Bauer AG — Interim / Quarterly Report 2014

Aug 14, 2014

Half-Year Interim Report to June 30, 2014

GROUP KEY FIGURES – 1ST HALF 2014

IFRS in EUR million	06/2013 *	06/2014	Change	12/2013 *
Total Group revenues	721.3	749.2	3.9 %	1,504.2
of which Germany	212.7	234.6	10.3 %	410.4
International	508.6	514.6	1.2 %	1,093.8
International in %	70.5	68.7	n/a	72.7
of which Construction	346.1	351.4	1.5 %	731.3
Equipment	309.8	321.3	3.7 %	628.7
Resources	93.6	101.0	7.9 %	199.2
Other/Elimination/Consolidation	-28.2	-24.5	n/a	-55.0
Consolidated revenues	679.1	732.1	7.8 %	1,447.5
Sales revenues	607.3	645.5	6.3 %	1,402.2
Orders received	804.9	757.6	-5.9 %	1,484.5
Orders in hand	868.6	773.7	-10.9 %	765.2
EBITDA	50.3	57.6	14.6 %	124.0
EBITDA margin in % (of sales revenues)	8.3	8.9	n/a	8.8
EBIT	7.4	13.6	83.1 %	30.1
EBIT margin in % (of sales revenues)	1.2	2.1	n/a	2.1
Net profit or loss	-7.9	-11.0	n/a	-19.4
Capital investment in property, plant and equipment	45.7	22.8	-50.1 %	91.9
Shareholders' equity	444.5	400.2	-10.0 %	419.4
Equity ratio in %	26.5	24.2	n/a	26.5
Net assets	1,677.8	1,652.3	-1.5 %	1,585.2
Earnings per share	-0.45	-0.66	n/a	-0.99
Return on equity after tax in %	n/a	n/a	n/a	-4.6
Employees (on average over the year)	10,388	10,406	0.2 %	10,264
of which Germany	4,112	4,154	1.0 %	4,144
International	6,276	6,252	-0.4 %	6,120

* Previous year's figures amended; see p. 24f. and 2013 Annual Report p. 106f.

At variance with the consolidated revenues presented in the Group income statement, the total Group revenues presented here include portions of revenues from associated companies as well as revenues of non-consolidated subsidiaries and joint ventures.

Percentages are calculated on the basis of unrounded starting values (EUR thousand).

Summary

Total revenues of the BAUER Group at the end of fi rst half 2014 were EUR 749.2 million, 3.9 percent above the previous year comparative (EUR 721.3 million). The Group's net loss for the period of EUR 11.0 million was EUR 3.1 million down against the previous year comparative. The fi rst-half result thus once again illustrates the many disturbances on global markets impacting on our business. The loss made on our dam project in the USA also continues to burden Group's earnings. We additionally had to make provision for an expected fi ne of over EUR 3 million arising from proceedings against one of our subsidiaries.

In our business, the year normally begins with a loss-making quarter which is balanced out in the subsequent quarters. We were unable to achieve this by the end of the fi rst half, although revenues have generally progressed in line with our planning. Business continued to be impacted by the uncertainty linked to a wide range of political problems. Order receipts in our Equipment segment in particular are very inconsistent. They nevertheless remained around the previous year's level.

In the Construction segment, the large-scale projects of the previous year have for the most part been completed. Business is again dominated by medium-scale contracts. In the Resources segment, the Environment area made positive progress, while the reorganization of the Materials area is well under way. Exploration & Mining continues to make losses, however, and is demanding major efforts on our part.

Group orders in hand of EUR 773.7 million are 10.9 percent down against the previous year comparative. The decrease refl ects the fact that last year we had a number of very large orders on our books which were mostly completed. We still have reasonable levels of orders in hand for medium to large-scale projects in all regions, which will keep us quite busy over the period ahead. Our Equipment segment continues to operate on the basis of short delivery lead times. Demand is very volatile, owing to the political situation in a number of regions.

As set forth in the 2013 Annual Report, we forecast total Group revenues for the full year 2014 of around EUR 1.55 billion and EBIT of around EUR 75 million. We adjust our after-tax profi t forecast slightly in view of the issues described and the most recent developments in relation to Russia. We now predict full-year profi t after tax of around EUR 15 to 20 million.

Course of Business and Background Conditions

GENERAL ECONOMIC CLIMATE

The global economy generally remains on a positive trend. However, increasing political and social turbulence in many countries around the world is spreading uncertainty ever more widely, endangering the stability of global relations and the associated economic opportunities.

The positive ongoing trends in the Far East and on the American continent are of course bright spots. And in Europe, too, there are gradual signs of an upturn. But there are many other changes which are giving cause for concern.

The situation in the Middle East has generally not stabilized. While some countries, such as the United Arab Emirates, Qatar and Saudi Arabia, have returned to a normal growth curve, the confl ict in Iraq has become much more severe. The country has for weeks now been suffering a renewed civil war, with absolutely no sign of any resolution to it in the near future. The

newly infl amed confl ict between Israel and the Palestinians has again become a fl ashpoint of international tensions. The impact is being felt by other countries in the region too. Nor are there any signs of an early normalization in Libya. The Arabian peninsula has become a region of great uncertainty as a result of the wide-ranging events of recent years. Consequently, further ongoing disturbance must be expected.

From a European viewpoint, the confl ict in Ukraine between the West and Russia is the biggest cause for concern. The problems of recent months have pushed Ukraine even closer to the verge of economic catastrophe. Russia is coming under increasing international pressure as a result of its conduct, and the threat of sanctions is hindering prospects for economic growth. Trade has already been signifi cantly reduced, and no solution is in sight.

All of these uncertainties are toxic in their impact on global economic development. The weakness of the Russian economy will doubtless also impact on the Western countries which rely on it as a key trading partner.

The BAUER Group has been operating in Russia and Ukraine for many years. Business in the region has declined in recent months. We expect to see further deterioration if calm is not restored to the confl ict. We see more positive prospects in Arabia, as the economies of the countries where we are most strongly represented in that region are improving.

Global construction markets are nevertheless generally making positive progress, aside from current crisis points. There has been far too little investment in construction in western economies over recent decades, while in the emerging economies there is still a signifi cant backlog in terms of renewal of infrastructure to meet the needs of the modern world. Increasing urbanization, especially, is creating enormous demand for construction works, as major infrastructure improvements are needed in order to enhance people's lives and grow the economy. Those works, including underground railway systems, bridges and underground parking garages, will entail increased demand for specialist foundation engineering services. The world will face further challenges in the years ahead with regard to water, the environment and energy production – all areas in which we offer solutions, and which will become increasingly important as time goes on. We therefore believe we are essentially very well set to meet a wide range of demands through our products and services.

A pleasing factor is that trends in the major economic regions are positive. The US economy is back on the road to stable, if slow, growth, and as such can act as a motor to drive progress in other countries. In some regions in the Far East, such as China, growth is slowing. But a number of countries, such as Indonesia, are in fact developing much better than could have been imagined years ago. Europe is slowly returning to growth, and in the Arab region the situation in some countries at least appears to be improving, so increasing demand for construction is evident there too. Eastern Europe is still struggling to recover its growth trend however. By contrast, a number of countries in Africa are exploiting their natural resources effectively to drive their economies.

In the machinery business, the shifts among market players following on from the major changes seen in previous years continue apace. Overcapacity among Chinese manufacturers has led many of them to move into international markets. Western companies are in a strong position to defend their customer base, however, so the situation is slowly beginning to stabilize. It is good to see that no new players are emerging on markets at present, so the supply side is quite stable.

In the past year we were able to increase our machinery sales in the face of complex market conditions. We are sure that customers value the major efforts we have made in recent years in terms of product development, quality and service, and as a result trust in our products is not only holding up well, but is increasing. We therefore expect to see sustained small growth in this segment in future. In relation to deep drilling rigs, we achieved a success with the cooperation agreement with Saxon Energy Services Inc. for the development of a new rig model.

Our Resources segment continues to see interesting prospects worldwide, particularly in the fi eld of environmental tech nology and for our products and services relating to water. As a result, that segment will likewise be able once again to achieve reasonable growth.

OVERVIEW OF INTERNATIONAL MARKETS

Germany

Trends on the German construction market are positive, and will remain healthy over the years ahead. The mild weather in the early months of 2014 meant that construction companies had a much better start to the year than last year, though that improvement will be dampened somewhat over the full year. Housing construction remains the main driver of growth, thanks to low interest rates acting as a major incentive for developers to invest. The commercial property construction sector is profi ting from the general upturn in the global economy. Only the public sector is lagging somewhat, because federal budgets were delayed due to last year's election. Moreover, the additional budget funding for transport infrastructure at federal level is in no way adequate to meet the country's needs. It is to be expected that more will be done in this respect in future, however, as all politicians have recognized the problem of under-fi nancing in the transport sector. That will bring additional opportunities for us.

The widely anticipated positive effects of the turnaround of energy policy in Germany have unfortunately not yet been realized. Only the onshore wind power sector is generating healthy orders. The necessary power lines from northern to southern Germany have not yet been realized, and little progress is being made in the development of offshore wind power. Even the urgently required growth in conventional power station capacity is not happening due to a lack of clear policy framing.

Europe

Eastern Europe continues to suffer the after-effects of the fi nancial crisis. Investment in construction remains at very low levels in almost all the countries in the region. A more positive trend is to be expected as a result of this stagnation over the years ahead. The situation in Russia is fundamentally somewhat better. The country's oil and gas wealth makes it easier to provide funding for infrastructure projects. The consequences of the confl ict in Ukraine are severe, though the further course of developments is unpredictable.

We predict that growth on construction markets in Western Europe will continue to be modest over the coming years. Many countries have had to impose strict budget constraints which will hamper the further development of their infrastructure. There are nevertheless a number of opportunities for us around the region, including in Switzerland. In France, major funding will be needed in the coming years to improve the traffi c situation in and around Paris.

Middle East and Central Asia

The countries of the Middle East have plenty of funds at their disposal thanks to their sales of oil and gas. Construction markets across the region – especially in Saudi Arabia, Qatar and the United Arab Emirates – should actually be growing rapidly. Unfortunately, progress is being hindered, among other factors, by protracted decision-making processes. Some major projects are in urgent need of execution, such as the underground railway lines in Riyadh and Qatar and the facilities for the football World Cup, but they have all recently been subject to repeated delays. Activities relating to the projects have intensifi ed however.

The situation in Egypt is remarkably positive for our business. Although the country is still struggling with major political and economic problems overall, some large-scale construction projects have been instigated, fi nanced in particular by other Arab nations. There are now also concrete plans once again for development of the underground railway system in Cairo. Our local presence is enabling us to acquire some interesting contracts. In Libya, trends on the construction market remain very subdued. Trends in Lebanon are pleasing, as a number of interesting projects are being carried out there. The market is at risk of being weakened due to the Israeli-Palestinian confl ict however.

Asia-Pacifi c, Far East and Australia

Construction markets in the Far East remain pleasingly stable. Almost every country in the region is undertaking major infrastructure projects. In Hong Kong, construction sector capacities are being well utilized by extensive rail and road construction works. The same is true in Singapore and Malaysia. Economies such as Indonesia and the Philippines are also seeing healthy growth. By contrast, the Australian economy is not doing as well. Construction activity in the country has slowed.

America

The situation in North America is improving steadily after a number of weak years. It is in the USA that there is the highest level of backlogged demand in many areas of infrastructure, arising from a lack of adequate investment over recent decades. Major efforts will be made over the coming years to make good this defi cit, and a positive side effect of this commitment will be a further boost to the economy. Overall, we regard the market situation as stable, and offering good opportunities for further growth in both our Construction and Equipment segments. Trends on the construction market in Canada are likewise sound. Interesting projects are regularly arising in Central America.

Africa

In Africa, it will be worthwhile actively pursuing new business, even though the economic weakness of the countries concerned means the business generated will not make a major contribution to our total Group revenues overall.

In general terms, our Equipment segment has similar opportunities to those of the Construction segment, as demand for machinery is dependent on construction markets.

The Resources segment has a number of interesting environmental projects in the pipeline, on the Arabian Peninsula especially, which will soon be entering the contract award phase. Enquiries from the mining sector have fallen back signifi cantly due to the weakness of commodity markets. A slight recovery is being seen in some isolated instances. Demand for water-related products and services is increasing worldwide.

PERFORMANCE OF THE BAUER GROUP

The adoption of IFRS 11 (Joint Arrangements) has entailed minor changes to the recognition of construction joint ventures in the income statement. These were also adjusted for the previous year, but they are of lesser importance. All explanatory notes relate to changes to the adjusted previous year fi gures.

In the fi rst half of 2014, the total Group revenues of the BAUER Group increased by 3.9 percent relative to the same period last year, to EUR 749.2 million. The Group's net loss for the period of EUR 11.0 million represented a EUR 3.1 million deterioration against the previous year comparative (EUR 7.9 million).

Earnings were hampered in particular by a EUR 5.0 million increase in income tax expense, and by the need to make provision for a fi ne of over EUR 3 million expected to be imposed on one of our subsidiaries. The earnings of the Equipment segment were substantially better than in the same period last year. By contrast, the earnings of the Resources segment declined.

Group orders in hand decreased against the previous year comparative period by 10.9 percent to EUR 773.7 million. This is in line with our expectations, as a number of large-scale Construction segment projects were completed in the course of the year. Orders in hand in the Equipment segment are slightly down against the previous year comparative. This illustrates how diffi cult it still is to fi ll up production capacities in advance. Orders in the environmental technology, underground mining and materials business of the Resources segment are in line with our planning, though in Exploration & Mining order receipts are insuffi cient.

All in all, the levels of orders in hand and the opportunities offered by the market provide an appropriate foundation for further growth in our business.

BREAKDOWN OF TOTAL GROUP REVENUES BY SEGMENT

	in EUR million	06/2013 * Revenues	06/2014 Revenues	Share 2014	Change against previous year	Orders in hand
	BAUER Spezialtiefbau GmbH (BST)
	BST, Germany	55.9	71.9	9.6 %	28.6 %	+
	Subsidiaries, Germany	30.4	5.0	0.7 %	-83.6 %	•
	BST, international	29.8	35.8	4.8 %	20.1 %	•
	Subsidiaries, international	249.0	252.9	33.7 %	1.6 %	•
Construction	BST Group total	365.1	365.6	48.8 %	0.1 %	•
	SCHACHTBAU NORDHAUSEN GmbH incl. subsidiaries (SBN)	24.9	29.3	3.9 %	17.7 %	•
	less intra-Group revenues and IFRS adjustments	-43.9	-43.5	-5.8 %
	Construction total	346.1	351.4	46.9 %	1.5 %	•
	BAUER Maschinen GmbH (BMA)	179.1	195.6	26.1 %	9.2 %	•
	Equipment subsidiaries	199.3	205.7	27.5 %	3.2 %	•
Equipment	BMA Group total	378.4	401.3	53.6 %	6.1 %	•
	SBN	30.9	30.5	4.1 %	-1.3 %	•
	less intra-Group revenues and IFRS adjustments	-99.5	-110.5	-14.8 %
	Equipment total	309.8	321.3	42.9 %	3.7 %	•
	BAUER Resources GmbH (BRE)	2.8	9.4	1.3 %	n/a
	Resources subsidiaries	90.9	96.3	12.8 %	5.9 %	-
Resources	BRE Group total	93.7	105.7	14.1 %	12.8 %	-
	SBN	12.3	15.0	2.0 %	22.8 %	++
	less intra-Group revenues and IFRS adjustments	-12.4	-19.7	-2.6 %
	Resources total	93.6	101.0	13.5 %	7.9 %	•
	BAUER Aktiengesellschaft (BAG)	15.4	15.0	2.0 %	-2.6 %
Other	Other subsidiaries	1.2	1.1	0.1 %	-8.3 %
	Total Other/services less intra-Group revenues and IFRS adjustments	16.6 -44.8	16.1 -40.6	2.1 % -5.4 %	-3.0 %
	Group total (including minority interests)	721.3	749.2	100.0 %	3.9 %	•
	of which: Germany	212.7	234.6	31.3 %	10.3 %
	International	508.6	514.6	68.7 %	1.2 %

* See footnote on page 2

Notes on the table:

List also includes non-consolidated holdings

Valuation of orders in hand relative to budgeted sales:

-- weak; - slightly weak; • adequate; + well adequate; ++ very well adequate; Percentages and totals are calculated on the basis of unrounded starting values

Breakdown Germany/international according to country in which accounting figures were allocated. For reasons of complexity the figures are not absolutely precise.

Trends in our Business Segments

CONSTRUCTION SEGMENT

CONSTRUCTION SEGMENT KEY FIGURES

in EUR '000	06/2013 *	06/2014	Change	12/2013 *
Total Group revenues	346,099	351,448	1.5 %	731,274
Sales revenues	292,085	328,609	12.5 %	657,920
Orders received	364,351	323,136	-11.3 %	716,888
Orders in hand	531,339	470,389	-11.5 %	498,701
EBIT	2,928	7,418	n/a	21,827
Net profit or loss	204	-1,661	n/a	5,472
Employees (on average over the year)	5,531	5,677	2.6 %	5,531

* See footnote on page 2

The total Group revenues of the Construction segment amounting to EUR 351.4 million were 1.5 percent up on the previous year. We made a good start to the year following on from a weak previous year. The second quarter of 2013 was very strong after the planned large-scale projects had started. Consequently, the weaker second quarter of this year adversely affects the half-year comparison. EBIT (earnings before interest and taxes) increased by EUR 4.5 million over the previous year comparative period to EUR 7.4 million. By contrast, the net profi t for the period deteriorated from EUR 0.2 million last year to EUR -1.7 million as a result of a substantial increase in income tax expense.

Orders in hand in our Construction segment fell to EUR 470.4 million (previous year: EUR 531.3 million) owing to the completion of large-scale projects. The orders are spread evenly across the various regions of the world, which provides a sound foundation for us to achieve our revenue targets in the current year. Nevertheless, we need to make determined efforts in order to establish a sound foundation for next year too.

The course of our business in Germany was particularly positive. Revenues increased by 28.6 percent over the previous year comparative. While revenues in the UK and in Saudi Arabia declined signifi cantly because of a shortage of projects, a substantial improvement was seen in Switzerland, the United Arab Emirates, Hong Kong and Indonesia. Revenues in Russia were again healthy thanks to follow-up contracts from the large-scale project in St. Petersburg. Our dam project in Tennessee, USA, unfortunately continues to cause us problems, with the resultant losses impacting on segment earnings.

Our other German construction companies in the Group have healthy order levels. SCHACHTBAU NORDHAUSEN GmbH is continuing to see healthy levels of capacity utilization in its mining business, which is assigned to the Resources segment.

An appraisal of ongoing market trends in the construction sector was presented in the "Overview of international markets" section above.

Full-year outlook

All in all, we expect our Construction segment's revenues to be around the same level as last year. We expect that earnings will improve slightly relative to 2013.

EQUIPMENT SEGMENT

EQUIPMENT SEGMENT KEY FIGURES

in EUR '000	06/2013 *	06/2014	Change	12/2013 *
Total Group revenues	309,782	321,340	3.7 %	628,661
Sales revenues	229,521	223,567	-2.6 %	561,615
Orders received	350,713	339,031	-3.3 %	632,102
Orders in hand	154,015	134,216	-12.9 %	116,525
EBIT	5,771	13,174	n/a	32,223
Net profit or loss	-5,303	-93	n/a	5,055
Employees (on average over the year)	2,991	3,057	2.2 %	2,998

* See footnote on page 2

Total Group revenues in the Equipment segment in the fi rst half of the year rose by 3.7 percent against the previous year comparative to EUR 321.3 million. Sales revenues decreased slightly, falling by 2.6 percent to EUR 223.6 million. EBIT increased from the previous year comparative EUR 5.8 million to EUR 13.2 million. A number of complex machines were delivered in the fi rst half of the year, resulting in an improvement in margins.

The net loss for the period improved from EUR 5.3 million last year to EUR 0.1 million this year. Orders in hand in the Equipment segment declined to EUR 134.2 million (previous year: EUR 154.0 million). Order receipts remain very volatile. Some of our markets are repeatedly being subjected to new political uncertainty, hampering the willingness of our customers to invest. No major growth has been achieved since the recovery in markets following on from the fi nancial crisis in 2010. Business continues to be very short-term in nature. Specialist foundation engineering machinery customers expect immediate delivery after ordering. Demand is nevertheless lively, leading us to forecast a generally stable trend in sales growth.

Our Equipment segment needs to increase revenues by more than 10 percent over the years ahead in order to achieve sustained earnings growth. This would provide much better utilization of our capacities, and so improve coverage of fi xed costs. We aim to deliver that increase based on new products in the specialist foundation engineering sector, by sales of the newly developed BG 11, and through our range of deep drilling rigs. The cooperation contract with Saxon Energy Services Inc. to develop a large-sized deep drilling rig is an example of the increased opportunities on what are new markets for us. We are confi dent that we will be able to improve our revenues in those segments.

On the other hand, the sanctions imposed on Russia are a matter of concern to us. We hope that they will not entail too severe a decline in our sales.

Full-year outlook

We forecast that sales in our Equipment segment will increase in the current fi nancial year, enabling us also to improve earnings.

RESOURCES SEGMENT

RESOURCES SEGMENT KEY FIGURES

in EUR '000	06/2013 *	06/2014	Change	12/2013 *
Total Group revenues	93,604	100,956	7.9 %	199,211
Sales revenues	85,372	93,166	9.1 %	182,115
Orders received	117,999	120,006	1.7 %	190,404
Orders in hand	183,222	169,070	-7.7 %	150,020
EBIT	-2,506	-3,281	n/a	-24,582
Net profit or loss	-4,513	-6,653	n/a	-31,444
Employees (on average over the year)	1,587	1,383	-12.9 %	1,449

* See footnote on page 2

Our Resources segment increased its total Group revenues by 7.9 percent to EUR 101.0 million in the fi rst half of 2014, primarily thanks to its Materials and Environment areas. Segment EBIT of EUR -3.3 million was somewhat lower than the previous year comparative (EUR -2.5 million). The net loss for the period of EUR 6.7 million was likewise down against the previous year.

Major efforts to reorganize the Resources segment continue. Operations in the fi eld of environmental technology and relating to water are especially pleasing. Our healthy levels of orders in hand in those areas will help us to achieve growth. The management of the Materials area has been changed, and intensive optimization efforts are under way. The successes achieved to date are highly promising. The segment had a better than expected start to this year thanks to the mild weather in the early months, among other factors.

Our deep drilling operations to extract water and for mining exploration are yet to meet expectations. We have not yet been able to acquire suffi cient orders to cover our capacities in Jordan owing to the problems in the region. Weak mining markets worldwide are additionally having a negative impact on us in this context. We are nevertheless optimistic that we will soon be able to make the necessary progress in this area as in others. The current problems are unfortunately continuing to cause losses.

Our Resources segment will be closing a number of minor locations in order to focus fully on core opportunities in future.

The segment has healthy levels of orders in hand totalling EUR 169.1 million, though that fi gure in the core business is somewhat down against the peaks seen in the past. The Mining division of SCHACHTBAU NORDHAUSEN GmbH accounts for much of the total, at EUR 40.7 million. Operations in this fi eld in particular include shaft driving for a mine in Kazakhstan. There are also a number of interesting large-scale environmental projects in the pipeline, on the Arabian Peninsula in particular, which we are working hard to realize.

Full-year outlook

We see further encouraging development opportunities over the coming years in the Resources segment. In 2014, we will increase our revenues again. We will still make an after-tax loss for the period however.

OTHER SEGMENT

The performance of the Other segment was substantially at variance from the same period last year. Segment EBIT is EUR 4.9 million down against the previous year comparative. This was due to special factors: the expected fi ne of over EUR 3 million arising from proceedings against one of our subsidiaries, costs linked to our syndicated loan, and losses from foreign exchange forward contracts of BAUER AG to hedge against foreign receivables which were not cashed. Based on current forecasts, these items will not impact on business any further this year.

Earnings, financial and net asset position

Our consolidated balance sheet and income statement continue to bear the marks of the years following the fi nancial crisis, which entailed the need for signifi cantly higher funding of our business. Up-front fi nancing of our works additionally rose substantially in relation to a number of major construction projects. Our Equipment segment, too, is still clearly showing the impact of its increased up-front fi nancing requirements, resulting from the need to hold more stocks due to shortened delivery lead times. The loss made last year and the adjustments to provisions for defi ned benefi t plans necessitated by IFRS have had a negative impact on our balance sheet, and especially on the equity ratio. Those changes will continue to affect us, though we will be working in the years ahead to improve the equity ratio again.

It is normal in the specialist foundation engineering and related equipment business that the fi nancing needs of the companies concerned increase substantially in the early months and only decrease again towards the end of the year. This effect is attributable fi rstly to the payment practices of our customers, but also stems from the seasonal nature of the business and the necessity to boost production at the start of the year in order to make deliveries in the summer when sales rise. This results in a signifi cant in-year rise in working capital. The same factors will have an opposite effect at the year-end.

Net assets at the end of the fi rst half-year 2014 had increased by 4.2 percent against the 2013 year-end. They had decreased by 1.5 percent against the fi gure shown on the balance sheet at the end of June last year. The trend in net assets is thus very substantially below the rate of rise in revenues (+7.8 percent year-on-year). Our medium-term target is a substantial reduction in net assets relative to total Group revenues.

EARNINGS

The consolidated revenues shown in the Group's earnings statement increased by 7.8 percent against the previous year comparative period to EUR 732.1 million. The changes in inventories item increased to EUR 69.3 million. The other capitalized goods and services for own account item, which mainly relates to the equipment required for our own in-house construction operations as well as development costs, amounted to EUR 6.0 million in the fi rst six months of the year. Other income decreased by EUR 1.3 million to EUR 11.3 million. Sales revenues in themselves totalled EUR 645.5 million, 6.3 percent up on the previous year comparative.

The cost of materials, staff costs, depreciation and amortization and other operating expenses items in the income statement rose somewhat less than the revenues overall, so also contributing to the slight improvement in EBIT.

Cost of materials increased by 8.0 percent – slightly more than the rate of rise in consolidated revenues. In the Construction segment's service business, the distribution of costs between years often varies considerably owing to the order structure. The small change is therefore insignifi cant. Staff costs increased by 6.1 percent – signifi cantly less than the rate of rise in revenues.

Depreciation of fi xed assets decreased by 2.0 percent. Write-downs of inventories due to use increased by EUR 1.9 million, because more machines were hired out than in the previous year comparative period.

Financial expenses changed only very slightly compared to the same period last year. Financial income of EUR 2.6 million was well down against the previous year comparative. No year-on-year comparison is possible in this respect, as the previous year period was subject to special infl uencing factors.

Income tax expense of EUR 5.8 million was EUR 5.0 million above the previous year comparative fi gure. Losses in the USA, among other factors, had produced tax income last year. This year signifi cant levels of taxation were incurred in spite of the reported loss. The reason is that tax breaks in countries where a loss is made cannot be set off against taxation in other countries where a profi t is made owing to the national autonomy of tax laws. We expect that full-year income tax expense will ultimately be around that of last year. However, the tax rate will be higher than the approximately 30 percent commonly seen in previous years.

The net loss for the period deteriorated against the previous year comparative from EUR 7.9 million to EUR 11.0 million. Key factors in this were the higher tax charge and the provision of over EUR 3 million.

FINANCIAL POSITION

Our fi nancial position is developing in line with our plans. On April 17, 2014, we agreed a three-year syndicated loan providing a EUR 450 million credit facility with a consortium of the company's main bankers. This provided the business with a new fi nancing structure which will form the basis of planning for the years ahead. The syndicated loan also replaces the loans affected by the breaking of covenants. The new fi nancing structure will increase the Group's fi nance costs.

NET ASSET POSITION

The net assets shown on the balance sheet increased by 4.2 percent against the 2013 year-end and decreased by 1.5 percent relative to June of last year. An in-year increase is normal in our business, for the reasons already outlined. According to our planning, the increase in net assets at the year-end will be markedly less than the rate of rise in revenues.

Fixed assets have decreased slightly relative to the 2013 year-end. Property, plant and equipment assets, in particular, decreased by 3.7 percent. This refl ects our efforts to be economical in our investment activities. Non-current assets decreased by 2.6 percent overall. The inventories (particularly fi nished goods and work in progress and stock for trade) and the receivables refl ect the annual recurring seasonal effect. The level of up-front fi nancing for our projects and inventories has therefore risen accordingly. Cash and cash equivalents decreased by EUR 10.0 million against the year-end fi gure, and by EUR 6.8 million against the half-year period last year. Current assets increased by 1.0 percent overall against the previous year comparative period.

On the Equity and Liabilities side, shareholders' equity decreased by EUR 19.2 million against the end of last year. The main changes, alongside the loss made (EUR 11.0 million), are foreign currency exchange variations of EUR +1.3 million, effects of changes in interest rates on the valuation of pension commitments totalling EUR -8.6 million (after deducting deferred taxes), dividend payments to minority shareholders totalling EUR 2.3 million, and the EUR 0.9 million increase in minority interests.

The usual seasonal additional fi nancing requirement was mainly covered by borrowings. The split between non-current and current fi nancial liabilities was signifi cantly affected by the syndicated loan. Most of the syndicated loan has been allocated to current fi nancial liabilities, as the company will be able to utilize those portions of it in a highly fl exible way. Borrowings under these items increased against the year-end by EUR 93.7 million in line with seasonal trends. Against the previous year comparative half-year period they decreased by EUR 7.6 million.

DEVELOPMENT OF THE BAUER AG SHARE

The Bauer share began the year on a positive trading note. From its opening price of EUR 18.75, by January 17 it had risen to its high for the year to date of EUR 20.04. Stock markets declined generally over the ensuing period. The company's share price followed that trend, and at the end of January was back at its year opening level. By mid-April, following the trend of the DAX and SDAX indices, the share price had recovered to around mid-January's level. Following publication of the 2013 Annual Report on April 11, it fell to EUR 18.27. Stock markets subsequently underwent a period of growth. The Bauer share failed to follow that trend, however, remaining around the same level before falling back to EUR 18.12 by May 20. By the end of the second quarter it had recovered again to EUR 18.87. In July stock markets again came under pressure. The Bauer share fell signifi cantly during that time. At the end of July the share was quoted at EUR 16.26.

HUMAN RESOURCES

The number of employees has increased only slightly since June of last year (10,388), climbing to 10,406 on average over the year. Changes were seen only in lower-pay countries, linked to specifi c projects. This is in line with our efforts to improve revenues without increasing staffi ng levels.

FOLLOW-UP REPORT

No matters of special note which we would expect to have a material infl uence on the net asset, fi nancial and earnings position of the BAUER Group occurred after June 30, 2014.

OPPORTUNITIES AND RISKS

Major opportunities and risks are set out in the individual sections of this Interim Report. There has been no material change in risks since the Annual Report to December 31, 2013. Consequently, we refer back to the Combined Management Report for fi nancial 2013.

FULL-YEAR OUTLOOK

The year to date has been marked by many different developments on our markets – both positive and negative. The in part dramatic political disturbances in relation to Russia, Ukraine, Israel and Iraq were particularly unpredictable. They are having a negative impact on our business – and not just in the countries concerned. However, they will not materially alter the opportunities open to our businesses overall.

All in all, we are pleased that we have been able to maintain our revenue growth within the target corridor in spite of such developments. Our after-tax earnings are somewhat below expectations owing to the changes in our operating environment and linked to a number of special infl uencing factors. A pleasing aspect is the trend on our home market in Germany. The positive expectations arising from the order receipts in our Equipment segment during the fi rst quarter have unfortunately not been fulfi lled. As a consequence, order receipts were again very volatile. We have nevertheless managed to sustain last year's levels.

There are unfortunately few very large-scale construction projects on markets at present, so our orders in hand are slightly in decline. We nevertheless expect to achieve our full-year revenue targets based on large numbers of small and medium-sized projects. Our Resources segment has opportunities to acquire some large-scale projects, though they are still in the early stages.

The latest sanctions imposed on Russia might impact on our business, thereby further restricting earnings.

The new fi nancing structure will slightly increase our interest costs, which we will offset by cost savings. The cost-saving programme which we have already launched to that end is progressing in line with our planning.

We must continue working hard to resolve some of the special problems we face and deal with the many uncertainties of our times. Some very good opportunities will also arise from specifi c business openings.

Overall, however, because of the disturbances we must recognize that – despite the unchanged outlook in terms of total Group revenues and EBIT – we will no longer be able to fully achieve our forecast after-tax earnings. We now predict:

• Total Group revenues of around EUR 1.55 billion and EBIT of around EUR 75 million
• Profi t after tax of around EUR 15 to 20 million

As in previous years, we must again point out that – contrary to earlier boom years – the forecast revenues and earnings of the BAUER Group are subject to a much greater degree of uncertainty. The main reason for this is the persisting uncertainty regarding developments in many parts of the world.

It is not easy for our management and staff to accept that problems beyond our control arising in our operating environment should repeatedly be hampering us in achieving planned goals. But we are not discouraged by such developments, and will continue devoting all our efforts to ensure that the Group is restored to a strong growth course.

Interim Financial Statements of the BAUER Group

INCOME STATEMENT

in EUR '000			01.04. - 30.06.2013 * 01.04. - 30.06.2014 01.01. - 30.06.2013 * 01.01. - 30.06.2014
1. Sales revenues	344,670	332,190	607,266	645,541
2. Changes in inventories	16,918	20,702	52,878	69,304
3. Other capitalized goods and services for own account	4,393	2,515	6,411	5,961
4. Other income	3,613	5,518	12,589	11,266
CONSOLIDATED REVENUES	369,594	360,925	679,144	732,072
5. Cost of materials	-208,380	-196,062	-366,156	-395,371
6. Staff costs	-85,252	-89,098	-164,794	-174,856
7. Depreciation and amortization a) Depreciation of fixed assets	-19,636	-18,243	-38,053	-37,300
b) Write-downs of inventories due to use	-2,437	-3,180	-4,796	-6,716
8. Other operating expenses	-48,800	-45,657	-97,917	-104,226
OPERATING RESULT	5,089	8,685	7,428	13,603
9. Financial income	5,389	1,670	6,277	2,641
10. Financial expenses	-10,090	-8,888	-21,637	-21,519
11. Share of the profi t or loss of associated companies accounted for using the equity method	1,006	64	787	66
PROFIT BEFORE TAX	1,394	1,531	-7,145	-5,209
12. Income tax expense	238	-5,145	-789	-5,755
NET PROFIT OR LOSS	1,632	-3,614	-7,934	-10,964
of which attributable to shareholders of BAUER AG	1,603	-3,571	-7,716	-11,346
of which attributable to minority interests	29	-43	-218	382
in EUR / share			01.04. - 30.06.2013 * 01.04. - 30.06.2014 01.01. - 30.06.2013 * 01.01. - 30.06.2014

Basic earnings per share	0.09	-0.21	-0.45	-0.66
Diluted earnings per share	0.09	-0.21	-0.45	-0.66
Average number of shares in circulation (basic)	17,131,000	17,131,000	17,131,000	17,131,000
Average number of shares in circulation (diluted)	17,131,000	17,131,000	17,131,000	17,131,000

STATEMENT OF COMPREHENSIVE INCOME OF THE BAUER GROUP

in EUR '000		01.04. - 30.06.2013 01.04. - 30.06.2014	01.01. - 30.06.2013	01.01. - 30.06.2014
Net profit or loss	1,632	-3,614	-7,934	-10,964
Income and expenses not transferred to profit and loss
Revaluation of commitments arising from employee benefi ts after termination of employment	-1,417	-6,259	-1,417	-12,060
Deferred taxes on that revaluation with no effect on profi t and loss	398	1,757	398	3,387
Income and expenses transferred to profit and loss
Market valuation of derivative fi nancial instruments	85	-70	698	82
Included in profi t and loss	0	566	0	573
Deferred taxes on fi nancial instruments with no effect on profi t and loss	-184	6	-487	-37
Differences from currency translation	-5,874	1,993	-2,024	1,268
Other comprehensive income after tax	-6,992	-2,007	-2,832	-6,787
Total comprehensive income	-5,360	-5,621	-10,766	-17,751
of which attributable to shareholders of BAUER AG	-4,603	-5,302	-9,738	-17,715
of which attributable to minority interests	-757	-319	-1,028	-36

* See footnote on page 2

BALANCE SHEET OF THE BAUER GROUP

	ASSETS in EUR '000	30.06.2013 *	31.12.2013 *	30.06.2014
	A. NON-CURRENT ASSETS
I.	Intangible assets	34,021	35,388	34,656
II.	Property, plant and equipment and investment property	469,933	459,537	442,415
	III. Investments accounted for using the equity method	12,259	12,651	12,507
	IV. Participations	3,613	3,613	3,613
V.	Deferred tax assets	32,757	26,299	28,456
	VI. Receivables from concession arrangements	38,934	36,762	36,964
	VII. Other non-current assets	8,374	7,564	7,859
	VIII. Other non-current fi nancial assets	8,507	5,420	5,382
		608,398	587,234	571,852
	B. CURRENT ASSETS
I.	Inventories	472,730	419,352	479,333
II.	Receivables and other assets	537,125	517,978	549,674
	III. Effective income tax refund claims	5,549	3,437	4,245
	IV. Cash and cash equivalents	54,015	57,217	47,219
		1,069,419	997,984	1,080,471
		1,677,817	1,585,218	1,652,323

A. SHAREHOLDERS' EQUITY I. Equity of BAUER AG shareholders 412,443 396,602 II. Minority interests 32,011 22,809 444,454 419,411 B. NON-CURRENT LIABILITIES I. Defi ned benefi t plans 82,801 81,637 II. Financial liabilities 438,407 279,437 III. Other liabilities 7,680 6,483 IV. Deferred tax liabilities 19,271 14,788 548,159 382,345 C. CURRENT LIABILITIES I. Financial liabilities 392,236 449,876 II. Other liabilities 271,204 307,203	30.06.2014	31.12.2013 *	30.06.2013 *	EQUITY AND LIABILITIES in EUR '000
	378,936
	21,299
	400,235
	95,110
	394,255
	5,701
	13,218
	508,284
	428,793
	291,906
	6,166	9,606	5,037	III. Effective income tax obligations
IV. Provisions 16,727 16,777	16,939
685,204 783,462	743,804
1,677,817 1,585,218	1,652,323

* See footnote on page 2

CASH FLOW STATEMENT OF THE BAUER GROUP

in EUR '000	30.06.2013	30.06.2014
Cash flows from operating activities	-116,934	-61,597
Cash flows from investing activities	-32,738	-16,339
Cash flows from financing activities	157,150	67,896
Changes in liquid funds affecting payments	7,478	-10,040
Influence of exchange rate movements on cash	1,305	42
Total change in liquid funds	8,783	-9,998
Cash and cash equivalents at beginning of reporting period	45,232	57,217
Cash and cash equivalents at end of reporting period	54,015	47,219
Change in cash and cash equivalents	8,783	-9,998

STATEMENT OF CHANGES IN EQUITY OF THE BAUER GROUP

Other revenue reserves and in EUR '000 net earnings available for distribution
	Subscribed capital	Capital reserve	Revenue reserves	Foreign currency translation	Reconciling item, IFRS	Hedging transactions reserve	Minority interests	Total
As at 01.01.2013	73,001	38,404	303,892	7,373	10,387	-3,722	33,205	462,540
Net profit or loss	0	0	-7,716	0	0	0	-218	-7,934
Differences from currency translation	0	0	0	-1,223	0	0	-801	-2,024
Revaluation of com mitments arising from employee benefits after termination of employment	0	0	-1,404	0	0	0	-13	-1,417
Market valuation of derivative financial instruments	0	0	0	0	0	698	0	698
Deferred taxes with no effect on profit and loss	0	0	394	0	0	-487	4	-89
Total comprehensive income	0	0	-8,726	-1,223	0	211	-1,028	-10,766
Changes in scope of consolidation	0	0	-2,015	0	0	0	0	-2,015
Dividend payments	0	0	-5,139	0	0	0	-166	-5,305
Other changes	0	0	0	0	0	0	0	0
As at 30.06.2013 *	73,001	38,404	288,012	6,150	10,387	-3,511	32,011	444,454
As at 01.01.2014	73,001	38,404	283,895	-6,492	10,387	-2,593	22,809	419,411
Net profit or loss	0	0	-11,346	0	0	0	382	-10,964
Differences from currency translation	0	0	0	1,620	0	0	-352	1,268
Revaluation of com mitments arising from employee benefits after termination of employment	0	0	-11,955	0	0	0	-105	-12,060
Market valuation of derivative financial instruments	0	0	0	0	0	644	11	655
Deferred taxes with no effect on profit and loss	0	0	3,357	0	0	-35	28	3,350
Total comprehensive income	0	0	-19,944	1,620	0	609	-36	-17,751
Changes in scope of consolidation	0	0	0	0	0	0	0	0
Dividend payments	0	0	0	0	0	0	-2,325	-2,325
Other changes	0	0	49	0	0	0	851	900
As at 30.06.2014	73,001	38,404	264,000	-4,872	10,387	-1,984	21,299	400,235

* See footnote on page 2

SEGMENT REPORTING OF THE BAUER GROUP

in EUR '000		Construction	Equipment		Resources		Other
01.01. - 30.06.	2013 *	2014	2013 *	2014	2013 *	2014	2013 *	2014
Total revenues (Group)	346,099	351,448	309,782	321,340	93,604	100,956	16,676	16,105
Sales revenues with third parties	292,085	328,609	229,521	223,567	85,372	93,166	288	199
Sales revenues between business segments	7,861	6,933	22,542	18,364	617	1,326	15,447	15,086
Changes in inventories	378	-67	50,096	67,584	2,404	1,787	0	0
Other capitalized goods and services for own account	295	80	2,137	2,316	150	98	0	0
Other income	6,330	4,593	5,087	4,765	1,438	1,826	384	309
CONSOLIDATED REVENUES	306,949	340,148	309,383	316,596	89,981	98,203	16,119	15,594
OPERATING RESULT	2,928	7,418	5,771	13,174	-2,506	-3,281	814	-4,065
Financial income	3,212	1,154	1,968	703	1,147	996	3,135	3,526
Financial expenses	-7,813	-6,935	-10,202	-11,141	-4,730	-4,928	-2,077	-2,253
Share of the profit or loss of associated companies accounted for using the equity method	15	-140	5	-57	767	263	0	0
Income tax expense	1,862	-3,158	-2,845	-2,772	809	297	-493	-43
NET PROFIT OR LOSS	204	-1,661	-5,303	-93	-4,513	-6,653	1,379	-2,835

ADDITIONAL INFORMATION ON THE INCOME STATEMENT

Depreciation and amortization

Depreciation of fixed assets	-23,556	-22,330	-7,884	-9,008	-5,161	-4,675	-1,644	-1,529
Write-downs of inventories due to use	0	0	-4,796	-6,716	0	0	0	0
	31.12.2013	30.06.2014	31.12.2013	30.06.2014	31.12.2013	30.06.2014	31.12.2013	30.06.2014
SEGMENT ASSETS	566,266	599,004	803,467	782,643	265,613	273,453	303,121	293,718

SEGMENT REPORTING OF THE BAUER GROUP

in EUR '000	Consolidation		Group
01.01. - 30.06.	2013	2014	2013 *	2014
Total revenues (Group)	-44,812	-40,634	721,349	749,215
Sales revenues with third parties			607,266	645,541
Sales revenues between business segments	-46,467	-41,709	0	0
Changes in inventories	0	0	52,878	69,304
Other capitalized goods and services for own account	3,829	3,467	6,411	5,961
Other income	-650	-227	12,589	11,266
CONSOLIDATED REVENUES	-43,288	-38,469	679,144	732,072
OPERATING RESULT	421	357	7,428	13,603
Financial income	-3,185	-3,738	6,277	2,641
Financial expenses	3,185	3,738	-21,637	-21,519
Share of the profit or loss of associated companies accounted for using the equity method	0	0	787	66
Income tax expense	-122	-79	-789	-5,755
NET PROFIT OR LOSS	299	278	-7,934	-10,964

ADDITIONAL INFORMATION ON THE INCOME STATEMENT

Depreciation and amortization
Depreciation of fixed assets	192	242	-38,053	-37,300
Write-downs of inventories due to use	0	0	-4,796	-6,716
	31.12.2013	30.06.2014	31.12.2013	30.06.2014
SEGMENT ASSETS	-353,249	-296,495	1,585,218	1,652,323	* See footnote on page 2

Notes to the Financial Statements

1. GENERAL DISCLOSURES RELATING TO THE GROUP

BAUER Aktiengesellschaft, Schrobenhausen (referred to in the following as BAUER AG) is a stock corporation under German law. Its registered offi ce is at BAUER-Strasse in Schrobenhausen, and the company is entered in the Register of Companies of Ingolstadt (HRB 101375).

The BAUER Group is a provider of services, machinery and ancillary products for ground and groundwater. The Group markets its products and services all over the world. Its business is divided into three segments: Construction, Equipment and Resources. BAUER AG is listed on the SDAX index.

These condensed consolidated fi nancial statements were released for publication on August 11, 2014.

Auditing

These condensed interim consolidated fi nancial statements and the interim Group Management Report have not been audited in accordance with section 317 of the German Commercial Code (HGB), nor have they been subjected to any review by an auditor.

2. BASES FOR COMPILING THE CONSOLIDATED FINANCIAL STATEMENTS

BAUER AG compiles its condensed interim consolidated fi nancial statements in accordance with International Financial Reporting Standards (IFRS), the requirements of the International Accounting Standards Board (IASB), London, and the Interpretations of the International Financial Reporting Interpretations Committee (IFRIC), as applicable on the accounting reference date and recognized by the European Union. Only IASB Standards and Interpretations adopted by the Commission and duly published in the Offi cial Journal of the EU by the accounting reference date are applied.

The Half-Year Interim Report to June 30, 2014 was prepared in condensed form on the basis of IAS 34, "Interim Financial Reporting", and as such does not include all the disclosures mandatory for full-year consolidated fi nancial statements.

These condensed interim consolidated fi nancial statements are based on the Group's consolidated fi nancial statements to December 31, 2013, and as such should be read in conjunction with the consolidated fi nancial statements of BAUER AG to December 31, 2013.

3. SCOPE OF CONSOLIDATION

The scope of consolidation includes BAUER AG and all major subsidiaries. Subsidiaries are all companies over which the parent has control in terms of fi nancial and corporate policy. This is routinely accompanied by a voting share of over 50 percent. When assessing whether control is exerted, the existence and effect of potential voting rights currently exercisable or convertible are considered.

In a small number of cases, companies are fully consolidated into the fi nancial statements of BAUER AG even though that company holds less than 50 percent of their voting rights. This is the result of state restrictions which stipulate that foreign investors may not hold more than 50 percent of the voting rights in domestic companies. In such cases BAUER AG makes use of so-called agency constructions, whereby more than 50 percent of the voting rights are commercially held in the company concerned, thus allowing for full consolidation.

Subsidiaries are included in the consolidated fi nancial statements (fully consolidated) from the point at which control is transferred to the Group. They are de-consolidated at the point when control ends.

Companies of which BAUER AG is able, directly or indirectly, to exercise a signifi cant infl uence on the said companies' fi nancial and operating policy decisions (associated companies) are consolidated according to the equity method. Joint ventures are likewise consolidated according to the equity method.

Changes at subsidiaries:

Equipment segment

With effect from April 30, 2014, Celler Brunnenbau Holding GmbH, Celle, contributed assets with a fair value of EUR 900 thousand to PRAKLA Bohrtechnik GmbH as part of an asset deal. The fair value was certifi ed by an external auditor. In return, linked to a capital increase by PRAKLA Bohrtechnik GmbH, Peine, a capital share (10 percent, or EUR 114 thousand) determined by the DCF method was allotted. The asset deal also entailed a premium of EUR 786 thousand.

The assets contributed are linked to the business unit involved in the production of drilling rigs, casing oscillators and grip heads, as well as spare parts in particular for water extraction, subgrade and constructional engineering works, and geological drilling and exploration.

Amounts recorded at time of acquisition:

in EUR '000
Cash and cash equivalents	0
Equity portions	900
Total acquisition cost	900
Non-current assets	900
Current assets	0
Assets	900
Non-current assets	0
Current assets	0
Equity and liabilities	0
Net worth	900
Minority interests	900
Goodwill	0

As this is a change in equity at a subsidiary as a result of which the Group's share in equity is reduced or increased without loss of control, the change is recognized as a transaction between equity investors not affecting profi t and loss.

No goodwill was created by the asset deal.

No changes have occurred to the scope of consolidation since December 31, 2013.

4. KEY ASSUMPTIONS AND ESTIMATES

In this context we refer to our 2013 Annual Report, page 103.

5. ACCOUNTING AND VALUATION METHODS

The accounting and valuation methods applied as from January 1, 2014 correspond to those applied to the consolidated fi nancial statements to December 31, 2013, with the following exceptions:

• IAS 28 – Investments in Associates and Joint Ventures

This amendment replaces IAS 28, "Investments in Associates", and stipulates the preconditions for application of the equity method by associates and joint ventures.

• IAS 32 – Financial Instruments: Presentation

The amendment essentially involves clarifi cation of a number of rules for the offsetting of fi nancial assets and liabilities. A fi nancial asset may only be set off against a fi nancial liability if the claim is current. That is to say, it must not be de pendent on a future event. Additionally, the amendments clarify that gross offsetting mechanisms (such as through clearing), which both eliminate credit and liquidity risks and process receivables and liabilities in a single accounting process, must be treated as equivalent to net offsetting.

The amendment to IAS 32 has no effect on the interim consolidated fi nancial statements of BAUER AG.

• IAS 36 – Impairment of Assets

Pursuant to the amendment to IFRS 13, "Fair Value Measurement", a number of disclosure rules in IAS 36, "Impairment of Assets", regarding measurement of the achievable amount of asset impairment have been changed. The amendment to IAS 36 has no effect on the interim consolidated fi nancial statements of BAUER AG.

• IAS 39 – Financial Instruments: Recognition and Measurement

With the amendment to IAS 39, it is possible to retain hedge accounting for derivatives if the contract party changes. This possibility is only allowable under certain preconditions. The amendment to IAS 39 has no effect on the interim consolidated fi nancial statements of BAUER AG.

• IFRS 10 – Consolidated Financial Statements

IFRS 10 modifi es the term "control" such that the same criteria are applied to all entities in assessing a control relationship. This defi nition is backed by wide-ranging application examples illustrating various kinds of control. The effects of IAS 10 have no effect on the interim consolidated fi nancial statements of BAUER AG.

• IFRS 11 – Joint Arrangements

As a result of the changes to defi nitions in IFRS 11, there are now two kinds of joint arrangement: joint operation and joint venture. Moreover, the option of proportionate consolidation of jointly controlled entities has been abolished. Parties to a joint venture are obligated to recognize their share on the balance sheet applying the equity method in accordance with IAS 28, "Investments in Associates and Joint Ventures". Parties to a joint operation recognize their shares proportionate to their share of the assets and liabilities of the joint operation. Consequently, a party to a joint operation includes the following items in its consolidated fi nancial statements:

• Its assets, including its share in jointly held assets
• Its liabilities, including its share in jointly incurred liabilities
• Its income from the sale of its share in the products of the joint operation
• Its share in income from the sale of products by the joint operation
• Its expenses, including its share in any jointly incurred expenses

The Accounting and Auditing Board of the Institute of German Certifi ed Public Accountants (IDW) takes the view that the typical German construction consortium meets the preconditions for classifi cation as a joint venture.

As previously mentioned, IFRS 11 stipulates that shares in joint ventures are to be valued according to the equity method.

In the BAUER Group the changes relate to recognition on the balance sheet and in the income statement.

Pro rata results are no longer stated as receivables from joint ventures and sales revenues through joint ventures, but under "Investments accounted for using the equity method" as well as in the net result from investments accounted for using the equity method. The previous year's fi gures have been adjusted for greater comparability.

Apart from the change in recognition, IFRS 11 has no effects on the interim consolidated fi nancial statements of BAUER AG.

• IFRS 12 – Disclosure of Interests in Other Entities

IFRS 12 requires disclosures which enable readers of fi nancial statements to assess the nature, risks and fi nancial effects linked to interests in subsidiaries, associated companies, joint arrangements and non-consolidated structured entities (special-purpose entities).

The effects of IFRS 12 have no effect on the interim consolidated fi nancial statements of BAUER AG.

• Amendments to IFRS 10, IFRS 12 and IAS 27

The IASB project resulting in the amendments to IFRS 10, IFRS 12 and IAS 27 emerged from the consultation process relating to the publication of IFRS 10, "Consolidated Financial Statements". These changes have no effect on the interim consolidated fi nancial statements of BAUER AG.

• IFRIC 21 – Levies

IFRIC 21 regulates accounting for government levies not covered by IAS 12. It stipulates when such an obligation is to be recognized as a liability.

The effects of IFRIC 21 have no effect on the interim consolidated fi nancial statements of BAUER AG.

6. DISCLOSURES REGARDING FINANCIAL INSTRUMENTS

6.1 Financial risk factors

In its business operations and fi nancing activities, the BAUER Group is subject to a wide range of market risks (foreign exchange rate, interest rate, raw material and liquidity risks, risk of default).

These condensed interim consolidated fi nancial statements do not include all disclosures and information relating to fi nancial risk management, so they should be read in conjunction with the consolidated fi nancial statements to December 31, 2013.

No changes to the management of fi nancial risks have been made since the end of the fi nancial year.

6.2 Carrying amounts and fair values

The fair values of fi nancial instruments are determined on the basis of one of the methods set out on the three following levels:

• Level 1: Quoted prices (adopted unchanged) on active markets for identical assets and liabilities
• Level 2: Directly or indirectly observable input data for the asset or liability other than quoted prices as per level 1
• Level 3: Applied input data which does not originate from observable market data for measurement of the asset and liability (non-observable input data)

The fi nancial instruments measured at fair value are assignable to the following levels:

ASSETS in EUR '000	IAS 39 category	30.06.2014	Level 1	Level 2
Securities	AfS	0	0	0
Derivatives not in hedge accounting	FAHfT	675	0	675
Derivatives in hedge accounting	n/a	664	0	664
Total		1,339	0	1,339

EQUITY AND LIABILITIES in EUR '000	IAS 39 category	30.06.2014	Level 1	Level 2
Derivatives not in hedge accounting	FLHfT	4,356	0	4,356
Derivatives in hedge accounting	n/a	2,456	0	2,456
Total		6,812	0	6,812

ASSETS in EUR '000	IAS 39 category	31.12.2013	Level 1	Level 2
Securities	AfS	0	0	0
Derivatives not in hedge accounting	FAHfT	1,326	0	1,326
Derivatives in hedge accounting	n/a	1,980	0	1,980
Total		3,306	0	3,306

EQUITY AND LIABILITIES in EUR '000	IAS 39 category	31.12.2013	Level 1	Level 2
Derivatives not in hedge accounting	FLHfT	4,591	0	4,591
Derivatives in hedge accounting	n/a	2,940	0	2,940
Total		7,531	0	7,531

In the fi rst six months of the year, no reclassifi cation was undertaken between level 1 and 2 fi nancial instruments measured at fair value.

6.3 Methods for determining level 2 fair values

Level 2 derivatives comprise foreign exchange forward contracts, foreign exchange forward options, interest rate swaps and cross-currency swaps.

The fair values of foreign exchange forward contracts and cross-currency swaps are measured separately at their respective forward prices and discounted to the reference date based on the corresponding interest rate curve. The market prices of foreign exchange forward options are determined by recognized option price models.

The fair values of the interest rate swaps correspond to the respective market value as determined by appropriate fi nancial valuation methods, such as by discounting expected future cash fl ows.

For cash and cash equivalents, current trade receivables and other current assets, current trade payables and other current liabilities, owing to their short remaining terms the carrying amount should be adopted as a realistic estimate of the fair value.

The fair values of non-current assets and non-current fi nancial assets and of non-current liabilities and non-current fi nancial liabilities correspond to the cash values of the payment fl ows linked to the assets, taking into account the applicable interest rate parameters, which refl ect changes in the terms and expectations of the market and of the respective parties. Investments are valued at cost, as no fair value can be reliably determined owing to the lack of an active market.

6.4 Fair value disclosures

The principles and methods of calculating fair value have essentially remained unchanged from the previous year. Detailed explanatory notes on the measurement principles and methods are set out in the 2013 Annual Report.

in EUR '000	31.12.2013 *		30.06.2014
	Carrying amount	Fair value	Carrying amount	Fair value
Receivables from concession arrangements	36,762	40,449	36,964	42,101
Other non-current financial assets	5,420	5,309	5,382	5,306
Trade receivables	320,329	319,482	318,148	317,649
Liabilities to banks	247,775	256,361	360,468	372,231
Other non-current financial liabilities	14,397	15,396	16,679	17,842
Total	624,683	636,997	737,641	755,129

The fi nancial assets and liabilities of which the fair values differ from their carrying amounts are as follows:

* See footnote on page 2

The carrying amounts of all other fi nancial assets and liabilities correspond to their fair value.

In other respects we refer to pages 154ff. of the 2013 Annual Report.

7. SEASONALITY

Our Construction segment undertakes many projects in regions where winter and other hostile weather conditions impact severely on site results in the fi rst quarter of the year and at the start of the second quarter. The fi rst quarter is also weak in terms of the performance of our Equipment segment, because customers only buy machines when they actually need them to carry out their construction works. For our Resources segment, wintry conditions at the start of the year mean that sales of well engineering materials are very weak.

Since most costs are fi xed, signifi cant losses are made in the fi rst quarter of each year. Beginning with the second quarter, those losses are balanced out as contribution margins improve. Break-even has normally not yet been achieved by the end of the second quarter. Most profi t is generated in the third and fourth quarters. This annually recurring business cycle allows performance, sales and earnings in the various quarters to be compared against the corresponding reference periods, ignoring special factors.

8. NOTES ON SEGMENT REPORTING

The internal organizational and management structure and the internal system of reporting to the Management Board and Supervisory Board dictate the segmentation employed by the BAUER Group.

The BAUER Group comprises the Construction, Equipment and Resources segments. Transactions between the segments are conducted at market prices.

SCHACHTBAU NORDHAUSEN GmbH is the only Group company to operate in all three segments.

The assets and liabilities and income statement items of SCHACHTBAU NORDHAUSEN GmbH are assigned to the relevant segments.

Construction

The core business of the Construction segment is specialist foundation engineering. Complete excavation pits and foundation works, often in diffi cult subgrade conditions, are carried out for major infrastructure projects and buildings. In order to offer customers a full range of services, the companies of the BAUER Group additionally offer other construction services, often involving a major specialist foundation engineering element. Examples of this include bridges, environmental engineering, remediation and building renovation projects. The Construction segment is founded on the close interlinking of all construction activities.

Equipment

In the Equipment segment, machinery for all specialist foundation engineering processes and for deep drilling is developed and manufactured for worldwide distribution. The specialist foundation engineering equipment can be employed to produce large-diameter and small-diameter bores for piles, diaphragm walls, anchors, injections and wells. The deep drilling equipment can be employed to drill for geothermal energy, oil and gas. Equipment for ramming and ground improvement is also manufactured. The range is supplemented by a wide selection of add-on units and ancillary equipment, covering all the processes involved in specialist foundation engineering.

Resources

The Resources segment brings together all the Group companies providing products and services relating to the remediation and extraction of natural resources essential to human life. They include environmental technology companies involved in the treatment of ground and groundwater as well as companies involved in exploratory drilling and mining of raw materials, and drilling of wells and geothermal energy sources. This segment also includes companies which manufacture and sell materials for the engineering of bore holes, specifi cally for wells and geothermal energy sources.

The Other segment comprises the central services (accounting, human resources, IT etc.) provided by BAUER AG to the Group companies as well as other units not assignable to the separately listed segments, providing services such as in-house and external education and training and centralized research and development.

The intersegmental consolidation effects are grouped here under Consolidation. This includes offsetting of intra-Group sales between the segments as well as income and expenses and interim results. The intersegmental consolidation effects are adjusted within the respective segments.

Total Group revenues, consolidated revenues and sales revenues with third parties

The consolidated revenues refl ect the performance of all the companies included in the scope of consolidation. The total Group revenues represent the revenues of all the companies forming part of our Group. The difference between the consolidated revenues and the total Group revenues is derived from the revenues of the associated companies, from our subcontractor shares in joint ventures, and from the revenues of non-consolidated companies. The sales revenues with third parties are allocated to the business segments according to the customer's location. No one customer accounts for more than 10 percent of total sales.

No breakdown of sales revenues by product and service, or by groups of comparable products and services, was available as per the balance sheet date.

9. EVENTS AFTER JUNE 30, 2014

No events subject to mandatory reporting in accordance with IAS 10 occurred after June 30, 2014.

10. MATERIAL TRANSACTIONS WITH RELATED PARTIES

The relationships between fully consolidated Group companies and related companies and persons relate mainly to associated and joint-venture companies. Transactions with the said companies are transacted at standard market terms. In the period under review no material transactions were undertaken with related parties.

11. CONTINGENT LIABILITIES

Contingent liabilities arising from guarantees to third parties exist in an amount of EUR 4,507 thousand (December 31, 2013: EUR 4,386 thousand). In addition, we are subject to joint and several liability in respect of all joint ventures in which we participate.

ASSURANCE BY THE LEGAL REPRESENTATIVES

We hereby assure that, to the best of our knowledge, the condensed interim consolidated fi nancial statements give a true and fair view of the net assets, fi nancial position and earnings of the company in accordance with the accounting principles applicable to interim reporting, and that the interim Group Management Report depicts the course of business, including the earnings and overall situation of the Group, in such a way that a true and fair view is conveyed and the material opportunities and risks of the foreseeable development of the Group over the remaining course of the fi nancial year are set out.

Schrobenhausen, August 11, 2014

The Management Board

Prof. Thomas Bauer Dipl.-Betriebswirt (FH) Hartmut Beutler Dipl.-Ing. Heinz Kaltenecker Chairman of the Management Board

FUTURE-RELATED STATEMENTS

This Interim Report contains future-related statements. Future-related statements are any statements which do not relate to historical facts and events, such as forecasts of future fi nancial earning power and indications of plans and expectations with regard to the development of the business of the BAUER Group and relating to the general economic climate or other factors to which the BAUER Group is subject. The use of words such as "believe", "expect", "predict", "forecast", "intend", "plan", "estimate", "aim", "likely", "assume" and similar formulations indicates that the statements in question are futurerelated. Future-related statements are subject to risks and many uncertainties which may mean that actual developments, earnings or levels of performance differ widely from those explicitly or implicitly assumed in the future-related statements.

Readers are advised that, in view of the said risks and uncertainties, no inappropriately high degree of confi dence should be placed in the likelihood of such statements proving to be accurate in the future. BAUER Aktiengesellschaft does not intend to, and assumes no obligation to, publish updates of such future-related statements in order to incorporate events or circumstances beyond the date of publication of this Interim Report.

DATES 2014

April 11, 2014	Publication of 2013 Annual Report
	Annual Press Conference
	Analysts' Conference
May 14, 2014	Interim Report to March 31, 2014
June 26, 2014	Annual General Meeting
August 14, 2014	Half-Year Interim Report to June 30, 2014
November 14, 2014	Interim Report to September 30, 2014

You will fi nd more information on the BAUER Group on the Internet at www.bauer.de.

PUBLISHED BY

BAUER Aktiengesellschaft BAUER-Strasse 1 86529 Schrobenhausen, Germany

Offi ce of the Management Board: Phone: +49 08252 97-1215 Fax: +49 08252 97-2900 E-mail: BAG@bauer.de

Registered place of business: 86529 Schrobenhausen, Germany Registered at the District Court of Ingolstadt under HRB 101375