Annual Report • Apr 11, 2013
Annual Report
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Annual Report 2012
engineering for a better world
All figures as of the reporting dates from 2011 onwards include the acquisitions of CFS and Bock. The figures for the reporting periods include the acquisitions as from the second quarter of 2011.
| (EUR million) | Q1-Q4 2012 |
Q1-Q4 2011 |
Change in % |
|---|---|---|---|
| Results of operations | |||
| Order intake | 5,901.1 | 5,609.7 | 5.2 |
| Revenue | 5,720.1 | 5,416.5 | 5.6 |
| Order backlog | 2,751.6 | 2,677.3 | 2.8 |
| Operating EBITDA 1 | 662.8 | 630.1 | 5.2 |
| as % of revenue | 11.6 | 11.6 | – |
| EBITDA | 597.8 | 610.2 | -2.0 |
| Operating EBIT 1 | 561.6 | 524.6 | 7.1 |
| as % of revenue | 9.8 | 9.7 | – |
| EBIT | 454.8 | 474.6 | -4.2 |
| as % of revenue | 8.0 | 8.8 | – |
| EBT | 366.9 | 398.6 | -7.9 |
| Profit for the period | 316.6 | 312.6 | 1.3 |
| Net assets | |||
| Total assets | 6,429.5 | 6,225.2 | 3.3 |
| Equity | 2,166.3 | 2,163.6 | 0.1 |
| as % of total assets | 33.7 | 34.8 | – |
| Working capital (reporting date) | 533.2 | 577.1 | -7.6 |
| Working capital (average of the past 12 months) | 752.7 | 685.2 | 9.9 |
| as % of revenue | 13.2 | 12.6 | – |
| Net liquidity (+)/Net debt (-) | -325.5 | -386.8 | 15.8 |
| Gearing in % (net debt / equity) | 15.0 | 17.9 | – |
| Financial position | |||
| Cash flow from operating activities | 465.1 | 313.5 | 48.4 |
| Cash flow driver 2 | 369.0 | 319.4 | 15.5 |
| as % of revenue | 6.5 | 5.9 | – |
| Capital employed (reporting date) | 3,559.5 | 3,635.0 | -2.1 |
| Capital employed (average of the past 12 months) | 3,836.5 | 3,537.5 | 8.5 |
| ROCE in % (EBIT / Capital Employed) 3 | 11.9 | 13.4 | – |
| ROCE in % (goodwill adjusted) 4 | 17.8 | 20.5 | – |
| Capital expenditure on property, plant and equipment | 161.2 | 155.2 | 3.9 |
| Full-time equivalents (reporting date) excluding vocational trainees and inactive employment contracts |
24,498 | 23,834 | 2.8 |
| GEA Shares | |||
| Earnings per share pre purchase price allocation (EUR) | 1.88 | 1.91 | -1.6 |
| Earnings per share (EUR) | 1.69 | 1.70 | -0.3 |
| Weighted average number of shares outstanding (million) | 185.8 | 183.8 | 1.1 |
1) Before effects of purchase price allocations and in 2012 additionally before non-recurring items at GEA Food Solutions.
2) Cash flow driver = EBITDA - Capital expenditure - Change in Working Capital (average of the past 12 months)
3) Capital employed including goodwill from the acquisition of the former GEA AG by the former Metallgesellschaft AG in 1999 (average of the past 12 months)
4) Capital employed excluding goodwill from the acquisition of the former GEA AG by the former Metallgesellschaft AG in 1999 (average of the past 12 months)
GEA Group is one of the largest suppliers to the food processing industry and a wide range of process industries. It generated consolidated revenues in excess of EUR 5.7 billion in 2012.
As an international technology group, the Company focuses on the development and production of process technology and components for sophisticated production methods in a variety of end markets. GEA generates around 70 percent of its consolidated revenues from the food and energy sectors, which are longterm growth industries.
The group employed around 24,500 people worldwide as of December 31, 2012. GEA Group is a market and technology leader in its business areas.
Order intake EUR 5.9 billion
Revenue EUR 5.7 billion
Operating EBIT EUR 562 million
Operating EBIT Margin 9.8 %
Earnings per share 1.69 EUR
Cover picture:
GEA has one of the most extensive offerings of screw compressors, supplying more than 20 sizes. The screw rotors pictured on the cover page work in these compressors, and their precise interaction during rotation is essential for their efficiency and reliability.
Executive Board of GEA Group Aktiengesellschaft
Management 9 Combined Management Report for GEA Group Aktiengesellschaft Report and the GEA Group
GEA Shares 93 GEA Shares/Investor Relations
Consolidated 97 Contents
Financial Statements 98 Consolidated Balance Sheet
Consolidated Income Statement
See inside back cover for index
Jürg Oleas, Chairman of the Executive Board of GEA Group Aktiengesellschaft
Fiscal year 2012 was successful for GEA Group overall. Order intake rose to EUR 5.9 billion, a year-onyear increase of 5 percent, despite the relatively weak trend on some of the markets relevant to us. Our revenue also improved by 6 percent to more than EUR 5.7 billion. Operating profit amounted to EUR 562 million, corresponding to an EBIT margin of 9.8 percent.
Our segments developed at differing rates in the past fiscal year. The integration of GEA Food Solutions presented major challenges. The fierce price competition in energy-related customer industries continued unabated for our GEA Heat Exchangers Segment, which nevertheless fared well compared with most of its competitors. In contrast, we recorded considerable improvements in our other segments, with half of these achieving record margins.
We again won a number of key reference projects in 2012. The food sector now accounts for a disproportionately high two-thirds of our major orders with a volume of more than EUR 15 million. For example, a EUR 70 million project to build the world's largest spray dryer is currently underway in New Zealand. In future, this will process more than 4.4 million liters of milk per day for the whole of the Asia region. In Asia, after receiving several orders for coffee production plants from Vietnam in 2011, we received an order worth around EUR 40 million from another major customer for several filler lines for various soft drinks in the country. We also won major orders from leading international food groups in Western Europe, clear evidence of the trust placed in our engineering expertise all over the world.
What gives me the greatest confidence is our innovative strength, which comes to the fore in projects such as these. We again won major awards for groundbreaking new products at several trade shows last year, including at ACHEMA, the world's largest trade fair for chemical engineering, environmental protection and biotechnology, and at EuroTier, the leading international trade fair for livestock production and management. We will be able to continue consolidating and extending our market position for as long as we continue providing our customers with intelligent process solutions.
The group took a major step towards sharpening its management focus on cash flow generation by introducing a new bonus system for our senior management. Cash flow drivers – EBITDA, the change in working capital, and capital expenditure – are now a key factor in determining the amount of their variable remuneration. This helps to ensure there is adequate financial scope to implement our strategic growth targets.
Strict liquidity management allowed us to reduce our net debt by EUR 61 million compared with December 31, 2011, to EUR 326 million as of December 31, 2012, despite the fact that we distributed dividends of more than EUR 100 million to shareholders for 2011 for the first time.
We reduced the ratio of working capital to revenue to 9.3 percent as of the reporting date, a further clear reduction on the prior year's already very healthy level of 10.7 percent. As a result, our cash flow from operating activities increased from EUR 313 million last year to EUR 465 million.
The problems encountered during the integration of the GEA Food Solutions Segment in the spring of the past fiscal year led us to put together an experienced management team from GEA's ranks. Our strategic interest in and assessment of this business have not changed. I am confident that this segment will contribute to increasing the group's margins over the medium term.
GEA's shares performed well during the fiscal year. In the first four months, the share price continued to rise, buoyed by the recovery of the global stock markets, and reached EUR 26.28 – its highest point since November 2007 – on April 2, 2012. However, it then came under pressure because our earnings figures for the first quarter were below market expectations. The simultaneous downward trend on the global stock markets put additional pressure on the share price and led to a low of EUR 19.69 on June 4, 2012. Following the trend reversal on the stock markets that then began in the summer, GEA's shares closed at EUR 24.47 on December 28, up 12.0 percent on the year.
We significantly raised the profile of our Human Resources and Legal/Compliance functions within our organizational structure. These areas were given top-level representation by the Supervisory Board's appointment of an additional Executive Board member, Dr. Stephan Petri. Demographic change means that all companies are faced with the growing challenge of finding, motivating, developing, and retaining highly qualified, dedicated employees. As a global company, GEA intends to maintain and strengthen its position as an attractive employer in the competition to win the best minds. This will be a key focus area for Dr. Stephan Petri, who has also been appointed as GEA's Labor Relations Director.
According to the International Monetary Fund (IMF), global economic growth continued to slow down in 2012: The global economy grew by just 3.2 percent in 2012, after 5.2 percent in 2010 and 3.9 percent in 2011. In light of this development, we implemented a cost-cutting program in the middle of the year, despite our own healthy figures, in order to prepare the group for potential challenges.
At the same time, it was important for us to continue making crucial investments to secure our ongoing competitiveness. For example, since 2011 we have invested EUR 80 million in our new production site in Oelde, the world's most advanced separator plant, further increasing capacity and considerably improving efficiency and quality. Over the past two years, a total of more than EUR 170 million has been invested in Germany to ensure the highest production process standards are met here over the long term.
However, our most important investments are still the ones we make in our dedicated employees, including our young staff. In 2012, we increased our vocational trainee ratio to 6.2 percent – despite the fact that there was a slight rise in the number of employees. This means that we are continuing to train more people than we will actually need, in spite of the ongoing uncertainty regarding economic developments. In addition, we are supporting a number of projects designed to promote enthusiasm for technology among children and young people, in particular, so that we will be able to find the right employees to continue our innovative work well into the future.
As in previous years, we have resolved that a bonus will be paid to non-executive employees for fiscal year 2012 in recognition of their outstanding work, and set up the corresponding provisions for this. The total amount for the past fiscal year will once again be around EUR 5 million. On behalf of my colleagues on the Executive Board, I would like to take this opportunity to thank all our staff for their dedication and their outstanding achievements. I would also like to explicitly include the employee representatives in this.
Major steps towards resolving legacy issues were taken in 2012. After 13 years, we were able to settle the award proceedings arising from the acquisition of GEA by Metallgesellschaft in 1999 by issuing around 8.7 million shares to legacy shareholders. This development met with relief on the capital markets.
Final agreement was also reached with the buyer of the former plant engineering business (Lurgi) at the end of the year. This brings to an end GEA's liability for project-related risks from the Lurgi order portfolio, which had continued to apply despite the sale. Only tax risks and individual legal disputes from this former segment now remain. With respect to the remaining orders from the power plant business (Lentjes), which was also sold, the last plant is scheduled to be taken over by the customer in the first half of 2013.
Our planning for the current fiscal year 2013 assumes that demand in our sales markets will match the high levels seen in 2012. Assuming that there is no downturn in global economic growth, we expect moderate revenue growth in the current fiscal year. With respect to our cash flow drivers, we are aiming for a ratio to revenue of at least 8.0 percent in 2013, after 6.5 percent in the previous year.
The extent to which individual segments contribute to growth will depend primarily on developments in the customer industries concerned. The breakdown of sales by customer industry is likely to continue shifting slightly in favor of the food industry. From a regional perspective, we believe that the share accounted for by Western Europe will record a slight decline over the medium term, whereas our business in the North America and Asia/Pacific regions will grow in importance.
In terms of price quality, we also expect the market environment to be unchanged as against 2012. On this basis, we are aiming for an earnings target (EBITDA) of around EUR 700 million (previous year: approximately EUR 600 million).
We will continue our strategy of acquiring companies that provide GEA with an entry into new markets or that selectively expand our range of offerings in existing markets. This will enable us to provide our customers with a single-source solution for an ever-broader range of services.
The Executive Board and Supervisory Board will again propose a dividend of EUR 0.55 per share for 2012 to the Annual General Meeting. Due to the increase in the number of shares outstanding to 192.5 million, the dividend volume will increase by a further 4.7 percent to EUR 106 million. This means that, once again, the distribution to our shareholders is in line with our long-term target of one-third of the group's earnings
Sincerely,
Jürg Oleas CEO GEA Group Aktiengesellschaft
GEA Food Solutions
Thermoformers
Slicers
Bowl cutters
Spiral ovens
Milking equipment
Animal hygiene products
Automatic feeding systems
Barn equipment
Plate and shell-and-tube heat exchangers
Dry and wet cooling systems
Air cooled heat exchangers
Air conditioning and treatment systems
Separators
Decanters
Homogenizers
Valves
Spray dryers
Aseptic filling
Brewery & dairy systems
Pharma systems
Compressors
Ice machines
Packages and skids
Freezers
Dr. Helmut Schmale Jürg Oleas Niels Graugaard Dr. Stephan Petri
Jürg Oleas, a Swiss national born on December 8, 1957, in Quito, Ecuador, was appointed as Chairman of the Executive Board effective November 1, 2004. His period of office runs until December 31, 2013. Jürg Oleas has been a member of the Company's Executive Board since May 1, 2001. He heads the GEA Food Solutions, GEA Farm Technologies, and GEA Heat Exchangers segments.
Born on November 9, 1956, in Gelsenkirchen, Germany, Dr. Helmut Schmale became Chief Financial Officer on April 22, 2009, after joining the Executive Board on April 1, 2009. His period of office runs until March 31, 2015.
Niels Graugaard, born on February 4, 1947, in Copenhagen, Denmark, has been a member of the Executive Board since August 1, 2007. He heads the GEA Mechanical Equipment, GEA Process Engineering, and GEA Refrigeration Technologies segments. Niels Graugaard's period of office runs until July 31, 2013, but he will retire at the close of the Annual General Meeting on April 18, 2013. Markus Hüllmann, who currently heads the GEA Mechanical Equipment Segment, has been appointed to succeed him.
Born on February 11, 1964, in Traben-Trarbach, Germany, Dr. Stephan Petri has been the Executive Board member responsible for Human Resources, Legal/Compliance, and the group's other companies since June 1, 2012. In addition, he is the Labor Relations Director and Chief Compliance Officer. Dr. Stephan Petri has been appointed until May 31, 2015.
GEA Group Aktiengesellschaft is the management company for the group. Profit and loss transfer agreements are in place with key domestic subsidiaries. In addition, GEA Group Aktiengesellschaft performs central financial and liquidity management. It also provides its subsidiaries with services on the basis of service agreements.
Since the performance of the business, the economic situation, and the opportunities and risks associated with the future development of GEA Group Aktiengesellschaft do not differ from the performance of the business, the economic situation, and the opportunities and risks associated with the future development of the group, the management report of GEA Group Aktiengesellschaft has been combined with that of the group in accordance with section 315(3) of the Handelsgesetzbuch (HGB – German Commercial Code). In contrast to the consolidated IFRS financial statements, the annual financial statements are based on the HGB, supplemented by the Aktiengesetz (AktG – German Stock Corporation Act).
Market leadership: The units in GEA Group focus on their respective core technologies and are leaders in their sales markets worldwide.
Technology leadership: GEA Group consistently promotes a pronounced innovation culture and by so doing continuously renews its technological edge.
Earnings orientation: GEA Group considers profitability more important than volume and practices systematic portfolio management and strict cost control.
Calculated risks: Active risk management, stability based on diversification, and a focus on the markets of the future are binding principles for all GEA Group business units.
In fiscal year 2012, the group was organized into six operating segments. GEA Food Solutions (formerly GEA Convenience-Food Technologies), GEA Farm Technologies, and GEA Heat Exchangers were headed by Jürg Oleas, and GEA Mechanical Equipment, GEA Process Engineering, and GEA Refrigeration Technologies by Niels Graugaard.
The "Other" reporting segment comprises GEA Group Aktiengesellschaft and those companies with business activities that do not form part of the core business. In the main, this means service companies.
At an organizational level, GEA Group is structured into segments and headed by the listed company GEA Group Aktiengesellschaft. This company performs all essential management functions for the entire group. These comprise the group-wide management of strategic, human resources, legal, and tax matters, mergers & acquisitions, central financial management, group financial control, group accounting, investor and public relations, and internal audit.
As an international technology group, GEA Group focuses on the development and production of process technology and components for sophisticated and efficient production methods in a variety of end markets. It is a market and technology leader in the majority of its business areas. GEA Group is one of the largest suppliers of systems and components for the food processing industry and a wide range of other processing industries. It generates approximately 70 percent of its revenue in these business areas.
The group's enduring success is founded on a number of major global trends:
The group's operating segments are described in detail below:
GEA Food Solutions is a manufacturer of machinery for preparing, marinating, processing, cutting, and packaging meat, poultry, fish, cheese, and other foods. The segment's offering ranges from individual machines through to end-to-end production lines.
GEA Farm Technologies is one of the world's leading manufacturers of integrated product solutions for profitable milk production and livestock farming. The segment's combined expertise in the areas of milking and milk-cooling technology, automatic feeding systems, manure management systems, and barn equipment provides today's farmers with a complete range of products and solutions. Services and animal hygiene solutions round off its profile as a full-line systems provider for farms of all sizes. The segment's sales strategy is built upon a global network of specialist dealers and sales and service partners.
GEA Heat Exchangers provides products and systems for numerous areas of use, ranging from air conditioning systems to cooling towers. Boasting one of the largest portfolios of heat exchangers worldwide, the segment supplies optimal single-source solutions for a wide range of applications and also offers professional support for customers' project planning.
GEA Mechanical Equipment specializes in separators, decanters, valves, pumps, and homogenizers – high-quality process engineering components that ensure seamless processes and cost-effective production in almost all major areas of industry worldwide. At the same time, such equipment helps reduce customer production costs and protect the environment in a sustainable manner.
GEA Process Engineering specializes in the design and development of process solutions for the dairy, brewing, food, pharmaceutical, and chemical industries. The segment is an acknowledged market and technology leader in its business areas: liquid processing, concentration, industrial drying, powder processing and handling, and emission control.
GEA Refrigeration Technologies is a market leader in the field of industrial refrigeration technology. The segment develops, manufactures, and installs innovative key components and technical solutions for its customers. To ensure complete customer satisfaction, GEA Refrigeration Technologies also offers a broad range of maintenance and other services. Its product range comprises the following core components: reciprocating and screw compressors, valves, chillers, ice generators, and freezing systems.
Group reports are prepared with the aid of standard applications that are precisely tailored to the needs of GEA Group and subject to continuous enhancement. Standard reports prepared on the basis of unified data are used throughout the group to report net assets, financial position, and results of operations. These standard reports are supplemented by special analyses as well as analyses and reports related to specific businesses and strategic measures. Corporate planning – which covers the current budget plus a further two planning years – and risk reporting are both based on the same reporting and consolidation system that is used for reporting actual figures.
Routine reporting procedures are supplemented by committee meetings that provide members of group management with an opportunity to share information on strategic and operational issues. Meetings of the Executive Board of GEA Group Aktiengesellschaft and of the Extended Management Board, which comprises the Executive Board members and segment heads, are held once a month. The Executive Board meetings concentrate on issues of relevance to the group as a whole, whereas decisions with a direct impact on the segments are prepared in meetings of the Extended Management Board, before passing to the Executive Board for approval. Additionally, regular meetings are held with the individual segments. These are attended by the Executive Board member responsible for the relevant segment along with the CFO, segment managers, and selected heads of department from the group management company. Such meetings entail detailed discussions of the net assets, financial position, results of operations, and business development of the segment concerned. Separate meetings for each segment are also held to discuss earnings for the latest fiscal year and the business plan for the following years.
GEA Group's overriding goals are to secure a sustainable increase in enterprise value and to achieve strategic growth. In order to create the requisite financial scope for this and to focus the group even more closely on cash flow generation, a new key performance indicator – the "cash flow driver margin" – has been introduced and also incorporated into the new bonus system. This is a simplified cash flow indicator (EBITDA minus capital expenditures for property, plant and equipment, and intangible assets, and change in working capital) and is calculated as a ratio to revenue.
The return on capital employed (ROCE) provides a further key performance indicator for measuring the value added that is generated by the group's operating activities. It therefore figures in both the group's regular reporting activities and the calculation of variable, performance-related elements of management remuneration. In order to enhance the implementation of ROCE, as the primary performance indicator, at an operational level, the ROCE drivers EBIT and EBIT margin, working capital, and the ratio of working capital to revenue are also monitored continuously. When calculating capital employed, effects arising from the acquisition of the former GEA AG by the former Metallgesellschaft AG in 1999 are not taken into account. Furthermore, as of 2011, the key performance indicators are also presented after adjustment for purchase price allocation effects. As a component of capital employed, capital expenditure is managed using a multilevel approval process.
The ratio of the expected ROCE to the weighted average cost of capital (WACC) is a key criterion for investment and portfolio decisions. The performance of these key indicators is presented in section 10 ("Segment reporting") of the notes to the consolidated financial statements. The group calculates WACC on the basis of the following factors: the cost of equity, based on the return yielded by an alternative, risk-free investment plus a market risk premium; actual borrowing costs; and the rate used to discount pension obligations.
A careful analysis of order intake and revenue, broken down by region and customer industry, is conducted on a monthly basis in order to identify emerging market trends as early as possible.
To respond rapidly to foreseeable developments, the segments again returned regularly the key performance indicators – order intake, revenue, and EBIT forecasts – in 2012.
Resources are allocated within the group primarily on the basis of the strategic and medium-term planning. This provides the framework for preparing key decisions on core technologies, sales markets, and other strategically important variables.
Acquisitions and expansion investments are assessed not only on the basis of key performance indicators showing potential returns, but also in terms of their importance for achieving the group's strategic goals. The key economic criterion for evaluating rationalization and expansion investments is the expected return compared with the cost of capital. The payback period is also calculated as an additional benchmark for assessing the risk arising from changing economic conditions. Working capital management begins before an order is accepted with the payment terms that are offered or negotiated.
In addition to general management with the aid of the key performance indicators described above, the group has established individual assessment and approval procedures for customer and investment projects, utilizing specific thresholds for the different hierarchy levels. Customer projects are evaluated primarily on the basis of their expected margins (gross margin on a fully absorbed cost basis) and of their commercial and contractual risk profile, with a particular emphasis on cash flow. Project management is also backed up by extensive project control not only at operating unit level but also – depending on the size of the project involved – at segment or group level in the form of a separate reporting system for major contracts. In many cases, the findings gained from this analysis yield suggestions for improving internal processes, which can be used in subsequent projects. At group level, the analysis focuses on deviations between the calculated and the expected or realized contract margin.
Compliance – which is defined as measures to ensure adherence to legal, statutory, and internal requirements, as well as their observance by group companies – is a key management and supervisory task at GEA Group. The Company therefore established a group-wide compliance organization many years ago. This is headed by the Chief Compliance Officer, who reports to the Supervisory Board's Audit Committee. The Chief Compliance Officer is assisted by the Corporate Compliance Officer. In addition, a Segment Compliance Officer has been appointed for each segment and a Company Compliance Manager for each operating company. A Compliance Committee was also established in 2010 to advise the Chief Compliance Officer. GEA Group's extensive compliance program is rounded off by classroom and web-based training sessions for the group employees responsible for compliance. Further information on the issue of compliance can be found in the Corporate Governance Report (see page 67 ff.).
The performance of the key value drivers is also reflected in managers' remuneration. Variable, performance-related salary components are determined on the basis of the cash flow driver margin and ROCE. In addition, performance-related remuneration depends on the achievement of personal goals, of which at least one must be measurable in financial terms. A further component of management and Executive Board remuneration is based on the performance of GEA's share price in relation to a benchmark index, the STOXX® Europe TMI Industrial Engineering (TMI IE).
GEA Group companies develop and produce components, machines, systems, and plants primarily on a make-to-order basis for a broad range of industries. The focus is on the food and beverage sectors and resource-friendly power generation and use. With its global engineering and production network, the group is able to provide customers with solutions that are precisely tailored to their individual requirements. Customers also benefit from our flexible production concepts, which ensure fast throughput and low costs, and minimize the capital tied up.
Given the ongoing uncertainty regarding the global financial and economic situation in 2012, GEA launched a comprehensive cost-cutting program back in the middle of the year. This cost-cutting program also included measures designed to increase the time frame for major investments that had already been scheduled or to put back forthcoming investment decisions. In view of the danger of a global recession, the objective here was to avoid creating overcapacity.
The group's largest investment project in fiscal year 2012 was implemented by the GEA Mechanical Equipment Segment. As part of the "Global Production Concept" approved in 2010, the segment constructed a new separator plant at its headquarters in Oelde/Germany. Designed in line with the latest production technology and environmental considerations, this new facility aims to achieve the following strategic objectives: to strengthen the segment's leading position in production technology, to reduce process and production costs, and to shorten throughput times per unit of production. The new plant in Oelde comprises two production buildings equipped with the relevant building systems and machinery. The project was implemented without interrupting normal operations. Key parts of the new facility were commissioned in 2012.
In 2012 the "Global Production Concept" also included key investments at the GEA Mechanical Equipment Segment to increase capacity at its location in Bengaluru/India and to establish a new location in Wuqing/China.
As in previous years, GEA is continuing to expand its product portfolio and hence strengthen its regional market coverage on the back of selected investments and acquisitions. This strategy also provides it with the ability to hedge against exchange rate fluctuations and to improve its cost structures in the areas of production, purchasing, and logistics. The group's acquisitions in fiscal year 2012 are presented in detail on page 56 f. and in section 5 (page 132 ff.) of the notes to the consolidated financial statements.
In today's global markets, an engineering corporation such as GEA needs to show an enduring commitment to permanently enhancing its own processes and technologies. It is this culture of innovation that helps secure its continued commercial success. In addition to pursuing its own intensive research and development (R&D) activities, the group also encourages cooperative research projects with its customers and suppliers.
At GEA, R&D activities are conducted locally by the individual segments and business units. This also facilitates direct cooperation with customers. The potential drawbacks of a decentralized R&D structure are avoided by ensuring cooperation between individual segments and a global exchange of knowledge throughout the group.
The culture of innovation at GEA is embodied in a uniform global ideas and improvement management system and three cross-segment innovation competitions.
The GEA Innovation Contest, which has been running with great success for a number of years now, provides a showcase for development projects that are potentially less than twelve months away from market launch. The winners at the segment level get to present their projects during a day at the annual international meeting of the group's senior managers. The three segments that present the most promising developments in terms of market opportunities, earnings potential, chances of realization, and level of innovation are awarded total prize money of EUR 1.5 million to boost their development budgets.
The overall winner in 2012 was the 24/7 PMO Valve™ from the GEA Mechanical Equipment Segment, a double-seat valve for nonstop operation. It is the only double-seat valve to hold U.S. Food and Drug Administration (FDA) authorization for cleaning during simultaneous operation. This means that one line may be cleaned while product is in the other line, although both lines are connected to the same double-seat valve. The result is a significant improvement in productivity, since with conventional technology parts of the line have to be shut down for two to three hours a day for cleaning purposes. A new kind of freezer from the GEA Refrigeration Technologies Segment took second place in the GEA Innovation Contest 2012. This uses an exceptionally rapid and gentle computer-simulated process to flash-freeze products such as fruit. This process minimizes the danger of water loss from the fruit and significantly reduces the energy required for freezing. The winner of the third prize shows that enhancements to production processes can also attract awards. In this instance, the honors went to improved orbital welding process, developed and patented in South Africa by the GEA Heat Exchangers Segment.
The GEA Development Contest is designed to promote promising new product ideas that are at an early stage of the development process and that still require up to three years until market launch. This competition, too, involves group-wide presentation events and offers prize money of varying amounts. In 2012, the first prize went to the GEA Refrigeration Technologies Segment for a low-maintenance and environmentally friendly compressor for deep-freeze equipment for use in supermarkets, for example. Second prize went to a GEA Mechanical Engineering development team for a highly innovative sterile separator, and third prize to a GEA Process Equipment development team for a project to boost coffee extraction yields.
The GEA Investment Fund is the third group-wide innovation competition. It is aimed at product ideas that are often still at an embryonic stage, and for which feasibility studies are available but as yet no prototypes. It is chiefly directed at projects involving cooperation between individual group segments or with external companies and organizations.
In 2012, GEA also successfully took part once again in external competitions organized by industry associations, customers, and trade fairs. Listed below are the events at which GEA won two prizes each.
Two new products from GEA were awarded prizes by the German agricultural society Deutsche Landwirtschafts-Gesellschaft (DLG) at the "EuroTier" trade fair: GEA DairyProQ, the world's first system for continuous automatic milking with different milking parlors, won a gold medal; and GEA DairyProView, the first software solution to provide a comprehensive overview of dairy farm processes, was awarded a silver medal. In addition, GEA DairyProQ won the "2013 Innovation of the Year" prize, awarded by the publisher Deutscher Landwirtschaftsverlag (dlv).
At the ACHEMA 2012 trade fair, GEA won the Innovation Award in the "Mechanical Processes" category with a new decanter from the ecoforce line, and in the "Plant Engineering and Processing" category with the new COMPACRYST forcedcirculation crystallizer.
At the Anuga FoodTec fair, two entries from GEA were honored with the Dairy Technology Award 2012: a "dynamic recipe" for new cheesemaking plants, and the "prolong" process for ESL milk (milk with an extended shelf life), featuring double bacteria removal.
Award-winning innovations made by GEA
Two of the 2012 IChemE Awards presented by the Institution of Chemical Engineers – the "2012 Award for Outstanding Achievement in Chemical and Process Engineering" and the "Chemical Engineering Project of the Year Award" – went to a consortium consisting of GEA, GlaxoSmithKline, Siemens, Sagentia, and three universities.
In fiscal year 2012, direct expenses for research and development rose to EUR 96.5 million, an increase of 16.1 percent on the previous year's expenditure of EUR 83.1 million. These figures also include refunded expenses (contract costs), which are reported in the production costs and which totaled EUR 13.4 million (previous year: EUR 12.3 million). The R&D ratio amounted to a total of 1.7 percent of revenue (previous year: 1.5 percent).
| R&D ratio (as % of revenue) | 1.5 | 1.3 | – | 1.7 | 1.5 | – |
|---|---|---|---|---|---|---|
| Total R&D expenses | 23.7 | 21.2 | 11.6 | 96.5 | 83.1 | 16.1 |
| Non-refunded R&D expenses | 20.4 | 18.6 | 9.2 | 83.0 | 70.8 | 17.2 |
| Refunded expenses (contract costs) | 3.3 | 2.6 | 28.4 | 13.4 | 12.3 | 9.4 |
| Research and development (R&D) expenses (EUR million) |
Q4 2012 |
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In the past fiscal year, GEA Group companies filed applications for 96 (previous year: 79) new patents. In particular, this growth resulted from the increased number of patents filed by the GEA Farm Technologies, GEA Food Solutions, and GEA Refrigeration Technologies segments.
GEA is continuing to focus on strategic procurement and on pooling orders so as to ensure long-term price stability and reliability on the part of our main suppliers. These measures also extend to hedging and risk diversification, which have helped to reduce price fluctuations, particularly with regard to the procurement of raw materials and semifinished products.
Procurement at GEA Group is conducted on a cross-segment basis, with the purchase of raw materials, components, semifinished products, and services being pooled both by region and by commodity groups. To achieve this goal, the GEA Procurement Council was set up in 2012 with the aim of consolidating the strategic procurement operations by individual segments. Teams specializing in specific raw materials cooperate on a cross-segment basis in order to make the best possible use of procurement synergies within GEA Group.
GEA is continuously expanding and intensifying its procurement activities in emerging economies. The group has now built up a reliable supplier base in these countries and is increasingly exploiting the cost benefits offered by these markets.
GEA Group's total purchasing volume amounted to approximately EUR 3.0 billion in 2012. Prices for raw materials, and in particular for metals, remained relatively stable in 2012.
A key focus was on providing further training for employees working in procurement. Staff from GEA's procurement divisions worldwide took part in "best-in-class" training programs.
The year 2012 also saw successful implementation of GEA Class, a group-wide classification system designed to provide more meaningful procurement data and establish a unified procurement system for materials and services. This system is based on eCl@ss, an international standard for data transfer between suppliers and customers that is used in 77 countries to classify a wide range of products, materials, and services. GEA Class was developed on the basis of this standard system and supplemented by the addition of a number of extra categories, resulting in a custom solution that enables the transparent and uniform classification of products and suppliers. In the future, GEA Class will provide detailed cross-segment analyses of procurement prices and conditions.
In fiscal year 2012, discontinued operations once again had no material impact on group earnings. As in previous years, this area relates to the risks remaining from the sale of the plant engineering activities, the continued process of winding-up the business operations of Ruhr-Zink, and individual legal disputes.
An agreement secured with the buyer of Lurgi in fiscal year 2012 released GEA Group from the remaining project-related risks deriving from the Lurgi order portfolio as well as from certain other risks related to the sale. Risks remain with regard to the former business operations of Lurgi in relation to individual legal disputes and tax issues.
All of the orders transferred with the sale of Lentjes Group to the initial buyer and then to its successor have been executed. A number of plants are still under warranty, and two plants are still subject to legal disputes. In addition, one order that did not form part of the sale is still being executed. This plant is scheduled to be handed over to the customer in the first half of 2013.
As regards to the discontinued business operations of Ruhr-Zink, the plan to rehabilitate and secure the site – along with the relevant contract under public law with the appropriate environmental agency (District of Recklinghausen) – is now in the last phase of the approval process and will be finalized in 2013. Meanwhile, Ruhr-Zink is still in negotiation with the town of Datteln regarding the subsequent use of the company's former production site.
Lasting success goes hand in hand with responsible corporate behavior. As an international technology group and one of the world's largest suppliers of process technology to the food industry, GEA is acutely aware of its responsibility with respect to the economy, society, and the environment. One of its prime enterprise goals is therefore to supply solutions that combine a high level of efficiency and social benefit with assisting our customers to protect the environment.
Sustainability for GEA means securing its future viability on the basis of a stable economic and social foundation and an intact environment. Sustainability management also serves to limit economic, social, and reputational risks to the group. Major global trends such as sustained population growth, increasing urbanization, and advancing climate change present the world with mounting challenges. In the future, people will continue to require an adequate supply of food, energy, and pharmaceutical products, all of which will have to be produced in a manner that helps to conserve precious resources. GEA has its own companies and production sites in the world's growth regions and directly supplies local markets. Its product portfolio of technical components, machinery, and systems provides key solutions to these challenges. At the same time, the Company regards its commitment to corporate social responsibility (CSR) as an investment in the economy, society, and the environment, and hence in its own future – in line with the group motto "engineering for a better world."
Society
GEA aims to safeguard the interests of its shareholders, customers, and employees for the long-term future, and to fulfill its responsibility toward society, by strengthening its international competitiveness and boosting its business performance. The group pursues this objective first and foremost by being a dependable partner with an attractive and sustainable product line to its customers, as an exemplary employer to its global workforce of approximately 24,500 employees, as a taxpayer, and as a supporter of charitable projects.
Although energy consumption and emissions during production are relatively low in the engineering sector, GEA regularly examines all areas for opportunities to improve efficiency in this sphere as well. The group's workforce provides a vital contribution to this process via the ideas and improvement management system.
The group not only ensures that its own processes along the value chain are based on ecological principles, but also helps its customers to protect the environment by providing efficient products and process solutions. As a rule, these customers employ very energy-intensive technologies and processes, with the result that potential energy savings and reductions in emissions and waste now play an increasingly significant role in their capital investment decisions. For many years now, GEA solutions have served as the benchmark for the successful combination of economic and ecological factors (see page 29 ff.).
The production of processed foods and beverages is one of the world's most stable growth markets, and one that can also be expected to see continuous growth over the coming decades. As a technology leader, GEA Group supplies this market with machinery, components, systems, and plant that guarantee safe process management and the highest standards of efficiency and hygiene.
What is more, the world's demand for energy is continuing to grow. GEA is a leading international supplier of power plant cooling and thermal engineering systems, providing its customers with technology that not only delivers an attractive price-performance ratio but also helps protect the environment by making sparing use of resources.
Detailed information on GEA's basic strategic principles, its segment structure, and its business orientation can be found in the chapters entitled "Organization and Structure" and "Business Activities" (see page 9 ff.).
GEA places the highest priority on transparent and responsible corporate governance and management aimed at long-term value enhancement. Its activities are based on recognized corporate governance principles and comply fully with the recommendations of the German Corporate Governance Code. In addition, GEA Group has an extensive compliance organization.
A detailed presentation of the topic of corporate governance can be found in the Corporate Governance Report included in this Annual Report (see page 67 ff.).
Together with its European Works Council, GEA Group Aktiengesellschaft issued a code of conduct in March 2006, which formulate a binding set of values, principles, and modes of behavior that are to governing corporate conduct at the GEA group. With these ethical and legal standards, GEA is making a clear commitment to free and open world trade as a vital precondition for continued global economic growth. Wherever possible, the group supports measures designed to combat underdevelopment in the countries of the Third World and fully accepts its corporate social responsibility. Likewise, GEA welcomes the principles of the UN Global Compact and, as part of the process of progressive internationalization, endorses all internal and external corporate social responsibility (CSR) initiatives. The group pledges to respect human rights and the core labor standards developed by the International Labour Organization (ILO). In addition, GEA fully complies with the OECD guidelines for multinational enterprises. In order to ensure the greatest possible transparency, GEA Group has also published its Global Business Conduct Policy on the company website (http://www.gea.com/en/investoren/corporate_governance.html).
Compliance is accorded the highest priority at GEA. All managers and employees must comply with the law and the relevant guidelines. GEA has drawn up detailed guidelines with binding principles for conduct, including, in particular, an anticorruption guideline. Regular training measures and monitoring help to provide early warning of, or prevent, improper behavior.
Further information on the issue of compliance can be found in the Corporate Governance Report included in this Annual Report (see page 67 ff.).
In addition to the compliance organization described in the separate Corporate Governance Report, there are also areas within group management dedicated to diversity, company values, and crisis management. Moreover, an environment, health, and safety (EHS) organization has been established over the period since 2010.
At GEA, we are convinced that much more can be achieved by working with, rather than merely alongside, one another. In order to establish this kind of corporate culture, GEA has defined clear principles which managers must follow, and has created the core competencies necessary for this.
All our managers are committed to information exchange and cooperation, strengthening the GEA group as a whole. This, too, has been a key factor in cementing GEA's position as one of the most successful engineering companies worldwide – an achievement from which each segment and every single employee profits.
Unexpected incidents such as natural disasters or terrorist attacks can also have extreme consequences for GEA. Such incidents can also jeopardize the safety, health, and even the lives of group employees. The topic of employee safety is presented in detail on page 22 f.
In order to prepare as effectively as possible for such major corporate risks, GEA Group has implemented a comprehensive safety management strategy at all levels of the company. The group's Major Incident Manual provides clearly defined criteria for all employees regarding the detection, evaluation, and reporting of critical incidents. This manual also contains measures and detailed contingency plans designed to ensure a rapid and appropriate response in an emergency, and names qualified contact persons within GEA Group.
GEA fully accepts its obligation to make a contribution towards the sustainable development of society, both within the Company, as a responsible employer, and in the wider social context.
GEA's vision and its corporate values are the mainstays of its management philosophy. They are likewise the key elements of its common corporate identity.
Detailed information on the topics of personnel marketing and human resources development at GEA can be found in the "Employees" chapter (see page 58 ff.).
GEA operates in a challenging international market environment with a large number of players who influence the Company in many different ways – ranging from customers, competitors, and employees down to the government and society in general. Companies can rise to the many challenges associated with this culturally extremely diverse environment
Fair Company label: widely recognized seal of quality for GEA
by being aware of diversity and by actively creating it within its own ranks. Diversity is defined as the composition of the workforce in terms of nationality, gender, age, and qualifications. GEA recognizes that diversity is a strategic success factor – that diversity is strength.
As a consequence, GEA has instituted corporate diversity management procedures at group management level with the aim of making diversity a firmly established part of its corporate culture and hence support the business activities of all its segments.
Through the creation of a diversity organization in all segments, diversity management is now institutionalized at the group. Our international team of diversity managers, which comprises women and men from a very wide range of functions, aims to represent the spirit of diversity on all levels of the group.
In order to promote diversity on as many levels as possible and thereby create, for example, an attractive working environment, GEA has also resolved to implement greater flexibility with regard to working hours, and to increase mobility within the Company.
Diversity criteria are included as a matter of course when appointing personnel. One of the objectives is to recruit more women to GEA and to involve a greater number of talented female employees in internal employee development initiatives. Furthermore, diversity management is one of the key ways in which employee potential and talent can be reliably identified. In line with this, the entire pool of future executives is to be developed in accordance with the GEA diversity criteria, as described above.
In order to be able to measure achievements and progress in the area of diversity, GEA also introduced a catalog of diversity performance indicators in mid-2012, taking the situation in 2012 as the benchmark. Applied on the group management, segment, and company level, these will serve to determine the degree to which targets are met and the success of diversity measures, which must always be evaluated on the basis of three criteria: performance, potential, and diversity.
In a clear affirmation of diversity within its own working environment, GEA Group has already ratified eight European diversity charters. This clearly demonstrates its commitment to promoting diversity and equal opportunity in the workplace, irrespective of, for example, nationality, gender, age, disability, or religion. A diversity charter is a document signed by companies and public institutions on a voluntary basis.
Because of its importance to corporate culture, the topic of diversity will be increasingly woven into GEA Group's company values. In this respect, diversity is a force for change, promoting greater pluralism in thought and action.
Over the past two years, GEA Group has formulated its company values – "excellence", "responsibility", "integrity", "passion", and "GEA-versity" – and communicated them in a series of interactive workshops worldwide. This process has involved all GEA Group employees in a constructive dialog.
With these company values, GEA has created an orientation system and frame of reference that provide managers and employees with a shared understanding and guidelines as to how to behave
at an individual level, particularly in ambiguous situations. This gives managers and employees at GEA greater security in their dealings not only with one another but also with the outside world. Ultimately, the company values should also boost levels of efficiency and professionalism in all GEA segments and companies.
GEA has implemented a host of measures to help employees reconcile the demands of work and family life, e.g., company-organized childcare, flexible working hours, and opportunities to work while on the move. In the District of Unna/Germany, for example, the GEA Farm Technologies Segment has been commended for best practice in its policy toward employees returning to work from parental leave.
In order to work productively and develop their potential to the full, employees need a pleasant and safe working environment. The requirement to offer all employees safe conditions in the workplace is likewise enshrined in the code of conduct, which obligates our managers to guarantee the best possible health and safety conditions in every GEA Group workplace worldwide. Even in countries with less stringent safety requirements, locations are still subject to GEA Group's higher standards. In addition, group employees regularly receive first-aid training, thereby ensuring that competent help is rapidly available in an emergency.
GEA Safety Management also provides a comprehensive service for all employees traveling worldwide on behalf of the group. This includes detailed travel and safety information for every region of the world. Should, nonetheless, a group employee become caught up in an emergency situation, he or she has access to the 24-hour GEA Group Security and Support Hotline. If necessary, this service can also rapidly organize personal protection for any employee and at any location worldwide. The Medical Support Service Hotline provides assistance with health-related issues and, in the event of illness, provides appropriate medical care or even transport back home.
GEA also maintains a continuously updated database with the locations of all employees on business trips worldwide. In the event of a regional crisis, this so-called Travel Tracker enables it to respond rapidly and provide employees with active assistance.
Employees who suddenly get into difficulties, following, for example, a severe accident or a sudden illness, require rapid and unbureaucratic financial assistance. In a group-wide agreement with the Works Council, GEA has pledged to provide this form of assistance in such cases. Employees affected in this way, and also the families of employees who suddenly die, can apply to the GEA Aid Commission.
GEA wants all its employees to be able to enjoy their well-deserved retirement. This also includes the financial security to enjoy an appropriate standard of living. In many countries, however, the impact of demographic change, increased life expectancy, and high unemployment is placing a growing financial burden on the state pension system. Private and, especially, company pension plans are playing an increasingly significant role in making up the shortfall. The Company therefore provides an efficient pension plan for all employees.
The company pension plan for GEA managers is, like the remuneration system, based on a mixture of fixed components and performance-related parameters.
GEA Group also offers an attractive performance-related pension plan for employees below senior management level. In Germany, for example, this is based on an employee-financed deferred compensation plan. Employees can opt not to be paid out part of their salary, instead putting the money toward their pension. If an employee chooses this option, GEA Group tops up the basic employee contribution with an additional employer (company-financed, performance-related) contribution.
A health-conscious workforce is important for the long-term, sustainable development of a company, because healthy employees are more productive, more reliable, and more motivated. GEA therefore supports its employees with a variety of active healthcare offerings.
This program to promote employee health comprises a broad range of measures to prevent illness. These include cancer screening, seminars on how to give up smoking, partnerships with fitness studios, training to improve driving safety, instruction on ergonomics in the workplace, nutritional advice, and the opportunity to participate in company runs. For example, the GEA Farm Technologies Segment has been awarded the "Deutscher Unternehmenspreis Gesundheit" (German Company Award for Health) in recognition of its healthcare offering for employees.
For the under-50s among GEA Group's top-level executives, there is the special option of a comprehensive health checkup every three years. For the over-50s, this service is available every two years.
Programs held in special development and assessment centers, and with the assistance of external coaches, provide employees with a range of information on the beneficial effects of exercise, greater fitness, and a healthy diet. Where possible, the theoretical information is supplemented by practical exercises. All preventive measures are based on the actual living and working environments of the employees concerned. In addition, the group also offers individual coaching with fitness tests or health checks.
GEAktiv is an online portal established by GEA to help employees meet up for joint sporting activities. Hosted in the GEA intranet, it enables people to find training partners in their specific sporting activity or to post their own events. GEAktiv already covers more than 30 different sports and is growing all the time.
As a global enterprise, GEA is also involved in a host of projects outside its own companies, where support is given directly to local people.
GEA focuses particularly on projects with children and adolescents, including schemes to introduce them as early as possible to the fascinating world of engineering. For visitors to the "Stöbertage" (Exploration Days) at the GEA Mechanical Equipment Segment, this starts even before they reach school age. Groups of kindergarten children are invited along to learn about tools and machinery, and to
The "Stöber Tage" at GEA are a fun experience for kids.
discover the world of engineering. At the same time, GEA also supports a variety of establishments such as schools and kindergartens.
By easing the transition between school and the world of work, and by encouraging school students to think about their future vocation or program of study, cooperation between schools and industry helps ensure that companies – especially in technical fields – are able to recruit a sufficient supply of new labor. This is why GEA is involved in the School-Business Cooperation Network. This covers activities such as information events at participating schools, assistance for students with job applications, and joint projects between school students and the Company's vocational trainees. In addition, the cooperation network is involved in staging a special exhibition of works by students and in organizing the program to mark the opening of the art exhibition "Family and Friends" in Bochum.
In future years, GEA Group will continue to need creative young people with a passion for science and engineering. In order to convince students of the variety and appeal of a career in engineering and to show them the career opportunities on offer, GEA has joined forces with other companies in a variety of projects, including the "Technik ist Zukunft" (Technology is the Future) initiative. In addition to the Company's financial support for the initiative, its employees go to meet potential recruits face to face at the various "Technik ist Zukunft" action days that are held at schools. Here, students can learn from their graphic accounts about the work of the group, the products and services it offers, and the career openings available. GEA also regularly invites groups of school students for tours of group locations, offering them an in-depth view of production operations and the daily working routine at GEA Group.
All GEA Group segments and the companies belonging to them participate in the German Girls' Day, an initiative designed to encourage girls from year five onward to think about their future career options. It provides them with an opportunity to find out more about a variety of professions in science and engineering. This mix of open day and detailed information event offers participants a hands-on encounter with technology and is intended to stimulate an interest in an engineering career at an early age.
True to its principles of diversity management, GEA is also helping to improve the economic situation of disadvantaged members of society in South Africa. As part of this initiative, the group has been involved since 2009 in a program to provide work opportunities for young black people with disabilities.
Participants receive job training from specially trained instructors and also have the opportunity to earn money at the same time. The trainees, accompanied by a mentor, are employed for a one-year training period. Regular monitoring ensures that the program's quality standards are being met. Graduates of the program receive the national certificate in Business Administration Services and are regularly taken on by GEA Group.
The American Cancer Society provides support for cancer sufferers and their families. One of the society's regular fund-raising events is the Relay for Life. For many years now, a team from GEA has taken part in this run. GEA pays the entry fee and provides a donation to support the team. In addition, group employees also donate to this cause. The money is largely raised on so-called Blue Jeans Days, when normal dress code is suspended. Anyone wishing to come to work in jeans and sneakers donates five dollars.
GEA employees in the U.S.A. support the American Cancer Society
GEA Group's "Kunst in der Rotunde" (Art in the Rotunda) exhibition program has been enlivening the art world in the Ruhr region since August 2000. The program derives its name from the glass rotunda at GEA's administrative building in Bochum. It offers an ideal forum for painting, graphic art, sculpture, found objects, photography, and installations.
Even now that group management has relocated to Düsseldorf, GEA still organizes several exhibitions a year in the GEA Center Bochum. A major selection criterion is whether an artist has a connection to the Ruhr region. Each exhibition features, as a rule, two or three artists, and kicks off with a vernissage and an introductory presentation of the works. An accompanying booklet is also published.
Works of art purchased from previous exhibitions now adorn the corridors, offices, and conference rooms of a number of GEA locations. GEA also has a scheme enabling employees to rent out works from this collection and also to buy them at the end of the rental period.
Closely connected to "Kunst in der Rotunde" is a special exhibition regularly held in the summer by the name of "Family and Friends." This program is intended to offer all GEA employees with a creative bent, along with their family and friends, a platform to present the fruits of their artistic labors. The "Family and Friends" exhibitions have also been held since the year 2000. Over the years, they have become increasingly popular among the global GEA family and are now a firm fixture in the events calendar.
Sustainability in the ecological sense is based on the principle of protecting nature and conserving its limited resources. GEA's innovative products make an important contribution to this cause. In the world of process technology and engineering, the days are long gone when economics and ecology were conflicting goals. Our customers can help promote climate protection by using machinery, components, systems, and plant produced by the group. Equally, environmental protection is accorded its proper status within the Company.
GEA's main environmental objectives are saving energy, optimizing plant design, and conserving resources.
At GEA, all key environmental parameters are monitored locally and their significance and impact on products and services analyzed to identify ways of improvement. Monitored environmental parameters include:
Measures taken at the group's production operations to protect the environment frequently exceed the statutory requirements – as confirmed by the environmental certifications obtained in accordance with DIN EN ISO 14001. In-process environmental protection, resource conservation, and comprehensive health and safety measures are all standard practice throughout the group. This means, for example, that production waste is sorted and, wherever possible, recycled. Any further environmental impact is largely avoided through the use of exhaust gas filters and collecting vessels, and through the treatment and recycling of process liquids.
Examples of the group's efforts to optimize the environmental performance of its production activities include the project at the GEA Mechanical Equipment Segment's main plant in Oelde/Germany. This is currently the largest investment project within the group and is described earlier in the chapter entitled "Engineering, Production, and Investment" (see page 13). Thanks to its emphasis on conserving resources, the project received financial support in the form of a low-interest loan, which was awarded under Kreditanstalt für Wiederaufbau (KfW)'s Environmental and Efficiency Program, following approval by the Federal Ministry for the Environment and the Federal Ministry of Economics. The project comprises a range of integrated environmental measures designed to promote efficient use of energy as well as waste elimination, air pollution control, and noise reduction. For example, the waste heat produced during power generation at the plant's own combined heat and power plant is used to heat the production buildings. In addition, installation of a centralized cooling lubricant and chip disposal
The new separator plant in Oelde
system will more than halve water consumption and wastewater production. All in all, this investment will reduce energy consumption by around one-third per unit of production.
As in previous years, GEA Group took part in the Carbon Disclosure Project (CDP) survey in 2012. CDP is an independent, not-for-profit organization currently representing more than 650 institutional investors. Each year, it gathers information on the greenhouse gas emissions of major listed corporations and their strategies to combat climate change. The results are then made available to current and potential investors. In the survey, GEA Group also provided an assessment of the opportunities and risks related to climate change, and information on the measures it employs to protect the climate. From GEA's perspective, any potential risks arising from a shift in demand will at the very least be offset by equally large opportunities to supply customers with energy-efficient solutions for their production processes from our wide range of products.
As yet, there is no uniform system in place throughout the group to measure CO2 emissions. However, CO2 emissions are measured in the segments on the basis of national and international standards such as ISO 14001 or the CO2 Saver Certificate.
The Blue Competence sustainability initiative GEA Group has been an alliance member of Blue Competence – an initiative of the German Engineering Federation (VDMA) – since 2012. The members of the initiative have pledged to develop and promote sustainable engineering solutions in accordance with the demands of economy, ecology, and society.
In this way, they are also assuming responsibility for prosperity, education, safety, and nature. The industry associations, organizations, and companies involved in this initiative – including GEA – are also factoring in the consequences of urbanization and globalization into their strategies.
GEA Refrigeration Technologies joined the COOL-SAVE energy conservation project in 2012. Founded as part of the European-wide Intelligent Energy Europe (IEE) program, this project aims to increase the energy efficiency of refrigeration systems used in the food industry. This is being done by collecting
data at the refrigeration plants of selected food producers that will serve as a benchmark in developing best-practice measures to improve the efficiency of refrigeration systems. Like the IEE program, the COOL-SAVE project is intended to boost the competitiveness of climate-friendly and sustainable energy technology. A total of nine companies from six EU member states are partners in the COOL-SAVE project.
In addition to sound economic grounds, there were also strong environmental reasons behind GEA's decision to upgrade large portions of its vehicle fleet. The group has opted for a more environmentally friendly model as its standard, particularly for service, pool, and high-usage vehicles. Efficiency and safety were key selection criteria for the new model. Three different variants of engines and features with average CO2 emissions of 120 g/km have been defined for the selected vehicle type. This will not only save fuel but also further reduce CO2 emissions compared to the current fleet.
From 2013 onward, new fleet management software means that key data on parameters such as kilometers driven, fuel consumption, and the related CO2 emissions for each vehicle can be recorded on a central basis. This system is being introduced initially in Germany, where the largest share of the vehicle fleet is in operation, creating the basis for ecological fleet management.
Energy consumption is an increasingly important factor in the total cost of ownership of a machine or item of equipment. GEA believes that global climate change creates major potential for the use of its energy-efficient products.
Water is a key factor in the sustainability of GEA's products. Around one-fifth of consolidated revenue is generated by products that are related in some way to the careful management of this precious resource. These include bottling systems that require substantially less water for cleaning purposes, air-cooled condensers whose closed-circuit design prevents water loss, efficient generator coolers, and separators and decanters for drinking water production or for wastewater treatment plants.
The following examples show the savings potential for a variety of resources that is provided by machinery, components, systems, and plant from GEA Group.
TiroBox Plus from GEA Food Solutions is an extremely ecological packaging solution based on a cardboard-plastic film laminate. It not only meets all of today's requirements with regard to functionality and performance but also enables a high-grade presentation of the end product. The new packaging material is based on a simple construction of cardboard on the outside with a plastic film on the inside, with the two being separated by a layer of air. The cardboard can be fully printed. After use, the cardboard and the plastic film are disposed
The TiroBox Plus packaging system
of separately. This solution relieves the environment in two ways: on the one hand, the film is relatively thin, while on the other over 60 percent of the packaging is made of renewable or reusable materials.
GEA presented the XScrew, its new screw separator for energy-efficient manure management, at EuroTier, the world's largest trade fair for animal husbandry and management. Environmental and cost reasons mean that professional manure management is becoming increasingly important. Effective separation of liquid and dry matter enables the sustainable and diverse use of manure as fertilizer, bedding conditioner, or energy feedstock. The
The XScrew screw separator
XScrew uses a screw to compress the manure within a sturdy housing, making it easier to pump off and transport the liquid. The XScrew separator can be used with any size of herd and has been designed in such as way as to run with an especially economical electric motor.
The new GEA Adia-DENCO® cooling system provides indirect free cooling in combination with adiabatic humidification. It was unveiled at Chillventa, the International Trade Fair for Refrigeration, Air Conditioning, Ventilation, and Heat Pumps. The system has been specially designed for climate control of computing centers and has a short amortization period as a result of its extremely low annual operating costs.
The GEA Adia-DENCO®
The adiabatic cooling system is based on the principle that water removes heat from its surroundings as it evaporates. The GEA Adia-DENCO® meets the new environmental recommendations for computing centers, which accept a maximum temperature for supply air of 27°C. With the GEA Adia-DENCO®, computing centers in the moderate to cold climatic regions of the world can largely dispense using compression refrigeration, saving-up to 70 percent of the energy otherwise required and reducing their operating costs accordingly.
In 2012, the GEA Mechanical Equipment Segment unveiled the GSI 125v, a new separator for clarifying beverages in medium-scale production operations. This means that the segment now provides a separator with all the advantages of energy-saving integrated direct-drive drive technology for operations with an output of up to 350 hectoliters per hour.
The GEA GSI 125v separator with integrated direct drive
The bowl is directly driven by an integrated,
infinitely variable three-phase motor. The separator's enhanced efficiency means it requires significantly reduced installed motor power, which results in energy savings of up to 30 percent. The direct drive also reduces the space requirements for the separator by 35 percent. In addition, the drive concept is especially maintenance-friendly, since the motor does not require separate mounting and therefore needs no lubrication, which also reduces the need for spare parts.
Thanks to superheated steam drying technology (SSDTM) from GEA Barr-Rosin, the GEA Process Engineering Segment now has a drying system with which up to 90 percent of the thermal energy can be recovered and reused.
SDDTM's intelligent system integration cuts production costs for ethanol and animal feed and also significantly reduces CO2 and greenhouse gas emissions.
A bioethanol plant with superheated steam drying technology
The GEA Refrigeration Technologies Segment was presented with the Dutch Refrigeration Prize in February 2012 for its combination of a refrigerating unit and a heat pump. The Energy Enhancer uses an ammonia heat pump to raise the temperature of waste heat from cooling compressors from approximately 35°C to a useful level of around 80°C. Heat of this temperature can be used in areas such as milk production (for pasteurization), French
Dutch Refrigeration Prize for Energy GEA's Enhancer
fry production (for blanching), and meat production (for cleaning machinery). Other possible areas of use include leisure centers that need to refrigerate a skating rink and heat a swimming pool at the same time.
The Energy Enhancer transforms the waste heat produced by conventional cooling systems – and which is often discharged into the environment unused due to its low temperatures – into usable energy with a higher temperature. This results in a significant reduction in operating costs and CO2 emissions. In addition, the system uses ammonia, a natural refrigerant that does not deplete the ozone layer.
The explanation of the group's business development follows its organizational structure, which is divided into six operating segments. The 2011 fiscal figures for the GEA Food Solutions Segment relate to the nine months from April to December only. The quarterly information contained in this management report is sourced from quarterly 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.
Economic growth weakened significantly across large parts of the world in the past year and some parts of Europe are back in recession. As before, the ups and downs of the euro crisis were the main factor significantly impacting investment and financing decisions. In addition, the situation in the U.S.A. escalated, where no deal on the budget was reached until the last minute, risking drastic tax increases and spending cuts. However, the European Central Bank (ECB) observed a decline in uncertainty on the financial markets as of the end of 2012. In its January 2013 Monthly Bulletin, it said that material economic indicators had stabilized again at a low level, trust on the financial markets had risen tangibly, and capital was flowing back into the eurozone.
In the update to its Global Economic Outlook (January 2013) for 2012, the International Monetary Fund (IMF) again recorded a slowdown in global economic growth. According to the IMF, the global economy grew by only 3.2 percent in 2012, after 5.2 percent in 2010 and 3.9 percent in 2011. However, the IMF found it noteworthy that the economic situation improved slightly again in the third quarter of 2012 as a result of the positive development in the emerging economies and the U.S.A. In the IMF's view, the financial markets have also stabilized slightly following the decline in financing costs for the crisis states in the eurozone and the recovery by many stock markets worldwide. The U.S. economy grew by 2.3 percent while the gross domestic product (GDP) of the eurozone countries contracted by 0.4 percent. In the emerging economies, the IMF recorded 5.1 percent growth in 2012 after 6.3 percent in the previous year. Economic growth in China in particular weakened to 7.8 percent, down from 9.3 percent in 2011.
The German economy grew by 0.7 percent in 2012 according to the Federal Statistical Office (February 2013) – significantly lower than the 3.0 percent growth rate achieved in the previous year. However, GDP declined by 0.6 percent quarter-on-quarter in the fourth quarter of 2012 after recording growth in each of the first three quarters. Nevertheless, this puts Germany in a better position than many of its European partners.
The German Engineering Federation (VDMA) reported a 3 percent decline in real terms year-on-year in the industry's order intake in 2012. While foreign demand remained on a level with the previous year, domestic demand decreased by 8 percent in Germany. However, here too, the situation improved significantly by the end of the year. Fourth-quarter orders were up by a total of 3 percent on the prioryear period, at 4 percent, business with the eurozone countries rose just as strongly as foreign business overall.
At EUR 1,477.9 million, GEA Group's order intake in the fourth quarter of 2012 was almost exactly on a level with the third quarter of 2012. In other words, demand did not weaken despite the increasingly difficult economic environment. Order intake declined by 1.6 percent compared with the fourth quarter of 2011 (EUR 1,502.2 million). However, this decline is exclusively attributable to the baseline effect in connection with substantial major orders in the GEA Heat Exchangers Segment in the previous year. Adjusted for portfolio and exchange rate changes (+0.1 percent and +1.9 percent, respectively), order intake recorded an organic decrease of 3.6 percent compared with the fourth quarter of 2011.
The largest major orders received were one order for several aseptic filling systems worth around EUR 40 million won by the GEA Process Engineering Segment for a customer in Vietnam, and the order won by the GEA Heat Exchangers Segment for a combined heat and power plant in the U.S.A. valued at EUR 39 million. In the prior-year period, three major orders were received for a total of approximately EUR 130 million.
In full-year 2012, order intake in the group increased by 5.2 percent to EUR 5,901.1 million (previous year: EUR 5,609.7 million). This growth of EUR 291.4 million resulted in particular from small and medium-sized orders worth up to EUR 5 million each, which account for some 83 percent of total volume and which grew by 5.9 percent, or EUR 272.5 million.
Portfolio changes contributed 2.5 percent to the increase in order intake. Changes in exchange rates positively affected this figure by 2.6 percent. Organic order intake thus grew slightly by 0.1 percent compared with 2011.
| Order intake (EUR million) |
Q4 2012 |
Q4 2011 |
Change in % |
Q1-Q4 2012 |
Q1-Q4 2011 |
Change in % |
|---|---|---|---|---|---|---|
| GEA Food Solutions * | 101.0 | 119.6 | -15.6 | 375.9 | 329.8 | 14.0 |
| GEA Farm Technologies | 142.6 | 131.7 | 8.3 | 583.9 | 527.4 | 10.7 |
| GEA Heat Exchangers | 349.7 | 462.3 | -24.4 | 1,509.8 | 1,653.2 | -8.7 |
| GEA Mechanical Equipment | 254.6 | 203.9 | 24.8 | 971.9 | 874.9 | 11.1 |
| GEA Process Engineering | 469.2 | 449.0 | 4.5 | 1,850.2 | 1,709.9 | 8.2 |
| GEA Refrigeration Technologies | 197.8 | 170.1 | 16.3 | 756.2 | 650.4 | 16.3 |
| Total | 1,514.9 | 1,536.6 | -1.4 | 6,047.9 | 5,745.5 | 5.3 |
| Other and consolidation | -37.0 | -34.3 | -7.9 | -146.8 | -135.8 | -8.1 |
| GEA Group | 1,477.9 | 1,502.2 | -1.6 | 5,901.1 | 5,609.7 | 5.2 |
*) Inclusion of GEA Food Solutions since 04/01/2011
The breakdown of order intake by end market was driven by the following trends:
The food and beverage sector expanded by 11 percent, increasing its share of GEA's business by 2.5 percentage points to 54.7 percent. The solid food sector and milk processing customer industries grew faster than average. In regional terms, Western Europe, North America, Africa, and the Middle East grew significantly. The increase in the food and beverage market accounts for the group's total increase in order intake.
In the energy end market, order intake from the oil and gas customer industry rose slightly by 1 percent, its share of group order intake declined by 0.3 percentage points to 6.4 percent. Growth in Western and Eastern Europe contrasted with a similarly significant decrease in Latin America. Demand in the power plant industry declined overall by 19 percent with the result that its share of GEA's business fell by 2.6 percentage points to 8.4 percent. In this industry, performance in the individual regions varied considerably. Only North America recorded significant growth, while demand from the Asia/Pacific region weakened considerably in the absence of new large orders from China. Western Europe was also weaker year-on-year.
The other industries expanded by 6 percent overall – slightly more than average – in fiscal year 2012, lifting their share of the total volume by 0.3 percentage points to 30.5 percent. With growth of 20 percent, the pharmaceutical industry expanded at the fastest rate, driven by Western Europe and the Asia/Pacific region. As a result, the overall share of the pharmaceutical industry rose by 0.7 percentage points to 5.9 percent. The chemical sector also grew by an above-average 14 percent, especially in Europe, the Middle East, and the Asia/Pacific region. The share attributable to this industry increased by 0.5 percentage points to 6.4 percent. The marine sector's share of the total volume continued to decline, falling to just 2.9 percent. The climate and environment customer industry maintained its share of 11.5 percent for the group as a whole, with the positive trend in North America and Latin America offsetting the decline in demand in Western Europe.
by sector (average last twelve months, 3 most important industries)
GEA Group order intake EUR 5,901.1 million (previous year EUR 5,609.7 million)
Order intake in the GEA Food Solutions Segment amounted to EUR 101.0 million in the fourth quarter of 2012. This was 15.6 percent below the figure for the prior-year period. The item includes two major process lines totaling approximately EUR 10 million in China and Brazil. Adjusted for the effects of the sale of the packaging materials business in the fourth quarter of 2011 (-6.2 percent) as well as for the effect of exchange rate changes of 1.2 percent, the segment's order intake declined organically by 10.5 percent in the period under review.
In full-year 2012, order intake by the segment increased by 14.0 percent to EUR 375.9 million (previous year: EUR 329.8 million). The additional first quarter and the portfolio change from the sale of the packaging materials business contributed to a net 20.3 percent increase in order intake. Changes in exchange rates had a positive effect of 2.2 percent. Compared with 2011, order intake was thus 8.5 percent lower in organic terms in particular due to a significant decline in orders over EUR 3 million.
GEA consciously selected the projects in which it wanted to become involved in the last fiscal year, in view of the reorganization of the segment's production processes and to avoid risks in order execution.
The segment operates in the food and beverage end market, and within this exclusively in the solid food customer industry. GEA Food Solutions is focused on Western Europe (42.4 percent), Eastern Europe (13.0 percent), and North America (16.9 percent). Overall, the shares attributable to business in Western Europe and Eastern Europe were around 6 and 3 percentage points higher respectively than for the group as a whole, while the share attributable to business in the Asia/Pacific region was around 11 percentage points lower.
GEA Food Solutions order intake EUR 375.9 million (previous year EUR 329.8 million)
Order intake in the GEA Farm Technologies Segment increased by 8.3 percent compared with the prioryear quarter to EUR 142.6 million. The acquisition of the Milfos International Group, New Zealand, which took effect on November 19, 2012, contributed 2.4 percent to the increase in order intake. Adjusted for the effect of exchange rate changes (also 2.4 percent), organic growth amounted to 3.5 percent.
In full-year 2012, order intake in the segment increased by 10.7 percent to EUR 583.9 million (previous year: EUR 527.4 million). Portfolio changes contributed 0.6 percent to the increase in order intake. Adjusted for the effect of exchange rate changes of 3.2 percent, organic growth amounted to 6.9 percent.
With the exception of three orders relating to projects in Turkey, Ukraine and Brazil, all orders were worth less than EUR 1 million.
The segment operates almost exclusively in the dairy industry.
There were minor changes to the regional sales structure for the year as a whole. Despite a drought in North America, business there also grew by over 3 percent. Significant growth rates were also recorded in Eastern Europe and the Asia/Pacific region.
GEA Farm Technologies order intake EUR 583.9 million (previous year EUR 527.4 million)
by region (%, average last twelve months)
Order intake in the GEA Heat Exchangers Segment declined by 24.4 percent to EUR 349.7 million in the fourth quarter of 2012. Adjusted for the effect of exchange rate changes of 1.8 percent, organic growth amounted to -26.1 percent. This development is partially attributable to two power plant orders in the previous year worth a total of EUR 104 million, in contrast to only one power plant order of EUR 39 million in the U.S.A. in the quarter under review in 2012.
In full-year 2012, order intake in the segment declined by 8.7 percent to EUR 1,509.8 million (previous year: EUR 1,653.2 million). Adjusted for the effect of exchange rate changes of 1.6 percent and for portfolio changes of 1.7 percent, organic growth amounted to -11.9 percent. This was primarily attributable to a low volume of power plant orders from China.
Shifts, some of them significant, occurred between the regions, primarily due to the locations of major power plant projects.
The energy sector is by far the segment's largest end market, accounting for a slightly lower share of 46.3 percent. The oil and gas industry's share of the segment's business remained virtually unchanged (16.0 percent, up 0.2 percentage points year-on-year).
GEA Heat Exchangers order intake EUR 1,509.8 million (previous year EUR 1,653.2 million)
by region (%, average last twelve months)
Order intake in the GEA Mechanical Equipment Segment rose to a record EUR 254.6 million in the fourth quarter of 2012, a year-on-year increase of 24.8 percent. Adjusted for the effect of exchange rate changes of 3.0 percent and portfolio changes of 2.7 percent, organic growth amounted to a remarkable 19.2 percent. The climate and environment area recorded the strongest growth with a large order for a wastewater treatment plant in the U.S.A.
In full-year 2012, order intake in the segment increased by 11.1 percent to EUR 971.9 million (previous year: EUR 874.9 million). Adjusted for the effect of exchange rate changes of 2.6 percent and portfolio changes of 1.8 percent, organic growth amounted to 6.7 percent. All three business areas reached record levels. In the mechanical separation area, growth in services outperformed the new machinery business. Organic growth in the flow components and homogenizers areas was in double digits.
The food and beverage sector, the largest end market by far, grew by a below-average 7 percent, so that its share fell by 2.9 percentage points to 54.4 percent. This decline was primarily due to the record demand from the dairy industry in the previous year. Driven by demand in Western Europe in particular, the energy end market grew by 22 percent, increasing its share to 13.7 percent (previous year: 12.6 percent). The marine sector was up slightly in Western Europe and Latin America. Despite growth of 6 percent, its share was down slightly by 0.7 percentage points to 12.3 percent. The volume accounted for by the chemical industry rose in nearly all regions, and by 40 percent overall. Its share of the total rose by 1.3 percentage points to 6.5 percent. The climate and environment customer industry also grew by over 40 percent, due in particular to the fourth-quarter order mentioned. Its 7.1 percent share of the segment represents an increase of 1.4 percentage points.
GEA Mechanical Equipment order intake EUR 971.9 million (previous year EUR 874.9 million)
At EUR 469.2 million, the GEA Process Engineering Segment lifted its order intake in the fourth quarter of 2012 by another 4.5 percent compared with the extremely strong prior-year quarter (EUR 449.0 million). Adjusted for the effect of exchange rate changes of 1.6 percent, organic growth amounted to 2.9 percent. The largest orders – which largely accounted for the growth recorded – relate to several aseptic filling plants in Vietnam, a plant for manufacturing coffee powder in the United Kingdom, and a milk-drying plant in Uruguay, and together totaled around EUR 79 million.
In fiscal year 2012, order intake in the segment increased by 8.2 percent to EUR 1,850.2 million (previous year: EUR 1,709.9 million). Adjusted for the effect of exchange rate changes of 3.1 percent and portfolio changes of 0.7 percent, organic growth amounted to 4.5 percent. This increase is largely due to orders of over EUR 15 million, which jumped 81 percent. As a result, this size category's share of the total volume increased from 9 percent to 16 percent. In addition to the three orders mentioned above, two milk powder plants for customers in New Zealand and the U.S.A. totaling around EUR 100 million, three orders for breweries in Ireland and Thailand for a total of approximately EUR 75 million, and pharmaceutical orders for China worth some EUR 17 million are worth mentioning.
Among the customer industries, the food and beverage end market grew by 8 percent, in line with overall order intake. Its share of the segment volume amounted to 67.6 percent (previous year: 67.9 percent). The Western Europe, North America, and Africa regions recorded particularly strong growth. These three submarkets alone account for all of the additional business volume recorded by the segment. The decline in the Asia/Pacific region is attributable to the high demand for filling systems for China in the previous year. The pharmaceutical sector continued its recovery, increasing by another 22 percent, most significantly in Western Europe and the Asia/Pacific region. It now accounts for a share of 15.9 percent, after 14.1 percent in the previous year. The climate and environment customer industry also grew significantly; with its share of the segment rising from 3.2 percent to 5.1 percent. Demand from the chemical area weakened considerably in North America. The share accounted for by this customer industry is now down to 8.7 percent, after 9.8 percent in the previous year.
GEA Process Engineering order intake EUR 1,850.2 million (previous year EUR 1,709.9 million)
by sector (average last twelve months, 3 most important industries)
In the GEA Refrigeration Technologies Segment, order intake amounted to EUR 197.8 million in the fourth quarter of 2012, an increase of 16.3 percent over the prior-year quarter (EUR 170.1 million). Adjusted for the effect of exchange rate changes of 1.8 percent, organic growth amounted to a remarkable 14.5 percent. The increase was mainly due to medium-sized orders of EUR 1 million or more. The largest project, a cold store for Italy, amounted to just under EUR 6 million.
In full-year 2012, order intake in the segment increased by 16.3 percent to EUR 756.2 million (previous year: EUR 650.4 million). Adjusted for the effect of exchange rate changes of 2.8 percent and portfolio changes of 2.6 percent from the acquisition of GEA Bock, organic growth amounted to 10.9 percent. As in the fourth quarter, the key growth driver in the full year was orders worth over EUR 1 million, whose share of the segment's business rose from 18 percent to 25 percent after several years of relatively muted demand. In addition to the order mentioned earlier, orders totaling EUR 37 million were received for three other major projects – for the cooling plant for a plastics plant in Saudi Arabia, for an LPG plant in Australia, and for the cold store for a poultry processing plant in Russia.
With respect to the end markets, the food and beverage sector, the most important by far, increased its business volume by 19 percent, lifting its share from 60.1 percent to 61.1 percent. In Western and Eastern Europe and in Africa, the share of this end market is in fact significantly higher. The energy business also rose by an above-average 24 percent, in particular in North America and the Middle East, rising to a share of 9.3 percent (up 0.5 percentage points year-on-year). The chemical business rose significantly by 79 percent due among other things to the major order in Saudi Arabia and now accounts for 10.3 percent (up 3.6 percentage points compared with the previous year) .
by region (%, average last twelve months)
In general, the same regional and sector-specific trends apply to revenue as to order intake, although with different time lags. However, revenue is proving to be significantly less volatile than order intake.
In the fourth quarter of 2012, group revenue declined slightly overall by 0.8 percent to EUR 1,619.6 million (previous year: EUR 1,632.2 million). Portfolio changes had no material effect in the quarter under review. The effect of exchange rate changes amounted to 1.8 percent. Organic revenue was thus down 2.6 percent year-on-year.
By contrast, the service business – which regularly turns in a significantly steadier performance than the new plant business – grew by 5.8 percent. Its share of total revenue in the fourth quarter amounted to 20.2 percent (previous year: 18.9 percent).
In full-year 2012, group revenue increased by 5.6 percent to EUR 5,720.1 million (previous year: EUR 5,416.5 million), 3.1 percent less than order intake. Portfolio changes contributed a total of 1.5 percent to revenue growth. The effects of exchange rate changes amounted to 2.4 percent. Organic revenue was thus up 1.7 percent year-on-year. The share contributed by the service business – which grew by 14.2 percent – rose to 21.3 percent in 2012 (previous year: 19.7 percent).
| Revenue | Q4 | Q4 | Change | Q1-Q4 | Q1-Q4 | Change |
|---|---|---|---|---|---|---|
| (EUR million) | 2012 | 2011 | in % | 2012 | 2011 | in % |
| GEA Food Solutions * | 88.0 | 130.6 | -32.6 | 332.4 | 346.0 | -3.9 |
| GEA Farm Technologies | 172.3 | 153.8 | 12.0 | 580.9 | 509.8 | 13.9 |
| GEA Heat Exchangers | 422.7 | 463.6 | -8.8 | 1,608.8 | 1,616.8 | -0.5 |
| GEA Mechanical Equipment | 261.2 | 240.4 | 8.7 | 933.9 | 844.7 | 10.6 |
| GEA Process Engineering | 518.3 | 496.6 | 4.4 | 1,716.3 | 1,577.2 | 8.8 |
| GEA Refrigeration Technologies | 203.1 | 181.6 | 11.8 | 694.8 | 647.2 | 7.4 |
| Total | 1,665.5 | 1,666.5 | -0.1 | 5,867.1 | 5,541.7 | 5.9 |
| Consolidation | -45.9 | -34.4 | -33.6 | -147.0 | -125.2 | -17.4 |
| GEA Group | 1,619.6 | 1,632.2 | -0.8 | 5,720.1 | 5,416.5 | 5.6 |
*) Inclusion of GEA Food Solutions since 04/01/2011
The percentage breakdown of revenue by sector and region changed in line with the different rates of economic growth. Normally, structural changes in revenue are substantially less pronounced than in order intake.
by sector (average last twelve months, 3 most important industries)
This chart shows a number of year-on-year shifts in the regional distribution of revenue in 2012. Both North America and the Asia/Pacific region saw double-digit percentage growth. The share accounted for by Western Europe decreased by 2.3 percentage points to 34.5 percent. By contrast, the share accounted for by North America and by the Asia/Pacific region rose by 2.1 and 1.1 percentage points to 15.0 and 23.1 percent, respectively. In the remaining regions, the positive or negative changes in revenue shares amounted to less than 1.0 percentage points each. The share of revenue accounted for by German customers declined further, from 10.8 percent to 9.8 percent. As in the previous year, the U.S.A. is the country with the strongest sales, accounting for 13.8 percent (previous year: 11.8 percent).
Revenue in the GEA Food Solutions Segment, which has been included in consolidation since the second quarter of 2011, amounted to EUR 332.4 million in 2012, a decline of 3.9 percent on the previous year. This item contains the effect of a change in estimates, which is explained in greater detail in the notes to the consolidated financial statements (see page 121), of EUR 42.0 million in the first quarter of 2012. Adjusted for the net effects of the additional first quarter – the period that was impacted by the change in estimates – and of the sale of the packaging materials business of 6.4 percent, and for the effect of exchange rate changes of 2.1 percent, revenue declined by 12.4 percent in organic terms.
In the past fiscal year, the service business grew by around 5 percent, while its margins remained stable. Adjusted for the above-mentioned change in estimates, its share of the segment's revenue was 37.6 percent, compared with 29.5 percent in the nine months of 2011.
The segment operates in the food and beverage end market, with customers coming exclusively from the solid food industry. Its sales focuses in 2012 were on Western Europe (42.0 percent), as well as Eastern Europe, North America, and the Asia/Pacific region, which each have a share of between 12 percent and 16 percent. Overall, the share of business attributable to Western Europe was around 7 percentage points higher than in the group as a whole, while that attributable to the Asia/Pacific region was approximately 10 percentage points lower.
The trends affecting revenue in the GEA Farm Technologies Segment are largely the same as those governing order intake, as the order backlog usually amounts to only 6 to 8 weeks' revenues. After adjustments for the effects of exchange rate changes of 3.4 percent and changes in the basis of consolidation of 0.3 percent, organic growth amounted to 10.2 percent in the past fiscal year. The service business grew by an above-average 22.3 percent and now represents 23.9 percent of the segment's revenue (previous year: 22.2 percent).
The segment operates almost exclusively in the dairy industry and revenue in 2012 was focused on Western Europe (down 2.0 percentage points to 38.6 percent) and North America (almost unchanged at 33.3 percent). The biggest momentum came from Eastern Europe, which increased its share by 3.0 percentage points to 12.2 percent.
The GEA Heat Exchangers Segment exhibits the most significant differences between order intake and revenue trends due to what are in some cases long throughput times. After adjustments for the effects of exchange rate changes of 1.2 percent and acquisitions of 0.4 percent, the organic rate of change was -2.2 percent in the past fiscal year. By contrast, the service business grew by a clear 14.3 percent and now accounts for 12.6 percent of segment revenue (previous year: 11.0 percent).
In the power plant area, the segment was impacted by the weak market overall, with its share declining to 34.5 percent. Conversely, the oil and gas customer industry maintained its share of 13.9 percent. The climate and environment customer industry was slightly below the previous year, decreasing by 0.6 percentage points to 31.0 percent. The most significant regional changes were seen in Western Europe (down 2.7 percentage points to 41.9 percent) and the Asia/Pacific region (up 3.5 percentage points to 16.7 percent).
The GEA Mechanical Equipment Segment significantly outperformed the strong prior year. After adjustments for the effects of exchange rate changes of 2.6 percent and changes in the basis of consolidation of 1.8 percent, organic growth in the past fiscal year amounted to 6.2 percent. The service business recorded growth of 13.7 percent. Its share of total revenue thus amounted to 33.0 percent (previous year: 32.1 percent).
In the breakdown by customer industry, the share of the food and beverage end market rose once again to 57.8 percent (previous year: 53.6 percent), while the share of the energy end market remained unchanged at 11.9 percent. The share of the other industries, in particular the pharmaceutical and marine sectors, declined in line with this. With the exception of Africa, all regions contributed to the segment's growth. The clear increase of 2.8 percentage points in North America to a share of 21.1 percent was accompanied by the 1.0 percentage point decline in the share accounted for by Western Europe to 29.6 percent, while the Asia/Pacific region decreased by 1.1 percentage points to 29.2 percent.
After adjustments for the effects of exchange rate changes of 3.1 percent and changes in the basis of consolidation of 1.2 percent above average, organic growth in the past fiscal year amounted to 4.5 percent. The service business – which grew by 13.5 percent, outperforming the segment as a whole – increased its share of total revenue to 13.6 percent (previous year: 13.1 percent).
The food and beverage end market increased its share by a further 1.6 percentage points to 68.7 percent. The pharmaceutical business also grew by a clear 20 percent, most noticeably in Western and Eastern Europe and North America, increasing its share to 14.6 percent. The chemical business declined slightly after strong growth in the previous year and now represents 9.0 percent of segment revenue (previous year: 10.6 percent). From a regional perspective, the share accounted for by Western Europe declined by 1.8 percentage points and that of the Middle East by 1.4 percentage points. This was offset by the share attributable to North America, which was up by 4.1 percentage points. At 36.2 percent, the Asia/ Pacific region once again accounted for the largest portion of revenue.
The GEA Refrigeration Technologies Segment also significantly exceeded the previous year's revenue figure. After adjustments for the effects of exchange rate changes of 2.6 percent and changes in the basis of consolidation of 2.3 percent, organic growth amounted to 2.5 percent in the past fiscal year. However, revenue in the service business stagnated.
In organic terms, the food and beverage end market rose by 8 percent, slightly exceeding the prior-year level with a share of 62.7 percent. The energy business also grew by 24 percent, adding 1.3 percentage points to 9.1 percent. Otherwise, the significant growth was seen in the chemical customer industry, in contrast to the clear decline in the other industries. In this segment, too, the share accounted for by the Asia/Pacific region also rose overall at the expense of Western Europe.
The order backlog rose by EUR 74.4 million or 2.8 percent compared with December 31, 2011 (EUR 2,677.3 million), to EUR 2,751.6 million. Portfolio changes had a positive effect of EUR 14.4 million and exchange rate changes had a negative effect of EUR 26.7 million.
Expressed in terms of order intake for the fiscal year, the order backlog amounts to 5.6 months (previous year: 5.7 months). This figure also changed only marginally year-on-year in the individual segments. In line with the different types of business, the order backlog ranges between 7.4 months and 6.9 months in the GEA Heat Exchangers and GEA Process Engineering Segments respectively and up to 1.6 months in the GEA Farm Technologies Segment.
| Order backlog (EUR million) |
12/31/2012 | 12/31/2011 | Change (absolute) |
Change in % |
|---|---|---|---|---|
| GEA Food Solutions | 107.3 | 85.5 | 21.8 | 25.5 |
| GEA Farm Technologies | 79.9 | 74.4 | 5.4 | 7.3 |
| GEA Heat Exchangers | 933.3 | 1,086.0 | -152.7 | -14.1 |
| GEA Mechanical Equipment | 331.1 | 309.7 | 21.4 | 6.9 |
| GEA Process Engineering | 1,069.6 | 951.2 | 118.4 | 12.5 |
| GEA Refrigeration Technologies | 257.0 | 197.0 | 60.0 | 30.5 |
| Total | 2,778.2 | 2,703.8 | 74.4 | 2.8 |
| Other and consolidation | -26.6 | -26.5 | -0.1 | -0.3 |
| GEA Group | 2,751.6 | 2,677.3 | 74.4 | 2.8 |
GEA remains committed to its policy of consciously selecting orders with reference to their price quality and contract terms. This is reflected in the multi-stage approval process for major customer projects. In the energy end market in particular, GEA was again faced with pronounced buyers' markets in fiscal year 2012.
At 30.9 percent, the gross margin in the fourth quarter was slightly above the prior-year level of 30.3 percent. The gross margin for full-year 2012 was 29.5 percent, 39 basis points higher than in the previous year.
Since the second quarter of 2011, earnings figures for GEA have been impacted by purchase price allocations for the acquisitions of CFS and Bock in particular. To enable a better assessment of operating performance trends, since 2011 all key earnings figures have also been presented after adjustment for these effects, which result from the remeasurement of assets added due to the acquisitions. The effects relate on the one hand to the recognition of the revalued amount of inventories, 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. However, there have been no further significant effects from this at the EBITDA level since the end of the second quarter of 2011.
In fiscal year 2012, key earnings figures for the GEA Food Solutions Segment included significant nonrecurring items totaling EUR 76.8 million, of which EUR 10.3 million was attributable to purchase price allocations. Of the remaining EUR 66.5 million, EUR 35.8 million was due to the changes in estimates reported in the first quarter of 2012 (see page 121), and a total of EUR 13.2 million to severance payments and personnel expenses for employees who left during the fiscal year and were not replaced. The figure also includes impairment losses of EUR 3.1 million on property, plant and equipment, and intangible assets, and of EUR 8.6 million on inventories. All other effects amounted to EUR 5.9 million.
Whenever operating profit is referred to in the following, this relates on the one hand to the adjustment of the purchase price allocation effects, which were also determined for all material past acquisitions, and on the other to the adjustment of the non-recurring items in the GEA Food Solutions Segment.
In the fourth quarter of 2012, EBITDA declined by 3.3 percent to EUR 227.2 million (previous year: EUR 234.9 million). As a result, the EBITDA margin decreased by 37 basis points to 14.0 percent of revenue.
In contrast, operating EBITDA rose by 4.0 percent to EUR 245.2 million in the fourth quarter of 2012 (previous year: EUR 235.7 million). As a result, the operating EBITDA margin improved by 69 basis points to 15.1 percent of revenue.
EBITDA in fiscal year 2012 amounted to EUR 597.8 million, falling short of the prior-year figure of EUR 610.2 million by EUR 12.4 million. This corresponds to an EBITDA margin of 10.5 percent and a year-on-year decline of 81 basis points (previous year: 11.3 percent). Adjusted for the recognition of the revalued amount of inventories resulting from purchase price allocation, which reduced earnings by EUR 1.6 million (previous year: EUR 19.9 million), and the non-recurring items recognized in EBITDA for the GEA Food Solutions Segment of EUR 63.4 million, operating EBITDA amounted to EUR 662.8 million. This is EUR 32.7 million higher than the prior-year figure of EUR 630.1 million. The operating EBITDA margin remained stable at 11.6 percent.
| EBITDA/EBITDA margin | Q4 | Q4 | Change | Q1-Q4 | Q1-Q4 | Change |
|---|---|---|---|---|---|---|
| (EUR million) | 2012 | 2011 | in % | 2012 | 2011 | in % |
| GEA Food Solutions * | -20.7 | 12.0 | – | -69.4 | 7.4 | – |
| as % of revenue | -23.5 | 9.2 | – | -20.9 | 2.1 | – |
| GEA Farm Technologies | 24.3 | 16.8 | 44.4 | 58.3 | 45.2 | 29.0 |
| as % of revenue | 14.1 | 10.9 | – | 10.0 | 8.9 | – |
| GEA Heat Exchangers | 61.5 | 48.6 | 26.6 | 167.5 | 160.3 | 4.5 |
| as % of revenue | 14.5 | 10.5 | – | 10.4 | 9.9 | – |
| GEA Mechanical Equipment | 66.9 | 57.9 | 15.6 | 204.8 | 178.7 | 14.6 |
| as % of revenue | 25.6 | 24.1 | – | 21.9 | 21.2 | – |
| GEA Process Engineering | 76.0 | 73.4 | 3.5 | 178.3 | 163.2 | 9.2 |
| as % of revenue | 14.7 | 14.8 | – | 10.4 | 10.3 | – |
| GEA Refrigeration Technologies | 24.9 | 21.7 | 14.6 | 65.2 | 59.0 | 10.5 |
| as % of revenue | 12.2 | 12.0 | – | 9.4 | 9.1 | – |
| Total | 232.8 | 230.4 | 1.0 | 604.7 | 613.9 | -1.5 |
| as % of revenue | 14.0 | 13.8 | – | 10.3 | 11.1 | – |
| Other and consolidation | -5.6 | 4.5 | – | -6.9 | -3.7 | -85.9 |
| GEA Group | 227.2 | 234.9 | -3.3 | 597.8 | 610.2 | -2.0 |
| as % of revenue | 14.0 | 14.4 | – | 10.5 | 11.3 | – |
The following table shows EBITDA and the corresponding EBITDA margin per segment:
*) Inclusion of GEA Food Solutions since 04/01/2011
The following table shows the reconciliation of EBITDA before purchase price allocation and nonrecurring items in the GEA Food Solutions Segment (operating EBITDA) through EBIT before purchase price allocation and non-recurring items (operating EBIT) to EBIT:
| Reconciliation of Operating EBITDA to EBIT | Q4 | Q4 | Change | Q1-Q4 | Q1-Q4 | Change |
|---|---|---|---|---|---|---|
| (EUR million) | 2012 | 2011 | in % | 2012 | 2011 | in % |
| Operating EBITDA * | 245.2 | 235.7 | 4.0 | 662.8 | 630.1 | 5.2 |
| Depreciation of property, plant and equipment, investment property, and amortization of intangible assets |
-27.5 | -25.5 | -7.9 | -103.2 | -101.0 | -2.1 |
| Impairment losses on property, plant and equipment, investment property, intangible assets, and goodwill |
-0.0 | -4.0 | 99.6 | 2.6 | -4.0 | – |
| Other impairment losses and reversals of impairment losses | -0.6 | -0.2 | < -100 | -0.6 | -0.5 | -8.4 |
| Operating EBIT * | 217.1 | 206.1 | 5.3 | 561.6 | 524.6 | 7.1 |
| Depreciation and amortization on capitalization of purchase price allocation |
-6.3 | -5.6 | -14.1 | -25.9 | -27.6 | 5.9 |
| Impairment losses on capitalization of purchase price allocation | -12.8 | -2.5 | < -100 | -12.8 | -2.5 | < -100 |
| Realization of step-up amounts on inventories | -0.3 | -0.9 | 70.5 | -1.6 | -19.9 | 92.1 |
| Non-recurring items | -20.9 | – | – | -66.5 | – | – |
| EBIT | 176.8 | 197.2 | -10.4 | 454.8 | 474.6 | -4.2 |
*) Before effects of purchase price allocations from revalued assets and liabilities and in 2012 before non-recurring items from GEA Food Solutions
Excluding purchase price allocation effects and the non-recurring items in the GEA Food Solutions Segment, the reconciliation of EBITDA to EBIT is as follows:
| Reconciliation of EBITDA to EBIT (EUR million) |
Q4 2012 |
Q4 2011 |
Change in % |
Q1-Q4 2012 |
Q1-Q4 2011 |
Change in % |
|---|---|---|---|---|---|---|
| EBITDA | 227.2 | 234.9 | -3.3 | 597.8 | 610.2 | -2.0 |
| Depreciation and impairment losses on property, plant and equipment, and investment property, and amortization of and impairment losses on intangible assets and goodwill, as reported in the statement of changes in non-current assets |
-49.8 | -37.5 | -32.7 | -142.4 | -135.1 | -5.5 |
| Other impairment losses and reversals of impairment losses | -0.6 | -0.2 | < -100 | -0.6 | -0.5 | -8.4 |
| EBIT | 176.8 | 197.2 | -10.4 | 454.8 | 474.6 | -4.2 |
At EUR 176.8 million, EBIT in the fourth quarter of 2012 was below prior-year (EUR 197.2 million). The EBIT margin declined by 117 basis points to 10.9 percent of revenue. Adjusted for purchase price allocation effects of EUR 19.4 million (previous year: EUR 8.9 million) and the non-recurring items described above, operating EBIT rose by EUR 11.0 million or 5.3 percent. The operating EBIT margin fell by 78 basis points to 13.6 percent.
The following table shows EBIT before purchase price allocation and non-recurring items and the corresponding EBIT margin per segment:
| as % of revenue | 13.4 | 12.6 | – | 9.8 | 9.7 | – |
|---|---|---|---|---|---|---|
| GEA Group | 217.1 | 206.1 | 5.3 | 561.6 | 524.6 | 7.1 |
| Other and consolidation | -7.7 | 1.9 | – | -14.8 | -12.3 | -20.8 |
| as % of revenue | 13.5 | 12.3 | – | 9.8 | 9.7 | – |
| Total | 224.7 | 204.2 | 10.0 | 576.5 | 536.9 | 7.4 |
| as % of revenue | 11.1 | 11.0 | – | 8.1 | 7.9 | – |
| GEA Refrigeration Technologies | 22.6 | 20.1 | 12.5 | 56.2 | 51.3 | 9.6 |
| as % of revenue | 13.8 | 14.0 | – | 9.5 | 9.4 | – |
| GEA Process Engineering | 71.4 | 69.4 | 2.8 | 162.8 | 148.2 | 9.9 |
| as % of revenue | 23.6 | 22.4 | – | 20.2 | 19.2 | – |
| GEA Mechanical Equipment | 61.7 | 53.8 | 14.8 | 188.4 | 162.1 | 16.2 |
| as % of revenue | 12.3 | 7.9 | – | 8.4 | 7.5 | – |
| GEA Heat Exchangers | 52.1 | 36.7 | 41.9 | 135.0 | 121.8 | 10.8 |
| as % of revenue | 12.5 | 9.1 | – | 8.0 | 6.6 | – |
| GEA Farm Technologies | 21.6 | 14.0 | 53.5 | 46.4 | 33.8 | 37.4 |
| as % of revenue | -5.3 | 7.8 | – | -3.7 | 5.7 | – |
| GEA Food Solutions * | -4.7 | 10.2 | – | -12.4 | 19.6 | – |
| Operating EBIT/ Operating EBIT margin (EUR million) |
Q4 2012 |
Q4 2011 |
Change in % |
Q1-Q4 2012 |
Q1-Q4 2011 |
Change in % |
*) Inclusion of GEA Food Solutions since 04/01/2011
Overall, EBIT declined by 4.2 percent in the past fiscal year to EUR 454.8 million (previous year: EUR 474.6 million). The EBIT margin narrowed by 81 basis points to 8.0 percent (previous year: 8.8 percent). Adjusted for purchase price allocation effects of EUR 40.3 million (previous year: EUR 50.0 million) and non-recurring items of EUR 66.5 million in the GEA Food Solutions Segment, operating EBIT increased by 7.1 percent to EUR 561.6 million (previous year: 524.6 million). As a result, the corresponding operating EBITDA margin improved by 13 basis points to 9.8 percent.
Excluding the new GEA Food Solutions Segment entirely, the operating EBIT margin reached a record high of 10.7 percent, following 10.0 percent in the previous year.
The key earnings figures for the GEA Food Solutions Segment in fiscal year 2012 include the nonrecurring items already described.
Adjusted for purchase price allocation effects of EUR 23.9 million and the non-recurring items of EUR 66.5 million, the segment generated operating EBIT of EUR -12.4 million or -3.7 percent of revenue in 2012.
In the GEA Farm Technologies Segment, operating EBIT and the operating EBIT margin increased by EUR 12.6 million to EUR 46.4 million and by 136 basis points to 8.0 percent in fiscal year 2012. Among other factors, this is attributable to organic revenue growth, to the adjustment measures implemented in previous years, and to the slight improvement in order price quality. The faster than average growth of the service business and the year-on-year reduction in the impact on earnings of the development and market launch of the segment's fully automated milking equipment also had a positive effect.
Operating EBIT in the GEA Heat Exchangers Segment rose from EUR 121.8 million to EUR 135.0 million, an increase of 10.8 percent. The corresponding EBIT margin rose by 86 basis points from 7.5 percent to 8.4 percent. This improved margin was achieved despite the slight decline in revenue and the ongoing difficult situation on the energy end market, and is mainly due to the effect of the reorganization measures that have been successfully implemented and the growth of the higher-margin service business.
The GEA Mechanical Equipment Segment increased operating EBIT by 16.2 percent to EUR 188.4 million, thus achieving an operating EBIT margin of 20.2 percent, a further 98 basis point increase on the previous year. This encouraging development was due not only to the measures taken to increase efficiency in the mechanical separation area, but also to significant economies of scale achieved through the high volume growth in all three business areas. It should be noted that the further margin improvement in the mechanical separation area was achieved in parallel with the construction of the new plant in Oelde and in spite of the impact on operations of the relocation of the production facilities that had already been partially implemented. A clear volume increase in the service business also made a significant contribution to the outstanding results.
The GEA Process Engineering Segment increased operating EBIT by 9.9 percent to EUR 162.8 million (previous year: EUR 148.2 million). A slight increase on last year's exceptionally good operating EBIT margin, which had been boosted by a number of orders proving better than originally expected, was recorded, with the margin edging up 9 basis points to a record 9.5 percent. The high utilization of engineering capacities in the process technology area, and the higher than average increase in volumes and encouraging margin growth in the service business made a positive contribution. The pharmaceutical sector recorded a further improvement in earnings following the adjustment measures taken in the past. The emission control business again achieved a double-digit EBIT margin.
Operating EBIT increased by 9.6 percent to EUR 56.2 million (previous year: EUR 51.3 million) in the GEA Refrigeration Technologies segment. At 8.1 percent, the segment's operating EBIT margin exceeded the 8 percent mark for the first time. This was driven by the successful implementation of the restructuring measures designed to focus on higher-margin business areas, high capacity utilization in the production facilities plus a better product mix, and an improved margin in the contracting business. The service business also contributed to the improvement in earnings.
| Key figures: Results of operations (EUR million) |
Q4 2012 |
Q4 2011 |
Change in % |
Q1-Q4 2012 |
Q1-Q4 2011 |
Change in % |
|---|---|---|---|---|---|---|
| Revenue | 1,619.6 | 1,632.2 | -0.8 | 5,720.1 | 5,416.5 | 5.6 |
| Operating EBITDA * | 245.2 | 235.7 | 4.0 | 662.8 | 630.1 | 5.2 |
| EBITDA pre purchase price allocation | 227.4 | 235.7 | -3.5 | 599.4 | 630.1 | -4.9 |
| EBITDA | 227.2 | 234.9 | -3.3 | 597.8 | 610.2 | -2.0 |
| Operating EBIT * | 217.1 | 206.1 | 5.3 | 561.6 | 524.6 | 7.1 |
| EBIT pre purchase price allocation | 196.2 | 206.1 | -4.8 | 495.1 | 524.6 | -5.6 |
| EBIT | 176.8 | 197.2 | -10.4 | 454.8 | 474.6 | -4.2 |
| EBT | 141.2 | 169.9 | -16.9 | 366.9 | 398.6 | -7.9 |
| Income taxes | -0.3 | 34.5 | – | 50.4 | 86.0 | -41.3 |
| Profit after tax from continuing operations | 141.5 | 135.4 | 4.5 | 316.5 | 312.6 | 1.2 |
| Profit/loss after tax from discontinued operations | 0.1 | 0.0 | > 100 | 0.1 | 0.0 | > 100 |
| Profit for the period | 141.6 | 135.4 | 4.6 | 316.6 | 312.6 | 1.3 |
*) Before effects of purchase price allocations from revalued assets and liabilities and in 2012 additionally before non-recurring items from GEA Food Solutions
Net interest income of EUR -35.6 million (previous year: EUR -27.3 million) in the fourth quarter does not reflect the EUR 2.4 million decline in the negative effects from the cash investments and loans related to net debt. It does include in particular EUR 19.7 million (previous year: EUR 3.5 million) of discount unwinding expenses relating to other non-current provisions.
For the full year, net interest income of EUR -87.8 million (previous year: EUR -76.0 million) includes, among other things, EUR 50.4 million (previous year: EUR 33.8 million) of discount unwinding expenses relating to provisions, of which EUR 29.6 million (previous year: EUR 29.2 million) is attributable to obligations under pension plans and supplementary healthcare benefit plans. All other components of net interest income therefore resulted in a EUR 4.8 million reduction in the negative impact on earnings, which declined to EUR 37.4 million.
Including purchase price allocation effects and non-recurring items in the GEA Food Solutions Segment, EBT in the fourth quarter was EUR 141.2 million or 8.7 percent of revenue. It was therefore down EUR 28.7 million – or 169 basis points in the case of the EBIT margin – on the previous year (EUR 169.9 million). EBT in full-year 2012 amounted to EUR 366.9 million, EUR 31.6 million lower than the previous year's figure (EUR 398.6 million). At the operating level, the prior-year earnings and margins were also exceeded here in both the fourth quarter and the full year.
The income tax expense in fiscal year 2012 of EUR 50.4 million (previous year: EUR 86.0 million) comprised current taxes of EUR 88.6 million (previous year: EUR 86.6 million) and deferred taxes of EUR -38.1 million (previous year: EUR -0.6 million). The group tax rate was thus 13.7 percent, after 21.6 percent in the previous year. This substantial decline in the tax rate is largely attributable to the recognition of deferred tax assets in respect of tax loss carryforwards, as it is assumed that greater use will be made of domestic tax loss carryforwards due to the expected positive business performance.
As in the previous year, discontinued operations did not have any overall impact on consolidated profit (income of EUR 95 thousand in Q4/2012 compared with EUR 22 thousand in Q4/2011).
Consolidated profit in the fourth quarter thus amounted to EUR 141.6 million (previous year: EUR 135.4 million), of which EUR 139.7 million (previous year: EUR 135.0 million) is attributable to GEA Group Aktiengesellschaft shareholders. This corresponds to earnings per share of EUR 0.74, after EUR 0.73 in the comparable prior-year period.
Consolidated profit in the full year amounted to EUR 316.6 million (previous year: EUR 312.6 million), of which EUR 314.4 million (previous year: EUR 312.0 million) is attributable to GEA Group Aktiengesellschaft shareholders. Taking into account the 1.1 percent increase in the average number of shares compared with the previous year, this corresponds to earnings per share of EUR 1.69 (previous year: EUR 1.70).
In connection with the settlement of the award proceedings (see page 85), the average number of GEA shares rose to 189,327,449 in the fourth quarter and 185,786,324 in the full year (2011: 183,807,845).
In addition to holding company costs in the narrower sense, the results of operations of GEA Group Aktiengesellschaft are primarily driven by net investment income and net interest income. Further details are presented in the section entitled "Net assets, financial position, and results of operations of GEA Group Aktiengesellschaft" (see page 61 ff.).
As in the previous year, the Executive Board and Supervisory Board are proposing a dividend of EUR 0.55 on the shares, the number of which has increased by 4.7 percent compared with the previous year. Our ongoing goal of distributing around one-third of the group's earning to shareholders as a dividend has therefore been achieved, as in the previous year.
Safeguarding liquidity and centralized financial management have been a top priority for GEA Group since the crisis on the financial markets began in 2008. GEA Group's financial position continues to be stable. Even allowing for the two significant acquisitions in 2011, GEA Group continues to have sufficient financing options for its future business development.
The financing structure of GEA Group's financial liabilities was further improved with the issue of a new borrower's note loan in the amount of EUR 300 million in September 2012. The issue is divided into a fixed and a variable component and has a term of five years. EUR 73 million of the transaction volume relates to the early extension of the borrower's note loan due in August 2013.
| GEA cash credit lines (EUR million) |
Maturity | 12/31/2012 approved |
12/31/2012 utilized |
|---|---|---|---|
| Borrower's note loan (2013) | August 2013 | 55 | 55 |
| Syndicated credit line ("Club Deal") | June 2015 | 650 | – |
| GEA Bond | April 2016 | 400 | 400 |
| Kreditanstalt für Wiederaufbau (KfW) (2016/05) | May 2016 | 80 | 80 |
| Kreditanstalt für Wiederaufbau (KfW) (2016/12) | December 2016 | 56 | 56 |
| European Investment Bank | July 2017 | 150 | 150 |
| Borrower's note loan (2017) | September 2017 | 300 | 300 |
| Various (bilateral) credit lines including accrued interests | Maximum of 1 year or "until further notice" |
155 | 28 |
| Total | 1,846 | 1,069 |
The group's financial management encompasses liquidity management, group financing, and the management of interest rate and exchange rate risks. As the group management company, GEA Group Aktiengesellschaft is responsible for GEA Group's central financial management, which aims to reduce financing costs as far as possible, to leverage economies of scale, to hedge interest rate and exchange rate risk exposures as effectively as possible, and to ensure that loan covenants are complied with. The goal of GEA Group's financing strategy is not only to be able to meet its payment obligations whenever they fall due, but also to always have sufficient cash reserves in the form of credit lines, in addition to maintaining a strategic cash position.
Cash flow from operating activities is the most important source of liquidity. Intragroup cash pooling aims to limit external cash investments and borrowings to a level as low as possible. To achieve this, GEA Group has established cash pooling groups in 13 countries that automatically balance the accounts of the participating group companies every day by crediting or debiting a target account at GEA Group Aktiengesellschaft. Any additional liquidity requirements are generally borrowed by group management, which also invests surplus liquidity. In a number of cases, however, liquidity peaks in individual countries cannot be reduced on a cross-border basis due to legal or tax-related reasons.
Net debt as of December 31, 2011 (EUR 386.8 million) narrowed by EUR 61.3 million to EUR 325.5 million as of December 31, 2012. This represents a EUR 296.1 million decline compared with September 30, 2012 (EUR 621.7 million).
| Overview of net liquidity | ||
|---|---|---|
| (EUR million) | 12/31/2012 | 12/31/2011 |
| Cash and cash equivalents | 743.5 | 432.4 |
| Securities | – | – |
| Liabilities to banks | 659.4 | 410.1 |
| Bonds | 409.6 | 409.1 |
| Net liquidity (+)/Net debt (-) | -325.5 | -386.8 |
| Gearing (%) | 15.0 | 17.9 |
Overall, cash and cash equivalents plus marketable securities increased to EUR 743.5 million as of December 31, 2012, compared with EUR 432.4 million as of the end of the previous year. Liabilities to banks (EUR 303.9 million), from the bond issue (EUR 409.6 million, including accrued interest), and the borrower's note loan (EUR 355.5 million, including accrued interest) amounted to a total of EUR 1,069.0 million at the reporting date (previous year: EUR 819.2 million). The rise in cash and cash equivalents is associated with the rise in borrowing with the aim of establishing a strategic liquidity reserve within the group.
Detailed information on the maturity, currency, and interest rate structure of debt financing can be found in the notes to the consolidated financial statements (see pages 124 ff. and 162 ff.).
Guarantee lines – which are mainly for contract performance, advance payments, and warranties – of EUR 1,898.3 million (December 31, 2011: EUR 2,069.7 million) were available to GEA Group as of the reporting date, of which EUR 749.8 million (December 31, 2011: EUR 747.6 million) had been utilized.
In addition to the assets recognized in its consolidated balance sheet, GEA uses in a minor degree factoring as off-balance-sheet financing instrument. These are mainly assets leased or rented under operating leases. GEA uses a small number of factoring programs as off-balance-sheet financing instruments. The obligations resulting from rental and leasing obligations are explained in section 9.2 to the consolidated financial statements (see page 178 f.).
The EUR 61.3 million decline in net debt is due in particular to the clear drop in working capital in the fourth quarter of 2012, which was reduced to below the level as of December 31, 2011, despite the higher revenue. In the year as a whole, working capital was reduced to EUR 61.4 million after adjustment for changes in the basis of consolidation. The ratio of working capital to revenue was 9.3 percent at the end of the year (previous year: 10.7 percent). Due to an increase in the first half of the year, the average ratio during the year was 13.2 percent (previous year: 12.6 percent).
The reduction in net debt, which as of the reporting date amounted to only 54 percent of the EBITDA of EUR 597.8 million generated in fiscal year 2012, and the key factors responsible for this development are shown in the following chart:
GEA Group Aktiengesellschaft's dividend payment for fiscal year 2011 was the highest in the Company's history, at EUR 101.1 million. Cash outflows for current capital expenditures on property, plant and equipment, and intangible assets, and for acquisitions (including the net debt acquired) amounted to EUR 161.0 million and EUR 70.1 million, respectively.
Interest and income tax payments reduced net liquidity by EUR 131.4 million. In addition, restructuring measures in previous years continued to affect liquidity by EUR 11.8 million in 2012.
Further payments of EUR 41.2 million arose in connection with the discontinued operations. These payments were made from the provisions recognized in previous years.
The consolidated cash flow statement can be summarized as follows:
| Overview of cash flow statement (EUR million) |
Q1-Q4 2012 |
Q1-Q4 2011 |
Change absolute |
|---|---|---|---|
| Cash flow from operating activities | 465.1 | 313.5 | 151.6 |
| Cash flow from investing activities | -248.5 | -341.9 | 93.4 |
| Free cash flow | 216.6 | -28.4 | 245.0 |
| Cash flow from financing activities | 97.7 | -90.8 | 188.5 |
| Change in unrestricted cash and cash equivalents | 309.3 | -126.1 | 435.4 |
Cash flow from operating activities amounted to EUR 465.1 million in the year under review, EUR 151.6 million up on the previous year (EUR 313.5 million). This increase is largely attributable to the EUR 61.4 million reduction in working capital compared with a EUR 51.4 million increase in the previous year. The cash outflow from the change in provisions was EUR 33.3 million lower than in the previous year.
Cash flow from investing activities narrowed by EUR 93.4 million in the year under review, from EUR -341.9 million to EUR -248.5 million. This was due in particular to the EUR 116.5 million decrease in payments for acquisitions, while cash outflows for property, plant and equipment, and intangible assets increased by EUR 5.8 million. Payments for guarantees and warranties relating to the sale of discontinued operations were down EUR 8.2 million on the previous year, at EUR 40.6 million.
Cash flow from financing activities amounted to EUR 97.7 million in 2012 compared with EUR -90.8 million in 2011. This EUR 188.5 million increase is primarily a result of the EUR 221.1 million increase in total loans and loan repayments, which was partially offset by a EUR 28.1 million increase in the dividend payment, as well as a EUR 4.1 million increase in interest payments.
| Condensed balance sheet | as % of | as % of | Change | ||
|---|---|---|---|---|---|
| (EUR million) | 12/31/2012 | total assets | 12/31/2011 | total assets | in % |
| Assets | |||||
| Non-current assets | 3,480.0 | 54.1 | 3,467.6 | 55.7 | 0.4 |
| thereof goodwill | 1,846.1 | 28.7 | 1,900.1 | 30.5 | -2.8 |
| thereof deferred taxes | 445.6 | 6.9 | 398.9 | 6.4 | 11.7 |
| Current assets | 2,931.0 | 45.6 | 2,752.5 | 44.2 | 6.5 |
| thereof cash and cash equivalents | 743.5 | 11.6 | 432.4 | 6.9 | 72.0 |
| Assets held for sale | 18.4 | 0.3 | 5.1 | 0.1 | > 100 |
| Total assets | 6,429.5 | 100.0 | 6,225.2 | 100.0 | 3.3 |
| Equity and liabilities | |||||
| Equity | 2,166.3 | 33.7 | 2,163.6 | 34.8 | 0.1 |
| Non-current liabilities | 2,003.4 | 31.2 | 1,669.3 | 26.8 | 20.0 |
| thereof financial liabilities | 1,005.4 | 15.6 | 813.8 | 13.1 | 23.5 |
| thereof deferred taxes | 124.0 | 1.9 | 145.9 | 2.3 | -15.0 |
| Current liabilities | 2,259.8 | 35.1 | 2,392.3 | 38.4 | -5.5 |
| thereof financial liabilities | 132.5 | 2.1 | 94.1 | 1.5 | 40.8 |
| Total equity and liabilities | 6,429.5 | 100.0 | 6,225.2 | 100.0 | 3.3 |
Total assets as of December 31, 2012, rose by EUR 204.3 million or 3.3 percent as against December 31, 2011, to EUR 6,429.5 million. This increase in total assets is solely attributable to the rise in cash and cash equivalents relating to the increase in borrowing, with the aim of establishing a strategic liquidity reserve within the group.
Consequently, the structure of non-current and current assets on the asset side of the balance sheet changed slightly. Non-current assets rose more slowly than the increase in total assets; the EUR 12.4 million rise is attributable in particular to the EUR 46.8 million increase in deferred taxes. In contrast, goodwill declined by EUR 54.1 million, primarily due to effects relating to the conclusion of the award proceedings.
Current assets increased by EUR 178.5 million. This rise related in particular to cash and cash equivalents, which were up EUR 311.1 million year-on-year, whereas inventories barely rose at all and trade receivables actually decreased by EUR 107.7 million. The increased advance payments for orders accounted for using the percentage of completion method reduced this figure.
The slight increase in equity of EUR 2.7 million represents the consolidated profit of EUR 316.6 million on one hand, and the dividend payment of EUR 101.1 million on the other. Significant negative effects of EUR 104.8 million resulted from actuarial losses (mainly resulting from a change in the discount rate) on pensions and other post-employment benefit obligations. Effects relating to the conclusion of the award proceedings also made a negative contribution of EUR 91.7 million. Currency translation effects reduced equity by EUR 19.5 million. The equity ratio therefore decreased by 1.1 percentage points compared with the end of 2011 (34.8 percent) to 33.7 percent.
The main reasons for the EUR 334.1 million increase in non-current liabilities are the issue of a new borrower's note loan in the amount of EUR 227.0 million, and the drawing down for the first time of the second credit line from the Kreditanstalt für Wiederaufbau (KfW) in the amount of EUR 56.0 million. Added to this are the EUR 142.8 million higher non-current employee benefit obligations (mainly pension obligations), which are largely due to the reduced discount rates.
As of the reporting date, current liabilities were down EUR 132.6 million on the figure for December 31, 2011. This is primarily attributable to the EUR 64.2 million decrease in trade payables and the EUR 82.8 million decline in provisions. EUR 41.2 million of the decrease in provisions is attributable to payments relating to obligations associated with the plant engineering activities sold in 2007.
Effective April 24, 2012, the GEA Mechanical Equipment Segment acquired all the shares of Aseptomag AG, one of the world's leading suppliers of aseptic and hygienic valves, valve modules, and system solutions, following approval by the antitrust authorities. Based in Kirchberg, Switzerland, the company had a workforce of 35 employees and generated revenue of around EUR 13.2 million in fiscal year 2011. Aseptomag's customers are mostly dairy, beverage, and food companies, but also include the pharmaceutical, chemical, and cosmetic industries.
Effective November 19, 2012, the GEA Farm Technologies Segment acquired Milfos International Ltd., which is based in Hamilton, New Zealand. Milfos is one of the leading developers and manufacturers of innovative dairy technologies, offering a comprehensive range of milking, cooling, barn equipment, and farm automation solutions as well as services focused on grazing farm applications. Its products are exported to over 20 countries. The company, founded in 1987, most recently employed about 90 people.
The subscribed capital was increased by around EUR 23.5 million in the fiscal year by the issuance of 8,687,631 no-par value bearer shares and the capital reserves reduced by EUR 115.6 million due to the court settlement reached in the award proceedings. The issuance of the shares served to meet the conditions of the settlement concluded in January 2012 in relation to the award proceedings.
The substance of and background to the award proceedings are described in greater detail on page 85. GEA Group Aktiengesellschaft's Annual General Meeting had approved the creation of the new shares required by the settlement in the form of contingent capital on April 24, 2012. The new shares were issued in three tranches.
| 2 September 03, 2012 1,967,361 shares 3 December 03, 2012 4,626,325 shares |
|
|---|---|
| 1 July 16, 2012 2,093,945 shares |
|
| Tranche Issuance Amount |
The subscribed capital of GEA Group Aktiengesellschaft amounted to EUR 520.4 million as of December 31, 2012, and is composed of 192,495,476 no-par value bearer shares. As before, the shares have a notional value of EUR 2.70 each (rounded). All the shares are fully paid up.
At its meeting on December 13, 2012, GEA Group Aktiengesellschaft's Supervisory Board appointed Markus Hüllmann (44), previously the Segment President of the GEA Mechanical Equipment Segment, as a member of GEA Group Aktiengesellschaft's Executive Board effective April 1, 2013. He is to succeed Niels Graugaard (65), who will retire after the next Annual General Meeting, which will take place on April 18, 2013.
Markus Hüllmann, who obtained an engineering degree (university of applied technology) and a master's degree after completing his vocational training as a dairy specialist, joined the former Westfalia Separator AG in 1995. After a successful career with the group in particular in sales and engineering in Germany and abroad as well as several years of experience as head of a business unit, he has been Segment President of the GEA Mechanical Equipment Segment since 2010. Under his leadership, the segment has become extremely profitable and innovative. Markus Hüllmann will also continue to head the GEA Mechanical Equipment Segment for a transitional period of one to two years.
Demand from GEA Group's customer markets remained steady in fiscal year 2012. Order intake and revenue both increased by around 5 percent. Operating EBIT grew by EUR 37 million to EUR 562 million. This corresponds to an EBIT margin of 9.8 percent. Excluding the new GEA Food Solutions Segment, the operating EBIT margin would have been 10.7 percent – another record high. This improvement in earnings was due in particular to the segments active in the food industry, as well as to the successful restructuring and reorganization measures of the past few years.
As expected, discontinued operations had no further negative impact on earnings overall.
Summing up, it can be said that all significant forecasts relating to order intake, revenue, and profit communicated at the beginning of fiscal year 2012 and increased in the first quarter have been met.
The Executive Board of GEA Group Aktiengesellschaft would like to thank all of the group's employees for their sterling work and active commitment in 2012. Our particular thanks go to the employee representatives in Germany and abroad for their responsible and constructive contributions.
There were 24,498 employees as of December 31, 2012. This represents an increase of 664 employees compared with December 31, 2011 (23,834 employees). Excluding the 202 employees from acquisitions and other changes in the basis of consolidation, the number of employees increased by 462, including 62 employees in Germany and 478 employees in Asia/Pacific alone. The GEA Heat Exchangers Segment recorded the sharpest decrease in employees, down by 359, while the GEA Process Engineering Segment saw the largest increase in capacity, up 473 employees.
Compared with September 30, 2012 (24,560 employees), the number of employees decreased by 62. Adjusted for an acquisition that led to an increase of 88 employees, the number of employees declined by 150, with the main reduction being in the GEA Heat Exchangers Segment.
| 5,566 3,267 24,196 301 |
5,093 3,147 23,554 281 |
|---|---|
| 3,961 | 3,614 |
| 7,329 | 7,679 |
| 2,286 | 2,184 |
| 1,787 | 1,836 |
| 12/31/2011 | |
| 12/31/2012 |
*) Full-time equivalents (FTE) excluding vocational trainees and inactive employment contracts
Overall, the share of the workforce in Western Europe decreased by a further 1.1 percentage points year-on-year, and by 0.5 percentage points in North America, but increased in the growth regions of Asia/Pacific and Eastern Europe by 1.9 and 0.2 percentage points, respectively.
| Employees * by region | 12/31/2012 | 12/31/2011 | ||
|---|---|---|---|---|
| Western Europe | 14,974 | 61.1% | 14,837 | 62.3% |
| Asia/Pacific | 3,992 | 16.3% | 3,426 | 14.4% |
| North America | 2,335 | 9.5% | 2,382 | 10.0% |
| Eastern Europe | 1,890 | 7.7% | 1,782 | 7.5% |
| Latin America | 646 | 2.6% | 716 | 3.0% |
| Africa | 517 | 2.1% | 520 | 2.2% |
| Middle East | 145 | 0.6% | 172 | 0.7% |
| Total | 24,498 | 100.0% | 23,834 | 100.0% |
*) Full-time equivalents (FTE) excluding vocational trainees and inactive employment contracts
As of December 31, 2012, GEA Group employed 624 vocational trainees compared with 629 at the same date in the previous year. In Germany, the vocational trainee ratio was 6.2 percent (previous year: 6.0 percent). As in the past, the vocational training level exceeds GEA Group's own needs.
In July 2006, GEA Group Aktiengesellschaft launched a long-term remuneration program for first- and second-tier managers; this was extended to include third-tier management in 2008. As in previous years, all participants had to invest an amount equal to 20 percent of the issued performance shares. In July 2012, a seventh tranche was issued for these three management levels, with a participation rate of 63 percent. Each GEA Performance Share Plan runs for three years. The fourth tranche, which was issued in the summer of 2009, was paid out at a rate of 87.9 percent of the target value. This value was calculated by comparing GEA's relative share price performance in the relevant three-year reference period with that of MDAX companies.
Performance assessments are carried out at regular intervals for managers worldwide. Standardized procedures are used to assess key attributes such as a performance- and results-driven approach, assertiveness, communications skills, leadership, commitment, use of management tools, and creativity, from the perspective of both their superiors and their employees. The results are used as a basis for drawing up individual development plans and long-term personnel and succession planning.
In addition to the "Professionals on Stage" development assessment center, which is designed to identify future managers and which is geared towards employees worldwide with at least five years' professional experience, a further talent identification and development program for high-potential individuals was implemented in 2011 under the name of "First Professional Program." Its three modules give young managers who have been with GEA Group for at least two years special training to develop their skills in communication, conflict resolution, leadership, and managing change processes.
In fiscal year 2012, Absolventa GmbH, which operates a career portal designed specifically for young graduates and students, recognized GEA's cross-segment trainee program for university graduates, which had been revamped in 2011, as a fair, career-enhancing program. Trainees are prepared at a crosssegment level for future management tasks in both commercial and technical areas, over a period of 18 months in GEA companies in Germany and abroad.
The GEA Group Academy is the central professional development and training program for all employees. In fiscal year 2012, the GEA Group Academy offered training courses in a variety of management and leadership areas. As in previous years, these were organized in cooperation with an internationally recognized partner.
GEA has been admitted to the London Business School's Global Business Consortium, in which top managers from internationally renowned companies can hone their strategic skills using case studies, among other things. Board members of the participating companies are actively included in the program, where they give presentations and take part in discussion groups.
GEA aims to ensure its young talent receives first-class training, which is why it offers twin-track courses of study in cooperation with Osnabrück University of Applied Sciences. Lasting six semesters, these twin-track training courses lead to bachelor degrees in various specialist areas.
At GEA, managers have the option of studying for a part-time MBA in an international environment. Corresponding cooperative agreements have been established with Mannheim University, the London Business School, INSEAD, and Harvard University.
Additional personnel-related information can be found under the Career area of our website at www.gea.com.
GEA's online career portal was expanded with a view to increasing the Company's attractiveness as an employer and facilitating initial contact with potential candidates, and now includes a corporate HR blog. In addition, GEA continued to exhibit regularly at university career fairs and product shows in 2012 and to expand its cooperation with student organizations such as AIESEC.
GEA Group promotes and harnesses the creativity and innovative capacity of each and every employee with its group-wide "i²m" ideas and improvement management scheme. I²m helps increase the group's profitability, product quality, and quality of work, as well as customer satisfaction, in the long term. GEA Improvement Projects (GIPs) are systematically documented in addition to individual employee ideas. Acquired companies are included in the improvement system's structures promptly.
In fiscal year 2011, GEA was singled out by Zentrum Ideenmanagement (ZI) as the sector winner in the category "Best ideas management in the engineering sector" as well as being ranked third across all sectors in Germany.
In 2012, a total of some 13,500 ideas were submitted via i²m by employees throughout the group, and around 650 GIPs were also documented, of which some 50 percent were successfully implemented in 2012. The net benefit for GEA Group from the improvement system in 2012 was EUR 19 million.
In addition to its economic benefits, i²m also strengthens the corporate culture by actively including employees and motivating them to become involved in shaping their Company. Their commitment was honored in 2012 by EUR 1.3 million in bonuses paid for implemented ideas, as well as recognition bonuses and numerous noncash bonuses.
In addition to the reporting by the group, the following section describes the performance of GEA Group Aktiengesellschaft (group management). The annual financial statements are prepared in accordance with the Handelsgesetzbuch (HGB – German Commercial Code) and the Aktiengesetz (AktG – German Stock Corporation Act). They are presented here in condensed form.
| Net assets of GEA Group AG (HGB) | as % | as % | ||
|---|---|---|---|---|
| (EUR million) | 31/12/2012 | of total assets | 31/12/2011 | of total assets |
| Assets | ||||
| Intangible fixed assets | 2.3 | – | 1.5 | – |
| Tangible fixed assets | 6.4 | 0.1 | 6.6 | 0.1 |
| Long-term financial assets | 3,048.8 | 65.5 | 3,359.4 | 76.1 |
| Fixed assets | 3,057.5 | 65.6 | 3,367.5 | 76.2 |
| Receivables from affiliated companies | 1,100.0 | 23.6 | 865.2 | 19.6 |
| Other assets | 30.4 | 0.7 | 32.7 | 0.7 |
| Receivables and other assets | 1,130.4 | 24.3 | 897.9 | 20.3 |
| Cash | 462.4 | 10.0 | 144.9 | 3.3 |
| Current assets | 1,592.8 | 34.3 | 1,042.8 | 23.6 |
| Prepaid expenses | 5.9 | 0.1 | 7.0 | 0.2 |
| Total | 4,656.2 | 100.0 | 4,417.3 | 100.0 |
| Equity and liabilities | ||||
| Subscribed capital | 520.4 | 11.2 | 496.9 | 11.2 |
| Capital reserves | 250.8 | 5.4 | 250.8 | 5.7 |
| Revenue reserves | 646.7 | 13.9 | 538.7 | 12.2 |
| Net retained profits | 109.0 | 2.3 | 101.4 | 2.3 |
| Equity | 1,526.9 | 32.8 | 1,387.8 | 31.4 |
| Provisions | 188.1 | 4.0 | 209.2 | 4.7 |
| Bonds | 400.0 | 8.6 | 400.0 | 9.1 |
| Liabilities to banks | 641.0 | 13.8 | 377.0 | 8.5 |
| Liabilities to affiliated companies | 1,879.7 | 40.4 | 2,013.7 | 45.6 |
| Other liabilities | 20.4 | 0.4 | 29.5 | 0.7 |
| Liabilities | 2,941.1 | 63.2 | 2,820.2 | 63.9 |
| Deferred income | 0.1 | – | 0.1 | – |
| Total | 4,656.2 | 100.0 | 4,417.3 | 100.0 |
The EUR 238.9 million increase in total assets is the result of the EUR 234.8 million rise in receivables from affiliated companies due to short-term group financing and the EUR 317.5 million increase in cash and cash equivalents on the one hand, and to the EUR 310.6 million reduction in long-term financial assets on the other.
In the long-term financial assets item, shares in affiliated companies declined by EUR 363.4 million primarily due to the redemption of shares by a subsidiary, while the loans to affiliated companies rose by EUR 52.9 million. The receivables from affiliated companies result in particular from short-term borrowings by subsidiaries participating in the group's cash pooling system. The EUR 317.5 million increase in cash and cash equivalents is connected with the increased borrowing reported under equity and liabilities, which aims to establish a strategic liquidity reserve within the group.
On the equity and liabilities side, equity increased by EUR 139.1 million. Its share of total assets therefore increased by 1.4 percentage points to 32.8 percent. In addition to the net income for the fiscal year of EUR 216.8 million less the dividend of EUR 101.1 million paid out in 2012, the EUR 23.5 million increase in subscribed capital also contributed to this. This is attributable to the new no-par value shares issued as a result of the court settlement reached in the award proceedings (see page 85). This settlement is also the main reason for the EUR 21.1 million decrease in provisions. The main factor in the EUR 264.0 million increase in liabilities to banks is the new borrower's note loan that was taken out in the amount of EUR 227.0 million. The liabilities to affiliated companies relating to short-term group financing decreased by EUR 134.0 million. The Executive Board and Supervisory Board transferred EUR 108.0 million to revenue reserves in fiscal year 2012.
| Net retained profits | 109.0 | 46.6 | 101.4 | 55.3 |
|---|---|---|---|---|
| Appropriation to other revenue reserves | -108.0 | -46.1 | -68.0 | -37.1 |
| Retained profits brought forward | 0.3 | 0.1 | 0.8 | 0.4 |
| Net income for the fiscal year | 216.7 | 92.6 | 168.6 | 92.0 |
| Taxes on income | -17.2 | -7.4 | -14.6 | -8.0 |
| Result from ordinary activities | 233.9 | 100.0 | 183.2 | 100.0 |
| Net interest income | 5.2 | 2.2 | -10.5 | -5.7 |
| Investment income | 256.2 | 109.6 | 221.3 | 120.8 |
| Other operating expenses | -116.0 | -49.6 | -122.3 | -66.8 |
| Amortization and writedowns of intangible fixed assets and depreciation and writedowns of tangible fixed assets |
-1.6 | -0.7 | -3.5 | -1.9 |
| Personnel expenses | -26.2 | -11.2 | -31.8 | -17.4 |
| Other operating income | 116.3 | 49.7 | 130.0 | 71.0 |
| Income statement of GEA Group AG (HGB) (EUR million) |
31/12/2012 | in % | 31/12/2011 | in % |
Personnel expenses declined by EUR 5.6 million year-on-year, primarily due to lower additions to other provisions for personnel expenses, while the expenses for post-employment benefits rose due to increased additions to the pension obligations.
Exchange rate gains and losses from own hedges and hedges for affiliated companies are reported gross within other operating income and expenses, as in the previous year. Gains of EUR 70.2 million and losses of EUR 62.2 million resulted in net exchange rate gains of EUR 8.1 million (previous year: net loss of EUR 11.5 million).
In addition to exchange rate gains, other operating income primarily includes income from the recharging of the intercompany management fee and the trademark fee to subsidiaries, from ancillary operations, and from the reversal of provisions and valuation allowances. In addition to exchange rate losses, other operating expenses mainly comprise the cost of expert opinions and consulting, as well as third-party services.
Investment income is primarily composed of income and expenses from profit and loss transfer agreements and writedowns of financial assets.
Net interest income rose by EUR 15.7 million to EUR 5.2 million (previous year: EUR -10.5 million). This development reflects GEA Group Aktiengesellschaft's net debt, which decreased year-on-year, and the overall decline in interest rates. The share of higher-interest long-term loans granted to affiliated companies also increased. In addition, the interest unwinding costs on long-term other provisions was EUR 2.0 million below the prior-year level.
| (EUR million) | 2012 | 2011 |
|---|---|---|
| Cash flow from operating activities | -140.4 | 36.5 |
| Cash flow from investing activities | 295.0 | -462.0 |
| Cash flow from financing activities | 162.9 | 274.4 |
| Liquid funds | 462.4 | 144.9 |
GEA Group Aktiengesellschaft's business development is primarily subject to the same risks and opportunities as the group. These are presented in the report on risks and opportunities. Additionally, the relationships with subsidiaries may result in negative effects due to statutory and contractual contingent liabilities (in particular finance).
Due to its overlap with the group as a whole, further details on the future business development of GEA Group Aktiengesellschaft can be found in the chapter entitled "Outlook" (see page 91 f.).
GEA Group Aktiengesellschaft's annual financial statements in accordance with the HGB report net income of EUR 216.7 million. The Executive Board and Supervisory Board appropriated EUR 108.0 million of this amount to other revenue reserves in accordance with section 58(2) sentence 1 of the AktG. The Executive Board and Supervisory Board will propose to the Annual General Meeting that a dividend of EUR 0.55 per share, unchanged year-on-year, be paid to shareholders from the net retained profits of EUR 109.0 million for a total of 192,495,476 shares (previous year: 183,807,845 shares) and to carry forward the remaining net retained profits of EUR 3.2 million to new account.
The dividend will be paid from the contribution account for tax purposes (section 27 of the Körperschaftsteuergesetz (KStG – German Corporate Income Tax Act)) and therefore without deduction of investment income tax and the solidarity surcharge. In the case of shareholders in Germany, the dividend is not subject to current taxation in the year of payment. The generally held opinion is that payment of dividends from the contribution account for tax purposes constitutes a repayment of contributions, which results in a subsequent reduction of the acquisition costs for the shares. This can lead to the imposition of higher capital gains taxes if the shares are sold at a later date.
As of December 31, 2012, the subscribed capital of GEA Group Aktiengesellschaft was EUR 520,375,765.57 and was composed of 192,495,476 no-par value bearer shares. All the shares are ordinary shares. The rights and obligations arising from these shares are defined in the AktG. The Executive Board is not aware of any restrictions affecting the voting rights. Participation in the GEA Performance Share Plan requires a personal investment by participants in GEA shares, which are subject to a holding period of three years. Participants who infringe the holding period lose their right to participate in the plan.
There were no interests in the Company exceeding 10 percent of the voting rights as of December 31, 2012
The Executive Board is appointed and dismissed in accordance with sections 84 and 85 of the AktG in conjunction with section 31 of the Mitbestimmungsgesetz (MitbestG – German Codetermination Act).
Under Article 20(1) of GEA Group Aktiengesellschaft's Articles of Association, amendments to the Articles of Association may – where legally permissible – be adopted by a simple majority of the share capital represented at the vote. Under Article 21 of the Articles of Association, the Supervisory Board may resolve amendments and additions to the Articles of Association that only affect their wording. In other respects, section 179 of the AktG applies to amendments to the Articles of Association.
In accordance with Article 4(3) of the Articles of Association, the Executive Board is authorized, with the approval of the Supervisory Board, to increase the share capital by up to EUR 77 million by issuing new no-par value shares against cash contributions on one or more occasions until April 23, 2017 (Authorized Capital I) and, in accordance with Article 5(4) of the Articles of Association, to define a starting date for profit rights in this case that differs from the date stipulated by law. The Executive Board is also entitled, with the approval of the Supervisory Board, to exclude fractions from shareholders' preemptive rights. The new shares may also be underwritten by banks with the obligation of offering them to the shareholders for subscription.
In accordance with Article 4(4) of the Articles of Association, the Executive Board is authorized, with the approval of the Supervisory Board, to increase the share capital by up to EUR 72 million by issuing new no-par value shares against cash or noncash contributions on one or more occasions until April 20, 2015 (Authorized Capital II) and, in accordance with Article 5(4) of the Articles of Association, to define a starting date for profit rights in this case that differs from the date stipulated by law. The Executive Board is also entitled, with the approval of the Supervisory Board, to exclude fractions from shareholders' preemptive rights. Furthermore, the Executive Board is authorized, with the approval of the Supervisory Board, to disapply shareholders' preemptive rights in a partial amount of EUR 50 million in the case of capital increases against noncash contributions for the purpose of business combinations or the acquisition of companies, parts of companies, or equity interests in companies. The new shares may also be underwritten by banks with the obligation of offering them to the shareholders for subscription.
In accordance with Article 4(5) of the Articles of Association, the Executive Board is authorized, with the approval of the Supervisory Board, to increase the share capital by up to EUR 99 million by issuing new no-par value shares against cash or noncash contributions on one or more occasions until April 21, 2014 (Authorized Capital III) and, in accordance with Article 5(4) of the Articles of Association, to define a starting date for profit rights in this case that differs from the date stipulated by law. The Executive Board is also authorized, with the approval of the Supervisory Board, to disapply shareholders' preemptive rights in the case of capital increases against noncash contributions for the purpose of business combinations or the acquisition of companies, parts of companies, or equity interests in companies. Furthermore, the Executive Board is authorized, with the approval of the Supervisory Board, to disapply shareholders' preemptive rights in the case of capital increases against cash contributions if the issue price of the new shares does not fall materially below the market price of the same class of shares of the Company at the time the issue price is set. This disapplication of preemptive rights in accordance with sections 203(1) and 186(3) sentence 4 of the AktG is limited to a maximum of 10 percent of the Company's share capital. The limit of 10 percent of the share capital is reduced by the proportion of the share capital attributable to the treasury shares of the Company that are sold during the term of Authorized Capital III while shareholders' preemptive rights are disapplied in accordance with sections 71(1) no. 8 sentence 5 and 186(3) sentence 4 of the AktG. The limit is also reduced by the proportion of the share capital attributable to those shares that are issued to settle bonds with warrants or convertible bonds with an option or conversion right or with an option or conversion obligation, provided that the bonds are issued during the term of Authorized Capital III and shareholders' preemptive rights are disapplied in accordance with section 186(3) sentence 4 of the AktG. Furthermore, the Executive Board is entitled, with the approval of the Supervisory Board, to exclude fractions from shareholders' preemptive rights. The new shares may also be underwritten by banks with the obligation of offering them to the shareholders for subscription.
Furthermore, the Executive Board is authorized, with the approval of the Supervisory Board, to stipulate the further details of the capital increase from Authorized Capital I, II, and III and the terms and conditions of the share issue.
Under a resolution adopted by the Annual General Meeting on April 21, 2010, the share capital was contingently increased by up to EUR 48,659,656.71, comprising up to 18 million bearer shares (Article 4(7) of the Articles of Association). The contingent capital increase will only be implemented to the extent that the holders or creditors of option or conversion rights or persons obliged to convert or exercise options under bonds with warrants or convertible bonds that are issued against cash contributions or guaranteed by the Company or a subordinate group company of the Company up to April 20, 2015, on the basis of the authorization of the Executive Board by the Annual General Meeting resolution dated April 21, 2010, exercise their option or conversion rights or, if they are obliged to convert or exercise options, satisfy their obligation to convert or exercise options, or if GEA Group Aktiengesellschaft exercises its option to grant shares of GEA Group Aktiengesellschaft in full or in part instead of payment of the monetary amount due, and if no cash settlement is granted or own shares or shares of another listed company are used in settlement. New shares will be issued at the option or conversion price to be determined in accordance with the authorizing resolution referred to above. The new shares carry dividend rights from the beginning of the fiscal year in which they are created. The Executive Board is authorized, with the approval of the Supervisory Board, to determine the further details of the implementation of the contingent capital increase.
Under Article 4(6) of the Articles of Association, the share capital was contingently increased by up to EUR 17,339,095.52, comprising up to 6,414,014 bearer shares. In accordance with the Articles of Association, the contingent capital increase serves to grant compensation in shares of the Company to the external shareholders of the former GEA AG, Bochum, in line with the settlement dated January 30, 2012, between the Company on the one hand and on the other hand the applicants as well as the joint representatives of the award proceedings pending before the Dortmund Local Court with the case reference number 20 O 533/99, which will bring the award proceedings related to the control and profit transfer agreement dating from June 29, 1999, between the former Metallgesellschaft AG (now GEA Group AG) and the former GEA AG to a close and increase the previous exchange ratio. The issue of the last tranche of shares on December 3, 2012, in line with the settlement completed the implementation of the capital increase.
Under a resolution adopted by the Annual General Meeting dated April 21, 2010, GEA Group Aktiengesellschaft is authorized to purchase own shares up to a total of 10 percent of the share capital in accordance with section 71(1) no. 8 of the AktG. The authorization is valid until April 20, 2015. The shares may be purchased via the stock exchange or by means of a public purchase offer to all shareholders. The shares may subsequently be used for all purposes allowed by law. In particular they may be redeemed, used to service bonds with warrants or convertible bonds, transferred to third parties as part of business combinations or acquisitions, or disposed of in another manner. Further details on the resolutions on the share buyback adopted by the 2010 Annual General Meeting are available in the invitation to the Annual General Meeting, which was published in the electronic Federal Gazette on March 11, 2010.
The individual lenders of the syndicated credit line (club deal) amounting to EUR 650 million may refuse new drawdowns in the event of a change of control. The lenders may call in any amounts already drawn down and terminate the respective credit line giving 20 days' notice.
In the case of the bond in the amount of EUR 400 million, each bondholder has the right to require the repayment by the issuer of the nominal amount of their bonds, including accrued interest, if there is a change of control and, as a result, the credit rating is revised downwards to non-investment grade within 90 days of the change of control taking effect. To exercise this right to early repayment, the bondholder has to submit an appropriate exercise notice within 45 days of publication of the event by the issuer.
In the event of a change of control, the lenders of borrower's note loans in the total amount of EUR 355 million are entitled to require early repayment of their loan receivable, including interest accrued up to the date of the early repayment. The borrower determines the repayment date, which may not be fewer than 60 days and more than 90 days after the date on which the borrower was informed of the change of control and notified the lenders of this via the paying agent.
In relation to the loan agreements with Kreditanstalt für Wiederaufbau (KfW) in the current amounts of EUR 80 million and EUR 56 million as of December 31, 2012, the borrower is obliged, on written request by KfW, to repay the loan including accrued interest by no later than the date on which the next interest payment is due.
In the case of the loan agreement with the European Investment Bank (EIB) amounting to EUR 150 million, the EIB is entitled to call in the loan and require early repayment including accrued interest in the event of a change of control. In this case, the borrower is obliged to repay the amount on the date specified by the Bank, which may not be earlier than 30 days after the repayment request.
Under a master loan agreement for EUR 235 million, which is primarily used to issue guarantees for subsidiaries, the lender has the right in the event of an imminent change of control to negotiate the continuation of the agreement under changed terms. If no agreement is reached, the master loan agreement will fall due with immediate effect. In this case, the lender must be released from its obligations under guarantees furnished within one month or, at the discretion of the borrower, the latter shall make a cash deposit in the amount of the outstanding obligations under the guarantees furnished.
All Performance Shares under the GEA Performance Share Plan expire in the event of a change of control. Managers who have participated in the plan then receive a compensation payment for the expired Performance Shares. This payment corresponds to the allocated target value in each case.
A change of control within the meaning of these agreements and the GEA Performance Share Plan is deemed to have occurred in particular if a majority of voting rights or shares of the Company are transferred to a single person or group of persons.
Executive Board members' contracts include provisions on the calculation of bonuses in the event of a change of control. Additional details can be found in the remuneration report starting on page 72. Further compensation arrangements with employees have been agreed with regard to the Performance Shares under the GEA Performance Share Plan.
See the "Risk Management System" and "Internal Control System" sections starting on page 82 of the management report.
In accordance with section 317(2) sentence 3 of the HGB, the Corporate Governance Declaration issued pursuant to section 289a of the HGB is not included in the audit of the financial statements.
GEA Group Aktiengesellschaft places great importance on transparent and responsible corporate governance and management with a view to long-term value enhancement. Our activities are based on recognized corporate governance principles and comply to a large extent with the suggestions and recommendations of the German Corporate Governance Code as amended on May 15, 2012 (announced in the Federal Gazette on June 15, 2012). The only deviation from the Code's recommendations referred to the period prior to the amendment to the Code as of May 15, 2012 and concerned the performancerelated remuneration of the Supervisory Board members previously recommended in section 5.4.6(2) sentence 1 of the Code.
On December 13, 2012, the Executive Board and Supervisory Board of GEA Group Aktiengesellschaft issued the following Declaration of Compliance in accordance with section 161 of the Aktiengesetz (AktG - German Stock Corporation Act); the Declaration of Compliance has been made permanently available to the public on the Company's website www.gea.com:
GEA Group Aktiengesellschaft complies and will continue to comply in the future with the recommendations of the German Corporate Governance Code as amended on May 15, 2012.
Since the Declaration of Compliance dated December 15, 2011, GEA Group Aktiengesellschaft has complied with the recommendations of the German Corporate Governance Code, as amended from time to time, with the exception stated below:
The compensation of the Supervisory Board members did not provide for a performance-related component (section 5.4.6(2) sentence 1 of the Code).
Explanation:
The Company believes that a suitable fixed remuneration more appropriately reflects the Supervisory Board's advisory and control function, which must be performed independently of the Company's performance.
Düsseldorf, December 13, 2012
For the Supervisory Board For the Executive Board
Dr. Jürgen Heraeus Jürg Oleas Dr. Stephan Petri
The Executive Board and Supervisory Board have drawn up a Code of Conduct that stipulates that the group's business activities comply with all laws and with high ethical standards. The Code of Conduct is binding on all employees. It is supplemented by guidelines on individual topics, in particular by the group's Anticorruption Guideline. Finally, the Company has agreed codes of conduct with its European Works Council that define ethical, social, and legal standards which are binding on all GEA Group employees. The Code of Conduct, the Anticorruption Guideline and further information are published on GEA Group Aktiengesellschaft's website under Investor Relations/Corporate Governance.
Compliance in the sense of measures to ensure adherence to legal, statutory, and internal policies, as well as compliance therewith by group companies, is considered a key management and supervisory duty at GEA Group. For this purpose, the Company established a compliance organization some years ago. The group-wide compliance organization is headed by the Chief Compliance Officer who reports to the Supervisory Board's Audit Committee in this capacity. The Chief Compliance Officer receives support from the Corporate Compliance Officer. In addition, a Compliance Committee was established in 2010 to advise the Chief Compliance Officer. Furthermore, a Segment Compliance Officer for each segment and a Company Compliance Manager for each operating company have been appointed respectively. In parallel, GEA set up a worldwide export control organization back in 2011; it is also headed by the Chief Compliance Officer who is supported by the Corporate Export Control Officer at group level. A Segment Export Manager for each segment and a Company Export Manager for each operating company have been appointed respectively.
The members of the compliance organization meet regularly to discuss the latest developments and their potential impact and any need to supplement GEA Group's compliance program. At regular intervals, classroom and web-based training sessions are delivered to group employees responsible for compliance; this training covers the rules and regulations contained in the law, the Code of Conduct, and GEA Group's additional compliance guidelines. GEA Group's extensive compliance program is rounded off by direct talks held at a local level between representatives of the compliance organization and local managing directors for evaluating best practices within the group, as well as computer-based IT tools (e.g. for the periodic identification of compliance risks).
Finally, the Company is in the process of setting up an environment, health and safety (EHS) organization; this process was initiated in 2010 and is aimed at developing and implementing group-wide guidelines, programs and procedures in this field.
GEA Group Aktiengesellschaft has grown considerably over the past few years. However, sustainable growth can only be achieved if both the opportunities and risks of business activities are identified and adequately taken into account. An effective control and risk management system is therefore one of the core elements of corporate governance at GEA Group Aktiengesellschaft. Further information on this is available on pages 82 ff. of this Annual Report.
GEA Group Aktiengesellschaft is committed to transparent reporting. The Company's consolidated financial statements and quarterly reports are prepared in accordance with the International Financial Reporting Standards (IFRS) as adopted by the European Union. The legally required single entity financial statements of GEA Group Aktiengesellschaft on which the dividend payment is based are prepared in accordance with the Handelsgesetzbuch (HGB – German Commercial Code). The Supervisory Board engages the external auditor elected by the Annual General Meeting. The Audit Committee gives particular attention to the surveillance of the accounting process, the effectiveness of the internal control, risk management and internal audit systems, as well as the audit of financial statements and compliance; moreover, it agrees the key audit areas with the auditor and determines the audit fee, while ensuring that the auditor's work is not compromised by any conflicts of interest and that the auditor immediately reports on all significant findings and events relevant to the tasks of the Supervisory Board that have come to the attention of the auditor in the course of the audit. In addition to the consolidated and annual financial statements, the Audit Committee also discusses the half-yearly and quarterly reports with the Executive Board.
GEA Group Aktiengesellschaft communicates openly, actively, and in detail. It regularly and promptly informs shareholders, shareholders' associations, analysts, and interested members of the public on equal terms about the Company's position and significant changes to its business. The Company's website is an important means of communication in this particular respect. It contains the annual and interim reports, press releases, ad hoc disclosures and other publications required under the Wertpapierhandelsgesetz (WpHG – German Securities Trading Act), as well as the financial calendar and other relevant information in German and English. The group also holds regular analyst meetings, press conferences, and events for investors. All presentations made at these events can also be downloaded from our website under "Investor Relations".
Under section 15a WpHG, Executive Board and Supervisory Board members as well as their related parties are obliged to disclose reportable transactions in shares of GEA Group Aktiengesellschaft or related financial instruments if the transactions concluded in a calendar year reach or exceed the threshold of EUR 5,000. The five transactions reported to the Company in fiscal year 2012 were published on the Company's website.
The total number of GEA Group Aktiengesellschaft shares held by all Executive Board and Supervisory Board members amounts to less than 1 percent of the shares issued by the Company.
With effect from July 1, 2006, GEA Group Aktiengesellschaft launched a long-term, share price-based remuneration program called "GEA Performance Share Plan" for managers in the first two contract levels below the Executive Board. In fiscal year 2008, this plan was extended to include managers on the third contract level. Details are available on page 59 and in note 7.3.4 (see page 158 f.)to the consolidated financial statements.
The Executive Board of GEA Group Aktiengesellschaft, which comprises four members with effect from June 1, 2012, is the group's management body. The Supervisory Board – which is composed of twelve members, half of whom are shareholder representatives and half employee representatives – advises the Executive Board and oversees its work. The Executive Board and Supervisory Board cooperate closely for the benefit of the Company; their common goal is a sustainable increase in enterprise value.
The Executive Board reports regularly, promptly, and extensively to the Supervisory Board on all issues relating to strategy, planning, business development, the risk position, the risk management system, and compliance that are relevant to the Company. The Articles of Association and the rules of procedure specify key transactions that require the Supervisory Board's approval. Further information on individual members of the Executive Board can be found on pages 8 and 205 of this Annual Report.
The Supervisory Board advises the Executive Board on the management of the Company and supervises its conduct of the Company's business. The Supervisory Board usually holds 5 meetings per calendar year, which are attended by the Executive Board members unless the Chairman of the Supervisory Board determines otherwise. As a rule, the Supervisory Board's resolutions are adopted at these meetings. Unless the majority of Supervisory Board members immediately object, the Chairman of the Supervisory Board can instruct the members to adopt resolutions in the course of a conference call or a video conference or outside meetings by casting their votes in writing, text form or by telephone. Resolutions require a simple majority of the votes cast unless a different majority is stipulated by law.
When appointing members of the Executive Board and proposing candidates for election to the Supervisory Board, the Supervisory Board and its committees take into account a balanced mix of specialist expertise and personal attributes as well as the need for diversity.
On December 13, 2012, the Supervisory Board redefined its targets relating to its own composition, in particular with a view to the revised version of section 5.4.1 of the German Corporate Governance Code, as amended on May 15, 2012. Thus, the revised version of section 5.4.1 of the German Corporate Governance Code recommends that the target composition of the Supervisory Board should also comprise the number of independent members within the meaning of section 5.4.2 of the German Corporate Governance Code.
According to the new target composition adopted on December 13, 2012, the Supervisory Board members shall continue to have the knowledge, skills and specialist expertise required to ensure the proper performance of their duties. In this context, the Supervisory Board also pays attention to industry knowledge, an adequate number of independent members, international experience as well as an appropriate consideration of women. With a view to the best interests of the Company, the decisive criterion for appointments shall always be the specialist expertise and personal suitability of the respective candidate.
During its current term of office, the Supervisory Board will seek to achieve the following specific objectives:
(1) The current number of international Supervisory Board members is to be maintained, at least at its current level. (2) The current number of female Supervisory Board members is to be maintained, at least at its current level. (3) As a rule, no person exceeding the age of 70 at the date of the Annual General Meeting, which is to decide on the composition of the Supervisory Board, shall be proposed for election. (4) The Supervisory Board shall comprise an adequate number of independent members. The Supervisory Board will seek to ensure that a minimum of two thirds of the shareholder representatives is independent within the meaning of the definition under section 5.4.2 sentence 2 of the German Corporate Governance Code.
In addition, the policies governing the management of conflicts of interest, which are set forth in the Rules of Procedure, will be taken into consideration. According to these rules, each member of the Supervisory Board is obliged to disclose potential conflicts of interest to the Supervisory Board. Material conflicts of interest that are not merely temporary in respect of the person of a Supervisory Board member shall result in the termination of his/her mandate. Currently the Supervisory Board considers the target composition as achieved.
The term of office of Prof. Dr. Werner Bauer, who had been appointed member of the Supervisory Board by the court, finished at the end of the Annual General Meeting on April 24, 2012. Following the recommendation of the Supervisory Board, the Annual General Meeting elected Prof. Dr. Werner Bauer to the Supervisory Board as a shareholder representative on April 24, 2012. His term will expire at the end of the Annual General Meeting resolving on the ratification of the acts of the members of the Supervisory Board for fiscal year 2015. On June 21, 2012, Prof. Dr. Werner Bauer was elected to serve on the Nomination Committee of the Supervisory Board pursuant to a resolution passed by the shareholder representatives on the Supervisory Board.
The Supervisory Board's work is supported by committees. These are primarily the Presiding Committee and the Audit Committee, as well as the statutory Mediation Committee and the Nomination Committee recommended by the German Corporate Governance Code. The Presiding Committee, the Audit Committee, and the Mediation Committee each comprise four members and feature equal representation of shareholders and employees. The Nomination Committee consists of three members who are exclusively shareholder representatives in accordance with section 5.3.3 of the German Corporate Governance Code.
The Presiding Committee and the Audit Committee usually meet four times during a calendar year. Resolutions by the Presiding Committee and the Audit Committee are adopted at meetings by a simple majority of the votes cast, or outside meetings by a simple majority of the members. If a vote is tied, the respective chairman has a second vote on the same resolution if another vote is held. The Nomination Committee and the Mediation Committee only hold meetings when required.
The duties of the Presiding Committee, which is chaired by the Chairman of the Supervisory Board, include preparing the Supervisory Board meetings. In particular, the Presiding Committee is also responsible for defining the legal relationships between the Company and the individual Executive Board members, as well as for succession planning for the Executive Board. Decisions on the Executive Board remuneration system, the total remuneration of the individual Executive Board members, as well as their appointment and dismissal are to be taken by the full Supervisory Board.
The Audit Committee, whose chairman has special knowledge and experience in applying financial reporting standards and systems of internal control, is primarily responsible for monitoring the financial reporting process, as well as dealing with matters regarding the efficiency of the internal control system, the risk management system, the internal audit, and the audit of the financial statements. In addition, it monitors compliance with key legislation and official regulations, as well as internal guidelines including GEA Group's Code of Conduct (compliance).
The Mediation Committee's duties are laid down in sections 27 and 31 of the Mitbestimmungsgesetz (MitbestG – German Co-determination Act). The Nomination Committee's task is to propose suitable candidates to the Supervisory Board based upon which the latter submits its nominations to the Annual General Meeting.
Further information on the composition of the Supervisory Board and its committees can be found on pages 205 and 206 of this Annual Report. In addition, the Report of the Supervisory Board on pages 201 ff. of this Annual Report gives further details on the activities of the Supervisory Board and its committees in the year under review 2012.
Following the recommendation of the Presiding Committee, the Supervisory Board determines the total remuneration of the individual Executive Board members and resolves on the remuneration system applicable to the Executive Board. The Supervisory Board reviews the appropriateness of the remuneration at regular intervals. Criteria for determining the appropriateness of the remuneration include the responsibilities of the individual Executive Board members, their respective personal performance, the economic situation, the success and the future prospects of the Company as well as the customary rate of remuneration on the basis of benchmarking.
Creating an incentive geared towards successful and sustainable corporate governance represents an essential element of any decision taken with regard to the remuneration system. The latter is to ensure that the Executive Board members strive for the long-term success of the Company and participate in a subsequent sustainable value enhancement. For this reason, a significant part of total remuneration is tied to GEA's share performance as well as key performance indicators, in particular a combination of cash flow aspects and the return on capital employed (ROCE), i.e. a ratio for measuring return on capital. This ensures that outstanding performance is adequately rewarded and non-accomplishment of set targets results in a reduction in remuneration.
Following consultation with an external expert who provided advice on realigning the variable remuneration system in the light of market trends, the Supervisory Board adopted a new variable remuneration system in December 2011. In particular, the Supervisory Board sought ways to provide for an even greater balance of the risk and opportunity profile from the shareholders' and Executive Board's perspective and to enhance the sustainability of the remuneration system by separating the short-term and long-term bonus elements. In addition, the objective was to develop a remuneration system that can be transferred more easily to the management levels below the Executive Board, thereby guaranteeing a better steering of business operations.
On April 24, 2012, the Annual General Meeting approved the remuneration system by a large majority after the Chairman of the Supervisory Board had provided detailed information on its key features to the Annual General Meeting.
In fiscal year 2012, the remuneration of the Executive Board members was composed of the following fixed and variable components:
The non-performance-related component of remuneration consists of a fixed annual salary that is paid in twelve equal amounts at the end of each calendar month.
The fixed annual salary paid to Jürg Oleas in the year under review amounted to EUR 1,250 thousand. Dr. Helmut Schmale's fixed annual salary was EUR 625 thousand until March 31, 2012, and increased to EUR 675 thousand as of April 1, 2012. Until July 31, 2012, Niels Graugaard's fixed annual salary totaled EUR 621 thousand and was raised to EUR 642,735 as of August 1, 2012. Dr. Stephan Petri, who was appointed Executive Board member with effect from June 1, 2012, draws a fixed annual salary in the amount of EUR 550 thousand.
In addition, the Executive Board members receive non-cash benefits that mainly comprise the value of the company car use in accordance with tax regulations, accident insurance premiums, and – for Niels Graugaard – the reimbursement of costs incurred for the maintenance of two households and for flights home to his place of residence.
In addition, each member of the Executive Board receives a variable annual remuneration (bonus) whose level depends on the achievement of specific targets determined by the Supervisory Board. In terms of a target achievement of 100 percent, the level of variable remuneration equals that of the fixed remuneration component (target bonus). To ensure that both positive and negative developments are taken into account, the proportion of variable remuneration increases or decreases in the event of over- or under-performance.
The variable remuneration consists of three components. They comprise both one-year and multi-year criteria for evaluation. Each of the three components provides for a maximum amount. Furthermore, all bonus components applicable to a specific fiscal year are limited to 240 percent of the target bonus (overall cap).
At its own discretion, the Supervisory Board takes into account extraordinary events and developments which indicate that a readjustment of the respective mathematically derived value is appropriate.
The individual component of variable remuneration is payable with the next regular salary payment following the date of the Supervisory Board meeting convened to adopt the financial statements for the preceding fiscal year. Its amount is calculated on the basis of 3 to 5 personal annual targets determined for the respective fiscal year by the Supervisory Board. When determining these individual targets, the Supervisory Board bases its decision on the sustainability of corporate governance, in particular. The Supervisory Board's definition of the individual targets also includes their respective weighting.
Under the variable remuneration component, the individual component has a weighting of 40 percent, i.e. 40 percent of the variable remuneration (target amount) are payable if 100 percent of the target set in relation to the individual component are achieved. The overall degree of target achievement and, thus, the amount paid out under the individual component, is limited to 200 percent of the target amount (cap).
After the end of the fiscal year, the Supervisory Board decides on the degree of target achievement. For 2012, the Supervisory Board has ascertained a 75 percent degree of target achievement for the Executive Board members.
The multi-year component is payable with the next regular salary payment following the date of the Supervisory Board meeting convened to adopt the financial statements for the preceding fiscal year. Performance measurement under the multi-year component takes place retrospectively for the previous three fiscal years. The period of assessment covers the respective fiscal year just ended, as well as the two preceding fiscal years. Criteria for evaluation are tied to key performance indicators embracing a combination of cash flow aspects (so called cash flow driver margin) and the return on capital employed (ROCE).
The "cash flow driver margin" (CFDM) target is a simplified cash flow indicator (EBITDA minus capital expenditure in property, plant and equipment as well as intangible assets (capex) minus change in working capital on a 12-month average) calculated as a ratio of revenue. The CFDM actually generated is calculated based on average values over a period of three years. The degree of target achievement results from a comparison between the achieved cash flow driver margin and the target value or target achievement corridor defined by the Supervisory Board: As to 2012, 100 percent of the target is achieved if the group's CFDM during the three-year period averages 8 percent. If the CFDM is lower or higher, the degree of target achievement will go up or down, accordingly. In this context, a CFDM that is less than or equal to 4.5 percent is equivalent to a target achievement of zero percent, while a CFDM that is greater than or equal to 13.5 percent represents a maximum target achievement of 250 percent.
The amount of the ROCE component (ROCE: return on capital employed – excluding the effects of the acquisition of the former GEA AG by the former Metallgesellschaft AG in 1999), which is calculated based on average values over a period of three years, corresponds to the ratio of earnings before interest and taxes (EBIT) to the capital employed. The degree of target achievement depends on the actual ROCE achieved compared with the target value or target achievement corridor of +/- 5 percentage points defined by the Supervisory Board. As to 2012, 100 percent of the target is achieved if the group's ROCE averages 19 percent during the three-year period. If the actual ROCE ratio is greater than or less than this level, but within the defined corridor of +/- 5 percentage points, the degree of target achievement is increased or reduced by up to 50 percentage points.
For calculating the overall degree of target achievement, the respective degrees of target achievement relevant to the individual key performance indicators CFDM and ROCE are multiplied. Under the variable remuneration component, the multi-year component has a weighting of 40 percent, i.e. 40 percent of variable remuneration are payable (target amount) if 100 percent of the target set in relation to the multi-year component are achieved. The overall degree of target achievement and, thus, the amount paid out under the multi-year component, is limited to 250 percent of this target amount (cap).
As to the variable remuneration awarded in 2012, the overall degree of target achievement under the multi-year component amounted to 71.4 percent, with a target achievement of the CFDM totaling 86.0 percent and of the ROCE amounting to 83.0 percent in the year under review.
The long-term share price component is payable at the end of a three-year performance period with the next regular salary payment following the date of the Supervisory Board meeting convened to adopt the financial statements for the preceding fiscal year. Performance measurement relating to the longterm share price component is conducted by taking a forward-looking approach. The period of assessment covers a three-year performance period including the relevant fiscal year as well as the two subsequent fiscal years.
Under the variable remuneration component, the long-term share price component has a weighting of 20 percent, i.e. 20 percent of variable remuneration are payable (target amount) if 100 percent of the set target are achieved. The overall degree of target achievement and, thus, the amount paid out under the long-term share price component is limited to 300 percent of the target amount (cap).
Performance measurement for the relevant three-year period is conducted by means of a comparison between the performance of GEA shares (adjusted for dividends) and the performance of the STOXX® Europe TMI Industrial Engineering index (TMI IE), in which a large number of European industrial firms are listed. The starting value is computed on the basis of the respective arithmetic mean closing prices on the last 20 trading days preceding the start of the three-year performance period. 100 percent of the target is met if the evolution of the daily arithmetic mean closing prices of GEA's share fully (i.e. 100%) corresponds to the relevant TMI performance. In the event of outperformance of more than 100 percent, the amount paid out rises to a maximum of 300 percent of the target amount. If the increase in GEA's share price over the three-year period is less than 100 percent of the growth in the TMI IE, the amount payable is reduced accordingly up to a performance of 75 percent: For each percentage point higher or lower than a 100 percent performance, the degree of target achievement will rise or fall by 4 percent (subject to the 300 percent cap). Should GEA shares have dropped, the Supervisory Board may still award a payment if GEA shares have nonetheless outperformed the TMI IE.
In the year under review, no payment under the long-term share price component was made, as the latter is measured over the three-year period between 2012 and 2014. A first payment is scheduled for fiscal year 2015. As of December 31, 2012, the computed degree of target achievement amounted to 93.88 percent.
The following table summarizes the respective weighting and assessment periods applicable to the variable components:
| Variable remuneration | Assessment period | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| component | Target | Weighting | Cap | Overall cap | 2010 | 2011 | 2012 | 2013 | 2014 |
| Individual component | Personal targets | 40% | 200% | One year | |||||
| Multi-year component | Combination of cash flow driver margin and ROCE |
40% | 250% | 240% | Retrospective (3 years) | ||||
| Long-term share price component |
Share price in relation to TMI IE |
20% | 300% | Forward-looking (3 years) |
The Annual Report 2011 provided a detailed account of the remuneration system applicable until the end of fiscal year 2011. To provide a better understanding of the following table which sets out the total amount of the remuneration (see page 80), the remuneration system applicable in 2011 is outlined below.
The remuneration of the Executive Board members in 2011 was composed of non-performance-related and performance-related components as follows:
Half of the calculated bonus was payable at the first payroll date following the Supervisory Board meeting convened to adopt the annual financial statements for the preceding year ("short-term bonus"). In the event of target overachievement, this portion of the bonus was limited to 75 percent of the annual basic bonus (cap 1). For the purpose of aligning remuneration with sustainability and creating a long-term incentive effect, the other half of the calculated bonus was converted into phantom shares in the Company, and their payment amount was determined on expiry of a holding period of three years. The amount payable ("long-term bonus") was limited to 300 percent of the annual basic bonus (cap 2). The combined total of short-term and long-term bonuses was in all cases limited to 375 percent of the basic bonus for the fiscal year to which the bonus related.
The contractual pension benefit of the Chairman of the Executive Board, Jürg Oleas, is a maximum of EUR 360 thousand p.a., with full entitlement to the pension arising after 18 years of service (end of April 2019). Under this agreement, Mr. Oleas' pension is paid if his Executive Board contract ends when or after he reaches the age of 62 or if he becomes permanently unable to work. If Jürg Oleas' Executive Board contract ends before he reaches 18 years of service, he will have a vested entitlement to a pro rata annual pension payable once he reaches the age of 62. The respective amount is calculated based on the ratio of his actual years of service to the period of 18 years of service. If Jürg Oleas leaves after at least 15 years of service but before reaching the age of 62, he will receive a pension in the form of a transitional benefit of EUR 220 thousand p.a. until he reaches the age of 62; his pension will be reduced by up to half of the transitional benefit for the year in question for any severance payment and any other income from new activities that he may have commenced after leaving the Company. The ongoing pension is adjusted annually in line with the consumer price index.
The surviving dependents' benefits defined in Jürg Oleas' contract mainly provide for a lifelong widow's pension and an orphan's pension. The lifelong widow's pension amounts to 60 percent of the annual retirement pension. The orphan's pension is a specific percentage of the retirement pension and its amount depends on the number of children and on whether they are full or half orphans. Entitlement to an orphan's pension generally expires on reaching the age of 18, or at the latest on reaching the age of 25 if the child in question is still at school or in vocational or professional training. Collectively, widow's and orphan's pensions must not exceed the amount of the retirement pension.
The contractual pension benefit of the Chief Financial Officer, Dr. Helmut Schmale, is a maximum of EUR 200 thousand p.a. Under this arrangement, a pension will be paid if the Executive Board contract ends when or after Dr. Helmut Schmale reaches the age of 62 or if he becomes permanently unable to work. Should Dr. Helmut Schmale's Executive Board contract end before one of the above conditions for payment of his pension is met, he will have a vested entitlement to a pro rata annual pension that becomes payable once he reaches the age of 62. The amount of this pension is calculated based on the ratio of his actual term of service to the maximum possible term of service before reaching the age of 62. The ongoing pension is adjusted annually in line with the consumer price index.
Pension subsidies of up to half of the income threshold for contribution assessment under the statutory pension insurance scheme are granted to Dr. Helmut Schmale against evidence of the costs incurred.
In addition, Dr. Helmut Schmale is entitled to make a personal contribution per fiscal year to a deferred compensation pension scheme for Executive Board members. No employer subsidy is paid.
The surviving dependents' benefits defined in Dr. Helmut Schmale's contract are in line with the provisions outlined above in relation to Jürg Oleas.
Instead of pension benefits, Niels Graugaard receives a non-recurrent payment in the amount of EUR 890 thousand, which was approved in fiscal year 2012, as well as 12.5 percent of his fixed annual salary for a private pension insurance scheme. The above non-recurrent payment is due upon his retirement from the Executive Board after the Annual General Meeting in 2013, and the payment of 12.5 percent of his fixed salary is limited to the term of his service contract. In addition, Niels Graugaard is entitled to make a personal contribution per fiscal year to a deferred compensation pension scheme for Executive Board members. No employer subsidy is paid.
As of December 2011, the Supervisory has decided to adjust the pension provisions for members of the Executive Board. Such adjustment was aimed at creating a comparable amount of the respective pension entitlement. Based on this, regarding the pension entitlement of Niels Graugaard it was resolved that his existing pension scheme shall be increased by a one time payment of EUR 890 thousand. This amount will be paid out in April 2013 and will be reduced by EUR 20 thousand for every month by which Niels Graugaard resigns prior April 2013. As of December 31, 2012 the present value of the pension benefit amounted to 877,198.
The contractual pension benefit of Dr. Stephan Petri, who was appointed Executive Board member on June 1, 2012, is a maximum of EUR 200 thousand p.a. Under this arrangement, a pension will be paid if the Executive Board contract ends when or after Dr. Stephan Petri reaches the age of 62 or if he becomes permanently unable to work. Should Dr. Stephan Petri's Executive Board contract end before one of the above conditions for payment of his pension is met, he will have a vested entitlement to a maximum annual pension of 200 thousand which may be reduced subject to the actual term of his Executive Board contract and becomes payable once he reaches the age of 62. The ongoing pension is adjusted annually in line with the consumer price index.
Pension subsidies of up to half of the income threshold for contribution assessment under the statutory pension insurance scheme or one of the pension schemes for the liberal professions are granted to Dr. Stephan Petri against evidence of the costs incurred. In addition, Dr. Stephan Petri is entitled to pension benefits based on his personal contributions to a deferred compensation pension under the GEA management pension scheme prior to becoming a member of the Executive Board.
In addition, Dr. Stephan Petri is entitled to make a personal contribution per fiscal year to a deferred compensation pension scheme for Executive Board members. No employer subsidy is paid.
The surviving dependents' benefits defined in Dr. Stephan Petri's contract are in line with the provisions outlined above in relation to Jürg Oleas.
The Company has recognized pension provisions for the future entitlements of Executive Board members. The amounts added to these pension provisions for active Executive Board members in accordance with IFRS are listed individually in the table below as at the end of fiscal year 2012. The corresponding amounts comprise service cost and interest cost.
| Dr. Stephan Petri * Total |
233,855 809,625 |
97,855 494,327 |
854,142 2,235,801 |
3,780,283 15,136,188 |
|---|---|---|---|---|
| Niels Graugaard | – | – | 789,132 | 877,198 |
| Niels Graugaard * | 15,770 | 15,770 | 5,465 | 218,724 |
| Dr. Helmut Schmale | 200,000 | 154,693 | 204,773 | 3,875,641 |
| Jürg Oleas | 360,000 | 226,009 | 382,289 | 6,384,342 |
| (EUR) | Pension benefit p.a. (as of 12/31/2012) (annual entitlement at start of pension) |
Pension entitlements p.a. earned as of 12/31/2012 |
Additions to pension provisions in fiscal year 2012 |
Present value of pension benefits as of 12/31/2012 |
*) Niels Graugaard's pension benefit is based on his personal contributions to a deferred compensation pension scheme and will be paid out on the date of his retirement in the form of a capital lump sum. Dr. Stephan Petri is, besides his entitlement as member of the Executive Board to a pension benefit of EUR 200,000, entitled to an amount of 33,855 EUR based on his personal contributions to a deferred compensation pension under the GEA management pension scheme prior to becoming a member of the Executive Board.
In fiscal year 2012, former members of the Executive Board and their surviving dependents received remuneration of EUR 5,039 thousand (previous year: EUR 5,062 thousand) from GEA Group. As of December 31, 2012, GEA Group had set up pension provisions totaling EUR 63,389 thousand (previous year: EUR 50,603 thousand) for former Executive Board members and their surviving dependents.
The Chairman of the Executive Board has a unilateral right of termination if the Supervisory Board revokes his appointment as Chairman of the Executive Board. Should he exercise his unilateral right of termination and leave the Executive Board, he is entitled to receive the corresponding fixed salary for the remaining months of his contractual term up to a maximum period of 8 months.
If the appointment of an Executive Board member is revoked for good cause with legal effect in accordance with section 84(3) of the Aktiengesetz (AktG - German Stock Corporation Act) or an Executive Board member validly resigns his office in accordance with section 84(3) of the AktG, the Executive Board member's service contract ends on expiry of the statutory notice period under section 622(1), (2) of the Bürgerliches Gesetzbuch (BGB - German Civil Code).
In this event, the respective Executive Board member first of all receives the bonus he has earned and is entitled to up to the date of his departure. For calculating this bonus, an overall degree of target achievement is ascertained in relation to the individual component on the basis of the targets achieved by the Executive Board member up to the time of his departure. Subsequently, the corresponding pro-rata bonus under the individual component is calculated by setting up the ratio of this overall degree of target achievement to the target amount set for the entire fiscal year. The pro-rata bonus under the multi-year component for the relevant fiscal year is computed by applying the principle of pro rata temporis. As for annual tranches outstanding under the long-term share price component, a distinction is made between annual tranches in relation to which the first fiscal year (one-year vesting period) of the three-year performance period has not yet passed, and annual tranches in relation to which the first fiscal year (one-year vesting period) has already passed. In the latter case, the pro-rata bonus is fully vested and calculated without applying the principle of pro rata temporis, whereupon it will be paid out after the three-year performance period has elapsed. If the first fiscal year (one-year vesting period) has not yet passed, the pro-rata bonus is ascertained by applying the principle of pro rata temporis (ratio of the actual period of service attained during the one-year vesting period to the full relevant one-year vesting period), whereupon it will be paid out after the three-year performance period.
In addition, the Executive Board member concerned receives a severance payment amounting to the total remuneration agreed for the rest of the contractual term as a compensation for his premature departure from the Company. For calculating the corresponding bonus entitlement, an 85 percent degree of target achievement is assumed in relation to the respective target amounts set for bonus entitlements that have not yet vested and have been accrued over the course of the current year or further years, as the case may be. The total remuneration for the remaining term is limited to a maximum of two full years of remuneration (severance payment cap). In calculating the cap on severance payment, reference is made to the Executive Board member's respective total annual remuneration received during the two calendar years preceding the termination of the service contract.
If the Executive Board contract is unilaterally terminated without good cause or terminated by the Company for good cause, any and all outstanding annual tranches not paid out under the long-term share price component will be forfeited. Moreover, there is no entitlement to any severance payment in the event of the Company exercising its right of lawful extraordinary termination of the Executive Board contract.
In the event of a change of control, the Executive Board member can opt for an early payment at target value of any outstanding, fully vested tranches under the share price component. This option shall apply regardless of whether or not the respective Executive Board member leaves the Company in connection with the change of control event. A change of control is deemed to have occurred as soon as the Company is notified that a shareholder has reached or exceeded 50 percent or 75 percent of the Company's voting rights in accordance with section 21 of the Wertpapierhandelsgesetz (WpHG - German Securities Trading Act), an intercompany agreement is entered into with the Company as a dependent company in accordance with sections 291 ff. of the AktG, or absorption under section 319 of the AktG or a change of legal form of the Company in accordance with the Umwandlungsgesetz (UmwG - German Reorganization Act) is resolved with legal effect. In the event of a change of control, the Executive Board members have no right to unilaterally terminate their contracts.
In the year 2012, the total remuneration paid to active Executive Board members of GEA Group Aktiengesellschaft amounted to EUR 5,177,640 and comprised both a fixed component of EUR 2,863,389 and a variable bonus of EUR 2,078,764. The bonus attributable to the long-term share price component is based on the fair value at grant date (March 8, 2012) and amounted to EUR 175,475 for Jürg Oleas, EUR 93,002 for Dr. Helmut Schmale, EUR 88,447 for Niels Graugaard and EUR 45,039 for Dr. Stephan Petri, i.e. a total of EUR 401,963 in the year under review.
In fiscal year 2011, the total remuneration paid to active Executive Board members amounted to EUR 6,304,783 and comprised both a fixed component of EUR 2,483,750 and a variable bonus of EUR 3,597,298, of which only half (EUR 1,798,649) was paid out in fiscal year 2012. The other half will be paid out as a long-term bonus after the expiry of a three-year holding period subject to the performance of the Company's shares.
| Fixed | Noncash | Pension | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| (EUR) | remuneration | Variable component (2012) | Variable component (2011) | benefits | subsidies | Total | ||||
| Individual component |
Multi-year component |
Long-term share price based component 1 |
Bonus 2 | Number of Phantom Shares awarded as LTI 3 |
Value of LTI 3 | |||||
| Jürg Oleas | 1,250,000 | 375,000 | 357,000 | 175,475 | – | – | – | 29,658 | – | 2,187,133 |
| prior year | 1,250,000 | – | – | – | 905,208 | 40,997 | 905,208 | 31,644 | – | 3,092,061 |
| Dr. Helmut Schmale | 662,500 | 198,750 | 189,210 | 93,002 | – | – | – | 37,573 | 6,448 | 1,187,483 |
| prior year | 625,000 | – | – | – | 452,604 | 20,498 | 452,604 | 26,763 | 6,448 | 1,563,419 |
| Niels Graugaard | 630,056 | 189,017 | 179,944 | 88,447 | – | – | – | 73,096 | 78,757 | 1,239,317 |
| prior year | 608,750 | – | – | – | 440,836 | 19,965 | 440,837 | 82,787 | 76,094 | 1,649,304 |
| Dr. Stephan Petri 4 | 320,833 | 96,250 | 91,630 | 45,039 | – | – | – | 6,113 | 3,842 | 563,707 |
| prior year | – | – | – | – | – | – | – | – | – | – |
| Total | 2,863,389 | 859,017 | 817,784 | 401,963 | – | – | – | 146,440 | 89,047 | 5,177,640 |
| prior year | 2,483,750 | – | – | – | 1,798,649 | 81,460 | 1,798,649 | 141,194 | 82,542 | 6,304,783 |
1) In the year under review, no payment under the long-term share price component was made, as it is measured over a three-year period between 2012 and 2014. The bonus attributable to the long-term share price component is based on the fair value at grant date (March 8, 2012).
2) Paid out after the end of the respective fiscal year
3) LTI = Long-term incentive = long-term bonus paid out following the expiry of a three-year holding period subject to the performance of GEA shares
4) Due to his participation in the GEA Performance Share Plan (Tranche 2009) during his position as Head of the Legal Department, Dr. Stephan Petri received an additional amount of 110,866.47 EUR. In addition,
Dr. Stephan Petri receives a bonus in the amount of 66,121.59 for the period between January 1, 2012 and May 31, 2012.
The share-based remuneration component applicable to the Executive Board comprised the long-term share price component in fiscal year 2012. Detailed information on existing entitlements of Executive Board members under these remuneration components is outlined in the table below.
| Long-term share price based component (EUR) |
Fair value (end of period) 12/31/2012 |
Fair value at grant date 03/08/2012 |
|---|---|---|
| Jürg Oleas | 121,225 | 175,475 |
| Dr. Helmut Schmale | 64,249 | 93,002 |
| Niels Graugaard | 61,103 | 88,447 |
| Dr. Stephan Petri | 31,114 | 45,039 |
| Total | 277,691 | 401,963 |
In the fiscal years 2010 and 2011 the share-based remuneration component comprised of phantom shares (see page 74 f). Detailed information on existing entitlements of Executive Board members under these remuneration components is outlined in the table below.
| Phantom Shares | Number of awarded shares | Fair value (EUR) | |
|---|---|---|---|
| 2010 / 2011 | 2012 | 2011 | |
| Jürg Oleas | |||
| Tranche 2010 (granted in 2010) | 26,589 | 675,892 | 591,605 |
| Tranche 2011 (granted in 2011) | 40,997 | 1,025,745 | 895,784 |
| Dr. Helmut Schmale | |||
| Tranche 2010 (granted in 2010) | 16,120 | 409,770 | 358,670 |
| Tranche 2011 (granted in 2011) | 20,498 | 512,860 | 447,881 |
| Niels Graugaard | |||
| Tranche 2010 (granted in 2010) | 15,178 | 385,825 | 337,711 |
| Tranche 2011 (granted in 2011) | 19,965 | 499,524 | 436,235 |
| Total | 139,347 | 3,509,616 | 3,067,886 |
In fiscal year 2012, the expenditure for share-based remuneration recognized in the consolidated IFRS financial statements (i.e. the sum of the fair value as of December 31, 2012 of the share-based remuneration granted in the fiscal year and the change of the fair value of claims under the long-term share price component in the respective fiscal year) amounted to EUR 335 thousand for Jürg Oleas (previous year EUR 912 thousand), EUR 195 thousand for Dr. Helmut Schmale EUR 180 thousand (previous year EUR 458 thousand), EUR 173 thousand for Niels Graugaard (previous year EUR 446 thousand) and EUR 31 thousand for Dr. Stephan Petri.
Further information on the awarded phantom shares and the long-term share price component is outlined in note 7.3.4 (see page 160 f.) to the consolidated financial statements.
The remuneration of the Supervisory Board members comprises solely a fixed base salary. The Supervisory board's remuneration does not include any performance-related component.
In the year under review, the expenses incurred for the Supervisory Board amounted to EUR 1,152 thousand (previous year EUR 1,147 thousand). Under section 15(1) of the Articles of Association, each member of the Supervisory Board receives fixed annual remuneration of EUR 50 thousand payable after the end of each fiscal year, in addition to the reimbursement of expenses. The Chairman of the Supervisory Board receives two and a half times this amount, and his deputy one and a half times this amount. In accordance with section 15(2) of the Articles of Association, the members of the Presiding Committee and the Audit Committee each receive an additional EUR 35 thousand. The chairman of each of these committees receives double the amount. No separate remuneration is paid to members of the Mediation Committee and the Nomination Committee. Members who join or leave the Supervisory Board or its committees during the year are only paid pro rata for the period of their membership. Under section 15(3) of the Articles of Association, the Supervisory Board members also receive an attendance fee of EUR 1 thousand for each meeting of the Supervisory Board, the Presiding Committee and the Audit Committee that they have attended.
The following table shows the individual remuneration and its respective components for members of the Supervisory Board, the Presiding Committee and the Audit Committee for 2012 compared with the previous year:
| Supervisory Board |
Presiding Committee |
Audit Committee |
|||
|---|---|---|---|---|---|
| (EUR) | remuneration | remuneration | remuneration | Attendance fees | Totals |
| Dr. Heraeus | 125,000 | 70,000 | 35,000 | 12,000 | 242,000 |
| Prior Year | 125,000 | 70,000 | 35,000 | 15,000 | 245,000 |
| Siegers * | 75,000 | 35,000 | – | 10,000 | 120,000 |
| Prior Year | 75,000 | 35,000 | – | 7,000 | 117,000 |
| Ammer | – | – | – | – | – |
| Prior Year (until 07/07/2011) | 25,000 | – | – | 2,000 | 27,000 |
| Bastaki | 50,000 | – | – | 5,000 | 55,000 |
| Prior Year | 50,000 | – | – | 3,000 | 53,000 |
| Prof. Dr. Bauer | 50,000 | – | – | 6,000 | 56,000 |
| Prior Year (since 08/04/2011) | 20,833 | – | – | 1,000 | 21,833 |
| Eberlein | 50,000 | – | 70,000 | 10,000 | 130,000 |
| Prior Year | 50,000 | – | 46,667 | 9,000 | 105,667 |
| Gröbel * | 50,000 | 35,000 | – | 10,000 | 95,000 |
| Prior Year | 50,000 | 35,000 | – | 11,000 | 96,000 |
| Hunger * | 50,000 | – | 35,000 | 11,000 | 96,000 |
| Prior Year | 50,000 | – | 23,333 | 9,000 | 82,333 |
| Kämpfert | 50,000 | – | – | 6,000 | 56,000 |
| Prior Year | 50,000 | – | – | 6,000 | 56,000 |
| Kerkemeier * | 50,000 | – | – | 6,000 | 56,000 |
| Prior Year (since 04/21/2011) | 37,500 | – | – | 4,000 | 41,500 |
| Dr. Kuhnt | – | – | – | – | – |
| Prior Year (until 04/21/2011) | 16,667 | – | 23,333 | 5,000 | 45,000 |
| Löw * | 50,000 | – | 35,000 | 11,000 | 96,000 |
| Prior Year | 50,000 | – | 35,000 | 11,000 | 96,000 |
| Dr. Perlet | 50,000 | 35,000 | – | 9,000 | 94,000 |
| Prior Year | 50,000 | 35,000 | – | 9,000 | 94,000 |
| Spence | 50,000 | – | – | 6,000 | 56,000 |
| Prior Year (since 04/21/2011) | 33,333 | – | – | 1,000 | 34,333 |
| Stöber * | – | – | – | – | – |
| Prior Year (until 04/21/2011) | 16,667 | – | 11,667 | 4,000 | 32,334 |
| Total | 700,000 | 175,000 | 175,000 | 102,000 | 1,152,000 |
| Prior Year | 700,000 | 175,000 | 175,000 | 97,000 | 1,147,000 |
* The employee representatives from the Works Council and the Union remit their remuneration in accordance with the guidelines drawn up by the Hans Böckler Foundation
There were no significant events occurring after the end of the fiscal year.
GEA Group's ability to leverage its growth and earnings potential depends on it using the opportunities that arise, although this in turn is associated as a matter of principle with business risks. Taking calculated risks is therefore part of GEA Group's corporate strategy. To meet the objective of sustainably increasing enterprise value, it is necessary, as far as possible, to enter into only those risks that are calculable and matched by greater opportunities. This requires active risk management to avoid taking inappropriate risks and monitor and control those risks that have been entered into.
GEA Group's strategic and medium-term planning are key components of the way in which it manages opportunities and risks. These processes are used to prepare decisions on core technologies and markets, along with the corresponding allocation of resources. The objective is to ensure stability by diversifying and by concentrating on markets of the future. At the same time, developments that may jeopardize GEA Group's continuing existence can be identified at an early stage.
Opportunities and risks arising from significant operating decisions – for example whether to take on orders or to implement capital expenditure projects – are assessed and hence actively managed by the relevant departments and decision-makers at all group levels in a decision-making process that takes materiality criteria into account.
All group companies are integrated into GEA Group's risk management system. Quarterly and sizerelated ad hoc risk reports ensure that segment and group management decision-makers are informed promptly about material existing risks and potential risks affecting future development.
The basic principles of an orderly risk management system and the related workflows are documented in a group-wide risk guideline, which is broken down and structured in greater detail by the divisions to meet their specific requirements. These guidelines also document mandatory risk reporting and management requirements. Compliance with these requirements is monitored regularly by the Internal Audit function.
Risk management instruments such as the Risk Assessment and Advisory Committees (RAACs) are supplemented by a reporting system encompassing consolidated financial projections, monthly consolidated financial statements, and regular meetings between the Executive Board and the segment heads to enable the various risks to be identified and analyzed.
The specific requirements of the group's project business are addressed by risk boards at segment and group management level. Before a binding quotation is submitted or an agreement signed, the commercial and contractual terms of potential orders are examined in detail by specialists from various departments so that risks that cannot be controlled are avoided. The risk management system therefore already comes into play before risks arise, in the form of a critical examination of the opportunity and risk profile of quotations. No agreement may be signed if the profile is inappropriate. The risk management system is not only designed to identify risks that jeopardize the group's continued existence at an early stage, as required by law; it also captures all risks that may have a material adverse effect on the operating result of a segment or the group. The application of the risk management system at all levels is reviewed regularly by the Internal Audit function.
Adequate provisions have been recognized for all identifiable risks arising from the group's operating activities provided that the recognition criteria for liabilities have been met. The following section provides details of existing risks. Risks that are not yet known or currently regarded as insignificant may also have an adverse effect on business activities.
GEA Group's internal control system (ICS) comprises the risk management system (RMS) as well as other principles, measures, and rules (other components of the ICS). While the RMS aims at identifying and classifying risks, the components comprising the rest of the ICS serve primarily to prevent or mitigate risk using control measures. The Internal Audit function is another component of the ICS.
The RMS comprises principles, measures, and rules relating to the early risk recognition system in accordance with section 91(2) of the Aktiengesetz (AktG – German Stock Corporation Act) as well as those relating to other components of the risk management system. In the other components of the ICS, a distinction is made between principles, measures, and rules that are accounting- or non-accounting-related.
GEA Group's accounting-related ICS encompasses all principles, measures, and rules that ensure the proper approval and recording of business transactions for monthly, quarterly, and annual financial statements. The goal of the implemented ICS is to ensure reliable financial reporting, compliance with the relevant laws and standards, and the cost-effectiveness of business workflows.
In addition to GEA Group Aktiengesellschaft, all consolidated subsidiaries are integrated into the ICS.
The following key principles of GEA Group's ICS must be applied in all business functions: clearly defined areas of responsibility, the separation of functions in all areas of activity, dual signature policies, compliance with guidelines, instructions, and procedural requirements (manuals), obligation to obtain comparative offers before awarding contracts, protection of data from unauthorized access, and the holding of training sessions to ensure uniform procedures within the group.
Key accounting-related measures and rules designed to ensure uniform accounting at all subsidiaries are: accounting and account allocation manuals, a uniform chart of accounts, consolidation and calculation manuals, the approval of entries using the dual control principle, and the fact that certain entries can only be made by selected persons. To prevent errors, standardized IT systems are used in GEA Group's accounting, controlling, and finance functions in all group companies, and are regularly updated to reflect legal requirements.
Compliance with the principles, measures, and rules set out in the ICS as described above is monitored systematically; this takes the form of regular reviews by GEA Group's Internal Audit function, which reports directly to the Executive Board and submits regularly reports to the Audit Committee. The results enable the elimination of defects identified at the companies reviewed and the ongoing enhancement of the ICS in the group.
Overall, GEA Group's internal control system has been implemented in such a way as to ensure reliable financial reporting.
The identified risks from operating activities and the negative impact on earnings that could result have not changed significantly as against the previous year. As in the previous year, the structure of GEA Group with its regional and industry diversification offers broad protection from cluster risks. In addition, GEA Group is not dependent on individual business partners, be they among either suppliers or customers.
The implementation of the legal settlement reached in the award proceedings in January 2012 meant that the past fiscal year brought to an end the proceedings regarding the control and profit transfer agreement entered into between the former Metallgesellschaft AG and the former GEA AG that began in 1999.
With regard to discontinued operations, the risks arising from the sale of the plant engineering business were reduced by the agreement reached with the purchaser of Lurgi and the further progress made in completing the Lentjes projects. Measurement uncertainties still exist in relation to individual legal disputes. These are described in greater detail in the "Legal risks" section below.
Overall, no risks to GEA Group or GEA Group Aktiengesellschaft were identified that, alone or in combination with other risks, could jeopardize the continued existence of the Company.
GEA Group's sales markets have a differentiated product and customer structure. This diversification moderates the impact on total demand of fluctuations in specific submarkets. However, the group does have a focus on the food, energy generation, and oil and gas industries.
A significant proportion of GEA's business consists of projects that depend on the financing available to GEA's customers. A general decline in demand or a shortage of credit could make it more difficult to implement such projects. For the same reason, existing orders could be deferred or even canceled.
Although country-specific conflict situations that may result in risks to the group are monitored continuously as part of the risk management process, the potential risks arising from such situations may be difficult to quantify. However, no risks are anticipated that could have a significant impact on the group's results of operations.
Should a deterioration in the economic environment or delays in the implementation of the reorganization measures that have been resolved the GEA Food Solutions Segment call the ability to hit the cash flow targets into question, a write-down of the goodwill from the acquisition of this segment in the course of regular impairment testing cannot be ruled out (see page 138 f.).
On the sales side, future prices will depend to a considerable extent on general economic trends going forward. Any fall in capacity utilization in the industry could also have a negative impact on price levels.
With respect to procurement, current expectations are that prices for key materials will not increase. GEA Group processes a number of materials, such as steel, copper, aluminum, and titanium. Purchase prices for these metals may fluctuate significantly depending on market conditions. Long-term supply agreements are entered into with selected suppliers in order to lock in the procurement prices used as the basis for costing orders.
In the award proceedings described in the last annual reports, a court settlement between the parties was agreed on January 30, 2012, before the Dortmund Regional Court. The award proceedings related to the control and profit transfer agreement dating from 1999 between the former Metallgesellschaft AG (whose legal successor is GEA Group Aktiengesellschaft) and the former GEA AG, which was later merged with it. Under the settlement, GEA Group Aktiengesellschaft has followed the court's suggestion and undertaken to pay increased compensation in shares and a higher cash settlement. On April 24, 2012, the Annual General Meeting adopted a resolution on the contingent capital to be used to create the new shares required to fulfill the court's settlement terms. The contingent capital increase was entered in the Company's commercial register on June 11, 2012. This terminated the award proceedings.
On the one hand, a total of 8,687,631 new shares were issued in fulfillment of the settlement, based on the exchange ratio agreed in the settlement (31 shares of GEA Group Aktiengesellschaft for 15 shares of the former GEA AG). On the other hand, those shareholders of the former GEA AG who had already received the compensation provided for in the control and profit transfer agreement received increased compensation in the total amount of approximately EUR 450 thousand.
In connection with a major order, a subcontractor in South Africa asserted substantial out-of-court claims in July 2012 against the GEA company that had been contracted. Based on its current analysis, GEA believes that the alleged additional costs or claims should either be borne by the subcontractor itself, or that the amounts are inflated or insufficiently specified. Furthermore, even if the amounts were to be substantiated, they could largely be recharged. Overall, based on GEA's current assessment, the claims asserted do not mean that there has been any material change in the project's risk/reward profile.
There are still some sector-specific legal disputes from the former plant engineering business in which the disputed amounts in some cases are in the high millions; often, they have been set too high for tactical reasons. The main legal disputes relating to the former plant engineering business include the following:
GEA Group Aktiengesellschaft is one of two defendants being sued by Panda Energy International, Inc. ("Panda Energy") in a district court in Texas (U.S.A.) Panda Energy bases its claim on alleged deception in connection with claimed investments in a project undertaken in Texas by the plant engineering business that GEA has since disposed of. The complainant specified its claim for damages in these proceedings at USD 100 million plus punitive damages and legal, expert, and court costs. In connection with the aforementioned project, there was also a further action pending before a district court in New York (U.S.A.) filed by GEA Group Aktiengesellschaft in August 2011 against a subsidiary of Panda Energy, which has since been decided against GEA. GEA Group Aktiengesellschaft continues to believe that Panda Energy's claims for compensation are unfounded.
Two subsidiaries of the former plant engineering business were sued in connection with an earlier plant engineering project for repayment of subsidies in a total amount of approximately EUR 22 million (including possible interest). Both defendant companies had made liability declarations in line with the amount of their investment in the now insolvent project company covering the obligation of the project company to pay back subsidies received under certain conditions. The basic issue in dispute is whether the subsidiaries can rely on an earlier restricting declaration made by the highest competent authority of a German federal state in their defense against the claims asserted against them under the liability declarations. Since the two subsidiaries have the different places of jurisdiction, the actions were filed in courts in both Düsseldorf and Frankfurt. During fiscal year 2011, the plaintiff won in the Higher Regional Court in Düsseldorf and lost in the Higher Regional Court in Frankfurt. The GEA subsidiary has appealed the decision of the Higher Regional Court in Düsseldorf to the German Federal Court of Justice (BGH) on the grounds of denial of appeal. In the decision of the Higher Regional Court in Frankfurt, the plaintiff has appealed to the BGH.
An action brought by the insolvency administrator of Dörries Scharmann AG against GEA Group Aktiengesellschaft is pending at the Düsseldorf Regional Court. The former Metallgesellschaft AG, the legal predecessor to GEA Group Aktiengesellschaft, held an interest in Schiess AG, which later became Dörries Scharmann AG. On the basis of that interest, the insolvency administrator is asserting various claims under company law, in particular for equity substitution, which amount to approximately EUR 20 million including possible interest. GEA Group Aktiengesellschaft considers the claims that have been asserted to be unfounded. After the senior expert appointed by the court to decide matters relating to equity substitution fully confirmed GEA Group Aktiengesellschaft's opinion, the Higher Regional Court in Düsseldorf upheld a motion by the insolvency administrator to disqualify this expert in a ruling issued on November 27, 2012. How the Regional Court will proceed in this matter is currently unknown. GEA Group Aktiengesellschaft will continue to defend itself against all claims.
In June 2012, several other companies along with GEA Group Aktiengesellschaft received a statement of objections ("Notification de griefs") from the French competition authority ("Autorité de la concurrence"). The statement of objections summarizes the status of competition investigations, amongst other things as regards practices implemented between 1997 and 2003 by a former subsidiary of GEA Group involved in the chemical business in France. It is beyond dispute that GEA Group Aktiengesellschaft was not involved in the events and transactions that are being investigated. Nevertheless, according to French competition law, the former parent company may also be held liable under certain circumstances for competition violations committed by a subsidiary. Whether and to what extent a fine may be imposed on GEA Group Aktiengesellschaft cannot be estimated at this time.
Further legal proceedings or official investigations have been or may be instituted against GEA Group companies as a result of earlier business disposals and operating activities.
Adequate provisions have been recognized for all risks arising from both the legal disputes described above and other legal disputes being pursued by GEA Group in the course of its ordinary operating activities. However, the outcome of these proceedings cannot be predicted with any degree of certainty. It is therefore possible that the conclusion of the proceedings may result in expenses that exceed the amounts that may have been set aside for them.
Long-term engineering orders are a significant element of GEA Group's business. Some of these contracts entail particular risks, as they involve assuming a significant portion of the risk associated with the project's completion, and may moreover provide for warranty obligations that remain in force for several years after the project's acceptance. Technical problems, quality problems at subcontractors, and missed deadlines may lead to cost overruns. There is therefore an extensive risk management system in place at group management and segment level to closely monitor order-related risks. This comes into play before binding quotations are submitted. Adequate provisions have been recognized for all foreseeable risks in this area.
As contractually agreed, defined risks relating to selected orders remained with the group following the sale of the former Lurgi and Lentjes divisions. The guarantee period for most of these Lentjes orders has already expired. With one exception, the other orders have provisionally been handed over to the customers (PAC) and are therefore under warranty. Under the final agreement entered into with the purchaser of Lurgi, the risks arising from the selected Lurgi orders have largely been eliminated for GEA Group.
Furthermore, the Company sees risks in connection with macroeconomic trends. If a downturn in the economy leads to a reduction in order intake to below the level of the previous fiscal year, this could have a negative impact on earnings due to capacity underutilization and capacity adjustment measures.
Dedicated and qualified employees are a critical success factor for GEA Group. The group has various staff policy measures in place to counter the risk that it will be unable to fill vacant positions adequately or will lose skilled employees. The measures aim to position GEA as an attractive employer and foster employees' long-term loyalty to the group (see page 58 ff.).
Acquisitions and internal company reorganizations entail risks resulting from the integration of employees, processes, technologies, and products. It is possible, therefore, that the aims of the measures in question will not be achieved at all or within the timeframe envisaged. Moreover, such transactions may give rise to substantial administrative and other expenses. Portfolio measures may also result in the need for additional finance and may impact negatively on financing requirements and the financing structure.
Several properties in our portfolio entail risks relating to environmental contamination and mining damage, primarily as a result of earlier business activities. These risks are countered through appropriate measures, for which adequate provisions were again recognized in 2012.
The Executive Board has put in place an effective set of guidelines to manage and hence largely limit or hedge financial risks throughout the group. The objectives with regard to protecting assets, eliminating gaps in security, and improving efficiency in identifying and analyzing risks are clearly defined, as are the relevant organizational structures, powers, and responsibilities. The guidelines are based on the principles of system security, the separation of functions, transparency, and immediate documentation.
Because it operates worldwide, GEA Group is exposed to currency, interest rate, commodity price, credit, and liquidity risk in the course of its ordinary activities. Financial risk management aims to reduce this risk through the appropriate use of derivative and nonderivative hedging instruments. The group's financial risks are quantified in section 3 of the notes to the consolidated financial statements (see pages 124 ff.).
Because GEA Group operates internationally, its cash flows are denominated not only in euros, but also in a number of other currencies, particularly U.S. dollars. Hedging the resulting currency risk is a key element of risk management.
The uniform group guidelines for central currency management used within GEA Group requires all group companies to hedge foreign-currency items as they arise in order to fix prices on the basis of hedging rates. Currency risks are hedged for recognized hedged items, unrecognized firm commitments, and highly probable forecast transactions. The hedging periods are determined by the maturity of the hedged items and are usually up to 12 months, but in exceptional cases may exceed that period significantly. Nevertheless, changes in exchange rates may affect sales opportunities outside the eurozone.
Affiliated group companies based in the eurozone are obliged to tender to GEA Group's central finance unit all outstanding exposures relating to transactions in goods and services in major transaction currencies. Most of these exposures are passed on directly to banks at matching maturities, depending on the hedging objective of the derivatives and the related accounting treatment; they may also be hedged as part of a portfolio. The hedging of financial transactions and transactions conducted by subsidiaries outside the eurozone is also closely coordinated with the central finance unit.
Because GEA Group operates worldwide, liquidity is raised and invested in the international money and capital markets in different currencies (mainly in euros) and at different maturities. The resulting financial liabilities and investments are exposed to interest rate risk , which must be assessed and controlled by central interest rate management. Derivative financial instruments may be used on a case-by-case basis to hedge the interest rate risk and reduce the interest rate volatility and financing costs of the hedged items. Only the central finance unit is permitted to enter into such interest rate hedges.
Financial instruments are exposed to credit risk in that the other party to the contract may fail to fulfill its obligations. The counterparty limit system used by GEA Group's central finance unit aims to continuously assess and manage the counterparty default risk. A maximum risk limit has been defined for each counterparty, which in most cases is derived from the ratings from recognized credit rating agencies and credit default swaps (CDSs). Appropriate action is taken if the individual limit is exceeded.
The financial standing of potential customers is ascertained before orders are accepted using an internal risk board procedure. Active receivables management, including nonrecourse factoring and credit insurance, is also performed. In the case of export transactions, confirmed and unconfirmed letters of credit are used alongside sureties, guarantees, and cover notes, including from export credit agencies such as Euler Hermes. In addition to local monitoring by the subsidiary in question, GEA Group also oversees the main credit risks at group management level so that any accumulation of risk can be better managed.
Since trade receivables are usually due from a large number of customers in different sectors and regions, there is no concentration of risk. Valuation allowances take account of specific credit risks.
So as to reduce the credit risk involved, derivative financial instruments are only entered into with reputable financial institutions whose creditworthiness has been classified as reliable under the counterparty limit system described above; this is also continuously monitored.
The maximum exposure for the financial assets is limited to their carrying amount.
GEA Group is exposed to liquidity risk in that it may be unable to meet payment obligations because it has insufficient cash funds at its disposal. GEA Group Aktiengesellschaft is responsible for managing this risk. Cash funds are arranged and credit lines managed on the basis of a multi-year financial plan and a rolling month-by-month cash forecast. The funds are then made available to the companies by group management. Cash pools have been established in a growing number of countries in order to optimize borrowing and the use of cash funds within GEA Group. To mitigate liquidity risk, GEA Group will continue to use various financing instruments in the future so as to diversify its sources of funding and stagger maturities.
The applicable national tax legislation may affect the use of loss carryforwards and thus the recoverability of the deferred taxes recognized in the consolidated financial statements and current taxation. Furthermore, future changes to the ownership structure may significantly reduce or even render impossible the use of German loss carryforwards (section 8c of the Körperschaftssteuergesetz (KStG – German Corporate Income Tax Act)). The ability to use U.S. loss carryforwards could also be restricted in the case of certain changes to the ownership structure of GEA Group Aktiengesellschaft under IRC Sec. 382 (limitation on net operating loss carryforwards following an ownership change).
Moreover, in Germany and abroad, there is considerable uncertainty regarding future changes to, and the application of, tax legislation as a result of tighter public-sector finances, the resulting pressure for reform, and noticeably greater scrutiny by the tax authorities.
GEA Group is entering fiscal year 2013 with a higher order backlog than in the previous year. Further growth is expected in the rapidly expanding Asian markets in the medium term. GEA Group will further expand its presence in these regions and thus participate in the sustained growth of these markets.
If the expected moderate growth in the global economy materializes, GEA Group's focus on products used in the food and energy end markets will allow it benefit more than average, especially in growth markets.
In the area of food process technology, growth will be driven not only by an increase in the standard of living and the trend toward high-quality foods, but also by the expected rise in production and quality standards as well as innovative process improvements and new product developments.
Investments in energy generation and in the oil and gas industry remained at a low level in 2012. The age structure of the power plants in many countries and the rise in the oil price are expected to encourage investments in these segments, which should translate into sales opportunities for GEA Group as well.
With regard to the proceedings against U.S. company Flex-N-Gate Corp., the court of arbitration in fiscal year 2010 ordered Flex-N-Gate to compensate GEA Group Aktiengesellschaft for losses incurred as a result of the collapse of the sale of the Dynamit Nobel plastics business to Flex-N-Gate in the fall of 2004. The award was overturned by the Higher Regional Court in Frankfurt in 2011. GEA Group Aktiengesellschaft's appeal on a point of law against this decision was dismissed as inadmissible by the German Federal Court of Justice in its decision of October 2, 2012. The Company then decided to continue the arbitration proceedings against Flex-N-Gate and filed a corresponding application with the Deutsche Institution für Schiedsgerichtsbarkeit (DIS – German Institution of Arbitration) on December 21, 2012.
In its Global Economic Outlook (January 2013) for 2013, the International Monetary Fund (IMF) forecasts growth of 3.5 percent in global real gross domestic product (GDP). In 2014, growth should reach 4.1 percent. For the U.S.A., the IMF is forecasting growth of 2.0 percent in 2013 and 3.0 percent in the following year, based on the strong performance seen at the end of 2012. However, with regard to the eurozone, the IMF stresses that the underlying financial problems have not yet been resolved and that budget consolidation is still required. As a result, it is expecting a further slight decline in economic output by the 17 eurozone countries of 0.2 percent in 2013. This region is not expected to return to growth until 2014, with a 1.0 percent increase is forecast. According to the IMF, after growing 7.8 percent in 2012, China's economic growth is expected to reach 8.2 percent in 2013 and 8.5 percent in 2014. Overall, growth of 5.5 percent in 2013 and 5.9 percent in 2014 is forecast for the emerging markets.
The most recent forecast by the OECD (November 2012) predicts a 0.6 percent rise in German GDP in 2013, which is largely in line with the 0.5 percent expected by the German federal government, in its 2013 Annual Economic Report (January 2013). The latter assumes that, following a slow start, German economic growth will pick up speed significantly in the second half of the year. The full-year estimate is based on the assumption that there are no further negative developments in the debt crisis.
At present (February 2013), VDMA, the German Engineering Federation, expects an increase in real revenue growth of 4 percent and a 2 percent increase in output in the German engineering sector in the current fiscal year.
Our machinery and process technology give us a leading position with our customers and in the markets they are active in.
Our planning for the current fiscal year 2013 assumes that demand in our sales markets will match the high levels seen in 2012.
In particular, we are expecting
The breakdown of sales by customer industry is likely to again shift slightly in favor of the food industry. From a regional perspective, we believe that the share accounted for by Western Europe will decline slightly over the medium term, whereas our business in the North America and Asia/Pacific regions will grow in importance.
Assuming that there is no downturn in global economic growth, we expect moderate revenue growth for GEA in the current fiscal year. With respect to our cash flow drivers, i.e., the net amount of EBITDA, the change in working capital, and capital expenditure, we are aiming for a ratio to revenue of at least 8.0 percent in 2013, after 6.5 percent in the previous year.
In terms of price quality, we expect the market environment to be unchanged as against 2012. On this basis, we are aiming for earnings (EBITDA) of around EUR 700 million (previous year: approximately EUR 600 million). We are not anticipating any major one-time expenses in 2013; this also applies to discontinued operations.
At present, we expect year-on-year revenue and earnings in the individual segments to be as follows in fiscal year 2013: Segment growth will largely depend on developments in the customer industries concerned. We expect a sharp rise in revenue and an operational turnaround in the GEA Food Solutions Segment. The GEA Heat Exchangers Segment will continue to face stagnating markets in 2013, which will lead to slower revenue and profit growth. We anticipate stable profit margins with moderate volume growth in all other segments.
Consolidated revenue should continue to grow in 2014 compared with 2013. A further increase in EBITDA and the cash flow driver margin are also expected. Here, too, developments in our customer industries will be decisive for the contribution to growth made by the individual segments. However, this will continue to depend on stable global economic development.
We are maintaining our strategy of acquiring companies that provide GEA with an entry into new markets or that selectively expand our range of offerings in existing markets. This will enable us to provide our customers with a single-source solution for an ever-broader range of products and services. However, given the uncertainties on the global financial markets, we shall focus closely on the financial feasibility of such projects with the aim of ensuring a stable credit rating for GEA in the debt markets.
The group's net liquidity amounted to EUR -325 million as of December 31, 2012. The available credit lines will be sufficient to finance the Company's ongoing growth.
The Executive Board and Supervisory Board will again propose a dividend of EUR 0.55 per share for 2012 to the Annual General Meeting. Due to the increase in the number of shares outstanding, the total dividend has increased by 4.7 percent to EUR 106 million. This means that the distribution to our shareholders for 2012 is once again in line with our long-term target of one-third of the group's earnings.
Düsseldorf, February 28, 2013
Jürg Oleas Dr. Helmut Schmale Niels Graugaard Dr. Stephan Petri
The international stock markets continued to experience significant volatility in 2012 as a result of the ongoing uncertainty in the eurozone. Although the global stock markets initially continued their recovery at the beginning of the year, they then had to surrender their gains for a time in the months following. On June 5, 2012, the DAX reached its low for the year at 5,969 points. The STOXX® Europe TMI Industrial Engineering Index – the more important benchmark for GEA – hit its low for the year on June 26, at 245.95 points. However, starting in June 2012, a positive trend reversal began on the stock markets, restoring them to the vicinity of their previous record highs and in some cases beyond by the end of the year. The DAX closed at 7,612 points on December 28, up 29.1 percent on the year. The MDAX reached its all-time high on December 19 at 12,086 points. It closed on December 28 at 11,914 points, up 33.9 percent. The TMI ended the year at 309.02 points, an increase of 22.3 percent in the course of the year.
GEA's shares also performed well during the fiscal year. In the first four months, they continued to rise, buoyed by the recovery of the global stock markets, and reached EUR 26.28, on April 2 2012 – their highest point since November 2007. However, GEA's share price then came under pressure as a result of earnings figures for the first quarter that were lower than market expectations. The simultaneous downward trend on the global stock markets put additional pressure on the share price and led to a low of EUR 19.69 on June 4, 2012. As a result of the trend reversal on the stock markets that then began in the summer, GEA shares closed at EUR 24.47 on December 28, up 12.0 percent on the year. Despite this increase, GEA's shares underperformed the DAX (+29.1 percent) and MDAX (+33.9 percent) in the past year, and also did not match the important TMI benchmark index (+22.3 percent).
| GEA Group shares (Balance sheet date 12/31/2012) compared to STOXX ® Europe TMI Industrial Engineering MDAX |
||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Past 3 months | -4.4 | -4.6 | percentage points | |||||||
| Past 6 months | -2.1 | +1.5 | percentage points | |||||||
| Past 12 months | -10.3 | -21.9 | percentage points | |||||||
| Past 24 months | +12.3 | -4.5 | percentage points | |||||||
| Past 36 months | +1.2 | -1.4 | percentage points |
10 percentage points 3 to 10 percentage points 3 to -3 percentage points -3 to -10 percentage points > -10 percentage points
GEA Group Aktiengesellschaft held no treasury shares as of December 31, 2012. The number of outstanding shares was 192,495,476 at the end of the year, resulting in a market capitalization of EUR 4.7 billion as of the end of December. In the index ranking of all listed German companies in the DAX, MDAX, SDAX, and TECDAX published by Deutsche Börse on December 28, GEA Group Aktiengesellschaft was ranked 34th (previous year: 33rd) in terms of market capitalization and 34th (previous year: 38th) in terms of trading volume. At 0.5 million shares, the average daily trading volume of official exchange trading in fiscal 2012 was significantly below the prior-year figure of 0.8 million shares.
GEA Group Aktiengesellschaft once again performed detailed analyses of its shareholder structure in 2012. In the current analysis from the fourth quarter of 2012, which was based on the number of GEA shares at the time of 187,869,151, it was able to identify 85 percent of the Company's shareholders. Kuwait Investment Office held around 7.9 percent. Institutional investors, the number of which increased further to 637 (previous year: 442), held a further 77 percent of the shares. Of these institutional investors, an unchanged 23 percent were headquartered in the UK. At around 14 percent, French investors were in second place (previous year: 11 percent), followed by Scandinavian investors, who now hold around 13 percent of the shares (previous year: 10 percent). The share of institutional investors from Germany fell from 14 percent in the previous year to 11 percent and that of American investors from 10 percent to 8 percent.
Sixty-five percent of all GEA Group Aktiengesellschaft shares were held by institutional investors with a long-term orientation (previous year: 66 percent). Less than 1 percent of shares were held by hedge funds.
31.4
Growth GARP* Value Index Hedge fund Others Not identified Investment styles of identified institutional investors (%) 3.3 23.5 0.5 20.3 7.7 13.2 * Growth At a Reasonable Price
GEA Group takes its task of maintaining close contact with capital market participants and correspondingly close relationships to its shareholders extremely seriously. In 2012, for example, GEA Group's investor relations activities again facilitated an ongoing, effective dialog with the capital markets. The Company informed its shareholders and investors about developments within the group in a transparent manner above and beyond its quarterly, half-yearly, and annual reports. It also kept in close contact with investors by taking part in international conferences and roadshows, which were regularly attended by the CEO and the CFO. A total of 36 roadshows were held in 2012 (previous year: 23). GEA representatives also took part in 19 conferences (previous year: 12), as well as holding 382 one-on-one meetings (previous year: 483). A particular focus of investor relations activities in 2012 was on further underlining the significance of the food industry as GEA's most important customer industry. In addition, another Capital Markets Day was held in June 2012 featuring presentations by analysts and investors on the GEA Refrigeration Technologies Segment's structure, business strategies, market environment, and products, and also on current developments in the GEA Food Solutions Segment.
Earnings per share (EPS) amounted to EUR 1.69 in the past fiscal year. They are calculated by dividing consolidated profit for the period by the weighted average number of shares outstanding in the course of the fiscal year. An average of 185.8 million no-par value shares (previous year: 183.8 million) were outstanding in the reporting period.
| Key performance indicators for GEA Group shares | Q4 2012 |
Q4 2011 |
Q1-Q4 2012 |
Q1-Q4 2011 |
|---|---|---|---|---|
| Shares issued (December 31, million) | 192.5 | 183.8 | 192.5 | 183.8 |
| Average shares outstanding (million) | 189.3 | 183.8 | 185.8 | 183.8 |
| Share price (December 31, EUR) 1 | 24.47 | 21.85 | 24.47 | 21.85 |
| High (EUR) | 25.57 | 22.34 | 26.27 | 25.50 |
| Low (EUR) | 23.13 | 16.33 | 19.69 | 16.33 |
| Market capitalization (December 31, EUR billion) 2 | 4.71 | 4.02 | 4.71 | 4.02 |
| Average daily trading volume (million) | – | – | 0.5 | 0.8 |
| Earnings per share pre purchase price allocation (EUR) | 0.84 | 0.77 | 1.88 | 1.91 |
| Earnings per share (EUR) | 0.74 | 0.73 | 1.69 | 1.70 |
| Dividend per share (EUR) | – | – | 0.55 | 0.55 |
| Total dividend (EUR mil) | – | – | 105.9 | 101.1 |
| Pay-out ratio | – | – | 32.5 | 32.4 |
1) Or on the last trading day of reporting period
2) Based on shares issued Prices: XETRA closing prices
The Executive Board and Supervisory Board of GEA Group Aktiengesellschaft will propose to the Annual General Meeting on April 18, 2013, that an unchanged dividend of EUR 0.55 per no-par value share, be paid for fiscal year 2012. This represents a dividend yield of 2.2 percent given the share price of EUR 24.47 on December 28, 2012. The distribution ratio is once again within the target range of a one-third of the group's earnings.
The dividend will be paid from the contribution account for tax purposes (section 27 of the Körperschaftsteuergesetz (KStG – German Corporate Income Tax Act)), meaning that investment income tax and the solidarity surcharge will not be deducted. In the case of shareholders in Germany, the dividend is not subject to current taxation in the year of payment. The generally held opinion is that payment of dividends from the contribution account for tax purposes constitutes a repayment of contributions, which results in a subsequent reduction of the acquisition costs for the shares. This may lead to taxation of higher capital gains when shares are sold subsequently.
In July 2006, GEA Group Aktiengesellschaft launched a long-term remuneration program for first- and second-tier managers (see page 59); this was extended to include third-level management in 2008. In July 2012, a seventh tranche was issued for these three management levels, with a participation rate of 63 percent. Each GEA Performance Share Plan runs for three years. The fourth tranche, which was issued in the summer of 2009, ended in June 2012 with a payout rate of 88 percent.
Two international agencies, Moody's and Fitch, have rated GEA Group Aktiengesellschaft's ability to meet its financial obligations. These ratings serve as evidence of the Company's creditworthiness to existing and potential debt capital providers. The two agencies gave the following unchanged ratings to GEA Group:
| 2012 | 2011 | |||
|---|---|---|---|---|
| Agency | Rating | Outlook | Rating | Outlook |
| Moody's | Baa3 | stable | Baa3 | stable |
| Fitch | BBB- | stable | BBB- | stable |
These ratings ensure that GEA Group has unlimited access to the international financial markets.
The bond issued in 2011 performed well, offering the investors a yield of 1.77 percent (bond price: EUR 107.85) as of December 31, 2012, following an issue yield of 4.33 percent. GEA Group Aktiengesellschaft agreed a second borrower's note loan in fiscal year 2012 to further optimize its financial structure. This transaction with a five-year term was also oversubscribed several times and was issued at EUR 300 million with a value date of September 21, 2012. The borrower's note loan was placed with German and foreign institutional investors. This transaction enabled GEA to extend the maturity structure of its financial liabilities in good time and to further broaden its lender base. Overall, GEA thus has credit lines (including bonds and borrower's note loans) in the amount of EUR 1,846 million, of which EUR 1,069 million had been utilized as of the balance sheet date. Further information on the credit lines and their utilization can be found in note 3 to the consolidated financial statements beginning on page 124.
| Assets | |||
|---|---|---|---|
| (EUR thousand) | Section | 12/31/2012 | 12/31/2011 |
| Property, plant and equipment | 6.1 | 738,479 | 727,472 |
| Investment property | 6.2 | 10,571 | 11,837 |
| Goodwill | 6.3 | 1,846,051 | 1,900,147 |
| Other intangible assets | 6.4 | 375,756 | 359,576 |
| Equity-accounted investments | 6.5 | 14,681 | 13,448 |
| Other non-current financial assets | 6.6 | 48,846 | 56,254 |
| Deferred taxes | 8.7 | 445,643 | 398,884 |
| Non-current assets | 3,480,027 | 3,467,618 | |
| Inventories | 6.7 | 752,058 | 742,899 |
| Trade receivables | 6.8 | 1,249,863 | 1,357,546 |
| Income tax receivables | 6.9 | 19,350 | 15,882 |
| Other current financial assets | 6.6 | 166,234 | 203,769 |
| Cash and cash equivalents | 6.10 | 743,524 | 432,401 |
| Current assets | 2,931,029 | 2,752,497 | |
| Assets held for sale | 6.11 | 18,447 | 5,116 |
| Total assets | 6,429,503 | 6,225,231 |
| Equity and liabilities | |||
|---|---|---|---|
| (EUR thousand) | Section | 12/31/2012 | 12/31/2011 |
| Subscribed capital | 520,376 | 496,890 | |
| Capital reserve | 1,217,864 | 1,333,359 | |
| Retained earnings | 397,553 | 288,660 | |
| Accumulated other comprehensive income | 27,953 | 43,657 | |
| Non-controlling interests | 2,552 | 1,026 | |
| Equity | 7.1 | 2,166,298 | 2,163,592 |
| Non-current provisions | 7.2 | 165,824 | 132,407 |
| Non-current employee benefit obligations | 7.3 | 702,908 | 560,073 |
| Non-current financial liabilities | 7.4 | 1,005,445 | 813,808 |
| Other non-current liabilities | 7.7 | 5,214 | 17,166 |
| Deferred taxes | 8.7 | 124,039 | 145,850 |
| Non-current liabilities | 2,003,430 | 1,669,304 | |
| Current provisions | 7.2 | 270,220 | 353,029 |
| Current employee benefit obligations | 7.3 | 180,370 | 203,765 |
| Current financial liabilities | 7.4 | 132,465 | 94,086 |
| Trade payables | 7.5 | 839,143 | 903,334 |
| Income tax liabilities | 7.6 | 39,912 | 51,525 |
| Other current liabilities | 7.7 | 797,665 | 786,596 |
| Current liabilities | 2,259,775 | 2,392,335 | |
| Total equity and liabilities | 6,429,503 | 6,225,231 |
| (EUR thousand) | Section | 01/01/2012 - 12/31/2012 |
01/01/2011 - 12/31/2011 |
|---|---|---|---|
| Revenue | 8.1 | 5,720,104 | 5,416,504 |
| Cost of sales | 4,032,991 | 3,840,091 | |
| Gross profit | 1,687,113 | 1,576,413 | |
| Selling expenses | 640,079 | 566,627 | |
| Research and development expenses | 83,034 | 70,842 | |
| General and administrative expenses | 526,879 | 504,642 | |
| Other income | 8.2 | 222,174 | 265,246 |
| Other expenses | 8.3 | 208,650 | 244,648 |
| Share of profit or loss of equity-accounted investments | 2,312 | 2,847 | |
| Other financial income | 8.5 | 4,312 | 17,616 |
| Other financial expenses | 8.6 | 2,499 | 776 |
| Earnings before interest and tax (EBIT) | 454,770 | 474,587 | |
| Interest income | 8.5 | 16,650 | 13,517 |
| Interest expense | 8.6 | 104,491 | 89,533 |
| Profit before tax from continuing operations | 366,929 | 398,571 | |
| Income taxes | 8.7 | 50,446 | 85,960 |
| of which current taxes | 88,551 | 86,558 | |
| of which deferred taxes | -38,105 | -598 | |
| Profit after tax from continuing operations | 316,483 | 312,611 | |
| Profit or loss after tax from discontinued operations | 8.8 | 95 | 22 |
| Profit for the period | 316,578 | 312,633 | |
| of which attributable to shareholders of GEA Group AG | 314,401 | 311,951 | |
| of which attributable to non-controlling interests | 2,177 | 682 | |
| Weighted average number of shares outstanding (million) | 183.8 | ||
|---|---|---|---|
| Earnings per share | 8.9 | 1.69 | 1.70 |
| Earnings per share from discontinued operations | 0.00 | 0.00 | |
| Earnings per share from continuing operations | 1.69 | 1.70 | |
| (EUR) |
| Weighted average number of ordinary shares used to calculate diluted earnings per share (million) |
185.8 | 197.2 * | |
|---|---|---|---|
| Diluted earnings per share | 8.9 | 1.69 | 1.58 * |
| Diluted earnings per share from discontinued operations | 0.00 | 0.00 * | |
| Diluted earnings per share from continuing operations | 1.69 | 1.58 * | |
| (EUR) |
*) On basis of settlement proposal by GEA Group AG
| (EUR thousand) | Section | 01/01/2012 - 12/31/2012 |
01/01/2011 - 12/31/2011 |
|---|---|---|---|
| Profit for the period | 316,578 | 312,633 | |
| Exchange differences on translating foreign operations | -19,536 | 14,373 | |
| of which changes in unrealized gains and losses | -19,536 | 14,373 | |
| Result of available-for-sale financial assets | -272 | 759 | |
| of which changes in unrealized gains and losses | -388 | 1,083 | |
| of which tax effect | 116 | -324 | |
| Result of cash flow hedges | 7.8 | 4,167 | -5,414 |
| of which changes in unrealized gains and losses | 2,348 | -7,777 | |
| of which realized gains and losses | 4,368 | -270 | |
| of which tax effect | -2,549 | 2,633 | |
| Actuarial gains/losses on pension and other post-employment benefit obligations | 7.3.1 / 7.3.2 |
-104,796 | -16,102 |
| of which changes in actuarial gains and losses | -147,616 | -24,070 | |
| of which tax effect | 42,820 | 7,968 | |
| Other comprehensive income | -120,437 | -6,384 | |
| Total comprehensive income | 196,141 | 306,249 | |
| of which attributable to GEA Group AG shareholders | 193,902 | 305,365 | |
| of which attributable to non-controlling interests | 2,239 | 884 |
| (EUR thousand) | Section | 01/01/2012 - 12/31/2012 |
01/01/2011 - 12/31/2011 |
|---|---|---|---|
| Profit for the period | 316,578 | 312,633 | |
| plus income taxes | 50,446 | 85,960 | |
| minus profit or loss after tax from discontinued operations | -95 | -22 | |
| Profit before tax from continuing operations | 366,929 | 398,571 | |
| Net interest income | 8.5/8.6 | 87,841 | 76,016 |
| Earnings before interest and tax (EBIT) | 454,770 | 474,587 | |
| Depreciation, amortization, impairment losses, and reversal of impairment losses | |||
| on non-current assets | 143,003 | 135,589 | |
| Other non-cash income and expenses | 1,377 | -3,946 | |
| Employee benefit obligations | -39,758 | -40,319 | |
| Change in provisions | -50,659 | -83,913 | |
| Losses and disposal of non-current assets | -2,432 | -1,246 | |
| Change in inventories including unbilled construction contracts* | 86,303 | -112,457 | |
| Change in trade receivables | 41,999 | -111,214 | |
| Change in trade payables | -66,928 | 172,268 | |
| Change in other operating assets and liabilities | -5,029 | -31,693 | |
| Tax payments | -96,726 | -78,178 | |
| Net cash flow from operating activities of discontinued operations | -868 | -6,023 | |
| Cash flow from operating activities | 465,052 | 313,455 | |
| Proceeds from disposal of non-current assets | 11,223 | 11,013 | |
| Payments to acquire property, plant and equipment, and intangible assets | -161,019 | -155,199 | |
| Payments to acquire non-current financial assets | -800 | -1,056 | |
| Interest income | 4,897 | 3,459 | |
| Dividend income | 4,839 | 7,297 | |
| Payments to acquire subsidiaries and other businesses | 5.5 | -67,015 | -183,473 |
| Proceeds from sale of subsidiaries and other businesses | 4.0 | – | 8,463 |
| Payments for disposal of discontinued operations | 11.1 | -40,626 | -32,394 |
| Cash flow from investing activities | -248,501 | -341,890 | |
| Dividend payments | -101,808 | -73,724 | |
| Payments from finance leases | -5,507 | -5,081 | |
| Proceeds from finance loans | 504,389 | 797,239 | |
| Proceeds from bond issue | – | 397,224 | |
| Repayments of finance loans | -255,317 | -1,166,505 | |
| Interest payments | -44,391 | -40,258 | |
| Net cash flow from financing activities of discontinued operations | 330 | 256 | |
| Cash flow from financing activities | 97,696 | -90,849 | |
| Effect of exchange rate changes on cash and cash equivalents | -4,940 | -6,773 | |
| Change in unrestricted cash and cash equivalents | 309,307 | -126,057 | |
| Unrestricted cash and cash equivalents at beginning of period | 426,674 | 552,731 | |
| Unrestricted cash and cash equivalents at end of period | 6.10 | 735,981 | 426,674 |
| Restricted cash and cash equivalents | 6.10 | 7,543 | 5,727 |
| Cash and cash equivalents reported in the balance sheet | 6.10 | 743,524 | 432,401 |
*) Including advanced payments received
| 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-control ling interests |
Total |
| Balance at Jan. 1, 2011 (183,807,845 shares) |
496,890 1,268,728 | 66,038 | 35,414 | – | -1,273 | 1,865,797 | 1,809 | 1,867,606 | |
| Income | – | – | 311,951 | – | – | – | 311,951 | 682 | 312,633 |
| Other comprehensive income | – | – | -16,102 | 14,171 | 759 | -5,414 | -6,586 | 202 | -6,384 |
| Total comprehensive income | – | – | 295,849 | 14,171 | 759 | -5,414 | 305,365 | 884 | 306,249 |
| Dividend payment by GEA Group Aktiengesellschaft |
– | – | -73,523 | – | – | – | -73,523 | – | -73,523 |
| Change in other non-controlling interests |
– | – | 626 | – | – | – | 626 | -1,667 | -1,041 |
| Share-based payments | – | 51 | – | – | – | – | 51 | – | 51 |
| Award proceedings * | – | 64,580 | -330 | – | – | – | 64,250 | – | 64,250 |
| Balance at Dec. 31, 2011 (183,807,845 shares) |
496,890 1,333,359 | 288,660 | 49,585 | 759 | -6,687 | 2,162,566 | 1,026 | 2,163,592 | |
| Income | – | – | 314,401 | – | – | – | 314,401 | 2,177 | 316,578 |
| Other comprehensive income | – | – | -104,796 | -19,599 | -272 | 4,167 | -120,500 | 62 | -120,438 |
| Total comprehensive income | – | – | 209,605 | -19,599 | -272 | 4,167 | 193,901 | 2,239 | 196,140 |
| Dividend payment by GEA Group Aktiengesellschaft |
– | – | -101,094 | – | – | – | -101,094 | – | -101,094 |
| Change in other non-controlling interests |
– | – | – | – | – | – | – | -713 | -713 |
| Share-based payments | – | 64 | – | – | – | – | 64 | – | 64 |
| Award proceedings * | 23,486 | -115,559 | 382 | – | – | – | -91,691 | – | -91,691 |
| Balance at Dec. 31, 2012 (192,495,476 shares) |
520,376 1,217,864 | 397,553 | 29,986 | 487 | -2,520 | 2,163,746 | 2,552 | 2,166,298 |
*) See section 7.1
The accompanying consolidated financial statements include GEA Group Aktiengesellschaft, Düsseldorf/ Germany, and its subsidiaries, which together make up GEA Group. GEA Group Aktiengesellschaft is a listed corporation. 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 in compliance with Regulation (EC) No. 1606/2002 of the European Parliament and the Council on the application of international accounting standards. The additional provisions of section 315a of the HGB were also complied with.
The accompanying consolidated financial statements have been prepared in euros (EUR). All amounts, including the prior-year 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 differences in the order of EUR 1 thousand in certain cases.
To improve the clarity of presentation, various items in the consolidated balance sheet and income statement have been aggregated and are explained accordingly in the notes. Assets and liabilities are classified into current and non-current items. The income statement is prepared using the cost of sales method.
The cash flow statement is prepared using the indirect method for cash flow from operating activities and the direct method for cash flow from investing and financing activities.
The Executive Board of GEA Group Aktiengesellschaft approved these consolidated financial statements for publication on February 28, 2013.
The following accounting standards were applied by GEA Group for the first time in the year under review:
IAS 12 "Income Taxes" – amendment relating to the recovery of underlying assets – published by the IASB in December 2010
The amendment contains a new rule on the treatment of temporary differences in connection with the measurement of investment property pursuant to the fair value model in accordance with IAS 40 "Investment Property." In general, temporary differences between the carrying amount and tax base of an asset or liability must be measured based on the tax consequences expected as a result of the planned use of the underlying asset or liability. In the future, deferred tax liabilities and deferred tax assets must be measured for investment property carried at fair value based on the tax consequences of a sale, unless the reporting entity can prove that recovery of the full carrying amount will be through use.
IFRS 7 "Financial Instruments: Disclosures" – enhanced disclosure requirements for transfers of financial assets – published by the IASB in December 2011
Under certain conditions, the transfer of rights under financial assets to a third party or the obligation to transfer payments from financial assets to a third party may lead to those assets being derecognized. In such cases, the existing version of IFRS 7 did not impose any disclosure requirements. The amendment now requires extensive disclosures on any assets and liabilities retained or assumed in the course of the transaction. In addition, the disclosure requirements have been extended in relation to restrictions on use if the asset continues to be recognized in its entirety although the associated rights were transferred or the entity has entered into an obligation to transfer payments resulting from the asset.
The accounting pronouncements required to be applied for the first time in the fiscal year did not have a material effect on the group's net assets, financial position, and results of operations, or on the notes to the consolidated financial statements.
The following accounting standards and interpretations, as well as amendments to existing standards and interpretations, were published but not yet required to be applied to the preparation of the IFRS consolidated financial statements as of December 31, 2012:
Improvements to IFRSs 2011 – amendments under the IASB's annual improvement project – published by the IASB in May 2012
The IASB published Annual Improvements to IFRS 2009 – 2011 Cycle as part of its Annual Improvements process to make minor amendments to standards and interpretations.
This collection of improvements contains minor amendments to a total of five standards. Subject to their endorsement by the EU, which is still outstanding, all of the amendments will be required to be applied for the first time in fiscal years beginning on or after January 1, 2013; earlier application is permitted. No effects are expected from the application of these amendments.
IAS 1 "Presentation of Financial Statements" – published by the IASB in June 2011
Under the revised IAS 1, other comprehensive income must be broken down into profit or loss that will subsequently be recycled to profit or loss as income or expense or that will remain directly in equity. The option remains to present items of other comprehensive income before or after tax. However, if the before-tax presentation is selected, the tax must be split between items that will subsequently be reclassified to profit or loss and those that will remain in equity.
The amendments to IAS 1 are required to be applied for fiscal years beginning on or after July 1, 2012; earlier application is permitted.
The amended IAS 19 contains new requirements for the recognition of the effects of changes in actuarial assumptions. In future, actuarial gains and losses must be recognized directly in other comprehensive income and must therefore be taken directly to equity. Immediate or deferred recognition in the income statement under the corridor approach, which was previously permitted, is no longer allowed. Following the change in accounting policy last fiscal year, this amendment has no effect on GEA Group. In addition, the revised IAS 19 replaces the expected return on plan assets and the interest expense on the pension obligation by a single net interest component. If GEA Group had already applied the revised IAS 19 in fiscal 2012, interest expense would have increased by around EUR 1.4 million. Moreover, in future the past service cost must be recognized in full in the period in which the relevant changes to the plan are made. Furthermore, the revision to IAS 19 changes the requirements for recognizing termination benefits and extends the disclosure and explanation requirements to include, among other things, the presentation of the main characteristics of the pension plans and potential funding risks. However, these changes are not expected to materially affect the financial statements of GEA Group.
The amendments to IAS 19 are required to be applied retrospectively for fiscal years beginning on or after January 1, 2013; earlier application is permitted.
IFRS 10 "Consolidated Financial Statements," IFRS 11 "Joint Arrangements," IFRS 12 "Disclosure of Interests in Other Entities," consequential amendments to IAS 27 "Separate Financial Statements," and IAS 28 "Investments in Associates" – revised standards on accounting for interests in other entities and the corresponding disclosures in the notes to the financial statements – published by the IASB in May 2011
Following publication of the new IFRS 10 (see below), the revised IAS 27 now only contains the requirements governing accounting for subsidiaries, joint ventures, and associated companies in separate financial statements prepared according to IFRSs.
The changes contained in IAS 28 arise from the publication of IFRS 10, IFRS 11, and IFRS 12 (see below). In addition, under the revised version of the standard, an investment in or portion of an associate or joint venture must be classified as held for sale if the criteria of IFRS 5 are met. Any remaining portion of the associate or joint venture must be accounted for using the equity method until the portion classified as held for sale has been disposed of.
The new standard replaces the consolidation requirements of IAS 27 "Consolidated and Separate Financial Statements" and SIC-12 "Consolidation – Special Purpose Entities." The new IFRS 10 affects the definition of the basis of consolidation. As currently required by IAS 27, consolidated financial statements must include those entities that are controlled by the parent. The definition of control in IFRS 10 differs from that used in IAS 27, where control is defined as the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. Under IFRS 10, control exists when an investing entity is exposed, or has rights, to variable returns from involvement with the investee on the one hand, and has the ability to affect those returns through its power over the investee on the other. The new concept of control applies to all entities, including special purpose entities. It can lead to differing assessments, especially in cases of potential voting rights, agency relationships, and in situations where substantial, but not majority, voting rights are held. The impact assessment of the new requirements on GEA Group's basis of consolidation has still to be concluded. To date, no impact is expected, because GEA Group Aktiengesellschaft has constant control, directly or indirectly, of all voting rights in its consolidated entities.
The new standard supersedes IAS 31 "Interests in Joint Ventures" and SIC-13 "Jointly Controlled Entities – Nonmonetary Contributions by Venturers." In contrast to IAS 31, accounting for joint arrangements under IFRS 11 depends not on the legal form of the arrangement but on the nature of the rights and duties arising under the arrangement. IFRS 11 makes a distinction between joint operations and joint ventures. Joint operations are joint arrangements in which the parties with joint control have rights to the assets and obligations for the liabilities relating to that arrangement. In line with this, they account for their shares of the respective assets, liabilities, income, and expenditure as they did previously. A joint venture exists when the parties with joint control have rights to the net assets of the arrangement. Joint ventures now have to be accounted for using the equity method. The previous option to account for joint ventures using proportionate consolidation has been removed. GEA Group does not expect the implementation of these new requirements to materially affect its financial reporting.
The new standard revises the disclosure requirements for all types of interests in other entities, including joint arrangements, associates, structured entities, and off-balance sheet vehicles. The objective is to help users of financial statements to understand the nature of, and risks associated with, the entity's interest in other entities, and the effects of these interests on its financial positions, financial performance, and cash flows.
The new IFRS 10, 11, and 12, and revised IAS 27 and IAS 28 standards are required to be applied for the first time retroactively in the first period of a fiscal year beginning on or after January 1, 2013. Earlier application is permitted. The new IFRS 10, 11, 12, and revised IAS 27 and IAS 28 standards must all be applied at the same time.
In the EU, the new IFRS 10, 11, and 12, and revised IAS 27 and IAS 28 standards are required to be applied for the first time for fiscal years beginning on or after January 1, 2014 – contrary to the date of initial application of the original standards.
In June 2012, the IASB published clarifications and revised transitional arrangements for the first-time application of the IFRS 10, 11, and 12 standards. Subject to endorsement by the EU, the amendments are required to be applied for fiscal years beginning on or after January 1, 2013.
IAS 32 "Financial Instruments: Presentation" and IFRS 7 "Financial Instruments: Disclosures" – offsetting financial assets and financial liabilities – published by the IASB in December 2011
The additions to IAS 32 specify in more detail the conditions under which financial assets and financial liabilities must be offset. In addition, they clarify which gross settlement systems may be considered equivalent to net settlement within the meaning of the standard. The relevant disclosure requirements in IFRS 7 were also modified in line with these clarifications.
The amendments to IAS 32 are required to be applied retroactively for fiscal years beginning on or after January 1, 2014; earlier application is permitted.
The amendments to IFRS 7 are required to be applied retroactively for fiscal years beginning on or after January 1, 2013.
IFRS 9 "Financial Instruments" – recognition and measurement of financial instruments – published by the IASB in November 2009
The accounting treatment of financial instruments set out in IFRS 9 will replace IAS 39.
In the future, there will only be two classification and measurement categories for financial assets: at amortized cost or at fair value. Financial assets at amortized cost comprise those financial assets that give rise solely to payments of principal and interest at specified dates and are also held within a business model for managing financial assets whose objective is to hold these financial assets and collect the associated contractual cash flows. All other financial assets are classified as at fair value. Under certain circumstances, a fair value option is available for financial assets falling under the first category, as at present.
Changes in financial assets belonging to the fair value category must generally be recognized in profit or loss. However, an election can be made to measure certain equity instruments at fair value through other comprehensive income; in this case, dividend income from these assets is recognized in profit or loss. The provisions governing financial liabilities have basically been taken over from IAS 39. The most important difference relates to the treatment of changes in value of financial liabilities measured at fair value. In future, the amount of the change relating to changes in own credit risk must be recognized in other comprehensive income, while the remaining amount of the change in fair value is recognized in profit or loss.
IFRS 9 "Financial Instruments" and IFRS 7 "Financial Instruments: Disclosures" – changes to the mandatory effective date and transition disclosures – published by the IASB in December 2011 The amendments no longer require restatement of prior-period figures upon initial application of IFRS 9. When an entity chooses to apply this exemption, additional disclosures are required according to IFRS 7 to allow for assessment of the effects of the first-time application of IFRS 9.
Subject to its endorsement by the EU, which is still outstanding, the date of initial application of IFRS 9 was delayed to fiscal years beginning on or after January 1, 2015; earlier application is permitted.
The new standard sets out the methodology for determining fair value and increases fair value disclosures. It means that a framework for measuring fair value is now contained in a single IFRS. The requirements do not apply to share-based payment transactions within the scope of IFRS 2 "Share-based Payment," leasing transactions within the scope of IAS 17 "Leases," or other measurements required by other standards that have some similarities to fair value but are not fair value, such as net realizable value in IAS 2 "Inventories," or value in use in IAS 36 "Impairment of Assets."
IFRS 13 will be required to be applied for the first time prospectively in fiscal years beginning on or after January 1, 2013. Earlier application is permitted.
IFRIC 20 "Stripping Costs in the Production Phase of a Surface Mine" – published by the IASB in October 2011
The interpretation governs the accounting for waste removal costs incurred during the production phase of surface mining activity. It clarifies the conditions under which an asset has to be recognized for stripping activities and how such an asset must be measured. IFRS 20 will be required to be applied for the first time in fiscal years beginning on or after January 1, 2013.
Unless otherwise stated, the new standards have been endorsed by the EU.
GEA Group is currently examining the effects of the revised accounting standards on the consolidated financial statements and will determine the date of initial application. At this point in time, GEA Group does not believe that application of the new or revised pronouncements will have a material effect on its consolidated financial statements.
GEA Group's consolidated financial statements include all significant companies in which GEA Group Aktiengesellschaft directly or indirectly holds the majority of voting rights or is otherwise able to directly or indirectly control the financial and operating policy decisions. Subsidiaries are consolidated from the date on which the group obtains the ability to control them. They are deconsolidated from the date on which control is lost.
Acquired subsidiaries are accounted for using the purchase method. The consideration paid is measured on the basis of the fair value of the assets received, the liabilities assumed to the seller, and the equity instruments issued at the transaction date. The identifiable assets acquired and liabilities and contingent liabilities assumed in the business combination are recognized at their fair value at the transaction date, irrespective of any non-controlling interests. Any contingent consideration agreed is recognized at fair value at the acquisition date. Subsequent changes in fair value are recognized in profit or loss.
The excess of cost over the share of the fair value of the subsidiary's net assets acquired is recognized as goodwill. If, after a further examination, cost is lower than the share of the fair value of the subsidiary's acquired net assets measured at fair value, the difference is recognized as a gain in profit or loss.
Intercompany receivables and liabilities are eliminated, as are profits and losses from intercompany transactions with the exception of income and expenses between continuing and discontinued operations.
If consolidated subsidiaries have a different reporting date to the parent, they are included on the basis of interim financial statements as of December 31, 2012.
The consolidated group changed as follows in fiscal year 2012:
| Number of companies | 2012 | 2011 |
|---|---|---|
| Consolidated group as of January 1 | 305 | 271 |
| German companies (including GEA Group AG) | 56 | 49 |
| Foreign companies | 249 | 222 |
| Initial consolidation | 10 | 65 |
| Merger | -13 | -22 |
| Liquidation | -5 | -6 |
| Deconsolidation | -4 | -3 |
| Consolidated group as of December 31 | 293 | 305 |
| German companies (including GEA Group Aktiengesellschaft) | 49 | 56 |
| Foreign companies | 244 | 249 |
Four companies were deconsolidated due to their minor significance. A total of 74 subsidiaries (previous year: 77) 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. Their consolidated revenue amounts to 0.4 percent (previous year: 0.5 percent) of the group's aggregate consolidated revenue, while their earnings account for 1.6 percent (previous year: 0.5 percent) of recognized earnings before tax, and their equity for 1.8 percent of consolidated equity, as in the previous year. The subsidiaries are measured at cost and recognized as non-current other financial assets, as their fair value cannot be determined with sufficient certainty.
A complete list of all subsidiaries, associates, and joint ventures can be found in section 12.4.
Investments in material companies over which significant influence can be exercised are accounted for using the equity method at the group's share of adjusted equity. They are initially recognized at cost. Entities over which a group company can exercise significant influence, i.e., it can participate in the investee's financial and operating policy decisions, are accounted for as associates. This generally relates to companies in which GEA Group directly or indirectly holds 20 to 50 percent of the voting rights.
The group's share of the profit or loss of associates is recognized and presented separately in the income statement. The group's share of income and expenses recognized outside profit or loss is reported directly in other comprehensive income. If the group's share of an associate's loss exceeds the carrying amount of the net investment in the associate, no further losses are recognized. Any goodwill arising on acquisition is included in the carrying amount of the investment.
Where necessary, the accounting policies of associates are adjusted to comply with uniform group accounting principles.
As of the reporting date, two investments in associates were accounted for in the consolidated financial statements using the equity method (previous year: two).
The group exercised the option to account for interests in joint ventures using the equity method.
As of the reporting date, 12 investments in joint ventures were accounted for in the consolidated financial statements (previous year: 13).
The group companies prepare their annual financial statements on the basis of their respective functional currencies.
Foreign currency transactions entered into by companies included in the consolidated financial statements are translated into the functional currency at the exchange rate prevailing at the transaction date. Monetary assets and liabilities are translated at the applicable exchange rate at each reporting date. The exchange rate gains and losses resulting from these items are generally reported in the income statement under other income or expenses.
All financial statements of companies whose functional currencies differ from the reporting currency are translated into the reporting currency used in GEA Group's consolidated financial statements. The assets and liabilities of the companies included in the consolidated financial statements are translated at the middle rates prevailing at the reporting date. The income statements of these companies are translated at the average rates for the period under review. If these average rates are not a reasonable approximation of the actual transaction rates, the income statements are translated at the relevant transaction rates. Any translation differences are reported in equity under other comprehensive income and adjusted.
Goodwill from the acquisition of foreign subsidiaries is translated at the closing rate as an asset attributable to these companies
Items of property, plant and equipment are recognized at cost less cumulative depreciation and impairment losses, plus reversals of impairment losses.
Expenses for major regular maintenance are amortized over the remaining useful life of the asset concerned or over the period to the next maintenance date.
The carrying amount of items of property, plant and equipment is reviewed if it is likely to have been impaired by events or changes in circumstances. An impairment test is performed by comparing the asset's carrying amount with its recoverable amount. The recoverable amount is defined as the higher of internal value in use and fair value less costs to sell (net realizable value). Fair value is primarily determined on the basis of the current local market price for used machinery or commercial real estate. If the carrying amount exceeds the recoverable amount, an impairment loss is recognized. To assess impairment, assets are grouped at the lowest level for which separate cash flows can be identified. If the reason for the impairment subsequently ceases to apply, the impairment loss is reversed up to a maximum of the amortized historical cost.
Leases are agreements granting the right to use an asset for a defined period in return for a payment. Leases are accounted for as finance leases if substantially all the risks and rewards incidental to using the leased asset and therefore beneficial ownership are attributable to the lessee. As a result, the GEA Group companies that, as lessees, bear substantially all the risks and rewards associated with the leased asset recognize the asset at the lower of fair value or the present value of minimum lease payments, and depreciate the asset in subsequent periods over the shorter of the lease term or the asset's estimated useful life. A corresponding liability is recognized, which is amortized in the following periods using the effective interest method. Payments to the lessor are divided into an interest and a principal repayment element, with the interest element being recognized in profit or loss over the lease term as a continuous interest payment on the residual lease liability. All other leases under which GEA Group is a lessee are treated as operating leases. In these cases, the lease payments are recognized as an expense using the straight-line method.
Lease transactions under which GEA Group companies are the lessor and substantially all the risks and rewards associated with the leased asset are transferred to the lessee are accounted for as sales and financing business. A receivable is reported in the amount of the net investment under the lease. The interest income subsequently generated is recognized in profit or loss. All other lease transactions under which the group is the lessor are treated as operating leases. In this case, the asset leased for use remains on the balance sheet and is depreciated. The lease payments are recognized as income using the straightline method over the term of the lease.
Various companies included in the consolidated financial statements have sold and leased back items of property, plant and equipment in the past. Depending on the distribution of risk, these sale and leaseback transactions resulted in a finance lease or an operating lease. In the case of operating leases, the entire gain was recognized immediately if the asset was sold at fair value. If the asset was sold above its fair value, the difference between the selling price and fair value was deferred and recognized over the lease term.
Property that is held to earn rentals or for capital appreciation is reported as investment property. In the case of property that is held partly to earn rentals and partly to produce or supply goods or services or for administrative purposes, the entire property is classified as investment property if the proportion of owner-occupation is insignificant. This is assumed to be the case if the proportion is below 10 percent.
Cost is depreciated using the straight-line method over a period of between 10 and 50 years. The same measurement method is applied as for property, plant and equipment.
Goodwill arising from business combinations is recognized as an intangible asset.
Goodwill is tested for impairment at segment level at least once a year at the end of the fiscal year and if there are any indications of impairment. The recoverable amount for the segment is compared with the carrying amount including goodwill. The recoverable amount corresponds to the higher of internal value in use and fair value less costs to sell. Fair value less costs to sell is the measure for the impairment of business units classified as discontinued operations. If the carrying amount of the segment's assets exceeds the recoverable amount, an impairment loss in the amount of the difference is recognized in profit or loss.
An impairment loss initially reduces the carrying amount of goodwill. Any amount exceeding goodwill is allocated proportionately to the carrying amounts of non-current nonfinancial assets.
The value in use of the individual business units is calculated annually at the end of the fiscal year using the discounted cash flow method. It is only necessary to estimate a selling price if the value in use is less than the carrying amount.
Other intangible assets include both internally generated and purchased assets. Internally generated intangible assets comprise capitalized development costs. In addition to contract-based rights, purchased intangible assets mainly contain technologies, brand names, and customer relationships. Technologies, brand names, and customer relationships are usually acquired in connection with takeovers. Internally generated and purchased intangible assets are recognized at cost.
If the useful life of an intangible asset can be determined, the asset is amortized on a straight-line basis over its useful life. Intangible assets whose useful life cannot be determined are recognized at cost.
The carrying amount of an intangible asset is reviewed if it is likely to have been impaired by events or changes in circumstances. Intangible assets with an indefinite useful life are tested for impairment at least once a year. This requires the recoverable amount of the assets to be determined. The recoverable amount corresponds to the higher of internal value in use and fair value less costs to sell. If the carrying amount is higher than the recoverable amount, the asset is written down to the recoverable amount. Previously recognized impairment losses are reversed if the reasons for the impairment no longer apply. Impairment losses are reversed up to a maximum of the amortized historical cost.
Indefinite-lived intangible assets are also examined each year to determine whether the classification of the asset as indefinite-lived can be retained. Any change to a finite useful life is applied prospectively.
Other financial assets include investments in unconsolidated subsidiaries and other equity investments, other securities, financial receivables (except trade receivables), and derivative financial instruments.
Shares in unconsolidated subsidiaries and other equity investments are allocated to the "available-forsale financial assets" measurement category. They are measured at cost because the shares in these corporations are not traded in an active market and their estimated fair value is subject to fluctuations without the probabilities of the individual fair values being able to be reliably determined within the margin of fluctuation. A reliable fair value can only be determined during sale negotiations. The group does not intend to sell these financial assets.
Securitized debt instruments that are intended to be held to maturity are allocated to the "held-tomaturity investments" measurement category and measured accordingly at amortized cost using the effective interest method. All other securities are measured at fair value and any fluctuations in value are recognized directly in other comprehensive income. These instruments are only allocated to the "available-for-sale financial assets" measurement category if no other category applies.
Financial receivables are allocated to the "loans and receivables" measurement category and measured at amortized cost using the effective interest method.
Derivative financial instruments are used exclusively for hedging purposes, in particular to hedge currency risk and to mitigate the risk of interest rate fluctuations resulting from financing transactions. They are always carried at fair value. If derivative financial instruments are not included in a documented hedging relationship, they are allocated to the "financial assets at fair value through profit or loss" measurement category, and their fair value changes are recognized in the income statement. If the derivative financial instruments included in a recognized hedging relationship are used to hedge future cash flows, the fair value fluctuations are recognized in other comprehensive income.
Embedded financial derivatives are separated from their host contracts if certain qualifying criteria relating to their recognition and measurement are met.
Financial assets are recognized as soon as GEA Group has received a cash payment or it has the right to receive cash flows. In the case of regular way sales of nonderivative financial assets, the settlement date, i.e., the delivery date of the financial assets, is decisive. Assets are derecognized as soon as the right to receive cash payments or other financial assets expires as a result of payment, waiver, statutory limitation, offsetting, or any other factor, or the right is transferred to another person, with the risks passing in full to the purchaser. In the case of regular way sales of nonderivative financial assets, the settlement date is taken to be the date of derecognition, in line with the principle used for recognition.
Items are originally recognized at fair value or, in the case of financial assets not measured at fair value, including directly attributable transaction costs.
Financial assets or groups of financial assets are tested for indications of impairment at each reporting date. Impairment losses are recognized in the income statement. Financial assets are impaired if, following one or more events that occurred after initial recognition of the asset, there is objective evidence that the expected future cash flows have declined. Objective evidence of impairment may be, for example, significant financial difficulties of the debtor or payment default. In the case of financial assets measured at amortized cost (e.g., unquoted equity instruments), the impairment loss corresponds to the difference between the carrying amount of the financial instrument and the present value of the future cash flows discounted at the original effective interest rate.
If the reasons for impairment no longer apply, impairment losses on financial assets – with the exception of equity instruments – are reversed to income up to the amount of the amortized cost that would have applied if no impairment loss had been charged.
At the time they are entered into, derivative financial instruments that are included in a recognized hedging relationship are designated either as a hedge against changes in the fair value of assets, liabilities, or binding agreements (fair value hedge) or as a hedge of future cash flows in connection with assets and liabilities (cash flow hedge).
In an effective hedge of the risk of a change in fair value, the change in the fair value of both the derivative and the hedged item is recognized in the income statement. Changes in fair value offset each other in a perfect hedge.
If derivatives are used to hedge future cash flows, the effective portion of the change in the derivative's fair value is recognized in other comprehensive income. The ineffective portion of the change in fair value is reported as a gain or loss. The item recognized in other comprehensive income arising from the effective portion of the change in fair value is recognized in the income statement as soon as the hedged item is settled. If settlement of the hedged item leads to the recognition of a nonfinancial asset, the changes in value previously recognized in other comprehensive income are offset against the cost of the nonfinancial asset. If, contrary to previous assumptions, the hedged transaction is not executed, the changes in value previously recognized in equity are reversed directly to profit or loss.
The group predominantly uses cash flow hedges to hedge foreign currency and interest rate risk. GEA Group also enters into hedging transactions in accordance with its risk management principles that offer economic hedges of existing risks, but do not meet the strict hedge accounting requirements of IAS 39. Currency forwards that are used to hedge currency risk arising from monetary assets and liabilities are not aggregated into a recognized hedging relationship. Effects arising from the translation of balance sheet items that are recognized in the income statement are largely offset by changes in the fair values of currency forwards that are also recognized in the income statement.
GEA Group does not currently apply hedge accounting for fair value hedges.
Deferred tax assets and liabilities are recognized for all temporary differences between the carrying amounts in the respective national tax accounts and those in the IFRS financial statements that are included in the consolidated financial statements. Deferred tax assets are also recognized for tax loss carryforwards. Deferred tax assets arising from deductible temporary differences and tax loss carryforwards are recognized only to the extent that there is likely to be sufficient taxable income available in future.
No deferred tax liabilities are recognized on taxable temporary differences arising from investments in subsidiaries, associates, or joint ventures as long as the reversal of temporary differences is unlikely.
Inventories are recognized at the lower of cost and net realizable value. Acquisition cost is calculated at average cost or using the first-in, first-out (FIFO) method. Production cost includes direct costs plus materials and production overheads, depreciation, and production-related administrative costs. Net realizable value is calculated as the estimated sale proceeds less costs incurred until completion, and selling expenses. Previously recognized impairment losses must be reversed if the reasons for the impairment no longer apply. Impairment losses are reversed up to a maximum of the amortized historical cost.
Trade receivables include no interest component and are recognized in the balance sheet at their principal amount less appropriate allowances for bad debts.
Trade receivables that are sold to financial services companies under factoring agreements are derecognized once substantially the majority risks and rewards have been transferred to the financial services company.
Receivables and revenues from construction contracts are recognized using the percentage of completion (PoC) method.
The percentage of completion is determined using the cost-to-cost method, which is derived from the ratio of contract costs incurred to the total estimated contract costs. Contracts are measured at production cost plus a profit in proportion to the stage of completion. Losses on construction contracts are immediately recognized in full in the fiscal year in which they are identified, regardless of the stage of completion. If the contract costs incurred and the gains or losses recognized exceed the progress billings, the excess amount is capitalized and reported under "trade receivables." If the progress payments received exceed the capitalized costs and recognized gains or losses at the reporting date, they are reported as a liability under "other liabilities." Advance payments on construction contracts are reported separately as a liability.
If the contract margin cannot be estimated reliably, revenue is recognized only in the amount of the contract costs incurred (zero-profit method). A profit is only recognized once the contract margin can be estimated reliably.
Payments for differences in the overall contract, claims, and premiums are included in the contract revenue insofar as these will probably result in revenue that is capable of being estimated reliably.
Cash and cash equivalents comprise cash, demand deposits, and financial assets that can be converted into cash at any time and that are subject to only slight fluctuations in value. They are recognized at fair value.
Non-current assets or groups of assets classified as "held for sale" within the meaning of IFRS 5 are recognized at the lower of carrying amount and fair value less costs to sell. They are classified as held for sale if their sale is highly probable, the assets or groups of assets held for sale are available for immediate sale, and their sale will have been completed within one year of their classification as held for sale. As the carrying amount of depreciable assets is realized by disposal rather than use, these assets are no longer depreciated once they have been reclassified. Corresponding liabilities are reported under "liabilities associated with assets held for sale."
Ordinary shares are classified as equity. Treasury shares are deducted from the equity attributable to the shareholders of GEA Group Aktiengesellschaft.
Obligations under pension plans relate to post-employment benefit obligations. Defined benefit contribution obligations are calculated using the projected unit credit method. The present value of these obligations reflects expected future salary and pension trends, since the entitlements earnable in the period up to the retirement age depend on these. Claims under supplementary healthcare benefit insurance are included in the actuarial measurement of assumptions made in respect of healthcare cost trends. The pension obligations are measured on the basis of actuarial reports by independent actuaries.
In order to provide these pension benefits, the Company in some cases holds financial assets in longterm funds outside GEA Group (plan assets) and qualifying insurance policies. Insofar as the entitlements are funded by such external assets, their fair value is offset against the present value of the defined benefit obligation. The net amount offset, adjusted for any unrecognized past service cost and the effects of the asset ceiling, is reported under non-current employee benefit obligations or other non-current financial assets.
Gains and losses resulting from changes in actuarial assumptions, such as changes to the discount rate or changes in the difference between the actual and expected return on plan assets, are recognized in other comprehensive income in the year in which they arise and reported in retained earnings after adjustment for tax effects. The interest component included in pension expenses is reported under interest expense, and the expected return on plan assets is included in interest income. The service cost for the period is recognized in the relevant functional costs.
Other employee benefit obligations comprise other long-term benefits and all short-term benefits. Shortterm employee benefit obligations generally fall due in full no more than 12 months after completion of the service rendered. They include wages, salaries, social insurance contributions, paid vacation, and profit-sharing schemes. They are recognized as an expense at the same time as the work is remunerated. Any expenditure in excess of the payments already made is reported as a deferred liability at the reporting date. Other long-term benefits, such as jubilee payments or partial retirement arrangements, are recognized at the present value of the obligation at the reporting date. Securities are pledged to the beneficiaries to protect vested partial retirement credits against the employer's insolvency. The fair value of these securities is offset against the corresponding liability.
Provisions for uncertain liabilities are recognized where there is a legal or constructive obligation to a third party, a future outflow of resources is likely, and the expected settlement value can be estimated reliably. The present value of the settlement amount is recognized if the time value of money is material. Amounts are discounted at the market rates for the appropriate maturity and currency. The interest unwinding costs are presented under interest expense.
The cost of creating warranty provisions is included in the cost of sales when revenue is recognized. In all other cases, provisions are recognized when the product is accepted. The provision is measured on the basis of both the warranty cost actually incurred in the past and on the evaluated overall risk inherent in the system or product. Provisions are also recognized if a claim is made under a warranty and a loss is likely. Recourse claims against suppliers are capitalized if their services are subject to a warranty and it is highly likely that the claim can be enforced.
Provisions for expected losses from onerous contracts are recognized if the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be received under it. The unavoidable costs also include the unavoidable overheads needed to meet the obligations.
Financial liabilities comprise bonds, liabilities to banks, and liabilities under finance leases. They are initially recognized at fair value less transaction costs. They are subsequently measured at amortized cost using the effective interest method. Liabilities under finance leases are initially measured at the lower of the fair value of the leased asset and the present value of minimum lease payments.
The recognition and subsequent measurement of other liabilities is the same as for financial liabilities, with the exception of advance payments and the gross amount due to customers for contract work. Advance payments are stated at their principal amount. Please see the information provided on the recognition of construction contracts for the measurement of the gross amount due to customers for contract work.
Trade payables also include liabilities for goods received or services rendered that have not yet been invoiced, as there is only slight uncertainty as to the amount of the liability. Trade payables are recognized at fair value. This corresponds to the settlement amount in the case of liabilities due within one year.
Revenue from the sale of goods is recognized when the risks and rewards inherent in ownership of the goods sold are transferred to the customer. This normally occurs when the goods are handed over to the customer. Revenue from services is recognized when the service is rendered. Revenue is measured at the fair value of the consideration received or to be received. Customer bonuses, discounts, or rebates reduce the amount of revenue recognized.
Revenue from construction contracts is generally recognized using the percentage of completion method under which revenue is recognized in accordance with the stage of completion. The stage of completion is determined using the ratio of contract costs incurred as of the reporting date to the total estimated contract costs as of the reporting date (cost-to-cost method). Contract costs include direct costs plus materials and construction overheads, depreciation, production-related administrative costs, and such other costs that are specifically chargeable to the customer under the terms of the contract. Where a construction contract is settled over a long period and where the contract is largely financed by GEA Group, contract costs also include directly attributable borrowing costs. Conversely, income from the investment of advance payments received is offset against contract costs where this has a material influence on the contract margin. Adjustments are made for amendments to contracts, claims, and premiums insofar as these will probably result in revenue that is capable of being reliably estimated.
In line with the percentage of completion method, construction contracts are measured as the contract costs incurred as of the reporting date plus the profit attributable to the proportion of work completed. Revenue recognized is reported under trade payables, less progress billings. If the outcome of a construction contract cannot be reliably estimated, the probable recoverable revenue is recognized up to the amount of the costs incurred. Contract costs are recognized as an expense in the period in which they are incurred. If it is foreseeable that the total contract costs will exceed the contract revenue, the expected loss is recognized as an expense immediately.
Interest income is recognized ratably over the remaining maturity based on the effective interest rate and the amount of the remaining receivable. Dividend income on equity instruments is recognized if the right to receive payment is based on legally assertable claims.
Revenue from royalties is recognized in the period in which it arises in accordance with the underlying contracts.
GEA Group has a share-based payment program under which selected managers are granted performance shares. The fair value of these rights is calculated at the grant date and allocated as an expense over the vesting period using the straight-line method; a corresponding provision is recognized. The provision is remeasured at each reporting date and at the payment date. Changes in the fair value of the provision are recognized as personnel expenses. Part of the bonus earned by the Executive Board members is also converted into phantom shares. Rights under these phantom shares are measured at the share price at the reporting date (see section 7.3.4).
In addition, one group company grants its employees options on shares of the company via a trustee. The cost of this share-based payment is estimated at the grant date and amortized using the straightline method up to the exercise date (see section 7.1).
Research expenditures are recognized immediately as an expense. Development costs that are designed to significantly enhance a product or process are capitalized if completion of the product or process is technically and economically feasible, the development is marketable, the expenditures can be measured reliably, and adequate resources are available to complete the development project. All other development expenditures are recognized immediately as expenses. Capitalized development expenditures for completed projects are reported at cost less cumulative amortization and impairment losses. Capitalized development costs for intangible assets not yet available for use are tested for impairment once a year.
Development costs that are required under construction contracts are capitalized as part of the cost of the asset.
Government grants are recognized at fair value provided that the group meets the conditions necessary to receive the grant. Government grants to cover expenses are recognized over the period in which the costs for which the grants were awarded are incurred. Government grants for capital expenditure are deducted from the cost of purchasing the corresponding asset.
Preparation of financial statements requires management to make certain estimates and exercise judgment that may affect the Company's assets, liabilities, provisions, and deferred tax assets and liabilities, as well as its income and expenses and contingent liabilities.
Factors that may cause amounts to fall below estimates might include a deterioration in the global economy, movements in exchange rates and interest rates, as well as material litigation and changes in environmental or other legislation. Production errors, the loss of key customers, and rising borrowing costs may also adversely affect the group's future performance.
The recognition and measurement of the following assets and liabilities are in some cases based on management judgment. All assumptions represent the best of management's knowledge and belief in order to convey a true and fair view of the Company's net assets, financial position, and results of operations. If actual circumstances subsequently differ from those forecast, this will affect the recognition and measurement of assets and liabilities. Depending on the item concerned, earnings may also be affected.
In the first quarter of 2012, the estimates used to account for the GEA Food Solutions segment were revised. This was necessary primarily as a result of the reorganization of production. The resulting changes in estimates reflect new information, as well as the experience gained in this new segment and the views of its new management. In light of this it is not assumed that these changes in estimates will have any significant effects on GEA's future IFRS financial statements.
Estimates relating to the stage of completion reached for construction contracts in progress were amended in the GEA Food Solutions segment in the first quarter of 2012. The reduction in revenue of EUR 42.0 million and of cost of sales of EUR 21.1 million arising from this change in estimates reduced consolidated profit before interest and taxes by EUR 20.9 million.
In addition, estimates concerning existing customer risks and risks relating to production locations were modified in the first quarter of 2012, resulting in a total additional expense of EUR 14.9 million. This expense is attributable mainly to increases in provisions for warranties and follow-up costs, as well as write-downs of outstanding trade receivables and surplus inventories. EUR 9.0 million of the additional expense is included in production costs and EUR 5.9 million is included in other expenses.
Management judgment was applied in defining the basis of consolidation (see section 2.1).
Goodwill is reported in the balance sheet as a result of acquisitions. When an acquired company is initially consolidated, all its identifiable assets, liabilities, and contingent liabilities are recognized at their acquisition-date fair value. The main problem is estimating these fair values. As a rule, land and buildings are measured on the basis of independent appraisals. If intangible assets are identified, their fair values are calculated using an appropriate measurement method. These measurements are made on the basis of assumptions by management with respect to the future value of the relevant assets and the discount rate. Obligations for contingent consideration are recognized on the basis of the current planning (see section 5.2).
The group tests goodwill for impairment annually. The recoverable amount calculated for this purpose for the individual segments is determined based on value in use. Value in use is calculated using assumptions by management (see section 6.3).
GEA Group operates in a large number of countries and is therefore subject to different tax jurisdictions. Calculating tax liabilities requires management to make various estimates. Management believes that it has made a reasonable estimate of tax uncertainties. However, no assurance can be given that the actual outcome of these uncertainties will correspond to the estimates made. Any deviations may have an impact on the level of tax liabilities or deferred taxes in the year of the decision.
When assessing the recoverability of deferred tax assets, management judges the extent to which realization of the deferred tax assets is sufficiently likely. The question of whether the deferred tax assets can actually be realized depends on whether sufficient future taxable income can be generated against which the temporary differences or tax loss carryforwards can be offset. Management therefore analyzes the times at which the deferred tax liabilities reverse, and expected future taxable income. Management forecasts whether deferred tax assets can be realized on the basis of expected future taxable income. Deferred tax assets decline if the estimate of planned taxable income decreases, if tax benefits available as a result of tax strategies are reduced, or the amount or timing of future tax benefits is restricted by changes in the law (see section 8.7).
Changes in estimates of the probability of a present obligation or of an outflow of resources embodying economic benefits could mean that items previously classified as contingent liabilities must be reported as provisions, or that the amount of provisions must be adjusted (see section 7.2). This also applies in particular to environmental obligations.
The present value of pension obligations depends on actuarial assumptions. These assumptions cover the discount rate, expected salary increases and returns on plan assets, mortality rates, and cost increases for medical care. These assumptions could differ significantly from actual future outcomes as a result of changes in market and economic conditions, and could therefore have a material effect on the level of the obligation and the related expenses.
The expected returns on plan assets are calculated on a uniform basis that reflects long-term forecast returns, asset allocation, and estimates of future long-term investment returns.
The discount rate is calculated at the end of each year. This is the rate used to calculate the present value of future cash outflows expected to be required to settle the obligation. In order to calculate the discount rate, the group uses the interest rate on high-quality corporate bonds denominated in the same currency in which the benefits are paid and whose terms to maturity correspond to those of the pension obligations.
Other significant assumptions relating to pension obligations are partly based on market conditions (see section 7.3.1).
The recognition of construction contracts using the percentage of completion method is based on management's estimates of the cost of such contracts. Changes in estimates or differences between the estimated cost and the actual cost have a direct effect on recognized earnings from construction contracts. The operating units continuously review the estimates and adjust them if required.
In some cases, GEA Group companies are parties to litigation. The outcome of this litigation could have a material effect on the group's net assets, financial position, and results of operations. Management regularly analyzes current information on these legal disputes and recognizes provisions for probable obligations, including estimated legal costs. Both internal counsel and external lawyers are used to make this assessment. When deciding on the need to recognize provisions, management takes into account the probability of an unfavorable outcome and its ability to estimate the amount of the obligation with sufficient reliability. The filing of a suit or the formal assertion of a claim against a GEA Group company does not necessarily mean that a provision must be recognized for the related risk (see section 9.4).
The Executive Board has put in place an effective set of guidelines to manage and hence largely limit or hedge financial risks throughout the group. The objectives with regard to protecting assets, eliminating gaps in security, and improving efficiency in identifying and analyzing risks are clearly defined, as are the relevant organizational structures, powers, and responsibilities. The guidelines are based on the principles of system security, the separation of functions, transparency, and immediate documentation. For further information, please see the discussion of the risk management system in the management report.
Because it operates worldwide, GEA Group is exposed to currency, interest rate, commodity price, credit, and liquidity risk in the course of its ordinary activities. Financial risk management aims to reduce this risk through the appropriate use of derivative and nonderivative hedging instruments.
Because GEA Group operates internationally, its cash flows are denominated not only in euros, but also in a number of other currencies, particularly U.S. dollars. Hedging the resulting currency risk is a key element of risk management.
The group guideline requires all group companies to hedge foreign currency items as they arise in order to fix prices on the basis of hedging rates. Currency risks are hedged for hedged items recognized in the balance sheet, unrecognized firm commitments, and highly probable forecast transactions. The hedging periods are determined by the maturity of the hedged items and are usually up to 12 months, but in exceptional cases may exceed that period significantly. Despite the hedging requirement, changes in exchange rates may affect sales opportunities outside the eurozone.
Group companies based in the eurozone are obliged to tender to GEA Group's central finance unit all outstanding exposures relating to transactions in goods and services in major transaction currencies. Most of these exposures are passed on directly to banks at matching maturities, depending on the hedging objective of the derivatives and the related accounting treatment; they may also be hedged as part of a portfolio. The hedging of financial transactions and transactions conducted by subsidiaries outside the eurozone is also closely coordinated with the central finance unit.
Because GEA Group operates worldwide, liquidity is raised and invested in the international money and capital markets in different currencies, mainly euros, and at different maturities. The resulting financial liabilities and investments are exposed to interest rate risk, which must be assessed and controlled by central interest management. Derivative financial instruments may be used on a case-bycase basis to hedge the interest rate risk and reduce the interest rate volatility and financing costs of the hedged items. Only the central finance unit is permitted to enter into such interest rate hedges.
All interest rate derivatives are allocated to individual loans. The hedging relationships are documented and recognized as cash flow hedges. Overall, the interest expense from the loans and the allocated derivatives reported in the income statement represents the fixed interest rate for the hedging relationship.
Cross-currency swaps were used in connection with the financing of acquisitions in Canada and the UK. They are recognized at fair value. However, they are not included in any documented hedging relationship with intragroup hedged items. The earnings effects arising from changes to currency parities that have occurred since the beginning of the cross-currency swaps, and the earnings effects due to the related intragroup receivables, do not match due to different calculation bases (forward rate relative to spot rate). The difference in value amounted to EUR 2,163 thousand in the fiscal year (previous year: EUR -865 thousand).
GEA Group requires various metals such as aluminum, copper, and steel, whose purchase prices can be subject to substantial fluctuations depending on the market situation. Long-term supply agreements have been entered into with various suppliers in order to hedge commodity price risk. There were a small number of aluminum and copper commodities futures as of the reporting date.
Financial instruments are exposed to credit risk in that the other party to the contract may fail to fulfill its obligations. The counterparty limit system used by GEA Group for financial management aims to continuously assess and manage the counterparty default risk. A maximum risk limit has been defined for each counterparty, which in most cases is derived from the ratings from recognized credit rating agencies and credit default swaps (CDSs). Appropriate action is taken if the individual limit is exceeded.
The financial standing of potential customers is ascertained before orders are accepted using an internal risk board procedure. Active receivables management, including nonrecourse factoring and credit insurance, is also performed. In the case of export transactions, confirmed and unconfirmed letters of credit are used alongside sureties, guarantees, and cover notes, including from export credit agencies such as Euler Hermes. In addition to local monitoring by the subsidiary in question, GEA Group also oversees the main credit risks at group management level so that any accumulation of risk can be better managed.
Since trade receivables are usually due from a large number of customers in different sectors and regions, there is no concentration of risk. Valuation allowances take account of specific credit risks.
Derivative financial instruments are only entered into with reputable financial institutions so as to reduce the credit risk involved.
The maximum exposure for the financial assets is limited to their carrying amount
GEA Group is exposed to liquidity risk in that it may be unable to meet payment obligations because it has insufficient cash funds at its disposal. GEA Group is responsible for managing this risk. Cash funds are arranged and credit lines managed on the basis of a multi-year financial plan and a rolling month-by-month cash forecast. The funds are then made available to the companies by group management. Cash flow from operating activities is the most important source of liquidity. Cash pools have been established in 13 countries in order to optimize borrowing and the use of cash funds within GEA Group. To achieve this, the cash pools automatically balance the accounts of the participating group companies every day by crediting or debiting a target account at GEA Group Aktiengesellschaft. This prevents separate cash investments and borrowings by these companies to a large extent. Any additional liquidity requirements are generally borrowed by the GEA Group Aktiengesellschaft, which also invests surplus liquidity.
The following tables show the undiscounted contractually agreed interest and principal payments for financial liabilities, including derivative financial instruments with negative fair values:
| Cash flows | |||||||
|---|---|---|---|---|---|---|---|
| (EUR thousand) | Carrying amount |
< 1 year | 1-2 years | 2-3 years | 3-4 years | 4-5 years | > 5 years |
| 2012 | |||||||
| Trade payables | 839,143 | 824,924 | 14,219 | – | – | – | – |
| Borrower's note loan | 355,543 | 62,609 | 6,935 | 7,436 | 8,194 | 307,308 | – |
| Bonds | 409,601 | 17,000 | 17,000 | 17,000 | 417,000 | – | – |
| Liabilities to banks | 303,889 | 53,314 | 37,895 | 37,218 | 36,408 | 151,159 | 267 |
| Liabilities under finance leases | 42,625 | 5,116 | 5,664 | 4,876 | 4,865 | 4,820 | 64,165 |
| Liabilities to investees | 1,955 | 1,955 | – | – | – | – | – |
| Currency derivatives not included in a recognized hedging relationship |
5,689 | 313,249 | 8,887 | 517 | – | – | – |
| Currency derivatives included in a cash flow hedge | 1,728 | 110,445 | 8,348 | – | – | – | – |
| Interest rate and cross-currency derivatives not included in a recognized hedging relationship |
11,244 | 9,060 | 8,659 | 8,263 | 7,881 | 28,779 | 3,636 |
| Interest rate and cross-currency derivatives included in a cash flow hedge |
5,538 | 2,475 | 1,238 | 1,238 | 1,242 | 926 | – |
| Commodity derivatives not included in a recognized hedging relationship |
98 | 98 | – | – | – | – | – |
| Other liabilities | 802,879 | 797,665 | 5,214 | – | – | – | – |
| 2011 Trade payables |
903,334 | 890,631 | 12,703 | – | – | – | – |
| Borrower's note loan | 128,724 | 4,143 | 130,577 | – | – | – | – |
| Bonds | 409,134 | 17,000 | 17,000 | 17,000 | 17,000 | 417,000 | – |
| Liabilities to banks | 281,356 | 55,652 | 26,649 | 25,378 | 24,797 | 24,052 | 152,345 |
| Liabilities under finance leases | 44,164 | 4,523 | 4,736 | 4,863 | 4,901 | 5,375 | 73,235 |
| Liabilities to investees | 3,901 | 3,901 | – | – | – | – | – |
| Currency derivatives not included in a recognized hedging relationship |
10,188 | 157,009 | 6,113 | – | – | – | – |
| Currency derivatives included in a cash flow hedge | 15,404 | 246,713 | 15,791 | 2,663 | 309 | – | – |
| Interest rate and cross-currency derivatives not included in a recognized hedging relationship |
12,456 | 3,857 | 3,473 | 3,079 | 2,689 | 2,315 | 2,166 |
| Interest rate and cross-currency derivatives included in a cash flow hedge |
2,390 | 1,501 | 1,235 | 1,238 | 1,238 | 1,242 | 926 |
| Commodity derivatives not included in a recognized hedging relationship |
177 | 177 | – | – | – | – | – |
| Other liabilities | 803,762 | 786,596 | 17,166 | – | – | – | – |
All financial liabilities outstanding as of December 31, 2012, are included in the above table to the extent that payments have already been contractually agreed. Projected figures for future new liabilities are not taken into account. Foreign currency amounts are translated at the closing rates. In the case of financial liabilities that can be repaid at any time, it is assumed that they will be repaid within one year.
Payments for derivative financial instruments totaling EUR 514,941 thousand (previous year: EUR 453,734 thousand) were partially offset by payments received from the same instruments of EUR 488,582 thousand (previous year: EUR 424,839 thousand).
As of December 31, 2012, the group held cash credit lines of EUR 1,845,745 thousand (previous year: EUR 1,702,688 thousand), EUR 1,069,033 thousand of which has been utilized (previous year: EUR 819,214 thousand). The cash credit lines are composed of the following items:
| Total | 1,845,745 | 1,069,033 | 1,702,688 | 819,214 | |
|---|---|---|---|---|---|
| Various (bilateral) credit lines including accrued interests | Maximum of 1 year or "until further notice" |
154,745 | 28,033 | 228,688 | 51,214 |
| Borrower's note loan (2017) | September 2017 | 300,000 | 300,000 | – | – |
| European Investment Bank | July 2017 | 150,000 | 150,000 | 150,000 | 150,000 |
| Kreditanstalt für Wiederaufbau (KfW) (2016/12) | December 2016 | 56,000 | 56,000 | 56,000 | – |
| Kreditanstalt für Wiederaufbau (KfW) (2016/05) | May 2016 | 80,000 | 80,000 | 90,000 | 90,000 |
| GEA Bond | April 2016 | 400,000 | 400,000 | 400,000 | 400,000 |
| Syndicated credit line ("Club Deal") | June 2015 | 650,000 | – | 650,000 | – |
| Borrower's note loan (2013) | August 2013 | 55,000 | 55,000 | 128,000 | 128,000 |
| (EUR thousand) | Maturity | 12/31/2012 approved |
12/31/2012 utilized |
12/31/2011 approved |
12/31/2011 utilized |
In September 2012, GEA Group Aktiengesellschaft placed a borrower's note loan of EUR 300,000 thousand with a term running to September 2017. The issue is divided into a fixed-rate tranche and a variable-rate tranche. Part of the transaction volume relates to the partial early extension of a borrower's note loan due in August 2013.
In addition, guarantee lines for the performance of contracts, advance payments, and warranty obligations of EUR 1,898,285 thousand were available (previous year: EUR 2,069,717 thousand), EUR 749,782 thousand of which has been utilized (previous year: EUR 747,637 thousand). Of this figure, guarantees amounting to EUR 217,430 thousand (previous year: EUR 219,615 thousand) are payable at first demand. As is generally customary for this type of order collateral and financing instrument, guarantees have only been drawn down by GEA Group in extremely rare exceptional cases in recent years.
As of the year-end, EUR 292 thousand (previous year: EUR 1,366 thousand) of bank guarantees under GEA Group Aktiengesellschaft credit lines and EUR 92,074 thousand (previous year: EUR 194,142 thousand) of group guarantees were granted to Lurgi AG's customers to collateralize that company's contractual obligations. EUR 292 thousand of the bank guarantees (previous year: EUR 1,364 thousand) is payable at first demand. The purchaser of the Lurgi Group has granted bank guarantees in favor of GEA Group Aktiengesellschaft that cover the liable amount concerned in the unlikely event of default. EUR 12,933 thousand (previous year: EUR 20,894 thousand) of bank guarantees under GEA Group Aktiengesellschaft credit lines and EUR 70,251 thousand (previous year: EUR 120,446 thousand) of group guarantees were granted to Lentjes GmbH's customers to collateralize that company's contractual obligations. EUR 3,765 thousand of the bank guarantees (previous year: EUR 4,662 thousand) is payable at first demand.
Future payments from operating leases are reported separately under other financial liabilities (see section 9.2).
GEA Group companies are always exposed to foreign currency risk if their cash flows are denominated in a currency other than their own functional currency. Foreign currency risk is hedged using suitable instruments, thus largely offsetting fluctuations arising from the hedged item and the hedging transaction over their term.
The foreign currency risk presented in the sensitivity analysis results from the following transactions:
Although swaps are matched by intragroup receivables as hedged items, they are not included in a documented hedging relationship. While receivables are measured using the spot rate, the currency components of the swaps are measured on the basis of the forward rates. The two rates could differ significantly depending on the interest rate difference between the two currencies.
The translation of foreign currency receivables or liabilities at the closing rate has a direct effect on earnings.
The currency pairs in which the major part of the foreign currency cash flows are settled are included as relevant risk variables in the foreign currency sensitivity analysis. The following table shows the sensitivity of a 10 percent increase or decrease in the relevant foreign currency in relation to the relevant base currency from the group's perspective:
| (EUR thousand) | Nominal amount | Profit/loss for the year | Equity | |||
|---|---|---|---|---|---|---|
| Base currency | Foreign currency | 2012 | 2012 | |||
| + 10% | - 10% | + 10% | - 10% | |||
| EUR | USD | 377,842 | 658 | -804 | 7,476 | -9,137 |
| EUR | GBP | 91,982 | 2,720 | -3,324 | -659 | 805 |
| EUR | CAD | 33,009 | 3,492 | -4,269 | 6 | -7 |
| HKD | CNY | 24,418 | – | – | -216 | 264 |
| EUR | RUB | 15,355 | 1,247 | -1,524 | 65 | -79 |
| EUR | INR | 9,437 | 857 | -1,047 | – | – |
| (EUR thousand) | Nominal amount | Profit/loss for the year | Equity | |||
|---|---|---|---|---|---|---|
| Base currency | Foreign currency | 2011 | 2011 | |||
| + 10% | - 10% | + 10% | - 10% | |||
| EUR | USD | 452,061 | 135 | -165 | 11,009 | -13,455 |
| EUR | GBP | 86,080 | 2,421 | -2,959 | 44 | -54 |
| EUR | CAD | 44,394 | 3,798 | -4,641 | 7 | -8 |
| EUR | HKD | 32,703 | -7 | 8 | 1,118 | -1,366 |
| EUR | RUB | 10,059 | 556 | -680 | 200 | -245 |
| USD | MXN | 6,998 | -635 | 777 | – | – |
The nominal amount relates to all contractually agreed foreign currency cash flows as of the reporting date, which are translated into euros at the closing rate.
The potential fluctuations in the profit or loss for the year result primarily from derivatives that are not included in a designated hedging relationship, but are used to avoid currency risk as part of the general hedging strategy.
The interest rate sensitivity analysis presents the effects of changes in market interest rates on interest payments, interest income and expenses, and equity. The sensitivity analyses are based on the following assumptions:
The sensitivity analysis assumes a linear shift in the yield curve for all currencies of +/– 100 basis points as of the reporting date. This results in the following effects:
| 12/31/2012 | 12/31/2011 | ||||
|---|---|---|---|---|---|
| (EUR thousand) | + 100 basis points | - 100 basis points | + 100 basis points | - 100 basis points | |
| Cash flow interest rate risk | -1,665 | 2,473 | -344 | 189 | |
| Balance sheet interest rate risk | 2,712 | -1,428 | 3,617 | -3,819 | |
| Interest rate risk recognized in profit or loss | -1,515 | 2,436 | 298 | -592 |
The calculation is based on a net volume of EUR 557,674 thousand (previous year: EUR 514,306 thousand).
GEA Group Aktiengesellschaft's key financial objective is to sustainably increase its enterprise value in the interests of investors, employees, customers, and suppliers, while safeguarding and securing the group's solvency at all times.
Improving profitability and, as a result, increasing the return on capital employed therefore takes priority in all business decisions. Our strict focus on contract margin quality is also derived from this. Equally, external growth through potential acquisitions is viewed from the perspective of this goal.
Capital management, in the form of generating sufficient liquidity reserves, plays a crucial role in the pursuit of these enterprise goals. Not only does it ensure GEA Group's long-term existence, it also creates the entrepreneurial flexibility needed to enhance and update current business activities and to take advantage of strategic opportunities. It is achieved by managing liquidity reserves and available credit lines on an ongoing basis using short- and medium-term forecasts of future liquidity trends and borrowing requirements.
The capital structure is monitored regularly using various key financial indicators so as to optimize capital costs. Core indicators include the equity ratio and the net debt to equity ratio (gearing). Net debt is calculated as follows:
| (EUR thousand) | 12/31/2012 | 12/31/2011 |
|---|---|---|
| Liabilities to banks | -303,889 | -281,356 |
| Borrower's note loan | -355,543 | -128,724 |
| Bonds | -409,601 | -409,134 |
| Cash and cash equivalents | 743,524 | 432,401 |
| Net liquidity (+)/Net debt (-) | -325,509 | -386,813 |
| Equity | 2,166,298 | 2,163,592 |
| Equity ratio | 33.7% | 34.8% |
| Gearing | 15.0% | 17.9% |
As of December 31, 2012, net debt narrowed by EUR 61,304 thousand from EUR 386,813 thousand in the previous year to EUR 325,509 thousand.
Two international rating agencies, Moody's and Fitch, again rated GEA Group Aktiengesellschaft's ability to meet its financial obligations. The two agencies have awarded the following unchanged ratings to GEA Group:
| 2012 | 2011 | |||
|---|---|---|---|---|
| Agency | Rating | Outlook | Rating | Outlook |
| Moody's | Baa3 | stable | Baa3 | stable |
| Fitch | BBB- | stable | BBB- | stable |
GEA Group's investment grade rating in the "BBB" range ensures that it has good financing opportunities both with banks and directly on the capital markets. The current ratings reflect GEA Group's strong solvency and ensure access to the international financial markets.
GEA Group did not make any disposals in fiscal year 2012.
In the previous year, GEA Group sold the packaging materials business for the food industry, which it also acquired in the previous year when it took over the CFS Group, by selling all material assets, including operating liabilities, of CFS Kempten GmbH, Kempten/Germany. The net assets of the company sold in the previous year were as follows at the date of disposal:
| (EUR thousand) | 2012 | 2011 |
|---|---|---|
| Non-current assets | – | 3,773 |
| Current assets | – | 8,981 |
| Liabilities | – | 5,058 |
| Net assets before non-controlling interests and accumulated other comprehensive income | – | 7,696 |
| less non-controlling interests | – | – |
| less accumulated other comprehensive income | – | – |
| Net assets | – | 7,696 |
| Selling price | – | 8,463 |
| Gain/loss on disposal | – | 767 |
| Cash received from sale | – | 8,463 |
| Cash and cash equivalents disposed | – | – |
| Net cash flow from disposal | – | 8,463 |
No goodwill was disposed of when the investment was sold in the previous year. The gain on disposal was offset in part by transaction costs and expenses associated with the recognition of a warranty provision totaling EUR 822 thousand.
GEA Group acquired the following companies by purchasing shares in fiscal year 2012:
| Business | Place | Acquisition Date | Percentage of voting interest (%) |
Consideration transferred (EUR thousand) |
|---|---|---|---|---|
| KET Marine International B.V. | Zevenbergen/Netherlands | February 24, 2012 | 100.0 | 18,452 |
| Aseptomag Holding AG | Kirchberg/Switzerland | April 24, 2012 | 100.0 | 42,289 |
| Milfos International Ltd. | Hamilton/New Zealand | November 19, 2012 | 100.0 | 9,633 |
KET Marine operates in the marine and energy customer industries and is assigned to the GEA Mechanical Equipment segment. In fiscal year 2011, the company generated revenue of EUR 7,515 thousand and had 11 employees. The acquisition consolidates GEA Group's market position in the mechanical separation area.
The transaction costs for the acquisition amounted to EUR 269 thousand, of which EUR 139 thousand was incurred in the fiscal year and EUR 130 thousand in the previous year.
With the acquisition of Aseptomag, GEA Group has acquired one of the world's leading suppliers of aseptic and hygienic valves, valve modules, and system solutions, whose customers are mostly dairy, beverage, and food companies, but also include the pharmaceutical, chemical, and cosmetic industries. The company is allocated to the GEA Mechanical Equipment segment and in fiscal year 2011 it generated revenue of EUR 13,164 thousand with a workforce of 35 employees. This acquisition will help GEA Group expand its expertise in the fast-growing area of sterile and aseptic applications and increase its components offering for its core market – food.
The transaction costs for the acquisition amounted to EUR 226 thousand, of which EUR 140 thousand was incurred in fiscal year 2012 and EUR 86 thousand in the previous year.
By acquiring Milfos, GEA Group has gained one of New Zealand's leading developers and manufacturers of innovative dairy technologies. The company is allocated to the GEA Farm Technologies segment and in fiscal year 2011 it generated revenue of EUR 17,223 thousand with a workforce of 85 employees. The Milfos acquisition is a further step for GEA Farm Technologies in its efforts to profit from growth opportunities in the grazing farm business worldwide, and particularly in the key market of New Zealand. Transaction costs of EUR 208 thousand were incurred for this acquisition in 2012.
Acquisition-related transaction costs are reported under other expenses.
The consideration transferred is composed of the following items:
| Company | |||
|---|---|---|---|
| (EUR thousand) | Cash | Cash consideration | Total |
| KET Marine International B.V. | 18,452 | – | 18,452 |
| Aseptomag Holding AG | 41,682 | 607 | 42,289 |
| Milfos International Ltd. | 8,353 | 1,280 | 9,633 |
| Total | 68,487 | 1,887 | 70,374 |
In acquiring Aseptomag, GEA Group agreed to make an additional purchase price payment, the level of which depends on Aseptomag's earnings before interest and tax for fiscal years 2012 to 2014. The additional purchase price need only be paid if average earnings before interest and tax for these fiscal years exceed a certain minimum amount. The amount of this contingent purchase price payment, which must be paid in 2015, amounts to between zero and EUR 2,496 thousand. At the acquisition date, the contingent purchase price payment was measured at a fair value of EUR 607 thousand based on the business plans.
Patrik Denoth, a former shareholder of Aseptomag, has been appointed as managing director of Aseptomag Holding AG. Since he is employed on standard market terms, this employment is being accounted for separately from the acquisition.
In the course of the Milfos acquisition, GEA Group agreed to make an additional purchase price payment, the amount of which depends on the gross profit generated by Milfos in fiscal years 2013 to 2015. The amount of this contingent consideration is between zero and EUR 1,280 thousand; it must be paid in regular installments from 2013 to 2015. Based on the business plans, the contingent purchase price payment was measured at a fair value of EUR 1,280 thousand at the acquisition date.
Jamie Mikkelson, a former shareholder of Milfos, has been appointed as managing director of the GEA Farm Technologies segment in New Zealand. He is employed on standard market terms, and the employment is being accounted for separately from the acquisition.
The following assets were acquired and liabilities assumed in connection with the acquisition of the three companies.
| Fair value (EUR thousand) |
KET Marine International B.V. |
Aseptomag Holding AG |
Milfos International Ltd. |
Total |
|---|---|---|---|---|
| Property, plant and equipment | 1,498 | 54 | 1,226 | 2,778 |
| Intangible assets | 4,498 | 20,096 | 2,771 | 27,365 |
| Non-current assets | 5,996 | 20,150 | 3,997 | 30,143 |
| Inventories | 3,662 | 4,218 | 3,618 | 11,498 |
| Trade receivables | 1,233 | 2,446 | 3,459 | 7,138 |
| Other current financial assets | 37 | 945 | 701 | 1,683 |
| Cash and cash equivalents | 280 | 2,583 | 38 | 2,901 |
| Current assets | 5,212 | 10,192 | 7,816 | 23,220 |
| Total assets | 11,208 | 30,342 | 11,813 | 53,363 |
| Non-current provisions | 12 | – | – | 12 |
| Non-current financial liabilities | – | – | 1,794 | 1,794 |
| Non-current obligations to employees | – | 1,053 | – | 1,053 |
| Deferred taxes | 1,097 | 4,198 | 761 | 6,056 |
| Non-current liabilities | 1,109 | 5,251 | 2,555 | 8,915 |
| Current Provisions | 20 | 509 | 552 | 1,081 |
| Current financial liabilities | – | 28 | 1,228 | 1,256 |
| Trade payables | 926 | 680 | 1,438 | 3,044 |
| Income tax liabilities | 231 | – | – | 231 |
| Other current financial liabilities | 43 | 1,170 | 2,058 | 3,271 |
| Current liabilities | 1,220 | 2,387 | 5,276 | 8,883 |
| Total liabilities | 2,329 | 7,638 | 7,831 | 17,798 |
| Net assets acquired | 8,879 | 22,704 | 3,982 | 35,565 |
| of which attributable to GEA Group shareholders | 8,879 | 22,704 | 3,982 | 35,565 |
| of which attributable to non-controlling interests | – | – | – | – |
| Acquisition cost | 18,452 | 42,289 | 9,633 | 70,374 |
| Goodwill | 9,573 | 19,585 | 5,651 | 34,809 |
The fair value and gross amount of the receivables acquired are as follows:
| Trade receivables (EUR thousand) |
Gross amount | Contractual Cashflows not expected to be collectable |
Fair value |
|---|---|---|---|
| KET Marine International B.V. | 1,262 | 29 | 1,233 |
| Aseptomag Holding AG | 2,446 | – | 2,446 |
| Milfos International Ltd. | 3,485 | 26 | 3,459 |
| Total | 7,193 | 55 | 7,138 |
The goodwill totaling EUR 34,809 thousand arising from the acquisitions reflects a general consolidation of GEA Group's competitive position, benefits from expected synergies and future market growth, as well as workforce expertise.
The preliminary purchase price allocation reported in the quarterly reports for fiscal 2012 for KET Marine and Aseptomag as well as for Nu-Con Ltd., which was acquired in fiscal 2011, was completed in fiscal 2012 with minor adjustments.
The purchase price allocation for Milfos is preliminary in terms of the identification and measurement of the assets acquired and liabilities assumed. There is particular uncertainty surrounding the measurement of intangible assets. In accordance with IFRS 3, purchase price allocation may be adjusted within one year from the acquisition date on the basis of new information.
Since their acquisition date, the companies acquired in 2012 contributed as follows to consolidated revenue and consolidated profit after tax:
| (EUR thousand) | Sales | Profit for the period |
|---|---|---|
| KET Marine International B.V. | 6,916 | 1,241 |
| Aseptomag Holding AG | 8,005 | -810 |
| Milfos International Ltd. | 1,472 | -308 |
| Total | 16,393 | 123 |
If the companies had been acquired as of January 1, 2012, consolidated revenue would have amounted to EUR 5,743,189 thousand and consolidated profit after tax to EUR 316,439 thousand.
The acquisitions in the fiscal year led to the following net cash outflow:
| (EUR thousand) | 2012 | 2011 |
|---|---|---|
| Consideration transferred | 70,374 | 227,076 |
| less contingent consideration | -1,887 | -14,037 |
| Purchase price paid | 68,487 | 213,039 |
| less cash acquired | -2,901 | -33,212 |
| Net cash used in acquisition | 65,586 | 179,827 |
Payments to acquire subsidiaries and other businesses reported in the cash flow statement amounted to EUR 67,015 thousand (previous year: EUR 183,473 thousand). This figure includes payments for contingent purchase price components amounting to EUR 2,245 thousand (previous year: EUR 2,842 thousand).
Property, plant and equipment changed as follows:
| Land and buildings | Technical equipment and |
Other equipment, operating and |
Assets under | ||
|---|---|---|---|---|---|
| (EUR thousand) | (owner-occupied) | machinery | office equipment | construction | Total |
| Jan. 1, 2011 | |||||
| Cost | 598,045 | 573,926 | 324,837 | 32,605 | 1,529,413 |
| Cumulative depreciation and | |||||
| impairment losses | -267,059 | -387,856 | -246,404 | -1,058 | -902,377 |
| Carrying amount | 330,986 | 186,070 | 78,433 | 31,547 | 627,036 |
| Changes in 2011 | |||||
| Additions | 14,438 | 19,563 | 27,781 | 71,385 | 133,167 |
| Disposals | -1,688 | -1,816 | -1,243 | -2,849 | -7,596 |
| Depreciation | -18,981 | -35,607 | -29,322 | -63 | -83,973 |
| Impairment losses | -2,176 | -605 | -353 | – | -3,134 |
| Reversal of impairment losses | – | – | – | – | – |
| Reclassification held for sale | – | – | – | – | – |
| Changes in consolidated Group | 39,294 | 8,858 | 13,675 | 1,559 | 63,386 |
| Currency translation | 208 | 1,550 | -453 | -271 | 1,034 |
| Other changes | 1,771 | 15,040 | 2,152 | -21,411 | -2,448 |
| Carrying amount at Dec. 31, 2011 | 363,852 | 193,053 | 90,670 | 79,897 | 727,472 |
| Jan. 1, 2012 | |||||
| Cost | 652,576 | 616,545 | 360,198 | 82,882 | 1,712,201 |
| Cumulative depreciation and | |||||
| impairment losses | -288,724 | -423,492 | -269,528 | -2,985 | -984,729 |
| Carrying amount | 363,852 | 193,053 | 90,670 | 79,897 | 727,472 |
| Changes in 2012 | |||||
| Additions | 7,006 | 21,737 | 24,589 | 78,732 | 132,064 |
| Disposals | -2,518 | -2,065 | -11,089 | -1,121 | -16,793 |
| Depreciation | -19,619 | -37,461 | -26,280 | -136 | -83,496 |
| Impairment losses | -2,052 | -6 | -87 | -15 | -2,160 |
| Reversal of impairment losses | 2,176 | 664 | 353 | – | 3,193 |
| Reclassification held for sale | -12,893 | -401 | – | – | -13,294 |
| Changes in consolidated Group | 2,208 | 839 | 630 | – | 3,677 |
| Currency translation | -470 | -929 | -373 | 109 | -1,663 |
| Other changes | 14,711 | 13,507 | 2,807 | -41,546 | -10,521 |
| Carrying amount at Dec. 31, 2012 | 352,401 | 188,938 | 81,220 | 115,920 | 738,479 |
| Dec. 31, 2012 | |||||
| Cost | 655,535 | 629,922 | 366,220 | 119,160 | 1,770,837 |
| Cumulative depreciation and impairment losses |
-303,134 | -440,984 | -285,000 | -3,240 | -1,032,358 |
| Carrying amount | 352,401 | 188,938 | 81,220 | 115,920 | 738,479 |
EUR 8,609 thousand of owner-occupied land and buildings reclassified as held for sale relates to a property in the GEA Heat Exchangers Segment in Turkey that is no longer required for operating purposes.
The changes in the consolidated group are mainly attributable to acquisitions. The other changes are primarily attributable to reclassifications from assets under construction to other items of property, plant and equipment, and to intangible assets.
As in the previous year, items of property, plant and equipment are depreciated on a straight-line basis using the relevant residual values and the following useful lives:
| Useful life in | |
|---|---|
| years | |
| Buildings and parts of buildings | 2 to 50 |
| Technical equipment and machinery, other equipment | 2 to 30 |
| Operating and office equipment | 3 to 40 |
The underlying residual values and useful lives are reviewed at each reporting date and adjusted if necessary.
Property, plant and equipment includes land and buildings, technical equipment and machinery, and office and operating equipment leased under finance leases:
| (EUR thousand) | 2012 | 2011 |
|---|---|---|
| Cost - capitalized leased assets under finance leases | 62,366 | 62,366 |
| Cumulative depreciation and impairment losses | -17,284 | -15,481 |
| Carrying amount | 45,082 | 46,885 |
EUR 38,219 thousand (previous year: EUR 39,668 thousand) of the carrying amount of the leased items of property, plant and equipment relates to buildings. The leases for the buildings extend beyond 2030. The leases do not include extension options, escalation clauses, or the option to acquire the leased asset.
The corresponding lease liabilities are explained under financial liabilities (see section 7.4).
The carrying amount of property, plant and equipment that serves as collateral for credit lines amounted to EUR 6,266 thousand at the reporting date (previous year: EUR 6,686 thousand). Most of these assets relate to land and buildings
The following table shows the changes in investment property:
| (EUR thousand) | Land | Buildings | Total |
|---|---|---|---|
| Jan. 1, 2011 | |||
| Cost | 21,835 | 22,645 | 44,480 |
| Cumulative depreciation and impairment losses | -4,853 | -18,931 | -23,784 |
| Carrying amount | 16,982 | 3,714 | 20,696 |
| Changes in 2011 | |||
| Additions | – | 8 | 8 |
| Disposals | -6,853 | -517 | -7,370 |
| Depreciation | – | -1,176 | -1,176 |
| Impairment losses | -1,187 | – | -1,187 |
| Reversal of impairment losses | 688 | – | 688 |
| Currency translation | – | -1 | -1 |
| Other changes | – | 179 | 179 |
| Carrying amount at Dec. 31, 2011 | 9,630 | 2,207 | 11,837 |
| Jan. 1, 2012 | |||
| Cost | 14,982 | 7,175 | 22,157 |
| Cumulative depreciation and impairment losses | -5,352 | -4,968 | -10,320 |
| Carrying amount | 9,630 | 2,207 | 11,837 |
| Changes in 2012 | |||
| Additions | – | – | – |
| Disposals | -360 | – | -360 |
| Depreciation | – | -152 | -152 |
| Impairment losses | -754 | – | -754 |
| Reversal of impairment losses | – | – | – |
| Currency translation | – | – | – |
| Other changes | – | – | – |
| Carrying amount at Dec. 31, 2012 | 8,516 | 2,055 | 10,571 |
| Dec. 31, 2012 | |||
| Cost | 15,310 | 7,175 | 22,485 |
| Cumulative depreciation and impairment losses | -6,794 | -5,120 | -11,914 |
| Carrying amount | 8,516 | 2,055 | 10,571 |
The fair value of investment property is EUR 15,830 thousand (previous year: EUR 16,955 thousand). The fair values are calculated on the basis of comparable market-based prices that are determined internally.
The following amounts are reported in the income statement in connection with investment property:
| 01/01/2012 - | 01/01/2011 - | |
|---|---|---|
| (EUR thousand) | 12/31/2012 | 12/31/2011 |
| Rental income | 3,844 | 14,824 |
| Operating expenses | 3,085 | 14,194 |
| of which: properties used to generate rental income | 3,085 | 14,194 |
| Total | 759 | 630 |
The reduction in rental income is primarily attributable to the termination of a property lease in Frankfurt am Main.
The following table shows the allocation of goodwill to the segments and changes in goodwill:
| GEA | GEA | GEA | GEA | GEA | |||
|---|---|---|---|---|---|---|---|
| Food | Farm | Heat | Mechanical | GEA Process | Refrigeration | ||
| (EUR thousand) | Solutions | Technologies | Exchangers | Equipment | Engineering | Technologies | Total |
| Carrying amount at Dec. 31, 2010 | – | 174,101 | 525,438 | 306,326 | 380,133 | 164,425 | 1,550,423 |
| Additions | 238,495 | 11,523 | 31,677 | 17,950 | 23,612 | 24,532 | 347,789 |
| Disposals | – | – | – | – | – | -69 | -69 |
| Currency translation | – | 2,209 | 75 | -178 | -1,031 | 929 | 2,004 |
| Carrying amount at Dec. 31, 2011 | 238,495 | 187,833 | 557,190 | 324,098 | 402,715 | 189,817 | 1,900,147 |
| Additions | – | 5,651 | – | 29,158 | 751 | – | 35,560 |
| Disposals | – | -10,101 | -31,999 | -20,951 | -17,841 | -8,579 | -89,471 |
| Currency translation | – | -529 | 776 | -114 | 108 | -426 | -185 |
| Carrying amount at Dec. 31, 2012 | 238,495 | 182,854 | 525,967 | 332,191 | 385,733 | 180,811 | 1,846,051 |
Additions amounting to EUR 35,560 thousand result from business acquisitions in fiscal year 2012, accounting for EUR 34,809 thousand (see section 5.3), and an adjustment of EUR 751 thousand to the purchase price allocation for the acquisition of Nu-Con Ltd. in fiscal year 2011.
The goodwill disposal of EUR 89,471 thousand is attributable to the conclusion of the award proceedings concerning the control and profit and loss transfer agreement entered into by the former Metallgesellschaft AG and the former GEA AG in 1999. Under this settlement, GEA Group Aktiengesellschaft followed the court's suggestion and undertook to pay increased compensation in shares and a higher cash settlement. A capital increase was implemented in fiscal year 2012 in order to settle (see section 7.1). The new share issue resulted in a retrospective increase in the acquisition cost of the former GEA AG and a corresponding increase in goodwill. Measurement of the new shares issued is based on the historical share price of the former Metallgesellschaft AG at the first possible date of exchange.
It should be noted that the effects of the conclusion of the award proceedings on the financial reporting had already mainly been recognized in previous fiscal years, although it had been assumed as of December 31, 2011, that 13,417 thousand no-par value shares would be issued. Since 8,688 thousand no-par value shares were issued as part of the capital increase, which was 4,729 thousand no-par value shares fewer than expected, there was a reduction in goodwill of EUR 89,471 thousand in fiscal year 2012.
Goodwill recoverability was tested at the end of the fiscal year. The segments were identified as cashgenerating units for this impairment test. The recoverable amounts for the segments were compared with their carrying amounts, which included any goodwill allocated to them.
The recoverable amount of a segment is determined by calculating value in use using the discounted cash flow method. The cash flows used are the after-tax operating cash flows from the consolidated medium-term planning (three-year period) planned on a bottom-up basis and prepared by the Executive Board. The Supervisory Board approved this planning for 2013 and has taken note of it for 2014 and 2015. Cash flows equal to the amount in the final planning year are assumed for the period beyond the planning horizon, extrapolated using a uniform growth rate of 1.5 percent (previous year 1 percent), which is no higher than the long-term average growth rate for the markets in which the segments are active.
The planning assumes continued stable growth in the food and drink sales markets. This assumption is based on an expectation of growing demand for processed foods. All GEA Group segments will profit from these underlying trends with the exception of GEA Heat Exchangers. Although less strong in comparison to the food industry, growth is also assumed for other customer industries. By contrast, declining growth rates have been factored in for the energy and marine sectors. In addition, planned growth for individual segments also takes account of actual past growth rates. Compared to the loss in 2012, a marked increase in revenue and profitability has been factored into the medium-term planning for the new GEA Food Solutions Segment.
With regard to raw material prices, it is assumed that any increase can be offset by increased selling prices. Future business acquisitions were not included in the planning.
The total cost of capital assumed for discounting is based on a risk-free interest rate of 2.25 percent (previous year: 4.00 percent) and a market risk premium of 6.25 percent (previous year: 5.00 percent). In addition, beta factors derived from the respective peer group, a borrowing risk premium, as well as capital structure were taken into account for each segment. Segment-specific tax rates were also applied.
Cash flows for the individual segments are discounted using the following after-tax rates:
| Discount rate | ||
|---|---|---|
| (%) | 12/31/2012 | 12/31/2011 |
| GEA Food Solutions | 7.76 | 8.43 |
| GEA Farm Technologies | 9.61 | 9.35 |
| GEA Heat Exchangers | 8.57 | 9.36 |
| GEA Mechanical Equipment | 9.50 | 10.10 |
| GEA Process Engineering | 7.89 | 9.34 |
| GEA Refrigeration Technologies | 8.60 | 8.74 |
In the GEA Food Solutions Segment, to which goodwill of EUR 238,495 thousand (previous year: EUR 238,495 thousand) has been allocated, the recoverable amount exceeds the carrying amount of net segment assets by EUR 82,302 thousand. A 1.82 percent reduction in the EBIT margin defined in the perpetual annuity at 12.2 percent, an increase in the discount rate by more than 0.94 percent to over 8.7 percent, or the use of a (negative) growth rate of less than 0.0 percent would have resulted in the recoverable amount being lower than the carrying amount of the net segment assets.
The carrying amount of intangible assets changed as follows:
| Market | Customer | Contract | Technology | Internally | ||
|---|---|---|---|---|---|---|
| related intangible |
related intangible |
based intangible |
based intangible |
generated intangible |
||
| (EUR thousand) | assets | assets | assets | assets | assets | Total |
| Jan. 1, 2011 | ||||||
| Cost | 48,452 | 37,931 | 78,957 | 98,844 | 30,746 | 294,930 |
| Cumulative amortization and impairment losses | -6,827 | -11,108 | -56,516 | -46,998 | -11,888 | -133,337 |
| Carrying amount | 41,625 | 26,823 | 22,441 | 51,846 | 18,858 | 161,593 |
| Changes in 2011 | ||||||
| Additions | 260 | – | 6,364 | 7,885 | 13,415 | 27,924 |
| Disposals | -262 | -23 | -36 | -807 | – | -1,128 |
| Amortization | -419 | -19,990 | -6,812 | -11,863 | -4,360 | -43,444 |
| Impairment losses | -369 | -225 | -54 | -1,909 | -270 | -2,827 |
| Reversal of impairment losses | – | – | – | – | – | – |
| Changes in consolidated Group | 27,959 | 134,034 | 598 | 51,510 | -69 | 214,032 |
| Currency translation | 642 | 532 | 80 | 354 | 19 | 1,627 |
| Other changes | 49 | -49 | 897 | 577 | 325 | 1,799 |
| Carrying amount at Dec. 31, 2011 | 69,485 | 141,102 | 23,478 | 97,593 | 27,918 | 359,576 |
| Jan. 1, 2012 | ||||||
| Cost | 76,851 | 172,667 | 85,828 | 159,517 | 44,822 | 539,685 |
| Cumulative amortization and impairment losses | -7,366 | -31,565 | -62,350 | -61,924 | -16,904 | -180,109 |
| Carrying amount | 69,485 | 141,102 | 23,478 | 97,593 | 27,918 | 359,576 |
| Changes in 2012 | ||||||
| Additions | 13 | – | 13,869 | 5,329 | 17,479 | 36,690 |
| Disposals | – | – | -50 | -23 | – | -73 |
| Amortization | -342 | -16,858 | -8,676 | -13,532 | -6,052 | -45,460 |
| Impairment losses | -11,807 | – | – | -1 | -2,122 | -13,930 |
| Reversal of impairment losses | – | – | 54 | 2 | 270 | 326 |
| Changes in consolidated Group | 10,458 | 6,642 | – | 10,280 | -3 | 27,377 |
| Currency translation | 537 | 165 | -6 | 211 | -71 | 836 |
| Other changes | – | – | 6,781 | -4,427 | 8,060 | 10,414 |
| Carrying amount at Dec. 31, 2012 | 68,344 | 131,051 | 35,450 | 95,432 | 45,479 | 375,756 |
| Dec. 31, 2012 | ||||||
| Cost | 87,984 | 179,277 | 106,978 | 170,467 | 70,418 | 615,124 |
| Cumulative amortization and impairment losses | -19,640 | -48,226 | -71,528 | -75,035 | -24,939 | -239,368 |
| Carrying amount | 68,344 | 131,051 | 35,450 | 95,432 | 45,479 | 375,756 |
The addition to internally generated intangible assets is primarily attributable to the capitalization of development costs in two segments: In the GEA Food Solutions Segment, the additions relate to a series of enhancements, especially in the area of forming and injecting of food. In the GEA Farm Technologies Segment, costs relating to developments in automated milking and health and fertility management were capitalized.
As in the previous year, intangible assets with finite useful lives are amortized on a straight-line basis using the following useful lives:
| Useful life in | |
|---|---|
| years | |
| Market-related intangible assets | 3 to 20 |
| Customer-related intangible assets | 1 to 10 |
| Contract-based intangible assets | 1 to 18 |
| Technology-based intangible assets | 1 to 25 |
Amortization of intangible assets amounting to EUR 45,460 thousand in fiscal year 2012 (previous year: EUR 43,444 thousand) is reported in cost of sales.
Market-related intangible assets amounting to EUR 64,863 thousand (previous year: EUR 65,710 thousand) are not amortized because their useful life cannot be determined. These assets are company and product names of the acquired companies. These are established brands in their respective sectors and will continue to be used indefinitely after the company in question has been acquired.
The carrying amount of intangible assets with indefinite useful lives is broken down as follows:
| 12/31/2012 | 12/31/2011 | ||||
|---|---|---|---|---|---|
| Proportion of total | Proportion of total | ||||
| Segment | Carrying amount (EUR thousand) |
carrying amount (%) |
Carrying amount (EUR thousand) |
carrying amount (%) |
|
| GEA Food Solutions | 4,397 | 6.8 | 13,676 | 20.8 | |
| GEA Farm Technologies | 6,429 | 9.9 | 4,862 | 7.4 | |
| GEA Heat Exchangers | 16,556 | 25.5 | 18,583 | 28.3 | |
| GEA Mechanical Equipment | 8,644 | 13.3 | – | – | |
| GEA Process Engineering | 13,885 | 21.4 | 13,657 | 20.8 | |
| GEA Refrigeration Technologies | 14,952 | 23.1 | 14,932 | 22.7 | |
| Total | 64,863 | 100.0 | 65,710 | 100.0 |
These brands are tested for impairment at least once a year. For this purpose, their internal value in use is determined using the relief from royalty method. Under this approach, the value of a brand is calculated on the basis of the future royalties that GEA Group would have to pay if it had to license the brands from third parties. The brand-related revenue is multiplied by the estimated license fee installments. The brand-related revenue is derived from the medium-term planning prepared by the Executive Board. The Supervisory Board approved this planning for 2013 and has taken note of it for 2014 and 2015. The assumed license fee installments generally correspond to those of the initial measurement. The payments saved calculated in this way are then discounted using a brand-specific pre-tax discount rate. Valuation is based on the following assumptions:
| (%) | 12/31/2012 | 12/31/2011 |
|---|---|---|
| Discount rate | 9.74 - 20.71 | 7.93 - 21.51 |
| Royalty rate | 0.20 - 3.00 | 0.25 - 1.50 |
The impairment test performed at the end of the year led to a write-down of EUR 11,806 thousand. EUR 9,279 thousand of this impairment loss relates to the GEA Food Solutions Segment, and is mainly attributable to a revised brand strategy and the consequent changes in planned brand name usage.
Equity-accounted investments are reported at a carrying amount of EUR 14,681 thousand as of December 31, 2012 (previous year: EUR 13,448 thousand).
The following overview presents the key figures for equity-accounted associates as of December 31, 2012. The relevant figures are stated at 100 percent and are based on the most recently available annual financial statements.
| (EUR thousand) | 01/01/2012 - 12/31/2012 |
01/01/2011 - 12/31/2011 |
|---|---|---|
| Revenue | 27,826 | 27,531 |
| Profit after tax | 4,408 | 9,702 |
| (EUR thousand) | 12/31/2012 | 12/31/2011 |
| Assets | 94,049 | 85,017 |
| Liabilities | 34,613 | 31,474 |
The proportionate total assets and the group's share of the profit of equity-accounted investments are insignificant in relation to the group's total assets and profit.
The following overview presents the proportionate key figures for equity-accounted joint ventures as of December 31, 2012:
| (EUR thousand) | 01/01/2012 - 12/31/2012 |
01/01/2011 - 12/31/2011 |
|---|---|---|
| Revenue | 36,964 | 32,972 |
| Profit after tax | 1,821 | 2,621 |
| (EUR thousand) | 12/31/2012 | 12/31/2011 |
| Assets | ||
| Non-current assets | 2,244 | 4,059 |
| Current assets | 32,251 | 27,401 |
| Liabilities | ||
| Non-current liabilities | 401 | 1,869 |
| Current liabilities | 22,954 | 19,236 |
Other financial assets are composed of the following items:
| 12/31/2012 | 12/31/2011 |
|---|---|
| 30,799 | 35,058 |
| 11,063 | 11,603 |
| 190 | 686 |
| 6,794 | 8,907 |
| 48,846 | 56,254 |
| 6,927 | 23,773 |
| 159,307 | 179,996 |
| 166,234 | 203,769 |
| 215,080 | 260,023 |
Derivative financial instruments are explained in section 7.8.
Miscellaneous other financial assets with a carrying amount of EUR 166,101 thousand (previous year: EUR 188,903 thousand) were recognized as of the reporting date. They are broken down into non-current and current assets as follows:
| (EUR thousand) | 12/31/2012 | 12/31/2011 |
|---|---|---|
| Other receivables from unconsolidated subsidiaries | – | 224 |
| Other receivables from equity investments | 308 | 297 |
| Receivables from tax authorities | 3,959 | 3,761 |
| Sundry miscellaneous other financial assets | 2,527 | 4,625 |
| Other non-current financial assets | 6,794 | 8,907 |
| Other receivables from unconsolidated subsidiaries | 3,276 | 5,419 |
| Other receivables from equity investments | 3,889 | 13,640 |
| Other receivables from tax authorities | 74,098 | 83,631 |
| Sundry miscellaneous other financial assets | 78,044 | 77,306 |
| Other current financial assets | 159,307 | 179,996 |
| Total | 166,101 | 188,903 |
Receivables from tax authorities primarily comprise VAT receivables.
Sundry miscellaneous other financial assets include prepaid expenses totaling EUR 26,957 thousand (previous year: EUR 33,248 thousand).
The maturity structure of sundry miscellaneous other financial assets is as follows:
| (EUR thousand) | 12/31/2012 | 12/31/2011 | |
|---|---|---|---|
| Carrying amount before impairment losses | 85,460 | 88,616 | |
| Impairment losses | 4,889 | 6,685 | |
| Carrying amount | 80,571 | 81,931 | |
| of which not yet due at the reporting date | 80,304 | 80,317 | |
| of which past due at reporting date | 267 | 1,614 | |
| Past due periods (time bands): | less than 30 days | – | 1,120 |
| between 31 and 60 days | 7 | – | |
| between 91 and 180 days | 9 | 166 | |
| between 181 and 360 days | 1 | – | |
| more than 360 days | 250 | 328 |
Inventories are composed of the following items:
| Total | 752,058 | 742,899 |
|---|---|---|
| Advance payments | 60,694 | 59,758 |
| Finished goods and merchandise | 314,290 | 284,281 |
| Assets for third parties under construction | 19,725 | 23,418 |
| Work in progress | 152,491 | 158,824 |
| Raw materials, consumables, and supplies | 204,858 | 216,618 |
| (EUR thousand) | 12/31/2012 | 12/31/2011 |
Impairment losses on inventories were EUR 20,666 thousand in the reporting period (previous year: EUR 23,699 thousand). Impairment losses arising in fiscal year 2012 were recognized in cost of sales; in the previous year, EUR 2,984 thousand of the impairment losses was reported as part of other operating expenses. Impairment losses on inventories in previous years amounting to EUR 2,326 thousand (previous year: EUR 2,949 thousand) were reversed due to increased market prices. The reversals were recognized in cost of sales.
Trade receivables are composed of the following items:
| (EUR thousand) | 12/31/2012 | 12/31/2011 |
|---|---|---|
| Trade receivables | 909,847 | 971,169 |
| of which from third parties | 887,870 | 941,926 |
| of which from unconsolidated subsidiaries | 21,977 | 29,243 |
| Gross amount due from customers for contract work | 340,016 | 386,377 |
| Total | 1,249,863 | 1,357,546 |
Trade receivables include receivables of EUR 25,466 thousand (previous year: EUR 25,297 thousand) that will not be realized until more than one year after the reporting date. Bad debt allowances on trade receivables totaled EUR 66,535 thousand (previous year: EUR 67,084 thousand).
The average payment period and volume of receivables outstanding are in line with the general market.
The maturity structure of trade receivables – with the exception of receivables from affiliated companies and equity investments – is as follows:
| (EUR thousand) | 12/31/2012 | 12/31/2011 | |
|---|---|---|---|
| Carrying amount before impairment losses | 954,405 | 1,009,010 | |
| Impairment losses | 66,535 | 67,084 | |
| Carrying amount | 887,870 | 941,926 | |
| of which not yet due at the reporting date | 666,297 | 727,700 | |
| of which past due at reporting date | 221,573 | 214,226 | |
| Past due periods (time bands): | less than 30 days | 99,341 | 98,432 |
| between 31 and 60 days | 44,397 | 38,949 | |
| between 61 and 90 days | 18,578 | 17,656 | |
| between 91 and 180 days | 28,210 | 24,452 | |
| between 181 and 360 days | 15,947 | 17,386 | |
| more than 360 days | 15,100 | 17,351 |
The gross amount due from and to customers for contract work is composed of the following items:
| (EUR thousand) | 12/31/2012 | 12/31/2011 |
|---|---|---|
| Capitalized production cost of construction contracts | 2,905,411 | 2,791,663 |
| plus net gain from construction contracts | 479,240 | 475,235 |
| less anticipated losses | 13,988 | 12,242 |
| less progress billings | 3,369,684 | 3,248,757 |
| Total | 979 | 5,899 |
| Gross amount due from customers for contract work (included in trade receivables) | 340,016 | 386,377 |
| Gross amount due to customers for contract work (included in other liabilities) | -339,037 | -380,478 |
| Total | 979 | 5,899 |
Advance payments received on construction contracts amounted to EUR 37,128 thousand at December 31, 2012 (previous year: EUR 17,024 thousand). Customer retention money amounted to EUR 32,750 thousand (previous year: EUR 41,135 thousand). Revenue of EUR 2,517,092 thousand (previous year: EUR 2,533,232 thousand) was generated from construction contracts in the reporting period.
Income tax receivables amounted to EUR 19,350 thousand at the reporting date (previous year: EUR 15,882 thousand). EUR 19,331 thousand (previous year: EUR 15,634 thousand) of this amount is due within one year. A further EUR 19 thousand (previous year: EUR 248 thousand) is due after more than one year.
Cash and cash equivalents were composed of the following items at the reporting date:
| (EUR thousand) | 12/31/2012 | 12/31/2011 |
|---|---|---|
| Unrestricted cash Restricted Cash |
735,981 7,543 |
426,674 5,727 |
| Total | 743,524 | 432,401 |
Cash and cash equivalents comprise cash funds and overnight deposits. Restricted cash consists of term deposits and bank deposits.
During the year, the standard market interest rate for short-term bank deposits in the eurozone lay between 0.0 and 0.5 percent (previous year: between 0.2 and 1.1 percent). The average interest rate at the end of the year was 0.3 percent (previous year: 0.4 percent).
Assets held for sale are reported at a carrying amount of EUR 18,447 thousand as of December 31, 2012 (previous year: EUR 5,116 thousand). They primarily include land and buildings in the GEA Heat Exchangers Segment that are not required for operating purposes. As these assets have no further use, they will be disposed of.
The subscribed capital was increased by EUR 23,486 thousand in the fiscal year by the issuance of 8,687,631 no-par value bearer shares.
This increase in subscribed capital served to meet the conditions of the settlement concluded in January 2012 in relation to the award proceedings. The substance of and background to the award proceedings are described in greater detail in section 9.4. GEA Group Aktiengesellschaft's Annual General Meeting had approved the creation of the new shares required by the settlement in the form of contingent capital on April 24, 2012. The new shares were issued in three tranches.
| Total | 8,687,631 shares | |
|---|---|---|
| 3 | December 03, 2012 | 4,626,325 shares |
| 2 | September 03, 2012 | 1,967,361 shares |
| 1 | July 16, 2012 | 2,093,945 shares |
| Tranche | Issuance | Amount |
The subscribed capital of GEA Group Aktiengesellschaft amounted to EUR 520,376 thousand as of December 31, 2012 (previous year: EUR 496,890 thousand). The shares are composed of 192,495,476 no-par value bearer shares (previous year: 183,807,845). All the shares are fully paid up.
As in the previous year, the shares have a notional value of EUR 2.70 each (rounded).
All shares convey the same rights. Shareholders are entitled to receive dividends as declared and are entitled to one vote per share at the Annual General Meeting.
| (EUR thousand) | Annual General Meeting resolution |
Expiring on | Amount (EUR thousand) |
|---|---|---|---|
| Authorized Capital I | April 24, 2012 | April 23, 2017 | 77,000 |
| Authorized Capital II | April 21, 2010 | April 20, 2015 | 72,000 |
| Authorized Capital III | April 22, 2009 | April 21, 2014 | 99,000 |
| Total | 248,000 |
Under Authorized Capital I, the Executive Board is authorized, with the approval of the Supervisory Board, to increase the share capital by issuing new no-par value shares against cash contributions on one or more occasions and, in accordance with Article 5(4) of the Articles of Association, to define a starting date for profit rights in this case that differs from the date stipulated by law. The Executive Board is also entitled, with the approval of the Supervisory Board, to exclude fractions from shareholders' preemptive rights. Furthermore, the Executive Board is authorized, with the approval of the Supervisory Board, to stipulate the further details of the capital increase from Authorized Capital I and the terms and conditions of the share issue. The new shares may also be underwritten by banks with the obligation of offering them to the shareholders for subscription.
Under Authorized Capital II, the Executive Board is authorized, with the approval of the Supervisory Board, to increase the share capital by issuing new no-par value shares against cash or noncash contributions on one or more occasions and, in accordance with Article 5(4) of the Articles of Association, to define a starting date for profit rights in this case that differs from the date stipulated by law. The Executive Board is also entitled, with the approval of the Supervisory Board, to exclude fractions from shareholders' preemptive rights. Furthermore, the Executive Board is authorized, with the approval of the Supervisory Board, to disapply shareholders' preemptive rights in a partial amount of EUR 50,000 thousand in the case of capital increases against noncash contributions for the purpose of business combinations or the acquisition of companies, parts of companies, or equity interests in companies. Additionally, the Executive Board is authorized, with the approval of the Supervisory Board, to stipulate the further details of the capital increases from Authorized Capital II and the terms and conditions of the share issue. The new shares may also be underwritten by banks with the obligation of offering them to the shareholders for subscription.
Under Authorized Capital III, the Executive Board is authorized, with the approval of the Supervisory Board, to increase the share capital by issuing new no-par value shares against cash or noncash contributions on one or more occasions and, in accordance with Article 5(4) of the Articles of Association, to define a starting date for profit rights in this case that differs from the date stipulated by law. The Executive Board is also authorized, with the approval of the Supervisory Board, to disapply shareholders' preemptive rights in the case of capital increases against noncash contributions for the purpose of business combinations or the acquisition of companies, parts of companies, or equity interests in companies. Furthermore, the Executive Board is authorized, with the approval of the Supervisory Board, to disapply shareholders' preemptive rights in the case of capital increases against cash contributions if the issue price of the new shares does not fall materially below the market price of the same class of shares of the Company at the time the issue price is set. This disapplication of preemptive rights in accordance with sections 203(1) and 186(3) sentence 4 of the AktG is limited to a maximum of 10 percent of the Company's share capital. The limit of 10 percent of the share capital is reduced by the proportion of the share capital attributable to the treasury shares of the Company that are sold during the term of Authorized Capital III while shareholders' preemptive rights are disapplied in accordance with sections 71(1) no. 8 sentence 5 and 186(3) sentence 4 of the AktG. The limit is also reduced by the proportion of the share capital attributable to those shares that are issued to settle bonds with warrants or convertible bonds with an option or conversion right or with an option or conversion obligation, provided that the bonds are issued during the term of Authorized Capital III and shareholders' preemptive rights are disapplied in accordance with section 186(3) sentence 4 of the AktG. Furthermore, the Executive Board is entitled, with the approval of the Supervisory Board, to exclude fractions from shareholders' preemptive rights. The Executive Board is also authorized, with the approval of the Supervisory Board, to stipulate the further details of the capital increases from Authorized Capital III and the terms and conditions of the share issue. The new shares may also be underwritten by banks with the obligation of offering them to the shareholders for subscription.
| (EUR thousand) | 12/31/2012 | 12/31/2011 |
|---|---|---|
| Compensation to external shareholders of GEA AG in line with the settlement dated January 30, 2012, resolved by the | ||
| Annual General Meeting on April 24, 2012 | 17,339 | – |
| Bonds with warrants and convertible bonds resolved by the Annual General Meeting on April 21, 2010 | 48,660 | 48,660 |
| Right to compensation of the shareholders of the former GEA AG in accordance with section 305 of the AktG | – | 3,211 |
| Total | 65,999 | 51,871 |
Under Article 4(6) of the Articles of Association, the share capital was contingently increased by up to EUR 17,339,095.52, comprising up to 6,414,014 bearer shares. In accordance with the Articles of Association, the contingent capital increase serves to grant compensation in shares of the Company to the external shareholders of the former GEA AG, Bochum, in line with the settlement dated January 30, 2012, between the Company on the one hand and on the other hand the applicants as well as the joint representatives of the award proceedings pending before the Dortmund Local Court with the case reference number 20 O 533/99, which will bring the award proceedings related to the control and profit transfer agreement dating from June 29, 1999, between the former Metallgesellschaft AG (now GEA Group AG) and the former GEA AG to a close and increase the previous exchange ratio. The issue of the last tranche of shares on December 3, 2012, in line with the settlement completed the implementation of the capital increase.
Under a resolution adopted by the Annual General Meeting on April 21, 2010, the share capital was contingently increased by up to EUR 48,660 thousand, comprising up to 18,000,000 bearer shares. The contingent capital increase will only be implemented to the extent that the holders or creditors of option or conversion rights or persons obliged to convert or exercise options under bonds with warrants or convertible bonds that are issued against cash contributions or guaranteed by the Company or a subordinate group company of the Company up to April 20, 2015, on the basis of the authorization of the Executive Board by the Annual General Meeting resolution dated April 21, 2010, exercise their option or conversion rights or, if they are obliged to convert or exercise options, satisfy their obligation to convert or exercise options, or if GEA Group Aktiengesellschaft exercises its option to grant shares of GEA Group Aktiengesellschaft in full or in part instead of payment of the monetary amount due, and if no cash settlement is granted or own shares or shares of another listed company are used in settlement. New shares will be issued at the option or conversion price to be determined in accordance with the authorizing resolution referred to above. The new shares carry dividend rights from the beginning of the fiscal year in which they are created. The Executive Board is authorized, with the approval of the Supervisory Board, to determine the further details of the implementation of the contingent capital increase.
As in the previous year, no bonds with warrants or convertible bonds were issued in fiscal year 2012.
Capital reserves primarily reflect the effects from the business combination of the former Metallgesellschaft Aktiengesellschaft and the former GEA AG as well as premiums from issuing shares of the former Metallgesellschaft AG.
Capital reserves decreased by EUR 115,495 thousand compared with the previous year and amounted to EUR 1,217,864 thousand (previous year: EUR 1,333,359 thousand). EUR 115,559 thousand of this reduction is attributable to the conclusion of the award proceedings concerning the control and profit and loss transfer agreement entered into by the former Metallgesellschaft AG and the former GEA AG in 1999. Under the settlement, GEA Group Aktiengesellschaft followed the court's suggestion and undertook to pay increased compensation in shares and a higher cash settlement (see section 9.4). Transaction costs of EUR 2,603 thousand in respect of the capital increase in fiscal year 2012 (see "Subscribed capital") were recognized directly in equity.
The remaining decrease of EUR 64 thousand (previous year: EUR 51 thousand) is related to the offsetting of expenses resulting from the launch of an employee share-based payment plan in South Africa. Under the major "Medupi" order received at the end of 2007, GEA Group undertook to meet certain assessment criteria defined by the Broad Based Black Economic Empowerment Act of 2003. To do this, GEA Group launched a share-based payment plan for staff at its South African company, among other things. The shares granted to these employees are held indirectly via a trustee, which in turn issues options on these shares to the employees. The options vest after a five-year holding period. Twenty percent of the options will be exercised each year after the holding period expires. The exercise price corresponds to the fair value of the shares at the grant date. The options lapse if employees leave the company before the five-year period expires.
11,710 options were outstanding at December 31, 2011. 1,395 options expired in fiscal year 2012. The number of options outstanding at December 31, 2012, was therefore 10,315.
The weighted average fair value of the options issued amounted to EUR 36.69 at the grant date of May 6, 2009. The fair value of the options was determined using a Monte Carlo simulation. Expenses of EUR 64 thousand (previous year: EUR 51 thousand) were recognized to reflect expected staff turnover in fiscal year 2012.
The changes in retained earnings and net retained profits are reported in the statement of changes in equity. Actuarial gains and losses on the measurement of non-current employee benefit obligations are included in retained earnings.
The distribution of profits is based on the annual financial statements of GEA Group Aktiengesellschaft prepared in accordance with the HGB.
Changes in equity outside profit or loss are reported in accumulated other comprehensive income if they do not relate to capital transactions with shareholders. Other comprehensive income comprises the gains or losses on financial assets measured at fair value and recognized directly in equity, the effective portion of the change in fair value of derivatives designated as cash flow hedges, and exchange rate gains or losses from the translation of the financial statements of foreign subsidiaries.
Non-controlling interests in GEA Group companies amounted to EUR 2,552 thousand (previous year: EUR 1,026 thousand).
The change in accumulated other comprehensive income attributable to non-controlling interests totaled EUR 62 thousand. This amount resulted primarily from exchange differences on foreign currency translation, which contributed EUR 62 thousand in the fiscal year to the change in accumulated other comprehensive income.
The following table shows the composition of and changes in provisions in 2012:
| Financial | Environmental | ||||||
|---|---|---|---|---|---|---|---|
| (EUR thousand) | Guarantees, warranties |
guarantee contracts |
Litigation risks |
Follow-up costs |
protection, mining |
Other provisions |
Total |
| Balance at Jan. 1, 2012 | 116,980 | 99,118 | 19,848 | 67,898 | 72,207 | 109,385 | 485,436 |
| of which non-current | 14,160 | 10,000 | 6,103 | 6,067 | 63,573 | 32,504 | 132,407 |
| of which current | 102,820 | 89,118 | 13,745 | 61,831 | 8,634 | 76,881 | 353,029 |
| Additions | 70,006 | 101 | 12,407 | 31,929 | 125 | 42,803 | 157,371 |
| of which reported in profit from discontinued operations |
– | – | 5,987 | – | – | 319 | 6,306 |
| Utilization | -29,763 | -42,382 | -7,473 | -31,459 | -2,837 | -38,548 | -152,462 |
| Reversal | -33,939 | -9,264 | -1,745 | -11,757 | -7,361 | -13,223 | -77,289 |
| of which reported in profit from discontinued operations |
– | -7,221 | – | – | -4,624 | – | -11,845 |
| Changes in consolidated Group | 390 | – | – | -1 | – | 2 | 391 |
| Unwinding of discount | – | 275 | 164 | -1 | 22,306 | 1,329 | 24,073 |
| of which reported in profit from discontinued operations |
– | – | – | – | 4,395 | – | 4,395 |
| Exchange differences | -665 | 59 | -156 | -208 | -36 | -470 | -1,476 |
| Balance at Dec. 31, 2012 | 123,009 | 47,907 | 23,045 | 56,401 | 84,404 | 101,278 | 436,044 |
| of which non-current | 17,356 | 24,438 | 6,471 | 5,260 | 75,942 | 36,357 | 165,824 |
| of which current | 105,653 | 23,469 | 16,574 | 51,141 | 8,462 | 64,921 | 270,220 |
Provisions for guarantees and warranties relate to warranty commitments for products and equipment. As is customary in the industry, the guarantees and warranties on which they are based are granted in connection with certain performance criteria relating to products or equipment (e.g., guaranteed output volume, quality of product manufactured). Warranties usually have a contractual term of between one and two years from the date on which the products or equipment are accepted. In addition to warranties explicitly agreed under contract, product liability rules apply in many sales countries and may also stipulate that the manufacturer is liable beyond the contractually defined term of the warranty. In some cases, recourse claims exist in the form of insurance refunds or subcontractor guarantees. The level of provisions is based on management's best estimate. As of December 31, 2012, refund claims amounting to EUR 355 thousand against nongroup third parties were recognized (previous year: EUR 303 thousand).
Provisions for financial guarantee contracts comprise obligations under indemnification agreements as well as warranties and undertakings relating to the sale of business activities. The utilization of the provisions in fiscal year 2012 relates primarily to contracts entered into by Lurgi and Lentjes for which risk-sharing had been agreed in the share purchase agreements. On the one hand, the utilization was attributable to an agreement entered into with the purchaser of Lurgi, under which the project-related risks from Lurgi's order portfolio that remain with the GEA Group are largely reduced. On the other hand, provisions relating to the sale of the Lentjes Group were utilized during the completion of further orders.
Provisions are recognized for risks arising from expected or pending litigation against GEA Group companies if it is believed that there is likely to be an unfavorable outcome to the proceedings. Assessments by counsel for the Company or legal experts were used to determine the likelihood of such litigation. The probable damages or sanctions have been recognized as a liability.
This item comprises the cost of residual work that is incurred after a contract has already been invoiced and the profit from the contract has been recognized. The amount of the expected cost is stated.
This item mainly comprises provisions for the clean-up of pit water from past mining activities, the clean-up of other instances of groundwater contamination, and the removal of contamination resulting from zinc production by Ruhr-Zink, including related measures to safeguard groundwater. Due to a lack of legal precedents, the law is unclear in some cases as to the amount and duration of the Company's obligation to clean up pit and ground water. The amount of the obligation will be influenced by the legal clarification of this issue, which the Company aims to achieve in cooperation with the authorities and the state of North Rhine-Westphalia. The level of provisions is based on the best estimate.
Other provisions include provisions for repayments of investment subsidies of EUR 24,713 thousand (previous year: EUR 23,828 thousand), and provisions for expected losses of EUR 3,557 (previous year: EUR 7,700 thousand).
Employee benefit obligations are composed of the following items:
| (EUR thousand) | 12/31/2012 | 12/31/2011 |
|---|---|---|
| Obligations under pension plans | 647,053 | 503,122 |
| of which defined benefit pension plans | 644,221 | 500,707 |
| of which defined contribution pension plans | 2,832 | 2,415 |
| Obligations under supplementary healthcare benefits | 17,762 | 15,872 |
| Other employee benefit obligations | 5,778 | 7,800 |
| Partial retirement | 14,886 | 13,900 |
| Jubilee benefits | 9,041 | 7,884 |
| Other non-current obligations to employees | 8,388 | 11,495 |
| Non-current employee benefit obligations | 702,908 | 560,073 |
| Redundancy plan and severance payments | 5,972 | 17,006 |
| Outstanding vacation, flexitime/overtime credits | 65,419 | 64,294 |
| Bonuses | 82,383 | 96,653 |
| Other current obligations to employees | 26,596 | 25,812 |
| Current employee benefit obligations | 180,370 | 203,765 |
| Total employee benefit obligations | 883,278 | 763,838 |
Pension benefits are granted to a large number of employees at GEA Group. The benefits in Germany usually comprise pension commitments. Employees typically receive fixed pension payments per year of service. Individual foreign subsidiaries operate country-specific pension plans, some of which are funded. As a rule, benefit obligations in Germany are unfunded.
As in the previous year, Klaus Heubeck's 2005G mortality tables were used as a basis for measuring all German pension plans as of December 31, 2012.
All German pension plans were measured as of December 31, 2012. The measurement date of the majority of foreign pension plans is also December 31, 2012.
The following table shows the changes in the present value of the defined benefit obligation and the plan assets, as well as in the calculation of the funded status:
| 12/31/2012 | 12/31/2011 | |||
|---|---|---|---|---|
| (EUR thousand) | Germany | Other countries |
Germany | Other countries |
| Present value of defined benefit obligation at beginning of fiscal year | 477,568 | 132,398 | 437,822 | 121,860 |
| Service cost: present value of vested entitlements earned during the period | 8,031 | 2,243 | 7,231 | 2,051 |
| Interest cost of expected pension obligations | 23,517 | 5,659 | 23,388 | 5,316 |
| Employee contributions | – | 806 | – | 756 |
| Actuarial loss | 136,295 | 16,914 | 13,782 | 3,868 |
| Past service cost | 1,257 | – | 1,899 | -154 |
| Transfer of assets | -724 | – | -512 | – |
| Changes in consolidated Group due to acquisitions | – | 3,687 | 24,576 | 1,258 |
| Other Changes in consolidated Group | – | 1,898 | – | – |
| Exchange differences | – | -912 | – | 3,622 |
| Pension payments | -31,581 | -7,368 | -30,618 | -6,179 |
| Present value of defined benefit obligation at end of fiscal year | 614,363 | 155,325 | 477,568 | 132,398 |
| Fair value of plan assets at beginning of the fiscal year | 17,155 | 91,334 | 15,077 | 86,314 |
| Expected return on plan assets | 665 | 5,432 | 675 | 4,945 |
| Actuarial gain (+) / loss (-) | 15 | 7,535 | 29 | -5,259 |
| Employer contributions | 857 | 5,770 | 624 | 7,691 |
| Employee contributions | – | 806 | – | 756 |
| Changes in consolidated Group due to acquisitions | – | 2,636 | 1,681 | – |
| Exchange differences | – | -456 | – | 2,135 |
| Pension payments by the funds | -823 | -6,329 | -931 | -5,248 |
| Fair value of plan assets at the end of fiscal year | 17,869 | 106,728 | 17,155 | 91,334 |
| Funded status | 596,494 | 48,597 | 460,413 | 41,064 |
| Unrecognized past service cost | – | -870 | – | -770 |
| Net carrying amount | 596,494 | 47,727 | 460,413 | 40,294 |
The following overview shows the present value of the defined benefit obligation broken down into funded and unfunded plans:
| 12/31/2012 | 12/31/2011 | ||||
|---|---|---|---|---|---|
| (EUR thousand) | Germany | Other countries |
Germany | Other countries |
|
| Present value of funded obligations | 145,100 | 143,189 | 117,212 | 123,525 | |
| Fair value of plan assets | 17,869 | 106,728 | 17,155 | 91,334 | |
| Funded status | 127,231 | 36,461 | 100,057 | 32,191 | |
| Unrecognized past service cost | – | -430 | – | -441 | |
| Net carrying amount of funded obligations | 127,231 | 36,031 | 100,057 | 31,750 | |
| Present value of unfunded obligations | 469,263 | 12,136 | 360,356 | 8,873 | |
| Unrecognized past service cost | – | -440 | – | -329 | |
| Net carrying amount of unfunded obligations | 469,263 | 11,696 | 360,356 | 8,544 | |
| Net carrying amount | 596,494 | 47,727 | 460,413 | 40,294 |
Experience adjustments made to reflect differences between actuarial assumptions and actual developments had the following effects:
| Germany | |||||
|---|---|---|---|---|---|
| (EUR thousand) | 12/31/2011 | 12/31/2010 | 12/31/2009 | 12/31/2008 | 12/31/2007 |
| Present value of defined benefit obligation | 614,363 | 477,568 | 437,822 | 417,463 | 409,247 |
| Effects of experience adjustments in the fiscal year (gain (-) / loss (+)) |
5,073 | 1,843 | -1,673 | 5,138 | 1,286 |
| Fair value of plan assets | 17,869 | 17,155 | 15,077 | 17,453 | 16,152 |
| Effects of experience adjustments in the current fiscal year (gain (+) / loss (-)) |
15 | 29 | 140 | -75 | -18 |
| Funded status | 596,494 | 460,413 | 422,745 | 400,010 | 393,095 |
| Other countries | |||||
|---|---|---|---|---|---|
| (EUR thousand) | 12/31/2011 | 12/31/2010 | 12/31/2009 | 12/31/2008 | 12/31/2007 |
| Present value of defined benefit obligation | 155,325 | 132,398 | 121,860 | 101,749 | 99,659 |
| Effects of experience adjustments in the fiscal year (gain (-) / loss (+)) |
-435 | -308 | -170 | -11 | 1,100 |
| Fair value of plan assets | 106,728 | 91,334 | 86,314 | 69,646 | 61,642 |
| Effects of experience adjustments in the current fiscal year (gain (+) / loss (-)) |
7,535 | -5,259 | 2,859 | 5,251 | -21,333 |
| Funded status | 48,597 | 41,064 | 35,546 | 32,103 | 38,017 |
The net carrying amount of defined benefit pension plans changed as follows in fiscal years 2012 and 2011:
| 12/31/2012 | 12/31/2011 | |||
|---|---|---|---|---|
| (EUR thousand) | Germany | Other countries |
Germany | Other countries |
| Net carrying amount at beginning of fiscal year | 460,413 | 40,294 | 422,745 | 34,564 |
| Net pension expenses | 32,140 | 2,530 | 31,843 | 2,481 |
| of which reported in profit from discontinued operations | 303 | – | 311 | – |
| Actuarial gains (-) / losses (+) recognized in other comprehensive income | 136,280 | 9,379 | 13,753 | 9,127 |
| Employer contributions | -857 | -5,770 | -624 | -7,691 |
| Pension payments | -30,758 | -1,039 | -29,687 | -931 |
| Transfers of assets | -724 | – | -512 | – |
| Changes in consolidated Group due to acquisitions | – | 1,051 | 22,895 | 1,258 |
| Other Changes in consolidated Group | – | 1,755 | – | – |
| Exchange differences | – | -473 | – | 1,486 |
| Net carrying amount | 596,494 | 47,727 | 460,413 | 40,294 |
The actuarial losses from the measurement of pension obligations reported in retained earnings as of December 31, 2012, were EUR 199,948 thousand (previous year: EUR 54,743 thousand). In the current fiscal year, losses of EUR 145,205 thousand (previous year: EUR 24,373 thousand) were recognized in other comprehensive income.
Of the pension provisions reported as of December 31, 2012, EUR 37,695 thousand (previous year: EUR 37,500 thousand) are classified as current.
The weighted actuarial assumptions used to calculate the present value of the defined benefit obligation and the obligations under key pension plans are as follows:
| 12/31/2012 | 12/31/2011 | |||
|---|---|---|---|---|
| Other | Other | |||
| (Percent) | Germany | countries | Germany | countries |
| Discount factor | 3.25 | 3.31 | 5.10 | 4.19 |
| Wage and salary increase rate | 3.00 | 1.98 | 3.00 | 2.13 |
| Pension increase rate | 1.66 | 0.53 | 1.60 | 0.51 |
The actuarial measurement factors for German pension plans are established in consultation with actuarial experts Towers Watson Deutschland GmbH, Wiesbaden. The corresponding assumptions for pension plans outside Germany are determined with in accordance with national conditions with the help of local experts in coordination with Towers Watson Deutschland GmbH, Wiesbaden.
The weighted composition of the plan assets used to cover the pension obligations was as follows at the reporting date:
| 12/31/2012 | 12/31/2011 | |||
|---|---|---|---|---|
| (Percent) | Germany | Other countries |
Germany | Other countries |
| Equity instruments | 1.9 | 29.7 | 2.0 | 43.7 |
| Debt instruments | 3.8 | 37.0 | 4.0 | 27.0 |
| Real estate | – | 2.0 | – | 2.1 |
| Insurance | 94.1 | 31.2 | 93.3 | 14.8 |
| Other | 0.2 | 0.1 | 0.7 | 12.4 |
| 100.0 | 100.0 | 100.0 | 100.0 |
Part of the plan assets of German pension plans is managed by pension funds and an endowment fund, and is mainly invested in fixed-income securities and term deposits, with only a relatively small proportion invested in equities. Plan assets held outside Germany are invested according to countryspecific conditions as shown in the table above. In addition, a proportion of both the German and foreign plan assets is managed by insurance companies in accordance with their specific investment guidelines. The basic objective is that these investments ensure secure returns and preserve the value of the underlying assets in order to fund current and future pension benefits. There are currently no plans to change this investment strategy. The fair values and the expected long-term return on the plan assets are presented in the relevant tables. The returns are based primarily on average historical interest rates and current capital market rates.
In fiscal year 2013, EUR 375 thousand is expected to be added to the plan assets of German pension plans and EUR 6,352 thousand to plans outside Germany.
The actual return on plan assets in 2012 was EUR 13,647 thousand (previous year: EUR 390 thousand). It was therefore above (previous year: below) the expected return by EUR 7,550 thousand (previous year: EUR 5,230 thousand).
The pension expenses recognized in the income statement are composed of the following items:
| 01/01/2012 - 12/31/2012 | 01/01/2011 - 12/31/2011 | ||||
|---|---|---|---|---|---|
| (EUR thousand) | Germany | Other countries |
Germany | Other countries |
|
| Service cost: present value of vested entitlements earned during the year | 8,031 | 2,243 | 7,231 | 2,051 | |
| Interest cost of expected pension obligations | 23,517 | 5,659 | 23,388 | 5,316 | |
| Less interest cost reported in profit from discontinued operations | -303 | – | -311 | – | |
| Expected return on plan assets | -665 | -5,432 | -675 | -4,945 | |
| Amortization of past service cost | 1,257 | 60 | 1,899 | 59 | |
| Net pension expenses | 31,837 | 2,530 | 31,532 | 2,481 |
Service cost, the effects of plan settlements, and the past service cost of continuing operations are recognized as personnel expenses under functional costs (cost of sales, selling expenses, or general and administrative expenses). The interest cost on expected pension obligations and the expected return on plan assets are reported under net interest income.
The weighted actuarial assumptions used to calculate net pension expenses are as follows:
| 2012 | 2011 | |||||
|---|---|---|---|---|---|---|
| (Percent) | Germany | Other countries |
Germany | Other countries |
||
| Discount factor | 5.10 | 4.19 | 5.30 | 4.34 | ||
| Wage and salary increase rate | 3.00 | 2.13 | 2.80 | 2.18 | ||
| Pension increase rate | 1.60 | 0.51 | 1.55 | 0.47 | ||
| Expected long-term return on plan assets | 3.93 | 6.00 | 4.00 | 8.05 |
The following payments are expected to be made under the German and foreign pension plans in the coming years:
| (EUR thousand) | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 - 2022 |
|---|---|---|---|---|---|---|
| German pension plans | 31,325 | 31,797 | 31,391 | 31,213 | 30,985 | 152,549 |
| Foreign pension plans | 6,370 | 6,775 | 7,426 | 6,994 | 7,221 | 40,886 |
In addition to occupational pension benefits, certain retired employees are granted health insurance subsidies. The following information relates to the group's obligations under supplementary healthcare benefits in Germany and abroad
| 12/31/2011 | 12/31/ | |||
|---|---|---|---|---|
| (EUR thousand) | Germany | Other countries |
Germany | Other countries |
| Changes in present value of defined benefit obligation | ||||
| Present value of defined benefit obligation at beginning of fiscal year | 15,795 | 77 | 16,527 | 159 |
| Service cost: present value of vested entitlements earned during the period | 14 | 1 | 18 | 1 |
| Interest cost of expected additional payment obligations | 793 | – | 842 | 2 |
| Actuarial loss (+) / gain (-) | 2,395 | 13 | -310 | 10 |
| Exchange differences | – | -1 | – | 6 |
| Payments | -1,251 | -74 | -1,282 | -101 |
| Present value of defined benefit obligation at end of fiscal year | 17,746 | 16 | 15,795 | 77 |
| Funded status | 17,746 | 16 | 15,795 | 77 |
| Net carrying amount | 17,746 | 16 | 15,795 | 77 |
Experience adjustments made to reflect differences between actuarial assumptions and actual developments had the following effects:
| Germany | |||||||
|---|---|---|---|---|---|---|---|
| (EUR thousand) | 12/31/2011 | 12/31/2010 | 12/31/2009 | 12/31/2008 | 12/31/2007 | ||
| Present value of defined benefit obligation | 17,746 | 15,795 | 16,527 | 15,461 | 15,365 | ||
| Effects of experience adjustments in the current fiscal year (loss (+) / gain (-)) |
-368 | -584 | 825 | -213 | 669 | ||
| Other countries | |||||||
| (EUR thousand) | 12/31/2011 | 12/31/2010 | 12/31/2009 | 12/31/2008 | 12/31/2007 | ||
| Present value of defined benefit obligation | 16 | 77 | 159 | 223 | 252 | ||
The net carrying amount of obligations under supplementary healthcare benefits changed as follows in fiscal years 2012 and 2011:
| 2012 | 2011 | |||
|---|---|---|---|---|
| (EUR thousand) | Germany | Other countries |
Germany | Other countries |
| Net carrying amount at beginning of fiscal year | 15,795 | 77 | 16,527 | 159 |
| Net pension expenses | 807 | 1 | 860 | 3 |
| of which reported in profit from discontinued operations | 43 | – | 44 | – |
| Actuarial gains (-) / losses (+) recognized in other comprehensive income | 2,395 | 13 | -310 | 10 |
| Payments | -1,251 | -74 | -1,282 | -101 |
| Exchange differences | – | -1 | – | 6 |
| Net carrying amount | 17,746 | 16 | 15,795 | 77 |
The actuarial losses from the measurement of obligations from supplementary healthcare benefit plans reported in retained earnings as of December 31, 2012 were EUR 3,268 thousand (previous year: EUR 857 thousand). In the current fiscal year, losses of EUR 2,411 thousand (previous year: gains of EUR 303 thousand) were recognized in other comprehensive income.
The weighted actuarial assumptions used to calculate the present value of the defined benefit obligation relating to supplementary healthcare benefits were as follows:
| 2012 | 2011 | |||
|---|---|---|---|---|
| (Percent) | Germany | Other countries |
Germany | Other countries |
| Discount factor | 3.25 | – | 5.10 | – |
| Growth rate in the cost healthcare benefits | 4.00 | – | 4.00 | – |
The growth rate in the cost of supplementary healthcare benefits in Germany is estimated at an unchanged 4 percent for fiscal year 2012. Based on past experience, this rate is not expected to change in the future.
For foreign supplementary health care benefits, no discounting is applied and the projected growth rate for the cost of benefits is zero, since the last benefit payments are expected in 2013.
The measurement date for obligations under supplementary healthcare benefits in Germany and abroad is December 31, 2012.
The cost of supplementary healthcare benefits is composed of the following items:
| 01/01/2012 - 12/31/2012 | 01/01/2011 - 12/31/2011 | |||
|---|---|---|---|---|
| (EUR thousand) | Germany | Other countries |
Germany | Other countries |
| Service cost: present value of vested entitlements earned during the year | 14 | 1 | 18 | 1 |
| Interest cost of expected additional payments obligations | 793 | – | 842 | 2 |
| Less interest cost reported in profit from discontinued operations | -43 | – | -44 | – |
| Net pension expenses | 764 | 1 | 816 | 3 |
Service cost from continuing operations is reported as personnel expenses under functional costs; the interest cost on expected pension obligations is recognized under interest expense.
The weighted actuarial assumptions used to calculate the cost of supplementary healthcare benefits in Germany and abroad are as follows:
| 2012 | 2011 | |||
|---|---|---|---|---|
| (Percent) | Germany | Other countries |
Germany | Other countries |
| Discount factor | 5.10 | – | 5.30 | 1.75 |
| Growth rate in the cost of healthcare benefits | 4.00 | – | 4.00 | 9.00 |
Estimated future payments for additional benefits in Germany and abroad are as follows:
| 2018 - | ||||||
|---|---|---|---|---|---|---|
| (EUR thousand) | 2013 | 2014 | 2015 | 2016 | 2017 | 2022 |
| German plans | 1,254 | 1,249 | 1,233 | 1,212 | 1,191 | 5,598 |
| Foreign plans | 25 | – | – | – | – | – |
The following overview presents the effects of a one percentage point change in the growth rate for healthcare and life insurance benefits in Germany and abroad on the present value of the defined benefit obligation at December 31, 2012:
| 1% increase | 1% decrease | |||
|---|---|---|---|---|
| (EUR thousand) | Germany | Other countries |
Germany | Other countries |
| Effects on the present value of the defined benefit obligation | 1,832 | – | -1,582 | – |
Various companies – especially in the U.S.A. and Scandinavia – operate defined contribution pension plans. Under these plans, the obligation does not lie with GEA Group, but with the respective pension funds. Contributions totaling EUR 20,564 thousand were paid in fiscal year 2012 (previous year: EUR 14,576 thousand). Contributions of EUR 51,430 thousand were paid to state pension insurance schemes (previous year: EUR 49,271 thousand). These contributions are recognized as personnel expenses at the same time as the relevant service is rendered.
A joint pension plan operated by several employers in the Netherlands was recognized as a defined contribution pension plan because the manager of the plan does not provide sufficient information to the participating companies on the amount of the obligation and of the plan assets for it to be recognized as a defined benefit pension plan. Contributions amounting to EUR 2,135 thousand (previous year: EUR 578 thousand) were made to the joint pension plan in fiscal year 2011. Neither a surplus nor a deficit in the plan would have any effect on the amount of future contributions.
Share-based payments in fiscal year 2012 totaled EUR 3,135 thousand (previous year: EUR 7,417 thousand). EUR 64 thousand of this amount (previous year: EUR 52 thousand) was attributable to equity-settled share-based payment transactions (see section 7.1). The carrying amount of liabilities arising from share-based payment transactions amounted to EUR 8,529 thousand as of December 31, 2012 (previous year: EUR 11,755 thousand).
Effective July 1, 2006, GEA Group Aktiengesellschaft launched a long-term remuneration program entitled "GEA Performance Share Plan", a cash-settled share-based payment plan for all first- and secondlevel managers below the Executive Board. Third-level managers were also eligible to participate starting with the third tranche of the program as of July 1, 2008. The seventh tranche was issued on July 1, 2012. The goal of the GEA Performance Share Plan is to link managers' remuneration with the long-term success of the Company and to align their interests with those of the shareholders.
Under the plan, participants are granted a defined number of Performance Shares at the beginning of the performance period. The number of Performance Shares allotted is determined by the participants' management level. To participate in the plan, managers must invest 20 percent of the amount of the allotted Performance Shares in shares of GEA Group Aktiengesellschaft. The personal investment must then be held for three years (performance period).
The performance of GEA Group Aktiengesellschaft's shares relative to the MDAX companies over the three-year performance period is measured on the basis of their total shareholder return (TSR). TSR is a suitable indicator for investors to compare the performance and appeal of different companies. It measures the total percentage return that an investor earns from a share over a certain period. In addition to share price performance, dividends and adjustments such as share splits are included in the calculation of TSR. This method of comparison eliminates share price performance that is due to general market volatility and enables the effects of different profit retention strategies to be compared. The relative performance of GEA Group Aktiengesellschaft's shares determines the number of Performance Shares finally paid out (between 0 percent and 300 percent).
The Performance Shares are paid out once the three-year performance period has expired. At that time, performance of GEA Group Aktiengesellschaft's shares relative to the MDAX determines how many Performance Shares are paid out: If the performance of the Company's shares equals the median in the TSR comparison, 50 percent of the Performance Shares are issued; if it reaches the third quartile, 100 percent of the Performance Shares are paid out. If GEA Group Aktiengesellschaft's shares outperform the MDAX companies, 300 percent of the Performance Shares are issued. Other performance figures are interpolated between these values. The total amount paid out corresponds to the number of Performance Shares allotted to a participant multiplied by the average share price over the last quarter of the three-year performance period. Once the performance period has expired, participants may freely dispose of their personal investment in GEA Group Aktiengesellschaft shares.
The fourth tranche expired on June 30, 2012. The TSR comparison over the three-year performance period resulted in a payout ratio of 87.95 percent. In the previous year, the TSR, at 5.96 percent, had been below the median, so there was no payout for the third tranche. The payout amounted to EUR 6,387,336 thousand (previous year: EUR 0 thousand).
| Changes in | ||||||
|---|---|---|---|---|---|---|
| (Number of shares) | 12/31/2011 | Additions | Expired | Paid Out | consolidated Group | 12/31/2012 |
| 2009 tranche | 321,300 | – | – | 321,300 | – | – |
| 2010 tranche | 237,390 | – | 7,660 | – | -24,250 | 205,480 |
| 2011 tranche | 184,798 | – | 594 | – | -18,547 | 165,657 |
| 2012 tranche | – | 162,150 | – | – | – | 162,150 |
| Total | 743,488 | 162,150 | 8,254 | 321,300 | -42,797 | 533,287 |
The number of Performance Shares changed as follows in fiscal year 2012:
The total expense for fiscal year 2012 amounts to EUR 2,351 thousand (previous year: EUR 5,549 thousand), taking into account the fair value as of December 31, 2012, of EUR 16.45 (previous year: EUR 20.65) for the fifth tranche, EUR 13.37 (previous year: EUR 17.08) for the sixth tranche, EUR 12.11 for the seventh tranche, and EUR 19.71 (previous year: EUR 0) for the fourth tranche (previous year: third tranche) at the payment date.
The fair value of the Performance Shares is determined using a Monte Carlo simulation. The following valuation assumptions are applied:
| Tranche | 2012 | 2011 | |||||
|---|---|---|---|---|---|---|---|
| 2010 | 2011 | 2012 | 2009 | 2010 | 2011 | ||
| Share price (EUR) | 25.76 | 25.35 | 24.47 | 22.59 | 22.20 | 21.85 | |
| Dividend yield (%) | 2.800 | 2.800 | 2.800 | 1.615 | 1.615 | 1.615 | |
| Risk-free interest rate (%) | 0.017 | -0.055 | -0.009 | 0.101 | 0.055 | 0.248 | |
| Volatility GEA shares (%) | 27.44 | 27.44 | 27.44 | 44.38 | 44.38 | 44.38 |
As the payout ratio of GEA Group Aktiengesellschaft's Performance Shares is linked to the MDAX, the volatilities of all MDAX shares and their correlations to GEA Group Aktiengesellschaft shares are also calculated. The calculation of volatilities and correlations is based on historical market data. Risk-free interest rates were determined from German government bond yields.
A long-term incentive component was added to the bonus arrangements for Executive Board members in fiscal years 2010 and 2011. Half of this was payable with the regular salary payment and the other half was converted into phantom shares of the Company. It was calculated as the arithmetic mean of the daily closing prices of GEA Group shares in Xetra trading operated by the Frankfurt Stock Exchange on the market days in the three-month period that ended one month before the date of the Supervisory Board meeting convened in the fiscal year to adopt the financial statements.
The payout value of the phantom shares is calculated following the expiration of a lock-up period of three years following the conversion into phantom shares. The amount of the payout is calculated as the arithmetic mean of the daily closing prices of GEA Group Aktiengesellschaft shares in Xetra trading operated by the Frankfurt Stock Exchange on the market days in the three-month period that ends one month before the date of the relevant Supervisory Board meeting convened to adopt the financial statements in the fiscal year in which the lock-up period expires. The dividends payable per share during the lock-up period are added to the value calculated in this way. The amount to be paid out under these arrangements is limited to 300 percent of the annual basic bonus. In the event of termination of the Executive Board member's contract of service, the three-year vesting period is reduced to one year as from the date of termination.
Because the exercise price is zero and the incentive program does not feature a vesting period, the fair value of the phantom shares corresponds to their intrinsic value and thus to the quoted market price of GEA Group Aktiengesellschaft shares at the reporting date. The fair value of the liability is calculated by multiplying the number of phantom shares by the relevant closing price, plus dividends paid during the lock-up period.
| (Number of shares) | 12/31/2011 | Additions | Expired | Paid Out | 12/31/2012 |
|---|---|---|---|---|---|
| 2010 tranche | 57,887 | 57,887 | |||
| 2011 tranche | 81,460 | 81,460 | |||
| 2012 tranche | |||||
| Total | 139,347 | – | – | – | 139,347 |
The number of phantom shares changed as follows in fiscal year 2012:
The relevant price for the phantom shares issued in fiscal year 2010 was EUR 25.42 (previous year: EUR 22.25), and EUR 25.02 for phantom shares issued in fiscal year 2011 (previous year: EUR 21.85). In fiscal year 2012, expenses of EUR 442 thousand (previous year: EUR 1,816 thousand) were recognized in respect of phantom shares. The liability as of December 31, 2012, amounted to EUR 3,510 thousand (previous year: EUR 3,068 thousand). This amount is reported in non-current employee benefit obligations under bonuses.
The long-term share price component was introduced as part of the revision of the variable remuneration system for Executive Board members in fiscal year 2012. The payout from the long-term share price component is measured over a three-year performance period that includes the relevant fiscal year and the two subsequent years.
Performance is measured by comparing the performance of the GEA share price, adjusted for dividends, with the performance of the STOXX® Europe TMI Industrial Engineering (TMI IE) index over a threeyear performance period. The starting value for the comparison calculation is the arithmetic mean of the closing prices of the last 20 trading days before the commencement of the three-year performance period. The target is achieved 100 percent if the performance of the arithmetic mean of the GEA share daily closing prices equates 100 percent to the corresponding TMI performance over the three-year performance period. In the event of outperformance of more than 100 percent, the bonus increases up to a maximum of 300 percent of the target amount. If the increase in GEA's share price over the threeyear comparison period is less than 100 percent of the growth in the TMI IE, the bonus is reduced up to a performance of 75 percent: For each percentage point over or under 100 percent performance, the degree of target achievement increases or decreases by 4 percent. The total degree of target achievement and thus the payout level for the long-term share price component is limited to 300 percent of this target amount (cap).
Starting from a target amount of EUR 573 thousand (previous year: EUR 0 thousand), the fair value of claims arising from the long-term share price component amounted to EUR 278 thousand (previous year: EUR 0 thousand) as of the reporting date.
The fair value of the claims arising from the long-term share price component is determined using a Monte Carlo simulation. The following valuation assumptions are applied:
| 2012 | 2011 | |
|---|---|---|
| Share price (arithmetic mean) (EUR) | 23.90 | – |
| STOXX TMI IE (arithmetic mean) (index points) | 281.73 | – |
| Risk-free interest (percent) | -0.044 | – |
| Volatility GEA share (percent) | 27.44 | – |
| Volatility STOXX TMI IE (percent) | 20.42 | – |
| Correlation between GEA share and STOXX TMI IE (percent) | 80.32 | – |
The calculation of volatilities and correlation is based on historical market data. Risk-free interest rates were determined from German government bond yields.
Financial liabilities as of December 31, 2012, were composed of the following items:
| (EUR thousand) | 12/31/2012 | 12/31/2011 |
|---|---|---|
| Borrower's note loan | 299,477 | 128,245 |
| Bonds | 397,724 | 397,290 |
| Liabilities to banks | 253,799 | 232,110 |
| Liabilities under finance leases | 38,519 | 39,972 |
| Liabilities from derivatives | 15,926 | 16,191 |
| Non-current financial liabilities | 1,005,445 | 813,808 |
| Borrower's note loan | 56,066 | 479 |
| Bonds | 11,877 | 11,844 |
| Liabilities to banks | 50,090 | 49,246 |
| Liabilities under finance leases | 4,106 | 4,192 |
| Liabilities from derivatives | 8,371 | 24,424 |
| Liabilities to equity investments | 1,955 | 3,901 |
| Current financial liabilities | 132,465 | 94,086 |
| Total financial liabilities | 1,137,910 | 907,894 |
The financing of GEA Group as of December 31, 2012, consisted mainly of the following items:
| Carrying amount 12/31/2012 56,066 |
Carrying amount 12/31/2011 |
Notional value 12/31/2012 |
Fair value 12/31/2012 |
Maturity |
|---|---|---|---|---|
| 55,631 | August 16, 2013 | |||
| 409,134 | 400,000 | 445,980 | April 21, 2016 | |
| 90,389 | 80,000 | 81,722 | yearly installments until Mai 31, 2016 |
|
| – | 56,000 | 56,675 | from March 31, 2013 quarterly installments until December 30, 2016 |
|
| 150,805 | 150,000 | 155,780 | July 14, 2017 | |
| – | 300,000 | 317,336 | September 19, 2017 | |
| 409,601 80,099 56,004 150,344 299,477 |
128,724 55,000 |
excluding interest rate hedges
On 14 April 2011, GEA Group Aktiengesellschaft issued a bond amounting to EUR 400,000 thousand. The bond has a five-year term and a fixed coupon of 4.25 percent. The bond is unsecured. It is listed on the regulated market of the Luxembourg Stock Exchange.
In 2012, GEA Group Aktiengesellschaft placed borrower's note loans with a nominal amount of EUR 300,000 thousand. Borrower's note loans of EUR 73,000 thousand of the borrower's note loans in the aggregate amount of EUR 128,000 thousand originally falling due in August 2013 were extended until September 2017. In addition, two further borrower's note loans were placed; they amounted to EUR 137,000 thousand and EUR 90,000 thousand and mature in September 2017.
The borrower's note loan of EUR 128,000 thousand falling due in August 2013 bears interest at 160 basis points above 3M Euribor. The partial amount of EUR 73,000 thousand extended until September 2017 bears interest at 170 basis points above 3M Euribor after its original maturity date. The borrower's note loan of EUR 137,000 thousand falling due in September 2017 also bears interest at 170 basis points above 3M Euribor. The borrower's note loan in the amount of EUR 90,000 thousand has a fixed interest rate of 2.725 percent.
In August 2010, the interest rate on the borrower's note loan of EUR 128,000 thousand was fixed for the remaining term of three years using interest rate swaps. The weighted average interest rate is 2.89 percent.
The maturities of liabilities to banks are as follows:
| (EUR thousand) | 12/31/2012 | 12/31/2011 |
|---|---|---|
| < 1 year | 50,090 | 49,246 |
| 1 - 2 years | 34,485 | 20,984 |
| 2 - 3 years | 34,464 | 20,305 |
| 3 - 4 years | 34,315 | 20,308 |
| 4 - 5 years | 150,279 | 20,153 |
| > 5 years | 256 | 150,360 |
| Total | 303,889 | 281,356 |
The amounts falling due in the next 4 years are related primarily to the amortizable loans from Kreditanstalt für Wiederaufbau (KfW). The amount due after 4 years is the loan of EUR 150,000 thousand from the European Investment Bank (EIB). This loan bears interest based on 3M Euribor plus a premium that is dependent on the GEA Group rating. For a partial amount of EUR 50,000 thousand, interest was fixed for the full term using two interest rate swaps. The weighted average interest rate is 3.29 percent.
None of the credit lines drawn down are secured. GEA Group has undertaken in the loan agreements to comply with a certain covenant. Compliance with the covenant must be reviewed at the end of each quarter. The covenant was met as of December 31, 2012.
Transaction costs for the unused syndicated credit line (club deal) are allocated on a straight-line basis over the term.
Other liabilities to banks in the eurozone bore interest rates of between 0.5 percent and 4.6 percent, depending on their maturity and financing purpose (previous year: between 1.0 percent and 4.6 percent). The group additionally had foreign currency liabilities in Indian rupees and Brazilian real that also bear standard market interest rates in those countries of around 12.0 percent (previous year: 13.0 percent) and 12.0 percent (previous year: 15.0 percent), respectively.
Liabilities to banks totaling EUR 83 thousand (previous year: EUR 846 thousand) were secured.
Including the borrower's note loans and the syndicated credit lines, the group had cash credit lines of EUR 1,845,745 thousand as of December 31, 2012 (previous year: EUR 1,702,688 thousand). Of this amount, cash credit lines of EUR 776.712 thousand (previous year: EUR 883,474 thousand) are unutilized (see section 3). In addition, guarantee credit lines for the performance of contracts, advance payments, and warranty obligations of EUR 1,898,285 thousand were available (previous year: EUR 2,069,717 thousand), EUR 1,148,503 thousand of which has not been utilized (previous year: EUR 1,322,080 thousand).
The following table shows a breakdown of future payments under finance leases:
| Minimum lease payments Interest |
Present value of minimum lease payments |
|||||
|---|---|---|---|---|---|---|
| (EUR thousand) | 12/31/2012 | 12/31/2011 | 12/31/2012 | 12/31/2011 | 12/31/2012 | 12/31/2011 |
| Not later than one year | 5,116 | 4,523 | 981 | 331 | 4,135 | 4,192 |
| Between one and five years | 20,225 | 19,875 | 5,351 | 4,924 | 14,874 | 14,951 |
| Later than five years | 64,165 | 73,235 | 40,549 | 48,214 | 23,616 | 25,021 |
| Total future payments under finance leases | 89,506 | 97,633 | 46,881 | 53,469 | 42,625 | 44,164 |
Liabilities under finance leases relate mainly to land and buildings. The present value of minimum lease payments as of December 31, 2012, relating to leases for land and buildings amounted to EUR 40,043 thousand (previous year: EUR 42,462 thousand).
As the interest rates used in leases are constant, the fair value of lease liabilities may be exposed to interest rate risk. All leases comprise contractually agreed payments.
Liabilities under finance leases are effectively secured because the rights to the leased asset revert to the lessor if the terms and conditions of the lease are breached.
Derivative financial instruments are explained in section 7.8.
Trade payables were as follows as of December 31, 2012:
| (EUR thousand) | 12/31/2012 | 12/31/2011 |
|---|---|---|
| Trade payables | 839,143 | 903,334 |
| of which to unconsolidated companies | 4,794 | 6,739 |
Trade payables of EUR 824,924 thousand (previous year: EUR 890,631 thousand) are due within one year. The balance of EUR 14.219 thousand (previous year: EUR 12,703 thousand) is due after more than one year.
Trade payables in the amount of EUR 49,919 thousand (previous year: EUR 45,303 thousand) are secured.
Income tax liabilities relate to current taxes and amounted to EUR 39,912 thousand at the reporting date (previous year: EUR 51,525 thousand).
Other liabilities as of December 31, 2012, are composed of the following items
| (EUR thousand) | 12/31/2012 | 12/31/2011 |
|---|---|---|
| Other non-current liabilities | 5,214 | 17,166 |
| Payments on account received in respect of orders and construction contracts | 290,458 | 239,134 |
| Gross amount due to customers for contract work | 339,037 | 380,478 |
| Other liabilities to unconsolidated subsidiaries | 21,781 | 25,492 |
| Liabilities from other taxes | 55,357 | 52,953 |
| Other liabilities | 91,032 | 88,539 |
| of which social security | 19,126 | 17,556 |
| of which other liabilities to employees | 10,515 | 12,825 |
| Other current liabilities | 797,665 | 786,596 |
| Total other liabilities | 802,879 | 803,762 |
Payments on account received in respect of orders amounting to EUR 36,711 thousand (previous year: EUR 25,755 thousand) and other liabilities amounting to EUR 9,379 thousand (previous year: EUR 9,351 thousand) are secured.
The gross amount due to customers for contract work is the aggregate amount of orders whose progress billings exceed the capitalized cost plus the contract gains and losses recognized.
The following tables provide an overview of the composition of financial instruments as of December 31, 2012, by class within the meaning of IFRS 7 as well as 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 |
12/31/2012 Amortized cost | Fair value through profit or loss |
Fair value recognized in other comprehensive income |
Measurement in accordance with other IFRSs |
Fair value 12/31/2012 |
| Assets | ||||||
| Trade receivables | 1,249,863 | 909,847 | – | – | 340,016 | 1,249,863 |
| of which PoC receivables | 340,016 | – | – | – | 340,016 | 340,016 |
| Income tax receivables | 19,350 | – | – | – | 19,350 | 19,350 |
| Cash and cash equivalents | 743,524 | 743,524 | – | – | – | 743,524 |
| Other financial assets | 215,080 | 91,886 | 3,237 | 14,943 | 105,014 | 215,567 |
| of which derivatives included in hedging relationships |
3,880 | – | – | 3,880 | – | 3,880 |
| By IAS 39 measurement category | ||||||
| Loans and receivables | 1,714,458 | 1,714,458 | – | – | – | 1,714,458 |
| of which cash and cash equivalents | 743,524 | 743,524 | – | – | – | 743,524 |
| of which trade receivables | 909,847 | 909,847 | – | – | – | 909,847 |
| of which other financial assets | 61,087 | 61,087 | – | – | – | 61,087 |
| Available-for-sale investments | 41,862 | 30,799 | – | 11,063 | – | 42,349 |
| Financial assets at fair value through profit or loss (derivatives not included in a recognized hedging relationship) |
3,237 | – | 3,237 | – | – | 3,237 |
| Liabilities | ||||||
| Trade payables | 839,143 | 839,143 | – | – | – | 839,143 |
| Financial liabilities | 1,137,910 | 1,070,988 | 17,031 | 7,266 | 42,625 | 1,199,443 |
| of which liabilities under finance leases | 42,625 | – | – | – | 42,625 | 42,625 |
| of which derivatives included in hedging relationships |
7,266 | – | – | 7,266 | – | 7,266 |
| Income tax liabilities | 39,912 | – | – | – | 39,912 | 39,912 |
| Other financial liabilities | 802,879 | 83,150 | – | – | 719,729 | 802,879 |
| By IAS 39 measurement category | ||||||
| Financial liabilities at amortized cost | 1,993,281 | 1,993,281 | – | – | – | 2,054,814 |
| of which trade payables | 839,143 | 839,143 | – | – | – | 839,143 |
| of which bonds and other securitized liabilities | 765,144 | 765,144 | – | – | – | 818,947 |
| of which liabilities to banks | 303,889 | 303,889 | – | – | – | 311,619 |
| of which loan liabilities to unconsolidated subsidiaries |
1,955 | 1,955 | – | – | – | 1,955 |
| of which other liabilities to affiliated companies | 21,781 | 21,781 | – | – | – | 21,781 |
| of which other liabilities | 61,369 | 61,369 | – | – | – | 61,369 |
| Financial liabilities at fair value through profit or loss (derivatives not included in a hedging relationship) |
17,031 | – | 17,031 | – | – | 17,031 |
| Measurement in accordance with IAS 39 | ||||||
|---|---|---|---|---|---|---|
| (EUR thousand) | Carrying amount |
12/31/2011 Amortized cost | Fair value through profit or loss |
Fair value recognized in other comprehensive income |
Measurement in accordance with other IFRSs |
Fair value 12/31/2011 |
| Assets | ||||||
| Trade receivables | 1,357,546 | 971,169 | – | – | 386,377 | 1,357,546 |
| of which PoC receivables | 386,377 | – | – | – | 386,377 | 386,377 |
| Income tax receivables | 15,882 | – | – | – | 15,882 | 15,882 |
| Cash and cash equivalents | 432,401 | 432,401 | – | – | – | 432,401 |
| Other financial assets | 260,023 | 103,322 | 16,812 | 19,249 | 120,640 | 260,782 |
| of which derivatives included in hedging relationships |
7,647 | – | – | 7,647 | – | 7,647 |
| By IAS 39 measurement category | ||||||
| Loans and receivables | 1,471,834 | 1,471,834 | – | – | – | 1,471,834 |
| of which cash and cash equivalents | 432,401 | 432,401 | – | – | – | 432,401 |
| of which trade receivables | 971,169 | 971,169 | – | – | – | 971,169 |
| of which other financial assets | 68,264 | 68,264 | – | – | – | 68,264 |
| Available-for-sale investments | 46,661 | 35,058 | – | 11,603 | – | 47,420 |
| Financial assets at fair value through profit or loss (derivatives not included in a recognized hedging relationship) |
16,812 | – | 16,812 | – | – | 16,812 |
| Liabilities | ||||||
| Trade payables | 903,334 | 903,334 | – | – | – | 903,334 |
| Financial liabilities | 907,894 | 823,115 | 22,821 | 17,794 | 44,164 | 931,365 |
| of which liabilities under finance leases | 44,164 | – | – | – | 44,164 | 44,164 |
| of which derivatives included in hedging relationships |
17,794 | – | – | 17,794 | – | 17,794 |
| Income tax liabilities | 51,525 | – | – | – | 51,525 | 51,525 |
| Other financial liabilities | 803,762 | 91,847 | – | – | 711,915 | 803,762 |
| By IAS 39 measurement category | ||||||
| Financial liabilities at amortized cost | 1,818,296 | 1,818,296 | – | – | – | 1,841,767 |
| of which trade payables | 903,334 | 903,334 | – | – | – | 903,334 |
| of which bonds and other securitized liabilities | 537,858 | 537,858 | – | – | – | 554,974 |
| of which liabilities to banks | 281,356 | 281,356 | – | – | – | 287,711 |
| of which loan liabilities to unconsolidated subsidiaries |
3,901 | 3,901 | – | – | – | 3,901 |
| of which other liabilities to affiliated companies | 25,492 | 25,492 | – | – | – | 25,492 |
| of which other liabilities | 66,355 | 66,355 | – | – | – | 66,355 |
| Financial liabilities at fair value through profit or loss (derivatives not included in a hedging relationship) |
22,821 | – | 22,821 | – | – | 22,821 |
Financial instruments measured at fair value can be classified as follows into the levels defined in the fair value measurement hierarchy:
Level 3 – Inputs that are not based on observable market data.
| 12/31/2012 | 12/31/2011 | |||||
|---|---|---|---|---|---|---|
| (EUR thousand) | Level 1 | Level 2 | Level 3 | Level 1 | Level 2 | Level 3 |
| Assets | ||||||
| Other financial assets | – | 7,117 | 11,063 | – | 24,459 | 11,603 |
| of which: derivatives included in hedging relationships | – | 3,880 | – | – | 7,647 | – |
| Equity and liabilities | ||||||
| Financial liabilities | – | 24,297 | – | – | 40,615 | – |
| of which: derivatives included in hedging relationships | – | 7,266 | – | – | 17,794 | – |
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 based on the debtor's payment plan.
The carrying amount of the trade receivables and other financial assets that are subject to the IAS 39 measurement requirements corresponds to their fair value. Assets allocated to the "available-for-sale financial assets" category are measured at amortized cost. These are shares in unconsolidated subsidiaries and other equity investments whose fair value cannot be determined reliably.
The carrying amount of the trade payables and other current liabilities that are subject to the measurement rules of IAS 39 corresponds to their fair value. The fair value of fixed-interest liabilities is the present value of their expected future cash flows. They are discounted at the rates prevailing at the reporting date. The carrying amount of variable-rate liabilities corresponds to their fair value.
The fair value of currency forwards at the reporting date is calculated on the basis of the spot exchange rate, taking into account forward premiums and discounts corresponding to the relevant remaining maturities. Forward premiums and discounts are derived from yield curves observable at the reporting date. The fair value of currency options is calculated on the basis of recognized measurement models. Fair value is affected by the remaining term of the option, the current exchange rate, the volatility of the exchange rate, and the underlying yield curves.
The fair value of interest rate swaps and options is determined on the basis of discounted expected future cash flows. Market interest rates applicable to the remaining maturities of these financial instruments are used. Cross-currency swaps also include the exchange rates of the relevant foreign currencies in which the cash flows are generated.
The fair value of commodity futures and options is calculated by measuring these at the market terms prevailing at the reporting date, and thus corresponds to its value at the end of the fiscal year. The fair value of exchange-traded contracts is derived from their quoted market price. Measurements are performed both internally and by external financial institutions as of the reporting date.
GEA Group uses derivative financial instruments, including currency forwards, interest rate swaps, cross-currency swaps, and commodity futures. Derivative financial instruments serve to hedge foreign currency risk, interest rate risk, and commodity price risk for existing or planned underlying transactions.
The following table presents the notional values and fair values of the derivative financial instruments in use as of the reporting date. The notional value in foreign currency is translated at the closing rate.
| 12/31/2012 | 12/31/2011 | |||
|---|---|---|---|---|
| (EUR thousand) | Notional value | Fair value Notional value | Fair value | |
| Assets | ||||
| Currency derivatives not included in a hedging relationship | 314,322 | 3,233 | 288,628 | 16,808 |
| Currency derivatives included in a cash flow hedge | 172,492 | 3,880 | 142,105 | 7,446 |
| Interest rate and cross-currency derivatives not included in a hedging relationship | 1,440 | 4 | 1,440 | 4 |
| Interest rate and cross-currency derivatives included in a cash flow hedge | – | – | 128,000 | 201 |
| Total | 488,254 | 7,117 | 560,173 | 24,459 |
| Equity and liabilities | ||||
| Currency derivatives not included in a hedging relationship | 318,964 | 5,689 | 191,366 | 10,188 |
| Currency derivatives included in a cash flow hedge | 118,052 | 1,728 | 283,123 | 15,404 |
| Interest rate and cross-currency derivatives not included in a hedging relationship | 52,379 | 11,244 | 69,092 | 12,456 |
| Interest rate and cross-currency derivatives included in a cash flow hedge | 178,000 | 5,538 | 58,979 | 2,390 |
| Commodity derivatives not included in a hedging relationship | 691 | 98 | 1,579 | 177 |
| Total | 668,086 | 24,297 | 604,139 | 40,615 |
Derivative financial instruments included in recognized hedging relationships serve exclusively to hedge foreign currency risks from future sale and procurement transactions, as well as interest rate risks from long-term financing (cash flow hedges). Fair value hedges are recognized to hedge changes in the fair value of assets, liabilities, or firm commitments. As in the previous year, the group had not entered into any fair value hedges as of December 31, 2012.
Derivatives are measured at fair value, which is split into an effective and an ineffective portion. The effective portion and any change in this amount are recognized in other comprehensive income until the hedged item is recognized in the balance sheet. The ineffective portion is recognized in the income statement. When the hedged item is recognized in the balance sheet, gains and losses recognized in equity are realized and the hedge is unwound. In the case of a sale transaction, the effective portion is recognized as revenue, whereas in the case of a procurement transaction the cost is adjusted accordingly. In the case of interest rate derivatives, the gains and losses recognized in equity are reversed to net interest income.
As of December 31, 2012, gains of EUR 4,229 thousand (previous year: EUR 7,819 thousand) and losses of EUR 7,420 thousand (previous year: EUR 17,814 thousand) from currency and interest rate derivatives were recognized directly in equity.
In the course of the fiscal year, EUR 1,910 thousand (previous year: EUR 2,337 thousand) was recognized in the income statement due to the hedged items being recognized in the balance sheet, and EUR -6,233 thousand (previous year: EUR -1,110 thousand) was offset against the cost of assets. The amounts recognized in the income statement resulted in an increase in revenue of EUR 1,939 thousand (previous year: EUR 3,529 thousand). In addition, gains of EUR 9,829 thousand (previous year: gains of EUR 7,850 thousand) and losses of EUR 9,858 thousand (previous year: losses of EUR 9,042 thousand) were reported in net exchange rate gains/losses. EUR -45 thousand (previous year: EUR -957 thousand) from interest rate derivatives was recognized in net interest income.
As in the previous year, there was no significant hedge ineffectiveness.
91 percent (previous year: 91 percent) of the hedged cash flows from the underlying transactions designated at the reporting date are expected to fall due in the following year. The remaining 9 percent (previous year: 9 percent) are due by 2017 (previous year: 2017). If financial assets are hedged, the derivatives are recognized in the income statement at the same time as the hedged items are recognized in the income statement and balance sheet. If financial liabilities from procurement transactions are hedged, the derivatives are recognized in the income statement when the purchased goods or services are recognized in the income statement.
If the criteria for recognizing a hedging relationship are not met, any change in fair value is recognized in the income statement.
The measurement effects from financial instruments have largely been recognized in profit or loss. The following table shows net income from financial instruments, broken down by the IAS 39 measurement categories:
| 01/01/2012 -12/31/2012 | 01/01/2011 -12/31/2011 | |||||
|---|---|---|---|---|---|---|
| (EUR thousand) | Net income | of which interest income/ expense |
of which impairment losses/reversals of impairment losses |
Net income | of which interest income/ expense |
of which impairment losses/reversals of impairment losses |
| Loans and receivables | 1,471 | 8,532 | -8,443 | -9,503 | 6,109 | -6,206 |
| Available-for-sale investments | 682 | 579 | -582 | 11,554 | – | 11,878 |
| Financial assets/liabilities at fair value through profit or loss |
-7,641 | -2,670 | – | 258 | -3,197 | – |
| Financial liabilities at amortized cost | -46,651 | -46,328 | – | -45,495 | -47,237 | – |
| Total | -52,139 | -39,887 | -9,025 | -43,186 | -44,325 | 5,672 |
Revenue is composed of the following items:
| 01/01/2012 - | 01/01/2011 - | |
|---|---|---|
| (EUR thousand) | 12/31/2012 | 12/31/2011 |
| From construction contracts | 2,517,092 | 2,533,232 |
| From sale of goods and services | 1,985,960 | 1,817,086 |
| From service agreements | 1,217,052 | 1,066,186 |
| Total | 5,720,104 | 5,416,504 |
Other income is composed of the following items:
| (EUR thousand) | 01/01/2012 - 12/31/2012 |
01/01/2011 - 12/31/2011 |
|---|---|---|
| Exchange rate gains | 91,982 | 85,712 |
| Gains on the measurement of foreign currency derivatives | 55,098 | 85,597 |
| Rental and lease income | 9,842 | 19,761 |
| Income from payments received on reversals previously written off | 5,780 | 4,622 |
| Income from disposal of non-current assets | 3,695 | 4,199 |
| Income from compensation payments and cost reimbursements | 1,211 | 2,907 |
| Miscellaneous other income | 54,566 | 62,448 |
| Total | 222,174 | 265,246 |
Other expenses are composed of the following items:
| (EUR thousand) | 01/01/2012 - 12/31/2012 |
01/01/2011 - 12/31/2011 |
|---|---|---|
| Exchange rate losses | 92,707 | 91,119 |
| Losses on the measurement of foreign currency derivatives | 60,069 | 82,142 |
| Bad debt allowances on trade receivables | 12,790 | 10,660 |
| Restructuring expenses | 5,892 | 25,920 |
| Cost of money transfers and payment transactions | 1,518 | 1,507 |
| Losses on the disposal of non-current assets | 1,199 | 2,378 |
| Miscellaneous other expenses | 34,475 | 30,922 |
| Total | 208,650 | 244,648 |
Miscellaneous other expenses primarily comprise additions to provisions.
The cost of materials included in cost of sales increased by EUR 56,542 thousand in the reporting period to EUR 2,957,584 thousand (previous year: EUR 2,901,042 thousand). Cost of materials was 51.6 percent of gross revenue and was therefore lower than the previous year's figure of 53.1 percent.
Personnel expenses increased by EUR 125,728 thousand in 2012 to EUR 1,494,255 thousand (previous year: EUR 1,368,527 thousand). The interest cost on expected pension obligations is not recognized under personnel expenses, but under financial and interest expenses. Personnel expenses include wages and salaries in the amount of EUR 1,221,154 thousand (previous year: EUR 1,125,386 thousand) as well as social security contributions and expenses for post-employment benefits of EUR 273,109 thousand (previous year: EUR 243,245 thousand). The ratio of personnel expenses to revenue thus rose to 26.1 percent of gross revenue (previous year: 25.3 percent)
Depreciation, amortization, and impairment losses totaling EUR 145,952 thousand (previous year: EUR 135,741 thousand) were charged on property, plant and equipment, investment property, and intangible assets in the reporting period. Depreciation, amortization, and impairment losses are largely included in cost of sales.
Impairment losses on nonderivative financial assets excluding trade receivables amounted to EUR 2,015 thousand in the reporting period (previous year: EUR 536 thousand). EUR 581 thousand of this amount (previous year: EUR 536 thousand) was attributable to non-current financial assets. Impairment losses on equity investments and marketable securities are contained in the financial expenses item. Inventories were written down by EUR 20,666 thousand (previous year: EUR 23,699 thousand). These impairment losses and the remaining impairment losses were recognized in cost of sales.
Financial income is composed of income from reversals of impairment losses on financial instruments, income from profit transfers, and investment income from other equity investments:
| Total | 4,312 | 17,616 |
|---|---|---|
| of which from unconsolidated subsidiaries | 3,907 | 5,077 |
| Income from other equity investments | 3,967 | 5,112 |
| Income from profit transfer agreements | 345 | 482 |
| Income from reversal of impairment losses on financial assets | – | 12,022 |
| (EUR thousand) | 01/01/2012 - 12/31/2012 |
01/01/2011 - 12/31/2011 |
Income from reversals of impairment losses on financial assets recognized in 2011 resulted from the reversal of impairment losses on a receivable relating to the former raw material activities of Metallgesellschaft AG.
Interest and similar income is composed of the following items:
| Total | 16,650 | 13,517 |
|---|---|---|
| Other interest income | 3,693 | 2,225 |
| Interest income on plan assets | 6,097 | 5,620 |
| of which from unconsolidated subsidiaries | 521 | 433 |
| Interest income on receivables, cash investments, and marketable securities | 6,860 | 5,672 |
| (EUR thousand) | 01/01/2012 - 12/31/2012 |
01/01/2011 - 12/31/2011 |
The following table shows the interest income on financial instruments broken down by the IAS 39 measurement categories, along with the interest income on assets measured in accordance with other pronouncements:
| Total | 16,650 | 13,517 |
|---|---|---|
| Financial assets not measured in accordance with IAS 39 | 6,097 | 5,624 |
| Financial assets at fair value through profit or loss | 1,442 | 1,784 |
| Available-for-sale investments | 579 | – |
| Loans and receivables | 8,532 | 6,109 |
| (EUR thousand) | 01/01/2012 - 12/31/2012 |
01/01/2011 - 12/31/2011 |
Financial expenses for fiscal year 2012 amounted to EUR 2,499 thousand (previous year: EUR 776 thousand) and comprised impairment losses on financial assets (excluding trade receivables) of EUR 2,015 thousand (previous year: EUR 312 thousand) and expenses from loss absorption of EUR 484 thousand (previous year: EUR 464 thousand).
Interest and similar expenses comprised the following items:
| Total interest expenses | 104,491 | 89,533 |
|---|---|---|
| of which to unconsolidated subsidiaries | 136 | 441 |
| Other interest expenses | 17,876 | 25,343 |
| Interest cost from discount unwinding on discounted provisions and other employee benefit obligations | 20,814 | 4,616 |
| Interest cost from discount unwinding on discounted pension obligations | 29,623 | 29,193 |
| Interest expenses on liabilities to banks | 36,178 | 30,381 |
| (EUR thousand) | 01/01/2012 - 12/31/2012 |
01/01/2011 - 12/31/2011 |
The following table shows the interest expenses on financial instruments broken down by the IAS 39 measurement categories, along with the interest expenses on liabilities measured in accordance with other pronouncements:
| Total | 104,491 | 89,533 |
|---|---|---|
| Financial liabilities not measured in accordance with IAS 39 | 54,051 | 37,315 |
| Financial liabilities at fair value through profit or loss | 4,112 | 4,981 |
| Financial liabilities at amortized cost | 46,328 | 47,237 |
| (EUR thousand) | 01/01/2012 - 12/31/2012 |
01/01/2011 - 12/31/2011 |
If finance can be allocated to a specific investment, the actual borrowing costs are capitalized as part of the cost of the investment. Where no direct relationship can be established, the average interest rate for group borrowings in the current period is used as the capitalization rate due to GEA Group's central financing function. This amounted to 3.8 percent in fiscal year 2012 (previous year: 4.0 percent). Interest income generated on advance payments and progress payments received reduces the cost of the asset. In fiscal year 2012, net interest income of EUR 473 thousand (previous year: EUR 405 thousand) was allocated to the cost of assets.
In the fiscal year under review, expenses totaling EUR 1,518 thousand (previous year: EUR 1,507 thousand) were incurred for fees that were not included in the calculation of the effective interest rate.
Income taxes for continuing operations are composed of the following items:
| Total | 50,446 | 85,960 |
|---|---|---|
| Deferred taxes | -38,105 | -598 |
| Other countries | 66,014 | 70,022 |
| Germany | 22,537 | 16,536 |
| Current taxes | 88,551 | 86,558 |
| (EUR thousand) | 01/01/2012 - 12/31/2012 |
01/01/2011 - 12/31/2011 |
The expected tax expense is calculated using the tax rate of 29.60 percent (previous year: 29.83 percent) applicable to German group companies. This includes an average trade tax rate of 13.77 percent (previous year: 14.00 percent) in addition to the uniform corporate income tax rate of 15.00 percent (previous year: 15.00 percent) and the solidarity surcharge of 0.825 percent (previous year: 0.825 percent). The following table shows a reconciliation to the effective tax rate of 13.75 percent (previous year: 21.57 percent):
| 01/01/2012 - 12/31/2012 | 01/01/2011 - 12/31/2011 | |||
|---|---|---|---|---|
| (EUR thousand) | (%) | (EUR thousand) | (%) | |
| Profit before tax | 366,929 | – | 398,571 | – |
| Expected tax expense | 108,611 | 29.60 | 118,894 | 29.83 |
| Non-tax deductible expense | 11,982 | 3.27 | 13,431 | 3.37 |
| Tax-exempt income | -7,650 | -2.08 | -3,109 | -0.78 |
| Change in valuation allowances | -66,753 | -18.19 | -47,077 | -11.81 |
| Change in tax rates | 987 | 0.27 | -2,561 | -0.64 |
| Foreign tax rate differences | -3,722 | -1.01 | 196 | 0.05 |
| Other | 6,991 | 1.91 | 6,186 | 1.55 |
| Income tax and effective tax rate | 50,446 | 13.75 | 85,960 | 21.57 |
The change in valuation allowances in the amount of EUR -66,753 thousand (previous year: EUR -47,077 thousand) was primarily due to a revised assessment of the recoverability of the deferred tax assets on tax loss carryforwards in Germany.
The effects of changes in tax rates in the amount of EUR 987 thousand (previous year: EUR -2,561 thousand) were mainly due to the change in the tax rate in Germany.
The foreign tax rate differences are due to different tax rates outside Germany in comparison to the German tax rate of 29.60 percent. The tax rates for foreign companies vary between 0.00 percent (UAE) and 38.00 percent (Japan).
The other reconciliation effects were primarily attributable to nondeductible withholding taxes in the amount of EUR 5,548 thousand and other income taxes, in particular in Italy and France in the amount of EUR 4,764 thousand. They also include tax income from previous years in the amount of EUR 6,651 thousand.
Deferred tax assets and liabilities during the year under review can be broken down into current and non-current assets and liabilities as follows:
| (EUR thousand) 12/31/2012 Current deferred tax assets 90,913 Non-current deferred tax assets 354,730 Total deferred tax assets 445,643 Current deferred tax liabilities 48,731 Non-current deferred tax liabilities 75,308 Total deferred tax liabilities 124,039 |
Net deferred tax assets | 321,604 | 253,034 |
|---|---|---|---|
| 145,850 | |||
| 88,186 | |||
| 57,664 | |||
| 398,884 | |||
| 296,332 | |||
| 102,552 | |||
| 12/31/2011 |
Deferred tax assets and liabilities as of December 31, 2012, and 2011, are composed of the following items:
| Deferred tax assets | Deferred tax liabilities | |||
|---|---|---|---|---|
| (EUR thousand) | 2012 | 2011 | 2012 | 2011 |
| Property, plant and equipment | 10,411 | 8,705 | 34,655 | 35,192 |
| Investment property | 223 | – | – | – |
| Intangible assets | 1,725 | 1,311 | 75,697 | 75,486 |
| Goodwill | 41,844 | 50,695 | 45,582 | 45,841 |
| Other non-current financial assets | 734 | 513 | 5,765 | 1,968 |
| Non-current assets | 54,937 | 61,224 | 161,699 | 158,487 |
| Inventories | 36,778 | 41,392 | 2,557 | 3,616 |
| Trade receivables | 12,221 | 9,044 | 49,194 | 50,858 |
| Other current financial assets | 18,572 | 20,454 | 6,409 | 13,497 |
| Cash and cash equivalents | 134 | – | 9 | 14 |
| Current assets | 67,705 | 70,890 | 58,169 | 67,985 |
| Total assets | 122,642 | 132,114 | 219,868 | 226,472 |
| Provisions | 19,996 | 15,335 | 91 | 127 |
| Employee benefits | 91,882 | 52,399 | 411 | 567 |
| Non-current financial liabilities | 8,087 | 8,543 | 3,533 | 3,613 |
| Other non-current financial liabilities | 406 | 321 | 2,567 | 4,233 |
| Non-current liabilities | 120,371 | 76,598 | 6,602 | 8,540 |
| Provisions | 27,405 | 34,746 | 3,378 | 2,481 |
| Employee benefits | 11,277 | 13,044 | 161 | 267 |
| Current financial liabilities | 9,650 | 12,563 | 13,794 | 12,524 |
| Trade payables | 5,233 | 4,178 | 13,153 | 9,888 |
| Other current financial liabilities | 18,789 | 13,699 | 5,963 | 7,356 |
| Current liabilities | 72,354 | 78,230 | 36,449 | 32,516 |
| Total liabilities | 192,725 | 154,828 | 43,051 | 41,056 |
| Valuation allowances on temporary differences | -11,372 | -12,085 | – | – |
| Deferred taxes on temporary differences | 303,995 | 274,857 | 262,919 | 267,528 |
| Tax loss carryforwards | 1,025,981 | 1,077,639 | – | – |
| Valuation allowances on tax loss carryforwards | -745,453 | -831,934 | – | – |
| Offsetting of deferred taxes | -138,880 | -121,678 | -138,880 | -121,678 |
| Recognized deferred taxes | 445,643 | 398,884 | 124,039 | 145,850 |
In addition to changes of EUR 38,105 thousand recognized in profit or loss (previous year: EUR 598 thousand), changes in deferred tax balances resulted mainly from changes of EUR 40,387 thousand recognized in other comprehensive income (previous year: EUR 10,277 thousand) and from deferred taxes taken directly to equity on initial consolidation amounting to EUR -6,056 thousand (previous year: EUR -45,188 thousand).
Deferred tax assets and liabilities are offset if there is a legally enforceable right to set off current tax assets against current tax liabilities and if the deferred taxes relate to income taxes levied by the same taxation authority.
As of December 31, 2012, GEA Group recognized deferred tax assets in the amount of EUR 280,528 thousand (previous year: EUR 245,705 thousand) on tax loss carryforwards:
| (EUR thousand) | 12/31/2012 | 12/31/2011 |
|---|---|---|
| Deferred tax assets on domestic tax loss carryforwards | ||
| Corporate income tax | 81,857 | 63,008 |
| Trade tax | 70,143 | 53,992 |
| Deferred tax assets on foreign tax loss carryforwards | 128,528 | 128,705 |
| Total | 280,528 | 245,705 |
The increase in deferred tax assets on German tax loss carryforwards relates to an updated assessment of the extent to which tax loss carryforwards can be utilized in future periods.
No deferred tax assets were recognized for corporate income tax loss carryforwards in the amount of EUR 1,819,019 thousand (previous year: EUR 2,051,707 thousand) and trade tax loss carryforwards in the amount of EUR 1,111,988 thousand (previous year: EUR 1,313,701 thousand) as their utilization is not sufficiently certain. The tax loss carryforwards of the German companies can be carried forward for an indefinite period. Foreign tax loss carryforwards can generally only be utilized for a limited period. The significant tax loss carryforwards of the foreign companies are expected to expire in 2029.
Profit after tax from discontinued operations of EUR 95 thousand (previous year: EUR 22 thousand) did not have any significant impact on consolidated profit. As in previous years, the amounts reported in profit or loss relate to the risks remaining from the sale of the plant engineering activities, the continued process of winding-up the business operations of Ruhr-Zink, and individual legal disputes arising from past discontinued operations.
The income tax expense from discontinued operations amounted to EUR 311 thousand (previous year: EUR -130 thousand).
For further information on the legal disputes concerning discontinued operations, please refer to the explanations in section 9.4.
Earnings per share are calculated as follows:
| (EUR thousand) | 01/01/2012 - 12/31/2012 |
01/01/2011 - 12/31/2011 |
|---|---|---|
| Profit for the period attributable to shareholders of GEA Group Aktiengesellschaft | 314,401 | 311,951 |
| of which from continuing operations | 314,306 | 311,929 |
| of which from discontinued operations | 95 | 22 |
| Weighted average number of shares outstanding (thousand) | 185,786 | 183,808 |
| Potential dilutive effect of award proceedings under status of settlement negotiations | – | 13,417 |
| Weighted average number of shares outstanding (thousand) | 185,786 | 183,808 |
| Earnings per share (EUR) | ||
| from profit for the period | 1.69 | 1.70 |
| of which attributable to continuing operations | 1.69 | 1.70 |
| of which attributable to discontinued operations | 0.00 | 0.00 |
| Diluted earnings per share (EUR) | ||
| from profit for the period | 1.69 | 1.58 |
| of which attributable to continuing operations | 1.69 | 1.58 |
| of which attributable to discontinued operations | 0.00 | 0.00 |
The weighted average number of shares outstanding increased in 2012 by 1,978 thousand to 185,786 thousand (previous year: EUR 183,808 thousand). This increase is attributable to the capital increase implemented in 2012 to meet the conditions of the settlement reached in the award proceedings (see section 7.1).
With the completion of the capital increase and the associated settlement in the award proceedings, the dilutive effect that existed in the previous year has disappeared.
GEA Group Aktiengesellschaft reported net income for the fiscal year of EUR 216,775 thousand in accordance with the HGB (previous year: EUR 168,582 thousand). The Executive Board and the Supervisory Board of GEA Group Aktiengesellschaft have appropriated an amount of EUR 108,000 thousand (previous year: EUR 68,000 thousand) to other retained earnings in accordance with section 58(2) of the AktG. Including the profit brought forward of EUR 273 thousand (previous year: EUR 785 thousand), the net retained profits amounted to EUR 109,048 thousand (previous year: EUR 101,367 thousand).
The Executive Board and Supervisory Board will propose to the Annual General Meeting that the net retained profits be appropriated as follows:
| Appropriation (EUR thousand) | 2012 | 2011 |
|---|---|---|
| Dividend payment to shareholders | 105,872 | 101,094 |
| Profit carried forward | 3,176 | 273 |
| Total | 109,048 | 101,367 |
The dividend payment corresponds to the payment of a dividend of 55 cents per share for a total of 192,495,476 shares (previous year: 183,807,845 shares). The dividend will be paid from the contribution account for tax purposes (section 27 of the Körperschaftsteuergesetz (KStG – German Corporate Income Tax Act)) and therefore without deduction of investment income tax and the solidarity surcharge. For shareholders in Germany, dividends are generally not subject to current taxation in the year of payment. The consensus opinion is that the dividend payment from the contribution account for tax purposes represents the return of shareholder contributions, which results in a retrospective reduction in the acquisition cost of the shares. This may lead to taxation of higher capital gains when shares are sold subsequently.
GEA Group Aktiengesellschaft has issued or instructed the issue of both bank and group guarantees in favor of customers or lenders. The obligations presented in the following table relate to contingent liabilities for which the primary debtor is not a consolidated company.
| (EUR thousand) | Bank guarantees | ||||
|---|---|---|---|---|---|
| 2012 | 2011 | 2012 | 2011 | ||
| Guarantees for prepayment | 3,959 | 934 | 3,858 | 538 | |
| Warranties | 3,931 | 3,343 | 42 | 55 | |
| Performance guarantees | 11,583 | 19,140 | 169,511 | 307,836 | |
| Other declarations of liability | 729 | 488 | 9,348 | 22,824 | |
| Total | 20,202 | 23,905 | 182,759 | 331,253 | |
| of which attributable to Lurgi / Lentjes | 13,225 | 22,261 | 162,325 | 314,588 |
Most of the bank and group guarantees are attributable to Lurgi and Lentjes (see section 3).
The other guarantees relate mainly to customers of unconsolidated companies, banks, and employees of former subsidiaries. The beneficiaries are entitled to asset claims under the guarantees if the primary debtor fails to meet its contractual obligations, for example, in the case of late or defective delivery, non-compliance with warranted performance parameters, or failure to repay loans in accordance with the contractual requirements.
The guarantees include contingent liabilities of EUR 1,677 thousand resulting from a joint venture (previous year: EUR 0 thousand); there is no further liability above and beyond this.
All guarantees issued by or on the instructions of GEA Group Aktiengesellschaft are issued on behalf of and with recourse against the relevant primary debtor.
In addition to the liability risks resulting from bank and group guarantees, there are risks in particular from court, arbitration, or out-of-court disputes (see section 9.4) that could result in cash outflows.
Other financial obligations as of December 31, 2012, are composed of the following items:
| (EUR thousand) | 12/31/2012 | 12/31/2011 |
|---|---|---|
| Rental and lease obligations | 190,641 | 232,453 |
| Purchase commitments | 313,510 | 425,782 |
| Total | 504,151 | 658,235 |
Obligations under rental and lease agreements amounting to EUR 190,641 thousand (previous year: EUR 232,453 thousand) relate primarily to land and buildings, and to a lesser extent to technical equipment and machinery. The leases run until no later than 2031 (previous year: 2031). Payments are spread over future fiscal years as follows:
| Total | 190,641 | 232,453 |
|---|---|---|
| Later than five years | 42,057 | 48,535 |
| Between one and five years | 96,722 | 114,861 |
| Not later than one year | 51,862 | 69,057 |
| (EUR thousand) | 12/31/2012 | 12/31/2011 |
Expenses related to rental and lease agreements in fiscal year 2012 amounted to EUR 79,356 thousand (previous year: EUR 97,827 thousand). EUR 16,042 thousand of this amount (previous year: EUR 15,147 thousand) was attributable to variable rents, which are primarly adjusted based on consumer price indexes. Subleases resulted in income of EUR 4,545 thousand in fiscal year 2011 (previous year: EUR 12,026 thousand). These subleases give rise to claims for rental income of EUR 1,898 thousand (previous year: EUR 6,252 thousand) over the coming years.
Sale and leaseback transactions relating to buildings resulted in future payments at the reporting date of EUR 32,350 thousand (previous year: EUR 38,467 thousand).
EUR 307,884 thousand (previous year: EUR 415,433 thousand) of the purchase commitments is attributable to inventories and EUR 3,680 thousand (previous year: EUR 10,349 thousand) to items of property, plant and equipment
On March 19, 2010, the court of arbitration ruled on the amount of compensation in favor of GEA Group Aktiengesellschaft in the arbitration proceedings against Flex-N-Gate Corp., Urbana, Illinois, U.S.A. The court of arbitration ordered Flex-N-Gate to compensate GEA Group Aktiengesellschaft for losses incurred as a result of the collapse of the sale of the Dynamit Nobel plastics business to Flex-N-Gate in the fall of 2004. After an appeal was filed by Flex-N-Gate Corp., the Higher Regional Court in Frankfurt am Main overturned the award on February 17, 2011. In its decision dated October 2, 2012, the German Federal Court of Justice dismissed GEA Group Aktiengesellschaft's appeal against the decision. The Company then opted to continue pursuing the arbitration proceedings against Flex-N-Gate and submitted an application to this effect to the German Institution of Arbitration (DIS - Deutsche Institution für Schiedsgerichtsbarkeit) on December 21, 2012.
In the award proceedings described in the last annual reports, a court settlement between the parties was agreed on January 30, 2012, before the Dortmund Regional Court. The award proceedings related to the control and profit transfer agreement dating from 1999 between the former Metallgesellschaft AG (whose legal successor is GEA Group Aktiengesellschaft) and the former GEA AG, which was later merged with it. Under the settlement, GEA Group Aktiengesellschaft has followed the court's suggestion and undertaken to pay increased compensation in shares and a higher cash settlement. On April 24, 2012, the Annual General Meeting adopted a resolution on the contingent capital to be used to create the new shares required to fulfill the court's settlement terms. The contingent capital increase was entered in the Company's commercial register on June 11, 2012. This terminated the award proceedings.
On the one hand, a total of 8,687,631 new shares were issued (see section 7.1) in fulfillment of the settlement, based on the exchange ratio agreed in the settlement (31 shares of GEA Group AG for 15 shares of the former GEA AG). On the other hand, those shareholders of the former GEA AG who had already received the compensation provided for in the control and profit transfer agreement received increased compensation in the total amount of approximately EUR 450 thousand.
In connection with a major order, a subcontractor in South Africa asserted substantial out-of-court claims in July 2012 against the GEA company that had been contracted. Based on its current analysis, GEA believes that the alleged additional costs or claims should either be borne by the subcontractor itself, or that the amounts are inflated or insufficiently specified. Furthermore, even if the amounts were to be substantiated, they could largely be recharged. Overall, based on GEA's current assessment, the claims asserted
There are still some sector-specific legal disputes from the former plant engineering business in which the disputed amounts in some cases are in the high millions; often, they have been set too high for tactical reasons. The main legal disputes relating to the former plant engineering business include the following:
GEA Group Aktiengesellschaft is one of two defendants being sued by Panda Energy International, Inc. ("Panda Energy") in a district court in Texas (U.S.A.) Panda Energy bases its claim on alleged deception in connection with claimed investments in a project undertaken in Texas by the plant engineering business that GEA has since disposed of. The complainant specified its claim for damages in these proceedings at USD 100 million plus punitive damages and legal, expert, and court costs. In connection with the aforementioned project, there was also a further action pending before a district court in New York (U.S.A.) filed by GEA Group Aktiengesellschaft in August 2011 against a subsidiary of Panda Energy, which has since been decided against GEA. GEA Group Aktiengesellschaft continues to believe that Panda Energy's claims for compensation are unfounded.
Two subsidiaries of the former plant engineering business were sued in connection with an earlier plant engineering project for repayment of subsidies in a total amount of approximately EUR 22 million (including possible interest). Both defendant companies had made liability declarations in line with the amount of their investment in the now insolvent project company covering the obligation of the project company to pay back subsidies received under certain conditions. The basic issue in dispute is whether the subsidiaries can rely on an earlier restricting declaration made by the highest competent authority of a German federal state in their defense against the claims asserted against them under the liability declarations. Since the two subsidiaries have the different places of jurisdiction, the actions were filed in courts in both Düsseldorf and Frankfurt. During fiscal year 2011, the plaintiff won in the Higher Regional Court in Düsseldorf and lost in the Higher Regional Court in Frankfurt. The GEA subsidiary has appealed the decision of the Higher Regional Court in Düsseldorf to the German Federal Court of Justice (BGH) on the grounds of denial of appeal. In the decision of the Higher Regional Court in Frankfurt, the plaintiff has appealed to the BGH.
An action brought by the insolvency administrator of Dörries Scharmann AG against GEA Group Aktiengesellschaft is pending at the Düsseldorf Regional Court. The former Metallgesellschaft AG, the legal predecessor to GEA Group Aktiengesellschaft, held an interest in Schiess AG, which later became Dörries Scharmann AG. On the basis of that interest, the insolvency administrator is asserting various claims under company law, in particular for equity substitution, which amount to approximately EUR 20 million including possible interest. GEA Group Aktiengesellschaft considers the claims that have been asserted to be unfounded. After the senior expert appointed by the court to decide matters relating to equity substitution fully confirmed GEA Group Aktiengesellschaft's opinion, the Higher Regional Court in Düsseldorf upheld a motion by the insolvency administrator to disqualify this expert in a ruling issued on November 27, 2012. How the Regional Court will proceed in this matter is currently unknown. GEA Group Aktiengesellschaft will continue to defend itself against all claims.
In June 2012, several other companies along with GEA Group Aktiengesellschaft received a statement of objections ("Notification de griefs") from the French competition authority ("Autorité de la concurrence"). The statement of objections summarizes the status of competition investigations, amongst other things as regards practices implemented between 1997 and 2003 by a former subsidiary of GEA Group involved in the chemical business in France. It is beyond dispute that GEA Group Aktiengesellschaft was not involved in the events and transactions that are being investigated. Nevertheless, according to French competition law, the former parent company may also be held liable under certain circumstances for competition violations committed by a subsidiary. Whether and to what extent a fine may be imposed on GEA Group Aktiengesellschaft cannot be estimated at this time.
Further legal proceedings or official investigations have been or may be instituted against GEA Group companies as a result of earlier business disposals and operating activities.
Adequate provisions have been recognized for all risks arising from both the legal disputes described above and other legal disputes being pursued by GEA Group in the course of its ordinary operating activities. However, the outcome of these proceedings cannot be predicted with any degree of certainty. It is therefore possible that the conclusion of the proceedings may result in expenses that exceed the amounts that may have been set aside for them.
GEA Group's business activities are divided into the following seven segments:
GEA Food Solutions is a leading manufacturer of machinery for preparing, marinating, processing, cutting, and packaging meat, poultry, fish, cheese, and other foods. Specializing in performance-driven solutions, its offering ranges from individual machines through to end-to-end production lines. GEA Food Solutions is a broadly positioned manufacturer of process technology for secondary food processing and packaging.
GEA Farm Technologies is one of the world's leading manufacturers of integrated product solutions for profitable milk production and livestock farming. The segment's combined expertise in the areas of milking and milk-cooling technology, automatic feeding systems, manure management systems, and barn equipment provides today's farmers with a complete range of products and solutions. Services and animal hygiene solutions round off its profile as a full-line systems provider for farms of all sizes. The segment's sales strategy is built upon a global network of specialist dealers and sales and service partners.
GEA Heat Exchangers provides products and systems for numerous areas of use, ranging from air conditioning systems to cooling towers, boasting what is probably the largest portfolio of heat exchangers worldwide. The segment supplies optimal single-source solutions for a large number of applications and also offers customers professional support with project planning.
GEA Mechanical Equipment specializes in separators, decanters, valves, pumps, and homogenizers – high-quality process engineering components that ensure seamless processes and cost-effective production in almost all major areas of industry worldwide. At the same time, such equipment helps reduce its customers' production costs and protect the environment in a sustainable manner.
GEA Process Engineering specializes in the design and development of process solutions for the dairy, brewing, food, pharmaceutical, and chemical industries. The GEA Process Engineering segment is an acknowledged market and technology leader in its business areas: liquid processing, concentration, industrial drying, powder processing and handling, and emission control.
GEA Refrigeration Technologies is a market leader in the field of industrial refrigeration technology. The segment develops, manufactures, and installs innovative key components and technical solutions for its customers. To ensure complete customer satisfaction, GEA Refrigeration Technologies also offers a broad range of maintenance and other services. Its product range comprises the following core components: reciprocating and screw compressors, valves, chillers, ice generators, and freezing systems.
The "Other" segment comprises the companies with business activities that do not form part of the core business. In addition to the holding and service companies, it contains companies that report investment property held for sale, pension obligations, and residual mining obligations.
Segment reporting
| (EUR million) | GEA FS | GEA FT | GEA HX | GEA ME | GEA PE | GEA RT | Other | Consolidation | GEA Group |
|---|---|---|---|---|---|---|---|---|---|
| 01/01/2012 - 12/31/2012 | |||||||||
| Order intake 2 | 375.9 | 583.9 | 1,509.8 | 971.9 | 1,850.2 | 756.2 | – | -146.8 | 5,901.1 |
| External revenue | 332.4 | 580.5 | 1,577.8 | 832.2 | 1,710.9 | 686.3 | – | – | 5,720.1 |
| Intersegment revenue | 0.0 | 0.3 | 31.0 | 101.7 | 5.3 | 8.6 | – | -147.0 | – |
| Total revenue | 332.4 | 580.9 | 1,608.8 | 933.9 | 1,716.3 | 694.8 | – | -147.0 | 5,720.1 |
| Share of profit or loss of equity-accounted investments |
– | 0.2 | 0.9 | – | -0.1 | 1.3 | – | – | 2.3 |
| Operating EBITDA 3 | -6.0 | 58.6 | 167.5 | 205.8 | 178.5 | 65.2 | -6.9 | – | 662.8 |
| as % of revenue | -1.8 | 10.1 | 10.4 | 22.0 | 10.4 | 9.4 | – | – | 11.6 |
| EBITDA pre PPA | -69.4 | 58.6 | 167.5 | 205.8 | 178.5 | 65.2 | -6.9 | – | 599.4 |
| EBITDA | -69.4 | 58.3 | 167.5 | 204.8 | 178.3 | 65.2 | -6.9 | – | 597.8 |
| Operating EBIT 3 | -12.4 | 46.4 | 135.0 | 188.4 | 162.8 | 56.2 | -14.8 | 561.6 | |
| as % of revenue | -3.7 | 8.0 | 8.4 | 20.2 | 9.5 | 8.1 | – | – | 9.8 |
| EBIT pre PPA | -78.9 | 46.4 | 135.0 | 188.4 | 162.8 | 56.2 | -14.8 | – | 495.1 |
| as % of revenue | -23.7 | 8.0 | 8.4 | 20.2 | 9.5 | 8.1 | – | – | 8.7 |
| EBIT | -102.8 | 43.0 | 130.2 | 185.4 | 159.9 | 54.0 | -15.0 | – | 454.8 |
| as % of revenue | -30.9 | 7.4 | 8.1 | 19.9 | 9.3 | 7.8 | – | – | 8.0 |
| ROCE in % 4 | -19.8 | 13.5 | 19.4 | 43.2 | 55.9 | 21.2 | – | – | 17.8 |
| Interest income | 0.7 | 2.9 | 7.6 | 3.8 | 4.0 | 1.4 | 41.6 | -45.3 | 16.7 |
| Interest expense | 7.7 | 14.3 | 22.3 | 12.0 | 8.6 | 6.1 | 78.9 | -45.3 | 104.5 |
| EBT | -109.8 | 31.6 | 115.5 | 177.3 | 155.4 | 49.3 | -52.4 | – | 366.9 |
| Income taxes | -17.6 | 6.5 | 25.0 | 25.4 | 28.6 | 11.5 | -30.8 | 1.9 | 50.4 |
| Profit or loss from discontinued operations |
– | – | – | – | – | – | 0.1 | – | 0.1 |
| Segment assets | 914.1 | 619.7 | 2,067.8 | 1,313.1 | 1,578.5 | 883.3 | 3,906.9 | -4,854.0 | 6,429.5 |
| Segment liabilities | 577.2 | 322.4 | 1,254.4 | 690.5 | 967.2 | 492.7 | 3,145.2 | -3,186.3 | 4,263.2 |
| Carrying amount of equity accounted investments |
– | 1.4 | 5.8 | – | 2.4 | 2.6 | 2.4 | – | 14.7 |
| Working capital (reporting date) 5 |
48.0 | 145.9 | 182.9 | 179.9 | -86.9 | 84.0 | -16.4 | -4.3 | 533.2 |
| Additions in property, plant and equipment, intangible assets, and goodwill |
13.9 | 20.5 | 36.3 | 126.1 | 15.2 | 13.5 | 9.5 | – | 235.0 |
| Depreciation and amortization | 20.2 | 15.1 | 38.0 | 18.9 | 18.3 | 11.2 | 7.5 | -0.1 | 129.1 |
| Impairment losses | 13.2 | 0.2 | 2.6 | – | – | – | 0.8 | – | 16.9 |
| Additions to provisions | 23.2 | 28.6 | 88.5 | 88.3 | 85.2 | 34.3 | 99.1 | – | 447.4 |
| (EUR million) | GEA FS 1 | GEA FT | GEA HX | GEA ME | GEA PE | GEA RT | Other | Consolidation | GEA Group |
|---|---|---|---|---|---|---|---|---|---|
| 01/01/2011 - 12/31/2011 | |||||||||
| Order intake 2 | 329.8 | 527.4 | 1,653.2 | 874.9 | 1,709.9 | 650.4 | – | -135.8 | 5,609.7 |
| External revenue | 346.0 | 509.0 | 1,588.2 | 757.5 | 1,574.1 | 641.7 | – | – | 5,416.5 |
| Intersegment revenue | – | 0.9 | 28.6 | 87.2 | 3.0 | 5.5 | – | -125.2 | – |
| Total revenue | 346.0 | 509.8 | 1,616.8 | 844.7 | 1,577.2 | 647.2 | – | -125.2 | 5,416.5 |
| Share of profit or loss of equity-accounted investments |
– | 0.1 | 1.6 | – | -0.1 | 0.9 | 0.4 | – | 2.8 |
| Operating EBITDA 3 | 26.2 | 45.2 | 160.4 | 178.7 | 163.2 | 60.0 | -3.7 | – | 630.1 |
| as % of revenue | 7.6 | 8.9 | 9.9 | 21.2 | 10.3 | 9.3 | – | – | 11.6 |
| EBITDA pre PPA | 26.2 | 45.2 | 160.4 | 178.7 | 163.2 | 60.0 | -3.7 | – | 630.1 |
| EBITDA | 7.4 | 45.2 | 160.3 | 178.7 | 163.2 | 59.0 | -3.7 | – | 610.2 |
| Operating EBIT 3 | 19.6 | 33.8 | 121.8 | 162.1 | 148.2 | 51.3 | -12.3 | – | 524.6 |
| as % of revenue | 5.7 | 6.6 | 7.5 | 19.2 | 9.4 | 7.9 | – | – | 9.7 |
| EBIT pre PPA | 19.6 | 33.8 | 121.8 | 162.1 | 148.2 | 51.3 | -12.3 | – | 524.6 |
| as % of revenue | 5.7 | 6.6 | 7.5 | 19.2 | 9.4 | 7.9 | – | – | 9.7 |
| EBIT | -16.0 | 31.1 | 118.0 | 161.2 | 146.1 | 46.6 | -12.5 | – | 474.6 |
| as % of revenue | -4.6 | 6.1 | 7.3 | 19.1 | 9.3 | 7.2 | – | – | 8.8 |
| ROCE in % 4 | -3.6 | 10.4 | 17.0 | 49.0 | 58.7 | 20.6 | – | – | 20.5 |
| Interest income | 1.0 | 2.0 | 4.6 | 7.3 | 7.5 | 2.8 | 37.5 | -49.2 | 13.5 |
| Interest expense | 10.2 | 13.9 | 18.4 | 10.7 | 9.6 | 8.1 | 67.8 | -49.2 | 89.5 |
| EBT | -25.3 | 19.2 | 104.3 | 157.8 | 144.0 | 41.3 | -42.8 | – | 398.6 |
| Income taxes | 1.7 | 9.7 | 30.5 | 17.0 | 27.3 | 10.3 | -8.5 | -2.0 | 86.0 |
| Profit or loss from discontinued operations |
– | – | – | – | – | – | 0.0 | – | 0.0 |
| Segment assets | 764.3 | 601.3 | 2,081.8 | 1,263.0 | 1,621.8 | 737.8 | 3,183.8 | -4,028.5 | 6,225.2 |
| Segment liabilities | 357.5 | 302.2 | 1,264.7 | 575.1 | 1,021.5 | 421.3 | 2,515.4 | -2,396.0 | 4,061.6 |
| Carrying amount of equity accounted investments |
– | 1.3 | 5.0 | – | 2.6 | 2.0 | 2.5 | – | 13.4 |
| Working capital (reporting date) 5 |
55.5 | 131.9 | 184.4 | 178.1 | -50.0 | 87.8 | -10.7 | -0.0 | 577.1 |
| Additions in property, plant and equipment, intangible assets, and goodwill |
493.9 | 29.0 | 66.3 | 78.0 | 53.9 | 70.8 | 10.2 | – | 802.1 |
| Depreciation and amortization | 23.5 | 14.1 | 37.9 | 17.5 | 16.8 | 10.6 | 8.4 | -0.2 | 128.6 |
| Impairment losses | -0.0 | 0.1 | 4.3 | – | – | 1.8 | 1.2 | – | 7.4 |
| Additions to provisions | 3.2 | 34.5 | 88.3 | 56.6 | 67.2 | 39.2 | 58.7 | – | 347.7 |
1) Inclusion of GEA Food Solutions since initial consolidation as of April 1, 2011
2) Unaudited supplemental information
3) Before effects of purchase price allocations from revalued assets and liabilities and in 2012 before non-recurring items from GEA Food Solutions
4) ROCE = EBIT in the past 12 months / (capital employed - goodwill from the acquisition of the former GEA AG by the former Metallgesellschaft in 1999 (both at average of the past twelve months));
capital employed = non-current assets + working capital
5) Working capital = inventories + trade receivables - trade payables - advance payments received
Consolidation primarily comprises the elimination of intercompany revenue and interest income and expense. Intersegment revenue is calculated using standard market prices.
| Sales (EUR million) |
2012 | 2011 |
|---|---|---|
| Sales from construction contracts | ||
| GEA Food Solutions | 93.9 | 195.0 |
| GEA Farm Technologies | – | – |
| GEA Heat Exchangers | 536.4 | 577.1 |
| GEA Mechanical Equipment | 141.0 | 128.0 |
| GEA Process Engineering | 1,440.0 | 1,338.9 |
| GEA Refrigeration Technologies | 317.9 | 301.2 |
| Other and consolidation | -12.1 | -7.1 |
| Total revenue from construction contracts | 2,517.1 | 2,533.2 |
| Sales components | ||
| GEA Food Solutions | 97.7 | 48.8 |
| GEA Farm Technologies | 442.2 | 396.4 |
| GEA Heat Exchangers | 869.6 | 862.2 |
| GEA Mechanical Equipment | 485.0 | 445.9 |
| GEA Process Engineering | 42.5 | 32.4 |
| GEA Refrigeration Technologies | 183.8 | 149.5 |
| Other and consolidation | -134.8 | -118.1 |
| Total Sales components | 1,986.0 | 1,817.1 |
| Total Sales from service agreements | ||
| GEA Food Solutions | 140.8 | 102.2 |
| GEA Farm Technologies | 138.7 | 113.4 |
| GEA Heat Exchangers | 202.8 | 177.5 |
| GEA Mechanical Equipment | 308.0 | 270.8 |
| GEA Process Engineering | 233.8 | 205.9 |
| GEA Refrigeration Technologies | 193.0 | 196.4 |
| Other and consolidation | – | – |
| Total revenue from service agreements | 1,217.1 | 1,066.2 |
| Total revenue | 5,720.1 | 5,416.5 |
The segment asset recognition and measurement policies are the same as those used in the group and described in the accounting policies section. The profitability of the individual group segments is measured using "earnings before interest and tax" (EBIT) and "profit or loss before tax" (EBT), as presented in the income statement.
Impairment losses include all impairment losses on property, plant and equipment, intangible assets, and investment property.
In fiscal 2012, the GEA Food Solutions segment's EBIT included costs totaling EUR 76.8 million that management believes will not be incurred in this amount in the coming fiscal year ("non-recurring items"). These non-recurring items include write-downs of items capitalized in the course of purchase price allocation amounting to EUR 10.3 million. Of the remaining EUR 66.5 million, EUR 35.8 million is attributable to the changes in estimates already recognized in the first quarter of 2012 (see section 2.2). This figure also includes impairment losses charged on property, plant and equipment, and intangible assets, of EUR 3.1 million and impairment losses on inventories of EUR 8.6 million, as well as severance payment expenses of EUR 4.3 million and personnel expenses for employees who left the Company in the fiscal year and were not replaced totaling EUR 8.9 million. All other effects amount to EUR 5.9 million.
| Reconciliation of Operating EBITDA to EBIT | Change | ||
|---|---|---|---|
| (EUR million) | 2012 | 2011 | in % |
| Operating EBITDA | 662.8 | 630.1 | 5.2 |
| Depreciation of property, plant and equipment, investment property, and amortization of intangible assets |
-103.2 | -101.0 | -2.1 |
| Impairment losses on property, plant and equipment, investment property, intangible assets, and goodwill |
2.6 | -4.0 | – |
| Other impairment losses and reversals of impairment losses | -0.6 | -0.5 | -8.4 |
| Operating EBIT | 561.6 | 524.6 | 7.1 |
| Depreciation and amortization on capitalization of purchase price allocation | -25.9 | -27.6 | 5.9 |
| Impairment losses on capitalization of purchase price allocation | -12.8 | -2.5 | < -100 |
| Realization of step-up amounts on inventories | -1.6 | -19.9 | 92.1 |
| Non-recurring items | -66.5 | – | – |
| EBIT | 454.8 | 474.6 | -4.2 |
| (EUR million) | 2012 | 2011 |
|---|---|---|
| EBITDA | 597.8 | 610.2 |
| Depreciation of property, plant and equipment, and investment property, and amortization of intangible assets | ||
| (see notes 6.1, 6.2, 6.4) | -129.1 | -128.6 |
| Impairment losses on property, plant and equipment, investment property, intangible assets, and goodwill | ||
| (see notes 6.1, 6.2, 6.3, 6.4) | -13.3 | -6.5 |
| Impairment losses on non-current financial assets (see section 8.4) | -0.6 | -0.5 |
| Reversals of impairment losses on non-current financial assets | 0.0 | – |
| EBIT | 454.8 | 474.6 |
| Reconciliation of working capital to total assets | ||
|---|---|---|
| (EUR million) | 12/31/2012 | 12/31/2011 |
| Working capital (reporting date) | 533.2 | 577.1 |
| Working capital (reporting date) of Ruhr-Zink | 0.1 | 0.4 |
| Non-current assets | 3,480.0 | 3,467.6 |
| Income tax receivables | 19.4 | 15.9 |
| Other current financial assets | 166.2 | 203.8 |
| Cash and cash equivalents | 743.5 | 432.4 |
| Assets held for sale | 18.4 | 5.1 |
| plus trade payables | 839.1 | 903.3 |
| plus advance payments in respect of orders and construction contracts | 290.5 | 239.1 |
| plus gross amount due to customers for contract work | 339.0 | 380.5 |
| Total assets | 6,429.5 | 6,225.2 |
In the presentation of segment disclosures by geographic region, revenue is allocated by the destination of the goods or place of performance of the services, or by customer domicile. Assets are allocated by their location.
| (EUR millions) | Germany | Europe (excluding Germany) |
North America |
Latin America |
Middle East |
Asia/ Pacific |
Africa | Total |
|---|---|---|---|---|---|---|---|---|
| 01/01/2012 - 12/31/2012 | ||||||||
| External revenue | 557.8 | 1,992.1 | 857.5 | 396.9 | 302.8 | 1,321.0 | 292.0 | 5,720.1 |
| Non-current assets (property, plant and equipment, intangible assets, and investment property) |
1,628.3 | 935.1 | 225.7 | 7.4 | 3.6 | 165.1 | 5.8 | 2,970.9 |
| 01/01/2011 - 12/31/2011 | ||||||||
| External revenue | 586.0 | 1,966.8 | 700.1 | 369.2 | 314.3 | 1,193.0 | 287.2 | 5,416.5 |
| Non-current assets (property, plant and equipment, intangible assets, and investment property) |
1,692.2 | 905.0 | 237.9 | 9.7 | 12.5 | 135.0 | 6.5 | 2,999.0 |
In the reporting period, revenue of EUR 789.1 million (previous year: EUR 636.9 million) was attributable to the United States of America and EUR 556.3 million (previous year: EUR 572.5 million) was attributable to the People's Republic of China. The carrying amounts of non-current assets (property, plant and equipment, intangible assets, and investment property) in the Netherlands amounted to EUR 494.8 million (previous year: EUR 501.3 million) as of the reporting date. There are no relationships with individual customers whose revenue can be considered material in comparison to total group revenue.
Cash flow from investing activities includes outflows of EUR 40,626 thousand (previous year: EUR 32,394 thousand) from the sale of discontinued operations. These outflows relate to payments linked to the sale of business activities in previous periods. The majority of this amount, at EUR 40,611 thousand (previous year: EUR 31,518 thousand), is attributable to the former Lurgi and Lentjes operations and results almost entirely from project-related indemnifications.
Government grants related to income amounting to EUR 2,466 thousand were received in fiscal year 2012 (previous year: EUR 1,568 thousand). This item contains an amount of EUR 8 thousand (previous year: EUR 104 thousand) for grants related to short-time working. The grants received were deducted from the corresponding expenses. Grants related to assets amounting to EUR 308 thousand (previous year: EUR 871 thousand) were deducted from the carrying amounts of the assets concerned. In fiscal year 2012, expenses of EUR 669 thousand (previous year: EUR 192 thousand) were incurred for the potential repayment of grants received.
Transactions between GEA Group Aktiengesellschaft and its consolidated subsidiaries have been eliminated in the course of consolidation, with the exception of income and expenses between continuing and discontinued operations.
Income and expenses from transactions with unconsolidated subsidiaries, joint ventures, and associates are composed of the following items:
| (EUR thousand) | Revenue | Other income | Other expenses |
|---|---|---|---|
| 01/01/2012 - 12/31/2012 | |||
| Unconsolidated subsidiaries | 71,391 | 2,779 | 2,792 |
| Joint ventures | 15,539 | 11 | – |
| Total | 86,930 | 2,790 | 2,792 |
| 01/01/2011 - 12/31/2011 | |||
| Unconsolidated subsidiaries | 73,164 | 1,923 | 828 |
| Joint ventures | 10,235 | 240 | 25 |
| Total | 83,399 | 2,163 | 853 |
Related party transactions resulted in the following outstanding items as of December 31, 2012:
| (EUR thousand) | Trade receivables | Trade payables | Other receivables | Other liabilities |
|---|---|---|---|---|
| 12/31/2012 | ||||
| Unconsolidated subsidiaries | 18,806 | 4,041 | 6,735 | 23,383 |
| Joint ventures | 2,965 | 699 | 709 | – |
| Associates | – | – | – | – |
| Total | 21,771 | 4,740 | 7,444 | 23,383 |
| of which current | 21,771 | 4,740 | 7,136 | 23,383 |
| 12/31/2011 | ||||
| Unconsolidated subsidiaries | 25,675 | 6,037 | 18,345 | 28,260 |
| Joint ventures | 3,404 | 634 | 1,195 | 1,133 |
| Associates | – | – | 37 | – |
| Total | 29,079 | 6,671 | 19,577 | 29,393 |
| of which current | 29,079 | 6,671 | 19,056 | 29,393 |
The outstanding amounts will be settled by bank transfer and are unsecured.
The Executive Board and Supervisory Board of GEA Group Aktiengesellschaft received total remuneration of EUR 8,903 thousand in fiscal year 2012 (previous year: EUR 9,424 thousand). This is composed of the following components:
| (EUR thousand) | 2012 | 2011 |
|---|---|---|
| Short-term employee benefits | 5,838 | 5,571 |
| Post-employment benefits | 2,325 | 2,037 |
| Share-based payments | 740 | 1,816 |
| Total | 8,903 | 9,424 |
Former Executive Board members and their surviving dependents received remuneration from the GEA Group amounting to EUR 5,039 thousand (previous year: EUR 5,062 thousand). Pension provisions were recognized for former Executive Board members and their surviving dependents in accordance with IFRSs totaling EUR 63,389 thousand (previous year: EUR 50,603 thousand).
The expenses incurred for the Supervisory Board amounted to EUR 1,152 thousand in fiscal year 2011 (previous year: EUR 1,147 thousand).
Other information on the remuneration of the Executive Board and the Supervisory Board can be found in the remuneration report.
There were no other transactions by members of the Executive Board or Supervisory Board or their related parties in either the reporting or the comparative period.
The Executive Board and the Supervisory Board issued an updated declaration of conformity in accordance with section 161 of the Aktiengesetz (AktG – German Stock Corporation Act) on December 13, 2012, and made it permanently available to the shareholders on the Company's website.
The average number of employees during the year was as follows:
| Total | 24,474 | 23,405 |
|---|---|---|
| Discontinued operations | 3 | 4 |
| Hourly workers | 3 | 4 |
| Continuing operations | 24,471 | 23,401 |
| Salaried employees | 14,913 | 14,214 |
| Hourly workers | 9,558 | 9,187 |
| Average number of employees during the year * | 2012 | 2011 |
*) Full-time equivalents (FTEs) excluding vocational trainees and inactive employment contracts
The number of employees at the reporting date was as follows:
| Employees at reporting date * | 12/31/2012 | 12/31/2011 |
|---|---|---|
| Hourly workers | 9,430 | 9,374 |
| Salaried employees | 15,068 | 14,460 |
| Continuing operations | 24,498 | 23,834 |
| Hourly workers | 3 | 4 |
| Discontinued operations | 3 | 4 |
| Total | 24,501 | 23,838 |
*) Full-time equivalents (FTEs) excluding vocational trainees and inactive employment contracts
The fees charged by the auditors of the consolidated financial statements, KPMG AG Wirtschaftsprüfungsgesellschaft, for fiscal year 2012 are broken down as follows.
| (EUR thousand) | 12/31/2012 | 12/31/2011 |
|---|---|---|
| Audit | 2,451 | 1,397 |
| Other audit related services | 823 | 0 |
| Tax consulting services | 43 | 21 |
| Other services | 188 | 181 |
| Total | 3,505 | 1,599 |
EUR 0.7 million of the fees listed for audits in fiscal 2012 is attributable to the audit of the 2011 consolidated financial statements.
The following list shows all subsidiaries, associates, and joint ventures. With the exception of other equity investments within the meaning of section 313(2) no. 4 of the HGB, it does not contain investments in companies that GEA Group neither controls nor over which it can exercise significant influence.
| Company | Head Office | Country | Shares % |
|---|---|---|---|
| Subsidiary | |||
| "SEMENOWSKY VAL" Immobilien- Verwaltungs-GmbH | Bochum | Germany | 100.00 |
| Beijing GEA Energietechnik Co., Ltd. | Beijing | China | 100.00 |
| Beijing Tetra Laval Food Machinery Company Limited | Beijing | China | 90.00 |
| Bliss & Co. Ltd. | Fareham | United Kingdom | 100.00 |
| Bliss Refrigeration Ltd. | Fareham | United Kingdom | 100.00 |
| Bloksma Asia Ltd. | Hong Kong | China | 100.00 |
| Breconcherry Ltd. | Bromyard, Herefordshire | United Kingdom | 100.00 |
| Brouwers Equipment B.V. | Leeuwarden | Netherlands | 100.00 |
| Brückenbau Plauen GmbH | Frankfurt am Main | Germany | 100.00 |
| CFS Asia Co. Ltd. | Hong Kong | China | 100.00 |
| CFS Asia Ltd. | Bangna, Bangkok | Thailand | 99.9998 |
| CFS Chile Comercializadora Limitada | Santiago de Chile | Chile | 100.00 |
| CFS Commercial (Beijing) Limited | Beijing | China | 100.00 |
| CFS Czech s.r.o. | Prague | Czech Republic | 100.00 |
| CFS Korea Ltd. | Seoul | South Korea | 80.00 |
| CFS Poland Sp. z o.o. | Warsaw | Poland | 100.00 |
| CFS Ukraine LLC | Kiev | Ukraine | 100.00 |
| Convenience Food Systems K.K. | Tokyo | Japan | 100.00 |
| Convenience Food Systems S.A. de C.V. | Mexico-City | Mexico | 100.00 |
| Dairy Technology Services Pty Limited | Kyabram, Victoria | Australia | 100.00 |
| Dawmec Limited | Fareham | United Kingdom | 100.00 |
| Diessel Aktiengesellschaft | Zug | Switzerland | 100.00 |
| Dixie Union Ltd. | Newport Pagnell | United Kingdom | 100.00 |
| Dobbelenberg S.A./N.V. | Haren, Brussels | Belgium | 100.00 |
| Ecodelta Ltd. | Zarechny | Russia | 62.00 |
| EGI Cooling System (China) Co. Ltd. | Tianjin | China | 100.00 |
| EGI Cooling Systems Trading (Beijing) Co. | Beijing | China | 100.00 |
| EGI Enerji Ins. Ic Ve Dis Tic. Ltd. Sti. | Ankara | Turkey | 90.00 |
| EGI Structura Kft. | Budapest | Hungary | 76.00 |
| Farmers Industries Limited | Mt. Maunganui South, Tauranga | New Zealand | 100.00 |
| GEA (Philippines) Inc. | Manila | Philippines | 100.00 |
| GEA (Shanghai) Farm Technologies Company Ltd. | Shanghai | China | 100.00 |
| GEA 2H Water Technologies GmbH | Wettringen | Germany | 100.00 |
| GEA 2H Water Technologies Ltd. | Northampton | United Kingdom | 100.00 |
| GEA 2H Water Technologies s.r.o. | Jilove | Czech Republic | 70.97 |
| GEA 2H Water Technologies Sp. z.o.o. | Bytom | Poland | 63.00 |
| GEA Abfülltechnik GmbH | Büchen | Germany | 100.00 |
| GEA Air Treatment GmbH | Herne | Germany | 100.00 |
| GEA Air Treatment Production GmbH | Wurzen | Germany | 100.00 |
| GEA Aircooled Systems (Pty) Ltd. | Germiston | South Africa | 75.00 |
| GEA Airflow Services SAS | Nantes | France | 100.00 |
| GEA Aseptomag AG | Kirchberg | Switzerland | 100.00 |
| GEA Aseptomag Holding AG | Kirchberg | Switzerland | 100.00 |
| GEA ATG UK Holdings Limited | Cheshire, Warrington | United Kingdom | 100.00 |
| GEA Avapac Ltd. | Hamilton | New Zealand | 100.00 |
| GEA AWP GmbH | Prenzlau | Germany | 100.00 |
| GEA Barr-Rosin Ltd. | Maidenhead, Berkshire | United Kingdom | 100.00 |
| GEA Batignolles Technologies Thermiques Qatar L.L.C. | Doha | Qatar | 100.00 |
| GEA Batignolles Technologies Thermiques S.A.S. | Nantes | France | 100.00 |
| GEA Batignolles Thermal Technologies (Changshu) Co. Ltd. | Changshu | China | 100.00 |
| GEA Beteiligungsgesellschaft AG | Bochum | Germany | 100.00 |
| GEA Beteiligungsgesellschaft I mbH | Bochum | Germany | 100.00 |
| GEA Beteiligungsgesellschaft II mbH | Düsseldorf | Germany | 100.00 |
| GEA Bischoff GmbH | Essen | Germany | 100.00 |
| GEA Bischoff Oy | Helsinki | Finland | 100.00 |
Supplemental disclosures in accordance with section 315a of the HGB
| GEA Bloksma B.V. | Almere | Netherlands | 100.00 |
|---|---|---|---|
| GEA Bock (India) Private Limited | Vadodara, Gujarat | India | 100.00 |
| GEA Bock (Thailand) Co., Ltd. | Bangkok | Thailand | 49,00 * |
| GEA Bock Asia Pte. Ltd. | Singapore | Singapore | 100.00 |
| GEA Bock Compressors (Hangzhou) Co., Ltd. | Hangzhou, Zhejiang | China | 100.00 |
| GEA Bock Czech s.r.o. | Stribro | Czech Republic | 100.00 |
| GEA Bock GmbH | Frickenhausen | Germany | 100.00 |
| GEA Bock Malaysia Sdn. Bhd. | Petaling Jaya | Malaysia | 100.00 |
| GEA Brewery Systems GmbH | Kitzingen | Germany | 100.00 |
| GEA CALDEMON, S.A. | Revilla de Camargo, Cantabria | Spain | 100.00 |
| GEA Canada Inc. | Lethbridge, Alberta | Canada | 100.00 |
| GEA CFS Finance B.V. | Bakel | Netherlands | 100.00 |
| GEA CFS Group B.V. | Bakel | Netherlands | 100.00 |
| GEA CFS Holding B.V. | Bakel | Netherlands | 100.00 |
| GEA CFS International B.V. | Bakel | Netherlands | 100.00 |
| GEA CFS International Weert B.V. | Weert | Netherlands | 100.00 |
| GEA CFS Uden B.V. | Bakel | Netherlands | 100.00 |
| GEA Colby Pty. Ltd. | Sydney | Australia | 100.00 |
| GEA DELBAG SAS | Montry | France | 100.00 |
| GEA Diessel GmbH | Hildesheim | Germany | 100.00 |
| GEA do Brasil Intercambiadores Ltda. | Franco da Rocha | Brazil | 100.00 |
| GEA Dutch Holding B.V. | 's-Hertogenbosch | Netherlands | 100.00 |
| GEA Ecoflex (Asia) Sdn. Bhd. | Shah Alam, Selangor | Malaysia | 100.00 |
| GEA Ecoflex China Co. Ltd. | Shanghai | China | 100.00 |
| GEA Ecoflex GmbH | Sarstedt | Germany | 100.00 |
| GEA Ecoflex India Private Limited | Rabale Navi, Mumbai | India | 98.00 |
| GEA Ecoflex Middle East FZE | Dubai | United Arab Emirates | 100.00 |
| GEA Ecoflex UK Limited | Birmingham | United Kingdom | 100.00 |
| GEA EcoServe België | Zele | Belgium | 100.00 |
| GEA EcoServe Deutschland GmbH | Holzwickede | Germany | 100.00 |
| GEA EcoServe Nederland B.V. | Belfeld | Netherlands | 100.00 |
| GEA EGI Energiagazdálkodási Zrt. | Budapest | Hungary | 99.63 |
| GEA Energietechnik Anlagen- und Betriebs-GmbH | Bochum | Germany | 100.00 |
| GEA Energietechnik GmbH | Bochum | Germany | 100.00 |
| GEA Energietechnik UK Limited | Moreton-On-Lugg, Hereford | United Kingdom | 100.00 |
| GEA Engenharia de Processos e Sistemas Industriais Ltda. | Campinas, Sao Paulo | Brazil | 100.00 |
| GEA Ergé-Spirale et Soramat S.A. | Wingles | France | 100.00 |
| GEA Erste Kapitalbeteiligungen GmbH & Co. KG | Bochum | Germany | 100.00 |
| GEA Eurotek Ltd. | Aylsham | United Kingdom | 100.00 |
| GEA Exergy AB | Gothenburg | Sweden | 100.00 |
| GEA Farm Technologies (Ireland) Ltd. | County Kildare | Ireland | 100.00 |
| GEA Farm Technologies (UK) Limited | Warminster | United Kingdom | 100.00 |
| GEA Farm Technologies Acier SAS | Château-Thierry | France | 100.00 |
| GEA Farm Technologies Argentina S.R.L. | Buenos Aires | Argentina | 100.00 |
| GEA Farm Technologies Australia Pty. Ltd. | Tullamarine, Victoria | Australia | 100.00 |
| GEA Farm Technologies Austria GmbH | Plainfeld | Austria | 100.00 |
| GEA Farm Technologies Belgium N.V. | Olen | Belgium | 100.00 |
| GEA Farm Technologies Bulgaria EOOD | Sofia | Bulgaria | 100.00 |
| GEA Farm Technologies Canada Inc. | Drummondville, Quebec | Canada | 100.00 |
| GEA Farm Technologies Chile SpA | Osorno | Chile | 100.00 |
| GEA Farm Technologies Croatia d.o.o. | Dugo Selo | Croatia | 100.00 |
| GEA Farm Technologies CZ, spol. s.r.o. | Napajedla | Czech Republic | 100.00 |
| GEA Farm Technologies do Brasil, Industria e Comercio de Equipamentos Agricolas e Pecuarios Ltda. |
Jaguariúna | Brazil | 100.00 |
| GEA Farm Technologies France SAS | Château-Thierry | France | 100.00 |
| GEA Farm Technologies GmbH | Bönen | Germany | 100.00 |
| GEA Farm Technologies Ibérica S.L. | Granollers | Spain | 100.00 |
| GEA Farm Technologies Japy SAS | Saint-Apollinaire | France | 100.00 |
| GEA Farm Technologies Mullerup A/S | Ullerslev | Denmark | 100.00 |
| GEA Farm Technologies Nederland B.V. | Zeewolde | Netherlands | 100.00 |
| GEA Farm Technologies New Zealand Limited | Cambridge | New Zealand | 100.00 |
| GEA Farm Technologies România S.R.L. | Alba Julia | Romania | 100.00 |
| GEA Farm Technologies Serbia d.o.o. | Beograd | Serbia | 100.00 |
| GEA Farm Technologies Slovakia spol. s.r.o. | Piestany | Slovakia | 100.00 |
| GEA Farm Technologies Sp. z o.o. | Bydgoszcz | Poland | 100.00 |
*) 51 percent of voting rights GEA Group
| GEA Farm Technologies Suisse AG | Ittigen | Switzerland | 100.00 |
|---|---|---|---|
| GEA Farm Technologies, Inc. | Wilmington, Delaware | USA | 100.00 |
| GEA FarmTechnologies Tarim Ekip.Mak.Kim. Tek.Dan.San.Tic.Ltd.Sti. | Kemalpasa, Izmir | Turkey | 100.00 |
| GEA Food Solutions France S.A.S. | Beaucouzé | France | 100.00 |
| GEA Food Solutions (Pty) Ltd. | Johannesburg | South Africa | 100.00 |
| GEA Food Solutions B.V. | Bakel | Netherlands | 100.00 |
| GEA Food Solutions Bakel B.V. | Bakel | Netherlands | 100.00 |
| GEA Food Solutions Brasil Comércio de Equipamentos Ltda. | Campinas, Sao Paulo | Brazil | 100.00 |
| GEA Food Solutions Denmark A/S | Slagelse | Denmark | 100.00 |
| GEA Food Solutions Germany GmbH | Biedenkopf-Wallau | Germany | 100.00 |
| GEA Food Solutions GmbH | Düsseldorf | Germany | 100.00 |
| GEA Food Solutions International A/S | Slagelse | Denmark | 100.00 |
| GEA Food Solutions Italy S.r.l. | Grumello Del Monte | Italy | 100.00 |
| GEA Food Solutions Middle East F.Z.E. | Dubai | United Arab Emirates | 100.00 |
| GEA Food Solutions Netherlands B.V. | Bakel | Netherlands | 100.00 |
| GEA Food Solutions Nordic A/S | Slagelse | Denmark | 100.00 |
| GEA Food Solutions North America, Inc. | Frisco | USA | 100.00 |
| GEA Food Solutions RUS ZAO | Moscow | Russia | 100.00 |
| GEA Food Solutions Switzerland AG | Rothrist | Switzerland | 100.00 |
| GEA Food Solutions UK and Ireland Limited | Newport Pagnell | United Kingdom | 100.00 |
| GEA Food Solutions Weert B.V. | Weert | Netherlands | 100.00 |
| GEA Goedhart B.V. | Sint Maartensdijk | Netherlands | 100.00 |
| GEA Goedhart Holding B.V. | Sint Maartensdijk | Netherlands | 100.00 |
| GEA Grasso Refrigeration OOO | Moscow | Russia | 100.00 |
| GEA Grasso s.r.o. | Prague | Czech Republic | 100.00 |
| GEA Grasso Spólka z o.o. | Gdynia | Poland | 100.00 |
| GEA Grasso TOV | Kiev | Ukraine | 100.00 |
| GEA Grasso UAB | Vilnius | Lithuania | 100.00 |
| GEA Grenco Ltd. | Sittingbourne, Kent | United Kingdom | 100.00 |
| GEA Group Holding France SAS | Montigny le Bretonneux | France | 100.00 |
| GEA Group Holding GmbH | Bochum | Germany | 100.00 |
| GEA Group Holdings (UK) Limited | Eastleigh, Hampshire | United Kingdom | 100.00 |
| GEA Happel Belgium N.V. | Haren, Brussels | Belgium | 100.00 |
| GEA Happel Nederland B.V. | Capelle an der Yssel | Netherlands | 100.00 |
| GEA Happel SAS | Roncq | France | 100.00 |
| GEA Heat Exchangers a.s. | Liberec | Czech Republic | 100.00 |
| GEA Heat Exchangers AB | Ystad | Sweden | 100.00 |
| GEA Heat Exchangers GmbH | Bochum | Germany | 100.00 |
| GEA Heat Exchangers Limited | Moreton-On-Lugg, Hereford | United Kingdom | 100.00 |
| GEA Heat Exchangers OÜ | Tallinn | Estonia | 100.00 |
| GEA Heat Exchangers Oy | Vantaa | Finland | 100.00 |
| GEA Heat Exchangers Pte. Ltd. | Singapur | Singapore | 100.00 |
| GEA Heat Exchangers S.r.l. | Monvalle | Italy | 100.00 |
| GEA Heat Exchangers, Inc. | Lakewood, Colorado | USA | 100.00 |
| GEA Ibérica S.A. | Igorre | Spain | 100.00 |
| GEA Industrial Heat Exchanger Systems (China) Ltd. | Wuhu | China | 97.08 |
| GEA Industrial Services Ltd. | Willenhall, West Midlands | United Kingdom | 100.00 |
| GEA Industriebeteiligungen GmbH | Bochum | Germany | 100.00 |
| GEA Insurance Broker GmbH | Frankfurt am Main | Germany | 100.00 |
| GEA Ireland Limited | Kildare | Ireland | 100.00 |
| GEA ISISAN TESISAT INSAAT TAAHHÜT TICARET VE SANAYI A.S. | Istanbul | Turkey | 100.00 |
| GEA IT Services GmbH | Oelde | Germany | 100.00 |
| GEA klima rashladna tehnika d.o.o. | Zagreb | Croatia | 100.00 |
| GEA Klima Sanayi ve Ticaret Anonim Sirketi A.S. | Istanbul | Turkey | 100.00 |
| GEA Klimatechnik GmbH | Gaspoltshofen | Austria | 100.00 |
| GEA Klimatechnika Kft. | Budapest | Hungary | 100.00 |
| GEA Klimatizacia s.r.o. | Bratislava | Slovakia | 100.00 |
| GEA Klimatizacijska tehnika d.o.o. | Ljubljana | Slovenia | 100.00 |
| GEA Klimatyzacja Spolka z o.o. | Wroclaw | Poland | 100.00 |
| GEA Küba GmbH | Baierbrunn | Germany | 100.00 |
| GEA Levati Food Tech S.r.l. | Collecchio | Italy | 100.00 |
| GEA Luftkühler GmbH | Bochum | Germany | 100.00 |
| GEA Lyophil (Beijing) Ltd. | Beijing | China | 100.00 |
| GEA Lyophil GmbH | Hürth | Germany | 100.00 |
| GEA Maschinenkühltechnik GmbH | Bochum | Germany | 100.00 |
Supplemental disclosures in accordance with section 315a of the HGB
| GEA Mashimpeks OOO | Moscow | Russia | 100.00 |
|---|---|---|---|
| GEA Mechanical Equipment Canada, Inc. | Saint-John, New Brunswick | Canada | 100.00 |
| GEA Mechanical Equipment GmbH | Oelde | Germany | 100.00 |
| GEA Mechanical Equipment Italia S.p.A. | Parma | Italy | 100.00 |
| GEA Mechanical Equipment UK Limited | Milton Keynes | United Kingdom | 100.00 |
| GEA Mechanical Equipment US, Inc. | Wilmington, Delaware | USA | 100.00 |
| GEA Messo GmbH | Duisburg | Germany | 100.00 |
| GEA Middle East FZE | Dubai | United Arab Emirates | 100.00 |
| GEA mts flowtec AG | Kirchberg | Switzerland | 100.00 |
| GEA NEMA Wärmetauscher GmbH | Netzschkau | Germany | 100.00 |
| GEA Nilenca (Pty) Ltd. | Germiston | South Africa | 74.83 |
| GEA NIRO GmbH | Müllheim | Germany | 100.00 |
| GEA Niro PT B.V. | 's-Hertogenbosch | Netherlands | 100.00 |
| GEA North America, Inc. | Delaware | USA | 100.00 |
| GEA Nu-Con Ltd. | Penrose, Auckland | New Zealand | 100.00 |
| GEA Nu-Con Manufacturing Limited | Mairangi Bay, Auckland | New Zealand | 100.00 |
| GEA Nu-Con Pty. Ltd. | Sutherland, Sydney | Australia | 100.00 |
| GEA of Alabama, L.L.C. | Montgomery | USA | 100.00 |
| GEA Pharma Systems (India) Private Limited | Vadodara, Gujarat | India | 100.00 |
| GEA Pharma Systems AG | Bubendorf | Switzerland | 100.00 |
| GEA Pharma Systems Limited | Eastleigh Hampshire | United Kingdom | 100.00 |
| GEA Polacel Cooling Towers B.V. | Doetinchem | Netherlands | 100.00 |
| GEA Polacel Cooling Towers FZCO | Dubai | United Arab Emirates | 100.00 |
| GEA Polska Sp. z o.o. | Swiebodzice | Poland | 100.00 |
| GEA Power Cooling de Mexico S. de R.L. de C.V. | San Luis Potosí | Mexico | 100.00 |
| GEA POWER COOLING TECHNOLOGY (CHINA) LTD. | Langfang | China | 100.00 |
| GEA Process Engineering (India) Private Limited | Vadodara, Gujarat | India | 100.00 |
| GEA Process Engineering (Pty) Ltd. | Midrand | South Africa | 100.00 |
| GEA Process Engineering A/S | Soeborg | Denmark | 100.00 |
| GEA Process Engineering Asia Ltd. | Hong Kong | China | 100.00 |
| GEA Process Engineering CEE Kft. | Budaörs | Hungary | 100.00 |
| GEA Process Engineering Chile S.A. | Santiago de Chile | Chile | 100.00 |
| GEA Process Engineering China Limited | Shanghai | China | 100.00 |
| GEA Process Engineering China Ltd. | Shanghai | China | 100.00 |
| GEA Process Engineering Inc. | Columbia | USA | 100.00 |
| GEA Process Engineering Italia S.P.A. | Segrate | Italy | 100.00 |
| GEA Process Engineering Japan Ltd. | Tokyo | Japan | 100.00 |
| GEA Process Engineering Ltd. | Birchwood,Cheshire,Warrington | United Kingdom | 100.00 |
| GEA Process Engineering Ltd. | Penrose, Auckland | New Zealand | 100.00 |
| GEA Process Engineering N.V. | Halle | Belgium | 100.00 |
| GEA Process Engineering Nederland B.V. | Deventer | Netherlands | 100.00 |
| GEA Process Engineering OOO | Moscow | Russia | 100.00 |
| GEA Process Engineering Oy | Vantaa | Finland | 100.00 |
| GEA Process Engineering Pte. Ltd. | Singapore | Singapore | 100.00 |
| GEA Process Engineering Pty. Ltd. | Blackburn, Victoria | Australia | 100.00 |
| GEA Process Engineering S.A. | Buenos Aires | Argentina | 100.00 |
| GEA Process Engineering S.A. | Alcobendas, Madrid | Spain | 100.00 |
| GEA Process Engineering S.A. de C.V. | Naucalpan de Juárez, Mex. City | Mexico | 100.00 |
| GEA Process Engineering S.A.S. | Saint-Quentin en Yvelines Ced. | France | 100.00 |
| GEA Process Engineering S.A.S. | Bogota D.C. | Colombia | 100.00 |
| GEA Process Engineering s.r.o. | Brno | Czech Republic | 100.00 |
| GEA Process Engineering Taiwan Ltd. | Taipeh | Taiwan | 100.00 |
| GEA Process Engineering Z o.o. | Warsaw | Poland | 100.00 |
| GEA PROCESS MÜHENDISLIK MAKINE INSAAT TAAHÜT ITHALAT IHRACAT DANIS. SAN. VE TIC. LTD. STI. |
Kemalpasa, Izmir | Turkey | 100.00 |
| GEA Process Technologies Ireland Limited | Dublin | Ireland | 100.00 |
| GEA Process Technology Netherlands B.V. i.L. | Cuijk | Netherlands | 100.00 |
| GEA Procomac S.p.A. | Sala Baganza | Italy | 100.00 |
| GEA Real Estate GmbH | Frankfurt am Main | Germany | 100.00 |
| GEA Refrigeration (Thailand) Co. Ltd. | Nonthaburi | Thailand | 99.9994 |
| GEA Refrigeration Africa (Pty) Ltd. | Capetown | South Africa | 100.00 |
| GEA Refrigeration Canada Inc. | Richmond | Canada | 100.00 |
| GEA Refrigeration Components (Australia) Pty. Ltd. | Carrum Downs, Victoria | Australia | 100.00 |
| GEA Refrigeration Components (Nordic) A/S | Kolding | Denmark | 100.00 |
| GEA Refrigeration Components (UK) Ltd. | Ross-on-Wye, Herfordshire | United Kingdom | 100.00 |
| GEA Refrigeration France SAS | Les Sorinières | France | 100.00 |
|---|---|---|---|
| GEA Refrigeration Germany GmbH | Berlin | Germany | 100.00 |
| GEA Refrigeration Hong Kong Ltd. | Hong Kong | China | 100.00 |
| GEA Refrigeration Ibérica S.A. | Alcobendas, Madrid | Spain | 100.00 |
| GEA Refrigeration Ireland Limited | Cavan | Ireland | 100.00 |
| GEA Refrigeration Italy S.p.A. | Castel Maggiore, Bologna | Italy | 100.00 |
| GEA Refrigeration Netherlands N.V. | 's-Hertogenbosch | Netherlands | 100.00 |
| GEA Refrigeration North America, Inc. | York, Pennsylvania | USA | 100.00 |
| GEA Refrigeration Romania S.R.L. | Cluj-Napoca | Rumania | 100.00 |
| GEA Refrigeration Technologies GmbH | Bochum | Germany | 100.00 |
| GEA Refrigeration Technology (Suzhou) Co., Ltd. | Suzhou | China | 100.00 |
| GEA Refrigeration UK Ltd. | London | United Kingdom | 100.00 |
| GEA Refrigeration Vietnam Co. Ltd. | Ho Chi Min City | Vietnam | 100.00 |
| GEA Renzmann & Grünewald GmbH | Monzingen | Germany | 100.00 |
| GEA Saudi Arabia LLC | Al Kobar | Saudi Arabian | 100.00 |
| GEA Searle Ltd. | Fareham | United Kingdom | 100.00 |
| GEA Segment Management Holding GmbH | Bochum | Germany | 100.00 |
| GEA Services and Components OOO | Moscow | Russia | 100.00 |
| GEA Shanxi Dry Cooling Design Ltd. | Taiyuan, Shanxi | China | 60.00 |
| GEA Sistemas de Resfriamento Ltda. | Indaiatuba | Brazil | 100.00 |
| GEA TDS GmbH | Sarstedt | Germany | 100.00 |
| GEA Technika Cieplna Spolka z o.o. | Opole | Poland | 100.00 |
| GEA Thermal Engineering Investments (Pty) Ltd. | Germiston | South Africa | 100.00 |
| GEA Tuchenhagen France | Hoenheim | France | 100.00 |
| GEA Tuchenhagen GmbH | Büchen | Germany | 100.00 |
| GEA Tuchenhagen Polska sp. z o.o. | Koszalin | Poland | 100.00 |
| GEA Westfalia Separating Equipment (Tianjin) Co., Ltd. | Tianjin | China | 100.00 |
| GEA Westfalia Separator (China) Ltd. | Wanchai, Hong Kong | China | 100.00 |
| GEA Westfalia Separator (S.E.A.) PTE. LTD. | Singapore | Singapore | 100.00 |
| GEA Westfalia Separator (Thailand) Ltd. | Bangkok | Thailand | 97.00 |
| GEA Westfalia Separator (Tianjin) Co., Ltd. | Tianjin | China | 100.00 |
| GEA Westfalia Separator Argentina S.A. | Buenos Aires | Argentina | 100.00 |
| GEA Westfalia Separator Australia Pty. Ltd. | Thomastown ,Victoria | Australia | 100.00 |
| GEA Westfalia Separator Austria GmbH | Vienna | Austria | 100.00 |
| GEA Westfalia Separator Belgium N.V. | Schoten | Belgium | 99.00 |
| GEA Westfalia Separator Chile S.A. | Santiago de Chile | Chile | 100.00 |
| GEA Westfalia Separator CIS Ltd. | Moscow | Russia | 100.00 |
| GEA Westfalia Separator CZ s.r.o. | Prague | Czech Republic | 100.00 |
| GEA Westfalia Separator Deutschland GmbH | Oelde | Germany | 100.00 |
| GEA Westfalia Separator DK A/S | Skanderborg | Denmark | 100.00 |
| GEA Westfalia Separator do Brasil Industria de Centrifugas Ltda. | Campinas, Sao Paulo | Brazil | 100.00 |
| GEA Westfalia Separator France | Château-Thierry | France | 100.00 |
| GEA Westfalia Separator Group | Kiev | Ukraine | 100.00 |
| GEA Westfalia Separator Group GmbH | Oelde | Germany | 100.00 |
| GEA Westfalia Separator Hellas A.E. | Athens | Greece | 100.00 |
| GEA Westfalia Separator Hungária Kft. | Budaörs | Hungary | 100.00 |
| GEA Westfalia Separator Ibérica, S.A. | Granollers | Spain | 100.00 |
| GEA Westfalia Separator Iceland ehf | Reykjavik | Iceland | 100.00 |
| GEA Westfalia Separator India Private Limited | New Delhi | India | 100.00 |
| GEA Westfalia Separator Ireland Ltd. | Ballincollig Cork | Ireland | 100.00 |
| GEA Westfalia Separator Japan K.K. | Minato-ku,Tokyo | Japan | 100.00 |
| GEA Westfalia Separator Korea Ltd. | Seoul | South Korea | 100.00 |
| GEA Westfalia Separator Mexicana S.A. de C.V. | Cuernavaca, Morelos | Mexico | 100.00 |
| GEA Westfalia Separator Nederland B.V. | Cuijk | Netherlands | 100.00 |
| GEA Westfalia Separator Nederland Services B.V. | Cuijk | Netherlands | 100.00 |
| GEA Westfalia Separator Nordic AS | Oslo | Norway | 100.00 |
| GEA Westfalia Separator NZ Ltd. | Penrose, Auckland | New Zealand | 100.00 |
| GEA Westfalia Separator Polska Sp. z o.o. | Warsaw | Poland | 100.00 |
| GEA Westfalia Separator Production France | Château-Thierry | France | 100.00 |
| GEA Westfalia Separator Romania S.R.L. | Bucarest | Romania | 100.00 |
| GEA Westfalia Separator Sanayi ve Ticaret Ltd. Sti. | Kemalpasa, Izmir | Turkey | 100.00 |
| GEA Westfalia Separator South Africa (Pty.) Ltd. | Midrand | South Africa | 100.00 |
| GEA Westfalia Separator Sweden AB | Gothenburg | Sweden | 100.00 |
| GEA Wiegand GmbH | Ettlingen | Germany | 100.00 |
| GEA WTT GmbH | Nobitz-Wilchwitz | Germany | 100.00 |
| Supplemental disclosures in accordance with section 315a of the HGB | |
|---|---|
| GEA Zweite Kapitalbeteiligungen GmbH & Co. KG | Bochum | Germany | 100.00 |
|---|---|---|---|
| Grasso Componentes Ibéria Lda. | Cascais | Portugal | 100.00 |
| Hovex B.V. Engineering | Veendam | Netherlands | 100.00 |
| KET Marine International B.V. | Zevenbergen | Netherlands | 100.00 |
| Kupferbergbau Stadtberge zu Niedermarsberg GmbH | Frankfurt am Main | Germany | 100.00 |
| Kupferexplorationsgesellschaft mbH | Bochum | Germany | 100.00 |
| LL Plant Engineering (India) Private Limited | Mumbai Maharashtra | India | 100.00 |
| LL Plant Engineering AG | Ratingen | Germany | 100.00 |
| LL Plant Engineering France S.A.S. | Sartrouville | France | 100.00 |
| mg AIS GmbH Automotive Ignition Systems i.L. | Frankfurt am Main | Germany | 100.00 |
| mg Altersversorgung GmbH | Bochum | Germany | 100.00 |
| mg capital gmbh | Bochum | Germany | 100.00 |
| MG Stahlhandel GmbH | Bochum | Germany | 100.00 |
| mg venture capital ag | Bochum | Germany | 100.00 |
| mgvv Projektgesellschaft Hornpottweg GmbH | Frankfurt am Main | Germany | 100.00 |
| mgvv Projektentwicklung Daimlerstrasse GmbH & Co. KG | Frankfurt am Main | Germany | 100.00 |
| mgvv Projektentwicklung Daimlerstrasse Verwaltungs GmbH | Frankfurt am Main | Germany | 100.00 |
| Milfos Australia Pty. Limited | Sydney | Australia | 100.00 |
| Milfos International Limited | Frankton, Hamilton | New Zealand | 100.00 |
| Milfos UK Limited | Droitwich, Worcestershire | United Kingdom | 100.00 |
| Milk 'N' Water Services Stratford Limited | Stratford | New Zealand | 100.00 |
| Niro Projectos e Instalacoes Ltda. | Campinas, Sao Paulo | Brazil | 100.00 |
| Niro Sterner Inc. | Columbia | USA | 100.00 |
| Nu-Con (Shanghai) Trading Co. Ltd. | Pudong, Shanghai | China | 100.00 |
| Nu-Con Systems Pte. Limited | Singapore | Singapore | 100.00 |
| Nu-Con Systems Sdn. Bhd. | Shah Alam, Selangor | Malaysia | 100.00 |
| OOO GEA Energietechnik | Moscow | Russia | 100.00 |
| OOO GEA Farm Technologies Rus | Moscow | Russia | 100.00 |
| OOO GEA Farm Technologies Ukraine | Bila Zerkva | Ukraine | 100.00 |
| Paul Pollrich GmbH | Herne | Germany | 100.00 |
| Pelacci S.R.L. i.L. | Sala Baganza | Italy | 67.00 |
| Procomac Engenharia Ltda. | Barueri | Brazil | 100.00 |
| PT Westfalia Indonesia | Jakarta | Indonesia | 100.00 |
| PT. GEA Grasso Indonesia | Jakarta Barat, Cengkareng | Indonesia | 100.00 |
| Royal de Boer Stalinrichtingen B.V. | Leeuwarden | Netherlands | 100.00 |
| Ruhr-Zink GmbH | Datteln | Germany | 100.00 |
| Sachtleben Bergbau Verwaltungsgesellschaft mit beschränkter Haftung | Lennestadt | Germany | 100.00 |
| SC GEA KLIMATECHNIK S.R.L. | Timisoara | Romania | 100.00 |
| SCI Sartrouville | Sartrouville | France | 100.00 |
| TOV GEA-Ukrayina | Kiev | Ukraine | 100.00 |
| Trennschmelz Altersversorgung GmbH | Bochum | Germany | 100.00 |
| Tuchenhagen (Philippines) Inc. | Manila | Philippines | 100.00 |
| Tuchenhagen (Thailand) Co. Ltd. i.L. | Bangkok | Thailand | 100.00 |
| Tuchenhagen do Brasil Ltda. | Campinas, Sao Paulo | Brazil | 100.00 |
| UAB GEA Klimatechnik | Vilnius | Lithuania | 100.00 |
| VDM-Hilfe GmbH | Frankfurt am Main | Germany | 100.00 |
| Westfalia Separator (Philippines), Inc. | Manila | Philippines | 100.00 |
| Westfalia Separator Malaysia SDN. BHD. | Petaling Jaya | Malaysia | 100.00 |
| Wilarus OOO | Kolomna | Russia | 100.00 |
| Wolfking LLC | Frisco | USA | 100.00 |
| Wolfking Ltd. | Newport Pagnell | United Kingdom | 100.00 |
| Wolfking Ltda. | Campinas, Sao Paulo | Brazil | 100.00 |
| ZiAG Plant Engineering GmbH | Frankfurt am Main | Germany | 100.00 |
| Accociated Companies | |||
| IMAI S.A. | Buenos Aires | Argentina | 20.00 |
| Polyamid 2000 Handels- und Produktionsgesellschaft Premnitz AG i.I. | Premnitz | Germany | 49.90 |
| Technofrigo Abu Dhabi i.L. | Abu Dhabi | United Arab Emirates | 49.00 |
| ZAO Moscow Coffee House | Moscow | Russia | 29.00 |
| Joint Ventures | |||
| Blue Glacier Technology, LLC | Durham | USA | 50.00 |
| Bock Australia Pty. Ltd. | Rosebery | Australia | 50.00 |
| GEA Cooling Tower Technologies (India) Private Limited | Chennai, Madras | India | 51.00 |
| GEA Shanxi Thermal Equipment Company Ltd. | Taiyuan, Shanxi | China | 48.00 |
| GRADE Grasso Adearest Limited | Dubai | United Arab Emirates | 50.00 |
| GRADE Refrigeration LLC | Sharjah | United Arab Emirates | 49.00 |
| Frankfurt am Main | Germany | 50.00 |
|---|---|---|
| Nagano | Japan | 49.00 |
| Sarstedt | Germany | 50.00 |
| Osaka | Japan | 50.00 |
| Muriedas Ayuntam. de Camargo | Spain | 50.00 |
| Wuhan | China | 50.00 |
| Other equity investments under section 313(2) no. 4 of the HGB | ||
| Bochum | Germany | 55.02 |
| Oelde | Germany | 35.50 |
| Wendelsheim | Germany | 26.00 |
| Sao Paulo, Sao Paulo | Brazil | 47.50 |
| Rajkot | India | 49.00 |
| Kozani | Greece | 47.00 |
| Seoul | South Korea | 25.00 |
| Moscow | Russia | 34.00 |
The following German companies are exempted from the duty to comply with the supplementary accounting, audit, and publication provisions applicable to corporations and certain partnerships in accordance with sections 264(3) and 264b of the HGB:
GEA 2H Water Technologies GmbH, Wettringen GEA Air Treatment GmbH, Herne GEA Air Treatment Production GmbH, Wurzen GEA AWP GmbH, Prenzlau GEA Bischoff GmbH, Essen GEA Bock GmbH, Frickenhausen GEA Brewery Systems GmbH, Kitzingen GEA Diessel GmbH, Hildesheim GEA Ecoflex GmbH, Sarstedt GEA Energietechnik Anlagen- und Betriebs-GmbH, Bochum GEA Energietechnik GmbH, Bochum GEA Erste Kapitalbeteiligungen GmbH & Co. KG, Bochum GEA Farm Technologies GmbH, Bönen GEA Food Solutions Germany GmbH, Biedenkopf-Wallau GEA Food Solutions GmbH, Düsseldorf GEA Group Holding GmbH, Bochum GEA Heat Exchangers GmbH, Bochum GEA Industriebeteiligungen GmbH, Bochum GEA Insurance Broker GmbH, Frankfurt am Main GEA IT Services GmbH, Oelde GEA Küba GmbH, Baierbrunn GEA Luftkühler GmbH, Bochum GEA Lyophil GmbH, Hürth GEA Maschinenkühltechnik GmbH, Bochum GEA Mechanical Equipment GmbH, Oelde GEA Messo GmbH, Duisburg GEA NEMA Wärmetauscher GmbH, Netzschkau
GEA NIRO GmbH, Müllheim GEA Real Estate GmbH, Frankfurt am Main GEA Refrigeration Germany GmbH, Berlin GEA Refrigeration Technologies GmbH, Bochum GEA Renzmann & Grünewald GmbH, Monzingen GEA TDS GmbH, Sarstedt GEA Tuchenhagen GmbH, Büchen GEA Westfalia Separator Deutschland GmbH, Oelde GEA Westfalia Separator Group GmbH, Oelde GEA Wiegand GmbH, Ettlingen GEA WTT GmbH, Nobitz-Wilchwitz GEA Zweite Kapitalbeteiligungen GmbH & Co. KG, Bochum LL Plant Engineering AG, Ratingen mg Altersversorgung GmbH, Bochum mg capital gmbh, Bochum mg vv Projektgesellschaft Hornpottweg GmbH, Frankfurt am Main Paul Pollrich GmbH, Herne ZiAG Plant Engineering GmbH, Frankfurt am Main
Düsseldorf, February 28, 2013
The Executive Board
Jürg Oleas Dr. Helmut Schmale Niels Graugaard Dr. Stephan Petri
We have audited the consolidated financial statements prepared by the GEA Group Aktiengesellschaft, Düsseldorf – comprising the consolidated balance sheet, consolidated income statement, consolidated statement of comprehensive income, notes to the consolidated statements, consolidated cash flow statement and consolidated statement of changes in equity – together with the group management report combined with the management report of the parent company (management report) for the business year from January 1 to December 31, 2012. The preparation of the consolidated financial statements and the management report in accordance with IFRSs, as adopted by the EU, and the additional requirements of German commercial law pursuant to § 315a Abs. 1 HGB [Handelsgesetzbuch "German Commercial Code"] and supplementary provisions of the articles of incorporation are the responsibility of the parent company`s management. Our responsibility is to express an opinion on the consolidated financial statements and on the management report based on our audit.
We conducted our audit of the consolidated financial statements in accordance with § 317 HGB [Handelsgesetzbuch "German Commercial Code"] and German generally accepted standards for the audit of financial statements promulgated by the Institut der Wirtschaftsprüfer [Institute of Public Auditors in Germany] (IDW). Those standards require that we plan and perform the audit such that misstatements materially affecting the presentation of the net assets, financial position and results of operations in the consolidated financial statements in accordance with the applicable financial reporting framework and in the management report are detected with reasonable assurance. Knowledge of the business activities and the economic and legal environment of the Group and expectations as to possible misstatements are taken into account in the determination of audit procedures. The effectiveness of the accounting-related internal control system and the evidence supporting the disclosures in the consolidated financial statements and the management report are examined primarily on a test basis within the framework of the audit. The audit includes assessing the annual financial statements of those entities included in consolidation, the determination of entities to be included in consolidation, the accounting and consolidation principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements and management report. We believe that our audit provides a reasonable basis for our opinion.
Our audit has not led to any reservations.
In our opinion, based on the findings of our audit, the consolidated financial statements comply with IFRSs, as adopted by the EU, the additional requirements of German commercial law pursuant to § 315a Abs. 1 HGB and supplementary provisions of the articles of incorporation and give a true and fair view of the net assets, financial position and results of operations of the Group in accordance with these requirements. The management report is consistent with the consolidated financial statements and as a whole provides a suitable view of the Group's position and suitably presents the opportunities and risks of future development.
Düsseldorf, February 28, 2013
KPMG AG Wirtschaftsprüfungsgesellschaft
Guido Moesta Dr. Markus Zeimes Wirtschaftsprüfer Wirtschaftsprüfer (German public auditor) (German public auditor)
To the best of our knowledge, and in accordance with the applicable reporting principles, the consolidated financial statements give a true and fair view of the assets, liabilities, financial position, and profit or loss of the Group, and the management report of the Group, which has been combined with the management report of the Company, includes a fair review of the development and performance of the business and the position of the Group, together with a description of the principal opportunities and risks associated with the expected development of the group.
Düsseldorf, February 28, 2013
The Executive Board
Jürg Oleas Dr. Helmut Schmale Niels Graugaard Dr. Stephan Petri
Yet again, the Supervisory Board performed the monitoring and advisory functions incumbent upon it by virtue of the law, the Articles of Association and the Rules of Procedure with due care and diligence in the year under review. In doing so, it dealt in depth with the Company's position and outlook as well as all relevant key issues. The Supervisory Board continuously advised the Executive Board on the management of the Company while monitoring its conduct of the Company's business on an ongoing basis.
This task was facilitated by the fact that, apart from engaging in deliberations during the meetings, the Executive Board met its duty to inform and regularly provided the Supervisory Board in written and/ or oral reports with timely and comprehensive information on all relevant matters and measures relating to the Company, on the course of business, corporate planning and strategy, as well as the position of the group. The Supervisory Board was directly involved in all decisions of fundamental importance to the Company. It was at all times given sufficient opportunity to critically discuss the reports and motions submitted by the Executive Board and to give recommendations through its committees and at the meetings of the full Supervisory Board.
In addition, the chairmen of the Supervisory Board and the Audit Committee maintained constant contact with the Executive Board and exchanged mutual information on significant events. In between the meetings, the Chairman of the Supervisory Board and the Chairman of the Executive Board regularly discussed significant current issues relating to the development of the Company including corporate strategy, business development, risk management and compliance. In this context, the Chairman of the Supervisory Board was regularly and promptly informed of the outlook for individual segments and the group, as well as further important developments and imminent decisions. Outside meetings, the Chairman of the Audit Committee remained in contact with the members of the Executive Board, in particular the Chief Financial Officer, to keep abreast of current developments relevant to the work of the Audit Committee and to discuss them, if necessary. In preliminary meetings, the employee representatives regularly deliberated on the items on the agenda prior to the plenary meetings of the Supervisory Board.
On a regular basis, the Supervisory Board was provided with comprehensive information on order intake, sales, earnings and employment trends of the group, its segments and other companies, as well as the discontinued operations. The Supervisory Board received detailed explanations on any business performance variances from plan and forecast on the basis of supporting documents. The future prospects and the strategic development of the Company and its business units, as well as corporate planning, were extensively discussed and agreed with the Supervisory Board. In the year under review, particular attention was paid to the strategic development of the group, the progress towards integrating the new Segment GEA Food Solutions, succession planning for Niels Graugaard, who will retire from the Executive Board at the conclusion of the 2013 Annual General Meeting, as well as the risks, business performance and financial position. Furthermore, the Supervisory Board and the Audit Committee extensively examined and addressed the Company's risk management system. In this context, the KPMG AG Wirtschaftsprüfungsgesellschaft was also entrusted to put a special emphasis on the Company's risk management system in the course of the audit.
After having scrutinized and extensively discussed the reports and motions submitted by the Executive Board, the Supervisory Board cast their respective votes insofar as this was appropriate or required by law, the provisions of the Articles of Association or the Rules of Procedure, as the case may be. Prior to and in between meetings, the Executive Board provided reports on significant events in writing or in text form. For reasons duly substantiated, in particular in matters of special urgency, resolutions were adopted by written procedure.
In the year under review, there were once again no conflicts of interest in respect to members of the Executive Board or the Supervisory Board that would have required immediate disclosure to the Supervisory Board and communication to the Annual General Meeting.
The Supervisory Board held six meetings in the year under review 2012, one of them as a conference call meeting. On these occasions, the Supervisory Board regularly discussed matters relating to the Company's business progress, its financial position, the strategic development of the group, the integration of the newly acquired Segment GEA Food Solutions added in 2011, the termination of the award proceedings by reaching a settlement and the resulting capital increase, an analysis of the Company's M&A activities, as well as the risks remaining from the sale of the plant engineering activities.
Key items on the agenda of the conference call Supervisory Board meeting on February 3, 2012, were the early information on the capital market as well as the dividend distribution proposal.
The two key items on the agenda of the Supervisory Board meeting held on March 8, 2012, were the approval of the annual financial statements and the consolidated financial statements for fiscal year 2011, including the appropriation of net earnings and the agenda for the Annual General Meeting in April 2012, as well as the appointment of Dr. Stephan Petri as an ordinary Executive Board member with effect from June 1, 2012 until midnight on May 31, 2015. In addition, the Supervisory Board one more time extensively discussed the new variable remuneration system for the Executive Board. In this meeting, the Supervisory Board also finally determined the Executive Board members' personal targets for fiscal year 2012 and addressed the examination of efficiency recommended under section 5.6 of the German Corporate Governance Code in relation to the activities of the Supervisory Board.
The Supervisory Board meeting on April 24, 2012, mainly served the purpose of preparing the Annual General Meeting which took place immediately afterwards. Amongst other things, the Executive Board gave a report on current business and the development of the recently acquired Segment GEA Food Solutions.
At the meeting held on June 21, 2012, the shareholder representatives on the Supervisory Board elected Prof. Dr. Bauer to serve on the Supervisory Board's Nomination Committee. Besides, the meeting focused on the current development of the Segment GEA Food Solutions, an impairment analysis of GEA acquisitions undertaken since 2004, latest information on strategies pursued by main competitors, as well as issues relating to the alignment of GEA's capital structure with financial market developments. Apart from that, the Supervisory Board was given a progress report on the capital increase in connection with the settlementbased termination of the award proceedings, as well as the resulting obligation to issue new shares.
On September 20, 2012, the Supervisory Board held a meeting in Vaals / Netherlands. Prior to that, the Supervisory Board was able to get an idea of the products offered by Segment GEA Food and their importance to GEA customers by paying a visit to the Segment GEA Food Solutions production facility in Bakel/Netherlands and by visiting a customer of this GEA segment. At the same time, the Supervisory Board took a closer look at the products offered by the GEA Heat Exchangers Segment by visiting a power plant and receiving a detailed presentation on the 'Medupi' project/South Africa which involves the construction of a large dry cooling tower. The main item on the agenda of the actual Supervisory Board meeting was a comprehensive introduction to GEA's strategy process. The latter is aimed at developing the cornerstones of GEA's long-term strategy. In addition, the Supervisory Board intensively deliberated on the succession of Niels Graugaard, who will retire from the Executive Board in April 2013. Further items on the agenda included the current development of the Segment GEA Food Solutions, an antitrust lawsuit filed against a former subsidiary in France, GEA's existing diversity reporting, as well as a peer comparison involving GEA's main competitors.
The meeting held on December 13, 2012, focused on two main topics: the approval of the 2013 budget and the medium-term planning for the years 2014 and 2015. Apart from that, those present followed up on the 2012 September meeting by discussing the strategy process in more detail. As usual, the December meeting also addressed current developments in the field of corporate governance, including the amendments to the Code adopted by the Government Commission on the German Corporate Governance Code on May 15, 2012. In response to these amendments, the Supervisory Board revised its targets relating to its own composition and amended the Rules of Procedure of the Supervisory Board, the Audit Committee, as well as the Executive Board accordingly. In this context, the Declaration of Compliance with the Corporate Governance Code was adopted. Another item on the agenda was the comprehensive report of the Chief Compliance Officer on his area of responsibility and the further extension of compliance activities in the group, as well as a preview of the achievement of bonus targets on the part of the Executive Board in fiscal year 2012, including the target proposals for the Executive Board for fiscal year 2013.
The Presiding Committee met on four occasions. Apart from the preparation of the Supervisory Board meetings, the main topics of the meetings were deliberations on the succession planning for Executive Board members, the preparation of the appointment of Dr. Stephan Petri and Markus Hüllmann as members of the Executive Board, as well as information on pending and new legal disputes of the group. Furthermore, the Presiding Committee engaged in in-depth discussions on the strategy process.
The Audit Committee met five times. In the presence of the auditor, the Chairman of the Executive Board, the Chief Financial Officer as well as the Director of Industrial Relations, the Audit Committee focused on the annual financial statements and the consolidated financial statements for fiscal year 2011 as well as the 2012 quarterly financial statements. Furthermore, the Committee's activities focused on monitoring the accounting processes. The Audit Committee also verified the effectiveness of the internal risk management and internal audit systems. Moreover, the Committee obtained detailed information on the Company's opportunities and risks including the group's legal disputes, as well as the financial planning of GEA Group. The auditors elaborated on their auditing activities and the audit process. In addition, the Audit Committee submitted its proposal for the appointment of an auditor to the Supervisory Board, dealt with the award of the audit contract to the auditor, the determination of the audit process including the audit fee for the year 2012, as well as the necessary independence of the auditor. Apart from that, the Audit Committee concerned itself with the capital increase in connection with the settlement-based termination of the award proceedings, in particular the prospectus, as well as the reports of the internal audit function and the Chief Compliance Officer.
The Nomination Committee was not convened in the year under review.
The Mediation Committee did not have to be convened in the year under review.
The committee chairmen rendered an account of the activities undertaken by their specific committees to the Supervisory Board at the respective subsequent Supervisory Board meetings.
The Supervisory Board is continuously monitoring the development of the Corporate Governance Standards. At its meeting on December 13, 2012, it discussed the recommendations and suggestions of the German Corporate Governance Code. In particular, it dealt with the Supervisory Board's concrete target composition in view of section 5.4.1 Corporate Governance Code. At that meeting, the Executive Board and the Supervisory Board issued an updated Declaration of Compliance in accordance with section 161 Aktiengesetz (AktG - German Stock Corporation Act) and made it permanently accessible to the public on the Company's website. GEA Group Aktiengesellschaft complies with the current recommendations of the German Corporate Governance Code. Further information on corporate governance can be found in the Corporate Governance Report (see page 67 ff.).
The 2012 annual financial statements of GEA Group Aktiengesellschaft, the consolidated financial statements prepared in accordance with IFRS and the combined management report have been audited by KPMG AG Wirtschaftsprüfungsgesellschaft and received an unqualified audit opinion.
In the presence of the auditors, the combined management report, the annual financial statements of GEA Group Aktiengesellschaft, the proposal for the appropriation of net earnings as well as the consolidated financial statements and the audit reports for 2012 were extensively discussed and examined at the meeting of the Audit Committee on February 28, 2013, and at the annual accounts adoption meeting of the Supervisory Board held on March 7, 2013. The auditors reported on the procedures applied and the material findings of their audit. They were also available to answer questions.
On the basis of the final results of the examination performed by the Audit Committee and after its own scrutiny, the Supervisory Board agreed with the auditors' findings at its meeting on March 7, 2013 and found that there were no objections to be raised. The Supervisory Board approved the 2012 consolidated financial statements, the 2012 annual financial statements of GEA Group Aktiengesellschaft, as well as the combined management report. The annual financial statements of GEA Group Aktiengesellschaft are hereby adopted. The Supervisory Board considers the proposal for the appropriation of net earnings to be reasonable.
Pursuant to a resolution adopted by the Annual General Meeting on April 24, 2012, Prof. Dr. Werner Bauer was elected to serve on the Supervisory Board as a shareholder representative. Earlier, he had been appointed to the Supervisory Board as a shareholder representative until the conclusion of the Annual General Meeting on April 24, 2012, pursuant to an order made by the Local Court of Düsseldorf on August 4, 2011. Moreover, Prof. Dr. Werner Bauer has been a member of the Nomination Committee of the Supervisory Board since June 21, 2012. For further information on the composition of the Supervisory Board, see also the Corporate Governance Report on page 70 f .
At the Supervisory Board meeting held on March 8, 2012, Dr. Stephan Petri was appointed as an ordinary Executive Board member in charge of legal affairs and human resources for a period of three years with effect from June 1, 2012 until May 31, 2015, while simultaneously being appointed Director of Industrial Relations for the above period. He took this function over from Jürg Oleas. During the Supervisory Board meeting on December 13, 2012, the Supervisory Board also appointed Markus Hüllmann to serve on the Executive Board for a period of three years with effect from April 1, 2013 until March 31, 2016. He will succeed Niels Graugaard who is retiring after the next Annual General Meeting on April 18, 2013.
The Supervisory Board wishes to express its gratitude and appreciation to the management teams, employee representative bodies and, in particular, to all employees of the GEA Group companies for their hard work and personal commitment in a difficult environment.
Düsseldorf, March 7, 2013
Dr. Jürgen Heraeus Chairman of the Supervisory Board
b) – GEA North America, Inc., Delaware, U.S.A., Chairman of the Board of Directors – Commerzbank AG, Frankfurt am Main, Germany, Member of the Northwest Regional Advisory Board
Ahmad M.A. Bastaki, Safat, Kuwait, Executive Director, Office of the Managing Director, Kuwait Investment Authority
President of the Board of Directors – Nutrition-Wellness Venture AG, Vevey, Switzerland, President of the Board of Directors
L'Oreal S.A., Paris, France,
a) – Schunk GmbH, Heuchelheim, Germany, Deputy Chairman of the Supervisory Board
Klaus Hunger, Herne, Germany, Chairman of the Central Segment Works Council of GEA Heat Exchangers GmbH
Michael Kämpfert, Düsseldorf, Germany, Head of Human Resources at GEA Group Aktiengesellschaft (until August 31, 2012) Vice President Human Resources/Legal Affairs, GEA Food Solutions Segment (from February 1, 2012)
Eva-Maria Kerkemeier, Bochum-Herne, Germany, First Authorized Representative of IG Metall, Herne
a) – GEA Westfalia Separator Group GmbH, Oelde, Deputy Chairman of the Supervisory Board (from May 21, 2012)
Jean Spence, Wilmette/IL, U.S.A., Executive Vice President Research, Development & Quality Mondeléz International (until October 29, 2012: Kraft Foods, Inc.)
Dr. Jürgen Heraeus, Chairman Dr. Helmut Perlet Reinhold Siegers Klaus Hunger
Dr. Jürgen Heraeus, Chairman Dr. Helmut Perlet Reinhold Siegers Rainer Gröbel
Hartmut Eberlein, Chairman (financial expert within the meaning of section 100(5) of the Aktiengesetz (AktG – German Stock Corporation Act)) Dr. Jürgen Heraeus Kurt-Jürgen Löw Klaus Hunger
Dr. Jürgen Heraeus, Chairman Dr. Helmut Perlet Prof. Dr. Ing. Werner Bauer (from June 21, 2012)
| Q1 2012 |
Q1 2011 |
Q2 2012 |
Q2 2011 |
Q3 2012 |
Q3 2011 |
Q4 2012 |
Q4 2011 |
2012 | 2011 | 2010 | |
|---|---|---|---|---|---|---|---|---|---|---|---|
| Order intake (EUR million) | |||||||||||
| GEA Food Solutions | 97.4 | – | 95.8 | 102.3 | 81.7 | 107.9 | 101.0 | 119.6 | 375.9 | 329.8 | – |
| GEA Farm Technologies | 148.1 | 125.9 | 145.7 | 129.5 | 147.4 | 140.3 | 142.6 | 131.7 | 583.9 | 527.4 | 448.5 |
| GEA Heat Exchangers | 406.1 | 375.5 | 379.0 | 445.6 | 375.1 | 369.8 | 349.7 | 462.3 | 1,509.8 | 1,653.2 | 1,506.0 |
| GEA Mechanical Equipment | 238.7 | 219.2 | 233.2 | 230.1 | 245.4 | 221.6 | 254.6 | 203.9 | 971.9 | 874.9 | 740.4 |
| GEA Process Engineering | 511.3 | 401.5 | 401.2 | 426.2 | 468.5 | 433.3 | 469.2 | 449.0 | 1,850.2 | 1,709.9 | 1,416.1 |
| GEA Refrigeration Technologies | 177.9 | 152.7 | 180.4 | 162.8 | 200.1 | 164.8 | 197.8 | 170.1 | 756.2 | 650.4 | 579.6 |
| GEA Group | 1,544.9 | 1,242.1 | 1,401.0 | 1,462.5 | 1,477.3 | 1,402.8 | 1,477.9 | 1,502.2 | 5,901.1 | 5,609.7 | 4,578.0 |
| Revenue (EUR million) | |||||||||||
| GEA Food Solutions | 52.7 | – | 101.6 | 103.3 | 90.1 | 112.1 | 88.0 | 130.6 | 332.4 | 346.0 | – |
| GEA Farm Technologies | 117.8 | 99.6 | 133.1 | 118.3 | 157.8 | 138.1 | 172.3 | 153.8 | 580.9 | 509.8 | 446.7 |
| GEA Heat Exchangers | 389.7 | 338.1 | 404.3 | 390.9 | 392.1 | 424.2 | 422.7 | 463.6 | 1,608.8 | 1,616.8 | 1,483.4 |
| GEA Mechanical Equipment | 216.7 | 191.6 | 217.6 | 207.8 | 238.5 | 204.9 | 261.2 | 240.4 | 933.9 | 844.7 | 725.4 |
| GEA Process Engineering | 373.2 | 300.8 | 401.2 | 385.1 | 423.6 | 394.7 | 518.3 | 496.6 | 1,716.3 | 1,577.2 | 1,288.5 |
| GEA Refrigeration Technologies | 149.5 | 132.8 | 165.2 | 166.6 | 177.0 | 166.2 | 203.1 | 181.6 | 694.8 | 647.2 | 563.7 |
| GEA Group | 1,263.7 | 1,038.0 | 1,391.3 | 1,349.0 | 1,445.6 | 1,397.4 | 1,619.6 | 1,632.2 | 5,720.1 | 5,416.5 | 4,418.4 |
| Operating EBIT (EUR million) | |||||||||||
| GEA Food Solutions | -9.4 | – | 1.8 | 4.0 | -0.2 | 5.5 | -4.7 | 10.2 | -12.4 | 19.6 | – |
| GEA Farm Technologies | 1.9 | 2.1 | 8.3 | 5.6 | 14.7 | 12.1 | 21.6 | 14.0 | 46.4 | 33.8 | 26.3 |
| GEA Heat Exchangers | 24.0 | 20.8 | 27.6 | 26.5 | 31.3 | 37.9 | 52.1 | 36.7 | 135.0 | 121.8 | 118.8 |
| GEA Mechanical Equipment | 36.3 | 28.6 | 40.9 | 40.5 | 49.5 | 39.3 | 61.7 | 53.8 | 188.4 | 162.1 | 117.0 |
| GEA Process Engineering | 16.6 | 16.5 | 35.8 | 27.6 | 39.1 | 34.6 | 71.4 | 69.4 | 162.8 | 148.2 | 93.2 |
| GEA Refrigeration Technologies | 8.7 | 7.1 | 11.1 | 12.3 | 13.8 | 11.9 | 22.6 | 20.1 | 56.2 | 51.3 | 29.4 |
| GEA Group | 74.9 | 69.0 | 122.7 | 109.7 | 146.9 | 139.8 | 217.1 | 206.1 | 561.6 | 524.6 | 366.8 |
| Operating EBIT margin (%) | |||||||||||
| GEA Food Solutions | -17.8 | – | 1.8 | 3.8 | -0.3 | 4.9 | -5.3 | 7.8 | -3.7 | 5.7 | – |
| GEA Farm Technologies | 1.6 | 2.1 | 6.2 | 4.7 | 9.3 | 8.7 | 12.5 | 9.1 | 8.0 | 6.6 | 5.9 |
| GEA Heat Exchangers | 6.2 | 6.1 | 6.8 | 6.8 | 8.0 | 8.9 | 12.3 | 7.9 | 8.4 | 7.5 | 8.0 |
| GEA Mechanical Equipment | 16.8 | 14.9 | 18.8 | 19.5 | 20.8 | 19.2 | 23.6 | 22.4 | 20.2 | 19.2 | 16.1 |
| GEA Process Engineering | 4.4 | 5.5 | 8.9 | 7.2 | 9.2 | 8.8 | 13.8 | 14.0 | 9.5 | 9.4 | 7.2 |
| GEA Refrigeration Technologies | 5.8 | 5.3 | 6.7 | 7.4 | 7.8 | 7.2 | 11.1 | 11.0 | 8.1 | 7.9 | 5.2 |
| GEA Group | 5.9 | 6.6 | 8.8 | 8.1 | 10.2 | 10.0 | 13.4 | 12.6 | 9.8 | 9.7 | 8.3 |
*) Before effects of purchase price allocations and in 2012 additionally before non-recurring items from GEA Food Solutions
| April 18, 2013 | Annual Shareholders' Meeting for 2012 |
|---|---|
| May 08, 2013 | Quarterly Financial Report for the period to March 31, 2013 |
| July 30, 2013 | Half-yearly Financial Report for the period to June 30, 2013 |
| October 31, 2013 | Quarterly Financial Report for the period to September 30, 2013 |
The GEA Group Stock: Key data
American Depository Receipts (ADR)
| WKN | 660 200 | CUSIP | 361592108 |
|---|---|---|---|
| ISIN | DE0006602006 | Symbol | GEAGY |
| Reuters code | G1AG.DE | Sponsor | Deutsche Bank Trust Company Americas |
| Bloomberg code | G1A.GR | ADR-Level | 1 |
| Xetra | G1A.DE | Ratio | 1:1 |
| Public Relations | Investor Relations | ||
|---|---|---|---|
| Tel. | +49 (0)211 9136-1492 | Tel. | +49 (0)211 9136-1492 |
| Fax | +49 (0)211 9136-31492 | Fax | +49 (0)211 9136-31492 |
| [email protected] | [email protected] |
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 Group. 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 Investor and Public Relations Peter-Müller-Straße 12 40468 Düsseldorf Germany www.gea.com |
|---|---|
| Design | www.kpad.de |
| Printed by | WAZ-Druck, Duisburg |
| Picture credits | Pages 8, 27: Tim Luhmann, Kamen Page 20: Fotolia All other pictures: GEA Group Aktiengesellschaft |
This report is a translation of the German original; in the event of variances, the German version shall take precedence over the Englisch translation.
| Acquisitions 56, 122, 132 | |
|---|---|
| Appropriation of profit 63 | |
| At-equity 142 | |
| Award proceedings 57, 85, 146, 177, 179 | |
| Capital expenditures 13 | |
|---|---|
| Cash and cash equivalents 55, 102, 145 | |
| Compliance 12, 20, 68 | |
| Corporate Governance 19, 67, 203 | |
| Currency risk 88, 124 | |
| Current financial liabilities 162 | |
| Deferred taxes 116, 175 | |
|---|---|
| Derivative financial instruments 168 | |
| Discontinued operations 17 | |
| Dividend 63, 96, 177 | |
| Diversity 21, 70 | |
| Earnings per share 95, 177 | |
|---|---|
| Economic environment 32, 91 | |
| Environmental protection 18, 26, 87, 151 | |
| Equity 55, 61, 103, 146 | |
| Factoring 116, 125 | |
|---|---|
| Financial income 61, 172 | |
| Free cash flow 54, 102 |
GEA Performance Share Plan ............... 59, 96, 158
| Ideas and improvement management 60 | |
|---|---|
| Income taxes 174 | |
| Intangible assets 113, 140 | |
| Investor relations 93 | |
| Leasing 112, 136, 164, 179 | ||
|---|---|---|
| Litigation 85, 123, 178 |
| Materials 16, 172 | |
|---|---|
| Minority interest 149 |
| Net liquidity/Net debt 52, 54 | |
|---|---|
| Non-current financial liabilities 162 |
| Obligations 54, 118, 122, 150 | |
|---|---|
| Other expenses 171 | |
| Other income 171 | |
| Other liabilities 119, 165 | |
| Other provisions 151 | |
| Outlook 91 |
| Penison obligations 76, 101, 118, 152, 189 | |
|---|---|
| Percentage-of-completion method 55, 117, 123 | |
| Procurement 16 | |
| Productivity 14 |
| R&D 14, 120 | |
|---|---|
| Rating 96, 130 | |
| Remuneration 13, 69, 72, 120, 158 | |
| Reporting principles 110 | |
| Responsibility statement 200 | |
| Risk management 20, 82, 124, 201 |
| Segment reporting 182, 207 | |
|---|---|
| Sharholder structure 63, 94 | |
| Sustainability 18 |
| Tangible assets 106,131 | |
|---|---|
| Treasury shares 65 |
We live our values.
Excellence • Passion • Integrity • Responsibility • GEA-versity
GEA Group 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 Group 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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