Quarterly Report • Aug 23, 2007
Quarterly Report
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| (EUR million) | Q2 2007 |
Q2 2006 (adjusted) |
Change % |
Q1 - Q2 2007 |
Q1 - Q2 2006 (adjusted) |
Change % |
|---|---|---|---|---|---|---|
| Results of operations | ||||||
| New orders | 1,266.3 | 1,042.3 | 21.5 | 2,647.6 | 2,265.3 | 16.9 |
| Sales | 1,253.2 | 1,033.3 | 21.3 | 2,308.8 | 1,870.1 | 23.5 |
| thereof outside Germany | 1,013.0 | 800.5 | 26.5 | 1,837.9 | 1,445.6 | 27.1 |
| thereof in Germany | 240.2 | 232.7 | 3.2 | 470.9 | 424.5 | 10.9 |
| Order book | 2,482.4 | 1,820.0 | 36.4 | 2,482.4 | 1,820.0 | 36.4 |
| EBITDA | 113.9 | 84.7 | 34.5 | 195.3 | 135.4 | 44.3 |
| EBIT | 95.6 | 69.7 | 37.0 | 159.9 | 104.9 | 52.4 |
| % of sales | 7.6 | 6.7 | - | 6.9 | 5.6 | - |
| Earnings before tax | 81.4 | 58.9 | 38.1 | 133.2 | 84.6 | 57.4 |
| % of sales | 6.5 | 5.7 | - | 5.8 | 4.5 | - |
| Net income on continuing operations | 61.3 | 36.0 | 70.3 | 93.0 | 51.7 | 79.9 |
| Net loss on discontinued operations | -33.1 | -50.6 | 34.7 | -31.7 | -55.7 | 43.1 |
| Net income/loss | 28.2 | -14.6 | 293.0 | 61.2 | -4.0 | > 1,000 |
| Net assets | ||||||
| Total assets | 5,629.7 | 5,045.9 | 11.6 | 5,629.7 | 5,045.9 | 11.6 |
| Equity | 1,318.0 | 1,546.1 | -14.8 | 1,318.0 | 1,546.1 | -14.8 |
| % of total assets | 23.4 | 30.6 | - | 23.4 | 30.6 | - |
| Net position (adjusted) 1/2 | 161.2 | 115.2 | 40.0 | 161.2 | 115.2 | 40.0 |
| Gearing (%) 1/3 | -12.2 | -7.5 | - | -12.2 | -7.5 | - |
| Financial position | ||||||
| Cash flow from operating activities | -15.0 | 22.5 | -166.6 | -133.6 | -108.8 | -22.8 |
| Free cash flow 4 | -121.5 | -3.0 | < -1,000 | -251.3 | -147.5 | -70.4 |
| Investment (at balance sheet date) 5 | 2,678.0 | 2,416.1 | 10.8 | 2,678.0 | 2,416.1 | 10.8 |
| ROCE (%) 6 | 3.6 | 2.9 | - | 6.0 | 4.3 | - |
| Capital expenditure incl. finance leases | 135.7 | 23.5 | 476.4 | 151.4 | 44.3 | 241.8 |
| Employees 7 | ||||||
| Employees at balance sheet date | 19,009 | 16,416 | 15.8 | 19,009 | 16,416 | 15.8 |
| thereof in Germany | 6,609 | 6,294 | 5.0 | 6,609 | 6,294 | 5.0 |
| thereof outside Germany | 12,400 | 10,122 | 22.5 | 12,400 | 10,122 | 22.5 |
| GEA Group's shares | ||||||
| Share price at balance sheet date (EUR) | 25.81 | 13.40 | 92.6 | 25.81 | 13.40 | 92.6 |
| Basic earnings per share (EUR) | 0.15 | -0.08 | 293.0 | 0.33 | -0.02 | > 1,000 |
| thereof on continuing operations | 0.33 | 0.19 | 70.5 | 0.49 | 0.27 | 80.1 |
| thereof on discontinued operations | -0.18 | -0.27 | 34.7 | -0.17 | -0.30 | 43.1 |
| Weighted average number of shares outstanding (million) | 187.9 | 187.9 | - | 187.9 | 187.9 | - |
1) Including Plant Engineering
2) Net position = cash + securities – bank debt
7) Full-time equivalents (FTEs), excl. trainees
4) Free cash flow = cash flow from operating activities + cash flow from investing activities
6) ROCE = EBIT / investment
Management Report
Financial Statements
The figures for the corresponding quarter of 2006 are presented in this report on a like-for-like basis, i.e. adjusted for the discontinued operations.
The GEA Group's share price continued to perform well after the end of the reporting period, hitting a new high of EUR 26.66 on July 6. Following a slight consolidation in the market, the price slipped back to EUR 22.97 on July 27, 2007.
The GEA Group's participation in six roadshows, 221 one-on-one meetings and eight capital markets conferences represents a marked overall increase on 2006. It is evidence of the heightened interest shown by the capital markets and underlines the intensive nature of the GEA Group's IR work.
No options are held by either directors of the company or employees of the Group.
In 2006, the company launched a new long-term remuneration program entitled GEA Performance Share Plan for executives of the first and second management levels. To receive their allocation, executives must use their own money to buy a certain number of GEA Group shares and then hold them throughout the three-year term of the program. At the end of the program – initially June 30, 2009 – the performance of GEA Group shares is compared with the performance of MDAX stocks. Executives only receive a payout from the program if the performance of the GEA Group's share price at the end of the term at least matches the average performance of stocks in the MDAX.
| GEA Group's shares: key performance indicators | Q2 | Q2 | Q1 - Q2 | Q1 - Q2 |
|---|---|---|---|---|
| 2007 | 2006 | 2007 | 2006 | |
| Shares in issue at June 30 (million) | 194.4 | 194.4 | 194.4 | 194.4 |
| Number of shares at June 30 (million) | 187.9 | 187.9 | 187.9 | 187.9 |
| Average number of shares (million) | 187.9 | 187.9 | 187.9 | 187.9 |
| Share price at June 30 1 (EUR) |
25.81 | 13.40 | 25.81 | 13.40 |
| Highest share price (EUR) | 25.81 | 16.08 | 25.81 | 16.08 |
| Lowest share price (EUR) | 20.30 | 11.38 | 16.23 | 10.97 |
| Market capitalization at June 30 1 (EUR billion) 2 |
5.02 | 2.60 | 5.02 | 2.60 |
| Basic earnings per share (EUR) | 0.15 | -0.08 | 0.33 | -0.02 |
| thereof on discontinued operations | -0.18 | -0.27 | -0.17 | -0.30 |
1) Or on the last trading day of the reporting period
2) Based on number of shares in issue
Prices: XETRA closing prices
At its meeting on March 19, 2007, the Supervisory Board extended Jürg Oleas' contract as chairman of the Executive Board and personnel director by three years until the end of 2010.
At its meeting on June 19, 2007, the Supervisory Board complied with Peter Schenk's request to release him from his contract of employment effective September 30, 2007, which is prior to its expiry. Mr. Schenk worked for the GEA Group and its current subsidiaries for 23 years. In the seven years during which he headed the current core segments, they doubled their sales and tripled their earnings. At the same meeting the Supervisory Board appointed Mr. Niels Graugaard as his successor. Mr. Graugaard has successfully managed the largest division in the core segments since 1999. He has been appointed to the Executive Board on a three-year contract with effect from August 1, 2007 and will work closely with the chairman of the Executive Board to manage the operational side of the business.
Once the sale of Lurgi to the Air Liquide Group had been completed, Klaus Moll's contract as a member of GEA Group AG's Executive Board came to an end. He decided to accept the option offered to him by the company's Supervisory Board to join the Air Liquide Group as the chairman of Lurgi AG's Executive Board. Mr. Moll assumed responsibility for plant engineering on GEA Group AG's Executive Board in December 2003. From 1997 to 1999 he sat on the Executive Board of Lurgi AG when it was part of the former Metallgesellschaft.
The global economy continues to be robust. In their spring report, Germany's leading economic research institutes had already noted that the global economy was still on an upward trajectory, although the pace of growth was not quite what it was a year ago, mainly because output growth in the United States has weakened. The slowdown in the US economy, for which the Kiel Institute for World Economics forecasts a growth rate of 2.6 percent in 2007, will be virtually compensated for by growth in Europe and Asia. The Kiel Institute is forecasting global economic growth of 4.7 percent for 2007, following a rise of 5.1 percent in real terms in 2006. Economic growth in the euro zone continues unabated, with initial estimates indicating another rise of around 3 percent in the second quarter of 2007 following a 3.1 percent increase in the first quarter. Economic growth in the developing countries and emerging markets remains robust, not least because of their increasing integration into the international division of labor.
The German Engineering Federation (VDMA) is predicting that sales in the euro-zone engineering sector will rise by 6 percent in real terms in 2007 on the back of brisk demand for capital goods. The Federation is also expecting global equipment sales to increase by over 5 percent yearon-year in real terms in 2007. German engineering companies currently expect their output to rise by 9 percent in 2007.
In the second quarter of 2007, the GEA Group expanded its volume of new orders by 21.5 percent year on year to EUR 1.266 billion (2006: EUR 1.042 billion). The cumulative volume of new orders for the first half of 2007, totaling EUR 2.648 billion, is 16.9 percent higher than that of 2006 (EUR 2.265 billion). Newly acquired companies contributed EUR 124.3 million to this increase in new orders.
Growth was particularly strong in the Customized Systems segment. The Air Treatment division expanded its volume of new orders, particularly on the back of the contribution made by Denco, which was acquired in October 2006. In addition, there was a general recovery in the western European construction industry, and conditions in the industrial refrigeration market also remained benign in the second quarter of 2007. The Refrigeration division increased its volume of new orders in comparison with both the second quarter and the first half of 2006, principally as a result of buoyant demand from the food and petrochemicals industries, which are its key markets. The segment's volume of new orders grew in the second quarter by 24.0 percent to EUR 278.3 million (2006: EUR 224.4 million). The first-half volume of new orders was EUR 523.1 million and therefore 20.7 percent higher than the 2006 volume of EUR 433.5 million.
The divisions in the Process Equipment segment also achieved an encouraging increase in the second quarter of 2007, expanding their volume of new orders by 20.3 percent to EUR 410.3 million (2006: EUR 341.0 million). In the first half of the year the segment's new orders rose by 17.8 percent from EUR 688.1 million to EUR 810.8 million. The Process Equipment division continued on its upward trajectory, generating growth primarily in its plate heat exchangers operations but also in its other businesses. High capital spending in the petrochemicals industry as the result of persistently high oil prices, brisk activity in the shipbuilding sector and strong demand from the BRIC countries (Brazil, Russia, India and China) are driving business in this division, which is a leading equipment supplier to the process engineering sectors. Strong demand from the food, energy and marine sectors continued to provide a high volume of new orders in the Mechanical Separation division, whose innovative products have further enhanced its position in these fast-growing markets. The volume of business in the Dairy Farm Systems division was ahead of the prior year, assisted by the newly acquired company J. Houle & Fils. Growth stimulus came from eastern Europe and South America rather than western Europe's markets, which are reliant on subsidies. The key US business was more stable again in the second quarter.
The volume of new orders won by the Process Engineering segment, which in the second quarter rose by 25.3 percent year on year from EUR 392.1 million to EUR 491.2 million, reported the strongest growth of all segments. In the first half of the year, the segment also achieved the biggest increase in absolute terms, a jump of 13.2 percent to EUR 1.109 billion (2006: EUR 979.5 million). The Energy Technology division's business is dominated by high capacity utilization and a limited number of engineers in the world market. Virtually all business lines contributed to the growth in the Process Engineering division due to strong demand from a large number of buyer industries and from all major regions of the world.
| New orders (EUR million) |
Q2 2007 |
Q2 2006 |
Change % |
Q1 - Q2 2007 |
Q1 - Q2 2006 |
Change % |
|---|---|---|---|---|---|---|
| Customized Systems | 278.3 | 224.4 | 24.0 | 523.1 | 433.5 | 20.7 |
| Process Equipment | 410.3 | 341.0 | 20.3 | 810.8 | 688.1 | 17.8 |
| Process Engineering | 491.2 | 392.1 | 25.3 | 1,108.6 | 979.5 | 13.2 |
| Total | 1,179.8 | 957.5 | 23.2 | 2,442.4 | 2,101.1 | 16.2 |
| Eliminated and "Other" | 86.5 | 84.7 | 2.1 | 205.2 | 164.2 | 25.0 |
| GEA Group | 1,266.3 | 1,042.3 | 21.5 | 2,647.6 | 2,265.3 | 16.9 |
Our Gas Cleaning division (Lurgi Bischoff) managed to grow in an extremely competitive industry. The global climate for investment is positive, and business driven by environmental protection is traditionally particularly strong in the European Union. In the "Other" segment also Ruhr-Zink grew once more.
The GEA Group's sales for the second quarter of 2007 grew by 21.3 percent compared with the same period last year to EUR 1.253 billion (2006: EUR 1.033 billion) on the back of its well-stocked order books and persistently strong demand. First-half growth was 23.5 percent, taking sales up from EUR 1.870 billion to EUR 2.309 billion. New acquisitions generated sales of EUR 96.6 million in the first half of the year.
| Sales (EUR million) |
Q2 2007 |
Q2 2006 |
Change % |
Q1 - Q2 2007 |
Q1 - Q2 2006 |
Change % |
|---|---|---|---|---|---|---|
| Customized Systems | 250.7 | 197.8 | 26.7 | 456.7 | 366.0 | 24.8 |
| Process Equipment | 390.5 | 338.0 | 15.5 | 696.0 | 610.1 | 14.1 |
| Process Engineering | 506.9 | 413.8 | 22.5 | 930.5 | 736.5 | 26.3 |
| Total | 1,148.1 | 949.6 | 20.9 | 2,083.1 | 1,712.6 | 21.6 |
| Eliminated and "Other" | 105.0 | 83.7 | 25.6 | 225.6 | 157.5 | 43.3 |
| GEA Group | 1,253.2 | 1,033.3 | 21.3 | 2,308.8 | 1,870.1 | 23.5 |
The Customized Systems segment raised its sales in the second quarter by 26.7 percent to EUR 250.7 million (2006: EUR 197.8 million). By integrating Denco, the Air Treatment division increased its sales compared with the first quarter of 2006, and the Refrigeration division's
sales also rose significantly. In the first half the segment's sales rose by 24.8 percent from EUR 366.0 million to EUR 456.7 million. Second-quarter sales in the Process Equipment segment advanced by a further 15.5 percent from an already high level to EUR 390.5 million (2006: EUR 338.0 million). The Process Equipment division is the segment's biggest growth driver. The segment increased its sales by 14.1 percent from EUR 610.1 million to EUR 696.0 million in the first half of the year. The Process Engineering segment achieved sales growth of 22.5 percent to EUR 506.9 million (2006: EUR 413.8 million). This effect is due to acquisitions in 2006 and the well-stocked order book. In the first half the segment's sales rose by 26.3 percent from EUR 736.5 million to EUR 930.5 million.
The Gas Cleaning division and Ruhr-Zink, the biggest company in the "Other" segment, both increased their sales.
The GEA Group's order book at June 30, 2007 amounted to EUR 2.482 billion, a 36.4 percent increase on the same date in 2006 (EUR 1.820 billion). This was an improvement of EUR 397.2 million, or 19.0 percent, on December 31, 2006 (EUR 2.085 billion).
| Order book | Change | ||
|---|---|---|---|
| (EUR million) | 06/30/2007 | 06/30/2006 | % |
| Customized Systems | 296.8 | 235.7 | 26.0 |
| Process Equipment | 501.8 | 389.9 | 28.7 |
| Process Engineering | 1,609.1 | 1,158.8 | 38.9 |
| Total | 2,407.8 | 1,784.3 | 34.9 |
| Eliminated and "Other" | 74.6 | 35.7 | 109.1 |
| GEA Group | 2,482.4 | 1,820.0 | 36.4 |
As at June 30, 2007 we carried out a revaluation of problem Lentjes contracts to reflect secondquarter events, mainly prompted by a fire in a waste incineration plant which was not yet fully functional and significant problems in the availability of contractors at a largely completed flue-gas desulfurization plant.
There was a small temporary downturn in Lurgi's order book because orders were delayed by the disposal process. GEA Group AG completed the sale of Lurgi to the French-based Air Liquide Group effective July 20, 2007, following final approval by the antitrust authority on July 12.
The approval for the Lentjes sale may be delayed until the fourth quarter if the antitrust authority's review process is lengthy.
The decision made by the Federal Court of Justice (BGH) on July 9, 2007 has reduced the risk that we will be called to pay under the complaint brought by the Polyamid 2000 AG insolvency administrator. Although the Federal Court of Justice considers the contract for the construction of a carpet-recycling plant null and void due to failure to comply with German Stock Corporation Act (AktG) regulations, the outcome will be a claim for compensation for unjust enrichment amounting to any difference between the cost of works paid and the value of the work and services unduly received, rather than for reimbursement of the full cost of the works undertaken, which amounts to EUR 164.6 million plus interest, which the claimant is demanding. Therefore we have reduced the provision to reflect a lower risk.
The GEA Group's earnings before interest and tax (EBIT) for the second quarter of 2007 came to EUR 95.6 million, an increase of 37.0 percent on the second quarter of 2006 (EUR 69.7 million). All core segments, the Gas Cleaning division and Ruhr-Zink contributed to this rise. The EBIT margin rose from 6.7 percent to 7.6 percent. In the first half of 2007 the GEA Group's EBIT rose by 52.4 percent from EUR 104.9 million to EUR 159.9 million. The first-half EBIT margin increased from 5.6 percent in 2006 to 6.9 percent in 2007.
| Key figures on results of operations (EUR million) |
Q2 2007 |
Q2 2006 |
Change % |
Q1 - Q2 2007 |
Q1 - Q2 2006 |
Change % |
|---|---|---|---|---|---|---|
| Sales | 1,253.2 | 1,033.3 | 21.3 | 2,308.8 | 1,870.1 | 23.5 |
| EBITDA | 113.9 | 84.7 | 34.5 | 195.3 | 135.4 | 44.3 |
| EBIT | 95.6 | 69.7 | 37.0 | 159.9 | 104.9 | 52.4 |
| Earnings before tax | 81.4 | 58.9 | 38.1 | 133.2 | 84.6 | 57.4 |
| Income taxes | -20.1 | -22.9 | 12.5 | -40.2 | -32.9 | -22.2 |
| Net income on continuing operations | 61.3 | 36.0 | 70.3 | 93.0 | 51.7 | 79.9 |
| Net loss on discontinued operations | -33.1 | -50.6 | 34.7 | -31.7 | -55.7 | 43.1 |
| Net income/loss | 28.2 | -14.6 | 293.0 | 61.2 | -4.0 | > 1,000 |
The Customized Systems, Process Equipment and Process Engineering core segments increased their EBIT (up by 32.9 percent from EUR 71.9 million to EUR 95.6 million) and their EBIT margin (from 7.6 to 8.3 percent) in the second quarter of 2007. First-half EBIT of EUR 156.2 million was 44.2 percent higher than in 2006 (EUR 108.3 million), and the first-half EBIT margin rose from 6.3 percent to 7.5 percent.
Our stated target for 2007 is to increase the core segments' overall EBIT margin by at least 60 basis points. As at June 30, 2007 it can be seen that all of the Group's segments had increased their second-quarter and first-half earnings year on year. However, the size of the increase varied from segment to segment. As expected, the Process Equipment segment achieved the highest increase, raising its EBIT margin by 150 basis points to 12.0 percent in the second quarter of 2007 and in the first half by 220 basis points to a margin of 11.3 percent. Despite the problem of start-up costs for new products in its Air Treatment division, the Customized Systems segment was next, with a second-quarter increase of 80 basis points in its EBIT margin bringing it to 7.1 percent and a first-half rise of 70 basis points to 5.9 percent. The EBIT margin in the Process Engineering segment grew by 30 basis points to 6.1 percent in the second quarter and in the first half by 80 basis points to 5.4 percent.
The GEA Group raised its earnings before tax (EBT) in the second quarter by EUR 22.4 million or 38.1 percent to EUR 81.4 million and in the first half by EUR 48.6 million or 57.4 percent to EUR 133.2 million. The fall in net interest income is due to higher interest rates.
Because tax costs are expected to be lower at the year end we applied a lower tax rate of 30.2 percent to earnings before tax in the second quarter of 2007 for the first time. The previous rate was 38.9 percent. The continuing operations increased their net income in the second quarter by 70.3 percent to EUR 61.3 million (2nd quarter 2006: EUR 36.0 million) and in the first half by 79.9 percent to EUR 93.0 million compared with EUR 51.7 million in 2006. The discontinued operations reported a net loss of EUR 33.1 million in the second quarter (2006: net loss of EUR 50.6 million) and a first-half net loss of EUR 31.7 million (2006: net loss of EUR 55.7 million). Although only a small pre-tax loss of EUR 2.5 million was made on discontinued operations, the post-tax figure includes a charge for the required write-down of deferred taxes resulting from reversing provisions. Overall, the GEA Group's net income for the second quarter improved from a net loss of EUR 14.6 million in 2006 to a profit of EUR 28.2 million and a first-half profit of EUR 61.2 million following a net loss of EUR 4.0 million in 2006.
The GEA Group's net income equates to earnings of EUR 0.15 per share in the second quarter (2006: loss of EUR 0.08) and of EUR 0.33 per share for the first half of 2007, compared with a loss of EUR 0.02 per share in 2006.
The adjusted net position – including discontinued operations – deteriorated by EUR 330.7 million compared with December 31, 2006. Over one third of this relates to outflows of funds for capital spending on financial assets and property, plant and equipment. The remainder is largely working capital, which rose proportionately less than sales. The Group's strong profitability improved the net position compared to the second quarter of 2006 by EUR 46.0 million. The gearing ratio is minus 12.2 percent.
| Cash flow from operating activities -133.6 -108.8 ROCE (%) 6.0 4.3 Cash flow from investing activities -117.7 -38.6 Free cash flow -251.3 -147.5 Cash flow from financing activities 281.5 39.3 Net position (adjusted) 1 161.2 115.2 |
Change % |
Q1 - Q2 2006 |
Q1 - Q2 2007 |
Summary cash flow statement (EUR million) |
|---|---|---|---|---|
| -22.8 | ||||
| - | ||||
| -204.7 | ||||
| -70.4 | ||||
| 616.6 | ||||
| 40.0 | ||||
| Gearing (%) 1 -12.2 -7.5 |
- |
1) Including Plant Engineering segment
Compared with December 31, 2006, total assets at June 30, 2007 had grown by 13.7 percent to EUR 5.630 billion. The increase in current liabilities arose primarily from the debt-financed acquisitions of J. Houle & Fils Inc., Procomac S.p.A. and Aero Heat Exchanger Inc. in the first half of 2007. In addition, the ending of the cash clearing system on December 31, 2006, with
| % of | % of | Change | ||
|---|---|---|---|---|
| 06/30/2007 | total assets | 12/31/2006 | total assets | % |
| 2,363.1 | 42.0 | 2,248.9 | 45.4 | 5.1 |
| 1,297.9 | 23.1 | 1,250.8 | 25.3 | 3.8 |
| 412.6 | 7.3 | 431.8 | 8.7 | -4.5 |
| 2,456.0 | 43.6 | 2,119.1 | 42.8 | 15.9 |
| 810.6 | 14.4 | 583.5 | 11.8 | 38.9 |
| 5,629.7 | 100.0 | 4,951.4 | 100.0 | 13.7 |
| 1,318.0 | 23.4 | 1,261.5 | 25.5 | 4.5 |
| 799.1 | 14.2 | 876.1 | 17.7 | -8.8 |
| 72.3 | 1.3 | 47.5 | 1.0 | 52.1 |
| 2,551.5 | 45.3 | 1,870.8 | 37.8 | 36.4 |
| 961.1 | 17.1 | 943.0 | 19.0 | 1.9 |
| 5,629.7 | 100.0 | 4,951.4 | 100.0 | 13.7 |
the result that the discontinued operations now hold most of their deposits externally, increased the balance-sheet items "Assets held for sale" and "Current liabilities".
The number of employees – excluding trainees – working in continuing operations came to 19,009 at the end of the second quarter of 2007 (June 30). This was an increase of 1,536 people compared with December 31, 2006, reflecting both growth by acquisition and organic growth in all segments. The acquisitions of J. Houle & Fils, Procomac and Aero Heat Exchanger brought 940 additional employees into the GEA Group. We employed 596 extra people through organic growth.
| GEA Group | 19,009 | 16,416 |
|---|---|---|
| Other | 556 | 517 |
| Total | 18,453 | 15,899 |
| Process Engineering | 6,616 | 5,508 |
| Process Equipment | 6,632 | 6,067 |
| Customized Systems | 5,205 | 4,324 |
| Employees in the GEA Group, excl. trainees | 06/30/2007 | 06/30/2006 |
A total of 1,731 people were employed in the discontinued operations at June 30, 2007 (December 31, 2006: 1,777 people).
Research and development (R&D) costs in the first half of 2007 came to EUR 34.8 million compared with EUR 31.2 million in the same period last year, making the R&D ratio 1.5 percent of sales.
| Research and development (R&D) costs | Q2 | Q2 | Change | Q1 - Q2 | Q1 - Q2 | Change |
|---|---|---|---|---|---|---|
| (EUR million) | 2007 | 2006 | % | 2007 | 2006 | % |
| Customer-funded (reimbursed) | 4.8 | 4.7 | 1.3 | 10.3 | 9.6 | 7.1 |
| Group-funded (non-reimbursed) | 12.6 | 11.1 | 14.2 | 24.5 | 21.6 | 13.4 |
| Total R&D costs | 17.4 | 15.8 | 10.3 | 34.8 | 31.2 | 11.5 |
| R&D ratio (% of sales) | 1.4 | 1.5 | - | 1.5 | 1.7 | - |
Specialty mechanical engineering continued to deliver a very strong performance in the first half of 2007. The level of new orders received ensured that all segments were fully employed. The disposal of the discontinued operations will significantly improve the Group's risk profile.
As things stand overall, there are no risks that might jeopardize the continued existence of the GEA Group. Adequate financial provision was made for all risks in accordance with the relevant legislation.
With regard to the complaint brought by the Polyamid 2000 AG insolvency administrator against GEA Group AG and three other Group companies, on July 9, 2007 the Federal Court of Justice (BGH) partially overturned the ruling of the regional appeal court in Frankfurt am Main involving one Group company as defendant, and referred the case back to the appeal court for a further hearing and decision. The Federal Court of Justice dismissed the appeal regarding the remaining defendants and therefore upheld the rejection of the complaint. The status of the case has been reported under "Discontinued operations" above. In terms of other ongoing litigation, the situation as described in the "Opportunities and risks report" in the 2006 annual report did not change materially during the period under review.
The Kiel Institute for World Economics is currently forecasting global economic growth of 4.7 percent for both 2007 and 2008. The "Euro-zone economic outlook", a joint forecast from the ifo Institute of Economic Research in Germany, the INSEE in Paris and the ISAE in Rome, puts 2007 GDP growth at 3.0 percent, which would even exceed the prediction in our first-quarter report. Strong growth is also expected to continue in the emerging markets of Asia and eastern Europe. Demand in the euro zone is brisk. Spending on capital equipment, which is key to our business, will continue to grow strongly in Germany, in part because depreciation allowances will be reduced at the start of 2008.
The GEA Group's key sales markets – the food and beverages, pharmaceuticals, energy and chemicals/petrochemicals industries – will continue to grow in the next few years because they are largely driven by global population growth and rising household incomes, particularly in the newly industrializing countries. Growing demand for processed foodstuffs, medicines and energy will boost demand for process engineering. This will benefit the GEA Group, which has a sizeable market presence in these areas.
Based on the extremely high level of new orders in 2006 totaling EUR 5.0 billion, the Executive Board forecasts a further increase of over 10 percent in 2007. We expect sales to rise by over 15 percent in 2007 as a whole and margins in the core business to improve by over 60 basis points, which will significantly increase our EBIT. Net income will be impacted by two one-off factors. Firstly we expect the proceeds from the sale of Lurgi to exceed EUR 200 million after setting aside sufficient funds for guarantees and general warranties, and secondly we expect our tax expense to be higher because a write-down of deferred taxes will be necessary once the corporation tax rate in Germany is reduced. The net adjustment to deferred tax assets this will necessitate, estimated to be EUR 75 million, will be reported in the third quarter.
We confirm that our target is to increase our core-segment margin to 10 percent by 2009. Organic growth in sales should be between 5 and 10 percent per annum in 2008 and 2009. We will continue to pursue our policy of active acquisition by taking advantage of the financial scope provided by the sale of the Plant Engineering segment. We plan to achieve a gearing ratio (net debt to equity ratio) of 50 - 60 percent, which equates to a multiple of earnings before interest, tax, depreciation and amortization (EBITDA) of around two, excluding pension provisions. To achieve this target we do not rule out repurchasing and then retiring our own stock. Therefore in July 2007 we retired approximately 6.2 million of the treasury shares we hold, leaving a small residue of 190,000 shares.
To the best of our knowledge, and in accordance with the applicable accounting principles for interim financial reporting, the interim consolidated financial statements give a fair presentation of the financial position and financial performance of the Group, and the interim management report of the Group includes a fair presentation of the development and performance of the business and the position of the Group, together with a description of the material opportunities and risks associated with the expected development of the Group for the remainder of the financial year.
Bochum, August 2, 2007
GEA Group Aktiengesellschaft
On behalf of the Executive Board
Jürg Oleas Hartmut Eberlein
Financial Statements
at June 30, 2007
| Assets | Change | ||
|---|---|---|---|
| (EUR thousand) | 06/30/2007 | 12/31/2006 | % |
| Property, plant and equipment | 453,525 | 404,927 | 12.0 |
| Investment property | 57,686 | 56,869 | 1.4 |
| Goodwill | 1,297,902 | 1,250,763 | 3.8 |
| Other intangible assets | 71,917 | 41,280 | 74.2 |
| Investments in enterprises reported at equity | 11,322 | 10,876 | 4.1 |
| Other non-current financial assets | 58,130 | 52,343 | 11.1 |
| Deferred taxes | 412,589 | 431,825 | -4.5 |
| Non-current assets | 2,363,071 | 2,248,883 | 5.1 |
| Inventories | 695,224 | 531,794 | 30.7 |
| Trade receivables | 1,263,820 | 1,163,512 | 8.6 |
| Income tax assets | 17,320 | 17,162 | 0.9 |
| Other current financial assets | 198,503 | 146,501 | 35.5 |
| Cash and cash equivalents | 281,104 | 260,101 | 8.1 |
| Current assets | 2,455,971 | 2,119,070 | 15.9 |
| Assets held for sale | 810,634 | 583,476 | 38.9 |
| Total assets | 5,629,676 | 4,951,429 | 13.7 |
| Change | ||
|---|---|---|
| 06/30/2007 | 12/31/2006 | % |
| 496,890 | 496,890 | - |
| 1,077,076 | 1,077,076 | - |
| -187,854 | -249,149 | 24.6 |
| -4,253 | 327 | < -1,000 |
| -65,263 | -65,263 | - |
| 1,393 | 1,582 | -11.9 |
| 1,317,989 | 1,261,463 | 4.5 |
| 191,791 | 287,576 | -33.3 |
| 511,032 | 509,676 | 0.3 |
| 16,714 | 17,585 | -5.0 |
| 7,250 | 13,766 | -47.3 |
| 72,312 | 47,535 | 52.1 |
| 799,099 | 876,138 | -8.8 |
| 356,511 | 321,262 | 11.0 |
| 146,378 | 165,814 | -11.7 |
| 645,228 | 89,674 | 619.5 |
| 662,554 | 707,027 | -6.3 |
| 32,309 | 29,098 | 11.0 |
| 708,472 | 557,964 | 27.0 |
| 2,551,452 | 1,870,839 | 36.4 |
| 961,136 | 942,989 | 1.9 |
| 5,629,676 | 4,951,429 | 13.7 |
April 1 - June 30, 2007
| (EUR thousand) | Q2 2007 |
Q2 2006 |
Change % |
|---|---|---|---|
| Sales | 1,253,161 | 1,033,254 | 21.3 |
| Cost of sales | -930,696 | -757,045 | -22.9 |
| Gross profit | 322,465 | 276,209 | 16.7 |
| Selling expenses | -107,362 | -99,423 | -8.0 |
| Administrative expenses | -109,486 | -97,384 | -12.4 |
| Other income | 7,099 | 13,030 | -45.5 |
| Other expenses | -17,816 | -22,620 | 21.2 |
| Net income/loss on enterprises reported at equity | 635 | -79 | 903.8 |
| Other financial income | 33 | 4 | 725.0 |
| Other financial expenses | - | - | - |
| Earnings before interest and tax (EBIT) | 95,568 | 69,737 | 37.0 |
| Interest and similar income | 3,186 | 2,156 | 47.8 |
| Interest expense and similar charges | -17,369 | -12,946 | -34.2 |
| Earnings before tax on continuing operations | 81,385 | 58,947 | 38.1 |
| Income taxes | -20,072 | -22,934 | 12.5 |
| thereof current taxes | -12,494 | -10,044 | -24.4 |
| thereof deferred taxes | -7,578 | -12,890 | 41.2 |
| Net income on continuing operations | 61,313 | 36,013 | 70.3 |
| Net loss on discontinued operations | -33,080 | -50,640 | 34.7 |
| Net income/loss | 28,233 | -14,627 | 293.0 |
| thereof minority interest | -46 | 23 | -300.0 |
| thereof attributable to shareholders of GEA Group Aktiengesellschaft |
28,279 | -14,650 | 293.0 |
| Per share (EUR) | |||
| Basic earnings per share | 0.15 | -0.08 | 293.0 |
| thereof on continuing operations | 0.33 | 0.19 | 70.5 |
| thereof on discontinued operations | -0.18 | -0.27 | 34.7 |
| Diluted earnings per share | 0.15 | -0.08 | 293.0 |
| Weighted average number of shares outstanding (million) | 187.9 | 187.9 | - |
January 1 - June 30, 2007
| Q1 - Q2 | Q1 - Q2 | Change | |
|---|---|---|---|
| (EUR thousand) | 2007 | 2006 | % |
| Sales | 2,308,778 | 1,870,090 | 23.5 |
| Cost of sales | -1,715,456 | -1,378,326 | -24.5 |
| Gross profit | 593,322 | 491,764 | 20.7 |
| Selling expenses | -212,131 | -190,181 | -11.5 |
| Administrative expenses | -208,026 | -186,159 | -11.7 |
| Other income | 22,899 | 29,681 | -22.8 |
| Other expenses | -36,913 | -40,430 | 8.7 |
| Net income/loss on enterprises reported at equity | 676 | -30 | > 1,000 |
| Other financial income | 33 | 279 | -88.2 |
| Other financial expenses | - | -12 | 100.0 |
| Earnings before interest and tax (EBIT) | 159,860 | 104,912 | 52.4 |
| Interest and similar income | 6,120 | 6,451 | -5.1 |
| Interest expense and similar charges | -32,807 | -26,780 | -22.5 |
| Earnings before tax on continuing operations | 133,173 | 84,583 | 57.4 |
| Income taxes | -40,218 | -32,903 | -22.2 |
| thereof current taxes | -21,362 | -15,052 | -41.9 |
| thereof deferred taxes | -18,856 | -17,851 | -5.6 |
| Net income on continuing operations | 92,955 | 51,680 | 79.9 |
| Net loss on discontinued operations | -31,718 | -55,718 | 43.1 |
| Net income/loss | 61,237 | -4,038 | > 1,000 |
| thereof minority interest | -58 | 43 | -234.9 |
| thereof attributable to shareholders of | |||
| GEA Group Aktiengesellschaft | 61,295 | -4,081 | > 1,000 |
| Per share (EUR) | |||
| Basic earnings per share | 0.33 | -0.02 | > 1,000 |
| thereof on continuing operations | 0.49 | 0.27 | 80.1 |
| thereof on discontinued operations | -0.17 | -0.30 | 43.1 |
| Diluted earnings per share | 0.33 | -0.02 | > 1,000 |
Weighted average number of shares outstanding (million) 187.9 187.9 -
January 1 - June 30, 2007
| Net income/loss 61,237 -4,038 plus income taxes 40,218 32,903 plus net loss on discontinued operations 31,718 55,718 Earnings before tax on continuing operations 133,173 84,583 Net interest income 26,687 20,329 Earnings before interest and tax (EBIT) 159,860 104,912 Depreciation, amortization, impairment and reversal of impairment on non-current assets 35,422 30,441 Other non-cash income and expenses -382 -249 Obligations to employees -11,561 -7,539 Change in provisions -1,498 11,178 Losses on disposal of non-current assets -165 -1,837 Change in inventories, incl. unbilled PoC receivables 1 -49,337 -93,175 Change in trade receivables -30,037 -13,245 Change in trade payables -94,423 -21,169 Change in other operating assets and liabilities -21,659 -2,293 Tax payments -18,043 -14,592 Net cash flow from operating activities of discontinued operations -101,824 -101,262 Cash flow from operating activities -133,647 -108,830 Proceeds from disposal of non-current assets 3,233 5,254 Cash payments for purchase of property, plant and equipment and intangible assets -45,754 -28,546 Cash payments for purchase of non-current financial assets -2,061 -7,096 Interest and dividend income 3,708 5,267 Cash payments for acquisitions -77,692 -2,923 Proceeds from disposals - 1,169 Net cash flow from investing activities of discontinued operations 880 -11,750 Cash flow from investing activities -117,686 -38,625 Change in finance lease liabilities -775 -925 Dividend paid by GEA Group AG for 2005 - -18,795 Cash receipts from finance facilities 538,447 45,133 Cash payments for redemption of finance facilities -31,580 -29,500 Interest payments -19,463 -7,574 Net cash flow from financing activities of discontinued operations -205,115 50,945 Cash flow from financing activities 281,514 39,284 Exchange-rate-related and other changes in cash and cash equivalents -4,745 -4,706 Change in unrestricted cash and cash equivalents 25,436 -112,877 Unrestricted cash and cash equivalents at beginning of year 252,240 424,363 Adjustment of unrestricted cash and cash equivalents of discontinued operations at beginning of year - -86,755 Unrestricted cash and cash equivalents at balance sheet date 277,676 224,731 Restricted cash and cash equivalents 3,428 4,577 Cash and cash equivalents reported on the face of the balance sheet 281,104 229,308 |
Q1 - Q2 | Q1 - Q2 | |
|---|---|---|---|
| (EUR thousand) | 2007 | 2006 | |
1) Including advances received
at June 30, 2007
| Accumulated | |||||||
|---|---|---|---|---|---|---|---|
| Additional | other compre | ||||||
| Issued | paid-in | Retained | hensive | Treasury | Minority | ||
| (EUR thousand) | capital | capital | earnings | income/loss | shares | interest | Total |
| Balance at 12/31/2005 | |||||||
| (187,945,616 shares) | 496,890 | 1,077,076 | 58,086 | 16,418 | -65,263 | 884 | 1,584,091 |
| Net loss | -288,224 | -288,224 | |||||
| Minority interest | -215 | 215 | - | ||||
| Accumulated other comprehensive income/loss | -16,091 | 49 | -16,042 | ||||
| Total income and expense for the year | -304,266 | ||||||
| thereof minority interest | 264 | ||||||
| thereof attributable to shareholders of GEA Group AG |
-304,530 | ||||||
| Dividend paid by GEA Group AG | -18,795 | -18,795 | |||||
| Change in other minority interest | 434 | 434 | |||||
| Balance at 12/31/2006 | |||||||
| (187,945,616 shares) | 496,890 | 1,077,076 | -249,149 | 327 | -65,263 | 1,582 | 1,261,463 |
| Net income | 61,237 | 61,237 | |||||
| Minority interest | 58 | -58 | - | ||||
| Accumulated other comprehensive income/loss | -4,580 | -15 | -4,595 | ||||
| Total income and expense for the year | 56,642 | ||||||
| thereof minority interest | -73 | ||||||
| thereof attributable to shareholders of GEA Group AG |
56,715 | ||||||
| Change in other minority interest | -116 | -116 | |||||
| Balance at 06/30/2007 (187,945,616 shares) |
496,890 | 1,077,076 | -187,854 | -4,253 | -65,263 | 1,393 | 1,317,989 |
| Accumulated other comprehensive income/loss (EUR thousand) |
Cumulative translation adjustment |
Available-for-sale securities |
Hedge accounting | Total |
|---|---|---|---|---|
| Balance at 12/31/2005 | 23,598 | 836 | -8,016 | 16,418 |
| Accumulated other comprehensive income/loss | -29,255 | -631 | 13,795 | -16,091 |
| Balance at 12/31/2006 | -5,657 | 205 | 5,779 | 327 |
| Accumulated other comprehensive income/loss | -4,754 | 1,691 | -1,517 | -4,580 |
| Balance at 06/30/2007 | -10,411 | 1,896 | 4,262 | -4,253 |
The interim financial statements of GEA Group Aktiengesellschaft and its subsidiaries' consolidated interim accounts have been prepared in accordance with the International Financial Reporting Standards (IFRSs) and the relevant interpretations of the International Accounting Standards Board (IASB), as applicable under Regulation No. 1606/2002 of the European Parliament and Council concerning the adoption of International Accounting Standards in the EU. These consolidated financial statements for the second quarter have not been reviewed by an auditor.
The accounting policies applied in these interim financial statements are unchanged since December 31, 2006 and are described in detail on pages 66 to 77 of the annual report and consolidated IFRS financial statements of the GEA Group. Otherwise, no IFRS accounting pronouncements of relevance to the GEA Group were issued or adopted during the reporting period.
The interim financial statements give a fair presentation of the GEA Group's financial position and financial performance during the reporting period.
The preparation of interim financial statements requires estimates and assumptions to be made that impact on the company's net assets, liabilities, provisions, deferred tax assets and liabilities as well as income and expenses. Although such estimates and assumptions are made carefully and in good faith, the actual amounts may differ from the estimates used in these interim financial statements.
Factors that may cause these amounts to differ from projections are a deterioration in the global economy, movements in exchange rates and interest rates, significant litigation, and changes in environmental or other legislation. Production errors, the loss of key customers, and changes in funding can also impair the GEA Group's future performance.
The interim financial statements have been prepared in euros. All amounts, including comparative figures, have been rounded, consequently there may be differences between the sum of individual values and the total value shown.
On April 6, 2007 the Dairy Farm Systems division acquired J. Houle & Fils Inc., a company based in Drummondville (Quebec), Canada. J. Houle & Fils Inc. is a leading North American manufacturer of manure-handling equipment for the stock farming industry. The takeover strengthens the Dairy Farm Systems division's position as one of the world's leading manufacturers and suppliers of agricultural equipment, and also enhances its ability to provide dairy producers with an integrated, end-to-end service.
On April 12, 2007 the Process Engineering division expanded its liquid processing operations in the food and beverages industry by acquiring Procomac S.p.A., Sala Baganza, Italy. Procomac S.p.A. specializes in the manufacture and installation of aseptic bottling plants for PET bottles. Its product range also includes non-aseptic bottling lines. The acquisition enables the division to extend its value chain and to expand its leading position in the integrated foodprocess engineering sector.
On June 1, 2007 the Refrigeration division acquired all the shares in Aero Heat Exchanger Inc. based in Richmond (British Columbia), Canada. The company is a leading North American manufacturer of refrigeration systems for the food industry. This deal consolidates the Refrigeration division's position, particularly in the North American market.
The provisional purchase cost of the companies amounts to EUR 100.685 million compared with net assets provisionally calculated to be EUR 55.109 million. Uncertainty about the determination of the net asset value primarily surrounds the measurement of intangible assets. Based on this provisional measurement, goodwill comes in at EUR 45.576 million. This is derived firstly from synergies arising from the opportunity to sell products globally which in part had previously only been sold locally by the companies acquired. Secondly, there is further potential for synergies in the GEA Group's new ability to offer an extended process chain to dairy producers and the liquid-processing segment of the food industry.
Because they have only been consolidated for a short period, and due to integration costs, the contributions to second-quarter earnings made by Procomac and Aero Heat Exchanger are negligible. The contribution to pre-tax earnings by Houle was EUR 740 thousand based on a provisional calculation of net assets.
Including the subsidiaries of the companies acquired, takeovers in the second quarter increased the number of companies consolidated in the Group by 17. In addition, two newly established companies and one company which had not previously been consolidated were included in the group of consolidated companies for the first time in the second quarter of 2007. Two companies were deconsolidated during the same period because they had been wound up. Including the changes made in the first quarter, the number of consolidated companies had increased by a total of 22 since December 31, 2006.
With the consent of the Supervisory Board, the Executive Board of GEA Group AG decided in August 2006 to sell the PET and Fibers (Zimmer), Energy and Environment (Lentjes), Gasto-Chemicals, and Synthetic Fuels and Biofuels (Lurgi) divisions of the former Plant Engineering segment. These divisions have been classified and presented as discontinued operations since the interim report on the third quarter of 2006. Since these divisions have been treated as discontinued operations, their assets and liabilities have been reported on the face of the balance sheet as assets held for sale and as liabilities related to assets held for sale. The income statement merely shows the divisions together with their net income or loss as "net income/loss on discontinued operations". The prior-year figures on the face of the income statement have been restated accordingly.
The net loss on discontinued operations is broken down as follows:
| (EUR thousand) | Q2 2007 |
Q2 2006 |
Q1 - Q2 2007 |
Q1 - Q2 2006 |
|---|---|---|---|---|
| Sales | 264,455 | 246,406 | 518,360 | 501,591 |
| Other income | 76,582 | 3,350 | 80,706 | 4,571 |
| Expenses | -371,221 | -333,943 | -629,291 | -598,641 |
| Net interest income | 25,492 | 789 | 27,762 | 1,287 |
| Taxes | -28,388 | 32,758 | -29,255 | 35,474 |
| Net loss on discontinued operations | -33,080 | -50,640 | -31,718 | -55,718 |
Other income includes income of EUR 73.60 million arising from the reversal of the provision for the risk of enforced repayment of remuneration received for constructing a carpet recycling plant because the contract for work was null and void (see page 8). EUR 34.555 million of this amount is attributable to Lentjes and the remaining amount of EUR 39.045 million relates to the former Zimmer division. The interest accrued on the interest cost of the provision was also cancelled, which increased net interest income by EUR 20.786 million. Under commercial law the income from the reversal of the provision is due to GEA Group AG, because at the time GEA Group AG had indemnified the companies involved against the risk.
In the first half of 2007, Lentjes incurred a net loss of EUR 67.756 million (2006: loss of EUR 8.308 million), which includes the income from the reduction in the provision. Penalties for failing to meet deadlines due to suppliers' delays and technical problems were the main causes of its weak EBIT. Lurgi's net income for this period amounted to EUR 6.432 million (2006: net loss of EUR 3.277 million). The sale of Lurgi to the Air Liquide Group, Paris, France, was finalized on July 20, 2007.
The prior-year comparative figures include income and expenses attributable to Lurgi and Lentjes as well as to Zimmer. The Zimmer operations specializing in plant for the manufacture of chemical fibers and nonwovens were sold with effect from December 14, 2006. As already reported, the remaining plant engineering operations relating to polymers, synthetic fibers and thermoplastics were sold within the GEA Group to Lurgi on December 31, 2006 as part of an asset deal.
The financial income and expenses shown in the segment tables on pages 28 et seq. comprise interest income and other financial income as well as interest expenses and other financial expenses. Other financial income essentially consists of income from equity investments. Interest income includes interest income from receivables, deposits and securities as well as the projected return on plan assets. Other financial expenses comprise impairment of financial assets and expenses incurred by the transfer of losses. Interest expenses consist of borrowing costs and the interest cost of other provisions and provisions for pensions, other postemployment benefits and supplementary healthcare benefits. The figure resulting from the netting of interest income and interest expenses represents the interest element of EBITDA and EBIT.
The taxes recognized in the interim reporting period were estimated using an anticipated taxation rate of 30.2 percent instead of the 38.9 percent used in the preceding quarter. The estimate of the anticipated taxation rate of 30.2 percent is based more closely on the weighted average income tax rate. The effects of the 2008 corporation tax reforms approved by the second chamber of the German parliament on July 6, 2007 have not yet been taken into account. The corporation tax reforms will reduce the tax rate applicable to the Group's German companies from 38.9 percent to 29.5 percent. The additional tax expense in the third quarter resulting from the remeasurement of deferred taxes this will necessitate is expected to be around EUR 75 million.
The cash flow statement is prepared under the indirect method with respect to cash flow from operating activities and under the direct method with respect to cash flow from investing and financing activities. Interest payments, interest proceeds and income tax payments are shown separately. Consequently, the computation of cash flow is based on earnings before interest and tax (EBIT). Whereas interest payments and interest proceeds are reported in the sections containing interest-bearing items, cash flow from income taxes is reported as cash flow from operating activities.
The individual activities shown on the face of the cash flow statement have been adjusted to exclude the cash flows from the Zimmer, Lurgi and Lentjes divisions for both 2007 and 2006. The cash flow from these divisions is shown for each individual activity as "net cash flow from discontinued operations".
| Cash flow | Customized | Process | Process | ||
|---|---|---|---|---|---|
| (EUR thousand) | Systems | Equipment | Engineering | Other | GEA Group |
| Q1 - Q2 2007 | |||||
| Cash flow from operating activities | 215 | 3,088 | -24,803 | -112,147 | -133,647 |
| Cash flow from investing activities | -32,062 | -44,268 | -36,936 | -4,420 | -117,686 |
| Cash flow from financing activities | 47,969 | 45,646 | 86,196 | 101,703 | 281,514 |
| Exchange-rate-related changes in cash and | |||||
| cash equivalents | -371 | 361 | 15 | -4,750 | -4,745 |
| Change in unrestricted cash and cash equivalents | 15,751 | 4,827 | 24,472 | -19,614 | 25,436 |
| Q1 - Q2 2006 | |||||
| Cash flow from operating activities | 4,374 | 1,058 | -5,462 | -108,800 | -108,830 |
| Cash flow from investing activities | -9,397 | -3,158 | -14,971 | -11,099 | -38,625 |
| Cash flow from financing activities | 18,841 | 8,290 | 55,930 | -43,777 | 39,284 |
| Exchange-rate-related changes in cash and | |||||
| cash equivalents | - | 1,260 | -5,896 | -70 | -4,706 |
| Change in unrestricted cash and cash equivalents | 13,818 | 7,450 | 29,601 | -163,746 | -112,877 |
The GEA Group was organized into the following four business segments as at June 30, 2007:
A detailed description of the individual business segments' business operations and the products and services they offer can be found on pages 15 and 16 of the annual report and consolidated IFRS financial statements of the GEA Group.
Segment results for the second quarter were as follows:
| Segment information | Customized | Process | Process | |||
|---|---|---|---|---|---|---|
| (EUR million) | Systems | Equipment | Engineering | Other | Eliminated | GEA Group |
| Q2 2007 | ||||||
| Sales | 250.0 | 366.5 | 502.2 | 134.4 | - | 1,253.2 |
| Intersegment sales | 0.7 | 24.0 | 4.7 | 2.9 | -32.3 | - |
| Total sales | 250.7 | 390.5 | 506.9 | 137.3 | -32.3 | 1,253.2 |
| EBITDA | 21.7 | 52.8 | 35.3 | 4.1 | - | 113.9 |
| EBIT | 17.8 | 46.7 | 31.0 | -0.0 | - | 95.6 |
| Segment earnings before tax (EBT) | 17.1 | 44.8 | 29.9 | -10.4 | - | 81.4 |
| Financial income | 0.8 | 2.6 | 2.3 | 6.8 | -9.4 | 3.2 |
| Financial expenses | 1.5 | 4.5 | 3.6 | 17.2 | -9.4 | 17.4 |
| Equity method income/loss in net financial income | - | 0.3 | 0.3 | - | - | 0.6 |
| Net loss on discontinued operations | - | - | - | -33.1 | - | -33.1 |
| Sales from discontinued operations | - | - | - | 257.4 | - | 257.4 |
| Capital expenditure | 7.5 | 13.8 | 6.1 | 2.7 | - | 30.1 |
| Depreciation, amortization and impairment | 3.9 | 6.0 | 4.2 | 4.1 | - | 18.3 |
| Q2 2006 | ||||||
| Sales | 197.6 | 317.0 | 414.9 | 103.8 | - | 1,033.3 |
| Intersegment sales | 0.2 | 21.0 | -1.1 | 2.5 | -22.7 | - |
| Total sales | 197.8 | 338.0 | 413.8 | 106.3 | -22.7 | 1,033.3 |
| EBITDA | 15.7 | 40.7 | 27.6 | 0.7 | - | 84.7 |
| EBIT | 12.4 | 35.5 | 24.1 | -2.2 | - | 69.7 |
| Segment earnings before tax (EBT) | 12.2 | 33.8 | 23.1 | -10.2 | - | 58.9 |
| Financial income | 0.9 | 1.1 | 1.9 | 4.6 | -6.4 | 2.1 |
| Financial expenses | 1.0 | 3.0 | 2.7 | 12.6 | -6.4 | 12.9 |
| Equity method income/loss in net financial income | - | -0.3 | 0.2 | - | - | -0.1 |
| Net loss on discontinued operations | - | - | - | -50.6 | - | -50.6 |
| Sales from discontinued operations | - | - | - | 243.4 | - | 243.4 |
| Capital expenditure | 3.5 | 3.6 | 4.2 | 2.9 | - | 14.2 |
| Depreciation, amortization and impairment | 3.3 | 5.2 | 3.5 | 3.4 | - | 15.4 |
| Segment information | Customized | Process | Process | |||
|---|---|---|---|---|---|---|
| (EUR million) | Systems | Equipment | Engineering | Other | Eliminated | GEA Group |
| Q1 - Q2 2007 | ||||||
| Sales | 455.3 | 648.8 | 923.2 | 281.5 | - | 2,308.8 |
| Intersegment sales | 1.4 | 47.2 | 7.2 | 6.8 | -62.7 | - |
| Total sales | 456.7 | 696.0 | 930.5 | 288.3 | -62.7 | 2,308.8 |
| EBITDA | 34.6 | 90.6 | 58.5 | 11.6 | - | 195.3 |
| EBIT | 27.0 | 78.9 | 50.3 | 3.7 | - | 159.9 |
| Segment earnings before tax (EBT) | 25.9 | 75.1 | 48.7 | -16.5 | - | 133.2 |
| Financial income | 1.5 | 4.4 | 4.6 | 11.8 | -16.1 | 6.2 |
| Financial expenses | 2.6 | 8.1 | 6.2 | 32.0 | -16.1 | 32.8 |
| Equity method income/loss in net financial income | - | 0.3 | 0.4 | - | - | 0.7 |
| Net loss on discontinued operations | - | - | - | -31.7 | - | -31.7 |
| Sales from discontinued operations | - | - | - | 511.3 | - | 511.3 |
| Segment assets | 904.2 | 1,787.1 | 1,896.4 | 3,119.2 | -2,077.2 | 5,629.7 |
| thereof from discontinued operations | - | - | - | 796.6 | - | 796.6 |
| Segment liabilities | 401.0 | 776.8 | 1,224.5 | 2,893.2 | -983.7 | 4,311.7 |
| thereof from discontinued operations | - | - | - | 961.1 | - | 961.1 |
| Capital expenditure | 10.6 | 18.6 | 9.4 | 7.2 | - | 45.8 |
| Depreciation, amortization and impairment | 7.6 | 11.7 | 8.3 | 7.9 | - | 35.4 |
| Number of employees | 5,205 | 6,632 | 6,616 | 556 | - | 19,009 |
| Q1 - Q2 2006 | ||||||
| Sales | 365.7 | 565.5 | 731.7 | 207.2 | - | 1,870.1 |
| Intersegment sales | 0.3 | 44.7 | 4.8 | 7.1 | -56.8 | - |
| Total sales | 366.0 | 610.1 | 736.5 | 214.3 | -56.8 | 1,870.1 |
|---|---|---|---|---|---|---|
| EBITDA | 25.5 | 65.9 | 40.7 | 3.2 | - | 135.4 |
| EBIT | 19.1 | 55.4 | 33.8 | -3.4 | - | 104.9 |
| Segment earnings before tax (EBT) | 18.8 | 52.0 | 32.2 | -18.5 | - | 84.6 |
| Financial income | 1.7 | 2.7 | 3.9 | 10.6 | -12.2 | 6.7 |
| Financial expenses | 1.9 | 6.1 | 5.2 | 25.7 | -12.2 | 26.8 |
| Equity method income/loss in net financial income | - | -0.2 | 0.1 | - | - | -0.0 |
| Net loss on discontinued operations | - | - | - | -55.7 | - | -55.7 |
| Sales from discontinued operations | - | - | - | 498.2 | - | 498.2 |
| Segment assets | 802.0 | 1,582.6 | 1,500.5 | 2,697.9 | -1,537.1 | 5,045.9 |
| thereof from discontinued operations | - | - | - | 481.8 | - | 481.8 |
| Segment liabilities | 298.1 | 616.2 | 882.2 | 2,296.9 | -593.7 | 3,499.8 |
| thereof from discontinued operations | - | - | - | 802.8 | - | 802.8 |
| Capital expenditure | 8.7 | 8.8 | 11.0 | 6.5 | - | 35.0 |
| Depreciation, amortization and impairment | 6.4 | 10.6 | 6.9 | 6.5 | - | 30.4 |
| Number of employees | 4,324 | 6,067 | 5,508 | 517 | - | 16,416 |
Since the decision was taken to sell the Zimmer, Lurgi and Lentjes divisions, the Plant Engineering segment, which was shown in 2006, has not been reported. Its assets and liabilities are now shown as assets and liabilities of the "Other" segment. The Gas Cleaning division, which remains in the GEA Group but was part of the former Plant Engineering segment, forms part of the "Other" segment. The comparative figures for 2006 have been restated accordingly.
With the exception of depreciation, amortization and impairment, there were no material noncash expenses within the segments in either the second quarter of 2007 or in the corresponding period of 2006.
The GEA Group's business segments operate in five main geographical regions. Most of the Group's sales are generated in Germany, other European countries and the Americas:
| Segmentation by region | Rest of | Asia, | ||||
|---|---|---|---|---|---|---|
| (EUR million) | Germany | Europe | Americas | Oceania | Africa | Total |
| Q1 - Q2 2007 | ||||||
| Sales | 470.9 | 884.2 | 420.4 | 480.1 | 53.2 | 2,308.8 |
| percentage of total | 20.4% | 38.3% | 18.2% | 20.8% | 2.3% | 100.0% |
| Segment assets | 2,835.7 | 1,721.3 | 698.4 | 343.4 | 30.9 | 5,629.7 |
| thereof from discontinued operations | 616.8 | 47.3 | 90.4 | 37.8 | 4.4 | 796.6 |
| Capital expenditure | 21.7 | 11.2 | 6.8 | 5.8 | 0.2 | 45.8 |
| Employees 1 | 6,609 | 7,668 | 2,496 | 1,924 | 312 | 19,009 |
| Q1 - Q2 2006 | ||||||
| Sales | 424.5 | 655.1 | 348.3 | 393.0 | 49.2 | 1,870.1 |
| percentage of total | 22.7% | 35.0% | 18.6% | 21.0% | 2.6% | 100.0% |
| Segment assets | 2,829.1 | 1,420.8 | 503.8 | 251.4 | 40.8 | 5,045.9 |
| thereof from discontinued operations | 358.2 | 50.0 | 42.1 | 25.3 | 6.2 | 481.8 |
| Capital expenditure | 19.7 | 10.9 | 2.8 | 1.4 | 0.1 | 35.0 |
| Employees 1 | 6,294 | 6,540 | 1,931 | 1,336 | 315 | 16,416 |
1) Full-time equivalents (FTEs), excl. trainees
Capital expenditure in the segment information relates to cash acquisitions of intangible assets and property, plant and equipment plus – unlike the cash flow statement – additionally capitalized liabilities under finance leases. Depreciation, amortization and impairment represent the diminution in the value of property, plant and equipment and intangible assets.
This interim report is a translation of the German original. Only the German version is legally binding.
This interim report includes forward-looking statements on GEA Group AG, 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.
| October 31, 2007 | Interim Report for the period to September 30, 2007 |
|---|---|
| March 13, 2008 | Financial Statements Press Conference / Analysts' Meeting for 2007 |
| April 23, 2008 | Annual Shareholders' Meeting for 2007 |
| May 8, 2008 | Interim Report for the period to March 31, 2008 |
| July 31, 2008 | Interim Report for the period to June 30, 2008 |
| October 31, 2008 | Interim Report for the period to September 30, 2008 |
| WKN | 660 200 |
|---|---|
| ISIN | DE0006602006 |
| Reuters code | G1AG.DE |
| Bloomberg code | G1A.GR |
| Xetra | G1A.DE |
GEA Group Aktiengesellschaft Dorstener Str. 484 44809 Bochum Germany www.geagroup.com
Corporate Communications Tel. +49 (0) 234 980-1081 Fax +49 (0) 234 980-1087 Email [email protected]
Investor Relations Tel. +49 (0) 234 980-1490 Fax +49 (0) 234 980-1087 Email [email protected]
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