 2016. As a result, unrealized exchange gains of EUR 6.7 million in 2015 (Q4 / 2015: unrealized exchange gains of EUR 1.8 million) are no longer recognized under this item.
123 Mandates of the Board of Directors / Management Boards 3 The fi nance result for the 2015 fi nancial year includes unrealized exchange gains of EUR 6.8 million (Q4 / 2015: unrealized exchange gains of EUR 1.8 million) from the valuati on of intercompany foreign currency loans at the rate on the reporti ng date.
124 Independent Auditor's Report 4 A uniform tax rate of 30.20 % was assumed to calculate the adjusted result for the period.
126 Responsibility Statement 5 A uniform tax rate of 30.90 % was assumed to calculate the adjusted result for the period.
6 Weighted average number of ordinary shares.
7 The calculati on of adjusted basic earnings per share also includes the result att ributable to non-controlling interests of EUR – 0.8 million (previous year: EUR 0.1 million).
8 Calculated taking into account 8.1 million shares equivalents (previous year: 8.1 million) and EUR 1.2 million (previous year: EUR 1.2 million) of earnings contributi on from the convertible bonds issued in 2014 and non-controlling interests of EUR – 0.8 million (previous year: EUR 0.1 million).
EBIT adjusted for purchase price allocati on eff ects (depreciati on and amorti zati on from PPA) and restructuring and transacti on costs of EUR 11.9 million (previous year: EUR 12.4 million) declined 3.8 % and amounted to EUR 90.4 million (previous year: EUR 94.0 million) in 2016. At 8.7 % (previous year: 8.9 %), the adjusted EBIT margin was in the upper half of the target range of 8 to 9 %, as forecasted. Around EUR 0.7 million of the restructuring and transacti on costs were att ributed to the acquisiti on of KLL and a further EUR 3.4 million was att ributed to the takeover off er for Haldex.
The adjusted EBIT in the fourth quarter of 2016 was EUR 19.8 million (previous year: EUR 20.4 million) yielding an adjusted EBIT margin of 7.8 % (previous year: 8.4 %). At EUR 3.0 million, adjustment items were well below the previous year's fi gure (EUR 4.5 million) and included the effects from the purchase price allocati on (EUR 1.3 million compared to EUR 2.1 million) and restructuring and transacti on costs of EUR 1.7 million (previous year: EUR 2.4 million). In connecti on with the acquisiti on of KLL, further transacti on costs of EUR 0.3 million were incurred in the fourth quarter of 2016. Compared to the fourth quarter of 2015, adjusted EBIT was somewhat lower mainly as a result of income of EUR 1.4 million from fi xed asset disposals related to the sale of the AerWay product line and property at the former locati on in Wörth, Germany, that was no longer needed. There was no corresponding income in the fourth quarter of 2016. In additi on, KLL, which in the fourth quarter was included in the Group's result for the fi rst ti me, generated an operati ng loss of EUR 0.4 million on the basis of adjusted EBIT in the fourth quarter as a result of the ongoing weak market environment in Brazil.
As a result, the adjusted result before taxes for the fi nancial year amounted to EUR 76.9 million (previous year: EUR 90.0 million). The decline was primarily due to the weaker fi nance result (EUR – 13.5 million compared to EUR – 4.0 million). The previous year's fi nance result benefi ted signifi cantly from the unrealized exchange gains from the valuati on of intercompany loans already described.
If the unrealized gain in 2015 had been recognized in other comprehensive income (in line with the accounti ng in 2016), the adjusted result before taxes in 2015 would have been EUR 83.3 million. On a comparable basis, the adjusted result before taxes in 2016 would have declined by 7.7 % to EUR 76.9 million (previous year: EUR 83.3 million) mainly due to the lower other operati ng income and the higher interest expenses which increased by EUR 2.9 million.
Aft er taxes, the adjusted result for the period in 2016 was EUR 53.7 million (previous year: EUR 62.2 million). As in the case of the result before taxes, this decline was largely due to the unrealized exchange gains from the valuati on of intercompany foreign currency loans sti ll contained in the prior year.
On a comparable basis, that is, if the unrealized exchange gains had been recognized in other comprehensive income in 2015 as well, the adjusted result for the period would have declined 6.8 % from EUR 57.6 million in 2015 to EUR 53.7 million.
Adjusted basic earnings per share for the 2016 fi nancial year amounted to EUR 1.18 (previous year: EUR 1.37), while adjusted diluted earnings per share totaled EUR 1.03 (previous year: EUR 1.18).
Overview of regions
| EUR million | ||||||||
|---|---|---|---|---|---|---|---|---|
| EMEAI | Americas | APAC / China | Total | |||||
| 2016 | 2015 | 2016 | 2015 | 2016 | 2015 | 2016 | 2015 | |
| Sales | 568.8 | 540.0 | 402.3 | 449.4 | 70.9 | 71.3 | 1,042.0 | 1,060.7 |
| Cost of sales | – 451.6 | – 444.2 | – 326.9 | – 359.5 | – 57.0 | – 54.1 | – 835.5 | – 857.8 |
| Gross profi t | 117.2 | 95.8 | 75.4 | 89.9 | 13.9 | 17.2 | 206.5 | 202.9 |
| in % of sales | 20.6 | 17.7 | 18.7 | 20.0 | 19.6 | 24.2 | 19.8 | 19.1 |
| Other operati ng income and expenses | – 58.9 | – 50.9 | – 45.4 | – 46.1 | – 11.8 | – 11.9 | – 116.1 | – 108.9 |
| Adjusted EBIT | 58.3 | 44.9 | 30.0 | 43.8 | 2.1 | 5.3 | 90.4 | 94.0 |
| in % of sales | 10.3 | 8.3 | 7.4 | 9.7 | 3.0 | 7.5 | 8.7 | 8.9 |
In the 2016 fi nancial year, sales in the EMEA / India region rose 5.3 % to EUR 568.8 million (previous year: EUR 540.0 million). On a currency-adjusted basis, sales rose to EUR 574.2 million (previous year: EUR 540.0 million) for an increase of 6.3 %. This growth refl ects the bett er economic development in parts of the region resulti ng in a stronger demand for transportati on capacity and a rising demand for trailers from fl eet operators. SAF-HOLLAND registered rapid growth in Southern Europe, parti cularly in Italy and Spain, as well as in several Eastern European countries such as Poland. The Russian subsidiary was able to increase sales for the fi rst ti me in years, albeit from a low basis aft er years of market weakness. The subsidiaries in the Middle East region developed well overall winning large contracts from major original equipment manufacturers in the 2016 fi nancial year. The steady growth in the EMEA / India region in recent years has resulted in a high uti lizati on of the region's current capacity. Producti on capacity in Europe has been gradually expanded in anti cipati on of the growth planned in the years ahead. SAF-HOLLAND has also built a new producti on facility for axle systems in Turkey in close proximity to its customers. This facility will expand the existi ng capacity in the EMEA / India region by up to 15 %. One advantage of the facility's locati on in Dücze is lower transportati on costs, which also benefi ts customers; another is the ability to make faster deliveries to adjacent sales markets from producti on faciliti es close by. Despite today's diffi cult politi cal and economic conditi ons in some of the Middle Eastern countries, we see promising potenti al from the emerging business with vehicle manufacturers in both Turkey and neighboring Iran. SAF-HOLLAND has already acquired some interesti ng orders from these areas.
Adjusted EBIT in the EMEA / India region rose 29.8 % to EUR 58.3 million (previous year: EUR 44.9 million). The adjusted EBIT margin reached 10.3 % (previous year: 8.3 %). The margin improvement resulted above all from an advantageous product mix and economies of scale, which can be att ributed to major contracts in the regions of the Middle East and Africa, among others.
CONSOLIDATED The solid business development of the fi rst nine months conti nued during the fourth quarter of 2016. In the period from October to December 2016, sales grew 6.2 % (currencyadjusted 6.5 %) to EUR 138.0 million (previous year: EUR 130.0 million). Adjusted EBIT was EUR 13.7 million (previous year: EUR 9.3 million), and the adjusted EBIT margin reached 9.9 % (previous year: 7.2 %).
68 Consolidated Statement of Changes in Equity 69 Consolidated Statement of Cash Flows 70 Notes to the Consolidated Financial Statements 70 Corporate Informati on 70 Accounti ng and Valuati on Principles 83 Scope of Consolidati on 84 Segment Informati on 92 Notes to the Consolidated Balance Sheet Sales in the Americas region in the 2016 fi nancial year declined by 10.5 % to EUR 402.3 million (previous year: EUR 449.4 million). Sales on an organic basis declined 8.5 % aft er adjusti ng for negati ve currency eff ects of EUR 4.7 million and negati ve eff ects of EUR 5.0 million from divesti ture of a product line as well as the change in the scope of consolidati on (EUR – 6.8 million from the sale of the AerWay product line in 2015; EUR + 1.8 million sales contributi on from KLL in 2016). As a result of this performance, SAF-HOLLAND signifi cantly outperformed the overall market.
121 SAF-HOLLAND S.A. Annual Financial Statements 121 Income Statement of SAF-HOLLAND S.A. 122 Balance Sheet of SAF-HOLLAND S.A. 123 Mandates of the Board of Directors / Management Boards 124 Independent Auditor's Report 126 Responsibility Statement The comparati vely bett er development of SAF-HOLLAND in the Americas region can be att ributed to market share gains. In the 2016 fi nancial year, SAF-HOLLAND not only won a pioneering order for disc brake technology from U.S. Xpress but also received a contract from Navistar making SAF-HOLLAND a standard equipment supplier for the presti gious North American truck manufacturer. The spare parts business, in contrast, was diffi cult. Aft er record new registrati ons in the years 2014 and 2015, today's average fl eet age is relati vely low resulti ng in a correspondingly low level of demand for spare parts. The spare parts business did, however, for the fi rst ti me report again a year-on-year growth in the fourth quarter, which marked the fi rst ti me in 2016.
Given the persistently diffi cult market environment in Brazil, the sales of the Brazilian subsidiary in 2016 remained at a very low level. The acti viti es in Brazil have been consolidated since the fourth quarter of 2016 aft er the acquisiti on of the suspension specialist KLL, which should lead to cost savings and effi ciency gains.
The adjusted EBIT for the Americas region reached EUR 30.0 million (previous year: EUR 43.8 million) resulti ng in an adjusted EBIT margin of 7.4 % (previous year: 9.7 %). Although the Group was able to reduce costs signifi cantly through early capacity adjustments, bett er effi ciency and strict overall cost control, the negati ve eff ect on earnings from the persistently weak market environment during the year could not be off set completely. These factors prompted SAF-HOLLAND's decision in January 2017 to restructure its North American plant network and adjust its producti on capacity to coincide with the changed market environment by consolidati ng its total seven producti on plants into fi ve
FINANCIAL STATEMENTS locati ons. Further informati on about these changes can found in the secti on enti tled "Events aft er the balance sheet date" on page 54.
The region's results were also infl uenced by higher steel prices in North America. Higher material prices are typically passed on to customers only aft er a certain ti me delay, which temporarily led to a burden on earnings in the reporting year. Many of the price adjustments were passed on to customers in the fourth quarter.
Sales in the Americas region in the fourth quarter of 2016 declined 6.2 % (7.0 % on an organic basis) to EUR 92.6 million (previous year: EUR 98.7 million). Adjusted EBIT was EUR 5.7 million (previous year: EUR 10.0 million), and the adjusted EBIT margin reached a level of 6.2 % (previous year: 10.1 %).
In the full year of 2016, sales in the APAC / China region were almost stable at EUR 70.9 million (previous year: EUR 71.3 million). On a currency-adjusted basis, sales grew 3.1 %. Aft er business in the fi rst three quarters being dominated by weaker economic development in most ASEAN markets and declines at our subsidiary Corpco due to the subdued environment in the Chinese bus market, sales increased sharply in the fourth quarter by 51.7 % to EUR 22.0 million (previous year: EUR 14.5 million). On a currency-adjusted basis, sales rose even 54.8 % to EUR 22.4 million. The pick-up resulted from the introducti on of the new GB 1589 standard in China, which limits the weight and length of truck and trailer combinati ons (further informati on can be found in the "Risks and Opportuniti es Report" on page 46). This new standard caused a signifi cant increase in customer interest at the end of the reporti ng year that could conti nue in 2017 as fl eet operators make the appropriate adjustments or increase investments in new semi-trailers and trailers.
Our established China business with trailer axle systems and components at the Xiamen site conti nued to be well uti lized as a result of this greater demand and resulted in signifi cantly higher sales in the fourth quarter. The Australian subsidiary also reported an improvement in sales during the fourth quarter but starti ng from a low base.
The result of the APAC / China region was impacted by two special factors in the 2016 fi nancial year. The buildings at the Xiamen locati on in Southern China were hit by a severe typhoon in the third quarter, which damaged porti ons of the inventory. In additi on, inventory adjustments were carried out in the course of introducing SAP in China. Oneti me expenses for warranti es in China and inventory correcti ons at the Corpco locati on in Baotou were necessary in the
fourth quarter. These factors resulted in a negati ve impact on the result for the 2016 fi nancial year totaling EUR 1.6 million and led to a 2016 adjusted EBIT for the region of EUR 2.1 million (previous year: EUR 5.3 million), as well as an adjusted EBIT margin of 3.0 % (previous year: 7.5 %).
The region's adjusted EBIT in the fourth quarter of 2016 was EUR 0.4 million (previous year: EUR 1.1 million) yielding an adjusted EBIT margin of 1.8 % (previous year: 7.6 %).
As of the December 31, 2016 reporti ng date, total assets increased 14.2 %, or EUR 126.2 million, to EUR 1,014.7 million (December 31, 2015: EUR 888.5 million). Most of this increase was accounted for by the build-up of liquidity in the amount of EUR 83.8 million. The fi rst-ti me consolidati on of KLL also resulted in an increase in total assets of EUR 25.6 million.
At EUR 344.6 million, liquid assets were the largest single asset item (December 31, 2015: EUR 260.7 million; EUR 145.7 million thereof were cash and cash equivalents and EUR 115.0 million other short-term investments). By maintaining signifi cantly higher liquidity, SAF-HOLLAND has the fi nancing necessary to carry out the acquisiti ons planned under its "Strategy 2020". Despite the payment of the net purchase price of EUR 7.5 million for KLL, liquid assets increased by EUR 39.8 million in the fourth quarter of 2016 alone. In additi on to strong free cash fl ow of EUR 29.2 million, this rise was also derived from the cash proceeds from the sale of the Haldex shares (EUR 19.0 million) in the fourth quarter.
Other current assets (excluding other short-term investments and cash and cash equivalents) increased overall by EUR 16.4 million. The majority of this increase resulted from inventories, which increased by EUR 13.0 million to EUR 131.0 million (December 31, 2015: EUR 118.0 million). There was a corresponding increase in days inventory outstanding as of December 31, 2016 to 58 days (previous year: 53 days). An amount of EUR 4.8 million was att ributable to the fi rst-ti me consolidati on of KLL. The appreciati on of the US dollar and Canadian dollar against the euro in comparison to the end of 2015 also resulted in a currency-related increase in inventory. In additi on, intermediate goods were stocked up in preparati on for the start of producti on at the new Turkish plant, which meant that the reducti on in inventory (September 30, 2016: EUR 124.6 million, or 54 days) originally targeted for the fourth quarter could not be achieved. The build-up in inventory, however, was accompanied by an even stronger increase in trade payables resulti ng in an overall reducti on in working capital in 2016.
Trade receivables for the full year were virtually unchanged at EUR 116.7 million (previous year: EUR 116.5 million). The days sales outstanding fell as of December 31, 2016 to 42 days (December 31, 2015: 43 days), thereby achieving the Group's target to signifi cantly reduce trade receivables (reduced by EUR 23.2 million) compared to their level on September 30, 2016 (EUR 139.9 million, or 49 days). At the end of September, SAF-HOLLAND sti ll had an aboveaverage share of outstanding receivables in regions where longer payment periods are customary.
Current fi nancial assets at the end of 2016 were EUR 1.0 million (previous year: EUR 3.1 million). As of September 30, 2016 (EUR 21.2 million) this positi on sti ll contained the Haldex shares acquired in advance of the takeover off er. These shares were then sold during the fourth quarter of 2016.
Non-current assets increased and amounted to EUR 406.3 million at the year's end (December 31, 2015: EUR 380.3 million). This rise was mainly due to the fi rst-ti me consolidati on of KLL, which led to an increase in this item of EUR 18.3 million. A total of EUR 12.8 million of this amount is att ributed to property, plant and equipment, EUR 2.8 million to goodwill and EUR 2.4 million to other intangible assets. Consequently, goodwill increased to EUR 56.1 million (previous year: EUR 53.0 million) and intangible assets rose to EUR 149.5 million (previous year: EUR 145.4 million). The rise in property, plant and equipment to EUR 144.3 million (previous year: EUR 127.8 million) resulted both from KLL and the constructi on of the new plant in Turkey. Depreciati on and amorti zati on of intangible assets and property, plant and equipment in the amount of EUR 22.6 million was slightly below the level of additi ons, which totaled EUR 25.0 million.
| EUR million | |||
|---|---|---|---|
| 12 / 31 / 2016 | 12 / 31 / 2015 | ||
| Total assets | 1,014.7 | 888.5 | |
| Equity | 305.6 | 287.8 | |
| Equity rati o | 30.1 % | 32.4 % | |
| Adjusted equity rati o1 | 45.1 % | 45.3 % | |
| Net debt2 | 97.1 | 122.4 | KLL described above. |
| 66 | Consolidated Statement of Comprehensive Income |
67 Consolidated Balance Sheet 1 Adjusted for cash and cash equivalents and other short-term investments above the fi gure targeted by SAF-HOLLAND of approximately EUR 7 million.
68 Consolidated Statement of Changes in Equity 2 Taking into account cash and cash equivalents and other short-term investments (December 31, 2016: EUR 0.0 million; December 31, 2015: EUR 115.0 million).
70 Corporate Informati on 70 Accounti ng and Valuati on Principles 83 Scope of Consolidati on 84 Segment Informati on 92 Notes to the Consolidated Balance Sheet 108 Other Disclosures 121 SAF-HOLLAND S.A. Annual Financial Statements 121 Income Statement of SAF-HOLLAND S.A. 122 Balance Sheet of SAF-HOLLAND S.A. 123 Mandates of the Board of Directors / Management Boards 124 Independent Auditor's Report 126 Responsibility Statement Equity as of December 31, 2016 was higher at EUR 305.6 million (previous year: EUR 287.8 million). This rise refl ected primarily the result for the period of EUR 43.5 million generated in the 2016 fi nancial year and was partly off set by the dividend distributi on for the 2015 fi nancial year of EUR 18.1 million. There was also a negati ve eff ect of EUR 18.2 million on equity resulti ng from the valuati on of the call opti on for the remaining 42.5 % interest in KLL, for which a corresponding liability had to be recognized. This eff ect was parti ally off set by positi ve exchange diff erences of EUR 5.3 million arising from the translati on of foreign operati ons and a EUR 3.9 million increase in non-controlling interests following the fi rst-ti me recogniti on of non-controlling interests in KLL. As of the end of 2016, the equity rati o was 30.1 % compared to its level of 32.4 % on December 31, 2015. Equity rose by EUR 9.8 million in comparison to September 30, 2016, due to the result for the period of EUR 7.2 million generated in the fourth quarter. The negati ve eff ect on equity from the valuati on of the KLL call opti on recognized in the fourth quarter of 2016 was largely off set by changes in accumulated other comprehensive income, which mainly aff ected the revaluati on of defi ned benefi t plans and exchange diff erences from the translati on of foreign business operati ons.
The balance sheet rati os as of December 31, 2016 and the end of the 2015 fi nancial year were infl uenced by the liquidity held. When total assets are adjusted for cash and other short-term investments, which exceed the target of roughly EUR 7 million set by SAF-HOLLAND, the calculated equity rati o as of December 31, 2016 is 45.1 % compared to 45.3 % as of December 31, 2015. This level is signifi cantly above the Group's targeted level of around 40 %.
Non-current liabiliti es increased as of the end of 2016 and amounted to EUR 555.4 million (December 31, 2015: EUR 475.4 million). Most of this change stemmed from non-current interest-bearing loans and bonds, which in-
CONSOLIDATED FINANCIAL STATEMENTS creased to EUR 435.6 million (December 31, 2015: EUR 379.3 million) mainly due to the assumpti on of a longterm loan (EUR 50.0 million) in the second quarter of 2016. There was also an increase in other fi nancial liabiliti es to EUR 18.2 million (previous year: EUR 0.7 million) att ributed to the valuati on as of December 31, 2016 of the call opti on for the remaining outstanding interest of 42.5 % in Brazilian KLL described above.
69 Consolidated Statement of Cash Flows 87 Notes to the Consolidated Statement of Comprehensive Income The rise in current liabiliti es of EUR 28.4 million to EUR 153.7 million (previous year: EUR 125.3 million) is primarily a result of the year-on-year increase in trade payables (EUR 106.7 million compared to EUR 89.9 million as of December 31, 2015). Trade payables declined only slightly by EUR 1.0 million in the fourth quarter of 2016, which was signifi cantly less than the decline in the fourth quarter of 2015 (EUR 12.9 million). This development mainly triggered the improvement in working capital as of year-end 2016 and more than compensated for the eff ect of higher inventories.
Total current and non-current liabiliti es from interestbearing loans and bonds amounted to EUR 441.7 million as of December 31, 2016 (previous year: EUR 383.2 million). Net debt (less cash and cash equivalents and other shortterm investments) was reduced during the year by EUR 25.3 million to EUR 97.1 million (December 31, 2015: EUR 122.4 million). The reducti on in net debt was a direct result of the free cash fl ow generated in the 2016 fi nancial year minus the dividend payment and the payment for the acquisiti on of KLL. Net debt in the fourth quarter declined by EUR 33.1 million not only as a result of the free cash fl ow generated in the quarter but also the sale of the Haldex shares. The Group's total liquidity as of the December 31, 2016 reporti ng date amounted to EUR 492.6 million versus EUR 409.2 million at the end of 2015.
Net cash fl ow from operati ng acti viti es increased to EUR 92.7 million in the 2016 fi nancial year (previous year: EUR 63.1 million). The year-on-year improvement resulted from signifi cantly lower additi onal funds ti ed up in net working capital as a result of bett er working capital management. The change in provisions, inventories, trade receivables and trade payables yielded a net cash infl ow of EUR 1.9 million versus a net outf low of EUR 25.9 million in the previous year. This infl ow allowed the net working capital rati o (the rati o of net working capital to the fourth quarter sales extrapolated for the full year) to decline to 11.1 % at the end of 2016 (previous year: 12.0 %) and achieve a level even below our targeted rate for the 2016 fi nancial year of 12 to 13 %. The change in net working capital resulted in a cash infl ow of EUR 19.5 million in the fourth quarter of 2016 (previous year: EUR 13.4 million) and net cash fl ow from operati ng acti viti es of EUR 38.8 million (previous year: EUR 33.1 million).
As described in the secti on "Net Assets," the improvement in net working capital in the 2016 fi nancial year was mainly the result of higher trade payables, which led to a cash infl ow of EUR 12.7 million (previous year: EUR – 8.6 million). A further positi ve eff ect of EUR 1.5 million (previous year: EUR – 6.5 million) stemmed from the rise in other provisions and pensions. These positi ve eff ects compare with a cash outf low of EUR 8.2 million (previous year: infl ow of EUR 4.3 million) from the change in inventories. The change in trade receivables led to a cash outf low of EUR 4.1 million, which was signifi cantly lower than in the previous year (EUR 15.0 million).
Cash fl ow before changes in net working capital in 2016 was slightly below the prior year's level (EUR 105.4 million) amounti ng to EUR 104.4 million. Most of the decline in the result before taxes to EUR 65.0 million (previous year: EUR 77.6 million) was off set by a higher level of depreciati on and amorti zati on of intangible assets and property, plant and equipment of EUR 22.6 million (previous year: EUR 21.7 million) and parti cularly net fi nance income and expenses of EUR 13.5 million (previous year: EUR 4.0 million). Allowances of current assets were litt le changed and amounted to EUR 4.5 million (previous year: EUR 4.6 million).
The cash conversion rate (cash fl ow from operati ng acti viti es before income taxes paid divided by adjusted EBIT) as an indicator of the Company's ability to generate cash infl ows from the operati ng business increased in 2016 to 117.6 % (previous year: 84.6 %).
| EUR million | ||
|---|---|---|
| 2016 | 2015 | |
| Cash fl ow from operati ng acti viti es before income taxes paid |
106.4 | 79.5 |
| Cash conversion rate1 | 117.7 % | 84.6 % |
| Net cash fl ow from investi ng acti viti es |
89.8 | – 139.2 |
| Investments in property, plant and equipment and intangible assets |
25.0 | 28.1 |
| in % of sales | 2.4 % | 2.6 % |
| Net cash fl ow from fi nancing acti viti es |
15.3 | 176.2 |
| Free cash fl ow2 | 67.7 | 35.0 |
1 Cash fl ow from operati ng acti viti es before income taxes paid divided by adjusted EBIT. 2 Net cash fl ow from operati ng acti viti es less investments in property, plant and equipment and intangible assets.
Net cash fl ow from investi ng acti viti es in 2016 was EUR 89.9 million and EUR – 139.2 million in 2015. Both of these amounts, however, were aff ected by the purchase (in 2015) and sale (in 2016) of other short-term investments of EUR 115.0 million in each year. Excluding these eff ects, net cash fl ow from investi ng acti viti es in 2016 would have amounted to EUR – 25.2 million (previous year: EUR – 24.2 million).
Investments in property plant and equipment and intangible assets added up to EUR 25.0 million in 2016 (previous year: EUR 28.1 million). The Group's strict investment discipline meant that the planned level of investments of roughly EUR 28 million was not fully realized, despite the constructi on of the new plant in Turkey. This level of investment is equivalent to an investment rati o of 2.4 % (previous year: 2.6 %). In additi on, the acquisiti on of KLL in early October 2016 resulted in a payment of EUR 7.5 million. The purchase of Haldex shares (cash outf low of EUR 13.4 million in the second quarter of 2016) and the subsequent sale of these shares in the fourth quarter (cash infl ow of EUR 19.0 million) had a positi ve net eff ect on net cash fl ow from investi ng acti viti es of EUR 5.6 million in the 2016 fi nancial year.
Net cash fl ow from investi ng acti viti es in the fourth quarter of 2016 was EUR 2.2 million (previous year: EUR – 118.4 million) and was mainly infl uenced by the sale of the Haldex shares and the acquisiti on of KLL. As described above, the same quarter in the previous year contained the purchase of other short-term investments in the amount of EUR 115.0 million.
66 Consolidated Statement of Comprehensive Income 67 Consolidated Balance Sheet 68 Consolidated Statement of Changes in Equity Free cash fl ow (net cash fl ow from operati ng acti viti es less investments in property, plant and equipment and intangible assets) increased signifi cantly in the 2016 fi nancial year and reached EUR 67.7 million (previous year: EUR 35.0 million). The main reasons for this rise were bett er working capital management and a lower level of investment. The free cash fl ow generated not only fi nanced SAF-HOLLAND's dividend payment and the acquisiti on of KLL but also allowed the Company to visibly reduce its net debt. Free cash fl ow in the fourth quarter of 2016 was EUR 29.2 million (previous year: EUR 26.3 million).
70 Notes to the Consolidated Financial Statements 70 Corporate Informati on 70 Accounti ng and Valuati on Principles 83 Scope of Consolidati on 84 Segment Informati on 87 Notes to the Consolidated Statement of Comprehensive Income 92 Notes to the Consolidated Balance Sheet 108 Other Disclosures 121 SAF-HOLLAND S.A. Annual Financial Statements 121 Income Statement of SAF-HOLLAND S.A. 122 Balance Sheet of SAF-HOLLAND S.A. 123 Mandates of the Board of Directors / Management Boards 124 Independent Auditor's Report 126 Responsibility Statement Cash fl ow from fi nancing acti viti es in 2016 amounted to EUR 15.3 million (previous year: EUR 176.2 million) as a result of the lower assumpti on of current and non-current fi nancial liabiliti es in the amount of just EUR 50.0 million in the 2016 fi nancial year aft er EUR 200.0 million in 2015. In the previous year, SAF-HOLLAND issued a promissory note giving it the fi nancing necessary to carry out the acquisiti ons planned under its "Strategy 2020". The cash outf low for the dividend payment amounted to EUR 18.1 million (previous year: EUR 14.5 million). In additi on, there was a payment in 2016 for the redempti on of foreign currency derivati ves in the amount of EUR 5.1 million mainly in the context of the terminati on of the hedge for the presumed purchase price payment for Haldex in Swedish krona. Cash fl ow from fi nancing acti viti es in the fourth quarter of 2016 amounted to EUR – 3.1 million (previous year: EUR 198.6 million). The fourth quarter of 2015 contained the assumpti on of a promissory note already described.
The industry environment in the 2016 fi nancial year proved once again to be challenging. Sti ll, we are sati sfi ed with our results. By generati ng almost stable organic sales and an adjusted EBIT margin of 8.7 %, we have fully achieved our targets. In terms of capital effi ciency, we were even able to signifi cantly exceed our forecast with a net working capital rati o of 11.1 % and thereby achieve a marked improvement in free cash fl ow. These fi gures show that with our balanced regional positi oning, we are able to stay on course even in a diffi cult environment, expand our market positi on and generate solid results.
The overall good results, however, cannot hide the fact that we are not enti rely sati sfi ed with our results last year in North America. Therefore, SAF-HOLLAND made a decision in January to restructure the North American plant network and provide it with a sustainable foundati on for the future.
CONSOLIDATED FINANCIAL STATEMENTS We also achieved important strategic milestones in the reporti ng year. By acquiring KLL, we are not only strengthening our positi on in the important Brazilian market but also taking the fi rst key step in pursuing our growth "Strategy 2020". Another one of our key strategic decisions was to abandon our eff orts to acquire Haldex as it became apparent that a takeover would only be possible at conditi ons that are not economically feasible for the Group. We believe SAF-HOLLAND is in an ideal fi nancial positi on to seize the emerging opportuniti es in the years ahead and benefi t from the structural growth in our markets.
SAF-HOLLAND has a comprehensive risk management system anchored in its key operati onal and decision-making processes and implemented by the Company's Management Board on a Group-wide basis. The purpose of the risk management system is to identi fy potenti al risks at an early stage by conti nuously monitoring the relevant markets, regions, customers, suppliers and internal processes so that eff ecti ve correcti ve measures can be initi ated. The risks identi fi ed that are considered signifi cant because of their size and are likely to occur are systemati cally and uniformly recognized, analyzed and evaluated as best as possible and then communicated. The risk management system intenti onally omits risks that are general and non-specifi c to the Company (macroeconomic risks) or impossible to monitor (natural catastrophes). The risk management system is exclusively devoted to detecti ng risks and not recognizing opportuniti es.
A risk management handbook is conti nuously updated for eff ecti veness and appropriateness and available Group-wide. This handbook defi nes the risk management processes, mandatory limits, use of fi nancial instruments for fi nancial risk control and provides supplementary Group guidelines to ensure that procedures are uniformly applied throughout the Group.
Risk assessment is based on the respecti ve loss potenti al and probability of occurrence, both at the Group level and the level of the individual subsidiaries. Control instruments and, if possible, correcti ve measures have been specifi ed for each risk. Individual risks are combined into risk areas, each with their own defi ned risk policy.
All of the essenti al Group reporti ng acti viti es, including the consolidati on of fi nancial data and the preparati on of quarterly and annual fi nancial statements, are centralized in the Group accounti ng department. Key fi nancial data gathered from the individual segments and subsidiaries are reported to this department for the purpose of consolidati on in accordance with uniform guidelines and defi ned processes.
An internal control and risk management system is used to ensure the reliability of fi nancial reporti ng and the compliance of the Group's accounti ng and fi nancial statements with IFRS requirements. This system features both integrated and independent process monitoring as well as surveillance measures such as spot checks, plausibility checks and IT-based validati on processes. The authorizati on procedure for accessing the accounti ng system is clearly defi ned and the four-eye principle is applied.
The Board of Directors bears the overall responsibility for the internal control and risk management system. The independent Internal Audit department is responsible for the eff ecti veness of the internal control and risk management system and the compliance with the system's guidelines, regulati ons and instructi ons. The accounti ng system for the business segments and subsidiaries is also included in these reviews. The Internal Audit department then forwards its audit reports to the respecti ve divisional managers, the Management Board and auditors and reports directly to the Board of Directors. The Board of Directors and the Audit Committ ee receive regular reports on the results of the Internal Audit department. The audit of the consolidated fi nancial statements by independent auditors provides additi onal external monitoring of the Group's accounti ng process.
The criteria "probability of occurrence" and "extent of risk" are used to evaluate risks. In additi on to assessing risks based on these criteria, we also subdivide the risks into "low," "medium" and "signifi cant" risks as shown in the graph below. The extent of the risk is quanti fi ed at the level of adjusted earnings before interest and taxes (adjusted EBIT) prior to risk miti gati on.
| Extent of risk in kEUR | |||
|---|---|---|---|
| Probability of occurrence | |||
| < 10 % 10 % – 30 % 30 % – 70 % 70 % – 90 % | > 90 % | ||
| < 1,500 | |||
| 1,500 – 3,000 | |||
| > 3,000 |
CONSOLIDATED 66 Consolidated Statement of Comprehensive Income 67 Consolidated Balance Sheet The SAF-HOLLAND Group's overall risk potenti al at the end of the 2016 fi nancial year amounted to around EUR 35 million (gross), which is slightly higher than in the previous year (around EUR 31 million). Therefore, based on the Group's business volume and economic situati on, we believe the Group's overall risk positi on, in terms of risks that can be directly infl uenced by the Group, is manageable and easy to control. Suffi cient precauti ons were taken for these risks in the form of depreciati on, amorti zati on, impairments and provisions. Strategic risks comprised the Group's most im-
FINANCIAL STATEMENTS portant risk area in the past fi nancial year and represented around one-third of the overall risk potenti al. Strategic risks have gained in importance compared to the previous year because they appear to have increased as a result of the Group's dependence on individual customers and due to the competi ti ve situati on. This rise in strategic risks was somewhat off set by the decline in other risks. No risks have been yet identi fi ed that would endanger the Group's conti nued existence or that of a key Group company.
| 70 Risk areas |
Notes to the Consolidated Financial Statements 70 Corporate Informati on 70 Accounti ng and Valuati on Principles 83 Scope of Consolidati on Individual risks 84 Segment Informati on |
Individual risk 2016 compared to previous year1 |
Total risk 2016 compared to previous year1 |
|---|---|---|---|
| Strategic risks | Customer dependency risk 87 Notes to the Consolidated Statement of Comprehensive Income |
higher | |
| Competi ti ve risk 92 Notes to the Consolidated Balance Sheet |
higher | ||
| Verti cal integrati on 108 Other Disclosures |
higher | higher | |
| Legal and regulatory risks | Trademark and patent protecti on risks | higher | |
| 121 | Liability risks SAF-HOLLAND S.A. Annual Financial Statements |
higher | |
| Trade risks 121 Income Statement of SAF-HOLLAND S.A. |
unchanged | ||
| Other regulatory risks 122 Balance Sheet of SAF-HOLLAND S.A. |
lower | unchanged | |
| Technology risks | Marketi ng risks | unchanged | |
| 123 | Risks from technological progress Mandates of the Board of Directors / Management Boards |
lower | |
| 124 | Risks from the loss of a cooperati on Independent Auditor's Report |
unchanged | unchanged |
| Operati ng risks 126 |
Procurement risks Responsibility Statement |
unchanged | unchanged |
| IT risks | System outage and cybercrime risks | unchanged | unchanged |
| Personnel risks | Loss of knowledge risk | unchanged | |
| Strike risks | unchanged | unchanged | |
| Financial risks | Financing risks | unchanged | |
| Currency risks | unchanged | ||
| Impairment risks | lower | unchanged | |
| Other risks | Compliance risks | unchanged | |
| Business relati onship risks | higher | unchanged |
Low Medium Signifi cant
1 An unchanged risk situati on is defi ned as a year-on-year change in individual risk up to a maximum of EUR 0.2 million or a change in the total risk compared with the previous year up to a maximum of EUR 0.5 million.
Macroeconomic and sector risks are not included in SAF-HOLLAND's risk management system because they are diffi cult to quanti fy. These risks refl ect the general conditi ons for risks menti oned in the categories below and are the assumpti ons used in their quanti fi cati on. It is important to note that on the other side of these risks lies opportuniti es.
SAF-HOLLAND's business acti viti es are naturally dependent on the economic and industry environment. As a result, any deviati ons from the economic developments expected in SAF-HOLLAND's relevant markets can have a positi ve or negati ve impact on the Group's net assets, fi nancial positi on and results of operati ons.
We counter these risks primarily by having broadly diversifi ed products, customers and regional markets. In the past, the investment cycles in the truck and trailer markets have oft en failed to coincide. Development also tends to vary in the respecti ve regional markets, as was seen again in the 2016 fi nancial year. We have also managed to off set some of the fl uctuati on in the original equipment business through our strength in the aft ermarket business, which is far less economically sensiti ve.
Customer dependency risk originates from the fact that the global truck business is dominated by a relati vely small number of global manufacturers. The trailer business, on the other hand, has a diff erent market structure with several hundred manufacturers operati ng in both North America and Europe.
SAF-HOLLAND responds to customer dependency risk by ensuring it has a balanced customer structure. The share of sales per customer largely mirrors the market share of the respecti ve manufacturers. SAF-HOLLAND also has a number of customers who are small and medium suppliers of vocati onal trucks and are very important in their niches and respecti ve markets. The Company's conti nued internati onalizati on and positi oning as a global partner for the commercial vehicles industry also improves its risk profi le. In the 2016 and 2015 fi nancial years, no one customer represented more than 10 % of Group sales.
The importance of competi ti ve risk increased in the 2016 fi nancial year mainly due to the decline in the North American truck and trailer market, which prompted many competi tors to signifi cantly cut prices.
We miti gate this risk by taking several acti ons. For one, we make certain that our cost structures are always in line with the market. If necessary, we adjust our cost base to ensure that we always off er competi ti ve pricing. We also conti nue to keep ahead of technology through innovati on. For example, last year in North America, we received a major order for disc brakes – a technology that is sti ll in its infancy in North America today. An elementary component of our innovati ve strength is our extensive research and development acti viti es especially in the area of axle and suspension systems versus our competi tors. These acti viti es have helped us to establish our technological leadership. We also have strong capabiliti es in the fi eld of lightweight constructi on. Another crucial competi ti ve advantage is our aft ermarket network, which spans roughly 9,000 spare parts and service stati ons, dealers and repair shops in more than 80 countries. We possess the densest network in Europe and North America, which represents a signifi cant barrier to market entry for potenti al new competi tors.
A further strategic risk is that customers will no longer purchase axles but manufacture axles themselves, which is a development seen at some of the trailer manufacturers. This approach has been used for the last few years in Europe and has recently started in Asia and North America. Several trailer manufacturers, however, are taking the opposite approach – parti cularly in North America – and buying enti re axle systems.
Overall, we believe verti cal integrati on risk is manageable, even if its importance has rather increased over the past year. One reason is that only a small number of manufacturers would fi nd it commercially viable to produce their own axles, and this refers solely to the producti on of standard axles. Another reason is that SAF-HOLLAND's customer base of trailer manufacturers numbers more than 350 companies in Europe alone.
In light of the competi ti ve strength of our products and soluti ons, the misuse of SAF-HOLLAND's trademarks and patent rights can lead to economic damage. We counter these risks by conti nually and intensively monitoring the relevant patent applicati ons and market developments worldwide, especially in the spare parts segment.
Product liability risks cannot generally be excluded. To isolate these risks as much as possible, SAF-HOLLAND manufactures Group-wide in accordance with high quality standards and thereby eff ecti vely minimizes potenti al risks due to product defects. Our quality assurance already starts at the product development stage and extends throughout the enti re value chain. Our quality standards are precisely tailored to our customers' needs. They are also the reason why we are able to meet the requirements of the DIN ISO 9001:2008 quality standard and the special requirements of the automoti ve industry (ISO / TS 16949:2009) at all of the locati ons and in all of the regions that supply to the truck industry. All of the regional locati ons that exclusively manufacture products for the trailer industry are DIN ISO 9001:2008 certi fi ed. The system capability of the welding technology at the German plants in Bessenbach is regularly verifi ed through the ISO 3834-2 welding quality certi fi cati on. Should any defecti ve products sti ll be shipped to customers despite the
CONSOLIDATED FINANCIAL STATEMENTS above quality assurance and it is necessary to recall the aff ected parts, the damage would be covered by insurance, the amount of which is checked annually for adequacy.
66 Consolidated Statement of Comprehensive Income 67 Consolidated Balance Sheet Trade risks can arise when trade restricti ons are ti ghtened, parti cularly in internati onal trade. We counter these risks by conti nuously and intensely observing internati onal politi cal developments and taking any potenti al changes into account in our monthly forecast.
70 Notes to the Consolidated Financial Statements 70 Corporate Informati on 70 Accounti ng and Valuati on Principles 83 Scope of Consolidati on Regulatory risks specifi cally include changes in the politi cal and legal environments in the truck and trailer markets. To keep abreast of any changes, SAF-HOLLAND follows these issues closely, among others, through the evaluati on of analyses from leading market research companies such as ACT Research and FTR.
121 SAF-HOLLAND S.A. Annual Financial Statements 121 Income Statement of SAF-HOLLAND S.A. 122 Balance Sheet of SAF-HOLLAND S.A. 123 Mandates of the Board of Directors / Management Boards 124 Independent Auditor's Report 126 Responsibility Statement We counter marketi ng risks fi rst and foremost by conti nuously monitoring our competi tors, especially with respect to their product range and the focus of their research and development. Among others, we use "benchmarking" to compare the competi tors' relevant products and acti viti es. Our market monitoring also focuses on maintaining a permanent exchange with our customers so that we can recognize changes in demand at an early stage and develop new demand-oriented soluti ons. Our fi ndings help us to avoid misdirected technological and conceptual developments that misinterpret the needs of the market.
We may sti ll fail to adequately recognize new developments in general technologies. We identi fy the risks that can arise as a result by comprehensively monitoring the market. In our annual research and development report, we fi nd and document the technological progress taking place in our industry. This enables us to recognize any advances early on that relate to our products, the materials we use and our manufacturing processes.
The terminati on of a cooperati on with a business partner can lead to the loss of experti se and, thereby, the loss of sourcing and sales opportuniti es. We counter these risks by paying close att enti on to developments on both the sourcing
and sales markets. We also make it our aim to cooperate only on the basis of contractual strategic alliances.
68 Consolidated Statement of Changes in Equity 69 Consolidated Statement of Cash Flows Procurement risks, which include the danger of reduced producti on and delivery capabiliti es and higher purchasing prices, can result from supply bott lenecks or substanti al cost increases for materials and components. A key procurement risk is the degree of the Company's dependence on individual suppliers. SAF-HOLLAND limits this risk by employing a multi -vendor strategy. We arrange multi -year framework contracts containing defi ned quanti ti es and prices with our core suppliers and always keep a certain level of inventory available to compensate for any shortterm bott lenecks.
87 Notes to the Consolidated Statement of Comprehensive Income 92 Notes to the Consolidated Balance Sheet Our main price-related risk involves the development of commodity prices, which is why some of our customer contracts are linked to changes in raw material prices, parti cularly prices for scrap steel. These contracts contain negoti ati ng terms that allow us to off set rising commodity prices. Such adjustments, however, are usually only possible aft er a certain ti me delay, which means additi onal temporary costs may sti ll occur.
Informati on technology risks can arise from the failure of IT systems. Such failures can stem from internal hardware and / or soft ware failures or errors, but may also result from cybercrime. We minimize these risks by using powerful structures that meet the industry's standards. Our comprehensive and always current IT security approach ranges from access restricti ons and controls to measures for data protecti on. Back-ups exist for essenti al hardware structures.
Personnel-related risks are primarily those arising from the loss of managers and expert personnel in key positi ons. We prevent these risks through an insti tuti onalized succession planning process and Group-wide knowledge management. We also have clearly defi ned deputi zati on rules for all relevant management positi ons.
To counter strike risks, we rely on sincere and respectf ul cooperati on with our works councils and trade union representati ves. In Germany, employment agreements help to secure jobs and at the same ti me improve SAF-HOLLAND's competi ti ve situati on. In North America, we have similar agreements with the various local trade unions. We also make use of temporary employment contracts.
We counter fi nancing risks mainly through the use of a budget, medium-term planning and a monthly reporti ng system that includes a target-actual comparison. We also conduct sensiti vity analyses based on the key underlying parameters.
The fi nancing risk of the SAF-HOLLAND Group is currently considered to be low. The Group not only has a high level of liquidity, which gives SAF-HOLLAND the fi nancing necessary for future acquisiti ons under its "Strategy 2020", but has also broadly diversifi ed its liabiliti es in terms of their maturity and nature. SAF-HOLLAND has received a corporate rati ng from the rati ng agency Euler Hermes since 2012. The current rati ng is BBB with a stable outlook, which was last reconfi rmed in April 2016.
The risk of a change in interest rates on fl oati ng rate fi nancial liabiliti es is principally hedged at a minimum of 70 % using suitable instruments.
We counter the risk of insuffi cient liquidity through our forward-looking, Group-wide strategy for safeguarding liquidity. The ongoing liquidity situati on is regularly monitored throughout the Group. The management also monitors the Group's compliance with the fi nancial covenants contained in long-term credit agreements. Liquidity risks are therefore classifi ed as low.
Further informati on on the Company's liquidity and fi nancing can be found on pages 43ff . of this management report.
As a result of its global business acti viti es, the Group is exposed to foreign currency risks arising from its investments, fi nancing and operati ng business. Individual subsidiaries operate primarily in their respecti ve nati onal currencies, which keeps the foreign currency valuati on risk for individual
transacti ons low at the Group level. Sales and costs in most currency areas are largely recognized in the same currencies, which signifi cantly limits transacti on risks. The related risks to Group's sales arise when converti ng the nati onal currencies into the euro, which is the Group's reporti ng currency. Thus, currency fl uctuati on risks for the given outlook, for example, may be possible depending on the exchange rate development of the relevant local currencies. These risks are generally accompanied by corresponding opportuniti es. When currency risks are hedged using fi nancial instruments, these instruments are used exclusively to hedge the risk of the underlying transacti on. Therefore, a net eff ect on the results of operati ons and fi nancial positi on can be ruled out almost enti rely.
As of this past fi nancial year, there is virtually no longer the risk that the valuati on of intra-company foreign currency loans could have a potenti al negati ve impact on results. As of 2016, intra- company foreign currency loans are being treated as part of a net investment in a foreign operati on and are no longer recognized in the fi nance result but in "other comprehensive income" (OCI).
Impairment risks can arise from the need to recognize unscheduled depreciati on or amorti zati on on assets. We counter these risks by adhering to a strict medium-term budget and compiling monthly reports both with respect to the Company's actual development and on the basis of a rolling planning process. Impairment risks in the reporti ng period were low.
We address the risk of bad debts by fully securiti zing our receivables. As a rule, we are committ ed to securing all claims from sales with non-Group companies to the extent that such insurance coverage is available. Last year, we secured roughly 70 % of all our receivables.
We counter risks arising from non-compliance with laws and regulati ons through the adopti on of a Group-wide Code of Conduct, which we conti nuously review for ti meliness and expand when necessary. The Internal Audit department is also involved in avoiding compliance risks. SAF-HOLLAND bases its response on common ethical and moral principles.
Risks arising from relati onships to business partners are inherently limited by the broad diversifi cati on of our customer and supplier base. Identi fi ed risks are handled in cooperati on with the respecti ve business partner.
68 Consolidated Statement of Changes in Equity 69 Consolidated Statement of Cash Flows 70 Notes to the Consolidated Financial Statements 70 Corporate Informati on 70 Accounti ng and Valuati on Principles 83 Scope of Consolidati on 84 Segment Informati on 92 Notes to the Consolidated Balance Sheet 108 Other Disclosures 121 SAF-HOLLAND S.A. Annual Financial Statements 121 Income Statement of SAF-HOLLAND S.A. Global freight transportati on and, consequently, the markets for trucks and trailers, are reaping long-term benefi ts from several of the global megatrends. The most important of these trends is the general demographic development. The United Nati ons expects the world's populati on to grow close to 25 % to almost 9.2 billion people by the year 2040. The populati on in the developing and emerging countries is projected to grow six ti mes faster than in the industrialized nati ons. Among the developing and emerging countries, special economic relevance is being att ached to what is known as the Next 11 countries (Egypt, Bangladesh, Indonesia, Iran, Mexico, Nigeria, Pakistan, Philippines, South Korea, Turkey and Vietnam) as well as to the BRIC countries Brazil, Russia, India and China.
123 Mandates of the Board of Directors / Management Boards 124 Independent Auditor's Report 126 Responsibility Statement The second megatrend – the globalizati on of the economy – promotes the growing internati onal exchange of goods. An essenti al requirement for this exchange is a global transportati on infrastructure. The development of road networks will play a central role in providing this infrastructure because the road networks in the developing and emerging countries have the highest need for expansion. The third megatrend, urbanizati on, is prompti ng an increasing number of people to move into citi es. This trend is parti cularly evident in the developing and emerging countries. In the large urban areas, trucks and trailers represent the most important means of transporti ng supplies.
A sharp increase in the populati on of the middle class is expected, especially in the Asia Pacifi c region. Growing incomes in the years to come will accompany a jump in the purchasing power of the global middle class, which in turn will lead to an increase in the exchange of goods and higher freight volumes.
In the world's strong growing regions, trucks and trailers are the most important links in the transportati on chain. A market analysis published by the consulti ng company Deloitt e
CONSOLIDATED FINANCIAL STATEMENTS Consulti ng predicts the growth of medium- and heavyduty trucks sold worldwide will average 3.1 % p.a. from 2014 through 2024. The strongest growth is expected in the developing and emerging countries and should result in almost three-quarters of the world's truck market being located outside of the established industrial nati ons by the year 2024.
66 Consolidated Statement of Comprehensive Income The demand for sophisti cated transportati on equipment should also rise steadily along with the growing safety regulati ons and the required compliance with environmental standards worldwide. This will provide a noti ceable boost over the next several years to the trend towards lightweight constructi on, or the use of new combinati ons of materials and technological innovati ons. SAF-HOLLAND is also taking a leading role in the areas of lightweight constructi on, safety and durability.
87 Notes to the Consolidated Statement of Comprehensive Income 122 Balance Sheet of SAF-HOLLAND S.A. The steady expansion expected in truck fl eets also implies a conti nuously growing demand for spare parts. With the launch of the trademarks SAUER GERMANY QUALITY PARTS and GoldLine, SAF-HOLLAND has penetrated another segment of spare parts supply in original equipment quality with special warranty packages. With tailored brands that off er somewhat more cost-eff ecti ve parts specially designed for older vehicles, SAF-HOLLAND is supplying to trucks and trailers in the "second life" marketplace. This opens up additi onal sales potenti al, parti cularly in the emerging markets, which have a high number of older vehicles traveling the roads. The above trademarks also play a key role in the Company's early positi oning in the "Strategy 2020" target markets because these brands deliver the special qualiti es that characterize trucks and trailers in these markets: robustness, reliability and a low price.
The European Union has been contemplati ng the admission of mega trailers (extra-long truck and trailer combinati ons), someti mes referred to as gigaliners, for some ti me. The use of the mega trailers might not only reduce traffi c on the roads but also save fuel consumpti on and CO2 emissions. Mega trailers are meanwhile allowed in some Scandinavian countries as well as in both the Netherlands and Spain. Germany has been running a large-scale fi eld test for several years now. Criti cs fear that the introducti on of mega trailers could mean an even greater shift of transport volumes from rails to roads.
Should mega trailers be allowed throughout the European Union in the coming years, it could spark a boom in the industry with the German market playing a pivotal role. The comparati vely bett er effi ciency of gigaliners, or mega trailers, with lower costs per kilometer compared to conventi onal truck and trailer combinati ons, would provide commercial benefi ts to fl eet operators and likely trigger a multi -year boost in new truck and trailer purchases. Apart from the temporary eff ect on demand, SAF-HOLLAND could also benefi t from the fact that mega trailers tend to increase the requirements for durability, safety and comfort. Our technological positi oning means we are ideally equipped for this type of development.
The GB1589 standard was published in China in 2004 and introduced new regulati ons for the maximum weight, dimensions and total weight per axle allowed for medium and heavy trucks. The aim of this standard is to increase the safety provisions and reduce the burden on the roads from overloaded trucks. The provisions of the standard were made even more stringent in 2016. Aft er a two-year transiti onal period, authoriti es will be strictly monitoring compliance with the new standard.
GB1589 provides for the reducti on of the maximum weight of a truck and trailer combinati on from 55 to 49 tons. At the same ti me, it also limits a truck and trailer combinati on's length to a maximum of 18.1 meters as well as the width and height. Unti l now, truck and trailer combinati ons stretching 22 meters were allowed in China but due to a lack of monitoring there were also truck and trailer combinati ons on the roads of up to 27 meters in length.
Compliance with the new standards is handled diff erently in the respecti ve provinces, and it is unclear as to how much longer the end-of-life vehicles that no longer meet the guidelines will be permitt ed. Sti ll, it should be assumed that the GB1589 standard will mean that the medium-term focus of truck and trailer manufacturers will turn increasingly toward weight-saving and technologically sophisti cated soluti ons. Our innovati ons and products provide us with highly competi ti ve soluti ons to meet these requirements and therefore place us in an excellent positi on to signifi cantly expand our market share in China.
A new directi ve with respect to CO2 emissions for heavyduty vehicles (Regulati ons for Greenhouse Gas Emissions from Commercial Trucks & Buses) was published in the United States in August 2016 by the American Environmental Protecti on Agency (EPA) and the Nati onal Highway Traffi c Safety Administrati on (NHTSA). This is the second phase of the legislati on on fuel effi ciency and CO2 reducti on, which not only governs trucks but also includes rules for trailers manufactured as of 2018. The new rules are expected to lead to higher prices for trucks and trailers. Increases in exhaust emission regulati ons in the past have usually led to what is known as "pre-buy eff ects," which describes a situati on in which fl eet operators stock up on lower-priced "old products" before the new guidelines take eff ect. This could spur demand for both trucks and trailers.
Apart from these short-term eff ects, more stringent regulati ons would also promote the increased use of lightweight components to meet requirements for bett er fuel effi ciency. SAF-HOLLAND can also profi t from this trend due its experti se in lightweight constructi on.
In July 2016, SAF-HOLLAND received a breakthrough order from U.S. Xpress in the United States for complete axle and suspension systems for roughly 1,800 newly ordered trailers that are set to be equipped with the latest generati on of disc brakes. This makes U.S. Xpress one of the fi rst truckload carriers in the United States to switch to disc brake technology. This order could usher in a change in the United States from the widely used drum brakes to disc brakes. Whereas roughly 80 % of the trailers in Europe drive with higher performance disc brakes, the share of disc brakes in the United States is just at roughly 10 %. In additi on to their weight advantages compared with drum brakes, disc brake technology scores highly with its signifi cantly bett er braking performance. For example, a truck equipped with disc brakes driving at a speed of 75 mph has a 20 % shorter stopping distance, dropping from 129 meters to 104 meters.
In the United States, the share of disc brake technology over the medium term is expected to rise from today's level of 10 % to 30 – 35 %. SAF-HOLLAND has been a pioneer in disc brake technology in the European market for years and possesses extensive know-how in this area. By employing disc brake technology in our axle systems, we can increase the value sold-in per vehicle by 50 % and more.
SAF-HOLLAND has already proven its ability to successfully consolidate its market positi on and accelerate its growth through acquisiti ons. As part of "Strategy 2020", the Company plans to generate a porti on of its sales growth over the next few years through collaborati ons, joint ventures and targeted acquisiti ons. In seeking these opportuniti es, SAF-HOLLAND conti nuously monitors the markets and conducts potenti al analyses in the relevant regions for both the original equipment and aft ermarket businesses.
CONSOLIDATED FINANCIAL STATEMENTS In the last few years, interesti ng opti ons have presented themselves from potenti al sellers of family-run businesses but not at reasonable terms and conditi ons. In view of the more diffi cult economic environments seen in several markets, we expect bett er opportuniti es going forward. We also believe that by taking an anti -cyclical approach we will be able to expand or enhance our positi on in selecti ve markets.
66 Consolidated Statement of Comprehensive Income 67 Consolidated Balance Sheet 68 Consolidated Statement of Changes in Equity 69 Consolidated Statement of Cash Flows 70 Notes to the Consolidated Financial Statements 70 Corporate Informati on 70 Accounti ng and Valuati on Principles 83 Scope of Consolidati on 84 Segment Informati on 87 Notes to the Consolidated Statement of Comprehensive Income 92 Notes to the Consolidated Balance Sheet A good example of this approach is our acquisiti on of KLL in the past fi nancial year. This acquisiti on was an anti -cyclical investment based on the sharp drop of around 70 % in the Brazilian commercial vehicle market over a period of several years. Given this poor performance, we see signifi cantly more opportuniti es than risks in the Brazilian market over the next few years. The KLL acquisiti on also allows us to expand our product portf olio to include products that stand out based on their durability and relati vely low prices. We also see great sales potenti al for these types of products in other emerging markets, which should open up some cross-selling opportuniti es.
121 SAF-HOLLAND S.A. Annual Financial Statements 121 Income Statement of SAF-HOLLAND S.A. 122 Balance Sheet of SAF-HOLLAND S.A. 123 Mandates of the Board of Directors / Management Boards In the 2016 fi nancial year, SAF-HOLLAND generated the majority of its sales in its traditi onal regions of Europe and North America. Under "Strategy 2020", our stated objecti ve is to expand the share of our sales outside of these core regions to around 30 % by the year 2020.
126 Responsibility Statement Among others, we have started to build a new plant in Turkey for the producti on of axle systems in 2016 to achieve this goal. The intended locati on off ers some advantages due to lower transportati on costs and also provides an opportunity to deliver more quickly to bordering new markets and several of the "stan" countries (e.g., Kazakhstan or Pakistan). In the future, Iran may also play a greater role. Aft er a relaxati on of economic sancti ons imposed by the United Nati ons, industry experts expect a signifi cant boom in the release of pent-up investments for the country's infrastructure and especially the transport sector.
The new U.S. administrati on under President Trump, which has been in power since January 2017, announced an extensive program to sti mulate economic growth in the United States. Although many of the details of this program are sti ll unclear, it is evident that infrastructure projects will be one of the focal points of the new government. An accelerati on of growth in the manufacturing sector, especially in the constructi on sector, would have a very positi ve eff ect on the demand for trucks and trailers, and thereby also on SAF-HOLLAND's business in North America.
On January 17, 2017, SAF-HOLLAND announced the consolidati on and restructuring of its North American plant network. This decision was the outcome of the conti nued weakness in the North American truck and trailer markets and part of an eff ort to centralize producti on closer to the customer base of the truck and trailer industry. The measures are designed to adapt the Company's structure to changes in the market situati on and to ensure the long-term competi ti veness of our acti viti es in North America. This new structure will be accompanied by an adjustment in the current excess producti on capacity at the North American locati ons in order to improve capacity uti lizati on. We will also opti mize our internal logisti cs processes, which may improve delivery ti mes.
The measures planned, which are to be implemented within a maximum period of 18 months, are expected to result in one-ti me restructuring costs of up to US\$ 10 million in 2017. These costs should consist mainly of relocati on costs, impairment on equipment and severance payments. SAF-HOLLAND expects the vast majority of these charges to be recognized in the 2017 fi nancial year. Here it is important to point out that the Group's key indicator – adjusted EBIT – is generally adjusted for restructuring expenses. Moreover, approximately US\$ 3.0 million in additi onal investments are planned for the remaining locati ons. SAF-HOLLAND currently expects an annual reducti on in the direct cost base in the mid single-digit million US\$ dollar range aft er the restructuring is completed.
There were no further events aft er the balance sheet date relevant for the report on the events aft er the balance sheet.
The outlook for the global economy has improved recently. Worries of a slowdown in the emerging markets have dissipated and some commodity prices – especially crude oil prices – have seen a signifi cant recovery from the lows experienced in 2016. At the same ti me, with a second interest rate increase in December 2016 and the prospect of three further increases on the way for 2017, the US Federal Reserve has signaled a return to a less liquidity-driven monetary policy. An obstacle to world trade may turn out to be growing protecti onism in some countries. In January 2017, the Internati onal Monetary Fund (IMF) confi rmed its fullyear 2017 forecast for an accelerated growth for the global economy of 3.4 % based on the above factors. This forecast compares to an expected global GDP growth of 3.1 % in the year 2016.
The United States looks parti cularly set to accelerate its growth. The IMF expects GDP growth in the United States to rise to 2.3 % compared to 1.6 % in 2016. This esti mate does only parti ally include any boost to the economy that could result from the infrastructure spending and tax cuts expected from the new US administrati on. Depending on the nature of the economic sti mulus package, growth in the US may end up even higher. The IMF's outlook for the eurozone, in contrast, is relati vely subdued. Moderate growth of 1.6 % is expected in 2017, which is close to the 1.7 % growth rate recorded in 2016. In the view of the IMF, the risks threatening conti nued economic growth in Europe include the pending Brexit and the politi cal uncertainty in the run-up to important electi ons in countries such as France and Germany. The IMF expects a majority of the emerging country economies to generally improve in the course of the year, despite the risks. This applies especially to countries such as Brazil and Russia where the IMF is projecti ng an end to the lengthy economic decline and a transiti on to marginal growth at a low level. The pace of economic growth in China is expected to slow minimally; however, with a projected increase in GDP of 6.5 %, momentum will remain at a comparati vely high level.
66 Consolidated Statement of Comprehensive Income 67 Consolidated Balance Sheet 68 Consolidated Statement of Changes in Equity 69 Consolidated Statement of Cash Flows 70 Notes to the Consolidated Financial Statements 70 Corporate Informati on 70 Accounti ng and Valuati on Principles 83 Scope of Consolidati on The global commercial vehicle market will remain challenging in 2017. Here it is important to point out that the SAF-HOLLAND Group generates more than 90 % of its sales in the core regions of the Americas and EMEA / India. As in the prior year, strong regional diff erences in demand are expected in 2017, as are varying developments in the trailer and heavy truck vehicle segments – both important segments for the Company. Whereas the North American truck market is showing the fi rst signs of stabilizati on, demand for trailers in the current year is expected to conti nue to decline. It is reasonable to assume that the overall solid demand situati on in Europe will conti nue, even though years of growth may suggest that demand will taper off at a high level. The outlook recently improved for several of SAF-HOLLAND's important sales markets such as Russia, Australia and China.
92 Notes to the Consolidated Balance Sheet 108 Other Disclosures The European commercial vehicle market, where SAF-HOLLAND generated the majority of its sales in 2016, is expected to develop steadily and stay at a high level.
121 Income Statement of SAF-HOLLAND S.A. 122 Balance Sheet of SAF-HOLLAND S.A. 123 Mandates of the Board of Directors / Management Boards 124 Independent Auditor's Report 126 Responsibility Statement The market research insti tute CLEAR expects European trailer market producti on volume to hold steady in 2017 at a strong level of about 295,000 trailers (– 1 % vs. 2016) aft er three years of strong growth. CLEAR expects growth in the Eastern European trailer market to reach almost 10 %, mainly driven by growth in most of the countries outside of the Russian Federati on and a recovery in the high-volume Turkish market. CLEAR is slightly more cauti ous when it comes to Western Europe. Market researchers are not ruling out a single-digit percentage decline in trailer producti on in 2017. These cauti ous market expectati ons are mainly based on the negati ve eff ect anti cipated from Great Britain's exit from the European Union.
The Western European truck market, which had a surprisingly strong upturn in 2016, is projected to contract slightly in 2017. However, aft er years of strong growth, the market should maintain a high level despite the pending slowdown. Industry observers expect vehicle producti on in the heavy-duty truck segment (above 16 tons) to range from a year-on-year mid-single-digit percentage decline to essenti ally no change.
In Eastern Europe, LMC Automoti ve, a provider of automoti ve industry forecasts, is projecti ng a 10.8 % increase in heavy truck producti on. A projected upswing in the Turkish market, which fell sharply in the second half of 2016, should also have a positi ve eff ect. Aft er years of decline, LMC Automoti ve expects vehicle purchases to rise in countries such as Russia,
FINANCIAL STATEMENTS Belarus and the Ukraine due to bett er economic conditi ons and a high average age of vehicles. The starti ng level in these regions, however, is in same cases very low.
The market research insti tute ACT Research believes the North American market for heavy trucks (Class 8) bott omed at the turn of 2016 / 2017 aft er declining by about one-third in the previous year, followed by a sequenti al slight rise in producti on during the fi rst quarter of 2017. For full-year 2017, market analysts are assuming a producti on decline of nearly 10 % to 207,000 units (2016: 228,000 trucks). This expectati on is based on the development of net orders for Class 8 trucks, which have been building a bott om since the second quarter of 2016. According to the market research insti tute FTR, orders increased from the third quarter to the fourth quarter of 2016 by around 40 %.
121 SAF-HOLLAND S.A. Annual Financial Statements The outlook for the North American trailer market is more restrained in 2017. In 2016, there was a lag in the performance of the trailer market to the correcti on in the truck market, and the decline in trailer producti on was far less than the decline registered in trucks. Accordingly, FTR expects 2017 US trailer producti on to contract by some 10 % to 255,000 units.
In response to the weaker North American trailer market, SAF-HOLLAND promotes with its North American customers the purchase of complete axle systems equipped with integrated suspension rather than simply axles and the bett er performance and effi ciency of disc brake technology. SAF-HOLLAND is ideally positi oned in disc brake technology given its years of experience in Europe. This approach could signifi cantly increase the Company's value sold-in per vehicle.
The noti ceable decline in the volumes of spare parts for commercial vehicles in North America in 2016 was primarily the outcome from the record purchases recorded in the years 2014 and 2015, especially for new Class 8 trucks and trailers. Because experience shows that a great number of spare parts are needed for these new vehicles aft er two to three years, there could be a gradual rise in demand in the aft ermarket in late 2017 and 2018. SAF-HOLLAND has not incorporated any of the eff ects of the prospecti ve economic and employment policies of Donald Trump's new US administrati on into any of the Company's planning. An infrastructure package combined with tax incenti ves for companies and consumers could outshine the diffi cult market environment in 2017 and boost sales momentum in the transportati on industry.
Aft er years of signifi cant sales decline, which on the whole amounted to more than 80 %, the Brazilian market for heavy trucks and trailers is signaling a stabilizati on in the course of 2017. Latent risks sti ll exist however. LMC Automoti ve, for instance, expects producti on of heavy trucks to increase 18.0 % in full-year 2017 given the forecasts for gradual economic recovery and the fi rst politi cal reforms under the new president. Even with this type of growth, the market would sti ll be roughly two-thirds lower than its level in 2013. LMC Automoti ve is consequently forecasti ng double-digit growth rates for the subsequent years. In September 2016, SAF-HOLLAND acquired a majority stake in the Brazilian company KLL. Together with this suspension specialist, SAF-HOLLAND may be able to profi t signifi cantly from the beginnings of a modest upswing in the Brazilian transportati on market, not only in the trailer segment but also the truck and bus segments.
Most of the truck and trailer markets in the emerging countries in the APAC / China region are expected to grow moderately again in 2017, although the regional development of the transportati on markets will widely vary. According to LMC Automoti ve, the Australian truck market – an important market for SAF-HOLLAND – should see registrati ons rise a moderate 2.5 % in 2017 aft er two years of signifi cantly lower sales. Demand for trailers should also increase slightly. LMC Automoti ve is less opti misti c when it comes to China where it is forecasti ng a slight decrease of approximately 1 % in heavy truck producti on. Here it is important to bear in mind that SAF-HOLLAND's producti on in China is currently focused on products for the trailer and bus segments and that it sti ll has a very small market share. The stricter applicati on of the GB 1589 standard by the Chinese authoriti es since September 21, 2016, increases the opportuniti es for a larger pickup in demand – parti cularly for trailer components. Restricti ons on the maximum weight permitt ed (49 t), the total length of a truck and trailer combinati on and the standardizati on of container dimensions all support increased demand. These factors are what sparked a strong rise in customer interest at the end of 2016 – a trend that is expected to persist in 2017 – and will prompt fl eet operators to invest in new trailers and semi-trailers. It also indicates that weight reducti on is becoming a key requirement in the Chinese market.
SAF-HOLLAND's focus is the Company's medium- to longterm business development, which is being addressed by the "Strategy 2020" already described. Growth opportuniti es are realized parti cularly through expanding the business to markets outside of the existi ng core markets, the targeted expansion of the product portf olio and joint ventures and acquisiti ons that enhance our business.
From today's perspecti ve, we expect the solid business performance of SAF-HOLLAND to conti nue in 2017. We expect the market environment to be mixed in many of the regional markets. In North America, we do not expect to see any signs of improvement in the truck and trailer markets unti l later in the year. Factors such as the infrastructure programs and tax cuts announced by the new US president remain hard to assess but sti ll represent opportuniti es, as do the stricter transportati on laws in China.
The Group has a relati vely comfortable starti ng positi on due to its regional diversifi cati on, strong foothold in the core markets of North America and Europe and the accompanying economic diversifi cati on.
With our strong focus on engineering and applicati on technology, we will drive forward the development of new products and new customer- and country-specifi c applicati ons in 2017, thereby diff erenti ati ng ourselves from the competi ti on. As discussed in the research and development report (page 23ff ), the topics that play an important role are weight reducti on and the resulti ng CO2 savings, new developments in brake technology and, of key importance, the digitalizati on of products and processes. We see a strong potenti al to enhance our business model from the interlacing of our mechanical components with sensor functi ons and using electronic evaluati on for providing data. Therefore, the Company anti cipates R&D cost as a percentage of sales to rise slightly in 2017.
In comparison to other manufacturing companies, SAF-HOLLAND's business model demands a lower level of capital intensity of around 2.5 % of sales on average and combines the development-intensive original equipment business with a long-term oriented spare parts business.
66 Consolidated Statement of Comprehensive Income 67 Consolidated Balance Sheet 68 Consolidated Statement of Changes in Equity 69 Consolidated Statement of Cash Flows In line with our business strategy, a growing porti on of investment in 2017 aside from the usual maintenance and replacement investments is expected to be made in our expansion. Our current investment focus is on expanding our business in new markets, especially in the APAC / China region.
70 Corporate Informati on 70 Accounti ng and Valuati on Principles 83 Scope of Consolidati on 84 Segment Informati on 92 Notes to the Consolidated Balance Sheet 108 Other Disclosures 121 SAF-HOLLAND S.A. Annual Financial Statements 121 Income Statement of SAF-HOLLAND S.A. 122 Balance Sheet of SAF-HOLLAND S.A. The restructuring of the North American plant network, which is essenti ally taking place in 2017, will include, among others, the consolidati on of the existi ng seven producti on sites into fi ve focused plants located near our customers and will be accompanied by potenti al cost savings. The improvements will cause additi onal project-related investment of around USD 3 million in the region. The Group plans to invest a total of EUR 28 to 31 million in property, plant and equipment and intangible assets in 2017. As a result, investment in 2017 is expected to be slightly higher than in 2016 with a moderately higher investment rati o.
124 Independent Auditor's Report 126 Responsibility Statement The majority of the investments planned for expanding business acti viti es in new regions will be made in the area of engineering, directed at setti ng up regional development capacity and testi ng and test bench centers or serve to expand local producti on faciliti es. The main focus in China is to set up producti on more effi ciently by increasing the level of automati on and standardizati on of processes and centralizing and streamlining the producti on network.
Our agenda in the area of informati on technology includes the increased linking of data from our producti on sites. Not only are we introducing SAP at our new locati on in Düzce, Turkey, we are also working on the data-technical linking of the Chinese locati ons to improve transparency and provide the foundati on for further process improvements.
SAF-HOLLAND generates a solid level of operati ng free cash fl ow, which it plans to use, among others, to fi nance acquisiti ons and pay dividends. The Company pursues a sustainable dividend policy and intends to conti nue to enable shareholders to parti cipate in the Company's success. Our general aim is to distribute 40 to 50 % of our available net earnings (result for the period excluding non-cash components) as a dividend to our shareholders, provided our equity rati o adjusted for excepti onal factors is at a level of roughly 40 %. Excepti onal factors such as the promissory note issue
FINANCIAL STATEMENTS in the amount of EUR 200 million in November 2015, which initi ally caused an increase in total assets and a temporary decline in the equity rati o, are adjusted for accordingly.
70 Notes to the Consolidated Financial Statements For the 2016 fi nancial year, the Board of Directors intends to propose a 10.0 % increase in the dividend to EUR 0.44 per share (previous year: EUR 0.40) to the Annual General Meeting on April 27, 2017. This is equivalent to a total distributi on of EUR 20.0 million (previous year: EUR 18.1 million) or 45.9 % (previous year: 35.0 %) of the result for the period, or 46.4 % (previous year: 38.6 %) of the available net earnings, which refl ects the strong development in free cash fl ow. Based on the closing price of SAF-HOLLAND shares in 2016 of EUR 13.64, this represents an unchanged high dividend yield of 3.2 % (previous year: 3.2 %).
123 Mandates of the Board of Directors / Management Boards Our planning is based on the expectati on that the global economy will grow slightly more than 3 % in 2017 and that the trend in the economies of our current core markets of Europe and North America will tend to be positi ve. We expect the development of transportati on markets and the demand for trailers and trucks to vary widely by region, as described, amid a generally mixed environment. Regional markets such as Brazil, Russia and parts of the Middle East are at a low level while Australia is improving and demand in China is picking up. Structural trends such as the increased tendency of major US customers to use disc brake technology and purchase complete axle systems help us increase our sales per vehicle.
In the year 2017, SAF-HOLLAND expects the market environment in important markets – especially North America and Brazil – to remain challenging and only start to pick up in the second half of the year. Given the anti cipated solid market performance in Europe, market share gains and the start-up of signifi cant major orders, the Company expects to achieve Group sales in the 2017 fi nancial year in the range of EUR 1,060 million to EUR 1,090 million. This forecast is based on the assumpti on of an unchanged scope of consolidati on and stable currency exchange rates.
The EBIT margin adjusted for special items should again be within a range of 8 % to 9 % in the 2017 fi nancial year. From today's standpoint, we expect the margin to rather tend toward the mid-point of the range due to the upfront investment necessary to achieve the goals of our "Strategy 2020".
In line with our targets under "Strategy 2020", additi onal Group sales and earnings contributi ons may result from collaborati ons, joint ventures or acquisiti ons that may take place at some ti me during the year. This assumes the availability and realizati on of appropriate opportuniti es at reasonable prices and a manageable risk profi le. In 2017, management's acti viti es will again be focused on generati ng external growth.
As already announced, SAF-HOLLAND will be consolidati ng its North American plant network in 2017. This consolidati on is expected to result in a one-ti me restructuring charge of up to US\$ 10 million. This charge will consist mainly of relocati on costs, impairment charges on equipment and severance payments. SAF-HOLLAND expects that the vast majority of these charges will be recognized in the 2017 fi nancial year. Here it should be noted that the Group's key indicator – adjusted EBIT – is generally adjusted for restructuring expenses. SAF-HOLLAND expects to achieve an annual reducti on in the North American direct cost base in the mid single-digit million US\$ dollar range aft er the restructuring is completed.
Despite the diffi cult market situati on in several markets brought on by economic or politi cal issues, the management expects the Group's net assets, fi nancial positi on and results of operati ons to conti nue their solid development in the 2017 fi nancial year. The fi nancial strength will remain at a high level based on ongoing disciplined investment spending and the Group-wide opti mizati on of net working capital, whereby the year 2017 may see a temporary increase in inventories due to the plant consolidati on in the United States. As a result, net working capital rati o is anti cipated in the range of 12 to 13 %. We expect the Company to conti nue to generate strong free cash fl ow in 2017, but below the high level generated in the 2016 fi nancial year due to the factors already menti oned.
The SAF-HOLLAND Group remains confi dent overall that it is well positi oned to meet the sales, earnings and return targets set under its medium-term "Strategy 2020".
126 Responsibility Statement Further informati on on sustainability can be found at htt ps://corporate.safh olland.com/en/sustainability und www.we-think-ahead.de/en
Sustainability is a key component of our corporate philosophy and strategy. We as a Company embrace social responsibility. The goal of our acti viti es at all ti mes is to align the growth and economic success of the Group with the legiti mate interests of our employees, the environment and society in general.
The basis of our business acti viti es is also our overriding corporate objecti ve: We at SAF-HOLLAND aim to be the most valued supplier of best-in-class components, systems and services that ensure the success of our fl eet customers worldwide. We pursue this objecti ve while upholding our seven corporate values: innovati on, cost consciousness, reliability, respect, teamwork, communicati on and honesty.
During the reporti ng year, a CSR Council was established to even bett er direct the sustainability acti viti es of the SAF-HOLLAND Group. The Council consists of the chief executi ve offi cer, representati ves from the departments of Human Resources, Health, Safety, Environment and Quality Management, Engineering, Logisti cs (Shipping), Marketi ng, Facility Management, Aft ermarket and Sourcing. The Corporate Social Responsibility Council meets regularly to deal with proposals and initi ati ves for improved energy effi ciency, the avoidance of waste, employee development and the social commitment of the Group, among others.
As an engineering group, we rely on the experti se and commitment of our employees because of their crucial contributi on to our economic success. Therefore, the traditi onal focus of our human resource acti viti es is on training our employees through goal-oriented advanced training programs.
As a manufacturing company, SAF-HOLLAND stresses technical vocati ons, especially in the areas of engineering and mechanical engineering. SAF-HOLLAND off ers employees several types of apprenti ceships and also provides a broad range of qualifi cati on and advanced training opportuniti es. The Company also off ers young people an opportunity to take part in dual-study programs. For the targeted development of our managers, we conduct regular training programs on employee management and moti vati on.
SAF-HOLLAND works together with the kindergarten at the Company's headquarters in Bessenbach, Germany, located directly across from the administrati on building. Spaces at the kindergarten are reserved for Company employees. SAF-HOLLAND also provides employees with kindergarten subsidies.
SAF-HOLLAND is further involved in a variety of other programs that span from providing work goggles and hearing protecti on to the integrati on of refugees and employee discounts.
The appreciati on of our employees is a key aspect of our corporate culture. SAF-HOLLAND supports the commitment of its employees in a variety of ways to encourage lifelong learning and further ongoing development. The Company also off ers an att racti ve and equitable working environment and ensures the highest standards on occupati onal safety. As a global company, we also place great value on the cooperati on and exchange of people from diff erent cultures.
The average length of service of 8.1 years at the Group level is the best example of how strongly employees identi fy with SAF-HOLLAND and a testi mony to our att racti veness as an employer. At 14 and 10 years, the average length of service at our core companies in Germany and the United States is even signifi cantly higher. The long tenure of our employees was also refl ected by the 20 and 30 year anniversaries of several of our employees in the 2016 fi nancial year.
Our health fair in Wylie, Texas sponsored by SAF-HOLLAND and the Plano Health Center at the Company's locati on in Wylie, Texas in March 2016, is another example of our commitment to our employees. At this event, SAF-HOLLAND employees were able to have their blood pressure and BMI measured. There were also experts on site explaining all there is to know about heart disease, healthy diets and nutriti on. The program was rounded off by the visit of a US health insurance representati ve, who answered questi ons about the benefi ts and advantages of the employee health and advisory program. Two local fi tness studios also took part and provided special off ers to employees.
| 2016 | 2015 | ||
|---|---|---|---|
| Key fi gures for locati ons (Group level) |
|||
| Average number of employees | |||
| (excluding temporary workers) | 3,081 | 2,653 | |
| Employee turnover rate | 8.6 % | 9.7 % | |
| Share of part-ti me workers 66 |
Consolidated Statement of Comprehensive Income | ||
| (as of reporti ng date) 67 |
2.4 % Consolidated Balance Sheet |
1.5 % | |
| Employees with severe disabiliti es 68 |
Consolidated Statement of Changes in Equity | ||
| (as of reporti ng date) 69 |
63 | 59 | Consolidated Statement of Cash Flows |
| Employees in managerial | |||
| positi ons (as of reporti ng date) | 106 | 125 | |
| 70 thereof women |
5 | 6 | Notes to the Consolidated Financial Statements |
| Occupati onal deaths | 70 Corporate Informati on 0 |
0 | |
| Average age of employees in years | 70 Accounti ng and Valuati on Principles | ||
| (as of reporti ng date) | 83 Scope of Consolidati on 40.3 |
41.3 | |
| Average length of employment in | 84 Segment Informati on | ||
| years (as of reporti ng date) | 8.1 | 7.3 | 87 Notes to the Consolidated Statement of Comprehensive Income period rose a corresponding 1.4 %. |
| Key fi gures for locati ons in | 92 Notes to the Consolidated Balance Sheet | ||
| Germany | 108 Other Disclosures | ||
| Average number of employees | |||
| (excluding temporary workers) 121 |
1,035 | 1,022 | SAF-HOLLAND S.A. Annual Financial Statements |
| Average sick days per employee | 14.5 121 Income Statement of SAF-HOLLAND S.A. |
15.0 | |
| Number of employees on | 122 Balance Sheet of SAF-HOLLAND S.A. | ||
| maternity or parental leave | 7 | 2 | |
| Percentage of trainees 123 |
Mandates of the Board of Directors / Management Boards | ||
| (as of reporti ng date) | 4.5 % | 4.5 % | |
| 124 Interns and graduati ng students |
Independent Auditor's Report | ||
| 126 (as of reporti ng date) |
Responsibility Statement 8 |
5 | |
| Total number of submitt ed | |||
| improvement proposals | 76 | 156 | |
| Number of successfully imple | |||
| mented improvement proposals | 7 | 13 | |
| Number of rejected improvement | |||
| proposals | 34 | 86 | |
| Employees with collecti ve | |||
| bargaining agreements | 967 | 1,005 |
CONSOLIDATED FINANCIAL STATEMENTS region and is mainly att ributable to the acquisiti on of KLL. The Group employed a total of 3,259 people on average in 2016 including temporary workers (previous year: 3,325).
| 12 / 31 / 2016 | 12 / 31 / 2015 | |
|---|---|---|
| EMEAI | 1,343 | 1,245 |
| Americas | 1,546 | 1,381 |
| APAC / China | 537 | 541 |
| Total | 3,426 | 3,167 |
87 Notes to the Consolidated Statement of Comprehensive Income Sales per employee remained stable at kEUR 319.7 in the 2016 fi nancial year (previous year: 319.0). Adjusti ng for nega ti ve currency eff ects of 1.2 %, sales per employee in the period rose a corresponding 1.4 %.
SAF-HOLLAND operates in a highly competi ti ve environment. Market-oriented, adaptable personnel structures are therefore an important success factor for the Company. To achieve the necessary fl exibility, we rely on fi xed-term contracts, part-ti me work, temporary staff and the Company's fl exi-ti me models, parti cularly in Germany, in additi on to our permanent workforce.
On the December 31, 2016 reporti ng date, SAF-HOLLAND employed 3,426 people worldwide, including temporary workers (previous year: 3,167). This represents a year-onyear increase of 8.2 %, which occurred mainly in the Americas
During the reporti ng year, we focused on developing a comprehensive environmental reporti ng system. As announced in last year's annual report, we completed this process in 2016 and for the fi rst ti me are publishing environmental data such as emissions, resource use and waste quanti ti es for our German locati ons for the reporti ng year. In next year's annual report, we will be extending our environmental reporti ng to include the enti re Group and will present the corresponding non-fi nancial performance indicators according to the specifi cati ons of a generally accepted standard.
SAF-HOLLAND environmental indicators for 2016
| 2016 | 2015 | ||
|---|---|---|---|
| Emissions | |||
| Total direct and indirect CO2 | |||
| emissions (energy sources only) in t | 6,300 | 7,041 | |
| Of which, direct and | |||
| indirect CO2 emissions | |||
| from electricity | in t | 3,239 | 3,229 |
| Total direct emissions of CO2 | in t | 5,823 | 6,445 |
| Of which, direct CO2 emissions | |||
| (fl eet vehicles + company | |||
| owned fi lling stati ons) | in t | 689 | 640 |
| Total indirect emissions of CO2 in t | 477 | 596 | |
| 2016 | 2015 | ||
| Energy consumpti on | |||
| Absolute energy consumpti on | |||
| (electricity, gas, district heati ng, | |||
| diesel) | in MWh | 28,346 | 28,693 |
| 2016 | 2015 | ||
| Waste | |||
| Total waste quanti ty | in t | 4,482 | 4,318 |
| Of which, metal waste | in t | 3,170.6 | 3,241.9 |
| Of which, wood waste | in t | 674.3 | 511.6 |
| Oils and emulsions | in t | 62.8 | 78.1 |
| Waste water | in m3 | 8,700 | 11,196 |
| 2016 | 2015 | ||
| Water | |||
| Water consumpti on | in m3 | 17,400 | 22,392 |
All fi gures pertain to the German locati ons Bessenbach, Frauengrund and Singen.
In our producti on processes, we conti nuously strive to reduce energy and material consumpti on to keep the "eco logi cal footprint" of our acti viti es as low as possible. As we began systemati cally gathering our CO2 emissions data in 2014, we made it our goal to achieve an improvement in the energy effi ciency of our German locati ons of at least 2.6 % by 2016 versus the 2014 reference year. To track our progress, we take the CO2 emissions of our German plants and compare them to the number of axles produced at those locati ons. We use axles in our calculati on because these are the main products at these locati ons. We achieved a 17.6 % improvement in energy effi ciency in the reporti ng year versus the 2014 reference year and substanti ally exceeded our goal. We have also succeeded in signifi cantly reducing our relati ve CO2 emissions over the long term.
SAF-HOLLAND CO2 emissions per axle
SAF-HOLLAND CO2 emissions per axle
Year-over-year change in %
In many other areas, we also are also working to achieve an ecologically friendly and meaningful use of resources. One example is our Lit Green initi ati ve. Instead of a printed handbook, the easily accessible serial number labels on all our fi ft h-wheel couplings now feature a QR code. The QR code can be scanned easily to open the digital product brochure. This new initi ati ve makes it easier for our customers to gain access to informati on, ensures that they are always up to date and protects the environment at the same ti me.
CONSOLIDATED With every fi ft h-wheel coupling we ship, we save up to 63 pages of paper, which amounts to approximately seven million pages of paper per year. This measures alone helps us save several thousand trees each year.
66 Consolidated Statement of Comprehensive Income 67 Consolidated Balance Sheet 68 Consolidated Statement of Changes in Equity 69 Consolidated Statement of Cash Flows 70 Notes to the Consolidated Financial Statements 70 Corporate Informati on 70 Accounti ng and Valuati on Principles 83 Scope of Consolidati on Beyond improving the ecological footprint of our producti on processes, we are also proacti ve when it comes to environmental protecti on. By perpetually reducing the weight of our products and components, we not only help customers operate more effi ciently but also help reduce fuel consumpti on and, consequently, CO2 emissions and pollutants. Our eff orts to increase the life of our products and ensure they meet the highest safety standards are also targeted at improving sustainability. More informati on on our recent innovati ons in lightweight constructi on can be found in the secti on "Research and Development" on page 23.
121 SAF-HOLLAND S.A. Annual Financial Statements 121 Income Statement of SAF-HOLLAND S.A. 122 Balance Sheet of SAF-HOLLAND S.A. 123 Mandates of the Board of Directors / Management Boards 124 Independent Auditor's Report 126 Responsibility Statement We also make an acti ve contributi on to preserving the environment for future generati ons through our social responsibility. The global increase in CO2 emissions is forcing us all to take acti on. Under the slogan "Stop talking. Start planti ng.", the "Plant for the Planet" campaign has planted 14 billion trees worldwide since 2007 with the help of citi zens, governments and businesses. The "Plant for the Planet" campaign was founded by Felix Finkbeiner, who was just nine years old at the ti me. SAF-HOLLAND supported this campaign during the fi nancial year with its own Group-wide campaign "Think Ahead" in which SAF-HOLLAND donated 80,000 trees to help save roughly one million kilograms of CO2 in the coming two years. However, "Plant for the Planet" has an even more ambiti ous aim: 1,000 billion newly planted trees by the year 2020 – the number needed to absorb one-quarter of the world's producti on of CO2.
Our social commitment is also refl ected in the support we give to charitable events. One example is SAF-HOLLAND's generous donati on to this year's "Christmas Trucker" campaign sponsored by the Johanniter Ambulance Brigade. Even more important was our employees' involvement in fi lling 96 packages for this campaign. The aid packages containing urgently needed basic foods, hygiene products and small toys, go directly to poverty-stricken families, the elderly and people with disabiliti es in Eastern Europe.
FINANCIAL STATEMENTS Social responsibility is also an important issue at our North American locati ons. The employees at SAF-HOLLAND's plants in Muskegon and Holland showed their commitment by taking part in the annual "United Way Day of Caring" in September 2016. At this event, a team of employees lent their support to the aid organizati on "Community enCompass" to refurbish buildings. A second team supported the organizati on "Kids Food Basket," which delivers evening meals daily to more than 900 primary school children in the greater Muskegon area. Other colleagues gave their assistance to a second-hand business whose revenue fl ows back into the community to help needy residents.
64 Sustainability
| kEUR | |||
|---|---|---|---|
| Notes | 2016 | 2015 | |
| Sales | (4) | 1,041,995 | 1,060,704 |
| Cost of sales | (5.1) | – 835,496 | – 857,778 |
| Gross profi t | 206,499 | 202,926 | |
| Other operati ng income | (5.2.1) | 1,159 | 3,281 |
| Selling expenses | (5.2.2) | – 60,729 | – 61,415 |
| Administrati ve expenses | (5.2.3) | – 50,927 | – 44,547 |
| Research and development costs | (5.2.4) | – 19,689 | – 20,942 |
| Operati ng result | (4) | 76,313 | 79,303 |
| Finance income | (5.2.5) | 8,359 | 9,290 |
| Finance expenses | (5.2.5) | – 21,853 | – 13,247 |
| Share of net profi t of investments accounted for using the equity method | (6.3) | 2,136 | 2,264 |
| Result before tax | 64,955 | 77,610 | |
| Income tax | (5.3) | – 21,494 | – 25,911 |
| Result for the period | 43,461 | 51,699 | |
| Att ributable to: | |||
| Equity holders of the parent | 44,234 | 51,627 | |
| Non-controlling interests | – 773 | 72 | |
| Other comprehensive income | |||
| Items that will not be reclassifi ed to profi t or loss | |||
| Remeasurements of defi ned benefi t plans | (6.10) | 1,303 | 2,937 |
| Income tax eff ects on items recognized in other comprehensive income | (6.10) | – 698 | – 341 |
| Items that may be reclassifed subsequently to profi t or loss: | |||
| Exchange diff erences on translati on of foreign operati ons | (6.10) | 5,277 | – 774 |
| Changes in fair values of derivati ves designated as hedges, recognized in equity | (6.10) / (7.1) | – 274 | 274 |
| Income tax eff ects on items recognized in other comprehensive income | (6.10) | 76 | – 76 |
| Other comprehensive income | 5,684 | 2,020 | |
| Comprehensive income for the period | 49,145 | 53,719 | |
| Att ributable to | |||
| Equity holders of the parent | 49,814 | 53,741 | |
| Non-controlling interests | – 669 | – 22 | |
| Basic earnings per share in EUR | (7.2) | 0.98 | 1.14 |
| Diluted earnings per share in EUR | (7.2) | 0.85 | 0.99 |
| kEUR | Notes | 12 / 31 / 2016 | 12 / 31 / 2015 |
|---|---|---|---|
| Assets | |||
| Non-current assets | 406,268 | 380,252 | |
| Goodwill | (6.1) | 56,059 | 52,985 |
| Intangible assets | (6.1) | 149,520 | 145,372 |
| Property, plant and equipment | (6.2) | 144,263 | 127,750 |
| Investments accounted for using the equity method | (6.3) | 15,425 | 14,102 |
| Financial assets | (7.1) | 1,243 | 1,368 |
| Other non-current assets | (6.4) | 3,528 | 3,668 |
| Deferred tax assets | (5.3) | 36,230 | 35,007 |
| Current assets | 608,428 | 508,260 | |
| Inventories | (6.5) | 130,988 | 118,008 |
| Trade receivables | (6.6) | 116,666 | 116,535 |
| Income tax assets | 1,808 | 1,611 | |
| Other current assets | (6.7) | 13,423 | 8,279 |
| Financial assets | (7.1) | 975 | 3,079 |
| Other short-term investments | (6.8) | – | 115,000 |
| Cash and cash equivalents | (6.9) | 344,568 | 145,748 |
| Total assets | 1,014,696 | 888,512 | |
| Equity and liabiliti es | |||
| Total equity | (6.10) | 305,577 | 287,800 |
| Equity att ributable to equity holders of the parent | 300,399 | 285,818 | |
| Subscribed share capital | 454 | 454 | |
| Share premium | 268,644 | 268,644 | |
| Legal reserve | 45 | 45 | |
| Other reserve | 720 | 436 | |
| Retained earnings | 45,055 | 36,338 | |
| Accumulated other comprehensive income | – 14,519 | – 20,099 | |
| Shares of non-controlling interests | 5,178 | 1,982 | |
| Non-current liabiliti es | 555,436 | 475,417 | |
| Pensions and other similar benefi ts | (6.11) | 38,393 | 37,336 |
| Other provisions | (6.12) | 6,872 | 8,042 |
| Interest bearing loans and bonds | (6.13) | 435,599 | 379,276 |
| Finance lease liabiliti es | (7.1) | – | 1,509 |
| Other fi nancial liabiliti es | (6.15) | 18,238 | 707 |
| Other liabiliti es | (6.16) | 615 | 838 |
| Deferred tax liabiliti es | (5.3) | 55,719 | 47,709 |
| Current liabiliti es | 153,683 | 125,295 | |
| Other provisions | (6.12) | 9,918 | 7,202 |
| Interest bearing loans and bonds | (6.13) | 6,067 | 3,917 |
| Finance lease liabiliti es | (7.1) | 1,587 | 465 |
| Trade payables | (6.14) | 106,714 | 89,940 |
| Income tax liabiliti es | 5,660 | 756 | |
| Other fi nancial liabiliti es | (6.15) | 972 | 178 |
| Other liabiliti es | (6.16) | 22,765 | 22,837 |
| Total equity and liabiliti es | 1,014,696 | 888,512 |
kEUR
| 2016 | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Att ributable to equity holders of the parent | |||||||||
| Sub scribed share capital |
Share premium |
Legal reserve |
Other re serve |
Retained earnings |
Accumulated other comprehensive income |
Total amount |
Shares of non controlling interests |
Total equity (Note 6.10) |
|
| As of 01 / 01 / 2016 | 454 | 268,644 | 45 | 436 | 36,338 | – 20,099 | 285,818 | 1,982 | 287,800 |
| Result for the period | – | – | – | – | 44,234 | – | 44,234 | – 773 | 43,461 |
| Other comprehensive income |
– | – | – | – | – | 5,580 | 5,580 | 104 | 5,684 |
| Comprehensive income for the period |
– | – | – | – | 44,234 | 5,580 | 49,814 | – 669 | 49,145 |
| Dividend | – | – | – | – | – 18,144 | – | – 18,144 | – | – 18,144 |
| Transfer to other reserve | – | – | – | 284 | – 284 | – | – | – | – |
| Put opti on for acquisiti on of remaining shares of KLL Equipamentos para Transporte Ltda. |
– | – | – | – | – 17,089 | – | – 17,089 | – | – 17,089 |
| Additi on of shares of non-controlling interests |
– | – | – | – | – | – | – | 3,865 | 3,865 |
| As of 12 / 31 / 2016 | 454 | 268,644 | 45 | 720 | 45,055 | – 14,519 | 300,399 | 5,178 | 305,577 |
| Att ributable to equity holders of the parent | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Sub scribed share capital |
Share premium |
Legal reserve |
Other reserve |
Retained earnings |
Accumulated other comprehensive income |
Total amount |
Shares of non controlling interests |
Total equity (Note 6.10) |
|
| As of 01 / 01 / 2015 | 454 | 268,644 | 45 | 436 | – 773 | – 22,213 | 246,593 | 2,004 | 248,597 |
| Result for the period | – | – | – | – | 51,627 | – | 51,627 | 72 | 51,699 |
| Other comprehensive income |
– | – | – | – | – | 2,114 | 2,114 | – 94 | 2,020 |
| Comprehensive income | |||||||||
| for the period | – | – | – | – | 51,627 | 2,114 | 53,741 | – 22 | 53,719 |
| Dividend | – | – | – | – | – 14,516 | – | – 14,516 | – | – 14,516 |
| As of 12 / 31 / 2015 | 454 | 268,644 | 45 | 436 | 36,338 | – 20,099 | 285,818 | 1,982 | 287,800 |
| kEUR | Notes | 2016 | 2015 | |
|---|---|---|---|---|
| Cash fl ow from operati ng acti viti es | ||||
| Result before tax | 64,955 | 77,610 | ||
| – | Finance income | (5.2.5) | – 8,359 | – 9,290 |
| + | Finance expenses | (5.2.5) | 21,853 | 13,247 |
| + / – Share of net profi t of investments accounted for using the equity method | (6.3) | – 2,136 | – 2,264 | |
| + | Amorti zati on / depreciati on of intangible assets and property, plant and equipment | (5.2.7) | 22,609 | 21,741 |
| + | Allowance of current assets | (6.5) / (6.6) | 4,458 | 4,576 |
| + / – Loss / Gain on disposal of property, plant and equipment | 125 | – 236 | ||
| + | Dividends from investments accounted for using the equity method | 943 | 19 | |
| Cash fl ow before change of net working capital | 104,448 | 105,403 | ||
| + / – Change in other provisions and pensions | 1,506 | – 6,540 | ||
| + / – Change in inventories | – 8,205 | 4,271 | ||
| + / – Change in trade receivables and other assets | – 4.1001 | – 14,9761 | ||
| + / – Change in trade payables and other liabiliti es | 12,748 | – 8,632 | ||
| Cash fl ow from operati ng acti viti es before income tax paid | 106,397 | 79,526 | ||
| – | Income tax paid | (5.3) | – 13,729 | – 16,439 |
| Net cash fl ow from operati ng acti viti es | 92,668 | 63,087 | ||
| Cash fl ow from investi ng acti viti es | ||||
| – | Purchase of other short term investments | (6.8) | – | – 115,000 |
| + | Proceeds from sale of other short term investments | 115,000 | – | |
| – | Purchase of property, plant and equipment | (6.2) | – 19,311 | – 22,166 |
| – | Purchase of intangible assets | (6.1) | – 5,695 | – 5,898 |
| + | Proceeds from sales of property, plant and equipment | 944 | 3,666 | |
| – | Purchase of other fi nancial assets | (5.2.5) | 5,730 | – |
| – | Payments for acquisiti on of subsidiaries net of cash | (3) | – 7,513 | – |
| + | Interest received | 670 | 248 | |
| Net cash fl ow from investi ng acti viti es | 89,825 | – 139,150 | ||
| Cash fl ow from fi nancing acti viti es | ||||
| – | Dividend payments to shareholders of SAF-HOLLAND S.A. | (6.10) | – 18,144 | – 14,516 |
| + | Proceeds from borrowing of non-current other loans | (6.13) | 50,000 | – |
| + | Proceeds from promissory note loan | – | 200,000 | |
| – | Paid transacti on costs relati ng to the issuance of the promissory note loan | – | – 805 | |
| – | Paid transacti on costs relati ng to fi nance agreements | – 514 | – 525 | |
| – | Payments for replacement of foreign currency derivati ves | – 5,232 | – | |
| – | Payments for fi nance lease | – 532 | – 432 | |
| – | Interest paid | – 11,938 | – 8,415 | |
| + / – Change in drawings on the credit line and other fi nancing acti viti es | (6.13) | 1,622 | 942 | |
| Net cash fl ow from fi nancing acti viti es | 15,262 | 176,249 | ||
| Net increase / decrease in cash and cash equivalents | 197,755 | 100,186 | ||
| + / – Eff ect of changes in exchange rates on cash and cash equivalents | 1,065 | 1,397 | ||
| Cash and cash equivalents at the beginning of the period | (6.9) | 145,748 | 44,165 | |
| Cash and cash equivalents at the end of the period | (6.9) | 344,568 | 145,748 |
1 As of December 31, 2016, trade receivables in the amount of EUR 26.4 million (previous year: EUR 25.6 million) were sold in the context factoring contract. Assuming the legal validity of the receivable, no further rights of recourse exist against SAF-HOLLAND from the sold receivables.
For the January 1 through December 31, 2016 Financial Year
SAF-HOLLAND S.A. (the "Company") was incorporated on December 21, 2005 as a "Société Anonyme" according to Luxembourg law. The Company's registered offi ce is located at 68 – 70, Boulevard de la Pétrusse, Luxembourg. The Company is entered in the Commercial Register of the District Court of Luxembourg under No. B 113.090. The Company's shares are listed in the Prime Standard of the Frankfurt Stock Exchange under the symbol "SFQ" (ISIN: LU0307018795). The shares have been included in the SDAX since 2010.
The consolidated fi nancial statements for SAF-HOLLAND S.A. and its subsidiaries (the "Group") as of December 31, 2016 were authorized for publicati on by the resoluti on of the Board of Directors on March 14, 2017. Shareholder approval of the fi nancial statements is required under Luxembourg law.
The SAF-HOLLAND S.A. consolidated fi nancial statements were prepared in accordance with Internati onal Financial Reporti ng Standards (IFRS), as adopted by the European Union and applicable as of the reporti ng date.
The consolidated fi nancial statements are prepared using the historical cost principle, except for derivati ve fi nancial instruments, which are measured at fair value.
The balance sheet presents current and non-current assets and current and non-current liabiliti es. The statement of comprehensive income is prepared according to the cost of sales method. Certain items in the consolidated statement of comprehensive income and the balance sheet are aggregated. They are disclosed separately in the notes to the consolidated fi nancial statements.
The consolidated fi nancial statements are prepared in euros. Unless otherwise stated, all amounts are presented in euro thousands (kEUR). Due to rounding, individual fi gures may not add up precisely to the totals provided.
In preparing the consolidated fi nancial statements, management has made assumpti ons and esti mates that aff ect the reported amounts of assets, liabiliti es, income, expenses and conti ngent liabiliti es as of the reporti ng date. In certain cases, actual amounts may diff er from these assumpti ons and esti mates. Any such changes are recognized in profi t and loss as soon as they become known. The following secti on details the key forward-looking assumpti ons as well as other main sources of esti mati on uncertainty as of the reporti ng date which pose a signifi cant risk that a material adjustment to the carrying amounts of assets and liabiliti es may be necessary within the subsequent fi nancial year.
Impairment of goodwill and intangible assets with indefi nite useful lives
The Group tests goodwill and other intangible assets with indefinite useful lives for impairment at least once a year and when there is an indicati on of impairment. The Group's impairment tests as of October 1, 2016 are based on calculati ons of the recoverable amount using a discounted cash fl ow model. Future cash fl ows are derived from the Group's fi ve-year fi nancial plan, which was approved by the Board of Directors. Cash fl ows beyond the planning period are extrapolated using individual growth rates. The recoverable amount depends heavily on the discount rate used in the discounted cash fl ow model, expected future cash infl ows and outf lows and the growth rate used for purposes of extrapolati on.
Assumpti ons are based on the informati on available at the ti me, parti cularly the expected business developments, current conditi ons and realisti c assessments of the future development of the global and industry-specifi c environment. The key assumpti ons underlying the Company's planning are based on projected unit volumes for the truck and trailer markets published by market research companies and planning discussions with the Group's major customers. Although management believes that the assumpti ons used to calculate the recoverable amount are reliable, any unforeseen changes in these assumpti ons could lead to an impairment charge that could adversely aff ect the Group's net assets, fi nancial positi on and results of operati ons. The basic assumpti on to determine the recoverable amount for the various cash-generati ng units and intangible assets with indefi nite useful lives, including a sensiti vity analysis, are discussed in more detail in Note 6.1. As of December 31, 2016, the carrying amount of goodwill totaled EUR 56.1 million (previous year: EUR 53.0 million), and that of intangible assets with indefi nite useful lives amounted to EUR 34.9 million (previous year: EUR 33.5 million).
Measurement of property, plant and equipment and intangible assets with fi nite useful lives
Measurement of property, plant and equipment and intangible assets with fi nite useful lives requires the use of esti mates for determining the fair value at the acquisiti on date, parti cularly for assets acquired in a business combinati on. Furthermore, the expected useful lives of these assets must be determined. The determinati on of fair values and useful lives of assets and impairment testi ng in the case of indicati ons of impairment are based on management's judgment. As of December 31, 2016, the carrying amounts of property, plant and equipment totaled EUR 144.3 million (previous year: EUR 127.8 million), and those of intangible assets with fi nite useful lives amounted to EUR 114.6 million (previous year: EUR 111.9 million). Further details are provided in Notes 6.1 and 6.2.
At each balance sheet date, the Group assesses whether the realizati on of future tax benefi ts is probable enough to recognize deferred tax assets. Among others, this requires management to assess the tax benefi ts arising from the available tax strategies and future taxable income and to take into account any other positi ve or negati ve factors. In order to make this assessment, the projected taxable income is esti mated based on the Company's planning. The reported amount of deferred tax assets could decline if the projected taxable income and tax benefi ts achievable through available tax strategies are lower than expected, or if changes in current tax legislati on restrict the ti ming or scope of future tax benefi ts.
Deferred tax assets are recognized for all unused tax loss carryforwards to the extent that it is probable that there will be taxable profi ts against which the losses can be uti lized. Deferred tax assets for all unused interest carryforwards are recognized to the extent that it is probable that they can be used in the future to reduce taxable income. As of December 31, 2016, the carrying amount of deferred tax assets for tax loss carryforwards amounted to EUR 3.7 million (previous year: EUR 2.9 million). Unrecognized tax loss carryforwards amounted to EUR 41.1 million (previous year: EUR 24.7 million). In additi on, as of December 31, 2016, the carrying amount of capitalized deferred tax assets for interest carryforwards was EUR 18.2 million (previous year: EUR 22.3 million). Further details are provided in Note 5.3.
Pensions and other similar obligati ons
The expense of defi ned benefi t pension plans and postemployment medical benefi ts is determined using actuarial calculati ons. These actuarial valuati ons are based on assumpti ons about discount rates, future salary and wage increases, mortality rates, future pension increases, expected staff turnover and trends in healthcare costs. All assumpti ons are reviewed on the reporti ng date. Management derives the appropriate discount rates based on the interest rates on corporate bonds in the respecti ve currency that have at least an AA rati ng. Bonds with higher default risks or off ering much higher or lower returns (stati sti cal outliers) compared to other bonds in the same risk category are not considered. The bonds are adjusted to the expected term of the defi ned benefi t obligati ons through extrapolati on. Mortality rates are based on publicly available mortality tables for the respecti ve country. Future wage, salary and pension increases are based on expected future infl ati on rates for a given country and the structure of the defi ned benefi t plan.
Due to the long-term nature of pension plans, such esti mates are subject to signifi cant uncertainty. As of December 31, 2016, the carrying amount of pensions and other similar obligati ons was EUR 38.4 million (previous year: EUR 37.3 million). Further details, including a sensiti vity analysis, are given in Note 6.11.
The recogniti on and measurement of other provisions is based on esti mates of the probability of the future outf lows of benefi ts based on past experience and the circumstances known as of the balance sheet date. As a result, the actual outf low of benefi ts may diff er from the amount recognized under other provisions.
As of December 31, 2016, other provisions amounted to EUR 16.8 million (previous year: EUR 15.2 million). Further details are provided in Note 6.12.
The Group initi ally recognizes the cost of share units (appreciati on rights) granted to members of the Management Board and certain managers at the fair value of the appreciati on rights at the grant date and subsequently measures them on each balance sheet date as well as on the sett lement date. Esti mati ng the fair value of share-based payments requires the selecti on of an appropriate valuati on model depending on the terms and conditi ons of the agreements. This model incorporates a variety of inputs for which assumpti ons must be made to esti mate the fair value. The main inputs are the expected life of the opti on, the volati lity of the share price and the forecast dividend yield. The expected volati lity is based on the average historical volati lity of a peer group during the same period, which is provided by Bloomberg. The period of volati lity is based on the remaining period of the performance share unit program. Due to the Group's past restructuring, the actual historical volati lity of the Group was not used because the management does not believe it represents future share price performance. In 2016, the carrying amount of obligati ons was EUR 5.0 million (previous year: EUR 4.3 million). Further details are presented in Note 6.12.
Where the fair value of fi nancial assets and fi nancial liabiliti es recognized in the balance sheet cannot be derived from an acti ve market, it is determined by using valuati on models. The inputs to these models are taken from observable markets when possible, otherwise determining the fair value requires a degree of judgment. This judgment considers inputs such as liquidity risk, credit risk and volati lity. Changes in the assumpti ons about these factors could aff ect the recognized fair value of fi nancial instruments. As of December 31, 2016, the fair value of derivati ve fi nancial instruments was EUR – 0.6 million (previous year: EUR 0.2 million). Further details are provided in Note 7.1.
The consolidated fi nancial statements consist of the fi nancial statements of SAF-HOLLAND S.A. and its subsidiaries as of December 31 of each year. The fi nancial statements of the consolidated subsidiaries, associates and joint ventures are prepared for the same reporti ng date as the parent company and apply uniform accounti ng and measurement policies.
All receivables and payables, sales and income, expenses and unrealized gains and losses from intercompany transacti ons are eliminated in full during consolidati on.
Subsidiaries are fully consolidated from the date of acquisiti on, i.e., from the date on which the Company obtains control. SAF-HOLLAND S.A. controls an investee when it has direct or indirect power over the investee, is exposed to the variable returns from its involvement with the company and has the ability to aff ect the variable returns through its power over the investee. An enti ty is no longer consolidated when a control relati onship with the parent company no longer exists.
Business combinati ons are accounted for using the acquisiti on method. Under this method, the cost of an acquisiti on represents the total considerati on paid measured at fair value on the acquisiti on date, including the amount of any non- controlling interest in the acquired company. For each business combinati on, the acquirer measures the non-controlling interest in the acquired company either at fair value or the proporti onate share of the acquired company's identi fi able net assets measured at fair value. Acquisiti on costs related to a business combinati on are expensed as incurred. The conti ngent considerati on agreed is recognized at fair value at the acquisiti on date. Subsequent changes in the fair value of conti ngent considerati on, which represents an asset or liability, are recognized in profi t and loss. If the conti ngent considerati on is classifi ed as equity, it will not be remeasured. The subsequent sett lement is accounted for within equity. In a business combinati on achieved in stages, the acquirer's previously held interest in the acquired company is fi rst remeasured at its fair value on the acquisiti on date and any resulti ng gain or loss is recognized in profi t and loss.
A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transacti on.
If the parent company loses control over a subsidiary, it will
Investments in associates and joint ventures
Investments in associates and joint ventures are accounted for in the consolidated fi nancial statements using the equity method.
An associate is an enti ty over which the Group can exercise signifi cant infl uence by parti cipati ng in the enti ty's fi nancial and operati ng policy decisions, but cannot exert control or joint control over those policies. Signifi cant infl uence is generally assumed when the Group holds between 20 % and 50 % of the voti ng rights.
A joint venture is a joint arrangement whereby the parti es have joint control over the arrangement and have rights to the net assets of the joint venture. Joint control is the contractually agreed sharing of control via an arrangement, which exists only when decisions about the relevant acti viti es require the unanimous consent of the parti es sharing control.
The considerati ons for determining whether signifi cant infl uence or joint control exists are similar to those for determining control over the subsidiaries. Investments in associates and joint ventures are no longer included in the consolidated fi nancial statements using equity method when the Group no longer exercises signifi cant infl uence or parti cipates in the joint control over decision processes. Gains and losses on transacti ons between the Group and an associate or joint venture are eliminated to the extent of the Group's interest in the associate or joint venture.
The complete list of the Group's shareholdings is provided in Note 7.6.
The consolidated fi nancial statements are presented in euros, which is the Group's functi onal and reporti ng currency. Each enti ty in the Group determines its own functi onal currency, and items included in the fi nancial statements of each enti ty are measured using that functi onal currency. Foreign currency transacti ons are initi ally translated into the functi onal currency at the spot rate on the day of the transacti on. Monetary assets and liabiliti es denominated in foreign currency are translated at the reporti ng day's closing rate. All exchange diff erences are recognized in profi t and loss. Non-monetary items measured at historical cost in a foreign currency are translated at the rate prevailing on the date of the transacti on. Any goodwill arising from the acquisiti on of a foreign operati on and any fair value adjustments to the carrying amounts of assets and liabiliti es arising from the acquisiti on of this foreign operati on are accounted for as assets and liabiliti es of the foreign operati on and translated at the reporti ng day's closing rate. As of the balance sheet date, the assets and liabiliti es of foreign operati ons are translated into euros at the closing rate. Income and expenses are translated at the weighted average exchange rate for the fi nancial year. The exchange diff erences arising from translati on are recognized in equity. On disposal of a foreign operati on, the accumulated amount recognized in equity relating to that parti cular foreign operati on is recognized in profi t and loss. Exchange diff erences from foreign currency loans that are part of a net investment in a foreign operati on are recognized directly in equity unti l disposal of the net investment, at which ti me they are recognized in profi t and loss. Deferred taxes att ributable to exchange diff erences from foreign currency loans are also recognized directly in equity.
The most important functi onal currencies of foreign operati ons are the US dollar (USD) and the Canadian dollar (CAD). The exchange rates for these currencies as of the balance sheet date were EUR / USD = 1.05356 (previous year: 1.09075) and EUR / CAD = 1.41884 (previous year: 1.51309). The weighted average exchange rates for these two currencies were EUR / USD = 1.10635 (previous year: 1.10963) and EUR / CAD = 1.46572 (previous year: 1.41743).
Goodwill acquired in a business combinati on is initi ally measured at cost. Following initi al recogniti on, goodwill is measured at cost less any accumulated impairment losses.
For the purpose of impairment testi ng, goodwill acquired in a business combinati on is allocated as of the acquisiti on date to each of the Group's cash-generati ng units that are expected to benefi t from the synergies of the combinati on, irrespecti ve of whether other assets or liabiliti es of the acquired company are allocated to those cash-generati ng units.
Intangible assets acquired separately are measured at cost upon their initi al recogniti on.
The acquisiti on cost of an intangible asset acquired in a business combinati on is its fair value as of the acquisiti on date.
Research costs are expensed in the period in which they are incurred. Development costs for internally generated intangible assets are only capitalized as an intangible asset when the Group can demonstrate:
Following their initi al recogniti on, intangible assets are carried at amorti zed cost less any accumulated impairment losses.
For development costs, amorti zati on begins when development is complete, and the asset is available for use.
A disti ncti on is made between intangible assets with fi nite useful lives and those with indefi nite useful lives.
Intangible assets with fi nite useful lives are amorti zed over their useful lives and tested for impairment whenever an indicati on of impairment exists. The useful life and the amorti zati on method used for an intangible asset with a fi nite useful life are reviewed at the end of each fi nancial year at a minimum. Amorti zati on is recognized in the expense category that corresponds to the intangible asset's functi on within the Company.
Intangible assets with indefi nite useful lives are not subject to scheduled amorti zati on, but are tested for impairment at least once annually. The useful life of these intangible assets is also examined annually to determine whether the assessment of an indefi nite useful life sti ll applies. If this is not the case, the change in the assessment of indefi nite to limited useful life is made prospecti vely.
Because the Group normally expects to expand acquired brands in the future, brands are assumed to have indefi nite useful lives. However, a fi nite useful life is assumed for acquired intangible assets such as technology and customer relati onships.
| Customer relati onship |
Technology | Capitalized development cost |
Brand | Service net | Licenses and soft ware |
|
|---|---|---|---|---|---|---|
| Amorti zati on method used | Amorti zed on a straight line basis over the useful life |
Amorti zed on a straight line basis over the useful life |
Amorti zed on a straight line basis over the useful life |
No amorti zati on Amorti zed on | a straight line basis over the useful life |
Amorti zed on a straight line basis over the useful life or over the period of the right |
| Useful life | 25 – 40 years | 8 – 13 years | 8 – 10 years | Indefi nite | 20 years | 3 – 10 years |
Gains or losses on the derecogniti on of intangible assets are determined as the diff erence between the net realizable value and the carrying amount of the asset and are recognized in profi t and loss in the period in which the asset is derecognized.
Property, plant and equipment
Property, plant and equipment is measured at cost less accumulated depreciati on and impairment losses.
The cost of self-constructed property, plant and equipment includes direct material and producti on costs, any allocable material and producti on overheads, as well as producti onrelated depreciati on. Administrati ve expenses are capitalized only when there is a direct link to producti on. Ongoing maintenance and repair expenses are immediately recognized as expenses.
The cost of replacing components or of overhauling plant and equipment are capitalized only when the recogniti on criteria are met.
If an item of property, plant and equipment consists of several components with diff erent useful lives, the components are depreciated separately over their respecti ve useful lives.
The residual values of the assets, useful lives and depreciati on methods are reviewed and adjusted prospecti vely at the end of each fi nancial year when appropriate.
Scheduled depreciati on is generally based on the following useful lives:
| Buildings | Plant and equipment |
Other equipment, offi ce furniture and equipment |
|
|---|---|---|---|
| Depreciati on method used | Depreciated on a straight line basis over the useful life |
Depreciated on a straight line basis over the useful life |
Depreciated on a straight line basis over the useful life |
| Useful life | 5 – 50 years | 3 – 15 years | 3 – 10 years |
An item of property, plant and equipment is derecognized upon disposal or when no future economic benefi t is expected from its conti nued use or disposal. Gains or losses on the derecogniti on of the asset are measured as the diff erence between the net realizable value and the carrying amount of the asset and are recognized in profi t and loss in the period in which the item is derecognized.
Borrowing costs consist of interest and other costs incurred by an enti ty when assuming liabiliti es. Borrowing costs directly att ributable to the acquisiti on, constructi on or producti on of an asset that requires a substanti al period of ti me to prepare for its intended use or sale are capitalized as part of the cost of the respecti ve asset. All other borrowing costs are expensed in the period they are incurred.
The classifi cati on of leases is based on the extent to which risks and rewards incidental to ownership of a leased asset lie with the lessor or the lessee.
Leases in which the Group as the lessee bears substanti ally all the risks and rewards incidental to the ownership of the leased asset are accounted for as fi nance leases. Under a fi nance lease, the Group capitalizes the leased asset at the asset's fair value or the present value of the minimum lease payments, if lower, and subsequently depreciates the leased asset over its esti mated useful life or the contractual term, if shorter. Lease payments are apporti oned between fi nance expenses and the redempti on of the lease liability to achieve a constant rate of interest on the remaining carrying amount of the lease liability. Finance expenses are recognized immediately in profi t and loss.
All other leases in which the Group is the lessee are accounted for as operati ng leases. Lease payments under a fi nance lease operati ng are recognized as an expense in profi t and loss on a straight-line basis over the term of the lease.
Under the equity method, investments in associates and joint ventures are recognized on the balance sheet at cost plus any changes in the Group's interest in the net assets of the equity investment following its acquisiti on. The Group's interest in the profi t or loss of the associate or joint venture is reported separately in the result for the period. Any changes recognized directly in the equity of the associate or joint venture are recognized by the Group according to its share and reported in accumulated other comprehensive income. Goodwill resulti ng from the acquisiti on of an associate or joint venture is included in the carrying amount of the investment in the associates or jointly controlled enti ti es and is neither amorti zed nor separately tested for impairment. Aft er applying the equity method, the Group determines whether it is necessary to recognize an additi onal impairment loss on the Group's investments in associates and joint ventures. At each balance sheet date, the Group determines whether there is any objecti ve evidence
indicati ng that investments in associates or joint ventures are impaired. If evidence exists, the Group calculates the amount of the impairment as the diff erence between the investment's fair value and carrying amount and recognizes the amount in profi t and loss.
An impairment test for goodwill and intangible assets with indefi nite useful lives is conducted at least on an annual basis on October 1 of each fi nancial year. In additi on, whenever there are specifi c indicati ons of impairment, an impairment test is carried out. An impairment test is conducted for other intangible assets with fi nite useful lives, property, plant and equipment and other non-fi nancial assets only if there are specifi c indicati ons of impairment.
Impairment is recognized in profi t and loss if the recoverable amount of the asset or cash-generati ng unit is lower than the carrying amount. The recoverable amount must be determined for each individual asset unless the asset does not generate cash infl ows that are largely independent of those from other assets or groups of assets. The recoverable amount is the higher of the fair value less costs to sell and value in use. In assessing the value in use, esti mated future cash fl ows are discounted to their present value using a pre-tax discount rate that refl ects current market expectati ons of the ti me value of money and the risk specifi c to the asset. In determining fair value less costs to sell, an appropriate valuati on model based on discounted future cash fl ows is used. To ensure the objecti vity of the results, these calculati ons are corroborated by valuati on multi ples, quoted prices for shares in publicly traded companies or other available fair value indicators.
If the reason for impairment recognized in previous years no longer exists, the carrying amount of the asset (the cashgenerati ng unit; with the excepti on of goodwill), is increased to the amount of the new esti mate of the recoverable amount. The increase in the carrying amount is limited to the value that would have been determined had no impairment loss been recognized for the asset (the cash-generati ng unit) in previous years. Such a reversal is recognized through profi t and loss.
A fi nancial instrument is any contract that creates a fi nancial asset at one enti ty and a fi nancial liability or equity instrument at another enti ty.
The Group recognizes fi nancial assets and fi nancial liabiliti es at fair value upon initi al measurement. If fi nancial assets and fi nancial liabiliti es are not measured at fair value through profi t and loss, the Group also includes transacti on costs directly att ributable to the acquisiti on or issue of the fi nancial asset or fi nancial liability.
For the purpose of subsequent measurement, IAS 39 classifi es fi nancial assets into the following categories:
IAS 39 classifi es fi nancial liabiliti es into the following categories:
The Group determines the classifi cati on of its fi nancial assets and liabiliti es at initi al recogniti on. Where permissible, any reclassifi cati ons deemed necessary are performed at the end of the fi nancial year.
Financial assets and liabiliti es are off set and the net amount reported in the consolidated balance sheet only if there is a currently enforceable legal right to off set the recognized amounts and there is an intenti on to sett le on a net basis or to realize the assets and sett le the related liabiliti es simultaneously.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transacti on between market parti cipants on the measurement date. Fair value measurement is based on the presumpti on that the transacti on to sell the asset or transfer the liability takes place either
The Group must have access to the principal or most advantageous market.
The fair value of an asset or liability is measured using the assumpti ons market parti cipants would use when pricing the asset or liability, assuming market parti cipants act in their own economic best interest.
A fair value measurement of a non-fi nancial asset takes into account a market parti cipant's ability to generate an economic benefi t with the asset's highest and best use or by selling it to another market parti cipant who would make the highest and best use of the asset.
The Group uses valuati on techniques appropriate for the respecti ve circumstances and for which suffi cient data is available to measure fair value while maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs.
All assets and liabiliti es for which fair value is measured or disclosed in the fi nancial statements are categorized within the following fair value hierarchy based on the lowest level of input that is signifi cant for the fair value measurement as a whole:
For assets and liabiliti es that are recognized in the fi nancial statements on a recurring basis, the Group determines whether reclassifi cati ons have occurred between levels in the hierarchy by reassessing their categorizati on (based on the lowest level of input that is signifi cant for the fair value measurement as a whole) at the end of each reporti ng period.
An analysis of the fair value of fi nancial instruments and further details on the method of their measurement are provided in Note 7.1.
Loans and receivables are non-derivati ve fi nancial assets with fi xed or determinable payments that are not quoted in an acti ve market. Aft er initi al recogniti on, loans and receivables are measured at amorti zed cost using the eff ecti ve interest method less any impairment. Gains and losses are recognized in profi t and loss when loans and receivables are derecognized or impaired. Loans and receivables include the Group's trade receivables, certain current assets and cash and cash equivalents.
The category held-to-maturity comprises non-derivati ve fi nancial assets with fi xed or determinable payments and fi xed maturiti es that the Group has the intenti on and ability to hold to maturity. Aft er initi al recogniti on, held-to-maturity fi nancial investments are measured at amorti zed cost using the eff ecti ve interest method less impairment. No fi nancial assets were allocated to this category in the reporti ng period.
Available-for-sale fi nancial investments are non-derivati ve fi nancial assets that do not fall into any other category. Aft er initi al recogniti on, available-for-sale fi nancial investments are measured at fair value, with any gains or losses, net of income tax eff ects, being recognized in accumulated other comprehensive income. This does not apply if the impairment is prolonged or signifi cant, in which case it is recognized in profi t and loss. The accumulated gains or losses from measurement previously reported in equity are only recognized in profi t and loss upon disposal of the fi nancial asset. No fi nancial assets were allocated to this category in the reporti ng period.
Financial instruments at fair value through profi t or loss include fi nancial instruments held for trading and fi nancial assets and fi nancial liabiliti es designated upon initi al recogniti on at fair value through profi t or loss. The Group has not designated any primary fi nancial instruments upon initi al recogniti on as at fair value through profi t or loss.
Aft er initi al recogniti on, other primary fi nancial liabiliti es are measured at amorti zed cost using the eff ecti ve interest method. They include the Group's interest-bearing loans and bonds as well as its trade payables.
Derivati ve fi nancial instruments are measured at fair value both on the date on which a derivati ve contract is entered into and in subsequent periods. Derivati ve fi nancial instruments are recognized as assets when the fair value is positi ve and as liabiliti es when the fair value is negati ve.
The Group uses derivati ve fi nancial instruments such as forward exchange contracts, interest rate swaps and caps to hedge risk positi ons arising from currency and interest rate fl uctuati ons. The hedges cover fi nancial risk from recognized underlying transacti ons, future interest rate and currency risks (hedged with interest rate swaps and caps) and risks from pending goods and service transacti ons.
The fair value of derivati ves corresponds to the present value of esti mated future cash fl ows. The fair value of forward exchange contracts is determined using the mean spot exchange rate prevailing on the balance sheet date taking into account the forward premiums and discounts for the residual term of each contract and compared with the contracted forward exchange rate. Interest rate swaps are measured at fair value by discounti ng esti mated future cash fl ows using interest rates with matching maturiti es.
Any measurement gain or loss is recognized immediately in profi t and loss unless the derivati ve is designated as a hedging instrument under hedge accounti ng and is eff ecti ve. A derivati ve that has not been designated as a hedging instrument must be classifi ed as held for trading.
At the incepti on of the hedge relati onship, the Group determines the hedge relati onship and strategy under the risk management objecti ve. Depending on the type of hedge relati onship, the Group classifi es the individual hedging instruments either as fair value hedges, cash fl ow hedges or hedges of a net investment in a foreign operati on. When entering into hedges and at regular intervals during their terms, the Group also reviews in each period whether the hedging instrument designated in the hedge is highly eff ecti ve in off setti ng the exposure to changes in the hedged item's fair value or cash fl ows att ributable to the hedged risk.
Financial instruments that contain both a debt and an equity component are classifi ed and measured separately according to their nature. Converti ble bonds are examples of such equity instruments. The fair value of conversion rights is recognized separately under share premium on the bond's issue date and therefore deducted from the bond's liability. The fair value of conversion rights from bonds with below market interest rates are calculated using the present value of the diff erence between the coupon rate and the market interest rate. The interest expense for the debt component is calculated over the bond's term based on the market interest rate on the issue date for a comparable bond without a conversion right. The diff erence between the calculated interest and the coupon rate accrued over the term increases the carrying amount of the bond's liability. The converti ble bond's issuing costs are deducted directly from the carrying amount of the debt and equity components in the same proporti on.
Financial assets or a group of fi nancial assets, with the excepti on of those recognized at fair value through profi t and loss, are tested for indicati ons of impairment at each balance sheet date. Financial assets are considered as impaired if there is objecti ve evidence that the asset's esti mated future cash fl ows were negati vely impacted by one or more events that has occurred aft er the asset's initi al recogniti on (an incurred "loss event").
For fi nancial assets measured at amorti zed cost, the impairment loss is the diff erence between the asset's carrying amount and the present value of the expected future cash fl ows determined using the fi nancial asset's original eff ecti ve interest rate. An impairment loss directly reduces the carrying amount of the fi nancial assets concerned with the excepti on of trade receivables whose carrying amount is reduced via an allowance account. Changes in the allowance account are recognized in profi t and loss.
Objecti ve evidence of impairment for available-for-sale fi nancial investments would include a signifi cant or prolonged decline in the fair value of the investment to a level below its carrying amount. Where such an asset is impaired, a loss previously recognized in equity is transferred to profi t and loss. Impairment losses on equity instruments are not reversed through profi t and loss; any subsequent increases in their fair value are recognized directly in other comprehensive income. Subsequent reversals of impairment losses for available-forsale equity instruments are recognized directly in equity rather than profi t and loss.
A fi nancial asset (or a porti on of a fi nancial asset or a porti on of a group of similar fi nancial assets) is derecognized when one of the following conditi ons has been met:
If the Group transfers its contractual rights to receive cash fl ows from an asset or concludes a transfer contract, it evaluates whether and to what extent it retains the associated risks and rewards. If the Group neither transfers nor retains substanti ally all risks and rewards associated with the ownership of this asset nor transfers control over the asset, the Group recognizes the asset to the extent of its conti nuing involvement with the asset. In such a case, the Group also recognizes an associated liability. The transferred asset and the associated liability are measured on a basis that refl ects the rights and obligati ons that the Group has retained.
When the conti nuing involvement takes the form of guaranteeing the transferred asset, the extent of the conti nuing involvement is the lower of the asset's original carrying amount and the maximum amount of the considerati on received that the Group could be required to repay.
Inventories are measured at the lower of cost or net realizable value. Net realizable value is the esti mated selling price in the ordinary course of business less esti mated costs of completi on and the esti mated necessary selling expenses.
Costs incurred in bringing inventories to their present locati on and current conditi on are accounted for as follows:
| Raw materials and supplies |
cost of purchase on a weighted average cost basis |
|---|---|
| Finished goods and work in progress |
direct material and labor costs, an appropriate proporti on of manufacturing overheads based on normal operati ng capacity (but excluding borrowing costs), producti on-related depreciati on as well as producti on-related conveyance and administrati ve costs |
Cash and cash equivalents
The balance sheet item cash and cash equivalents consists of cash on hand, cash at banks and short-term deposits with an original maturity of less than three months.
A provision is recognized when the Group has a present obligati on (legal or constructi ve) resulti ng from a past event, when it is probable that an outf low of resources embodying economic benefi ts will be required to sett le the obligati on and a reliable esti mate of the obligati on's amount can be made. If the Group expects some or all of a provision to be reimbursed, for example under an insurance contract, the reimbursement is recognized as a separate asset only when the reimbursement is virtually certain. The expense relati ng to the formati on of a provision is recognized in profi t or loss net of any reimbursement. If the eff ect of the ti me value of money is material, provisions are discounted using a current pre-tax rate that refl ects the risks specifi c to the liability. If discounti ng is used, the increase in the provision due to the passage of ti me is recognized as a fi nance expense.
Members of the Management Board and certain managers of the Group receive share-based payments in the form of phantom shares and share units (share appreciati on rights) in return for services rendered; these share appreciati on rights can only be sett led in cash (cash-sett led payment transacti ons). The cost of cash-sett led payment transacti ons is measured initi ally at fair value at the grant date using a "Monte Carlo" simulati on. The fair value is expensed over the period recognizing a corresponding liability unti l the vesti ng date. The liability is remeasured at each reporti ng date up to and including the sett lement date. Changes in the fair value are assigned to the costs of the functi onal areas. No cost is recognized for appreciati on rights that do not vest. If the conditi ons for a transacti on with cash sett lement are changed, these changes are considered within the scope of the remeasurement on the respecti ve balance sheet date. If a cash-sett led payment transacti on is canceled, the relevant liability is derecognized through profi t and loss.
Pensions and other similar obligati ons
The obligati ons resulti ng from defi ned benefi t plans are determined separately for each plan using the projected unit credit method. The remeasurement of defi ned benefi t plans include actuarial gains and losses, returns on plan assets (provided they are not included in net interest expense) as well as eff ects from asset ceiling limitati on (the "asset ceiling"). The Group recognizes the remeasurement of defi ned benefi t plans in other comprehensive income. All other expenses under defi ned benefi t plans are immediately recognized in the result for the period.
Past service cost is recognized immediately in profi t and loss.
The amount recognized as a defi ned benefi t asset or liability comprises the present value of the defi ned benefi t obligati on less the fair value of plan assets from which the obligati ons are to be sett led directly. The value of any asset is limited to the present value of any economic benefi ts available in the form of plan refunds or reducti ons in future contributi ons to the plan. Insofar as payment obligati ons in connecti on with fund assets exist as a result of minimum funding requirements for benefi ts already earned, this can also lead to the recogniti on of an additi onal provision if the economic benefi t of a fi nancing surplus is limited for the Company when taking into account the minimum funding requirements yet to be paid.
The eff ects of closure or curtailing plans are recognized in the result for the period in which the curtailment or closure takes place.
In the North American subgroup, existi ng obligati ons for the payment of post-employment medical benefi ts are classifi ed as pensions and other post-employment obligati ons due to their pension-like nature.
The Group's obligati ons under defi ned contributi on plans are recognized in profi t and loss within operati ng profi t. The Group has no further payment obligati ons once the contributi ons have been paid.
The Group grants its employees in Europe the opti on of concluding phased reti rement agreements. The block model is used for these agreements. Obligati ons of the phased reti rement model are accounted for as non-current employee benefi ts.
The Group grants long-service awards to a number of employees. The corresponding obligati ons are measured using the projected unit credit method.
Current income tax assets and liabiliti es for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxati on authoriti es. The calculati on of the amount is based on the tax rates and tax legislati on applicable on the balance sheet date.
Deferred income tax assets and liabiliti es arise from temporary diff erences between the carrying amounts of assets and liabiliti es for fi nancial reporti ng purposes and their tax bases and tax loss carryforwards and interest carryforwards with the excepti on of
Deferred income tax assets are recognized only if it is probable that suffi cient taxable profi t will be available to allow the deducti ble temporary diff erence to be uti lized. Deferred income tax assets and liabiliti es are measured at the tax rates that are expected to apply in the period when the asset is realized or the liability is sett led. The tax rates and tax laws used to calculate the amount are those that are applicable on the balance sheet date. Deferred income tax assets and liabiliti es are off set, if the Group has a legally enforceable right to off set current tax assets against current income tax liabiliti es and the deferred taxes relate to the same taxable enti ty and the same taxati on authority.
Deferred income taxes relati ng to items recognized directly in other comprehensive income are recognized in accumulated other comprehensive income and not in the result for the period.
Revenue is recognized if it is probable that the economic benefi ts will accrue to the Group and the revenue can be reliably measured. Revenue is measured at the fair value of the considerati on received excluding discounts, rebates, sales taxes or other duti es. Revenue from the sale of goods and merchandise is recognized when the signifi cant risks and rewards of ownership of the goods and merchandise sold have passed to the buyer. This transfer usually occurs upon delivery. Interest income is recognized aft er a period of ti me using the eff ecti ve interest method. Dividends are recognized when the Group's right to receive payment is established.
Government grants are recognized when there is reasonable assurance that the grant will be received and all att ached conditi ons will be complied with. Expense-related grants are recognized as income over the same period as the corresponding expenses. Where the grant relates to an asset, it is recognized as deferred income and recognized as income in equal amounts over the expected useful life of the related asset.
The accounti ng and valuati on methods applied correspond basically to the methods used in the previous year with the following excepti ons:
Amendments to IFRS 11 Joint Arrangements: Accounti ng for Acquisiti ons of Interests
The amendments to IFRS 11 require that a joint operator accounti ng for the acquisiti on of an interest in a joint operati on, in which the acti vity of the joint operati on consti tutes a business, must apply the relevant IFRS 3 Business Combinati ons principles for business combinati on accounti ng. The amendments also clarify that a previously held interest in a joint operati on is not remeasured on the acquisiti on of an additi onal interest in the same joint operati on if joint control is retained. In additi on, a scope exclusion has been added to IFRS 11 to specify that the amendments do not apply when the parti es sharing joint control, including the reporti ng enti ty, are under common control of the same ulti mate controlling party. The amendments apply to both the acquisiti on of the initi al interest in a joint operati on and the acquisiti on of any additi onal interests in the same joint operati on and are applied prospecti vely. These amendments do not have any impact on the Group as there has been no interest acquired in a joint operati on during the period.
Acceptable Methods of Depreciati on and Amorti sati on The amendments clarify the principle in IAS 16 Property, Plant and Equipment and IAS 38 Intangible Assets that revenue refl ects a patt ern of economic benefi ts that are generated from operati ng a business (of which the asset is a part) rather than the economic benefi ts that are consumed through use of the asset. As a result, a revenue-based method cannot be used to depreciate property, plant and equipment and may only be used in very limited circumstances to amorti se intangible assets. The amendments are applied prospecti vely and do not have any impact on the Group, given that it has not used a revenuebased method to depreciate its non-current assets.
These improvements include: IFRS 5 Non-current Assets Held for Sale and Disconti nued Operati ons Assets (or disposal groups) are generally disposed of either through sale or distributi on to the owners. The amendment clarifi es that changing from one of these disposal methods to the other would not be considered a new plan of disposal, rather it is a conti nuati on of the original plan. There is, therefore, no interrupti on of the applicati on of the requirements in IFRS 5. This amendment is applied prospecti vely.
In additi on, there were further changes in accounti ng policies which have no eff ect on the Group's net assets, fi nancial positi on and results of operati ons.
The following new or amended standards and interpretati ons, which are relevant for the business operati ons of the Group, have already been adopted by the Internati onal Accounti ng Standards Board (IASB) but are not yet mandatory in the reporting period or have not yet been endorsed by the European Union. The Group has decided to forego early adopti on of the following standards that have already been adopted. They will be applied at the latest in the year in which they fi rst become mandatory.
IFRS 9, issued in July 2014, replaces the existi ng guidelines of IAS 39 "Financial Instruments: Recogniti on and Measurement". IFRS 9 provides amended guidance on the classifi cati on and measurement of fi nancial instruments, including a new model on expected credit losses for calculati ng the impairment of fi nancial assets as well as the new general accounti ng provisions for hedging instruments. It also carries over the guidelines on recogniti on and derecogniti on of fi nancial instruments from IAS 39.
Applicati on of IFRS 9 is required for fi nancial years beginning on or aft er January 1, 2018, whereby early applicati on is permitt ed.
The Group is currently assessing the impact on its consolidated fi nancial statements of adopti ng IFRS 9.
IFRS 15 establishes a comprehensive framework for determining whether, to what extent and at what ti me revenue is recognized. It replaces existi ng guidelines for the recogniti on of revenue, including IAS 18 "Revenue", IAS 11 "Constructi on Contracts" and IFRIC 13 "Customer Loyalty Programs."
Applicati on of IFRS 15 is required for fi nancial years beginning on or aft er January 1, 2018, whereby early applicati on is permitt ed.
Based on analysis carried out by the Group, no signifi cant impact is expected on the consolidated fi nancial statements as a result of the applicati on of IFRS 15.
In January 2016, the IASB issued the new IFRS 16 standard, which requires lessees to recognize assets and liabiliti es for most leases. For lessors, there is litt le change to the existi ng accounti ng under IAS 17 "Leases". As a result of the fi rst-ti me adopti on, the majority of the obligati ons from operati ng rental and lease agreements currently presented under secti on 7.4 "Other fi nancial obligati ons" will be presented as an extension to the balance sheet. Applicati on of IFRS 16 is required for fi nancial years beginning on or aft er January 1, 2019.
The Company is currently assessing the impact on its consolidated fi nancial statements from the applicati on of IFRS 16 and will apply the standard in the fi nancial year beginning on January 1, 2019.
In additi on, there were further changes in accounti ng standards which have no eff ect on the Group's net assets, fi nancial positi on and results of operati ons.
On October 5, 2016, SAF-HOLLAND do Brasil Ltda. acquired a 57.5 % interest in KLL Equipamentos para Transporte Ltda., an unlisted company based in Brazil specializing in the manufacture of air suspension systems for trucks and buses and axles and mechanical and air suspension systems for trailers. As part of the acquisiti on, the contracti ng partners received a call / put opti on for the purchase / sale of the remaining 42.5 % interest, which can be exercised four years aft er the acquisiti on. The other fi nancial liabiliti es resulti ng from the put opti on are accounted for in accordance with IAS 39. Because SAF-HOLLAND do Brasil Ltda. holds the majority of voti ng rights, it has obtained control over KLL Equipamentos para Transporte Ltda. as of the acquisiti on date.
The initi al consolidati on of KLL Equipamentos para Transporte Ltda. was carried out in accordance with IFRS 3 using the acquisiti on method. The results of the company acquired were included in the Consolidated Financial Statements from the date of acquisiti on. Transacti on costs recognized as expense in connecti on with the acquisiti on amounted to EUR 0.7 million. As of 31 December 2016, the earnings contributi on of KLL Equipamentos para Transporte Ltda. was EUR – 0.6 million. The sales thereby generated amounted to EUR 1.8 million. If the business combinati on had taken place at the beginning of the year, the group's sales would have amounted to EUR 1,052 million and consolidated result before tax would have been EUR 63.9 million.
The purchase price of EUR 8.1 million was paid in cash.
The following informati on shows the preliminary purchase price allocati on and the amounts of the main groups of assets acquired and liabiliti es assumed that were recognized as of the acquisiti on date:
kEUR
| Fair value as of acquisisti on date |
|
|---|---|
| Brand | 1,095 |
| Other intangible assets | 1,104 |
| Property, plant and equipment | 12,588 |
| Inventories | 3,996 |
| Trade receivables | 1,985 |
| Other assets | 924 |
| Cash and cash equivalents | 552 |
| 22,244 | |
| Deferred tax liabiliti es | 2,267 |
| Interest bearing loans and borrowings | 8,577 |
| Trade payables | 925 |
| Other liabiliti es | 1,380 |
| 13,149 | |
| Total of identi fi ed net assets | 9,095 |
| Shares with non-controlling interests | – 3,865 |
| Goodwill from the acquisiti on | 2,835 |
| Considerati on transferred | 8,065 |
Goodwill in the amount of kEUR 2,835 includes non-separable intangible assets such as employee experti se and expected synergies. The tax deducti bility of the goodwill requires the full acquisiti on of the outstanding shares in KLL Eqipamentos para Transporte Ltda. and a future reorganizati on of the Group's acti viti es in Brazil.
The fair value of trade receivables amounted to kEUR 1,985 as of the acquisiti on date. The gross amount of trade receivables was kEUR 2,343. As of the acquisiti on date, an impairment of kEUR 358 was recognized on receivables.
The non-controlling interests in the acquired company are measured at the fair value of the proporti onal share in identi fi able net assets of the acquired company and as of the acquisiti on date amounted to kEUR 3,865.
| kEUR | |
|---|---|
| Cash outf low | 8,065 |
| Cash acquired | 552 |
| Actual cash outf low | 7,513 |
KLL Equipamentos para Transporte Ltda. was allocated to the Americas region.
The value of the put opti on for the remaining 42.5 % interest in KLL Equipamentos para Transporte Ltda. is dependent on future results and amounts to kEUR 17,089 as of the acquisiti on date.
Newly established companies
No companies were established during the reporti ng year.
No companies were deconsolidated during the reporti ng year.
In the previous year, the associated company Lakeshore Air LLP, which was accounted for in the consolidated fi nancial statements using the equity method, was liquidated in December 2015.
On January 1, 2016, a new segment structure was introduced within the corporate management and reporti ng system to better achieve the targets defi ned under the Company's "Strategy 2020". The previous segments "Trailer Systems", "Powered Vehicle Systems" and "Aft ermarket" were disconti nued as part of SAF-HOLLAND's new focus on regions. Starti ng with the 2016 reporti ng period, corporate management and Group reporti ng are organized under the segments "EMEA / India," "Americas" and "APAC / China."
Management monitors the regions' operati ng results separately for the purpose of making decisions about resource allocati on and performance assessment. Regional performance is evaluated based on adjusted operati ng profi t (adjusted EBIT). The determinati on of operati ng profi t (EBIT) may deviate to a certain extent from the consolidated fi nancial statements. The reason for this deviati on may be due to adjustments made for special items such as depreciati on and amorti zati on of property, plant and equipment and intangible assets from purchase price allocati on (PPA), impairment and reversals of impairment and restructuring and integrati on costs (see the table below). Group fi nancing (including fi nance expenses and fi nance income) and income taxes are managed on a Group basis and not allocated to the individual regions. Transfer prices between the regions are determined under normal market conditi ons for transacti ons with third parti es.
The reconciliati on of operati ng profi t to adjusted EBIT is provided as follows:
| kEUR | ||
|---|---|---|
| 2016 | 2015 | |
| Operati ng result | 76,313 | 79,303 |
| Share of net profi t of investments ac counted for using the equity method |
2,136 | 2,264 |
| EBIT | 78,449 | 81,567 |
| Additi onal depreciati on and | ||
| amorti zati on from PPA | 5,353 | 7,041 1 |
| Restructuring and transacti on costs | 6,612 | 5,418 2 |
| Adjusted EBIT | 90,414 | 94,026 |
1 Losses arising from the disposal of assets from PPA relate to the sale of the AerWay product line and amount to kEUR 576.
2 Restructuring and transacti on costs comprise aperiodic expenses in the amount of kEUR 1,020.
Segment informati on for the periods from January 1 through December 31:
| kEUR | ||||
|---|---|---|---|---|
| 2016 | ||||
| Regions | ||||
| Americas1 | EMEAI2 | APAC / China3 | Consolidated | |
| Sales | 402,242 | 568,819 | 70,934 | 1,041,995 |
| Cost of sales | – 326,855 | – 451,574 | – 57,067 | – 835,496 |
| Gross profi t | 75,387 | 117,245 | 13,867 | 206,499 |
| Gross margin | 18.7 % | 20.6 % | 19.5 % | 19.8 % |
| Selling and administrati ve expenses, research and development costs, other income, share of net profi t of investments accounted for using the |
||||
| equity method | – 49,754 | – 66,327 | – 11,969 | – 128,050 |
| Adjustments4 | 4,334 | 7,434 | 197 | 11,965 |
| Adjusted EBIT | 29,967 | 58,352 | 2,095 | 90,414 |
| Adjusted EBIT margin | 7.4 % | 10.3 % | 3.0 % | 8.7 % |
| Depreciati on | – 10,560 | – 10,601 | – 1,448 | – 22,609 |
1 Includes Canada, the USA as well as Central and South America.
2 Includes Europe, Middle East, Africa and India.
3 Includes Asia / Pacifi c and China.
4 Adjustments comprise depreciati on and amorti zati on expenses from in the amount of kEUR 5,353 as well as restructuring and transacti on costs in the amount of 6,612 TEUR.
| kEUR | 2015 | ||||
|---|---|---|---|---|---|
| Regions | |||||
| Americas1 | EMEAI2 | APAC / China3 | Consolidated | ||
| Sales | 449,361 | 540,038 | 71,305 | 1,060,704 | |
| Cost of sales | – 359,468 | – 444,240 | – 54,069 | – 857,778 | |
| Gross profi t | 89,893 | 95,797 | 17,236 | 202,926 | |
| Gross margin | 20.0 % | 17.7 % | 24.2 % | 19.1 % | |
| Selling and administrati ve expenses, research and development costs, other income, share of net profi t of investments accounted for using the |
|||||
| equity method | – 49,890 | – 59,139 | – 12,330 | – 121,359 | |
| Adjustments4 | 3,792 | 8,208 | 459 | 12,459 | |
| Adjusted EBIT | 43,794 | 44,867 | 5,365 | 94,026 | |
| Adjusted EBIT margin | 9.7 % | 8.3 % | 7.5 % | 8.9 % | |
| Depreciati on | – 9,996 | – 10,575 | – 1,170 | – 21,741 |
Includes Canada, the USA as well as Central and South America.
2 Includes Europe, Middle East, Africa and India.
3 Includes Asia / Pacifi c and China.
4 Adjustments comprise depreciati on and amorti zati on expenses from in the amount of kEUR 7,041 as well as restructuring and transacti on costs in the amount of 5,418 TEUR.
Finance income and expenses are not allocated to any one business segments as the underlying fi nancial instruments are controlled at the Group level.
Business in the EMEA / India region includes the manufacture and sale of axles and suspension systems for trailers and semi-trailers as well as fi ft h wheels for heavy trucks. In this region, the Group also provides spare parts for the trailer and commercial vehicle industry. In America, the Group manufactures and sells key components for the semi-trailer, trailer, truck, bus and recreati onal vehicle industries. In this region, the Group provides axle and suspension systems, fi ft h wheels, kingpins and landing legs as well as coupling devices. In America, the Group also provides spare parts for the trailer and commercial vehicle industry. The focus of business acti viti es in the APAC / CHINA region is the manufacture and sale of axle and suspension systems for buses, trailers and semi-trailers. The Group also off ers spare parts for the trailer and commercial vehicle industry in this region.
The following table presents the sales development by business unit:
No signifi cant sales are generated in the country where the Company is located. In additi on, the Company does not have any signifi cant share in the Group's non-current assets in the country where it is located.
In both reporti ng year and the previous year, not one customer reached a share of 10 % of the Group's total sales.
The following table presents non-current assets by region:
| kEUR | ||
|---|---|---|
| 12 / 31 / 2016 | 12 / 31 / 2015 | |
| America | 182,181 | 159,412 |
| EMEAI | 167,671 | 165,808 |
| APAC / China | 18,943 | 18,657 |
| Total | 368,795 | 343,877 |
Non-current assets consist of goodwill, intangible assets, property, plant and equipment, investments accounted for using the equity method and other non-current assets.
Revenues from external customers
| kEUR | ||
|---|---|---|
| 2016 | 2015 | |
| OEM | 772,219 | 792,685 |
| Aft ermarket | 269,776 | 268,019 |
| Total | 1,041,995 | 1,060,704 |
Cost of sales consists of the following:
| kEUR | ||
|---|---|---|
| 2016 | 2015 | |
| Cost of materials | 674,293 | 698,163 |
| Personnel expenses | 118,224 | 115,241 |
| Depreciati on and amorti zati on of property, plant and equipment and |
||
| intangible assets | 12,207 | 10,755 |
| Repair and maintenance expenses | 9,420 | 8,266 |
| Warranty expenses | 6,805 | 5,387 |
| Temporary employees expenses | 4,455 | 4,883 |
| Restructuring and transacti on costs | 1,145 | 3,522 |
| Other | 8,947 | 11,561 |
| Total | 835,496 | 857,778 |
The following overview shows the compositi on of selling expenses:
| kEUR | ||
|---|---|---|
| 2016 | 2015 | |
| Personnel expenses | 30,909 | 30,506 |
| Expenses for adverti sing and sales promoti on |
9,994 | 9,413 |
| Depreciati on and amorti zati on of property, plant and equipment and |
||
| intangible assets | 4,166 | 4,498 |
| Expenses for distributi on | 4,206 | 4,405 |
| Trade receivable allowance | 2,946 | 2,240 |
| Commissions | 714 | 1,650 |
| Restructuring and transacti on costs | 613 | 89 |
| Other | 7,181 | 8,614 |
| Total | 60,729 | 61,415 |
In the 2016 fi nancial year, cost of sales included inventory usage of kEUR 818,599 (previous year: kEUR 837,308).
5.2 OTHER INCOME AND EXPENSES
Other operati ng income consists of the following:
| kEUR | ||
|---|---|---|
| 2016 | 2015 | |
| Gain from disposal of property, plant | ||
| and equipment | 68 | 1,427 |
| Income from reimbursements | – | 747 |
| Other | 1,091 | 1,107 |
| Total | 1,159 | 3,281 |
Administrati ve expenses are shown in the following table:
| kEUR | ||
|---|---|---|
| 2016 | 2015 | |
| Personnel expenses | 25,167 | 21,911 |
| Expenses for offi ce and operati ng supplies |
4,186 | 4,111 |
| Depreciati on and amorti zati on of property, plant and equipment and |
||
| intangible assets | 4,216 | 3,415 |
| Legal and consulti ng expenses | 3,568 | 3,058 |
| Travel costs | 1,835 | 2,002 |
| Restructuring and transacti on costs | 4,854 | 1,783 |
| Other | 7,101 | 8,267 |
| Total | 50,927 | 44,547 |
The gains from disposal of property, plant and equipment in 2015 were mainly related to the sales of the AerWay product line and a property in Wörth am Main, Germany.
Research and development costs consist of the following:
| kEUR | ||
|---|---|---|
| 2016 | 2015 | |
| Personnel expenses | 10,994 | 10,349 |
| Depreciati on and amorti zati on of property, plant and equipment and |
||
| intangible assets | 2,020 | 3,073 |
| Testi ng Cost | 2,099 | 1,986 |
| Restructuring and transacti on costs | – | 24 |
| Other | 4,576 | 5,510 |
| Total | 19,689 | 20,942 |
Development costs of kEUR 3,697 (previous year: kEUR 3,681) were capitalized in the fi nancial year. Payments by the Bavarian Ministry of Economic Aff airs of kEUR 102 (previous year: kEUR 265) were off set against research and development costs as performance-based grants.
Finance income consists of the following:
| kEUR | ||
|---|---|---|
| 2016 | 2015 | |
| Finance income from the sale of other fi nancial instruments |
5,730 | – |
| Unrealized foreign exchange gains on foreign currency loans and dividends |
579 | 6,809 |
| Realized foreign exchange gains on foreign currency loans and dividends |
805 | 1,684 |
| Finance income due to derivati ves | 488 | 560 |
| Finance income due to pensions and other similar benefi ts |
23 | 18 |
| Interest income | 670 | 203 |
| Other | 64 | 16 |
| Total | 8,359 | 9,290 |
Finance income from the sale of other fi nancial instruments derived mainly from the sale of the Haldex shares acquired in the course of the planned acquisiti on of Haldex. The Group had acquired approximately 3.6 % of the Haldex shares before issuing the all-cash off er. During the fourth quarter, these shares were sold enti rely through the stock exchange, as this positi on was no longer of strategic importance.
Unrealized foreign exchange gains on foreign currency loans and dividends in the prior year primarily consist of unrealized foreign exchange gains on intercompany foreign currency loans translated at the exchange rate on the reporti ng date.
Since the fi rst quarter of 2016, the majority of intercompany foreign currency loans are now considered as part of a net investment in a foreign operati on. In the course of the Groups regional realignment on January 1, 2016, intercompany foreign currency loans were remeasured with regard to the planned repayments. Given the market's development and the pursuit of the targets under "Strategy 2020", repayment of these loans is neither planned nor expected to be likely for the foreseeable future. Exchange rate eff ects resulti ng from the valuati on of intercompany foreign currency loans at the closing rate on the reporti ng date are therefore recognized in other comprehensive income.
Finance expenses consist of the following:
| kEUR | ||
|---|---|---|
| 2016 | 2015 | |
| Interest expenses due to interest bearing loans and bonds |
– 12,399 1 | – 8,996 1 |
| Reversal of transacti on costs | – | – 468 |
| Amorti zati on of transacti on costs | – 920 | – 545 |
| Finance expenses due to pensions and other similar benefi ts |
– 1,239 | – 1,111 |
| Finance expenses due to derivati ves | – 6,157 | – 816 |
| Other | – 1,138 | – 1,311 |
| Total | – 21,853 | – 13,247 |
1 Includes the non-cash interest expense of kEUR 644 (previous year: kEUR 633) for the converti ble bond.
The rise in interest expenses related to interest-bearing loans and bonds resulted from the issue of a promissory note in the amount of EUR 200 million in November 2015 and the assumpti on of new loans with a volume of EUR 50 million in June 2016.
The reversal of transacti on costs from the previous year primarily resulted from the early reversal of capitalized transacti on costs totaling kEUR – 468 from the completi on of refi nancing in October 2015.
The amorti zati on of transacti on costs of kEUR – 920 (previous year: kEUR – 545) represents the contract closing fees recognized as expenses in the period in accordance with the eff ecti ve interest method.
Finance expenses related to derivati ves resulted from the redempti on of foreign currency derivati ves of kEUR 5,131. These were originally used to secure the purchase price payment in SEK in the case the acquisiti on of Haldex was successful. Finance expenses related to derivati ves also resulted from a change in accounti ng for the valuati on of a derivati ve embedded in the promissory note issued in November 2015. The variable interestbearing tranches of the promissory note include a zero fl oor cap, which specifi es that a decline in the Euribor is limited to 0 %. In the prior year, a zero fl oor cap was accounted for and measured separately as what is known an "embedded derivati ve". Based on the clarifi cati on of the IFRS IC in relati on to the separati on of interest rate fl oors from variable interest rate basic contracts in a negati ve interest rate environment in 2016, a separate measurement of the zero fl oor cap was waived. At the same ti me, hedge accounti ng for the hedging relati onship between the variable interest-bearing tranche of the promissory note and interest rate hedges was terminated due to ineff ecti veness. The changes in the value of the interest rate hedges recorded so far in other comprehensive income have therefore been recycled to profi t and loss.
Further informati on on the above is presented in Notes 6.13 and 7.1.
Expenses for employee benefi ts consist of the following:
| kEUR | ||
|---|---|---|
| 2016 | 2015 | |
| Wages and salaries | – 159,773 | – 155,673 |
| Social insurance contributi ons | – 22,784 | – 20,961 |
| Pension expenses | – 1,355 | – 1,079 |
| Terminati on benefi ts | – 1,382 | – 294 |
| Total | – 185,294 | – 178,007 |
Social insurance contributi ons include expenses from defi ned contributi on plans in the amount of kEUR 6,970 (previous year: kEUR 6,557).
Depreciati on and amorti zati on expenses according to functi onal area:
| kEUR | ||||||
|---|---|---|---|---|---|---|
| Depreciati on of property, plant and equipment |
Amorti zati on of intangible assets |
Total | ||||
| 2016 | 2015 | 2016 | 2015 | 2016 | 2015 | |
| Cost of sales | – 11,424 | – 10,180 | – 783 | – 575 | – 12,207 | – 10,755 |
| Selling expenses | – 1,143 | – 1,220 | – 3,023 | – 3,278 | – 4,166 | – 4,498 |
| Administrati ve expenses | – 1,441 | – 1,227 | – 2,775 | – 2,188 | – 4,216 | – 3,415 |
| Research and development costs | – 902 | – 922 | – 1,118 | – 2,151 | – 2,020 | – 3,073 |
| Total | – 14,910 | – 13,549 | – 7,699 | – 8,192 | – 22,609 | – 21,741 |
Depreciati on and amorti zati on of property, plant and equipment and intangible assets arising from purchase price allocati on amounted to kEUR 5,343 (previous year: kEUR 6,465).
Income taxes consist mainly of the following:
| Deferred income taxes as of the balance sheet date consist of | |||
|---|---|---|---|
| the following: |
| kEUR | ||
|---|---|---|
| 2016 | 2015 | |
| Current income taxes | – 18,041 | – 15,882 |
| Deferred income taxes | – 3,453 | – 10,029 |
| Income tax reported in the result | ||
| for the period | – 21,494 | – 25,911 |
The eff ecti ve income tax rate for the Group for the year ended December 31, 2016 is 33.09 % (previous year: 33.39 %). The following table reconciles the actual versus the expected income taxes for the Group using the Group's corporate income tax rate of 30.20 % (previous year: 30.90 %). The Group tax rate is the weighted tax rates in the EMEA / India, Americas and APAC / China regions applied to the result before taxes. The German corporate income tax rate of 27.22 %, consisti ng of a corporate income tax of 15.83 % (including the solidarity surcharge) and a trade tax of 11.37 %, was used for the EMEA / India region. The tax rate for the Americas region was equivalent to the US tax rate of 37.00 % which consists of a federal tax rate of 35.00 % and a state tax rate of 2.00 %. The Chinese corporate tax rate of 25.00 % was applied in the APAC / China region.
The expected income tax expenses (current and deferred) based on the Group's income tax rate of 30.20 % deviate from the reported income tax expenses as follows:
| kEUR | ||
|---|---|---|
| 2016 | 2015 | |
| Result before income tax | 64,955 | 77,610 |
| Income tax based on Group's | ||
| income tax rate of 30.20 % | ||
| (previous year: 30.90 %) | – 19,616 | – 23,981 |
| Unused interest carry-forwards | – | – 1,867 |
| Unused tax loss carry-forwards | – 2,561 | – 1,096 |
| Use of previously not recognized | ||
| tax loss carry-forwards | 806 | 1,114 |
| Non-deducti ble operati ng expenses | – 982 | – 381 |
| Tax-exempt income | 907 | – |
| Diff erences in tax rates | – 77 | 437 |
| Income taxes resulti ng from | ||
| previous year | – 38 | 55 |
| Other | 67 | – 192 |
| Income tax based on eff ecti ve | ||
| income tax rate of 33.09 % | ||
| (previous year: 33.39 %) | – 21,494 | – 25,911 |
| kEUR | ||
|---|---|---|
| 12 / 31 / 2016 | 12 / 31 / 2015 | |
| Inventories | 2,637 | 2,756 |
| Pensions and other similar benefi ts | 12,978 | 11,510 |
| Other fi nancial liabiliti es | 261 | 25 |
| Other provisions | 2,629 | 2,256 |
| Tax loss carry-forwards | 3,710 | 2,904 |
| Interest carry-forwards | 18,231 | 22,351 |
| Other | 5,274 | 6,462 |
| Deferred income tax assets | 45,720 | 48,264 |
| Intangible assets | – 39,745 | – 35,828 |
| Property, plant and equipment | – 11,789 | – 11,397 |
| Inventories | – | – 215 |
| Investments accounted for using the | ||
| equity method | – 5,736 | – 5,319 |
| Other assets | – 423 | – 578 |
| Interest bearing loans and bonds | – 859 | – 993 |
| Other | – 6,657 | – 6,636 |
| Deferred income tax liabiliti es | – 65,209 | – 60,966 |
As of the balance sheet date, deferred tax assets and liabiliti es of kEUR 9,490 (previous year: kEUR 13,257) were off set, having met the requirements for off setti ng. The balance sheet thus includes deferred tax assets of kEUR 36,230 (previous year: kEUR 35,007) and deferred tax liabiliti es of kEUR 55,719 (previous year: kEUR 47,709).
The Group has tax loss carryforwards of kEUR 55,284 (previous year: kEUR 41,319) that are available indefi nitely or with defi ned ti me limits to several Group companies to off set against future taxable income of the companies in which the losses arose or of other Group companies. Deferred tax assets have not been recognized with respect to tax loss carryforwards of kEUR 41,144 (previous year: kEUR 24,727) due to insuffi cient taxable income or opportuniti es for off setti ng at the individual companies or other Group companies.
| kEUR | ||
|---|---|---|
| 12 / 31 / 2016 | 12 / 31 / 2015 | |
| Infi nite | 37,731 | 24,419 |
| Within 5 years | 3,413 | 308 |
| Total | 41,144 | 24,727 |
In additi on to tax loss carryforwards, the Group has interest carryforwards of kEUR 70,253 (previous year: kEUR 84,141), which are available indefi nitely to various Group companies for use in the future as a tax deducti on. Interest carryforwards result from the interest limitati on rules introduced by the business tax reform in Germany as well as a comparable regulati on in North America.
In fi nancial year 2016, deferred income taxes amounti ng to kEUR – 622 (previous year: kEUR – 417) were recognized in other comprehensive income.
Furthermore, temporary diff erences associated with investments in subsidiaries for which no deferred taxes have been recognized amounted to EUR 11.1 million (previous year: EUR 61.0 million).
| kEUR | ||||||||
|---|---|---|---|---|---|---|---|---|
| Customer | Development | Licences and | Intangible | |||||
| relati onship | Technology | costs | Brand | Service net | soft ware | assets | Goodwill | |
| Historical costs | ||||||||
| As of 12 / 31 / 2014 | 106,629 | 21,652 | 7,706 | 33,220 | 3,495 | 28,083 | 200,785 | 79,585 |
| Additi ons | – | – | 3,691 | – | – | 2,207 | 5,898 | – |
| Disposals | – | 345 | 10 | 439 | – | 166 | 960 | – |
| Transfers | – | – 7 | – | – | – | – 67 | – 74 | – |
| Foreign currency translati on | 4,595 | 690 | – | 1,333 | – | 699 | 7,317 | 3,666 |
| As of 12 / 31 / 2015 | 111,224 | 21,990 | 11,387 | 34,114 | 3,495 | 30,756 | 212,966 | 83,251 |
| Additi ons from initi al | ||||||||
| consolidati on | 908 | – | – | 1,095 | – | 601 | 2,604 | 2,835 |
| Additi ons | – | – | 3,673 | – | – | 2,022 | 5,695 | – |
| Disposals | – | – | – | – | – | 228 | 228 | – |
| Transfers | – | – | – | – | – | 2,005 | 2,005 | – |
| Foreign currency translati on | 1,630 | 219 | 121 | 490 | – | 599 | 3,059 | 588 |
| As of 12 / 31 / 2016 | 113,762 | 22,209 | 15,181 | 35,699 | 3,495 | 35,755 | 226,101 | 86,674 |
| Accumulated amorti zati on | ||||||||
| As of 12 / 31 / 2014 | 26,449 | 16,015 | 1,150 | 540 | 1,531 | 12,737 | 58,422 | 29,337 |
| Additi ons | 3,054 | 1,948 | 515 | 100 | 175 | 2,400 | 8,192 | – |
| Disposals | – | 208 | – | – | – | 151 | 359 | – |
| Foreign currency translati on | 1,077 | 330 | – | 8 | – | – 76 | 1,339 | 929 |
| As of 12 / 31 / 2015 | 30,580 | 18,085 | 1,665 | 648 | 1,706 | 14,910 | 67,594 | 30,266 |
| Additi ons from initi al consolidati on |
– | – | – | – | – | 405 | 405 | – |
| Additi ons | 3,087 | 894 | 734 | 136 | 174 | 2,674 | 7,699 | – |
| Disposals | – | – | – | – | – | 23 | 23 | – |
| Foreign currency translati on | 484 | 133 | 25 | – 4 | – | 268 | 906 | 349 |
| As of 12 / 31 / 2016 | 34,151 | 19,112 | 2,424 | 780 | 1,880 | 18,234 | 76,581 | 30,615 |
| Carrying amount 12 / 31 / 2015 |
80,644 | 3,905 | 9,722 | 33,466 | 1,789 | 15,846 | 145,372 | 52,985 |
| Carrying amount 12 / 31 / 2016 |
79,611 | 3,097 | 12,757 | 34,919 | 1,615 | 17,521 | 149,520 | 56,059 |
Intangible assets with fi nite useful lives that the Group considers important are presented in the following table:
| kEUR | ||||
|---|---|---|---|---|
| 2016 | 2015 | |||
| Remaining useful life in |
Remaining useful life in |
|||
| Netbook value | years | Netbook value | years | |
| Customer relati onship "OEM" | 28,387 | 30 | 29,358 | 31 |
| Customer relati onship "5th-Wheel" | 12,192 | 22 | 12,752 | 23 |
| SAP-Applicati on | 10,710 | 6.5 | 12,067 | 7.5 |
Impairment testi ng of goodwill and intangible assets with indefi nite useful lives
The Group carries out its annual impairment tests of recognized goodwill and intangible assets with indefi nite useful lives as of October 1. In doing so, the recoverable amounts for the cash-generati ng units were generally esti mated to be higher than the carrying amounts.
For the purpose of the impairment test, the recoverable amount of a cash-generati ng unit is determined on the basis of the value in use.
A discounted cash fl ow method was used to calculate the recoverable amount. A detailed fi ve-year plan based on past experience, current operati ng earnings, management's best esti mate of future development and market assumpti ons served as the basis for calculati ng cash fl ows. The value contributi on as of 2021 is supplemented by the perpetual annuity. The basis for the calculati on of the perpetual annuity is the assumed longterm sustainably achievable result given the market environment's cyclical nature.
To calculate the discount rates, a weighted average cost of capital (WACC) method was applied. This method considers yields on government bonds at the beginning of the budget period as a risk-free interest rate. As in the previous year, a growth rate deducti on of 1.0 % was applied for the perpetual annuity.
The following table presents the discount factors before taxes that are applied during the impairment tests for goodwill and intangible assets with indefi nite useful lives:
| % | Discount factor before taxes |
|---|---|
| 2016 | |
| Americas | 12.46 |
| EMEAI | 9.18 |
| APAC / China | 15.52 |
As part of the Group's new alignment according to region, the regions "EMEA / India", "Americas" and "APAC / China" were defi ned as cash-generati ng units. The allocati on of the carrying amounts of goodwill to the cash-generati ng units was made on the basis of the use of future synergies from the company's underlying transacti on. The allocati on of the brands "SAF" and "Holland" to the cash-generati ng units was done on the basis of the primary geographical use of these brands. The impairment test of the SAF brand was performed on the basis of the EMEA / India cash-generati ng unit. The impairment test of the Holland brand was performed on the basis of the Americas cash-generati ng unit. The carrying amounts are as follows:
| kEUR | ||||||||
|---|---|---|---|---|---|---|---|---|
| Americas | EMEAI | APAC / China | Total | |||||
| 12 / 31 / 2016 | 12 / 31 / 2015 | 12 / 31 / 2016 | 12 / 31 / 2015 | 12 / 31 / 2016 | 12 / 31 / 2015 | 12 / 31 / 2016 | 12 / 31 / 2015 | |
| Goodwill | 26,444 | 23,369 | 23,442 | 23,442 | 6,173 | 6,174 | 56,059 | 52,985 |
| Brand | 14,187 | 12,613 | 20,617 | 20,618 | 115 | 235 | 34,919 | 33,466 |
Besides the brands "SAF" and "Holland" the group owns several other brands that are amorti zed over the intended useful life in accordance with the brand stategy followed.
Within the scope of the value in use calculati on, sensiti vity analyses were carried out for the cash-generati ng units to which material goodwill or intangible assets with indefi nite useful lives were allocated to. An increase in the average cost of capital (aft er taxes) of 100 basis points or a decline of future cash fl ows (aft er taxes) of 10 % or a one-percent reducti on in the long-term growth rate was assumed. Based on this method SAF-HOLLAND determined that there was no need for impairment at any of the cash-generati ng units.
kEUR
| Land and buildings | Plant and equipment |
Other equipment, offi ce furniture and equipment |
Advance payments and constructi on in progress |
Total | |
|---|---|---|---|---|---|
| Historical costs | |||||
| As of 12 / 31 / 2014 | 73,089 | 118,885 | 21,165 | 7,873 | 221,012 |
| Additi ons | 5,322 | 5,615 | 1,402 | 9,827 | 22,166 |
| Disposals | 4,748 | 4,286 | 989 | 25 | 10,048 |
| Transfers | 3,548 | 10,604 | 311 | – 14,389 | 74 |
| Foreign currency translati on | 2,659 | 6,460 | 362 | 346 | 9,827 |
| As of 12 / 31 / 2015 | 79,870 | 137,278 | 22,251 | 3,632 | 243,031 |
| Additi ons from initi al consolidati on | 7,716 | 10,091 | 153 | – | 17,960 |
| Additi ons | 848 | 5,419 | 2,513 | 10,531 | 19,311 |
| Disposals | 963 | 5,894 | 346 | – | 7,203 |
| Transfers | 894 | 4,389 | 1,164 | – 7,977 | – 1,530 |
| Foreign currency translati on | 1,554 | 3,886 | 344 | 7 | 5,791 |
| As of 12 / 31 / 2016 | 89,919 | 155,169 | 26,079 | 6,193 | 277,360 |
| Accumulated depreciati on | |||||
| As of 12 / 31 / 2014 | 18,482 | 71,065 | 14,494 | – | 104,041 |
| Additi ons | 2,733 | 8,527 | 2,289 | – | 13,549 |
| Disposals | 2,259 | 3,982 | 978 | – | 7,219 |
| Foreign currency translati on | 806 | 3,829 | 275 | – | 4,910 |
| As of 12 / 31 / 2015 | 19,762 | 79,439 | 16,080 | – | 115,281 |
| Additi ons from initi al consolidati on | 981 | 4,391 | – | – | 5,372 |
| Additi ons | 2,891 | 9,727 | 2,292 | – | 14,910 |
| Disposals | 925 | 5,096 | 318 | – | 6,339 |
| Transfers | 481 | – 11 | 5 | – | 475 |
| Foreign currency translati on | 535 | 2,557 | 306 | – | 3,398 |
| As of 12 / 31 / 2016 | 23,725 | 91,007 | 18,365 | – | 133,097 |
| Carrying amount 12 / 31 / 2015 | 60,108 | 57,839 | 6,171 | 3,632 | 127,750 |
| Carrying amount 12 / 31 / 2016 | 66,194 | 64,162 | 7,714 | 6,193 | 144,263 |
The carrying amount of technical and operati ng and offi ce equipment held under fi nance leases as of December 31, 2016 is kEUR 2,754 (previous year: kEUR 2,789). There were no additi ons to technical equipment held under fi nance leases in the reporti ng year (previous year: kEUR 22). Depreciati on during the fi nancial year amounted to kEUR 117 (previous year: kEUR 131). The present value of minimum lease payments amounted to kEUR 1,587 (previous year: kEUR 1,974). Undiscounted minimum lease payments amounted to kEUR 1,605 (previous year: kEUR 2,153).
The following investments were accounted for using the equity method:
| Country of incorporati on |
% Equity interest |
|
|---|---|---|
| Associates | ||
| Castmetal FWI S.A. | Luxembourg | 34.1 |
| Joint ventures | ||
| SAF-HOLLAND Nippon, Ltd. | Japan | 50.0 |
Details about the Group's signifi cant associates are presented in the following table:
The reconciliati on item "other adjustments" mainly results from the disclosure of hidden reserves in the context of the acquisiti on of the investment and its amorti zati on.
| Name of the associate | Castmetal FWI S.A. |
|---|---|
| Nature of relati onship with the Group | Supplier of components |
| in cast steel | |
| Principal place of business | Luxembourg |
| Ownership interest | 34.09 % |
A dividend of kEUR 943 was distributed by Castmetal FWI S.A. in 2016.
The summarized fi nancial informati on for the "SAF-HOLLAND Nippon Ltd." joint venture is presented in the following:
Group's share in profi t or loss 37 – 285
income 37 – 285
Group's share in this company 1,092 996
12 / 31 / 2016 12 / 31 / 2015
The following table summarizes fi nancial informati on for Castmetal FWI S.A. The summarized fi nancial informati on corresponds to the relevant amounts in the associates' fi nancial statements prepared in accordance with IFRS (for accounti ng purposes adjusted to the Group according to the equity method).
| kEUR | ||
|---|---|---|
| Castmetal FWI S.A. | ||
| 12 / 31 / 2016 | 12 / 31 / 2015 | |
| Current assets | 46,713 | 40,704 |
| Non-current assets | 9,261 | 9,707 |
| Current liabiliti es | – 10,292 | – 10,760 |
| Non-current liabiliti es | – 5,821 | – 2,536 |
| Sales | 34,022 | 42,193 |
| Net profi t of the fi nancial year from | ||
| conti nuing operati ons | 6,169 | 7,455 |
| Other comprehensive income | – 11 | 22 |
| Total comprehensive income | 6,158 | 7,477 |
| Group's share in total comprehensive | ||
| income | 2,099 | 2,549 |
| Other equity holders | 4,059 | 4,928 |
6.4 OTHER NON-CURRENT ASSETS
Group's share in total comprehensive
Aggregate carrying amount of
kEUR
| kEUR | ||
|---|---|---|
| 12 / 31 / 2016 | 12 / 31 / 2015 | |
| Receivables from fi nance lease | 886 | 1,000 |
| VAT reimbursement claims | 1,201 | 844 |
| Claims from reinsurance | 670 | 595 |
| Defi ned benefi t assets | 68 | 279 |
| Insurance premiums | 96 | 129 |
| Other | 607 | 821 |
| Total | 3,528 | 3,668 |
A reconciliati on between the reported summarized fi nancial informati on and the carrying amount of the investment in Castmetal FWI S.A. as shown in the consolidated fi nancial statements:
| kEUR | ||
|---|---|---|
| 12 / 31 / 2016 | 12 / 31 / 2015 | |
| Net assets of the associate | 39,861 | 37,115 |
| Equity interest of the Group | 34.09 % | 34.09 % |
| Other adjustments | 744 | 453 |
| Carrying amount of the investment | ||
| in Castmetal FWI S.A. | 14,333 | 13,106 |
| kEUR | ||
|---|---|---|
| 12 / 31 / 2016 | 12 / 31 / 2015 | |
| Raw materials | 45,626 | 42,258 |
| Work in progress | 35,603 | 26,587 |
| Finished and trading goods | 40,819 | 41,657 |
| Goods in transit | 8,940 | 7,506 |
| Total | 130,988 | 118,008 |
Cost of sales includes allowances for inventories of kEUR 2,416 (previous year: kEUR 2,336). The inventory allowance is recorded in a separate allowance account and nett ed against the gross amount of inventory.
| Allowance account | |
|---|---|
| As of 12 / 31 / 2014 | 5,859 |
| Charge for the year | 2,412 |
| Uti lized | 1,993 |
| Released | 76 |
| Foreign currency translati on | 8 |
| As of 12 / 31 / 2015 | 6,210 |
| Charge for the year | 2,416 |
| Uti lized | 1,023 |
| Released | – |
| Foreign currency translati on | 316 |
| As of 12 / 31 / 2016 | 7,919 |
kEUR
The total amount of trade receivables is non-interest-bearing and due within one year.
kEUR Thereof not impaired on the reporti ng date and past due in the following periods Carrying amount Thereof neither impaired nor past due on the reporti ng date Thereof impaired on the reporti ng date Less than 30 days Between 31 and 60 days Between 61 and 90 days Between 91 and 120 days Between 121 and 360 days More than 360 days Trade receivables as of 12 / 31 / 2016 116,666 71,871 3,624 20,432 7,392 3,022 2,067 4,438 3,820 Trade receivables as of 12 / 31 / 2015 116,535 76,568 411 10,599 12,595 4,942 2,124 8,279 1,017
Allowances for trade receivables are recorded in a separate allowance account and nett ed with the gross amount of trade receivables.
| kEUR | |
|---|---|
| Allowance account | |
| As of 12 / 31 / 2014 | 3,953 |
| Charge for the year | 2,240 |
| Uti lized | 1,865 |
| Foreign currency translati on | – 125 |
| As of 12 / 31 / 2015 | 4,203 |
| Charge for the year | 2,088 |
| Uti lized | 1,106 |
| Released | 46 |
| Foreign currency translati on | 102 |
| As of 12 / 31 / 2016 | 5,241 |
With respect to trade receivables that are not impaired and past due, there are no indicati ons as of the reporti ng date that the debtors will not meet their payment obligati ons. The Group has taken out trade credit insurance in Europe and the United States to hedge the default risk.
The Group disposed of receivables with a volume of kEUR 26,359 as of the balance sheet date (previous year: kEUR 25,573) under a factoring agreement. Assuming the legal validity of the receivables, the factor bears the customer default risk for the purchased receivables.
| kEUR | ||
|---|---|---|
| 12 / 31 / 2016 | 12 / 31 / 2015 | |
| VAT receivables | 3,928 | 2,552 |
| Prepaid expenses | 1,636 | 1,712 |
| Insurance premiums | 313 | 430 |
| Creditors with a debit balance | 1,488 | 192 |
| Deposit within the framework | ||
| of factoring | 1,409 | 330 |
| Other | 4,649 | 3,063 |
| Total | 13,423 | 8,279 |
In previous year, other short-term investments resulted from the short-term deposit of liquid funds from the issue of the promissory note in November 2015. As of December 31, 2016, the Group had no short-term fi nancial investments.
| kEUR | ||
|---|---|---|
| 12 / 31 / 2016 | 12 / 31 / 2015 | |
| Cash on hand, cash at banks and | ||
| checks | 344,154 | 145,742 |
| Short-term deposits | 414 | 6 |
| Total | 344,568 | 145,748 |
The Company's subscribed share capital was unchanged compared to the prior year and amounted to EUR 453,611.12 as of the balance sheet date (previous year: EUR 453,611.12). Subscribed share capital is fully paid-in and consists of 45,361,112 (previous year: 45,361,112) ordinary shares with a nominal value of EUR 0.01 per share.
As of the balance sheet date, exisiti ng authorized share capital is as follows:
| Arti cles of Associati on | Date of resoluti on/ expirati on |
Euro/ number of shares |
Capital increase against | Subscripti on rights excluded / executi on of capital increase |
|---|---|---|---|---|
| Arti cle 5.3.4 ICW | June 4, 2012 / valid unti l | EUR 119,588.52 = | Contributi on in cash | |
| Arti cle 5.3.6 | July 25, 2017 | 11,958,852 shares | and / or in kind | – |
| Capital increase can | ||||
| be executed under | ||||
| Arti cle 5.3.3 ICW | June 4, 2012 / valid | EUR 45,361.11 = | the exclusion of | |
| Arti cle 5.3.5 | unti l December 22, 2020 | 4,536,111 shares | – | subscripti on rights |
| Capital increase | ||||
| is carried out when | ||||
| creditors of the | ||||
| converti ble bond | ||||
| Arti cle 5.4 ICW | July 15, 2014 / valid | EUR 90,722.22 = | To serve 2014 | exercisetheir |
| Arti cle 5.4.2 | unti l July 14, 2019 | 9,072,222 shares | converti ble bond | conversion rights |
As of December 31, 2016, the share premium was unchanged and amounted to kEUR 268,644 (previous year: kEUR 268,644).
As in the previous year, legal reserve amounts to kEUR 45.
Other reserves consist of a reserve that is subject to restricti ons on distributi on. This reserve ensures the Group adheres to specifi c requirements under Luxembourg tax law. A total of kEUR 284 was allocated to other reserves for tax purposes. As of December 31, 2016, other reserves totaled kEUR 720 (previous year: kEUR 436).
Retained earnings include the result for the period att ributable to shareholders of SAF-HOLLAND S.A. of kEUR 44,234 (previous year: kEUR 51,627).
A dividend of EUR 0.44 per share will be proposed for the 2016 fi nancial year, corresponding to a total dividend distributi on of kEUR 19,959 based on 45,361,112 shares. This amounts to a payout rati o of the available net earnings of 46.4 % and as such essenti ally achieved the targeted range. In this context, available net earnings are defi ned as the result for the period less unrealized foreign exchange gains on intercompany transacti ons, net of related income taxes. A dividend of EUR 0.40 per share was paid in the previous year, and the total dividend distributi on amounted to kEUR 18,144.
Moreover, retained earnings were reduced by 17,089 TEUR due to the initi al recogniti on of the put opti on in equity arising from the acquisiti on of KLL Equipamentos para Transporte Ltda. Subsequent changes in the value of the opti on are recognized through profi t and loss.
| Before tax amount | Tax (income) / expense | Net of tax amount | ||||
|---|---|---|---|---|---|---|
| 2016 | 2015 | 2016 | 2015 | 2016 | 2015 | |
| 1,303 | 2,937 | – 698 | – 341 | 605 | 2,596 | |
| 5,277 | – 774 | – | – | 5,277 | – 774 | |
| – 274 | 274 | 76 | – 76 | – 198 | 198 | |
| 6,306 | 2,437 | – 622 | – 417 | 5,684 | 2,020 | |
The total amount of exchange diff erences on translati on of foreign operati ons included in accumulated other comprehensive income is kEUR 3,966 (previous year: kEUR – 1,311).
The total amount of changes in the fair value of derivati ves designated as hedges aft er taxes included in accumulated other comprehensive income is kEUR 0 (previous year: kEUR 198).
The total amount aft er tax of the remeasurement of defi ned benefi t plans included in accumulated other comprehensive income is kEUR – 17,949 (previous year: kEUR – 18,554).
The Group's target liquidity is an amount of cash and cash equivalents of EUR 7 million. The equity rati o adjusted for excess liquidity amounts to 45.1 % (previous year: 45.3 %).
The Group off ered defi ned benefi t plans to its employees in Germany in accordance with a supplemental agreement.
Under a supplemental agreement dated January 1, 2007, SAF-HOLLAND GmbH's pension plans were frozen and no further pension enti tlements can be earned. The future pension payments for these plans depend on an employee's length of service.
Future pension payments for the plan of SAF-HOLLAND Verkehrstechnik GmbH depend on the length of service and the individual's income. In February 2011, the Company restructured its existi ng pension plans by amending the underlying supplemental agreements. The form was changed from a direct
pension commitment to an indirect pension commitment by establishing a reinsured employee benefi t fund. The conversion did not alter the benefi ts granted to employees. The pension plan remains a defi ned benefi t obligati on as defi ned by IAS 19 recorded under provisions for pensions and other similar obligati ons. Pension commitments of the employee benefi t fund are covered by a group insurance contract. As these reinsurance claims do not consti tute plan assets because the employees' claims are not protected against insolvency, the amount of the asset value of the pension liability insurance of kEUR 670 (previous year: kEUR 595) is recognized under other non-current assets in accordance with IAS 19.
The development of the asset value of the pension liability insurance is as follows:
| kEUR | |
|---|---|
| 2016 | |
| Claims arising from the pension liability insurance at the beginning of the period |
595 |
| Allocati on to pension liability insurance | 83 |
| Insurance compensati on | – 11 |
| Interest income | 3 |
| Claims arising from the pension liability insurance at the end of the period |
670 |
There are no legal or regulatory minimum investment commitments in Germany.
SAF-HOLLAND, Inc. sponsors three pension plans, which have been closed to new parti cipants. The benefi ts paid in the context of the defi ned benefi t plans depend on the length of the service or, in some cases, the individual income of the parti cipants. The management of the plan assets has been assigned to Investment committ ee. The trustees of the plans are responsible for the administrati on of the assets of the trusts, taking directi on from the Investment Committ ee. The plans are subject to the funding requirements under the Employee Reti rement Income Security Act of 1974 as amended (ERISA). There is a regulatory requirement to maintain a minimum funding level of 80 % in the defi ned benefi t plans in order to avoid benefi t restricti ons.
SAF-Holland Canada Limited sponsors three Pension Plans, of which only one plan is open to new parti cipants. The other plans are in the process of liquidati on, with the approval of the regulatory authoriti es sti ll pending. In accordance with the legal framework of the Ontario Pension Benefi ts Act (OPBA) and the Canadian Revenue Agency (CRA), there is a minimum funding requirement for pension plans which are not fully fi nanced and will not be fi nanced in the foreseeable future.
| kEUR | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Defi ned benefi t | Fair value | Eff ects of | Net defi ned | ||||||
| obligati on (DBO) (I) |
of plan assets (II) |
asset ceiling (III) |
benefi t balance | ||||||
| (I – II + III) | |||||||||
| 2016 | 2015 | 2016 | 2015 | 2016 | 2015 | 2016 | 2015 | ||
| Balance as of the beginning | |||||||||
| of the period | 103,606 | 100,896 | 66,694 | 63,782 | 145 | 182 | 37,057 | 37,296 | |
| Current service cost | 1,076 | 1,079 | – | – | – | – | 1,076 | 1,079 | |
| Past service cost | 279 | – | – | – | – | – | 279 | – | |
| Interest expenses | 3,858 | 3,684 | – | – | 6 | 7 | 3,864 | 3,691 | |
| Interest income | – | – | 2,648 | 2,588 | – | – | – 2,648 | – 2,588 | |
| Components of defi ned benefi t costs recognized in the Consolidated |
|||||||||
| Statements of income | 5,213 | 4,763 | 2,648 | 2,588 | 6 | 7 | 2,571 | 2,182 | |
| Actuarial gains / losses | 581 | – 4,617 | 1,722 | – 1,680 | – | – | – 1,141 | – 2,937 | |
| Eff ects of asset ceilling | – | – | – | – | – 162 | – 31 | – 162 | – 31 | |
| Remeasurements recognized in the Consolidated Statements |
|||||||||
| of Comprehensive Income | 581 | – 4,617 | 1,722 | – 1,680 | – 162 | – 31 | – 1,303 | – 2,968 | |
| Employer Contributi ons | – | – | 489 | 1,412 | – | – | – 489 | – 1,412 | |
| Benefi ts paid | – 4,600 | – 4,519 | – 4,203 | – 3,804 | – | – | – 397 | – 715 | |
| Foreign currency translati on eff ects |
3,647 | 7,083 | 2,772 | 4,396 | 11 | – 12 | 886 | 2,675 | |
| Other reconciling items | – 953 | 2,564 | – 942 | 2,004 | 11 | – 12 | – | 548 | |
| Balance as of the end of the period |
108,447 | 103,606 | 70,122 | 66,694 | – | 145 | 38,325 | 37,057 | |
| thereof: | |||||||||
| Germany | 14,827 | 13,971 | 11 | 10 | – | – | 14,816 | 13,961 | |
| USA | 66,464 | 64,417 | 53,012 | 51,317 | – | – | 13,452 | 13,100 | |
| Canada | 17,031 | 14,943 | 17,099 | 15,367 | – | 145 | – 68 | – 279 | |
| Post-employment medical | 10,125 | 10,275 | – | – | – | – | 10,125 | 10,275 | |
| Actual return on plan assets | – | – | 4,371 | 907 | – | – | – | – |
The net balance from defi ned benefi t plans in the amount of kEUR 38,325 (previous year: kEUR 37,057) consists of a net liability of kEUR 38,393 (previous year: kEUR 37,336) and net plan assets of kEUR 68 (previous year: kEUR 279). The net interest expense was kEUR 1,216 (previous year: kEUR 1,093).
The major categories of plan assets as a percentage of the fair value of total plan assets and according to value are as follows:
| 2016 | 2015 | |||
|---|---|---|---|---|
| % | kEUR | % | kEUR | |
| Equiti es | 57.29 | 40,173 | 59.25 | 39,517 |
| Bonds | 30.35 | 21,284 | 28.00 | 18,672 |
| Cash and money market | 6.69 | 4,689 | 7.75 | 5,171 |
| Real estate | 2.61 | 1,830 | 4.75 | 3,169 |
| Insurance | 3.06 | 2,146 | 0.25 | 165 |
| Total | 100.00 | 70,122 | 100.00 | 66,694 |
Investments for the pension fund are managed through a diversifi ed portf olio of highly liquid Insti tuti onal mutual funds, as regulated under the Investment Advisors Act of 1940. The portf olio is invested across various asset classes to include, but not limited to, US and Global Equiti es, US and Global Fixed Income and Real Estate.
The present value of the pension obligati ons, the plan assets and the funded status for the current and previous reporti ng periods are as follows:
| kEUR | ||
|---|---|---|
| 12 / 31 / 2016 | 12 / 31 / 2015 | |
| Defi ned benefi t obligati on | 108,447 | 103,606 |
| Fair value of plan assets | – 70,122 | – 66,694 |
| Benefi t liabiliti es | 38,325 | 36,912 |
| Experience losses (+) / gains (–) related to defi ned benefi t obligati on |
– 1,034 | 60 |
| Experience losses (+) / gains (–) related to plan assets |
– 1,723 | 1,680 |
| Actuarial losses (+) / gains (–) due to changes in demographic assumpti ons |
– 1,382 | – 1,605 |
| Actuarial losses (+) / gains (–) due to changes in fi nancial assumpti ons |
2,836 | – 3,072 |
The key assumpti ons used in determining pension and postemployment medical benefi t obligati ons for the Group's pension plans are shown below.
%
| German plan | US plan Canadian plan Post employment medical |
|||||||
|---|---|---|---|---|---|---|---|---|
| 2016 | 2015 | 2016 | 2015 | 2016 | 2015 | 2016 | 2015 | |
| Discount rate | 1.90 | 2.20 | 3.94 | 4.13 | 3.85 | 4.00 | 3.76 | 3.92 |
| Future salary increases | 0.00 / 2,001 | 0.00 / 2,001 | 3.50 | 3.50 | – 3 | – 3 | n / a | n / a |
| Future pension increases | 2.00 | 2.00 | – 2 | – 2 | – 3 | – 3 | n / a | n / a |
| Turnover rates | 4.60 | 4.60 | 2.88 | 2.88 | – | – | Sarason T5 | Sarason T5 |
1 For the calculati on of SAF-HOLLAND GmbH's defi ned benefi t obligati ons, no salary increases were considered because the amount of the obligati on depends on the length of service of the respecti ve employee and the pension plan has been frozen so that no additi onal enti tlements can be earned. The future salary increase for the plan of SAF-Holland Verkehrstechnik GmbH is assessed to be 2.00 %.
2 For the pension plans in the USA, no future pension increases were considered as the pension payments remain constant. Therefore, only years of service or salary and wage increases up to reti rement were considered in determining the defi ned employee benefi t obligati ons for these plans.
3 For the Canadian pension plans, no future salary and pension increases were considered as the pension payments depend on the years of service.
| Germany | Heubeck Richtt afeln 2005G | % | 2016 | 2015 |
|---|---|---|---|---|
| USA | RP-2014 mortality table with MP-2016 generati onal projecti on |
Initi al rate (health care cost trend rate assumed for next year) |
7.00 | 7.25 |
| Canada | RP-2014Priv mortality table with CPM-B generati onal projecti on |
Ulti mate rate (health care cost trend rate assumed to reduce cost) |
5.00 | 5.00 |
| Year of ulti mate | 2024 | 2024 |
A 1.00 % change in the assumed trend in healthcare costs would have the following eff ects:
| kEUR | ||||
|---|---|---|---|---|
| 2016 | 2015 | |||
| Increase | Decrease | Increase | Decrease | |
| Eff ect on the aggregate current service cost and interest expenses | 94 | – 80 | 91 | – 77 |
| Eff ect on the defi ned benefi t obligati on | 950 | – 829 | 987 | – 860 |
The discount rate is seen as a signifi cant input for the value of defi ned benefi t obligati ons. A 0.75 percentage point change in the discount rate would have the following eff ect on the amount of defi ned benefi t obligati ons:
| kEUR | ||||
|---|---|---|---|---|
| 2016 | ||||
| Germany | USA | Canada | Total | |
| Increase of Discount Rate + 0.75 percentage point | – 1,756 | – 5,396 | – 2,006 | – 9,157 |
| Reducti on of Discount Rate – 0.75 percentage point | 2,160 | 6,267 | 2,260 | 10,687 |
| kEUR | ||||||
|---|---|---|---|---|---|---|
| Germany | USA | Canada | Total | |||
| Increase of Discount Rate + 0.75 % | – 1,675 | – 5,316 | – 1,874 | – 8,865 | ||
| Reducti on of Discount Rate – 0.75 % | 2,059 | 6,170 | 1,874 | 10,103 |
Future payments of defi ned benefi t obligati ons are summarized in the following table:
| kEUR | |||||
|---|---|---|---|---|---|
| 2016 | |||||
| 2017 | 2018 – 2021 | 2022 – 2026 | 2027 ff . | Total | |
| Germany | 435 | 1,876 | 2,582 | 15,417 | 20,310 |
| USA | 4,350 | 18,274 | 23,805 | 82,198 | 128,627 |
| Canada | 3,977 | 2,343 | 4,079 | 29,495 | 39,894 |
| Total | 8,762 | 22,493 | 30,466 | 127,110 | 188,831 |
kEUR
| 2016 | 2017– 2020 | 2021– 2025 | 2026 ff . | Total | ||||
|---|---|---|---|---|---|---|---|---|
| Germany | 453 | 1,864 | 2,204 | 16,179 | 20,700 | |||
| USA | 4,151 | 17,328 | 22,954 | 85,612 | 130,045 | |||
| Canada | 408 | 2,258 | 4,244 | 32,381 | 39,291 | |||
| Total | 5,012 | 21,450 | 29,402 | 134,172 | 190,036 |
The weighted average durati on of pension plans is described below:
| Germany | USA | Canada | |
|---|---|---|---|
| Weighted average durati on as at 12 / 31 / 2016 | 18 | 12 | 17 |
| Weighted average durati on as at 12 / 31 / 2015 | 18 | 12 | 17 |
The employer contributi ons to defi ned benefi t plans expected for the 2017 fi nancial year amount to kEUR 673.
The main components of other provisions and their development are shown in the following table:
| kEUR | ||||||||
|---|---|---|---|---|---|---|---|---|
| Product | Parti al | Environ | Workers' compensa ti on and health insurance |
Share based payment |
||||
| warranty | reti rement | mental issues | benefi ts Restructuring | transacti ons | Other | Total | ||
| As of 01 / 01 / 2016 | 5,295 | 596 | 586 | 1,714 | 773 | 4,270 | 2,010 | 15,244 |
| Additi ons | 7,070 | 93 | – | 140 | 252 | 1,494 | 937 | 9,581 |
| Uti lized | 4,470 | – | 39 | 1 | 679 | 854 | 1,747 | 7,385 |
| Release | 53 | 135 | 337 | – | 139 | – | 323 | 987 |
| Interest eff ect from measurement |
7 | – | – | – | – | 31 | – | 38 |
| Foreign currency translati on | 107 | – | 7 | 68 | 18 | 75 | 24 | 299 |
| As of 12 / 31 / 2016 | 7,956 | 554 | 217 | 1,921 | 225 | 5,016 | 901 | 16,790 |
| Thereof in 2016 | ||||||||
| Current | 5,442 | 323 | 39 | 497 | 225 | 2,639 | 753 | 9,918 |
| Non-current | 2,514 | 231 | 178 | 1,424 | – | 2,377 | 148 | 6,872 |
| Thereof in 2015 | ||||||||
| Current | 2,978 | 297 | 160 | 458 | 773 | 854 | 1,682 | 7,202 |
| Non-current | 2,317 | 299 | 426 | 1,256 | – | 3,416 | 328 | 8,042 |
Guarantees and warranti es
Provisions are recognized for expected guarantees and warranty claims on products sold during past periods. The amount of the provision is based on past experience, taking the circumstances on the reporti ng date into account. Product warranti es include free repairs and, at the Group's discreti on, the free replacement of components conducted by authorized partner repair shops.
The Group off ers a part-ti me reti rement plan to employees in Germany going into early reti rement. In Germany, the Group uses what is known as a block model, which divides part-ti me reti rement into two phases. Under such an arrangement, employees generally work full-ti me during the fi rst half of the transiti on period and leave the Company at the start of the second half. The provision is discounted and recognized at its present value. Part-ti me reti rement commitments are insured for potenti al insolvency.
Provisions for environmental levies are recognized for environmental obligati ons based on past events – parti cular those that are probable and can be esti mated reliably.
Occupati onal disability and health insurance benefi ts for employees
Occupati onal disability and health insurance benefi ts are recognized in the amount of the claims made. In additi on, overall liability for claims of this kind is esti mated based on past experience and taking into account stop-loss insurance coverage.
Provisions include mainly personnel costs in the form of severance payments.
Under the PSU plan, members of the Management Board and selected managers are enti tled to receive cash awards depending on the achievement of certain performance targets. Since 2013, a PSU plan with four-year term has been off ered each year to the scheme's parti cipants.
The goal of this plan is to sustainably link the interests of the management and executi ves with the interests SAF-HOLLAND S.A. shareholders of a long-term increase in enterprise value. The Performance Share Unit Plan takes into account both the Company's performance and the share price development for a performance period of four years.
Parti cipants receive virtual Share Units at the beginning of the performance period. The number of Share Units at the beginning of the performance period is determined by dividing the allowance value set annually by the Board of Directors by the average share price in the last two months of the year preceding the allowance. Upon expirati on of the performance period, the number of Share Units allowed is adjusted by the multi plicati on with a target-achievement factor. The target-achievement factor is the rati o of the Company's average performance (adjusted EBIT margin) during the performance period versus the average target value previously set for the performance period.
The amount of the parti cipant's payment enti tlement is determined by multi plying the Share Units with the average share price during the last two months of the performance period and the target-achievement factor. An enti tlement to shares of SAF-HOLLAND S.A. does not exist.
Payment under the Performance Share Unit Plan is limited to 200 % of the parti cipant's gross annual salary at the ti me of payment.
The prerequisite for exercising appreciati on rights is the achievement of a defi ned performance target. The performance target is fulfi lled if during the enti tlement period the Group has achieved an average minimum operati ng performance measured by the performance indicator "adjusted EBIT."
The total of Share Units granted as of the balance sheet date amounts to 610,916 and consists of the following:
| kEUR | |||||
|---|---|---|---|---|---|
| Performance Share Unit Plan | |||||
| 2013 – 2016 | 2014 – 2015 | 2014 – 2017 | 2015 – 2018 | 2016 – 2019 | |
| Share Units outstanding at the beginning of the period | 284,463 | 73,478 | 142,966 | 136,479 | – |
| Share Units granted during the period | – | – | 20,623 | 30,380 | 151,862 |
| Share Units forfeited during the period | 55,296 | – | 32,151 | 37,797 | 30,613 |
| Share Units exercised during the period | – | 73,478 | – | – | – |
| Share Units expired during the period | – | – | – | – | – |
| Share Units outstanding at the end of the period | 229,167 | – | 131,438 | 129,062 | 121,249 |
| Share Units exercisable at the end of the period | – | – | – | – | – |
The Share Units granted are classifi ed and accounted for as cash-sett led, share-based payments. The fair value of the Share Units is remeasured on each balance sheet date using a Monte Carlo simulati on and in considerati on of the conditi ons under which the Share Units were granted. The measurement of the opti ons granted was based exclusively on the following parameters:
| Performance Share Unit Plan | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| 2013 – 2016 | 2014 – 2017 | 2015 – 2018 | 2016 – 2019 | ||||||
| Expected remaining contractual life (years) | 0.00 | 1.00 | 2.00 | 3.00 | |||||
| Average share price on measurement date (EUR) | 13.64 | 13.64 | 13.64 | 13.64 | |||||
| Expected volati lity | n/a | 34.17 % | 33.97 % | 31.78 % | |||||
| Risk free interest rate | – 0.85 % | – 0.86 % | – 0.80 % | – 0.72 % | |||||
| Dividend return | 3.00 % | 3.00 % | 3.00 % | 3.00 % |
Further informati on on the measurement parameters is provided in Note 2.2.
visions for these performance plans amounted to EUR 5.0 million (previous year: EUR 4.3 million). Expenses for the period in the amount of EUR 1.5 million (previous year: EUR 2.2 million) have been allocated to the relevant functi onal areas in the consolidated statement of comprehensive income.
The fair value is expensed over the contract term with recogniti on of a corresponding liability. As of December 31, 2016, pro-
| kEUR | ||||||
|---|---|---|---|---|---|---|
| Non-current | Current | Total | ||||
| 12 / 31 / 2016 | 12 / 31 / 2015 | 12 / 31 / 2016 | 12 / 31 / 2015 | 12 / 31 / 2016 | 12 / 31 / 2015 | |
| Interest bearing bank loans | 10,639 | 9,305 | – | – | 10,639 | 9,305 |
| Converti ble bond | 97,743 | 97,069 | – | – | 97,743 | 97,069 |
| Bond | 75,000 | 75,000 | – | – | 75,000 | 75,000 |
| Promissory note loan | 200,000 | 200,000 | – | – | 200,000 | 200,000 |
| Financing costs | – 1,668 | – 2,249 | – 722 | – 540 | – 2,390 | – 2,789 |
| Accrued interests | – | – | 4,217 | 4,209 | 4,217 | 4,209 |
| Other loans | 53,885 | 151 | 2,572 | 248 | 56,457 | 399 |
| Total | 435,599 | 379,276 | 6,067 | 3,917 | 441,666 | 383,193 |
Under the agreement dated June 13, 2016, loans were assumed with a volume of EUR 50 million. The loans have a 10-year maturity and a coupon of 2.75 %.
In the prior year, a new agreement was signed with a smaller consorti um of banks, which replaced the previous fi nancing arrangement and ensures the supply of long-term fi nancing at more favorable interest rates for the Group unti l October 2022. The arranged credit agreement consists of a multi -currency revolving credit line of about EUR 150 million, which is subdivided into EUR 120 million and USD 35 million. In additi on, a promissory note was issued in the prior year with a volume of EUR 200 million. This promissory note is divided into six tranches with each tranche having a maturity of either 5, 7, or 10 years.
The table below shows the total liquidity calculated as the sum of freely available credit lines valued with the rate as of the reporti ng date including available cash and cash equivalents and short-term freely available fi nancial assets:
kEUR
| 12 / 31 / 2016 | |||||
|---|---|---|---|---|---|
| Amount drawn valued as at the period-end exchange rate |
Agreed credit lines valued as at the period-end exchange rate |
Cash and cash equivalents |
Other short-term investments |
Total liquidity | |
| Facility A | 5,731 | 120,000 | – | – | 114,269 |
| Facility B | 44 | 33,221 | – | – | 33,177 |
| Other Faciliti es | 4,864 | 5,465 1 | 344,568 | – | 345,169 |
| Total | 10,639 | 158,686 | 344,568 | – | 492,615 |
1 Includes the bilateral credit line for the acti viti es of the Group in China.
kEUR
| 12 / 31 / 2015 | |||||
|---|---|---|---|---|---|
| Amount drawn valued as at the period-end exchange rate |
Agreed credit lines valued as at the period-end exchange rate |
Cash and cash equivalents |
Other short-term investments |
Total liquidity | |
| Facility A | 5,923 | 120,000 | – | – | 114,077 |
| Facility B | 42 | 32,088 | – | – | 32,046 |
| Other Faciliti es | 3,339 | 5,648 1 | 145,748 | 115,000 | 263,057 |
| Total | 9,304 | 157,736 | 145,748 | 115,000 | 409,180 |
1 Includes the bilateral credit line for the acti viti es of the Group in China.
The prior year's total liquidity included other current investments. Other current investments were highly liquid and were to be viewed as cash equivalents in economic terms. In accordance with accounti ng policies, these current investments were sti ll presented separately from cash and cash equivalents.
Trade payables in the amount of kEUR 106,714 (previous year: kEUR 89,940) are non-interest-bearing and are normally sett led within two to six months.
Other fi nancial liabiliti es in the amount of kEUR 18,238 refl ect mainly the value of the put opti on for the outstanding shares of KLL Equipamentos para Transporte Ltda.
| kEUR | |||||
|---|---|---|---|---|---|
| Current | Non-current | ||||
| 12 / 31 / 2016 | 12 / 31 / 2015 | 12 / 31 / 2016 | 12 / 31 / 2015 | ||
| Liabiliti es for salaries and social security contributi ons | 12,368 | 12,165 | – | – | |
| Other taxes | 4,655 | 4,891 | – | – | |
| Anniversary obligati ons | 277 | 206 | 573 | 613 | |
| Other | 5,465 | 5,575 | 42 | 225 | |
| Total | 22,765 | 22,837 | 615 | 838 |
Carrying amounts, amounts recognized and fair values by measurement category are as follows:
kEUR
| 12 / 31 / 2016 | |||||||
|---|---|---|---|---|---|---|---|
| Amounts recognized in balance sheet | according to IAS 39 | ||||||
| Category in accordance with IAS 39 |
Carrying amount |
(Amorti zed) cost |
Fair value recognized in equity |
Fair value recognized in profi t or loss |
Amounts recognized in balance sheet according to IAS 17 |
Fair value | |
| Assets | |||||||
| Cash and cash equivalents | LaR | 344,568 | 344,568 | – | – | – | 344,568 |
| Trade receivables | LaR | 116,666 | 116,666 | – | – | – | 116,666 |
| Other fi nancial assets | |||||||
| Derivates without a hedging relati onship |
FAHfT | 368 | – | – | 368 | – | 368 |
| Other fi nancial assets | LaR | 1,850 | 1,850 | – | – | – | 1,850 |
| Liabiliti es | |||||||
| Trade payables | FLAC | 106,714 | 106,714 | – | – | – | 106,714 |
| Interest bearing loans and bonds |
FLAC | 441,666 | 441,666 | – | – | – | 475,336 |
| Finance lease liabiliti es | n/a | 1,587 | – | – | – | 1,587 | 1,587 |
| Other fi nancial liabiliti es | |||||||
| Other fi nancial liabiliti es |
FLAC | 18,238 | 18,238 | – | – | – | 18,238 |
| Derivates without a hedging relati onship |
FLHfT | 972 | – | – | 972 | – | 972 |
| Of which aggregated by category in accordance with IAS 39 |
|||||||
| Loans and receivables | LaR | 463,084 | 463,084 | – | – | – | 463,084 |
| Financial liabiliti es measured at amorti zed cost |
FLAC | 566,618 | 566,618 | – | – | – | 600,288 |
| Financial assets held | |||||||
| for trading | FAHfT | 368 | – | – | 368 | – | 368 |
| Financial liabiliti es held for trading |
FLHfT | 972 | – | – | 972 | – | 972 |
kEUR
| 12 / 31 / 2015 | |||||||
|---|---|---|---|---|---|---|---|
| Amounts recognized in balance sheet | according to IAS 39 | ||||||
| Category in accordance with IAS 39 |
Carrying amount |
(Amorti zed) cost |
Fair value recognized in equity |
Fair value recognized in profi t or loss |
Amounts recognized in balance sheet according to IAS 17 |
Fair value | |
| Assets | |||||||
| Cash and cash equivalents | LaR | 145,748 | 145,748 | – | – | – | 145,748 |
| Trade receivables | LaR | 116,535 | 116,535 | – | – | – | 116,535 |
| Other fi nancial assets | |||||||
| Derivates without a hedging relati onship |
FAHfT | 839 | – | – | 839 | – | 839 |
| Derivates with a hedging relati onship |
FAHfT | 274 | – | 274 | – | – | 274 |
| Other fi nancial assets | LaR | 3,334 | 3,334 | – | – | – | 3,334 |
| Other short-term investments |
LaR | 115,000 | 115,000 | – | – | – | 115,000 |
| Liabiliti es | |||||||
| Trade payables | FLAC | 89,940 | 89,940 | – | – | – | 89,940 |
| Interest bearing loans and bonds |
FLAC | 383,193 | 383,193 | – | – | – | 413,304 |
| Finance lease liabiliti es | n / a | 1,974 | – | – | – | 1,974 | 1,974 |
| Other fi nancial liabiliti es | |||||||
| Derivates without a hedging relati onship |
FLHft | 885 | – | – | 885 | – | 885 |
| Of which aggregated by category in accordance with IAS 39 |
|||||||
| Loans and receivables | LaR | 380,617 | 380,617 | – | – | – | 380,617 |
| Financial liabiliti es measured at amorti zed cost |
FLAC | 473,133 | 473,133 | – | – | – | 503,244 |
| Financial assets held | |||||||
| for trading | FAHfT | 1,113 | – | 274 | 839 | – | 1,113 |
| Financial liabiliti es held for trading |
FLHfT | 885 | – | – | 885 | – | 885 |
The following table shows the allocati on to the three hierarchy levels of fair values for fi nancial assets and liabiliti es measured at fair value:
| 12 / 31 / 2016 | |||
|---|---|---|---|
| Level 1 | Level 2 | Level 3 | Total |
| 79,729 | – | – | 79,729 |
| – | 121,893 | – | 121,893 |
| – | 199,763 | – | 199,763 |
| – | 73,950 | – | 73,950 |
| – | – | 18,238 | 18,238 |
| – | 368 | – | 368 |
| – | 972 | – | 972 |
| kEUR | ||||
|---|---|---|---|---|
| 12 / 31 / 2015 | ||||
| Level 1 | Level 2 | Level 3 | Total | |
| Bonds | 200,707 | – | – | 200,707 |
| Promissory note loan | – | 198,970 | – | 198,970 |
| Interest bearing loans and borrowings | – | 13,627 | – | 13,627 |
| Derivati ve fi nancial assets | – | 1,113 | – | 1,113 |
| Derivati ve fi nancial liabiliti es | – | 885 | – | 885 |
Cash and cash equivalents, trade receivables and payables, as well as non-current, non-derivati ve fi nancial assets and liabiliti es, mainly have short remaining maturiti es. For this reason, their carrying amounts as of the reporti ng date approximate their fair values.
The fair values of interest-bearing loans, the promissory note loan and converti ble bond are calculated as the present value of the payments associated with the debt based on the applicable yield curve and currency-specifi c credit spreads. The fair value of the bond and converti ble bond reported under the line item "Bonds" is determined on the basis of their market values as of the balance sheet date. Foreign exchange forward contracts are the main category of derivati ves measured using valuati on methods based on inputs observable on the market. The valuati on methods applied include forward pricing models using present value calculati ons.
The fair value of other fi nancial assets and liabiliti es is calculated based on interest rates with matching maturiti es. In the balance sheet of December 31, 2016, only derivati ves of kEUR – 604 (previous year: kEUR 228) as well as other fi nancial liabiliti es resulti ng from the valuati on of the put opti on for the remaining 42.5 % of the shares in KLL Equipamentos para Transporte Ltda. of kEUR 18,238 were measured at fair value. The fair value of the other fi nancial liability resulti ng from the valuati on of the put opti on for the acquisiti on of the remaining shares of KLL Equipamentos para Transporte Ltda. is based on the projecti on of certain earnings fi gures. As the informati on is not based on oberservable market data, the put opti on is allocated to Level 3.
The fair value of liabiliti es from interest-bearing loans, the promissory note loan and derivati ve fi nancial assets and liabiliti es, excluding the bond, was measured based on directly (e.g., prices) or indirectly (e.g., derived from prices) observable input factors. Under IFRS 7, this fair value measurement can, therefore, be allocated to Level 2 of the measurement hierarchy. As an acti ve market in the sense of IFRS 7 is missing for the converti ble bond, the converti ble bond is allocated to Level 2 as well. The fair value of the quoted bonds is based on price quotati ons on the reporti ng date (Level 1). The fair value hierarchy Levels are described below:
Level 3: Informati on on assets and liabiliti es that is not based on observable market data
The net result by valuati on category is as follows:
| kEUR | |||||||
|---|---|---|---|---|---|---|---|
| 12 / 31 / 2016 | |||||||
| From subsequent measurement | |||||||
| From | Currency | ||||||
| From interest | remunerati on | At fair value | translati on | Impairment | Net result | ||
| Loans and receivables | 486 | – | – | – | – 2,042 | – 1,556 | |
| Financial assets held for trading | – | 5,730 | – 226 | – | – | 5,504 | |
| Financial liabiliti es measured at | |||||||
| amorti zed cost | – 13,319 | – | – | 567 | – | – 12,752 | |
| Financial liabiliti es held for trading | – | – 5,131 | – 1,110 | – | – | – 6,241 | |
| Total | – 12,833 | 599 | – 1,336 | 567 | – 2,042 | – 15,045 |
| kEUR | ||||||
|---|---|---|---|---|---|---|
| 12 / 31 / 2015 | ||||||
| From subsequent measurement | ||||||
| From interest | From remunerati on |
At fair value | Currency translati on |
Impairment | Net result | |
| Loans and receivables | 15 | – | – | – 2,240 | – 2,225 | |
| Financial assets held for trading | – | – | 655 | – | – | 655 |
| Financial liabiliti es measured at amorti zed cost |
– 9,541 | – 468 | – | 7,520 | – | – 2,489 |
| Financial liabiliti es held for trading | – | – | – 238 | – | – | – 238 |
| Total | – 9,526 | – 468 | 417 | 7,520 | – 2,240 | – 4,297 |
The components of the net result are recognized as fi nance income or fi nance expenses, except for impairments on trade receivables which are reported under selling expenses.
The interest result from fi nancial liabiliti es in the category "fi nancial liabiliti es measured at amorti zed cost" primarily consists of interest expenses on interest-bearing loans and bonds as well as of transacti on costs.
As an internati onally acti ve group, SAF-HOLLAND S.A. is exposed to both business and industry-specifi c risks. Controlling opportuniti es and risks in a targeted manner is an integral part of management and decision-making within the Group.
To be adequately prepared for changes in competi ti ve and environmental conditi ons and effi ciently control the creati on of value within the Group, the Management Board has implemented a risk management system, which is monitored by the Board of Directors. Risk management processes, required limits and the use of fi nancial instruments to manage risks are defi ned in the Group's risk management handbook and supplementary guidelines. The risk management system strives to identi fy and assess the risks that arise. Identi fi ed risks are communicated, managed and monitored in a ti mely manner.
The Group is exposed mainly to liquidity risk, credit risk, interest rate risk and foreign currency risk. The aim of the Group's risk management is to limit the risks posed by the Group's business and fi nancing acti viti es mainly through the use of derivati ve and non-derivati ve hedging instruments.
The Group's liquidity risk is the risk that it will be unable to meet existi ng or future payment obligati ons because of insuffi cient funds. Limiti ng and managing the liquidity risk are among the management's primary tasks. The Group monitors the current liquidity situati on on a daily basis. To manage future liquidity requirements, the Group uses a weekly 3-month forecast and a monthly rolling liquidity plan on a twelve-month basis. In additi on, management conti nually evaluates adherence to the fi nancial covenants as required under the long-term credit agreement.
The maturity structure of the Group's fi nancial liabiliti es is as follows:
| kEUR | ||||
|---|---|---|---|---|
| 12 / 31 / 2016 | ||||
| Total | Remaining term of up to 1 year |
Remaining term of more than 1 year and up to 5 years |
Remaining term of more than 5 years |
|
| Interest bearing loans and bonds | 441,666 | 6,067 | 326,272 | 109,327 |
| Finance lease liabiliti es | 1,587 | 1,587 | – | – |
| Trade payables | 106,714 | 106,714 | – | – |
| Other fi nancial liabiliti es | ||||
| Other fi nancial liabiliti es | 18,238 | – | 18,238 | – |
| Derivates without a hedging relati onship | 972 | 972 | – | – |
| Financial liabiliti es | 569,177 | 115,340 | 344,510 | 109,327 |
| kEUR | ||||
|---|---|---|---|---|
| 12 / 31 / 2015 | ||||
| Total | Remaining term of up to 1 year |
Remaining term of more than 1 year and up to 5 years |
Remaining term of more than 5 years |
|
| Interest bearing loans and bonds | 383,193 | 3,917 | 319,776 | 59,500 |
| Finance lease liabiliti es | 1,974 | 465 | 1,509 | – |
| Trade payables | 89,940 | 89,940 | – | – |
| Other fi nancial liabiliti es | ||||
| Derivates without a hedging relati onship | 885 | 885 | – | – |
| Financial liabiliti es | 475,992 | 95,207 | 321,285 | 59,500 |
The following tables show the contractually agreed (undiscounted) interest and principal payments of primary fi nancial liabiliti es and derivati ve fi nancial instruments with negati ve fair values:
| kEUR | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Cash Flows 2017 | Cash Flows 2018 | Cash Flows 2019 – 2026 | 12 / 31 / 2016 | ||||||
| Fixed interest rate |
Variable interest rate |
Repay ment |
Fixed interest rate |
Variable interest rate |
Repay ment |
Fixed interest rate |
Variable interest rate |
Repay ment |
|
| Interest bearing loans and bonds |
– 8,367 | – 2,513 | – 2,572 | – 4,659 | – 2,513 | – 75,000 | – 13,354 | – 10,891 | – 304,604 |
| Finance lease liabiliti es | – 18 | – | – 1,587 | – | – | – | – | – | – |
| Other fi nancial liabiliti es | |||||||||
| Derivates without a hedging relati onship |
– 972 | – | – | – | – | – | – | – | – |
kEUR
| 12 / 31 / 2015 | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Cash Flows 2016 | Cash Flows 2017 | Cash Flows 2018 – 2025 | |||||||
| Fixed interest rate |
Variable interest rate |
Repay ment |
Fixed interest rate |
Variable interest rate |
Repay ment |
Fixed interest rate |
Variable interest rate |
Repay ment |
|
| Interest bearing loans and bonds |
– 6,992 | – 2,513 | – 248 | – 6,842 | – 2,513 | – 151 | – 9,528 | – 14,533 | – 309,355 |
| Finance lease liabiliti es | – 90 | – | – 465 | – 63 | – | – 431 | – 26 | – | – 1,078 |
| Other fi nancial liabiliti es | |||||||||
| Derivates without a hedging relati onship |
– 885 | – | – | – | – | – | – | – | – |
All instruments are included that were held as of the reporti ng date and for which payments were already contractually agreed. Planning data for future new liabiliti es is not included. Amounts in foreign currencies were translated at the year-end spot rates. Variable interest payments arising from fi nancial instruments were calculated using the most recent interest rates determined ahead of the reporti ng date. Financial liabiliti es that can be repaid at any ti me are always assigned to the earliest possible ti me period.
The Group is exposed to default risk through the possibility that a contracti ng party may fail to fulfi ll its commitment with respect to fi nancial instruments. To minimize default risk, the outstanding receivables in all business areas are monitored conti nuously at the local level by all Group companies. To limit credit risks, the Group as a rule only does business with creditworthy business partners. In doing so, ongoing credit management is implemented that requires potenti al customers to undergo a credit verifi cati on procedure. To manage specifi c default risks, the Group also takes out commercial credit insurance coverage in Europe and the United States and defi nes credit limits for each customer.
Any credit risk that sti ll arises is covered by individual and collecti ve allowances on receivables carried in the balance sheet. The carrying amounts of fi nancial assets stated in this note correspond to the maximum credit risk. Further signifi cant credit risks do not exist as of the balance sheet date.
The Group is exposed to interest rate risk due to its fi nancing acti viti es. Market-induced interest rate changes, in parti cular, can have an eff ect on the interest burden of fl oati ng-rate loans and bonds. Changes in interest rates aff ect interest-related cash fl ows. To hedge the cash fl ow risk, the Group holds interest rate swaps to transform certain variable cash fl ows into fi xed cash fl ows and to hedge the interest rate. The Group is also exposed to the risk of the carrying amount of fi nancial liabiliti es changing as a result of interest rate changes. The Group has no plans to measure these fi nancial liabiliti es at their market price so therefore there is no related economic risk.
The Group is exposed to interest rate risk mainly in the euro zone, North America and China.
As a result of the promissory note issued in November 2015, interest rate hedges were put in placed with a nominal volume of EUR 72.0 million. In line with the Group's risk strategy, the variable interest bearing tranches of the promissory note are hedged.
According to IFRS 7, the Group must depict relevant interest rate risks using sensiti vity analyses. These analyses show the eff ects of changes in market interest rates on interest payments, interest income and interest expenses.
If market interest rates on December 31, 2016 had been 100 base points lower (higher), the result would have been kEUR 401 (previous year: kEUR 388) higher (lower). All other variables are assumed to be constant.
The internati onal nature of the Group's investi ng, fi nancing and operati ng acti viti es exposes the Group to foreign currency risk. The individual subsidiaries predominantly conduct their operati ng acti viti es and investments in their respecti ve local currency. Financing the Group's companies is conducted primarily by SAF-HOLLAND S.A. and SAF-HOLLAND GmbH. Loans granted to internati onal Group companies are generally denominated in euros. The translati on of intercompany loans as of the reporti ng date may result in unrealized foreign exchange gains and losses. Unrealized foreign exchange gains as of the balance sheet date amounted to kEUR 1,571. Of this amount, kEUR 992 was reclassifi ed to other comprehensive income (OCI) as translati on eff ects from the valuati on of intercompany foreign currency loans, which are accounted for as part of a net investment in a foreign operati on and are therefore recognized directly in equity.
The following table shows the Group's sensiti vity to a 5 % increase or decrease in the euro versus the US dollar. The sensiti vity analysis includes only outstanding monetary items denominated in foreign currencies and adjusts their translati on at the end of the period by a 5 % change in exchange rates.
| Change in exchange rate USD / EUR |
Eff ect on earnings before taxes |
Eff ect on equity aft er taxes |
|
|---|---|---|---|
| 2016 | 5 % | 2,840 | 3,488 |
| – 5 % | – 2,840 | – 3,488 | |
| 2015 | 5 % | 2,545 | 2,746 |
| – 5 % | – 2,545 | – 2,746 |
| 2016 | 2015 | ||
|---|---|---|---|
| Result for the period | kEUR | 44,234 | 51,627 |
| Weighted average number of shares outstanding | thousands | 45,361 | 45,361 |
| Basic earnings per share | EUR | 0.98 | 1.14 |
| Diluted earnings per share | EUR | 0.85 | 0.99 |
Basic earnings per share is calculated by dividing the result for the period att ributable to shareholders of SAF-HOLLAND S.A. by the average number of shares outstanding. New shares issued during the period are included pro rata for the period in which they are outstanding.
Diluted earnings per share is based on the assumpti on that the outstanding debt instruments are converted into shares (converti ble bond). The converti ble bond is only considered in the calculati on of diluted earnings per share if it has a diluti ve eff ect in the reporti ng period.
The issue of the converti ble bond resulted in a diluti ve eff ect of EUR 0.13 (previous year: EUR 0.15) per share.
Diluted earnings per share is derived from basic earnings per share as follows:
| kEUR | ||
|---|---|---|
| Overall potenti ally diluti ve fi nancial instruments 2016 |
Diluti ve fi nancial instruments used for the calculati on 2016 |
|
| Result for the period | ||
| Numerator for basic earnings per share (att ributable to the shareholders of the parent company) |
44,234 | 44,234 |
| Increase in profi t equivalent to eff ect of converti ble bond recognised in profi t and loss | 1,198 | 1,198 |
| Numerator for diluted earnings | 45,432 | 45,432 |
| Number of shares | ||
| Denominator for basic earnings per share (weighted average number of shares) | 45,361 | 45,361 |
| Converti ble bond | 8,177 | 8,177 |
| Denominator for potenti ally diluted earnings per share | 53,538 | |
| thereof to be included for diluti on (adjusted weighted average) | 53,538 | |
| Basic earnings per share (EUR) | 0.98 | |
| Diluted earnings per share (EUR) | 0.85 |
| kEUR | ||
|---|---|---|
| Overall potenti ally | Diluti ve fi nancial | |
| diluti ve fi nancial | instruments used for | |
| instruments 2015 | the calculati on 2015 | |
| Result for the period | ||
| Numerator for basic earnings per share (att ributable to the shareholders | ||
| of the parent company) | 51,627 | 51,627 |
| Increase in profi t equivalent to eff ect of converti ble bond recognised in profi t and loss | 1,190 | 1,190 |
| Numerator for diluted earnings | 52,817 | 52,817 |
| Number of shares | ||
| Denominator for basic earnings per share (weighted average number of shares) | 45,361 | 45,361 |
| Converti ble bond | 8,108 | 8,108 |
| Denominator for potenti ally diluted earnings per share | 53,469 | |
| thereof to be included for diluti on (adjusted weighted average) | 53,469 | |
| Basic earnings per share (EUR) | 1.14 | |
| Diluted earnings per share (EUR) | 0.99 |
The calculati on of potenti ally diluti ve shares which are included in the determinati on of diluted earnings per share is shown in the following table:
| Par value (EUR) | Number | Days | Weighted number |
|
|---|---|---|---|---|
| 01 / 01 / 2016 – 04 / 28 / 2016 | 0.01 | 8,110,892 | 118 | 957,085,256 |
| 04 / 29 / 2016 – 12 / 31 / 2016 | 0.01 | 8,208,631 | 242 | 1,986,488,605 |
| Total | 360 | 2,943,573,861 | ||
| Average | 8,176,594 |
| Par value (EUR) | Number | Days | Weighted number |
|
|---|---|---|---|---|
| 01 / 01 / 2015 – 03 / 23 / 2015 | 0.01 | 8,099,849 | 83 | 672,287,467 |
| 03 / 24 / 2015 – 12 / 31 / 2015 | 0.01 | 8,110,892 | 277 | 2,246,717,084 |
| Total | 360 | 2,919,004,551 | ||
| Average | 8,108,346 |
The statement of cash fl ows was prepared in accordance with IAS 7 and is divided into cash fl ows from operati ng, investi ng and fi nancing acti viti es.
Cash fl ows from operati ng acti viti es are determined using the indirect method whereas cash fl ows from investi ng acti viti es are calculated using the direct method. Cash fl ows from investing acti viti es are used to generate income over the long-term, generally for one year or more. Cash fl ows from fi nancing acti viti es were also calculated using the direct method and include cash fl ows from transacti ons with shareholders and the issue and repayment of fi nancial liabiliti es.
Operati ng lease obligati ons
The Group acts as lessee in rental and lease agreements mainly for commercial buildings, offi ce and operati ng equipment, IT, material handling equipment and motor vehicles. The average term of the lease agreements is between three and fi ve years.
As of the balance sheet date, the following future minimum lease payments exist as a result of operati ng lease contracts:
| kEUR | ||
|---|---|---|
| 12 / 31 / 2016 | 12 / 31 / 2015 | |
| Remaining term of up to 1 year | 4,175 | 4,747 |
| Remaining term of more than 1 year | ||
| and up to 5 years | 7,989 | 11,028 |
| Remaining term of more than 5 years | 2,907 | 6,347 |
| Total | 15,071 | 22,122 |
| Operate lease payments for the | ||
| reporti ng period | 8,315 | 8,415 |
The Group has fi nance lease agreements for various technical faciliti es as well as operati ng and offi ce equipment. Future minimum lease payments under these fi nance leases and the reconciliati on to the present value of minimum lease payments are as follows:
| kEUR | ||||
|---|---|---|---|---|
| 12 / 31 / 2016 | 12 / 31 / 2015 | |||
| Lease payments |
Present value including residual value and initi al payments |
Lease payments |
Present value including residual value and initi al payments |
|
| Remaining term of up to 1 year | 1,605 | 1,587 | 555 | 465 |
| Remaining term of more than 1 year and up to 5 years | – | – | 1,598 | 1,509 |
| Remaining term of more than 5 years | – | – | – | – |
| Total | 1,605 | 1,587 | 2,153 | 1,974 |
Legal disputes
In the reporti ng year and as of the balance sheet date, there were no material legal disputes that could potenti ally have a signifi cant impact on the Group's net assets, fi nancial positi on or results of operati ons.
The consolidated fi nancial statements include the fi nancial statements of SAF-HOLLAND S.A. and the following subsidiaries, associates and joint ventures:
| Subsidiaries | Country of incorporati on | % Equity interest |
|---|---|---|
| SAF-HOLLAND GmbH | Germany | 100.0 |
| SAF-HOLLAND Polska Sp. z o.o. | Poland | 100.0 |
| SAF-HOLLAND France S.A.S. | France | 100.0 |
| SAF-HOLLAND Austria GmbH | Austria | 100.0 |
| SAF-HOLLAND Czechia spol.s.r.o. | Czech Republic | 100.0 |
| SAF-HOLLAND España S.L.U. | Spain | 100.0 |
| SAF-HOLLAND Italia s.r.l. unipersonale | Italy | 100.0 |
| SAF-HOLLAND Romania SRL | Romania | 100.0 |
| SAF-HOLLAND Bulgaria EOOD | Bulgaria | 100.0 |
| SAF-HOLLAND do Brasil Ltda. | Brazil | 100.0 |
| KLL Equipamentos para Transporte Ltda. (KLL) | Brazil | 57.5 |
| SAF-HOLLAND South Africa Ltd. | South Africa | 100.0 |
| Jinan SAF AL-KO Axle Co., Ltd. | China | 100.0 |
| OOO SAF-HOLLAND Rus | Russia | 100.0 |
| SAF HOLLAND Middle East FZE | United Arab Emirates | 100.0 |
| SAF HOLLAND Otomoti v Sanayi ve Ticaret Limited Sirketi | Turkey | 100.0 |
| SAF-HOLLAND Inc. | USA | 100.0 |
| SAF-HOLLAND Canada Ltd. | Canada | 100.0 |
| SAF-HOLLAND (Aust.) Pty. Ltd. | Australia | 100.0 |
| SAF-HOLLAND (Malaysia) SDN BHD | Malaysia | 100.0 |
| SAF-HOLLAND (Thailand) Co., Ltd. | Thailand | 100.0 |
| SAF-HOLLAND Verkehrstechnik GmbH | Germany | 100.0 |
| SAF-HOLLAND Internati onal de México S. de R.L. de C.V. | Mexico | 100.0 |
| SAF-HOLLAND Internati onal Services México S. de R.L. de C.V. | Mexico | 100.0 |
| SAF-HOLLAND Hong Kong Ltd. | Hong Kong | 100.0 |
| SAF-HOLLAND (Xiamen) Co., Ltd. | China | 100.0 |
| Corpco Beijing Technology and Development Co, Ltd | China | 80.0 |
| OOO SAF-HOLLAND Russland | Russia | 100.0 |
| SAF-HOLLAND India Pvt. Ltd. | India | 100.0 |
| Associates and joint ventures | Country of incorporati on | % Equity interest |
|---|---|---|
| SAF-HOLLAND Nippon, Ltd. | Japan | 50.0 |
| Castmetal FWI S.A. | Luxembourg | 34.1 |
The table below shows the compositi on of the Management Board and the Board of Directors of SAF-HOLLAND S.A. as of the balance sheet date:
| Detlef Borghardt | Chief Executi ve Offi cer (CEO) & |
|---|---|
| President Region APAC / China | |
| Wilfried Trepels | Chief Financial Offi cer (CFO) |
| (unti l December 31, 2016) | |
| Mike Kamsickas | Chief Operati ng Offi cer (COO) |
| (unti l May 03, 2016) | |
| Arne Jörn | Chief Operati ng Offi cer (COO) |
| (since October 17, 2016) | |
| Steff en Schewerda President Region Americas |
|
| Alexander Geis President Region EMEA / India |
|
| Mao Guoxin | President Region China |
| (since August 9, 2016) |
| Bernhard Schneider | Chairman of the Board of Directors |
|---|---|
| Marti na Merz | Deputy Chairman of the Board of Directors |
| Detlef Borghardt | Member of the Board of Directors |
| Dr Marti n Kleinschmitt Member of the Board of Directors | |
| Anja Kleyboldt | Member of the Board of Directors |
| Sam Marti n | Member of the Board of Directors |
The terms of offi ce and other positi ons held by the members of the Board of Directors and the Management Board are described in the chapter "Mandates of the Board of Directors and Management Board" in this annual report.
As of December 31, 2016, members of the Management Board directly or indirectly held ordinary shares amounti ng to kEUR 5 (previous year: kEUR 6) while members of the Board of Directors directly or indirectly held ordinary shares of kEUR 1 (previous year: kEUR 1).
As of the balance sheet date, appreciati on rights in the amount of kEUR 2,827 have been accrued for members of the Management Board (previous year: kEUR 2,944); thereof kEUR 772 were recognized in profi t and loss in 2016 (previous year: kEUR 1,482). Of the total accrual, an amount of kEUR 1,493 is classifi ed as current provisions. The appreciati on rights are a share-based payment. For further informati on, please refer to Note 6.12.
Total short-term remunerati on for the Management Board members in the reporti ng year amounted to kEUR 2,944 (previous year: kEUR 2,561). These include severance and compensati on payments to members of the management board, who have left the company during the fi nancial year, of kEUR 298. Remunerati on from the Performance Share Unit Plan are not included in the total remunerati on.
Total remunerati on for the Board of Directors was kEUR 280 (previous year: kEUR 312) and was recognized in profi t and loss.
The following are transacti ons with joint ventures and associates:
| kEUR | |||||
|---|---|---|---|---|---|
| Sales to related party | Purchases from related party | ||||
| 2016 | 2015 | 2016 | 2015 | ||
| Joint Ventures | 1,389 | 1,376 | – | – | |
| Associates | – | – | 27,135 | 37,767 | |
| Total | 1,389 | 1,376 | 27,135 | 37,767 |
| kEUR | ||||
|---|---|---|---|---|
| Amounts owed by related party | Amounts owed to related party | |||
| 12 / 31 / 2016 | 12 / 31 / 2015 | 12 / 31 / 2016 | 12 / 31 / 2015 | |
| Joint Ventures | 237 | 300 | 207 | 207 |
| Associates | – | – | 1,303 | 953 |
| Total | 237 | 300 | 1,510 | 1,160 |
Outstanding balances as of December 31, 2016 are unsecured, interest-free and paid on ti me. There have been no guarantees provided or received for any receivables or payables from related parti es. As of December 31, 2016 and in the previous year, the Group did not record any impairment of receivables for amounts owed by related parti es. An evaluati on is carried out in each reporti ng period which examines the fi nancial positi on of the related parti es as well as the markets in which these parti es operate.
The overriding aim of the Group's capital management is to ensure that the Group's ability to repay debt and its fi nancial substance are maintained in the future. The foundati on for steering and opti mizing the existi ng fi nancing structure are EBIT, EBITDA and monitoring the development of net working capital and cash fl ow. Net debt is comprised of interest-bearing loans and bonds less cash and cash equivalents.
| kEUR | |||
|---|---|---|---|
| 12 / 31 / 2016 | 12 / 31 / 2015 | ||
| Interest bearing loans and bonds | 441,666 | 383,193 | |
| Other short-term investments | – | – 115,000 | |
| Cash and cash equivalents | – 344,568 | – 145,748 | |
| Net debt | 97,098 | 122,445 | |
| Equity att ributable to equity holders | |||
| of the parent | 300,399 | 285,818 | |
| Equity and net debt | 397,497 | 408,263 |
According to a fi nancial covenant under the fi nancing agreement signed on October 13, 2015, the Group is obliged to maintain a certain level of net debt coverage (net debt divided by adjusted consolidated EBITDA).
Net debt is defi ned as the aggregate principal amount of Group's fi nancial liabiliti es as of the balance sheet date less debt from derivati ves to hedge against price or currency exchange risk and back-up obligati ons from guarantees, damage claims, bonds, lett ers of credit or any other fi nancial instruments issued by fi nancial insti tuti ons.
The following expenses were incurred in the 2016 fi nancial year for services provided by the auditors and their related companies:
| kEUR | ||
|---|---|---|
| 2016 | 2015 | |
| Auditi ng of fi nancial statements | 491 | 563 |
| Tax accountancy services | – | 187 |
| Other services | 11 | 24 |
| Total | 502 | 774 |
On January 17, 2017, SAF-HOLLAND announced the consolidati on and restructuring of its North American plant network. This decision was the outcome of the conti nued weakness in the North American truck and trailer markets and part of an eff ort to centralize producti on closer to the customer base of the truck and trailer industry. The measures are designed to adapt the Company's structure to changes in the market situati on and to ensure the long-term competi ti veness of our acti viti es in North America. This new structure will be accompanied by an adjustment in the current excess producti on capacity at the North American locati ons in order to improve capacity uti lizati on. We will also opti mize our internal logisti cs processes, which may improve delivery ti mes.
The measures planned, which are to be implemented within a maximum period of 18 months, are expected to result in oneti me restructuring costs of up to USD 10 million in 2017. These costs should consist mainly of relocati on costs, impairment on equipment and severance payments. SAF-HOLLAND expects the vast majority of these charges to be recognized in the 2017 fi nancial year. Here it is important to point out that the Group's key indicator – adjusted EBIT – is generally adjusted for restructuring expenses. Moreover, approximately USD 3.0 million in additi onal investments are planned for the remaining locati ons. SAF-HOLLAND currently expects an annual reducti on in the direct cost base in the mid single-digit million USD range aft er the restructuring is completed.
There were no further events aft er the balance sheet date relevant for the report on the events aft er the balance sheet.
Luxembourg, March 14, 2017
Bernhard Schneider Chairman of the Board of Directors
Detlef Borghardt Chief Executi ve Offi cer of SAF-HOLLAND GmbH
| kEUR | ||
|---|---|---|
| 2016 | 2015 | |
| Income from fi nancial fi xed assets | 29,278 | 26,888 |
| Income from fi nancial current assets | 741 | 738 |
| Total income | 30,019 | 27,626 |
| Other external charges | – 2,959 | – 1,813 |
| Staff costs | – 36 | – 32 |
| Other operati ng charges | – 656 | – 568 |
| Interest and other fi nancial charges | – 6,254 | – 6,253 |
| Other taxes | – 148 | – 183 |
| Result before tax | 19,966 | 18,777 |
| Income tax | – 7 | – 77 |
| Result for the period | 19,959 | 18,700 |
1 Figures according to Luxembourg GAAP.
| kEUR | ||
|---|---|---|
| 12 / 31 / 2016 | 12 / 31 / 2015 | |
| Assets | ||
| Non-current assets | 452,766 | 447,498 |
| Shares in affi liated undertakings | 313,238 | 265,638 |
| Amounts owed by affi liated undertakings | 139,525 | 181,857 |
| Other long-term assets | 3 | 3 |
| Current assets | 35,820 | 39,111 |
| Amounts owed by affi liated undertakings | 34,480 | 36,863 |
| Cash at bank, cash in postal cheque account, cheques and cash on hand | 202 | 546 |
| Prepayments | 1,138 | 1,702 |
| Total assets | 488,586 | 486,609 |
| Equity and liabiliti es | ||
| Equity att ributable to equity holders of the parent | 308,334 | 306,520 |
| Subscribed share capital | 454 | 454 |
| Share premium | 276,455 | 276,455 |
| Legal reserve | 45 | 45 |
| Other reserve | 720 | 436 |
| Profi t brought forward | 10,701 | 10,429 |
| Profi t for the fi nancial year | 19,959 | 18,701 |
| Non-current liabiliti es | 175,200 | 175,200 |
| Bonds | 175,200 | 175,200 |
| Current liabiliti es | 5,052 | 4,889 |
| Bonds | 3,903 | 3,901 |
| Trade payables | 180 | 213 |
| Tax and social security debts | 689 | 463 |
| Other creditors | 280 | 312 |
| Total equity and liabiliti es | 488,586 | 486,609 |
1 Figures according to Luxembourg GAAP.
− Associated Member of the Board of Directors, SAF-HOLLAND S.A. (Proposed to be appointed as member of the Board of Directors at the Annual General Meeti ng on April 27, 2017)
− Managing Director, SAF-HOLLAND GmbH, Chief Operati ng Offi cer (since October 2016)
− Managing Director, SAF-HOLLAND GmbH, President Region EMEA / India
− Managing Director, SAF-HOLLAND GmbH, President Region Americas
− President Region China (since August 2016)
To the Shareholders of SAF-HOLLAND S.A. Société Anonyme 68 – 20, Boulevard de la Petrusse L-2320 Luxembourg
Following our appointment by the General Meeti ng of the Shareholders dated 28 April 2016, we have audited the accompanying consolidated fi nancial statements of SAF-HOLLAND S.A., which comprise the consolidated balance sheet as at 31 December 2016, and the consolidated statement of comprehensive income, consolidated statement of changes in equity and the consolidated cash-fl ow statement for the year then ended and a summary of signifi cant accounti ng policies and other explanatory informati on.
The Board of Directors is responsible for the preparati on and fair presentati on of these consolidated fi nancial statements in accordance with Internati onal Financial Reporti ng Standards as adopted by the European Union, and for such internal control as the Board of Directors determines is necessary to enable the preparati on of consolidated fi nancial statements that are free from material misstatement, whether due to fraud or error.
Our responsibility is to express an opinion on these consolidated fi nancial statements based on our audit. We conducted our audit in accordance with Internati onal Standards on Auditi ng as adopted for Luxembourg by the "Commission de Surveillance du Secteur Financier". Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated fi nancial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated fi nancial statements. The procedures selected depend on the judgment of the "Réviseur d'entreprises agréé" including the assessment of the risks of material misstatement of the consolidated fi nancial statements, whether due to fraud or error. In making those risk assessments, the "Réviseur d'entreprises agréé" considers internal control relevant to the enti ty's preparati on and fair presentati on of the consolidated fi nancial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the eff ecti veness of the enti ty's internal control. An audit also includes evaluati ng the appropriateness of accounti ng policies used and the reasonableness of accounting esti mates made by the Board of Directors, as well as evaluati ng the overall presentati on of the consolidated fi nancial statements.
We believe that the audit evidence we have obtained is suffi cient and appropriate to provide a basis for our audit opinion.
In our opinion, the consolidated fi nancial statements give a true and fair view of the consolidated fi nancial positi on of SAF-HOLLAND S.A. as of 31 December 2016, and of its consolidated fi nancial performance and its cash fl ows for the year then ended in accordance with Internati onal Financial Reporting Standards as adopted by the European Union.
The Board of Directors is responsible for the other informati on. The other informati on comprises the informati on included in the consolidated management report, including the corporate governance statement, but does not include the consolidated fi nancial statements and our audit report thereon.
Our opinion on the consolidated fi nancial statements does not cover the other informati on and we do not express any form of assurance conclusion thereon.
In connecti on with our audit of the consolidated fi nancial statements, our responsibility is to read the other informati on and, in doing so, consider whether the other informati on is materially inconsistent with the consolidated fi nancial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other informati on, we are required to report this fact. We have nothing to report in this regard.
The consolidated management report, including the corporate governance statement, is consistent with the consolidated fi nancial statements and has been prepared in accordance with the applicable legal requirements.
Luxembourg, March 14, 2017 PricewaterhouseCoopers, Société coopérati ve Represented by
Patrick Schon
To the best of our knowledge, and in accordance with the applicable fi nancial reporti ng principles, the consolidated fi nancial statements give a true and fair view of the sales and earnings performance, net assets and cash fl ows of the Group, and the Group's management report includes a fair review of the development and performance of the Group's business and positi on, together with a descripti on of the principal opportuniti es and risks associated with the expected development of the Group.
Luxembourg, March 14, 2017 SAF-HOLLAND S.A.
Bernhard Schneider Chairman of the Board of Directors
Experience adjustments (the eff ects of diff erences between the previous actuarial assumpti ons and what has actually occurred) and the eff ects of changes in actuarial assumpti ons.
Earnings before interest and taxes (EBIT) is adjusted for special items, such as depreciati on and amorti zati on from purchase price allocati ons, impairment of goodwill and intangible assets, reversal of impairment of intangible assets as well as restructuring and integrati on costs.
Adjusted EBIT / sales x 100
Equity / adjusted total capital x 100 (Total capital adjusted for cash and cash and cash equivalents and other short-term investments that exceed SAF-HOLLAND's targeted level of EUR 7 million)
A call opti on gives the buyer the right, but not the obligati on, to buy the underlying stock (the underlying asset) at a specifi ed price (the strike price) by a set date (the expirati on date).
Cash fl ow from operati ng acti viti es before income taxes paid / adjusted EBIT x 100
Cash-generati ng unit is the smallest identi fi able group of assets that generates cash infl ows that are largely independent of the cash infl ows of other assets or groups of assets.
An insti tuti on connected to or integrated into a derivati ves exchange, which off sets all exchange transacti ons and acts as counterparty to the buyer and the seller aft er each transacti on.
A debt issue that may be exchanged, or converted, by the owner for a fi xed number of common shares, or other securiti es, usually of the same company, in accordance with the terms of the issue. Companies also issue converti ble preferred shares.
Analysts at renowned banks and investment houses regularly observe and evaluate the development of SAF-HOLLAND S.A.'s shares.
Eff ects on sales resulti ng from a year-on-year change in the exchange rate of a foreign currency in relati on to the Group's reporti ng currency of euro.
Alternati ve venues for trading equiti es outside of the regular organized stock exchanges.
The German Stock Index (DAX) consisti ng of the 30 largest listed companies in Germany measured by market capitalizati on and trading volume.
Inventory / cost of sales per day (cost of sales of the quarter / 90 days)
Trade payables / cost of sales per day (cost of sales of the quarter / 90 days)
Trade receivables / sales per day (sales of the quarter / 90 days)
Defi ned Benefi t Obligati on
EBIT
Earnings before interest and taxes
EBITDA
Earnings before interest, taxes and depreciati on / amorti zati on
Eff ecti ve income tax rate Income tax / earnings before tax x 100
Equity rati o Equity / total assets x 100
Euro Interbank Off ered Rate is the interest rate at which banks within Europe borrow fi xed-term funds from one another.
Financial assets held for trading
Amount obtainable from the sale in an arm's length transacti on between knowledgeable, willing parti es.
Financial liabiliti es measured at amorti zed
Financial liabiliti es held for trading
Operati ng cash fl ow minus capital expenditures
The porti on of a company's shares outstanding that are not closely held. According to Deutsche Börse AG, shareholdings in companies in excess of fi ve percent are considered to be closely held. This defi niti on does not include shares held by assets managers, funds, trusts or pension fund companies.
GDP Gross domesti c product
Gross margin Gross profi t / sales x 100
Financial instrument that, depending on ist economic substance, contains both a liability and an equity component.
(Internati onal Financial Reporti ng Standards / Internati onal Accounti ng Standards): The Internati onal Accounting Standard rules are intended to make company data more comparable. Under the EU resoluti on, accounti ng and reporti ng for companies listed at the stock exchange must me done in accordance with these rules.
A hedging instrument to hedge against interest rate fl uctuati ons.
Investments in property, plant and equipment and intangible assets / sales x 100
A joint arrangement whereby the parti es that have joint control of the arrangement have rights to the net assets of the arrangement.
LaR
Loans and receivables
Leverage rati o Net debt / EBITDA
London Interbank Off ered Rate
Stock market value of a company: Number of company's outstanding shares x share price
The mid-cap-DAX (MDAX) comprises 50 companies that rank immediately below DAX securiti es in terms of market capitalizati on and order book volume.
The sum of current and non-current liabiliti es from interest- bearing loans and bonds less cash and cash equivalents and other short-term investments.
Current assets less cash and cash equivalents less current and non-current other provisions less trade payables less other current liabiliti es less income tax liabiliti es.
Net working capital / (sales for the fourth quarter / 3 x 12)
Factoring where the factor takes on the bad debt risk.
Cancellati on of a contractual obligati on and establishment of a new contractual obligati on in place of the old one.
OCI
Other comprehensive income
P
Organic sales
Prime Standard
Personnel expenses per employee
including temporary employees)
Purchase price allocati on (PPA)
with internati onal transparency standards.
gent liabiliti es of the (acquired) company.
The assessment of a debtor's credit standing (creditworthiness).
Organic sales refers to the growth generated from within the company and excluding currency eff ects and contributi ons to sales from acquired or sold business enti ti es.
Personnel expenses (not including restructuring and integrati on costs) / average number of employees (not
Prime Standard is a market segment of the German Stock Exchange that lists German companies which comply
Distributi on of the acquisiti on costs of a business combinati on to the identi fi able assets, liabiliti es and conti n-
The recoverable amount is the higher of the fair value less cost to sell and the value in use.
Restructuring and transacti on costs are defi ned as expenses that have occured outside the normal course of the business. These expenses include – besides other – expenses associated with the purchase of enti ti es, restructuring measures within the group and severance payments for executi ves. The defi niti on of restructuring and integrati on expenses used diff ers from the one defi ned in IAS 37.
R&D cost and capitalized development cost / sales x 100
What you earn from your investments.
Sales / average number of employees (including temporary employees)
The small-cap-DAX (SDAX) comprises 50 companies that rank immediately below mid-cap-DAX (MDAX) securiti es in terms of market capitalizati on and order book volume. As is the case with DAX, TecDAX and MDAX, the SDAX belongs to the Prime Standard.
An enti ty has been designed so that voti ng or similar rights are not the dominant factor in deciding who controls the enti ty, such as when any voti ng rights relate to administrati ve tasks only and the relevant acti viti es are directed by means of contractual arrangements.
Hedging instruments in which two contracti ng parti es agree to mutually exchange contractual rights and obligati ons (swap) for a certain period of ti me and according to a predetermined schedule.
Income taxes / Result before tax x 100
Total cost relati ng to acquisiti on, operati ng and maintenance of an asset.
The sum of cash and cash equivalents and other shortterm investments including arranged lines of credit.
Present value of future cash fl ows from an asset.
WACC Weighted Average Cost of Capital
| A | I | ||
|---|---|---|---|
| ACEA | European Automobile Manufacturers Associati on | IAS | Internati onal Accounti ng Standards |
| APO | Advanced Planner & Opti mizer (IT-System to | IASB | Internati onal Accounti ng Standards Board |
| uti lize supply-chain-management) | IFRIC | Internati onal Financial Reporti ng Interpreta | |
| APAC | Consists of the regions Asia, Australia and | ti ons Committ ee | |
| Oceania that are located in the West Pacifi c | IFRS | Internati onal Financial Reporti ng Standards | |
| or nearby. | IfW | Insti tut für Weltwirtschaft (German economic | |
| ASEAN | Associati on of Southeast Asian Nati ons | organizati on) | |
| IMF | Internati onal Monetary Fund | ||
| IR | Investor Relati ons | ||
| B | ISIN | Internati onal securiti es identi fi cati on number | |
| B.S. | Bachelor of Science (academic degree) | ISO | Internati onal Organizati on for Standardizati on |
| IT | Informati on technology | ||
| C | |||
| CAD | IT-System oft en used in engineering / product | K | |
| development | kEUR | Thousand Euro | |
| CEO | Chief Executi ve Offi cer | ||
| CFO | Chief Financial Offi cer | ||
| COO | Chief Operati ng Offi cer | M | |
| CSR | Corporate Social Responsibility | MATS | Mid-America Trucking Show |
| MBA | Master of Business Administrati on | ||
| (academic degree) | |||
| D | MDAX | Mid-Cap-DAX | |
| DAX | Deutscher Akti enindex (German stock index) | Mio. | Million |
| DIN | Deutsches Insti tut für Normung (German | M.S. | Master of Science (academic degree) |
| Insti tute for Standardizati on) | |||
| N | |||
| E | n / a | Not applicable | |
| EMEAI | Consists of the regions Europe, Middle East, | ||
| Africa and India. | |||
| O | |||
| OEM | Original Equipment Manufacturer | ||
| F | OES | Original Equipment Service | |
| FEM | Finite-Elemente-Methode; numerical tech | ||
| nique for fi nding approximate soluti ons | |||
| for parti al diff erenti al equati on; oft en used | P | ||
| in industrial engineering | PDM | Product data management | |
| PIK | Pay-in-kind | ||
| PPA | Purchase Price Allocati on | ||
| p. a. | per annum | ||
| R ROI R&D |
Return on investment Research and development |
|---|---|
| S SDAX |
Small-Cap-DAX |
| U US USA USD |
United States of America United States of America US-Dollar |
| V VDA |
Verband der Automobilindustrie (German Automoti ve Industry Associati on) |
| W | |
| WKN | Wertpapierkennnummer (security identi fi ca ti on number) |
| WpHG | Wertpapierhandelsgesetz (German Securiti es Trading Act) |
April 27, 2017 Annual General Meeti ng 2017
May 11, 2017 Report on Q1 2017 results
August 10, 2017 Report on half-year 2017 results
November 9, 2017 Report on Q3 2017 results
SAF-HOLLAND GmbH Hauptstraße 26 63856 Bessenbach Germany
www.safh olland.com
stephan.haas@safh olland.de Phone: + 49 (0) 6095 301-617 Fax: + 49 (0) 6095 301-102
Christi na Hütt ner christi na.huett ner@safh olland.de Phone: + 49 (0) 6095 301-255 Fax: + 49 (0) 6095 301-102
Responsible:
SAF-HOLLAND S.A. 68 – 70, Boulevard de la Pétrusse L-2320 Luxembourg Luxembourg
Editorial deadline: March 14, 2017 Date of publicati on: March 17, 2017 Editorial offi ce: Klusmann Communicati ons, Niedernhausen; Redakti onsbüro delta eta – Paschek & Winterhagen GbR; SAF-HOLLAND GmbH, Bessenbach Design and realizati on: 3st kommunikati on GmbH Translated by: Klusmann Communicati ons, Niedernhausen Photography: Berndt Bodtländer Fotografi e; Studio Dino Eisele; Gett yimages; Shutt erstock Printed by: caPRI Print+Medien GmbH
This report is also available in German.
This report contains certain statements that are neither reported fi nancial results nor other historical informati on. This report contains forward-looking statements, which as such are based on certain assumpti ons and expectati ons made at the ti me of publicati on of the report. These forward-looking statements are subject to risks and uncertainti es that could cause actual results to diff er materially from those expressed in the forward-looking statements. Many of these risks and uncertainti es relate to factors that are beyond the Group's ability to control or esti mate precisely, such as future market and economic conditi ons, the behavior of other market parti cipants, the achievement of anti cipated synergies, and the acti ons of government regulators. Readers are cauti oned not to place undue reliance on these forward-looking statements, which apply only as of the date of this publicati on. SAF-HOLLAND S.A. does not undertake any obligati on to publicly release any revisions to these forward-looking statements to refl ect events or circumstances aft er the date of publicati on of these materials.
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