Quarterly Report • Jul 31, 2015
Quarterly Report
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January 1 – June 30, 2015
engineering for a better world
| 3 | Summary | |
|---|---|---|
| Management Report | 5 | |
| 7 | Management Report | |
| 21 | Report on Risks and Opportunities | |
| 21 | Report on Expected Developments | |
| GEA Shares | 23 | |
| Consolidated Financial Statements | 26 | Consolidated Balance Sheet |
| 28 | Consolidated Income Statement / Considated Statement of Comprehensive Income |
|
| 32 | Consolidated Cash Flow Statement | |
| 33 | Consolidated Statement of Changes in Equity | |
| 34 | Notes to the Consolidated Financial Statments | |
| Responsibility Statement | 48 | |
| Financial Calendar / Publication Details |
49 |
In the second quarter 2015 revenue of GEA exceeded the high level seen in the previous year by 3 percent. The service business demonstrated healthy growth. The order intake declined slightly due to the limited number of major orders. However, the basic business saw stable growth rates in both of GEA's business areas. GEA's operating profit improved again. This shows that the increases in efficiency resulting from the "Fit for 2020" program have begun to have an impact. Both operating EBITDA and the operating EBITDA margin hit all-time highs for a second quarter. Non-recurring expenses of about EUR 134 million were recognized in the reporting quarter. This figure includes restructuring expenses of around EUR 115 million for the "Fit for 2020" program. Consolidated profit in the past quarter was negative overall as a result of these substantial non-recurring expenses.
"Unfortunately, we were unable to escape the effects of the renewed decline in momentum in some of our markets in the reporting period. However, it is encouraging to see that our targeted measures are paying off and that we further increased profitability. For example, we have reduced our workforce by around 300 employees since the beginning of the year. This reduction is partly attributable to our 'Fit for 2020' initiative. The workforce reduction and the initial recognition of material non-recurring expenses for this strategic project show that we are implementing it systematically. We are on track with this initiative," said GEA CEO Jürg Oleas.
| (EUR million) | Q2 2015 |
Q2 2014 |
Change in % |
Q1-Q2 2015 |
Q1-Q2 2014 |
Change in % |
|---|---|---|---|---|---|---|
| Results of operations | ||||||
| Order intake | 1,148.8 | 1,169.9 | –1.8 | 2,276.2 | 2,194.2 | 3.7 |
| Revenue | 1,150.1 | 1,117.7 | 2.9 | 2,156.5 | 2,068.3 | 4.3 |
| Operating EBITDA 1 | 139.3 | 128.0 | 8.8 | 237.4 | 213.2 | 11.4 |
| as % of revenue | 12.1 | 11.5 | – | 11.0 | 10.3 | – |
| Operating EBIT 1 | 119.8 | 109.3 | 9.6 | 198.6 | 176.1 | 12.7 |
| as % of revenue | 10.4 | 9.8 | – | 9.2 | 8.5 | – |
| EBIT | –20.9 | 98.7 | – | 46.6 | 157.4 | –70.4 |
| Net assets | ||||||
| Working capital intensity in % (average of the past 12 months) | 12.3 | 11.9 | – | 12.3 | 11.9 | – |
| Net liquidity (+)/Net debt (-) | 603.4 | –551.8 | – | 603.4 | –551.8 | – |
| Financial position | ||||||
| Cash flow driver margin 2 | 6.6 | 9.0 | – | 6.6 | 9.0 | – |
| ROCE in % (goodwill adjusted) 3 | 16.4 | 22.9 | – | 16.4 | 22.9 | – |
| Full-time equivalents (reporting date) | 17,975 | 18,186 | –1.2 | 17,975 | 18,186 | –1.2 |
| GEA Shares | ||||||
| Earnings per share before non-recurring items (EUR) 4 | 0.43 | 0.42 | 3.2 | 0.67 | 0.65 | 2.6 |
1) Before effects of purchase price allocations and before non-recurring items (see page 46)
2) Cash flow driver = EBITDA - Capital expenditure - Change in Working Capital (average of the last 12 months)
3) Capital employed excluding goodwill from the acquisition of the former GEA AG by former Metallgesellschaft AG in 1999 (average of the last 12 months)
4) Calculated before non-recurring items (see page 46) using the corresponding tax rates for continuing and discontinued operations
In addition, three acquisitions were made in the past quarter, two of which have already been completed. These acquisitions, which together generated revenue of almost EUR 100 million in 2014, GEA implements its strategy of closing gaps in technology by acquiring specialized companies, and of expanding the product portfolio in terms of covering all steps in the process.
In addition to its operating activities, GEA has made substantial progress with its strategic realignment as part of the "Fit for 2020" initiative in the second quarter, taking on a new group structure. On the basis of a simplified, harmonized, and more streamlined organization, the aim is not only to exploit existing substantial savings potential, but also, in particular, to create the organizational conditions that will ensure future competitiveness and implementation of GEA's growth targets.
In line with its current assessment, GEA expects that the forecast to date for the operating business in 2015 will be met, despite less dynamic growth. Assuming this, the dividend for fiscal year 2015 should not be less than the EUR 0.70 per share resolved last year, independent of expenses incurred under the "Fit for 2020" initiative.
Following intensive preparation, GEA's new group structure – which was resolved under the "Fit for 2020" initiative – became effective June 8, 2015. The explanation of the group's course of business in this financial report for the second quarter, including the comparable prior-year figures, is presented for the first time in line with the new group structure for the two Business Areas Equipment and Solutions.
The Business Area (BA) Equipment brings together all activities that relate to standardized and in part, to customer-specific equipment offerings. The products are mainly manufactured as part of large-scale series production on a standardized and modular basis. Typical products covered by the business area are separators, valves, pumps, homogenizers, and cooling compressors, but its product range also comprises automatic feeding systems, manure management systems, and barn equipment.
The Business Area Solutions brings together all group activities that largely consist of customerspecific and modular solutions, and projects. This business area tailors its products and services to the specific application or customer requirements. The offering mainly includes the design and development of process solutions for the dairy processing, brewing, food, pharma, and chemical industries.
The new structure brings together customer-centric sales and services under the umbrella of a single country organization. The countries are grouped together in newly defined regions, and are also reported in line with these. For GEA's customers, this means one national organization per country as a central point of contact offering the entire product portfolio and all services on a local basis. Bringing together the current large number of sales and service companies will strengthen local competencies, realize existing potential synergies even more efficiently, and raise awareness of the common brand GEA in the market. The national organizations are each led by a managing director and are divided into two categories, depending on the market's size and growth potential. The large and medium-sized national organizations have separate functions for Equipment sales and Solutions sales. In addition, they have a service business, a supply chain function (including local logistics, warehousing, and local procurement), and operational marketing. A small national organization has a joint sales organization and a service business. The countries are in turn grouped under six regions. A regional head is identical to a managing director of a country of this region and agrees on country strategies, drives forward market entries, coordinates activities between countries, and allocates resources across countries.
In addition, the administrative functions were streamlined and more strongly standardized, and will now be managed considerably more centrally, in order to ensure uniform high process standards globally as well as cost savings. The Global Corporate Center is the central port of call for all supporting management and administrative functions, which so far have mostly been organized locally at the operating units. Regional Shared Service Centers will take care of the implementation of standardized administrative processes in the future, thus reducing the workload for the operating units. The Global Corporate Center and the Regional Shared Service Centers' expenses will be allocated to the business areas wherever possible.
On June 19, 2015, GEA completed the acquisition of the Italian company Comas. Comas is one of the leading European manufacturers of machinery and equipment for sophisticated processes in the production of bakery goods. Based in Torrebelvicino, the company had a workforce of 155 employees and generated revenue of around EUR 50 million in accordance with local GAAP in the last fiscal year, mainly in Europe and Asia. As an established supplier in this industry, Comas will join the Business Area Solutions to form the Application Center Bakery.
On the same date, June 19, 2015, GEA also completed the acquisition of CMT, a leading supplier of machinery and integrated process lines for pasta filata cheeses (fresh mozzarella and pizza cheese). The company, which is based in Peveragno, Italy, had around 70 employees and generated revenue of EUR 11 million in accordance with local GAAP in 2014, primarily in the European Union countries. GEA intends to integrate this business into its Application Center Dairy in the Business Area Solutions.
On June 30, 2015, GEA acquired Hilge, a leading supplier of hygienic pumps that specializes in particular in stainless steel pumps for the food and beverage industries. Based in Bodenheim, Germany, the company had a workforce of around 150 employees and generated revenue of over EUR 35 million in accordance with local GAAP in fiscal year 2014. The plan is to integrate Hilge's business into the Business Area Equipment. On the date of preparation of this report, the transaction was still subject to antitrust approval.
The quarterly information contained in this management report is sourced from financial reports that were not audited or reviewed in accordance with the Wertpapierhandelsgesetz (WpHG – German Securities Trading Act). All amounts have been rounded using standard rounding rules. Adding together individual amounts may therefore result in rounding differences in certain cases.
GEA's order intake declined by 1.8 percent to EUR 1,148.8 million in the second quarter of 2015 (previous year: EUR 1,169.9 million). Adjusted for the effects of exchange rate changes (6.6 percent) and the acquisitions of de Klokslag and Scan Vibro (total of 0.5 percent), the change in order intake was –8.9 percent. The Business Area Solutions in particular saw a weaker performance compared with the previous year due to the decline in major orders. By contrast, in the basic business (orders below EUR 1 million) both business areas recorded encouraging growth rates.
In the second quarter of 2015, the group won two major orders for a dairy project in the Middle East and a dairy powder plant in Asia, together worth over EUR 55 million. In the comparable prior-year's quarter, the group booked four major orders with a volume of EUR 123 million, including a beverages project in Africa.
| Order intake (EUR million) |
Q2 2015 |
Q2 2014 |
Change in % |
Adjusted growth in % |
Q1-Q2 2015 |
Q1-Q2 2014 |
Change in % |
Adjusted growth in % |
|---|---|---|---|---|---|---|---|---|
| BA Equipment | 573.0 | 569.7 | 0.6 | –6.0 | 1,159.6 | 1,144.7 | 1.3 | –4.9 |
| BA Solutions | 628.9 | 652.4 | –3.6 | –10.9 | 1,217.2 | 1,154.5 | 5.4 | –0.7 |
| Total | 1,201.9 | 1,222.2 | –1.7 | –8.6 | 2,376.7 | 2,299.2 | 3.4 | –2.8 |
| Consolidation/others | –53.1 | –52.2 | –1.7 | – | –100.5 | –104.9 | 4.2 | - |
| GEA | 1,148.8 | 1,169.9 | –1.8 | –8.9 | 2,276.2 | 2,194.2 | 3.7 | –2.6 |
The group's order intake rose by 3.7 percent to EUR 2,276.2 million in the first half of 2015 (previous year: EUR 2,194.2 million). Adjusted for currency translation effects (+6.0 percent) and acquisition effects (0.4 percent), the change was –2.6 percent.
The following charts provide a breakdown and show trends based on the last 12 months:
GEA Order intake EUR 1,148.8 million (previous year EUR 1,169.9 million)
by applications (average last 12 months)
The order backlog grew by EUR 157.9 million or 7.7 percent compared with that of December 31, 2014 (EUR 2,037.6 million) to EUR 2,195.5 million. Exchange rate changes increased the order backlog by EUR 48.1 million.
Around EUR 1,350 million of the order backlog as of June 30, 2015, is expected to be billed in the current fiscal year.
| GEA | 2,195.5 | 2,137.2 | 2.7 |
|---|---|---|---|
| Consolidation/others | -38.8 | -38.8 | 0.0 |
| Total | 2,234.3 | 2,176.0 | 2.7 |
| BA Solutions | 1,652.9 | 1,551.9 | 6.5 |
| BA Equipment | 581.4 | 624.1 | -6.9 |
| Order backlog (EUR million) |
06/30/2015 | 06/30/2014 | Change in % |
In general, the same regional and sector-specific trends apply to revenue as to order intake, although with different time lags. However, revenue is less volatile than order intake.
Group revenue in the second quarter of 2015 amounted to EUR 1,150.1 million, up 2.9 percent from the prior-year figure (EUR 1,117.7 million). Of this, 6.5 percent is attributable to exchange rate movements and 0.5 percent to acquisition effects. Adjusted revenue thus declined by 4.1 percent year-on-year.
The book-to-bill ratio, the ratio of order intake to revenue, was almost precisely 1.0 in the second quarter of 2015.
| Adjusted | Adjusted | |||||||
|---|---|---|---|---|---|---|---|---|
| Revenue | Q2 | Q2 | Change | growth | Q1-Q2 | Q1-Q2 | Change | growth |
| (EUR million) | 2015 | 2014 | in % | in % | 2015 | 2014 | in % | in % |
| BA Equipment | 587.9 | 565.4 | 4.0 | –2.5 | 1,114.8 | 1,060.8 | 5.1 | –1.1 |
| BA Solutions | 612.9 | 603.3 | 1.6 | –5.8 | 1,139.0 | 1,105.4 | 3.0 | –4.3 |
| Total | 1,200.8 | 1,168.7 | 2.7 | –4.2 | 2,253.8 | 2,166.3 | 4.0 | –2.7 |
| Consolidation/others | –50.7 | –51.0 | 0.7 | – | –97.3 | –98.0 | 0.7 | - |
| GEA | 1,150.1 | 1,117.7 | 2.9 | –4.1 | 2,156.5 | 2,068.3 | 4.3 | –2.7 |
In the first half of 2015, group revenue rose by 4.3 percent to EUR 2,156.5 million (previous year: EUR 2,068.3 million). Exchange rate movements and acquisitions increased revenue by 6.5 percent and 0.5 percent respectively. The adjusted revenue change was thus –2.7 percent.
The adjusted revenue decline affected the food and beverages end market (–2.0 percent) and in particular the pharma/chemical end market (–8.6 percent). At a regional level, it is attributable to North and Central Europe and the Asia Pacific region. This was not fully offset by revenue growth in Germany, Austria, Switzerland (DACH) & Eastern Europe, and in Western Europe, the Middle East & Africa. The Asia Pacific region and DACH & Eastern Europe continue to generate the highest revenue, accounting for 24 percent and 19 percent respectively.
The share contributed by the service business, which saw adjusted growth of 4.5 percent, rose significantly from 27.6 percent in the previous year to 29.8 percent.
The following charts provide a breakdown and show trends based on the last 12 months:
GEA Revenue EUR 1,150.1 million (previous year EUR 1,117.7 million)
by applications (average last 12 months)
Revenue in the Business Area Equipment grew by 5.1 percent in the first half of 2015. However, on a constant exchange rate basis, revenue declined slightly by 1.1 percent. This was due in particular to the oil and gas industry within the other industries and – to a significantly lesser extent – to the pharma/ chemical end market. The most important end market – food and beverages – continued to generate adjusted revenue growth. The Asia Pacific region, North America, and North and Central Europe in particular recorded a below-average total performance, while Western Europe, the Middle East & Africa generated double-digit adjusted growth. The key sales regions are North America and DACH & Eastern Europe, which both have an over 20 percent share of the revenue.
The following charts provide a breakdown and show trends based on the last 12 months:
Business Area Equipment Revenue EUR 587.9 million (previous year EUR 565.4 million)
by applications (average last 12 months, 3 most important applications, only exernal business)
Top line growth in the Business Area Solutions amounted to 3.0 percent in the first half of 2015. Adjusted for exchange rate and acquisition effects, revenue decreased by 4.3 percent. This development is mainly attributable to the dairy processing and beverages industry within the food and beverages end market, as well as to the pharma industry. At a regional level, adjusted revenue growth saw a particularly significant decline in North and Central Europe. The Asia Pacific region also saw a weaker performance, while almost double-digit adjusted revenue growth was generated in DACH & Eastern Europe. The Asia Pacific region is clearly the strongest in this business area, with an almost 30 percent share of the revenue.
The following charts provide a breakdown and show trends based on the last 12 months:
Business Area Solutions Revenue EUR 612.9 million (previous year EUR 603.3 million)
by applications (average last 12 months, 3 most important applications, only external business)
GEA remains committed to its policy of consciously selecting orders on the basis of their price quality and contract terms. This is reflected in the multi-stage approval process for major customer projects.
Whenever operating profit is referred to in the following, this relates on the one hand to the adjustment of the purchase price allocation effects that were determined for all material past acquisitions, and on the other hand to the adjustment of expenses for strategic projects and the allocation of service fees and trademark fees for fiscal year 2014, as required in accordance with IFRSs.
The key earnings figures for the first half of 2015 were adjusted overall for non-recurring expenses of EUR 139.4 million (previous year: EUR 7.1 million). These items included strategic projects (EUR 135.1 million, compared with the prior-year figure of EUR 5.1 million), of which EUR 115.7 million is attributable to restructuring expenses. A further EUR 4.3 million relates to various restructuring and capacity adjustment measures in the business areas (previous year: EUR 0.0 million). Also, for the previous year the service fees and trademark fees previously charged to GEA Heat Exchangers – which was sold last year – had to be allocated to the continuing operations, including the holding company, in accordance with IFRSs. These amounted to a total of EUR 2.0 million in the first half of the previous year.
In the second quarter of the year under review, EBITDA declined by EUR 116.7 million to EUR 6.4 million (previous year: EUR 123.1 million), due in particular to high non-recurring expenses. The EBITDA margin fell accordingly, from 11.0 percent in the prior-year quarter to 0.6 percent. Adjusted for non-recurring items in the amount of EUR 132.8 million, operating EBITDA amounted to EUR 139.3 million. This was up EUR 11.2 million, or 8.8 percent, on the figure from the previous year (EUR 128.0 million). The operating EBITDA margin improved by 65 basis points to 12.1 percent of revenue. Both operating EBITDA and the operating EBITDA margin hit all-time highs for a second quarter.
At EUR 99.4 million, EBITDA for the first half of the year was down EUR 106.7 million from the prioryear's figure (EUR 206.1 million), due to the high non-recurring expenses in the second quarter. The EBITDA margin thus fell from 10.0 percent to 4.6 percent. By contrast, operating EBITDA increased by EUR 24.3 million to EUR 237.4 million (previous year: EUR 213.2 million). At 11.0 percent, the operating EBITDA margin was up 70 basis points year-on-year.
The following table shows operating EBITDA and the operating EBITDA margin per business area:
| Operating EBITDA/operating EBITDA margin * | Q2 | Q2 | Change | Q1-Q2 | Q1-Q2 | Change |
|---|---|---|---|---|---|---|
| (EUR million) | 2015 | 2014 | in % | 2015 | 2014 | in % |
| BA Equipment | 84.5 | 71.7 | 17.7 | 151.8 | 128.0 | 18.7 |
| as % of revenue | 14.4 | 12.7 | – | 13.6 | 12.1 | – |
| BA Solutions | 58.1 | 57.8 | 0.5 | 90.4 | 92.0 | –1.8 |
| as % of revenue | 9.5 | 9.6 | – | 7.9 | 8.3 | – |
| Total | 142.6 | 129.6 | 10.0 | 242.2 | 220.0 | 10.1 |
| as % of revenue | 11.9 | 11.1 | – | 10.7 | 10.2 | – |
| Consolidation/others | –3.3 | –1.5 | < -100 | –4.8 | –6.8 | 30.3 |
| GEA | 139.3 | 128.0 | 8.8 | 237.4 | 213.2 | 11.4 |
| as % of revenue | 12.1 | 11.5 | – | 11.0 | 10.3 | – |
*) Before effects of purchase price allocations and before non-recurring items (see page 46)
The following table shows the reconciliation of EBITDA before purchase price allocation and nonrecurring items (operating EBITDA) through EBIT before purchase price allocation and non-recurring items (operating EBIT) to EBIT for continuing operations:
| Reconciliation of operating EBITDA to EBIT (EUR million) |
Q2 2015 |
Q2 2014 |
Change in % |
Q1-Q2 2015 |
Q1-Q2 2014 |
Change in % |
|---|---|---|---|---|---|---|
| Operating EBITDA | 139.3 | 128.0 | 8.8 | 237.4 | 213.2 | 11.4 |
| Depreciation of property, plant and equipment, investment property, and amortization of intangible assets |
–19.5 | –18.7 | –4.1 | –38.9 | –37.1 | –5.0 |
| Operating EBIT | 119.8 | 109.3 | 9.6 | 198.6 | 176.1 | 12.7 |
| Depreciation and amortization on capitalization of purchase price allocation |
–6.3 | –5.7 | –10.6 | –12.4 | –11.6 | –6.8 |
| Realization of step-up amounts on inventories | –0.1 | – | – | –0.1 | – | – |
| Non-recurring items | –134.3 | –5.0 | < -100 | –139.4 | –7.1 | < -100 |
| EBIT | –20.9 | 98.7 | – | 46.6 | 157.4 | –70.4 |
| Reconciliation EBITDA to EBIT (EUR million) |
Q2 2015 |
Q2 2014 |
Change in % |
Q1-Q2 2015 |
Q1-Q2 2014 |
Change in % |
|---|---|---|---|---|---|---|
| EBITDA | 6.4 | 123.1 | –94.8 | 99.4 | 206.1 | –51.8 |
| Depreciation of property, plant and equipment, investment property, and amortization of intangible assets |
–27.3 | –24.4 | –11.8 | –52.8 | –48.7 | –8.5 |
| EBIT | –20.9 | 98.7 | – | 46.6 | 157.4 | –70.4 |
The following table shows operating EBIT and the operating EBIT margin per business area:
| Operating EBIT/operating EBIT margin * (EUR million) |
Q2 2015 |
Q2 2014 |
Change in % |
Q1-Q2 2015 |
Q1-Q2 2014 |
Change in % |
|---|---|---|---|---|---|---|
| BA Equipment | 71.5 | 59.3 | 20.5 | 125.8 | 103.4 | 21.7 |
| as % of revenue | 12.2 | 10.5 | – | 11.3 | 9.7 | – |
| BA Solutions | 53.3 | 53.1 | 0.2 | 80.7 | 82.9 | –2.6 |
| as % of revenue | 8.7 | 8.8 | – | 7.1 | 7.5 | – |
| Total | 124.8 | 112.5 | 10.9 | 206.5 | 186.3 | 10.9 |
| as % of revenue | 10.4 | 9.6 | – | 9.2 | 8.6 | – |
| Consolidation/others | –5.0 | –3.1 | –57.6 | –8.0 | –10.1 | 21.3 |
| GEA | 119.8 | 109.3 | 9.6 | 198.6 | 176.1 | 12.7 |
| as % of revenue | 10.4 | 9.8 | – | 9.2 | 8.5 | – |
*) Before effects of purchase price allocations and before non-recurring items (see page 46)
EBIT in the second quarter of 2015 amounted to EUR –20.9 million, down from EUR 98.7 million in the prior-year period. The EBIT margin fell accordingly, from 8.8 percent to –1.8 percent. By contrast, operating EBIT, which has been adjusted for purchase price allocation effects of EUR 6.4 million (previous year: EUR 5.7 million) and non-recurring items of EUR 134.3 million (previous year: EUR 5.0 million), improved by around 10 percent to EUR 119.8 million (previous year: EUR 109.3 million). The operating EBIT margin increased by 60 basis points to 10.4 percent of the revenue.
EBIT amounted to EUR 46.6 million in the first half of 2015, down EUR 110 million from the previous year's figure (EUR 157.4 million) as a result of high non-recurring expenses. At 2.2 percent of revenue, the EBIT margin was significantly below the prior-year level (7.6 percent). However, operating EBIT increased by almost 13 percent to EUR 198.6 million (previous year: EUR 176.1 million.) The operating EBIT margin improved year-on-year by nearly 70 basis points to 9.2 percent of the revenue.
| Key figures: Results of operations (EUR million) |
Q2 2015 |
Q2 2014 |
Change in % |
Q1-Q2 2015 |
Q1-Q2 2014 |
Change in % |
|---|---|---|---|---|---|---|
| Revenue | 1,150.1 | 1,117.7 | 2.9 | 2,156.5 | 2,068.3 | 4.3 |
| Operating EBITDA * | 139.3 | 128.0 | 8.8 | 237.4 | 213.2 | 11.4 |
| EBITDA pre purchase price allocation | 6.5 | 123.1 | –94.8 | 99.5 | 206.1 | –51.7 |
| EBITDA | 6.4 | 123.1 | –94.8 | 99.4 | 206.1 | –51.8 |
| Operating EBIT * | 119.8 | 109.3 | 9.6 | 198.6 | 176.1 | 12.7 |
| EBIT pre purchase price allocation | –14.5 | 104.4 | – | 59.2 | 169.0 | –65.0 |
| EBIT | –20.9 | 98.7 | – | 46.6 | 157.4 | –70.4 |
| Interest | 9.2 | 19.3 | –52.4 | 20.9 | 37.6 | –44.3 |
| EBT | –30.1 | 79.4 | – | 25.7 | 119.8 | –78.6 |
| Income taxes | –6.6 | 17.0 | – | 5.7 | 25.6 | –78.0 |
| Profit after tax from continuing operations | –23.4 | 62.4 | – | 20.0 | 94.2 | –78.7 |
| Profit after tax from discontinued operations | 1.7 | 18.4 | –91.0 | –1.3 | 33.8 | – |
| Profit for the period | –21.8 | 80.8 | – | 18.7 | 128.0 | –85.4 |
*) Before effects of purchase price allocations and before non-recurring items (see page 46)
Net interest income amounted to EUR –20.9 million in the first half of 2015, after EUR –37.6 million in the prior-year period. The EUR 16.7 million improvement is attributable on the one hand to changes in the discount rate used to measure non-current provisions, and on the other to lower bank interest expenses due to the repayment of financial liabilities using proceeds from the sale of the former GEA Heat Exchangers Segment.
EBT amounted to EUR –30.1 million in the second quarter of 2015, around EUR 110 million down from the prior-year's figure (EUR 79.4 million). The corresponding EBT margin amounted to –2.6 percent, after 7.1 percent in the previous year.
In the first half of the year, EBT declined to EUR 25.7 million, down from EUR 119.8 million in the previous year. The corresponding EBT margin amounted to 1.2 percent (previous year: 5.8 percent).
An income tax rate of 22.0 percent is expected for fiscal year 2015; the tax expense for the first half of 2015 was calculated using this figure. This results in a tax income of EUR 6.6 million in the reporting quarter (previous year: EUR 17.0 million expense) and an income tax expense of EUR 5.7 million in the first half of the year (previous year: EUR 25.6 million).
Discontinued operations generated a slight loss of EUR 1.3 million in the first 6 months of the year. Currency effects when measuring financial liabilities from the sale of the GEA Heat Exchangers Segment had a materially negative impact on earnings. In the previous year, the profit from discontinued operations in the amount of EUR 33.8 million was almost exclusively attributable to the GEA Heat Exchangers Segment.
Consolidated profit for the second quarter of 2015 was negative, at EUR –21.8 million (previous year: EUR 80.8 million). Based on the unchanged average number of shares compared with the previous year (192,495,476), this corresponds to earnings per share of EUR –0.11 (previous year: EUR 0.42).
In the first six months of the year, consolidated profit amounted to EUR 18.7 million (previous year: EUR 128.0 million). EUR 18.7 million of this amount (previous year: EUR 127.9 million) is attributable to GEA Group Aktiengesellschaft shareholders. This corresponds to earnings per share of EUR 0.10 (previous year: EUR 0.66).
Net debt including discontinued operations was fully repaid compared with the prior-year's period. Net liquidity amounted to EUR 603.4 million as of June 30, 2015, due in particular to the EUR 1,059.3 million cash inflow from the sale of the GEA Heat Exchangers Segment. This represented an increase of EUR 1,155.2 million as against June 30, 2014 (net debt of EUR 551.8 million).
| Net liquidity (+)/Net debt (-) | 603.4 | 903.7 | –551.8 |
|---|---|---|---|
| Bonds | 276.6 | 282.2 | 402.0 |
| Liabilities to banks | 147.4 | 246.9 | 541.3 |
| Securities | 37.0 | 37.0 | – |
| Fixed deposits with a remaining period ≤ 1 year | 200.0 | 200.0 | – |
| Cash and cash equivalents | 790.4 | 1,195.9 | 391.6 |
| Overview of net liquidity incl. discontinued operations (EUR million) |
06/30/2015 | 12/31/2014 | 06/30/2014 |
Cash and cash equivalents were reduced to EUR 790.4 million as of June 30, 2015, compared with EUR 1,195.9 million as of the end of the previous year. Liabilities to banks (EUR 55.6 million), from the bond issue (EUR 276.6 million, including accrued interest), and from the borrower's note loans (EUR 91.8 million, including accrued interest) amounted to a total of EUR 423.9 million as of the reporting date (December 31, 2014: EUR 529.1 million).
Guarantee lines – which are mainly for contract performance, advance payments, and warranties – of EUR 1,707.2 million (December 31, 2014: EUR 1,732.3 million) were available to GEA as of the reporting date, of which EUR 472.8 million (December 31, 2014: EUR 462.1 million) have been been utilized.
The key factors responsible for the change in net debt (including discontinued operations) are shown for the last 12 months in the following chart:
Change in net liquidity/net debt, including discontinued operations (EUR million)
The Others item mainly comprises restructuring expenses already recognized in EBITDA that have not yet had a cash effect.
The consolidated cash flow statement can be summarized as follows:
| Overview of cash flow statement (EUR million) |
Q1-Q2 2015 |
Q1-Q2 2014 |
Change absolute |
|---|---|---|---|
| Cash flow from operating activities | –13.3 | –140.2 | 127.0 |
| Cash flow from investing activities | –125.4 | –33.9 | –91.5 |
| Free cash flow | –138.7 | –174.1 | 35.4 |
| Cash flow from financing activities | –255.6 | –167.1 | –88.5 |
| Net cash flow from disposal group GEA Heat Exchangers | – | –59.4 | 59.4 |
| Net cash flow other discontinued operations | –20.2 | –6.2 | –14.0 |
| Change in unrestricted cash and cash equivalents | –405.0 | –405.9 | 0.9 |
Cash flow from operating activities attributable to continuing operations amounted to EUR –13.3 million in the first half of 2015, narrowing by EUR 127.0 million compared with the previous year (EUR –140.2 million). This improvement was primarily due to the slighter increase in working capital (down by EUR 82.7 million) and the EUR 44.4 million rise in other operating assets and liabilities. The decline in consolidated profit as a result of high non-recurring expenses was almost fully offset by the increase in provisions and a decline in tax payments.
Cash flow from investing activities attributable to continuing operations amounted to EUR –125.4 million in the first six months of the fiscal year as a result of the acquisition of Comas and CMT (previous year: EUR –33.9 million).
Cash flow from financing activities attributable to continuing operations reflects, in particular, the EUR 100.0 million early repayment of the loan from the European Investment Bank (EIB) and the dividend payment of EUR 134.7 million. The figure widened to EUR –255.6 million in the first half of the year, compared with EUR –167.1 million in the previous year.
Cash flow from discontinued operations amounted to EUR –20.2 million in the first half of 2015, which was almost exclusively attributable to cash flow from operating activities. Cash flow from discontinued operations in the prior-year period amounted to EUR –65.6 million.
GEA's overriding goal is to sustainably increase its enterprise value by growing profitably. The cash flow driver margin is a key group performance indicator that is used to create the necessary financial scope for this and to focus the group even more closely on cash flow generation. It is also incorporated into the bonus system.
GEA defines the cash flow driver margin as the net amount of reported EBITDA, the change in average working capital, and capital expenditure on property, plant, and equipment as well as intangible assets, calculated as a ratio to revenue.
The cash flow driver margin for the last 12 months amounted to 6.6 percent. EBITDA already included EUR 181.7 million in non-recurring items for this period. Adjusted for these effects, the cash flow driver margin would amount to 10.5 percent.
| Cash flow driver/Cash flow driver margin | |
|---|---|
| (EUR million) | 06/30/2015 |
| EBITDA (last 12 months) | 433.3 |
| Capital expenditure on property, plant and equipment (last 12 months) | 86.9 |
| Change in Working Capital (average of the last 12 months) | 42.8 |
| Cash flow driver (EBITDA - Capex -/+Change in Working Capital) |
303.6 |
| as % of revenue (last 12 months) | 6.6 |
| Condensed balance sheet | as % of | as % of | Change | ||
|---|---|---|---|---|---|
| (EUR million) | 06/30/2015 | total assets | 12/31/2014 | total assets | in % |
| Assets | |||||
| Non-current assets | 2,847.6 | 49.9 | 2,714.8 | 46.5 | 4.9 |
| thereof goodwill | 1,423.9 | 24.9 | 1,330.0 | 22.8 | 7.1 |
| thereof deferred taxes | 489.7 | 8.6 | 469.3 | 8.0 | 4.4 |
| Current assets | 2,860.0 | 50.1 | 3,117.2 | 53.5 | –8.3 |
| thereof cash and cash equivalents | 790.4 | 13.8 | 1,195.9 | 20.5 | –33.9 |
| thereof assets held for sale | 7.2 | 0.1 | 5.6 | 0.1 | 28.2 |
| Total assets | 5,707.7 | 100.0 | 5,832.0 | 100.0 | –2.1 |
| Equity and liabilities | |||||
| Equity | 2,522.4 | 44.2 | 2,527.2 | 43.3 | –0.2 |
| Non-current liabilities | 1,272.2 | 22.3 | 1,558.4 | 26.7 | –18.4 |
| thereof financial liabilities | 182.6 | 3.2 | 456.1 | 7.8 | –60.0 |
| thereof deferred taxes | 132.2 | 2.3 | 118.6 | 2.0 | 11.5 |
| Current liabilities | 1,913.1 | 33.5 | 1,746.4 | 29.9 | 9.5 |
| thereof financial liabilities | 299.0 | 5.2 | 133.5 | 2.3 | > 100 |
| Total equity and liabilities | 5,707.7 | 100.0 | 5,832.0 | 100.0 | –2.1 |
Total assets as of June 30, 2015, declined by EUR 124.4 million or 2.1 percent in comparison with those of December 31, 2014, to EUR 5,707.7 million. This reduction in total assets is due in particular to the decrease in cash funds. By contrast, intangible assets, inventories, and trade receivables increased. The ratio of noncurrent to current assets continued to shift in favor of non-current assets toward the end of 2014.
Equity declined slightly, down EUR 4.8 million to EUR 2,522.4 million. This improved thanks to consolidated profit of EUR 18.7 million, currency translation effects, and effects from the actuarial measurement of pension obligations (amounting to EUR 111.2 million overall). This was offset by the dividend payment of EUR 134.7 million. The equity ratio improved by 0.9 percentage points compared with that of December 31, 2014, to 44.2 percent, due to the reduction in total assets.
Non-current liabilities were significantly reduced to EUR 1,272.2 million, in particular as a result of the reclassification of the bond in the amount of EUR 274.2 million for maturity reasons. By contrast, at EUR 1,913.1 million as of the reporting date, current liabilities were up EUR 166.7 million on the figure for December 31, 2014 (EUR 1,746.4 million). On the one hand, this balance sheet item reflects the abovementioned reclassification of the bond for maturity reasons; on the other, trade payables were reduced and the EUR 100.0 million loan from the European Investment Bank (EIB) was repaid early.
There were 17,975 employees as of the end of the first half of the year. This represents a decrease of 269 employees compared with December 31, 2014 (18,243). Changes in the basis of consolidation increased the number of employees by 93. The decrease in employee numbers was seen in almost all regions. The largest declines were recorded in the Asia Pacific region, in Western Europe, Middle East & Africa, and in North America. In Germany, employee numbers fell at a slightly lower rate.
There were no major shifts in the regional breakdown from that of December 31, 2014.
| Employees * by region | 06/30/2015 | 12/31/2014 | 06/30/2014 | |||
|---|---|---|---|---|---|---|
| Asia Pacific | 3,067 | 17.1% | 3,188 | 17.5% | 3,117 | 17.1% |
| DACH & Eastern Europe | 6,726 | 37.4% | 6,773 | 37.1% | 6,815 | 37.5% |
| Western Europe, Middle East & Africa | 2,529 | 14.1% | 2,589 | 14.2% | 2,588 | 14.2% |
| North and Central Europe | 3,249 | 18.1% | 3,216 | 17.6% | 3,199 | 17.6% |
| Latin America | 379 | 2.1% | 387 | 2.1% | 396 | 2.2% |
| North America | 2,025 | 11.3% | 2,090 | 11.5% | 2,071 | 11.4% |
| Total | 17,975 | 100.0% | 18,243 | 100.0% | 18,186 | 100.0% |
*) Full-time equivalents (FTE) excluding vocational trainees and inactive employment contracts
As of June 30, 2015, GEA employed 486 vocational trainees compared with 463 at the same date in the previous year. In Germany, the vocational trainee ratio rose from 5.7 percent in the previous year to 6.2 percent.
In the first half of 2015, direct expenses for research and development (R&D) before restructuring expenses amounted to EUR 41.0 million, compared with EUR 41.2 million in the prior-year period. These figures include refunded expenses which are reported in the cost of sales and which totaled EUR 6.3 million (previous year: EUR 4.9 million). The R&D ratio was on a level with the previous year, at 1.9 percent of revenue.
| Research and development (R&D) expenses (EUR million) |
Q2 2015 |
Q2 2014 |
Change in % |
Q1-Q2 2015 |
Q1-Q2 2014 |
Change in % |
|---|---|---|---|---|---|---|
| Refunded expenses (contract costs) | 3.1 | 2.4 | 25.4 | 6.3 | 4.9 | 29.6 |
| Non-refunded R&D expenses | 18.1 | 18.5 | –2.3 | 34.6 | 36.3 | –4.7 |
| Total R&D expenses | 21.1 | 20.9 | 1.0 | 41.0 | 41.2 | –0.6 |
| R&D ratio (as % of revenue) | 1.8 | 1.9 | – | 1.9 | 2.0 | – |
There was no significant change in the overall assessment of risks and opportunities in the reporting period compared with the position presented in the 2014 Annual Report.
All in all, from today's perspective, there are no risks to the continued existence of GEA as a going concern. Sufficient provisions have been recognized for known risks, in line with the relevant requirements.
In its current World Economic Outlook Update (July 2015), the International Monetary Fund (IMF) made a slight downward adjustment to its 2015 growth forecast for the global economy in comparison with the previous version published in April 2015. Growth is now expected to amount to just 3.3 percent in 2015, down from the previous forecast of 3.5 percent. As a result, the global economy will expand at a slower pace than in the previous year (3.4 percent).
The expectation is that growth will continue to slow in the emerging markets, most notably in China (6.8 percent growth following 7.4 percent in 2014). The current update saw a slight reduction in the forecasts for Latin America and for other Asian countries, meaning that the growth forecast for the emerging markets is now just 4.2 percent, down from the prior-year figure of 4.6 percent. For the industrialized nations, the expectation continues to be of modest year-on-year expansion, with the figure now standing at 2.1 percent (previous year: 1.8 percent). Consequently, the IMF's economists lowered their forecast by 0.3 percent compared with the previous outlook published in April. The decline is primarily due to the growth assumptions for North America, which were again reduced.
In summary, it can be stated that only moderate global economic growth is expected in 2015.
Provided that there is no slowdown in global economic growth and that exchange rates remain the same as in 2014, and excluding the effect of acquisitions and non-recurring items, we are aiming for our key performance indicators to develop as follows in the current fiscal year:
GEA is aiming to generate moderate organic revenue growth in 2015.
Including the savings already expected in 2015 under the "Fit for 2020" initiative, we are aiming for an operating EBITDA of between EUR 590 million and EUR 640 million in fiscal year 2015.
With respect to our cash flow driver, i.e. the net amount of EBITDA, the change in working capital, and capital expenditure, we are aiming for a ratio to revenue of between 9.0 percent and 9.5 percent in 2015.
Provided that there is no deterioration in the global economy, we expect the group to achieve moderate organic growth. The continual increase in profitability together with the ongoing focus on liquidity generation should help to ensure that we have the financial leeway to successfully implement our strategic growth targets. With regard to the distribution ratio, our long-term objective is to distribute between 40 and 50 percent of net income to our shareholders.
In line with its current assessment, GEA expects that, assuming it meets the forecast for the operating business, the dividend for fiscal year 2015 will not be less than the EUR 0.70 per share resolved last year, independent of expenses incurred under the "Fit for 2020" initiative.
Düsseldorf, July 28, 2015
The Executive Board
Buoyed by the European Central Bank's bond-buying program, European shares experienced a rally in the first quarter 2015 that continued into April, when increasing uncertainty over the effects of the escalating Greek debt crisis led to a sharp correction in the equity indices that GEA shares were unable to escape. As a result, GEA shares initially hit an all-time record closing price of EUR 46.82 on April 10, 2015, before gradually losing ground until the end of the quarter in line with the overall correction to reach EUR 40.01, their lowest level of the quarter.
Unease about a further decrease in milk and dairy powder prices over the same period fueled occasional doubts about the extent to which GEA might report potential future drops in demand from the dairy processing industry. Overall, this caused the share price to decline by 11.2 percent since the beginning of the quarter, despite remaining 9.3 percent up from the beginning of the 2015.
GEA's share price decreased by 5.5 percentage points relative to the benchmark Stoxx Europe TMI Industrial Engineering index in the second quarter. Nevertheless, it should be remembered that GEA has outpaced this benchmark index by 6.3 percentage points over the last 12 months.
| GEA shares compared to STOXX ® Europe TMI Industrial Engineering | ||||||
|---|---|---|---|---|---|---|
| (Balance sheet date 06/30/2015) | Market capitalization* | |||||
| Last 3 months: | Mcap: | -5.5 | percentage points | |||
| Last 6 months: | Mcap: | -3.0 | percentage points | |||
| Last 9 months: | Mcap: | +3.1 | percentage points | |||
| Last12 months: | Mcap: | +6.3 | percentage points | |||
| Last 24 months: | Mcap: | +24.1 | percentage points | |||
| Last 36 months: | Mcap: | +52.6 | percentage points |
10 percentage points 3 to 10 percentage points 3 to -3 percentage points -3 to -10 percentage points > -10 percentage points
*) Based on shares issues by GEA Group Aktiengesellschaft as of the particular reporting date
| Key performance indicators for GEA shares (prices: XETRA closing prices) | Q2 2015 |
Q2 2014 |
Q1-Q2 2015 |
Q1-Q2 2014 |
|---|---|---|---|---|
| Shares issued (June 30, million) 1 | 192.5 | 192.5 | 192.5 | 192.5 |
| Weighted average number of shares outstanding (million) | 192.5 | 192.5 | 192.5 | 192.5 |
| Share price (June 30, EUR) 1 | 40.01 | 34.58 | 40.01 | 34.58 |
| High (EUR) | 46.82 | 35.23 | 46.82 | 35.91 |
| Low (EUR) | 40.01 | 30.42 | 35.07 | 30.42 |
| Market capitalization (June 30, EUR billion) 2 | 7.7 | 6.7 | 7.7 | 6.7 |
| Average daily trading volume (million) | 0.4 | 0.4 | 0.4 | 0.4 |
| Earnings per share before non-recurring items (EUR) 3 | 0.43 | 0.42 | 0.67 | 0.65 |
| Earnings per share (EUR) | –0.11 | 0.42 | 0.10 | 0.66 |
1) Or on the last trading day of reporting period
2) Based on shares issued
3) Calculated before non-recurring items (see page 46) using the corresponding tax rates for continuing and discontinued operations
| Shareholders with an equity interest of over 5% in accordance with disclosures received under the WpHG (German Securities Trading Act) | 06/30/2015 |
|---|---|
| Kuwait Investment Office | 7.9 |
as of June 30, 2015
| Assets | Change | ||
|---|---|---|---|
| (EUR thousand) | 06/30/2015 | 12/31/2014 | in % |
| Property, plant and equipment | 509,610 | 498,758 | 2.2 |
| Investment property | 11,848 | 12,483 | –5.1 |
| Goodwill | 1,423,879 | 1,329,972 | 7.1 |
| Other intangible assets | 357,892 | 325,557 | 9.9 |
| Equity-accounted investments | 15,363 | 15,293 | 0.5 |
| Other non-current financial assets | 39,314 | 63,433 | –38.0 |
| Deferred taxes | 489,732 | 469,301 | 4.4 |
| Non-current assets | 2,847,638 | 2,714,797 | 4.9 |
| Inventories | 636,774 | 561,875 | 13.3 |
| Trade receivables | 993,753 | 945,755 | 5.1 |
| Income tax receivables | 20,108 | 17,531 | 14.7 |
| Other current financial assets | 411,873 | 390,625 | 5.4 |
| Cash and cash equivalents | 790,357 | 1,195,858 | –33.9 |
| Assets held for sale | 7,158 | 5,585 | 28.2 |
| Current assets | 2,860,023 | 3,117,229 | –8.3 |
| Total assets | 5,707,661 | 5,832,026 | –2.1 |
| Equity and liabilities | Change | ||
|---|---|---|---|
| (EUR thousand) | 06/30/2015 | 12/31/2014 | in % |
| Subscribed capital | 520,376 | 520,376 | – |
| Capital reserve | 1,217,861 | 1,217,861 | – |
| Retained earnings | 639,299 | 737,094 | –13.3 |
| Accumulated other comprehensive income | 144,300 | 51,316 | > 100 |
| Non-controlling interests | 560 | 560 | – |
| Equity | 2,522,396 | 2,527,207 | –0.2 |
| Non-current provisions | 128,915 | 131,592 | –2.0 |
| Non-current employee benefit obligations | 765,750 | 793,565 | –3.5 |
| Non-current financial liabilities | 182,569 | 456,072 | –60.0 |
| Other non-current liabilities | 62,703 | 58,566 | 7.1 |
| Deferred taxes | 132,216 | 118,598 | 11.5 |
| Non-current liabilities | 1,272,153 | 1,558,393 | –18.4 |
| Current provisions | 146,071 | 148,828 | –1.9 |
| Current employee benefit obligations | 240,011 | 170,637 | 40.7 |
| Current financial liabilities | 298,982 | 133,474 | > 100 |
| Trade payables | 561,852 | 639,719 | –12.2 |
| Income tax liabilities | 25,455 | 35,649 | –28.6 |
| Other current liabilities | 640,741 | 618,119 | 3.7 |
| Current liabilities | 1,913,112 | 1,746,426 | 9.5 |
| Totaly equity and liabilities | 5,707,661 | 5,832,026 | –2.1 |
| Q2 | Q2 | Change | |||
|---|---|---|---|---|---|
| (EUR thousand) | 2015 | 2014 | in % | ||
| Excluding | Restructuring | ||||
| restructuring | expenses | Total | |||
| Revenue | 1,150,135 | – | 1,150,135 | 1,117,656 | 2.9 |
| Cost of sales | 779,032 | 56,160 | 835,192 | 777,523 | 7.4 |
| Gross profit | 371,103 | –56,160 | 314,943 | 340,133 | –7.4 |
| Selling expenses | 130,706 | 19,266 | 149,972 | 117,120 | 28.0 |
| Research and development expenses | 18,053 | 8,958 | 27,011 | 18,469 | 46.3 |
| General and administrative expenses | 130,371 | 25,695 | 156,066 | 114,578 | 36.2 |
| Other income | 70,892 | – | 70,892 | 35,205 | > 100 |
| Other expenses | 68,683 | 5,620 | 74,303 | 27,053 | > 100 |
| Share of profit or loss of equity-accounted investments | 426 | – | 426 | 625 | –31.8 |
| Other financial income | 206 | – | 206 | –74 | – |
| Earnings before interest and tax (EBIT) | 94,814 | –115,699 | –20,885 | 98,669 | – |
| Interest income | 2,821 | 1,170 | > 100 | ||
| Interest expense | 11,997 | 20,445 | –41.3 | ||
| Profit before tax from continuing operations | –30,061 | 79,394 | – | ||
| Income taxes | 6,613 | 16,974 | –61.0 | ||
| Profit after tax from continuing operations | –23,448 | 62,420 | – | ||
| Profit or loss after tax from discontinued operations | 1,658 | 18,367 | –91.0 | ||
| Profit for the period | –21,790 | 80,787 | – | ||
| of which attributable to shareholders of GEA Group AG | –21,788 | 80,719 | – | ||
| of which attributable to non-controlling interests | –2 | 68 | – |
| Weighted average number of ordinary shares used to calculate basic and diluted earnings per share (million) |
192.5 | 192.5 | – |
|---|---|---|---|
| Basic and diluted earnings per share | -0.11 | 0.42 | – |
| Basic and diluted earnings per share from discontinued operations | 0.01 | 0.10 | -91.0 |
| Basic and diluted earnings per share from continuing operations | -0.12 | 0.32 | – |
| (EUR) | Q2 2015 |
Q2 2014 |
Change in % |
for the period April 1 – June 30, 2015
| Q2 | Q2 | Change | |
|---|---|---|---|
| (EUR thousand) | 2015 | 2014 | in % |
| Profit for the period | –21,790 | 80,787 | – |
| Items, that will not be reclassified to profit or loss in the future: | |||
| Actuarial gains/losses on pension and other post-employment benefit obligations | 70,909 | –30,741 | – |
| Exchange differences on translating foreign operations | –52,040 | 16,547 | – |
| Items, that will be reclassified subsequently to profit or loss when specific conditions are met: |
|||
| Result of available-for-sale financial assets | – | 17 | – |
| Result of cash flow hedges | 3,119 | 1,009 | > 100 |
| Other comprehensive income | 21,988 | –13,168 | – |
| Total comprehensive income | 198 | 67,619 | –99.7 |
| 200 | 67,530 | ||
| of which attributable to GEA Group AG shareholders | –99.7 |
| (EUR thousand) | Q1-Q2 2015 |
Q1-Q2 2014 |
Change in % |
||
|---|---|---|---|---|---|
| Excluding restructuring |
Restructuring expenses |
Total | |||
| Revenue | 2,156,500 | – | 2,156,500 | 2,068,316 | 4.3 |
| Cost of sales | 1,470,743 | 56,160 | 1,526,903 | 1,437,090 | 6.2 |
| Gross profit | 685,757 | –56,160 | 629,597 | 631,226 | –0.3 |
| Selling expenses | 254,729 | 19,266 | 273,995 | 229,944 | 19.2 |
| Research and development expenses | 34,629 | 8,958 | 43,587 | 36,326 | 20.0 |
| General and administrative expenses | 237,706 | 25,695 | 263,401 | 224,317 | 17.4 |
| Other income | 205,953 | – | 205,953 | 85,491 | > 100 |
| Other expenses | 204,092 | 5,620 | 209,712 | 72,229 | > 100 |
| Share of profit or loss of equity-accounted investments | 944 | – | 944 | 1,099 | –14.1 |
| Other financial income | 814 | – | 814 | 2,403 | –66.1 |
| Earnings before interest and tax (EBIT) | 162,312 | –115,699 | 46,613 | 157,403 | –70.4 |
| Interest income | 5,834 | 3,089 | 88.9 | ||
| Interest expense | 26,766 | 40,698 | –34.2 | ||
| Profit before tax from continuing operations | 25,681 | 119,794 | –78.6 | ||
| Income taxes | 5,650 | 25,636 | –78.0 | ||
| Profit after tax from continuing operations | 20,031 | 94,158 | –78.7 | ||
| Profit or loss after tax from discontinued operations | –1,328 | 33,840 | – | ||
| Profit for the period | 18,703 | 127,998 | –85.4 | ||
| thereof attributable to shareholders of GEA Group AG | 18,705 | 127,928 | –85.4 | ||
| thereof attributable to non-controlling interests | –2 | 70 | – |
| Weighted average number of ordinary shares used to calculate basic and diluted earnings per share (million) |
192.5 | 192.5 | – |
|---|---|---|---|
| Basic and diluted earnings per share | 0.10 | 0.66 | –85.4 |
| Basic and diluted earnings per share from discontinued operations | –0.01 | 0.18 | – |
| Basic and diluted earnings per share from continuing operations | 0.10 | 0.49 | –78.7 |
| (EUR) | Q1-Q2 2015 |
Q1-Q2 2014 |
Change in % |
for the period January 1 – June 30, 2015
| (EUR thousand) | Q1-Q2 2015 |
Q1-Q2 2014 |
Change in % |
|---|---|---|---|
| Profit for the period | 18,703 | 127,998 | –85.4 |
| Items, that will not be reclassified to profit or loss in the future: | |||
| Actuarial gains/losses on pension and other post-employment benefit obligations | 18,247 | –31,384 | – |
| Items, that will be reclassified subsequently to profit or loss when specific conditions are met: |
|||
| Exchange differences on translating foreign operations | 90,907 | 11,442 | > 100 |
| Result of available-for-sale financial assets | 393 | –1,264 | – |
| Result of cash flow hedges | 1,684 | 733 | > 100 |
| Other comprehensive income | 111,231 | –20,473 | – |
| Total comprehensive income | 129,934 | 107,525 | 20.8 |
| thereof attributable to GEA Group AG shareholders | 129,936 | 107,467 | 20.9 |
| thereof attributable to non-controlling interests | –2 | 58 | – |
for the period January 1 – June 30, 2015
| (EUR thousand) | Q1-Q2 2015 |
Q1-Q2 2014 |
|---|---|---|
| Profit for the period | 18,703 | 127,998 |
| plus income taxes | 5,650 | 25,636 |
| minus profit or loss after tax from discontinued operations | 1,328 | –33,840 |
| Profit before tax from continuing operations | 25,681 | 119,794 |
| Net interest income | 20,932 | 37,609 |
| Earnings before interest and tax (EBIT) | 46,613 | 157,403 |
| Depreciation, amortization, impairment losses, and reversal of impairment losses on non-current assets | 52,817 | 48,687 |
| Other non-cash income and expenses | 6,918 | 7,360 |
| Employee benefit obligations from defined benefit pension plans | –20,222 | –19,793 |
| Change in provisions and other employee benefit obligations | 59,854 | –35,334 |
| Losses and disposal of non-current assets | –378 | –442 |
| Change in inventories including unbilled construction contracts * | –97,716 | –76,129 |
| Change in trade receivables | 82,606 | –14,054 |
| Change in trade payables | –124,739 | –132,359 |
| Change in other operating assets and liabilities | 16,690 | –27,749 |
| Tax payments | –35,706 | –47,806 |
| Cash flow from operating activities of continued operations | –13,263 | –140,216 |
| Cash flow from operating activities of discontinued operations | –17,037 | –44,241 |
| Cash flow from operating activities | –30,300 | –184,457 |
| Proceeds from disposal of non-current assets | 1,182 | 1,881 |
| Payments to acquire property, plant and equipment, and intangible assets | –35,321 | –39,196 |
| Proceeds from non-current financial assets | – | –278 |
| Interest income | 3,639 | 2,477 |
| Dividend income | 2,323 | 1,465 |
| Payments to acquire subsidiaries and other businesses | –97,220 | –213 |
| Cash flow from investing activities of continued operations | –125,397 | –33,864 |
| Cash flow from investing activities of discontinued operations | –3,132 | –19,151 |
| Cash flow from investing activities | –128,529 | –53,015 |
| Dividend payments | –134,747 | –115,497 |
| Payments from finance leases | –2,116 | –2,565 |
| Proceeds from finance loans | 2,417 | 16,353 |
| Repayments of finance loans | –100,000 | –45,547 |
| Interest payments | –21,162 | –19,872 |
| Cash flow from financing activities of continued operations | –255,608 | –167,128 |
| Cash flow from financing activities of discontinued operations | – | –2,164 |
| Cash flow from financing activities | –255,608 | –169,292 |
| Effect of exchange rate changes on cash and cash equivalents | 9,464 | 869 |
| Change in unrestricted cash and cash equivalents | –404,973 | –405,895 |
| Unrestricted cash and cash equivalents at beginning of period | 1,194,437 | 794,313 |
| Unrestricted cash and cash equivalents at end of period | 789,464 | 388,418 |
| Restricted cash and cash equivalents | 893 | 3,143 |
| Cash and cash equivalents total | 790,357 | 391,561 |
| less cash and cash equivalents classified as held for sale | – | –98,296 |
| Cash and cash equivalents reported in the balance sheet | 790,357 | 293,265 |
*) Including advanced payments received
as of June 30, 2015
| Accumulated other comprehensive income | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| (EUR thousand) | Subscribed capital |
Capital reserves |
Retained earnings |
Translation of foreign operations |
Result of available for-sale financial assets |
Result of cash flow hedges |
Equity attributable to shareholders of GEA Group AG |
Non controlling interests |
Total |
| Balance at Jan. 1, 2014 (192,495,476 shares) |
520,376 | 1,218,073 | 627,612 | –53,677 | 262 | 389 | 2,313,035 | 2,667 | 2,315,702 |
| Profit for the period | – | – | 127,928 | – | – | – | 127,928 | 70 | 127,998 |
| Other comprehensive income | – | – | –31,384 | 11,454 | –1,264 | 733 | –20,461 | –12 | –20,473 |
| Total comprehensive income | – | – | 96,544 | 11,454 | –1,264 | 733 | 107,467 | 58 | 107,525 |
| Redemption of treasury shares | – | – | – | – | – | – | – | – | – |
| Dividend payment by GEA Group AG |
– | – | –115,497 | – | – | – | –115,497 | – | –115,497 |
| Change in other non-controlling interests |
– | – | – | – | – | – | – | –83 | –83 |
| Share-based payments | – | 14 | – | – | – | – | 14 | – | 14 |
| Balance at June 30, 2014 (192,495,476 shares) |
520,376 | 1,218,087 | 608,659 | –42,223 | –1,002 | 1,122 | 2,305,019 | 2,642 | 2,307,661 |
| Balance at Jan. 1, 2015 (192,495,476 shares) |
520,376 | 1,217,861 | 737,094 | 57,315 | –997 | –5,002 | 2,526,647 | 560 | 2,527,207 |
| Profit for the period | – | – | 18,705 | – | – | – | 18,705 | –2 | 18,703 |
| Other comprehensive income | – | – | 18,247 | 90,907 | 393 | 1,684 | 111,231 | – | 111,231 |
| Total comprehensive income | – | – | 36,952 | 90,907 | 393 | 1,684 | 129,936 | –2 | 129,934 |
| Redemption of treasury shares | – | – | – | – | – | – | – | – | – |
| Dividend payment by GEA Group AG |
– | – | –134,747 | – | – | – | –134,747 | – | –134,747 |
| Change in other non-controlling interests |
– | – | – | – | – | – | – | 2 | 2 |
| Share-based payments | – | – | – | – | – | – | – | – | – |
| Balance at June 30, 2015 (192,495,476 shares) |
520,376 | 1,217,861 | 639,299 | 148,222 | –604 | –3,318 | 2,521,836 | 560 | 2,522,396 |
The interim financial statements of GEA Group Aktiengesellschaft and the interim financial statements of the subsidiaries included in the consolidated financial statements were prepared in accordance with the International Financial Reporting Standards (IFRSs) and related interpretations issued by the International Accounting Standards Board (IASB), as adopted by the EU for interim financial reporting in accordance with Regulation (EC) No. 1606/2002 of the European Parliament and the Council on the application of international accounting standards. In accordance with IAS 34, the interim financial report does not contain all the information and disclosures required by IFRSs for full-year consolidated financial statements.
The accompanying consolidated financial statements and Group management report on the second quarter have not been audited in accordance with section 317 of the Handelsgesetzbuch (HGB – German Commercial Code) or reviewed by an auditor.
These interim financial statements have been prepared in euros (EUR). All amounts, including the comparative figures, are presented in thousands of euros (EUR thousand), except for the segment information. All amounts have been rounded using standard rounding rules. Adding together individual amounts may therefore result in a difference in the order of EUR 1 thousand in certain cases.
With the exception of the pronouncements effective as of January 1, 2015, the accounting policies applied to the accompanying interim financial statements are the same as those applied as of December 31, 2014, and are described in detail on pages 128 to 149 of the Annual Report containing GEA Group's IFRS consolidated financial statements.
These interim financial statements present a true and fair view of the Company's results of operations, financial position, and net assets in the reporting period.
Preparation of interim financial statements requires management to make certain estimates and assumptions that may affect the Company's assets, liabilities, provisions, and deferred tax assets and liabilities, as well as its income and expenses. Although management makes such estimates and assumptions carefully and in good faith, actual amounts may differ from the estimates used in the interim financial statements.
Factors that may cause amounts to fall below expectations include a deterioration in the global economic situation, movements in exchange rates and interest rates, as well as material litigation and changes in environmental or other legislation. Errors in internal operating processes, the loss of key customers, and rising borrowing costs may also adversely affect the Group's future performance.
The consolidated group changed as follows in the second quarter of 2015:
| Number of companies |
|
|---|---|
| Consolidated Group as of March 31, 2015 | 215 |
| German companies (including GEA Group AG) | 34 |
| Foreign companies | 181 |
| Initial consolidation | 6 |
| Consolidated Group as of June 30, 2015 | 221 |
| German companies (including GEA Group AG) | 34 |
| Foreign companies | 187 |
A total of 48 subsidiaries (March 31, 2015: 50) were not consolidated since their effect on the Group's net assets, financial position, and results of operations is not material even when viewed in the aggregate.
GEA Group acquired the following companies by way of share deals in the second quarter of 2015:
| Business | Head office | Acquisition Date | Percentage of voting interest (%) |
Consideration transferred (EUR thousand) |
|---|---|---|---|---|
| CMT S.p.A. | Peveragno/Italien | June 19, 2015 | 100.0 | 19,950 |
| Comas | Torrebelvicino/Italien | June 19, 2015 | 100.0 | 103,355 |
GEA Group completed the acquisition of Italian group Comas on June 19, acquiring all shares of the group's holding company, Finsamoc S.p.A. The Comas group is a leading manufacturer of machinery and equipment for sophisticated decorated cake and pastry making processes. As an established player in this segment, the Comas group will form the bakery application center in GEA's Solutions Business Area, allowing GEA to extend its leading position in the field of sophisticated process technologies for the food industry. The transaction costs associated with the acquisition amounted to EUR 1,450 thousand, and were incurred in their entirety in the current fiscal year.
GEA also acquired CMT S.p.A. (CMT), a leading supplier of equipment and integrated production lines for pasta filata cheese. The company's customer base is primarily located in the EU, but it also has a portfolio of major reference projects in North and South America. This acquisition enhances GEA's position in the growth area of cheese processing. The transaction costs associated with the acquisition amounted to EUR 194 thousand, and were incurred in their entirety in the current fiscal year.
The transaction costs associated with the acquisitions are reported in other expenses.
The consideration paid is composed as follows:
| Business (EUR thousand) |
Cash | Contingent consideration |
Total |
|---|---|---|---|
| CMT S.p.A. | 18,350 | 1,600 | 19,950 |
| Comas | 103,355 | – | 103,355 |
| Total | 121,705 | 1,600 | 123,305 |
As part of the acquisition of CMT, GEA agreed to pay an additional purchase price consideration, the amount which is dependent on CMT's earnings before interest, tax, depreciation, amortization and impairment losses, and reversals of impairment losses, in fiscal years 2016 to 2018; these must exceed a specified minimum amount for payment to be made. Payment is also subject to specified employees remaining with CMT until December 31, 2018. The amount of the contingent consideration is between zero and EUR 4,000 thousand; it is payable in installments in the years 2017 to 2019. Based on the corporate planning, the fair value of the contingent consideration was measured at EUR 1,600 thousand as of the acquisition date.
The acquisition of Comas was completed with economic effect as of January 1, 2015. As of that date, the company had net financial assets of EUR 27,908 thousand, which declined by EUR 1,321 thousand in the period up to the closing date primarily due to an increase in working capital.
The following assets were acquired and liabilities assumed as a result of the acquisition of the two companies:
| Fair value | |||
|---|---|---|---|
| (EUR thousand) | CMT S.p.A | Comas | Total |
| Property, plant and equipment | 628 | 10,694 | 11,322 |
| Intangible assets | 5,242 | 10,051 | 15,293 |
| Other non-current assets | 42 | 397 | 439 |
| Non-current assets | 5,912 | 21,142 | 27,054 |
| Inventories | 4,042 | 4,144 | 8,186 |
| Trade receivables | 2,863 | 11,711 | 14,574 |
| Other current assets | 673 | 1,858 | 2,531 |
| Cash and cash equivalents | 1,254 | 26,587 | 27,841 |
| Current assets | 8,832 | 44,300 | 53,132 |
| Total assets | 14,744 | 65,442 | 80,186 |
| Other non-current liabilities | 785 | 1,436 | 2,221 |
| Deferred taxes | 1,857 | 5,073 | 6,930 |
| Non-current liabilities | 2,642 | 6,509 | 9,151 |
| Trade payables | 2,231 | 9,226 | 11,457 |
| Income tax liabilities | 790 | 3,191 | 3,981 |
| Other current liabilities | 1,573 | 6,192 | 7,765 |
| Current liabilities | 4,594 | 18,609 | 23,203 |
| Total liabilities | 7,236 | 25,118 | 32,354 |
| Net assets acquired | 7,508 | 40,324 | 47,832 |
| of which attributable to GEA Group AG | 7,508 | 40,324 | 47,832 |
| Acquisition cost | 19,950 | 103,355 | 123,305 |
| Goodwill of GEA Group AG | 12,442 | 63,031 | 75,473 |
| Total | 12,422 | 318 | 12,104 | |
|---|---|---|---|---|
| Comas | 9,456 | 78 | 9,378 | |
| CMT S.p.A. | 2,966 | 240 | 2,726 | |
| Receivables (EUR thousand) |
Gross amount | Contractual Cashflows not expected to be collectable |
Fair value |
The fair value and gross amount of the receivables acquired are calculated as follows:
The purchase price allocations are provisional with respect to the identification and measurement of the assets acquired and liabilities assumed. There is particular uncertainty regarding the identification and measurement of intangible assets.
The goodwill arising from the acquisitions in the expected amount of EUR 75,473 thousand is attributable to the strengthening of GEA Group's general competitive position, advantages from expected synergies and future market developments, and the expertise of the workforce.
Since the timing of the two acquisitions made in the second quarter of 2015 fell close to the reporting date, they have not yet had any impact on consolidated revenue or consolidated profit. If the two companies had been acquired as of January 1, 2015, consolidated revenue for the first half of 2015 would have been EUR 2,186,089 thousand, and the corresponding consolidated profit after tax EUR 23,989 thousand.
The acquisitions of CMT S.p.A. and the Comas group resulted in the following cash outflows:
| Q2 | |
|---|---|
| (EUR thousand) | 2015 |
| Consideration transferred | 123,305 |
| less contingent consideration | –1,600 |
| Purchase price paid | 121,705 |
| less cash acquired | –27,841 |
| Net cash used in acquisition | 93,864 |
Outflows of EUR 97,220 thousand from acquisitions were recognized in the cash flow statement for the first half of 2015. The difference of EUR 3,356 thousand is attributable to purchase price payments for previous acquisitions.
The cash credit lines were composed of the following items as of June 30, 2015:
| 423,921 | 1,191,190 | 1,305,421 | 529,106 |
|---|---|---|---|
| 9,182 | 126,451 | 140,682 | 14,367 |
| – | 650,000 | 650,000 | – |
| 90,000 | 90,000 | 90,000 | 90,000 |
| 50,000 | 50,000 | 150,000 | 150,000 |
| 274,739 | 274,739 | 274,739 | 274,739 |
| 06/30/2015 utilized |
06/30/2015 approved |
12/31/2014 approved |
12/31/2014 utilized |
The following tables provide an overview of the composition of financial instruments as of June 30, 2015, by class within the meaning of IFRS 7 as well as by measurement category. The tables also include financial assets and liabilities, as well as derivatives that are included in recognized hedging relationships but do not belong to any of the IAS 39 measurement categories.
| Measurement in accordance with IAS 39 | |||||||
|---|---|---|---|---|---|---|---|
| (EUR thousand) | Carrying amount 06/30/2015 |
Amortized cost | Fair value through profit or loss |
Fair value recognized in other comprehensive income |
Measurement in accordance with other IFRSs |
Fair value 06/30/2015 |
|
| Assets | |||||||
| Trade receivables | 993,753 | 660,463 | – | – | 333,290 | 993,753 | |
| of which PoC receivables | 333,290 | – | – | – | 333,290 | 333,290 | |
| Income tax receivables | 20,108 | – | – | – | 20,108 | 20,108 | |
| Cash and cash equivalents | 790,357 | 790,357 | – | – | – | 790,357 | |
| Other financial assets | 451,187 | 282,579 | 10,919 | 52,717 | 104,972 | 451,187 | |
| of which derivatives included in hedging relationships |
5,834 | – | – | 5,834 | – | 5,834 | |
| By IAS 39 measurement category | |||||||
| Loans and receivables | 1,709,242 | 1,709,242 | – | – | – | 1,709,242 | |
| of which cash and cash equivalents | 790,357 | 790,357 | – | – | – | 790,357 | |
| of which trade receivables | 660,463 | 660,463 | – | – | – | 660,463 | |
| of which other financial assets | 258,422 | 258,422 | – | – | – | 258,422 | |
| Available-for-sale investments | 71,040 | 24,157 | – | 46,883 | – | 71,040 | |
| Financial assets at fair value through profit or loss (derivatives not included in a recognized hedging relationship) |
10,919 | – | 10,919 | – | – | 10,919 | |
| Liabilities | |||||||
| Trade payables | 561,852 | 561,852 | – | – | – | 561,852 | |
| Financial liabilities | 481,551 | 425,184 | 10,737 | 11,274 | 34,356 | 494,111 | |
| of which liabilities under finance leases | 34,356 | – | – | – | 34,356 | 34,356 | |
| of which derivatives included in hedging relationships |
11,274 | – | – | 11,274 | – | 11,274 | |
| Income tax liabilities | 25,455 | – | – | – | 25,455 | 25,455 | |
| Other financial liabilities | 703,444 | 124,598 | 6,174 | – | 572,672 | 702,301 | |
| By IAS 39 measurement category | |||||||
| Financial liabilities at amortized cost | 1,117,808 | 1,117,808 | – | – | – | 1,129,225 | |
| of which trade payables | 561,852 | 561,852 | – | – | – | 561,852 | |
| of which bonds and other securitized liabilities | 368,342 | 368,342 | – | – | – | 380,188 | |
| of which liabilities to banks | 55,579 | 55,579 | – | – | – | 56,293 | |
| of which loan liabilities to unconsolidated subsidiaries |
1,263 | 1,263 | – | – | – | 1,263 | |
| of which other liabilities to affiliated companies | 23,974 | 23,974 | – | – | – | 23,974 | |
| of which other liabilities | 100,624 | 100,624 | – | – | – | 99,481 | |
| Financial liabilities at fair value through profit or loss (derivatives not included in a hedging relationship and contingent consideration) |
16,911 | – | 16,911 | – | – | 16,911 |
| Measurement in accordance with IAS 39 | ||||||
|---|---|---|---|---|---|---|
| (EUR thousand) | Carrying amount 12/31/2014 |
Amortized cost | Fair value through profit or loss |
Fair value recognized in other comprehensive income |
Measurement in accordance with other IFRSs |
Fair value 12/31/2014 |
| Assets | ||||||
| Trade receivables | 945,755 | 691,440 | – | – | 254,315 | 945,755 |
| of which PoC receivables | 254,315 | – | – | – | 254,315 | 254,315 |
| Income tax receivables | 17,531 | – | – | – | 17,531 | 17,531 |
| Cash and cash equivalents | 1,195,858 | 1,195,858 | – | – | – | 1,195,858 |
| Other financial assets | 454,058 | 282,643 | 16,558 | 50,006 | 104,851 | 454,058 |
| of which derivatives included in hedging relationships |
4,453 | – | – | 4,453 | – | 4,453 |
| By IAS 39 measurement category | ||||||
| Loans and receivables | 2,145,183 | 2,145,183 | – | – | – | 2,145,183 |
| of which cash and cash equivalents | 1,195,858 | 1,195,858 | – | – | – | 1,195,858 |
| of which trade receivables | 691,440 | 691,440 | – | – | – | 691,440 |
| of which other financial assets | 257,885 | 257,885 | – | – | – | 257,885 |
| Available-for-sale investments | 70,311 | 24,758 | – | 45,553 | – | 70,311 |
| Financial assets at fair value through profit or loss (derivatives not included in a recognized hedging relationship) |
16,558 | – | 16,558 | – | – | 16,558 |
| Liabilities | ||||||
| Trade payables | 639,719 | 639,719 | – | – | – | 639,719 |
| Financial liabilities | 589,546 | 530,249 | 11,445 | 12,923 | 34,929 | 608,703 |
| of which liabilities under finance leases | 34,929 | – | – | – | 34,929 | 34,929 |
| of which derivatives included in hedging relationships |
12,923 | – | – | 12,923 | – | 12,923 |
| Income tax liabilities | 35,649 | – | – | – | 35,649 | 35,649 |
| Other financial liabilities | 676,685 | 152,949 | 7,137 | – | 516,599 | 676,898 |
| By IAS 39 measurement category | ||||||
| Financial liabilities at amortized cost | 1,330,054 | 1,330,054 | – | – | – | 1,349,424 |
| of which trade payables | 639,719 | 639,719 | – | – | – | 639,719 |
| of which bonds and other securitized liabilities | 372,743 | 372,743 | – | – | – | 391,032 |
| of which liabilities to banks | 156,377 | 156,377 | – | – | – | 157,245 |
| of which loan liabilities to unconsolidated subsidiaries |
1,129 | 1,129 | – | – | – | 1,129 |
| of which other liabilities to affiliated companies | 24,166 | 24,166 | – | – | – | 24,379 |
| of which other liabilities | 128,783 | 128,783 | – | – | – | 128,996 |
| Financial liabilities at fair value through profit or loss (derivatives not included in a hedging relationship and contingent consideration) |
18,582 | – | 18,582 | – | – | 18,582 |
Financial assets and liabilities that are measured at fair value, or for which a fair value is disclosed in the notes to the consolidated financial statements, are required to be categorized according to the fair value hierarchy described in the following. Categorization within the levels of the fair value hierarchy is based on the measurement of the underlying inputs:
Level 1 inputs: quoted prices (unadjusted) in active markets for identical financial assets and liabilities.
Level 2 inputs: quoted market prices that are observable as direct (prices) or indirect (derived from prices) inputs used to measure fair value and that are not quoted prices as defined by Level 1.
Level 3 inputs: inputs that are not based on observable market data.
The following table shows the categorization of financial assets and financial liabilities into the threelevel fair value hierarchy:
| Recurring fair value measurements | 06/30/2015 | 12/31/2014 | |||||||
|---|---|---|---|---|---|---|---|---|---|
| Fair value Carrying |
Carrying | Fair value | |||||||
| (EUR thousand) | amount | Level 1 | Level 2 | Level 3 | amount | Level 1 | Level 2 | Level 3 | |
| Financial assets measured at fair value | |||||||||
| Derivatives included in hedging relationships | 5,834 | – | 5,834 | – | 4,453 | – | 4,453 | – | |
| Derivatives not included in hedging relationships | 10,919 | – | 10,919 | – | 16,558 | – | 16,558 | – | |
| Available-for-sale financial assets valued at fair value | 9,883 | – | – | 9,883 | 8,518 | – | – | 8,518 | |
| Other financial assets | 37,000 | 37,000 | – | – | 37,036 | 37,036 | – | – | |
| Financial liabilities measured at fair value | |||||||||
| Derivatives included in hedging relationships | 11,274 | – | 11,274 | – | 12,923 | – | 12,923 | – | |
| Derivatives not included in hedging relationships | 10,737 | – | 10,737 | – | 11,445 | – | 11,445 | – | |
| Contingent consideration | 6,174 | – | – | 6,174 | 7,137 | – | – | 7,137 | |
| Financial liabilities not measured at fair value | |||||||||
| Bonds | 276,557 | 285,006 | – | – | 282,202 | 295,810 | – | – | |
| Promissory note bonds | 91,785 | – | 95,182 | – | 90,541 | – | 95,222 | – | |
| Liabilities to banks | 55,579 | – | 56,293 | – | 156,377 | – | 157,245 | – | |
| Other financial liabilities | 79,148 | – | – | 78,005 | 76,987 | – | – | 77,200 |
There were no transfers between the levels of the fair value hierarchy in the first six months of fiscal year 2015.
The fair value of the bond and the other financial assets is calculated on the basis of quoted bid prices on an active market and is therefore categorized within Level 1. The fair value includes the interest deferred as of the reporting date.
The fair value of derivatives is calculated using quoted exchange rates and yield curves observable in the market. Accordingly, these are categorized within Level 2 of the fair value hierarchy.
The fair value of borrower's note loans and liabilities to banks is measured on the basis of the yield curve, taking into account credit spreads. They are therefore categorized within Level 2 of the fair value hierarchy. The interest deferred as of the reporting date is included in the fair values.
The fair values of trade receivables, cash and cash equivalents, and other financial receivables essentially correspond to the carrying amounts; this is due to the predominantly short remaining maturities.
Certain other financial liabilities resulting from the sale of the former GEA Heat Exchangers Segment, which was completed in 2014, are categorized within Level 3 of the fair value hierarchy, since their fair value is measured on the basis of the present value of future cash outflows expected on the basis of contractual obligations associated with the sale.
A receivable relating to the former raw material activities of Metallgesellschaft AG that had previously been written off was allocated to Level 3 financial instruments; its fair value is determined by means of a present value calculation on the basis of the debtor's payment plan.
Financial liabilities resulting from contingent purchase price considerations are also assigned to Level 3 of the fair value hierarchy. The fair value of these liabilities is determined by means of present value calculations, taking into account various inputs that are not observable in the market, and that are based in particular on corporate planning, as specified in the respective purchase price clauses.
The measures resolved as part of the "Fit for 2020" initiative were specified in detail and implemented during the reporting period. This initiative – part of the strategic realignment of the company – aims to ensure an optimized organizational setup. As a result it is expected to lead to significant cost reductions and promote further growth. For example, the development and manufacturing of products and the provision of process solutions have been bundled in two new business areas – Equipment and Solutions. This new structure with business areas of roughly equal size strength promises greater operational synergies across technologies and applications, and helps achieve functional excellence by standardizing processes. For GEA's customers this means one country organization per country as a central point of contact offering the entire product portfolio and all services on a local basis. The planned measures include a net workforce reduction of approximately 1,450 full-time equivalents.
Restructuring expenses for the "Fit for 2020" initiative were recognized for the first time in the second quarter of 2015, to the extent that the relevant conditions for the individual countries or locations were met. The restructuring provisions recognized as of June 30 amounted to EUR 110.9 million.
The income taxes recognized were calculated for continuing operations in the reporting period using an estimated tax rate of 22.0 percent (previous year: 21.4 percent).
The change in exchange differences on translating foreign operations amounted to EUR 90,907 thousand in the period under review (previous year: EUR 11,442 thousand) and resulted primarily from the rise of the U.S. dollar and the Chinese renminbi against the euro. In the prior-year quarter, exchange differences on translating foreign operations moved in the same direction due to a rise in the U.S. dollar against the euro.
Following intensive preparations, GEA's new group structure – which was developed as part of its "Fit for 2020" initiative – was implemented on June 8, 2015. As part of this new structure, the development and manufacturing of products and the provision of process solutions have been bundled in two new business areas – Equipment and Solutions.
The Group's operating segments were reorganized in line with this during the reporting period: The former GEA Mechanical Equipment and GEA Farm Technologies segments were allocated to the Business Area Equipment, while GEA Process Engineering belongs to the Business Area Solutions. The former GEA Refrigeration Technologies Segment was split between the Business Areas Equipment and Solutions, with the goodwill attributable to the former segment being reallocated based on the relative values as of the reorganisation date.
The administrative functions bundled in the Global Corporate Center and the Shared Service Center do not represent independent operating segments. Their income and expenses and assets and liabilities are charged to the business areas if allocatable. Non-core business activities are not reported within the business areas. This includes investment property held for sale, pension obligations, and liabilities related to discontinued operations. The former GEA Heat Exchangers Segment, which was sold on October 31, 2014, is also not an operating segment. The prior-period information was adjusted to reflect the amended reporting structure.
GEA Group's business activities are divided into the following two business areas:
The Business Area Equipment brings together all activities that relate to standardized and in part customer-specific equipment offerings. In general, the products are manufactured in large quantities as part of large-scale series production on a standardized and modular basis. Typical products covered by the business area are separators, valves, pumps, homogenizers, and cooling compressors, but its product range also comprises automatic feeding systems, manure management systems, and barn equipment.
The Business Area Solutions brings together all Group activities that largely consist of marketing customer-specific and modular solutions, and projects. This business area tailors its products and services to the specific application or customer requirements. The offering mainly comprises the design and development of process solutions for the dairy processing, brewing, food, pharma, and chemical industries.
| Consolidation/ | ||||||
|---|---|---|---|---|---|---|
| (EUR million) | BA-E | BA-S | Total | others | GEA | |
| Q2 2015 | ||||||
| Order Intake | 573.0 | 628.9 | 1,201.9 | –53.1 | 1,148.8 | |
| External revenue | 541.6 | 608.6 | 1,150.1 | – | 1,150.1 | |
| Intersegment revenue | 46.3 | 4.4 | 50.7 | –50.7 | – | |
| Total revenue | 587.9 | 612.9 | 1,200.8 | –50.7 | 1,150.1 | |
| Operating EBITDA * | 84.5 | 58.1 | 142.6 | –3.3 | 139.3 | |
| as % of revenue | 14.4 | 9.5 | 11.9 | – | 12.1 | |
| EBITDA | 27.6 | 31.1 | 58.7 | –52.3 | 6.4 | |
| Operating EBIT * | 71.5 | 53.3 | 124.8 | –5.0 | 119.8 | |
| as % of revenue | 12.2 | 8.7 | 10.4 | – | 10.4 | |
| EBIT | 8.1 | 24.9 | 33.1 | –54.0 | –20.9 | |
| as % of revenue | 1.4 | 4.1 | 2.8 | – | –1.8 | |
| Additions to property, plant and equipment and intangible assets |
12.5 | 107.1 | 119.5 | 1.7 | 121.2 | |
| Depreciation and amortization | 19.4 | 6.2 | 25.6 | 1.7 | 27.3 | |
| Q2 2014 | ||||||
| Order Intake | 569.7 | 652.4 | 1,222.2 | –52.2 | 1,169.9 | |
| External revenue | 517.8 | 599.9 | 1,117.7 | – | 1,117.7 | |
| Intersegment revenue | 47.6 | 3.4 | 51.0 | –51.0 | – | |
| Total revenue | 565.4 | 603.3 | 1,168.7 | –51.0 | 1,117.7 | |
| Operating EBITDA * | 71.7 | 57.8 | 129.6 | –1.5 | 128.0 | |
| as % of revenue | 12.7 | 9.6 | 11.1 | – | 11.5 | |
| EBITDA | 71.7 | 57.8 | 129.6 | –6.5 | 123.1 | |
| Operating EBIT * | 59.3 | 53.1 | 112.5 | –3.1 | 109.3 | |
| as % of revenue | 10.5 | 8.8 | 9.6 | – | 9.8 | |
| EBIT | 54.5 | 52.3 | 106.8 | –8.1 | 98.7 | |
| as % of revenue | 9.6 | 8.7 | 9.1 | – | 8.8 | |
| Additions to property, plant and equipment and | ||||||
| intangible assets | 15.3 | 5.7 | 21.0 | 2.4 | 23.4 | |
| Depreciation and amortization | 17.2 | 5.6 | 22.8 | 1.6 | 24.4 |
*) Before effects of purchase price allocations and before non-recurring items (see page 46)
| Consolidation/ | |||||
|---|---|---|---|---|---|
| (EUR million) | BA-E | BA-S | Total | others | GEA |
| Q1 - Q2 2015 | |||||
| Order Intake | 1,159.6 | 1,217.2 | 2,376.7 | –100.5 | 2,276.2 |
| External revenue | 1,025.9 | 1,130.6 | 2,156.5 | – | 2,156.5 |
| Intersegment revenue | 88.9 | 8.4 | 97.3 | –97.3 | – |
| Total revenue | 1,114.8 | 1,139.0 | 2,253.8 | –97.3 | 2,156.5 |
| Operating EBITDA 1 | 151.8 | 90.4 | 242.2 | –4.8 | 237.4 |
| as % of revenue | 13.6 | 7.9 | 10.7 | – | 11.0 |
| EBITDA | 92.0 | 62.9 | 154.9 | –55.4 | 99.4 |
| Operating EBIT 1 | 125.8 | 80.7 | 206.5 | –8.0 | 198.6 |
| as % of revenue | 11.3 | 7.1 | 9.2 | – | 9.2 |
| EBIT | 54.6 | 50.7 | 105.3 | –58.7 | 46.6 |
| as % of revenue | 4.9 | 4.4 | 4.7 | – | 2.2 |
| ROCE in % 2 | 14.9 | 51.9 | – | – | 16.4 |
| Segment assets | 3,697.6 | 2,617.9 | 6,315.5 | –607.9 | 5,707.7 |
| Segment liabilities | 1,848.8 | 1,627.2 | 3,476.0 | –290.7 | 3,185.3 |
| Working Capital (reporting date) 3 | 546.1 | 40.2 | 586.3 | –3.4 | 582.9 |
| Additions to property, plant and equipment and intangible assets |
25.9 | 138.3 | 164.2 | 2.3 | 166.5 |
| Depreciation and amortization | 37.4 | 12.2 | 49.6 | 3.2 | 52.8 |
| Q1 - Q2 2014 | |||||
| Order Intake | 1,144.7 | 1,154.5 | 2,299.2 | –104.9 | 2,194.2 |
| External revenue | 969.1 | 1,099.2 | 2,068.3 | – | 2,068.3 |
| Intersegment revenue | 91.7 | 6.2 | 98.0 | –98.0 | – |
| Total revenue | 1,060.8 | 1,105.4 | 2,166.3 | –98.0 | 2,068.3 |
| Operating EBITDA 1 | 128.0 | 92.0 | 220.0 | –6.8 | 213.2 |
| as % of revenue | 12.1 | 8.3 | 10.2 | – | 10.3 |
| EBITDA | 128.0 | 92.0 | 220.0 | –13.9 | 206.1 |
| Operating EBIT 1 | 103.4 | 82.9 | 186.3 | –10.1 | 176.1 |
| as % of revenue | 9.7 | 7.5 | 8.6 | – | 8.5 |
| EBIT | 93.5 | 81.1 | 174.6 | –17.2 | 157.4 |
| as % of revenue | 8.8 | 7.3 | 8.1 | – | 7.6 |
| ROCE in % 2 | 17.3 | 60.3 | – | – | 22.9 |
| Segment assets | 2,912.5 | 2,420.2 | 5,332.7 | 935.9 | 6,268.6 |
| Segment liabilities | 1,416.9 | 1,396.2 | 2,813.2 | 1,147.8 | 3,961.0 |
| Working Capital (reporting date) 3 | 548.3 | 42.5 | 590.8 | –0.6 | 590.1 |
| Additions to property, plant and equipment and intangible assets |
30.0 | 8.7 | 38.7 | 4.2 | 42.9 |
| Depreciation and amortization | 34.5 | 10.9 | 45.4 | 3.3 | 48.7 |
1) Before effects of purchase price allocations and before non-recurring items (see page 46)
2) ROCE = EBIT/capital employed; EBIT and capital employed both calculated as the average for the past 12 months and before effects relating to goodwill from the acquisition of the former
GEA AG by the former Metallgesellschaft AG in 1999; capital employed = non-current assets + working capital 3) Working capital = inventories + trade receivables - trade payables - advance payments received
Order intake is recognized on the basis of legally valid contracts. Intersegment revenue is calculated using standard market prices.
In accordance with the internal management system as described in the 2014 Annual Report, the profitability of the two business areas is measured using earnings before interest, tax, depreciation, amortization and impairment losses, and reversals of impairment (EBITDA), earnings before interest and tax (EBIT), and profit or loss before tax (EBT). These measures correspond to the figures presented in the income statement except that reclassifications to profit or loss from discontinued operations are disregarded and the non-current assets of the former GEA Heat Exchangers Segment were still depreciated or amortized following their classification as held for sale. These continued depreciation/ amortization charges amounted to EUR 17.8 million in the first half of 2014.
Management also monitors operating EBITDA and operating EBIT, which are adjusted for effects resulting from the re-measurement of the assets acquired as part of business combinations. These effects relate on the one hand to the revalued amount of inventories recognized as cost of sales, which reduces earnings, and on the other to the amortization of the revalued amount from the measurement of property, plant, and equipment, and intangible assets at fair value. In addition, management eliminates earnings effects that it believes will not be incurred to the same extent in future fiscal years ("non-recurring items"). Operating EBIT for the first half of 2015 was thus adjusted for non-recurring items totaling EUR 139.4 million (previous year: EUR 7.1 million). Non-recurring items comprise EUR 135.1 million (previous year: EUR 5.1 million) of expenses for strategic projects, of which EUR 115.7 million (previous year: EUR 0.0 million) was attributable to restructuring expenses. In addition, personnel expenses of EUR 4.3 million for employees who left the company and were not replaced (previous year: EUR 0.0 million) and the expense arising from the allocation in accordance with IFRS 5 of service and trademark fees totaling EUR 0.0 million (previous year: EUR 2.0 million) exclusively to continuing operations, i.e., to the business areas, were identified as non-recurring items. In addition, non-recurring expenses of EUR 1.1 million (previous year: EUR 7.7 million) were recognized in profit or loss from discontinued operations in connection with preparations for the separation of the GEA HX Segment.
The following tables show the reconciliation of EBITDA before purchase price allocation and nonrecurring items to EBIT and of EBITDA to EBIT:
| Reconciliation of operating EBITDA to EBIT (EUR million) |
Q2 2015 |
Q2 2014 |
Change in % |
Q1-Q2 2015 |
Q1-Q2 2014 |
Change in % |
|---|---|---|---|---|---|---|
| Operating EBITDA according to segment reporting | 142.6 | 129.6 | 10.0 | 242.2 | 220.0 | 10.1 |
| Depreciation of property, plant and equipment, investment property, and amortization of intangible assets |
–17.8 | –17.1 | –4.3 | –35.7 | –33.8 | –5.7 |
| Operating EBIT according to segment reporting | 124.8 | 112.5 | 10.9 | 206.5 | 186.3 | 10.9 |
| Depreciation and amortization on capitalization of purchase price allocation |
–6.3 | –5.7 | –10.6 | –12.4 | –11.6 | –6.8 |
| Realization of step-up amounts on inventories | –0.1 | – | – | –0.1 | – | – |
| Non-recurring items | –85.3 | – | – | –88.7 | – | – |
| EBIT according to segment reporting | 33.1 | 106.8 | –69.0 | 105.3 | 174.6 | –39.7 |
| Operating EBITDA others | –2.5 | –0.8 | < -100 | –4.5 | –5.8 | 23.1 |
| Depreciation of property, plant and equipment, investment property, and amortization of intangible assets |
–1.7 | –1.6 | –2.5 | –3.2 | –3.3 | 2.8 |
| Operating EBIT others | –4.2 | –2.4 | –71.8 | –7.7 | –9.1 | 15.8 |
| Non-recurring items others | –49.0 | –5.0 | < -100 | –50.7 | –7.1 | < -100 |
| EBIT others | –53.2 | –7.4 | < -100 | –58.4 | –16.2 | < -100 |
| Consolidation | –0.8 | –0.7 | –8.4 | –0.3 | –1.0 | 71.8 |
| EBIT | –20.9 | 98.7 | – | 46.6 | 157.4 | –70.4 |
| Reconciliation EBITDA to EBIT (EUR million) |
Q2 2015 |
Q2 2014 |
Change in % |
Q1-Q2 2015 |
Q1-Q2 2014 |
Change in % |
|---|---|---|---|---|---|---|
| EBITDA | 6.4 | 123.1 | –94.8 | 99.4 | 206.1 | –51.8 |
| Depreciation of property, plant and equipment, investment property, and amortization of intangible assets |
–27.3 | –24.4 | –11.8 | –52.8 | –48.7 | –8.5 |
| EBIT | –20.9 | 98.7 | – | 46.6 | 157.4 | –70.4 |
A reconciliation of EBIT to profit or loss before income tax is contained in the income statement.
ROCE is regularly used to assess how effectively the capital invested in business operations is being used.
The recognition and measurement policies for the business areas' assets and liabilities, and hence also for working capital, are the same as those used in the group and described in the accounting policies section of the 2014 Annual Report.
The following table shows the reconciliation of working capital to total assets:
| Reconciliation of working capital to total assets | ||
|---|---|---|
| (EUR million) 06/30/2015 |
||
| Working capital (reporting date) according to segment reporting | 586.3 | 590.8 |
| Non-current assets | 2,561.3 | 2,339.7 |
| Income tax receivables | 23.9 | 15.7 |
| Other current financial assets | 1,825.8 | 1,211.6 |
| Cash and cash equivalents | 227.1 | 150.8 |
| Assets held for sale | 1.2 | 1.2 |
| plus trade payables | 603.5 | 567.0 |
| plus advance payments in respect of orders and construction contracts | 219.4 | 189.6 |
| plus gross amount due to customers for contract work | 267.1 | 266.1 |
| Total assets according to segment reporting | 6,315.5 | 5,332.7 |
| plus total assets others | 4,315.6 | 2,870.6 |
| Consolidation | –4,923.5 | –1,934.7 |
| Total assets | 5,707.7 | 6,268.6 |
There were no material related party transactions with an effect on the results of operations, financial position, and net assets.
To the best of our knowledge, and in accordance with the applicable reporting principles for interim financial reporting, the interim consolidated financial statements give a true and fair view of the assets, liabilities, financial position, and profit or loss of the group, and the interim management report of the group includes a fair review of the development and performance of the business and the position of the group, together with a description of the material opportunities and risks associated with the expected development of the group for the remaining months of the fiscal year.
Düsseldorf, July 28, 2015
The Executive Board
Jürg Oleas Dr. Helmut Schmale Markus Hüllmann Dr. Stephan Petri
October 28, 2015 Quarterly Financial Report for the period to September 30, 2015
| Fax |
[email protected] | +49 (0)211 9136-31492 | Fax |
[email protected] | +49 (0)211 9136-31082 | |
|---|---|---|---|---|---|---|
| Tel. | +49 (0)211 9136-1492 | Tel. | +49 (0)211 9136-1082 | |||
| Communication, Marketing & Branding | Investor Relations | |||||
| Xetra | G1A.DE | Ratio | 1:1 | |||
| Bloomberg code | G1A.GR | ADR-Level | 1 | |||
| Reuters code | G1AG.DE | Sponsor | Deutsche Bank Trust Company Americas | |||
| ISIN | DE0006602006 | Symbol | GEAGY | |||
| WKN | 660 200 | CUSIP | 361592108 | |||
| The GEA Group Stock: Key data | American Depository Receipts (ADR) |
This report includes forward-looking statements on GEA Group Aktiengesellschaft, its subsidiaries and associates, and on the economic and political conditions that may influence the business performance of the GEA. All these statements are based on assumptions made by the Executive Board using information available to it at the time. Should these assumptions prove to be wholly or partly incorrect, or should further risks arise, actual business performance may differ from that expected. The Executive Board therefore cannot assume any liability for the statements made.
| Published by | GEA Group Aktiengesellschaft Peter-Müller-Straße 12 40468 Düsseldorf Germany www.gea.com |
|---|---|
| Design | www.kpad.de |
This report is a translation of the German original; in the event of variances, the German version shall take precedence over the Englisch translation.
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GEA is a global engineering company with multi-billion euro sales and operations in more than 50 countries. Founded in 1881 the company is one of the largest providers of innovative equipment and process technology. GEA is listed in the STOXX® Europe 600 Index.
GEA Group Aktiengesellschaft
Peter-Müller-Straße 12, 40468 Düsseldorf Germany Phone: +49 211 9136-0 [email protected], www.gea.com
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