Bauer AG — Interim / Quarterly Report 2018

Aug 10, 2018

Half-Year Interim Report as at June 30, 2018

At a glance

GROUP KEY FIGURES

IFRS in EUR million	6M/2017 *	6M/2018	Change
Total Group revenues	902.3	792.3	-12.2%
Sales revenues	830.2	717.1	-13.6%
Order intake	938.9	814.8	-13.2%
Order backlog	1,044.7	1,000.3	-4.3%
EBITDA	85.4	79.4	-7.0%
EBIT	38.6	34.1	-11.7%
Earnings after tax	0.1	1.6	n/a
Total assets	1,750.4	1,706.3	-2.5%
Equity	422.4	416.4	-1.4%
Employees (on average over the year)	10,890	11,210	2.9%

* Previous year adjusted; see notes on page 93 ff. of the Annual Report 2017

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.

OUTLOOK

in EUR million	Actual 2017	Forecast 2018
Total Group revenues	1,772	~ 1,800
EBIT	89.6	~ 90
Earnings after tax	3.7	significant increase

Summary

Total Group revenues of the BAUER Group at the end of the fi rst half of 2018 were EUR 792.3 million, 12.2% below the previous year comparative (EUR 902.3 million). The sales revenues have declined by 13.6% to EUR 717.1 million. At EUR 34.1 million, EBIT is somewhat less than the previous year's fi gure of EUR 38.6 million. The fi nancial year in the Equipment segment remains positive, the Construction segment remains below the exceptionally strong start to the previous year as expected. The Resources segment was able to again increase revenues in the second quarter. The earnings after tax of the Group were EUR 1.6 million (previous year: EUR 0.1 million), since the negative effects of currency fl uctuations were signifi cantly smaller than the previous year, which correspondingly improved the fi nancial result.

The Group's order backlog has decreased by 4.3% compared to the same period in the previous year and has increased by 2.3% to EUR 1,000.3 million compared to the year-end results for 2017. The order backlog in the Construction and Equipment segments is smaller than that of the previous year, but is greater in the Resources segment. Order intake declined by 13.2% from EUR 938.9 million to EUR 814.8 million. Overall, we see many possible project opportunities in all three segments.

Significant events and transactions

MACRO-ECONOMIC TREND

The world economy has managed to overcome sustained and new crises and political turmoil in the fi rst half year of 2018 and it continues to exhibit solid growth. Trade confl icts, the atomic agreement rescinded by the USA with new sanctions against

Iran, the confl icts in the Middle East, shifts in international collaboration, increasing protectionism, continual uncertainty as to the actual manner of execution of the pending Brexit, changes to the political landscape in a number of important European countries and increasingly autocratic developments such as in Turkey – all of these topics have, most recently, shown no signifi cant effects on the real economy. However, the general level of social insecurity is increasing, which poses risks for the future.

The sturdy condition of the world economy, with stable markets in the USA and Europe and positive development in Asia continue to provide the construction sector with good development conditions.

Increasing investments in infrastructure projects create excellent conditions for specialist foundation engineering companies and equipment manufacturers. The continuing urbanization trend and constant population growth rate provide the basis for a positive long-term outlook in the construction sector.

A GENERAL VIEW OF OUR MARKETS

The diverse political and economic topics have not signifi cantly infl uenced construction and equipment sales markets over the last few months.

The sustained confl icts in the Middle East and continued isolation of Qatar, the wars in Yemen and Syria and the sanctions against Iran have created a diffi cult market climate for construction and equipment sales in most countries in the region. This is not currently counteracted by the recovering oil price and the region therefore remains signifi cantly behind the general global economic rate of development.

In Europe, the construction sector has benefi ted from a general recovery in the Southern European countries, stable development in Eastern Europe and a still strong Germany. The continuing Brexit negotiations have weakened the British economy but this has not yet affected the currently healthy economic situation for the construction sector. The Russian market is suffering under sanctions and the Turkish economy is suffering under a weak currency.

The constant high economic growth in Asia is ensuring good demand for equipment and specialist foundation engineering services in almost all markets in the region. This is especially characterized by enormous growth in the Chinese construction equipment market.

Market/region	Situation	Status
Germany	- Good market situation overall - High state budget for infrastructure measures	++
Europe	- Overall recovery in Western Europe - Only slow positive development in Eastern Europe - Russia remains weak	+ o
Middle East & Central Asia	- Outlook for Qatar still uncertain - Overall uncertainty due to oil price not yet high enough - India with few opportunities	-
Asia-Pacific, Far East and Australia	- Positive development in many markets - Excellent capacity utilization in Malaysia - Strong construction sector in China - Growing development in Indonesia and the Philippines	+
Americas	- Few large infrastructure projects in the USA - Slight recovery in the markets in South America	+
Africa	- Slight construction growth with opportunities in individual markets	o

Overview of construction markets

-- very weak - weak o stable + growing ++ growing strongly

Regardless of the repeated extreme political fl uctuations in the US government, the market is currently growing strongly – supported by a recovering oil price and adjustments in the monetary policy. Growth is not yet discernible for investments in buildings and infrastructure, in both the public and private sectors. Economic development in South America is being supported by a benefi cial macroeconomic environment, higher raw material prices, low infl ation and a liberal monetary policy, but still remains at a low level overall.

The construction and equipment markets in Africa are at a low level and are placing hopes in a recovery through increasing raw material prices. However, since these are rising again, it tends to mean better prospects of the future, particularly in the countries in Africa, the Middle East and South America.

CONSTRUCTION SEGMENT

in EUR '000	6M/2017 *	6M/2018	Change
Total Group revenues	431,579	327,095	-24.2%
Sales revenues	402,976	307,394	-23.7%
Order intake	372,730	341,648	-8.3%
Order backlog	526,423	507,234	-3.6%
EBIT	13,368	4,765	-64.4%
Earnings after tax	-4,171	-4,147	n/a

* Previous year adjusted; see notes on page 93 ff. of the Annual Report 2017

Total Group revenues for the Construction segment were EUR 327.1 million, signifi cantly down by 24.2% over the previous year. With a fi gure of EUR 431.6 million, this was at an unusually high level in the fi rst half of the previous year since some large projects performed very well. This decline in revenue this year is due to a weaker degree of utilization in Germany up to now and postponement of large projects in the Middle East and other individual projects. The EBIT decreased from EUR 13.4 million to EUR 4.8 million year-on-year. In contrast to this, the earnings after tax lies at EUR -4.1 million, which is exactly the same as the EUR -4.2 million from the previous year, since the negative effects of currency fl uctuations were signifi cantly smaller than in the previous year.

We expect revenues to catch up in the coming half year, with a corresponding development of the earnings. This is based on corresponding order backlog in Germany, England and the Far East, and additional project opportunities.

Order backlog in our Construction segment has declined by 3.6% to EUR 507.2 million (previous year: EUR 526.4 million), which can be attributed to the lower order intake of EUR 341.6 million, which is 8.3% less than the value for the previous year of EUR 372.7 million. Overall, the order backlog still represents a good basis for achieving our targets. Despite strongly fl uctuating economic and political developments, these are spread very evenly across the global regions. In addition, we are currently working on further interesting project opportunities. Among others, these include large projects in England and the USA.

EQUIPMENT SEGMENT

in EUR '000	6M/2017 *	6M/2018	Change
Total Group revenues	372,060	374,462	0.6%
Sales revenues	312,324	302,241	-3.2%
Order intake	429,699	396,707	-7.7%
Order backlog	201,669	171,589	-14.9%
EBIT	23,923	36,327	51.8%
Earnings after tax	6,606	16,087	n/a

* Previous year adjusted; see notes on page 93 ff. of the Annual Report 2017

Total Group revenues in the Equipment segment in the fi rst half-year increased by 0.6% from EUR 372.1 million to EUR 374.5 million. The sales revenues declined slightly by 3.2% from EUR 312.3 million to EUR 302.2 million. In the previous year, the sale of two deep drilling rigs was included here, so that there is a signifi cant increase in specialist foundation engineering equipment compared to 2017. EBIT increased strongly from EUR 23.9 million to EUR 36.3 million year-on-year. Earnings after tax improved considerably from EUR 6.6 million to EUR 16.1 million. These results are attributed to high sales levels and continued good delivery fi gures for equipment.

Order backlog in the Equipment segment has decreased from EUR 201.7 million to EUR 171.6 million. Order intake declined by 7.7% from EUR 429.7 million to EUR 396.7 million. Despite the decrease, order intake is stable from a global perspective, especially in Europe and in the Far East. Only the markets in Africa and the Middle East were below expectations. The current production utilization and current order backlog give us reason to expect continued positive development in the coming months. The generally strong growth in the construction machinery sector has resulted in longer lead times for the delivery of components, which have resulted in longer production times in individual cases.

RESOURCES SEGMENT

in EUR '000	6M/2017 *	6M/2018	Change
Total Group revenues	127,721	119,227	-6.7%
Sales revenues	113,059	106,719	-5.6%
Order intake	165,550	104,918	-36.6%
Order backlog	316,624	321,462	1.5 %
EBIT	794	-6,657	n/a
Earnings after tax	-4,034	-9,263	n/a

* Previous year adjusted; see notes on page 93 ff. of the Annual Report 2017

After the fi rst half of 2018, total Group revenues in the Resources segment amounted to EUR 119.2 million, 6.7% below the previous year (EUR 127.7 million). EBIT decreased from EUR 0.8 million to EUR -6.7 million and earnings after tax decreased from EUR -4.0 million to EUR -9.3 million.

After many measures implemented in previous years, the Resources segment remains in a reorganization phase, which we are continuing to drive onward very actively. The environmental and water treatment businesses are able to work with a very good order backlog and positive results. Our subsidiary in Jordan, whose drilling capacity has not been exhausted, continues to have the biggest impact. A pending large order in this sector has been postponed to the second half year.

The segment has a good order backlog of EUR 321.5 million, which is 1.5% above the previous year's EUR 316.6 million. This is mainly attributable to the major project for the expansion of the reed bed treatment plant in Oman. This contract is worth about EUR 160 million and is not fully included in the order backlog due to the long duration of the project. At EUR 104.9 million, order intake was signifi cantly lower than in the previous year (EUR 165.6 million).

Earnings, financial and net asset position

EARNINGS POSITION

Compared to the same period in the previous year, the sales revenues have declined by 13.6% to EUR 717.1 million and the consolidated revenues have fallen by 11.1% to EUR 765.9 million EUR, which is mainly due to the Construction and Resources segments.

The Group's EBITDA for the half year decreased by 7.0% from EUR 85.4 million to EUR 79.4 million. The cost of materials and other operating expenses fell more signifi cantly than the consolidated revenues, whereas the personnel expenses remained almost constant.

At EUR 34.1 million, EBIT was 11.7% below the previous year's fi gure of EUR 38.6 million. Depreciation of fi xed assets decreased by EUR 1.7 million, while write-downs of inventories due to use increased by EUR 0.2 million compared to the previous year.

Earnings after tax improved from EUR 0.1 million to EUR 1.6 million. The fi nancial expenses decreased from EUR 46.9 million to EUR 35.4 million and the fi nancial income decreased from EUR 19.6 million to EUR 17.1 million. Overall, the negative effects of currency fl uctuations were signifi cantly smaller than in the same period of the previous year.

FINANCIAL POSITION

Our fi nancial position is developing in line with plans.

NET ASSET POSITION

The total assets increased by 5.5% against the 2017 year-end (EUR 1,617.7 million) but fell by 2.5% relative to June of the previous year to EUR 1,706.3 million. Overall, the balance sheet structure has improved signifi cantly thanks to a reduction of debt.

The assets side in the balance sheet increased primarily due to the increase in inventories of 11.5% to EUR 484.8 million, and due to the increase in receivables and other assets of 8.0% to EUR 562.0 million.

On the Equity and Liabilities side, equity decreased by 0.6% to EUR 416.4 million against the end of last year.

Non-current debt increased from EUR 334.4 million at the end of the previous year to EUR 525.8 million. This is due to the shift of the majority of liabilities to banks from current to non-current debt in the fi rst quarter. The covenant (EBITDA to net interest coverage) for primary loans was exceeded as of the end of 2017 and, according to IFRS, these loans must be transferred to current liabilities to banks by December 31.

In contrast, current debt decreased from EUR 864.6 million at the end of the previous year to EUR 764.1 million. This is due to the effect described for non-current debt.

Opportunities and risks

Material opportunities and risks are outlined in the individual sections of this Interim Report. There has been no material change in risks since the Annual Report dated December 31, 2017. Please refer to the Combined Management Report for the 2017 fi nancial year.

Full-year outlook

We continue to forecast a positive trend for our business overall. The global construction market is recording stable growth and demand for complex specialist foundation engineering projects will continue to grow due to continuing urbanization and an increasingly complex infrastructure. This development has resulted in good sales for the construction equipment business. The recovery and stabilization of the raw materials prices is pushing investments in the industry once again.

We met the challenges in recent years by implementing numerous measures, which are being consistently continued to increase our profi tability in the long term. We plan to use the signifi cantly improved overall situation for investing in the sustainability of this development. We are therefore confi dent that we are in a good position to sustainably improve our earnings again in the next two years.

As reported in the 2017 Annual Report, we continue to forecast about EUR 1.8 billion in total Group revenues and about EUR 90 million in EBIT for the 2018 fi nancial year. We expect earnings after tax to be signifi cantly higher than in the previous year.

For 2018, we still expect the Construction segment to report a slight decline in total Group revenues due to the very strong increase in the previous year. We expect EBIT to improve signifi cantly. From the current perspective, for the Equipment segment we expect total Group revenues and an EBIT of approximately the same level as the previous year, and for the Resources segment we expect a good increase in total Group revenues and an improved EBIT.

Interim consolidated financial statements

INCOME STATEMENT

in EUR '000	Q2/2017 *	Q2/2018	6M/2017 *	6M/2018
Sales revenues	451,200	398,701	830,242	717,104
Changes in inventories	-13,249	3,123	12,289	38,311
Other capitalized goods and services for own account	6,304	2,031	8,909	3,595
Other income	5,848	3,063	9,843	6,880
Consolidated revenues	450,103	406,918	861,283	765,890
Cost of materials	-242,853	-210,151	-468,492	-393,561
Personnel expenses	-96,660	-97,981	-191,082	-190,076
Other operating expenses	-55,616	-52,565	-116,278	-102,839
Earnings before interest, tax, depreciation and amortization (EBITDA)	54,974	46,221	85,431	79,414
Depreciation and amortization a) Depreciation of fixed assets	-21,285	-19,189	-39,640	-37,948
b) Write-downs of inventories due to use	-3,508	-3,979	-7,145	-7,357
Earnings before interest and tax (EBIT)	30,181	23,053	38,646	34,109
Financial income	9,669	8,295	19,633	17,104
Financial expenses	-29,095	-15,719	-46,856	-35,427
Share of the profit or loss of associated companies accounted for using the equity method	1,091	-138	1,054	-207
Earnings before tax (EBT)	11,846	15,491	12,477	15,579
Income tax expense	-7,817	-8,073	-12,345	-13,932
Earnings after tax	4,029	7,418	132	1,647
of which attributable to shareholders of BAUER AG	3,443	6,658	-1,303	741
of which attributable to non-controlling interests	586	760	1,435	906
in EUR	Q2/2017 *	Q2/2018	6M/2017 *	6M/2018
Basic earnings per share	0.20	0.39	-0.08	0.04
Diluted earnings per share	0.20	0.39	-0.08	0.04
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

in EUR '000	Q2/2017 *	Q2/2018	6M/2017 *	6M/2018
Earnings after tax	4,029	7,418	132	1,647
Income and expenses which will not be subsequently reclassified to profit and loss
Revaluation of commitments arising from employee benefits after termination of employment	2,293	1,198	5,864	-1,465
Deferred taxes on that revaluation with no effect on profit and loss	-646	-338	-1,647	331
Market valuation of other participations	0	615	0	615
Income and expenses which will be subsequently reclassified to profit and loss
Market valuation of derivative financial instruments	-8,918	-2,504	-9,623	2,995
Included in profit and loss	8,439	2,742	8,872	-2,725
Deferred taxes on financial instruments with no effect on profit and loss	135	-69	211	-78
Exchange differences on translation of foreign subsidiaries	-12,697	2,838	-13,453	940
Other comprehensive income	-11,394	4,482	-9,776	613
Total comprehensive income	-7,365	11,900	-9,644	2,260
of which attributable to shareholders of BAUER AG	-7,199	11,059	-10,224	1,444
of which attributable to non-controlling interests	-166	841	580	816

CONSOLIDATED BALANCE SHEET

Assets in EUR '000	June 30, 2017 *	Dec. 31, 2017	June 30, 2018
Intangible assets	23,190	21,021	19,237
Property, plant and equipment and investment property	412,679	407,429	408,581
Investments accounted for using the equity method	123,638	121,315	119,288
Participations	9,746	11,733	11,299
Deferred tax assets	43,913	45,607	48,932
Other non-current assets	8,271	7,653	8,154
Other non-current financial assets	16,218	14,389	18,700
Non-current assets	637,655	629,147	634,191
Inventories	447,205	430,606	484,760
Less advances received on inventories	-26,184	-13,883	-20,155
	421,021	416,723	464,605
Receivables and other assets	643,948	520,591	562,038
Effective income tax refund claims	4,730	3,976	4,560
Cash and cash equivalents	43,002	47,266	40,858
Current assets	1,112,701	988,556	1,072,061
	1,750,356	1,617,703	1,706,252

Equity and liabilities in EUR '000	June 30, 2017 *	Dec. 31, 2017	June 30, 2018
Equity of BAUER AG shareholders	417,930	415,483	412,825
Non-controlling interests	4,456	3,249	3,553
Equity	422,386	418,732	416,378
Provisions for pensions	122,332	126,332	128,552
Financial liabilities	465,327	180,395	366,118
Other non-current liabilities	7,257	6,883	7,216
Deferred tax liabilities	26,599	20,789	23,917
Non-current debt	621,515	334,399	525,803
Financial liabilities	289,612	460,565	352,580
Other current liabilities	389,722	364,998	379,418
Effective income tax obligations	7,849	16,202	16,889
Provisions	19,272	22,807	15,184
Current debt	706,455	864,572	764,071
	1,750,356	1,617,703	1,706,252

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

in EUR '000	Other revenue reserves and unappropriated net profit
	Subscribed capital	Capital reserve	Revenue reserves	Foreign currency translation	Derivative financial instruments	Equity instruments/ Debt instruments	Non controlling interests	Total
As at Jan. 1, 2017 *	73,001	38,404	316,422	3,962	-1,922	0	4,264	434,131
Earnings after tax	0	0	-1,303	0	0	0	1,435	132
Exchange differences on translation of foreign subsidiaries	0	0	0	-12,598	0	0	-855	-13,453
Revaluation of commitments arising from employee benefits after termination of employment	0	0	5,864	0	0	0	0	5,864
Market valuation of derivative financial instruments	0	0	0	0	-751	0	0	-751
Deferred taxes with no
effect on profit and loss	0	0	-1,647	0	211	0	0	-1,436
Total comprehensive income	0	0	2,914	-12,598	-540	0	580	-9,644
Changes in basis of consolidation	0	0	0	0	0	0	0	0
Dividend payments	0	0	-1,713	0	0	0	-388	-2,101
Other changes	0	0	0	0	0	0	0	0
As at Jun. 30, 2017 *	73,001	38,404	317,623	-8,636	-2,462	0	4,456	422,386
As at Jan. 1, 2018	73,001	38,404	319,812	-14,721	-1,013	0	3,249	418,732
Amendment of accounting policies	0		-4,102	0	0	0	0	-4,102
As at Jan. 1, 2018 (adjusted)	73,001	38,404	315,710	-14,721	-1,013	0	3,249	414,630
Earnings after tax	0	0	741	0	0	0	906	1,647
Exchange differences on translation of foreign subsidiaries	0	0	0	1,035	0	0	-95	940
Revaluation of commitments arising from employee benefits after termination of employment
	0	0	-1,471	0	0	0	6	-1,465
Market valuation of other participations	0	0	0	0	0	615	0	615
Market valuation of derivative financial instruments	0	0		0	270	0	0	270
Deferred taxes with no effect on profit and loss	0	0	332	0	-78		-1	253
Total comprehensive income	0	0	-398	1,035	192	615	816	2,260
Changes in basis of consolidation	0	0	0	0	0	0	0	0
Dividend payments	0	0	0	0	0	0	-512	-512
Other changes	0	0		0	0	0	0	0
As at Jun. 30, 2018	73,001	38,404	315,312	-13,686	-821	615	3,553	416,378

CONSOLIDATED STATEMENT OF CASH FLOWS

in EUR '000	6M/2017	6M/2018
Cash flows from operational activity:
Earnings before tax (EBT)	12,477	15,579
Depreciation of property, plant and equipment and intangible assets	39,640	37,948
Write-downs of inventories due to use	7,145	7,357
Depreciation of financial assets	123	0
Financial income *	-19,633	-17,104
Financial expenses *	46,733	35,427
Other non-cash transactions and results of de-consolidations *	19,750	7,953
Dividends received	2,877	2,698
Income from the disposal of property, plant and equipment and intangible assets	-1,999	-1,932
Income from associated companies accounted for using the equity method	1,054	-207
Change in provisions	204	-5,194
Change in trade receivables	-24,670	-9,089
Change in contract assets	-56,663	-4,551
Change in other assets and in prepayments and deferred charges	-30,455	-26,427
Change in inventories *	-9,949	-58,234
Change in trade payables *	49,590	19,185
Change in contract liabilities	-9,259	-7,384
Change in other current and non-current liabilities	-13,155	-11,856
Cash and cash equivalents generated from day-to-day business operations *	13,810	-15,831
Income tax paid	-15,417	-13,817
Net cash from operating activities *	-1,607	-29,648
Cash flows from investment activity:
Acquisition of property, plant and equipment and intangible assets	-35,090	-42,009
Proceeds from the sale of property, plant and equipment and intangible assets	7,380	12,099
Consolidation scope-related change in financial resources	-9	0
Net cash used in investing activities	-27,719	-29,910
Cash flows from financing activity:
Raising of loans and liabilities to banks	156,455	234,974
Repayment of loans and liabilities to banks	-95,532	-156,007
Repayment of liabilities from finance lease agreements	-5,451	-8,859
Dividends paid	-2,101	-512
Interest paid *	-16,857	-19,038
Interest received	3,639	2,403
Net cash used in financing activities *	40,153	52,961
Changes in liquid funds affecting payments	10,827	-6,597
Influence of exchange rate movements on cash	-1,288	189
Total change in liquid funds	9,539	-6,408
Cash and cash equivalents at beginning of reporting period	33,463	47,266
Cash and cash equivalents at end of reporting period	43,002	40,858
Change in cash and cash equivalents	9,539	-6,408

SEGMENT REPORTING

in EUR '000		Construction Equipment Resources
January - June	2017 *	2018	2017 *	2018	2017 *	2018
Total revenues (Group)	431,579	327,095	372,060	374,462	127,721	119,227
Sales revenues with third parties	402,976	307,394	312,324	302,241	113,059	106,719
Sales revenues between business segments	6,289	6,799	25,532	21,255	214	500
Changes in inventories	0	0	12,422	38,010	-133	301
Other capitalized goods and services for own account	150	231	1,592	1,614	26	67
Other income	6,670	4,266	2,265	1,681	973	1,004
Consolidated revenues	416,085	318,690	354,135	364,801	114,139	108,591
Earnings before interest, tax, depreciation and amortization (EBITDA)	34,250	25,967	40,687	53,363	8,598	-893
Depreciation of fixed assets	-20,882	-21,202	-9,916	-9,679	-7,804	-5,764
Write-downs of inventories due to use	0	0	-7,145	-7,357	0	0
Earnings before interest and tax (EBIT)	13,368	4,765	23,923	36,327	794	-6,657
Financial income	8,537	8,287	9,818	5,559	951	1,929
Financial expenses	-22,696	-12,812	-18,926	-14,214	-6,643	-6,402
Share of the profit or loss of associated companies accounted for using the equity method	320	-49	-1,816	-2,678	2,550	2,520
Income tax expense	-3,700	-4,338	-6,393	-8,907	-1,686	-653
Earnings after tax	-4,171	-4,147	6,606	16,087	-4,034	-9,263
	Dec. 31, 2017	June 30, 2018	Dec. 31, 2017	June 30, 2018	Dec. 31, 2017	June 30, 2018
SEGMENT ASSETS	623,628	638,241	774,855	822,428	258,244	256,156

in EUR '000		Others	Consolidation Group
January - June	2017 *	2018	2017	2018	2017 *	2018
Total revenues (Group)	21,953	20,647	-51,027	-49,122	902,286	792,309
Sales revenues with third parties	1,883	750			830,242	717,104
Sales revenues between business segments	19,215	18,929	-51,250	-47,483	0	0
Changes in inventories	0	0	0	0	12,289	38,311
Other capitalized goods and services for own account	5	0	7,136	1,683	8,909	3,595
Other income	11	48	-76	-119	9,843	6,880
Consolidated revenues	21,114	19,727	-44,190	-45,919	861,283	765,890
Earnings before interest, tax, depreciation and amortization (EBITDA)	2,038	934	-142	43	85,431	79,414
Depreciation of fixed assets	-1,729	-1,782	394	479	-39,640	-37,948
Write-downs of inventories due to use	0	0	0	0	-7,145	-7,357
Earnings before interest and tax (EBIT)	309	-848	252	522	38,646	34,109
Financial income	5,948	5,637	-5,621	-4,308	19,633	17,104
Financial expenses	-4,212	-6,307	5,621	4,308	-46,856	-35,427
Share of the profit or loss of associated companies accounted for using the equity method	0	0	0	0	1,054	-207
Income tax expense	-534	68	-32	-102	-12,345	-13,932
Earnings after tax	1,511	-1,450	220	420	132	1,647
	Dec. 31, 2017	June 30, 2018	Dec. 31, 2017	June 30, 2018	Dec. 31, 2017	June 30, 2018

SEGMENT ASSETS 407,162 412,028 -446,186 -422,601 1,617,703 1,706,252

Notes to the consolidated financial statements

1. GENERAL INFORMATION ABOUT 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, equipment and products dealing with ground and groundwater. The Group markets its products and services all over the world. The operations of the Group are divided into three segments: Construction, Equipment and Resources.

These condensed interim consolidated fi nancial statements were released for publication on August 7, 2018.

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. BASIS OF PREPARATION OF THE CONSOLIDATED FINANCIAL STATEMENTS

BAUER AG prepares 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 balance sheet date and recognized by the European Union. Only IASB Standards and Interpretations adopted by the Committee and duly published in the Offi cial Journal of the EU by the balance sheet date are applied.

The Half-Year Interim Report to August 10, 2018 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, 2017, and as such should be read in conjunction with the consolidated fi nancial statements of BAUER AG to December 31, 2017.

3. BASIS OF CONSOLIDATION

The basis of consolidation includes BAUER AG and all major subsidiaries. Subsidiaries are all companies over which the Group has control in terms of fi nancial and corporate policy. This is routinely accompanied by a voting rights share of over 50%. 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% of their voting rights. This is the result of state restrictions which stipulate that foreign investors may not hold more than 50% of the voting rights in domestic companies. In such cases BAUER AG makes use of "agency constructions", whereby more than 50% 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, or the option of control, is transferred to the Group. They are de-consolidated at the point when control ends. Companies in 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.

Changes at subsidiaries:

No changes have occurred to the basis of consolidation since December 31, 2017.

4. CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS

In this context we refer to page 90 of the 2017 Annual Report.

5. ACCOUNTING POLICIES

The accounting policies applied from January 1, 2018 correspond to those of the consolidated fi nancial statements to December 31, 2017, with the exception of the valuation of the provisions for pensions and the fi rst-time application of new and amended standards.

a) Valuation of the provisions for pensions

On June 30, 2018, the BAUER Group lowered the discount rate for measuring its defi ned benefi t plan commitments in Germany to 1.85% (previous year: 2.05%).

b) New and amended standards adopted by the BAUER Group

Numerous new or amended standards entered into force in the current reporting period. Due to the fi rst-time application of the new standards IFRS 9 "Financial Instruments" and IFRS 15 "Revenue from Contracts with Customers," there were retrospective amendments of accounting methods in the BAUER Group.

The effects of the fi rst-time application of these two standards are explained under point 6. Other amendments to standards do not affect the accounting principles of the BAUER Group.

6. CHANGES IN ACCOUNTING POLICIES

a) IFRS 9 "Financial Instruments "

IFRS 9 "Financial Instruments" was published in its fi nal version by the IASB in July 2014 and replaces the regulations of IAS 39 concerning the classifi cation and measurement of fi nancial instruments, the impairment of fi nancial assets and the accounting treatment of hedging relationships. The obligation to apply is valid for the reporting periods beginning on January 1, 2018.

At initial recognition, fi nancial assets are to be classifi ed in the valuation categories "Amortised Cost," "Fair Value through Profi t and Loss (FVTPL)" and "Fair Value through Other Comprehensive Income" (FVOCI). The classifi cation is performed depending on the respective underlying business model and the so-called cash fl ow condition, i.e. the concrete design of the contractually agreed cash fl ows of the fi nancial asset to be evaluated. Impacts from this result in the envisaged receivables for a sale that are sold to a bank as part of forfeitures. These receivables meet the requirements for the business model "Sale" and must therefore be assigned to the category "Fair Value through Profi t and Loss." As sales are only carried out to a limited extent, the changeover effect is to be considered insignifi cant. All further debt instruments are still measured in the category under "Amortised Cost."

Furthermore, participations are generally to be measured in net income at fair value. There is an irrevocable option to record changes to the fair value in Other Comprehensive Income; the BAUER Group exercises this option.

The recognition of write-downs is no longer based solely on any losses incurred (Incurred loss model), but also on expected losses (Expected loss model). In order to determine the scope of the risk provision strategy, a three-stage model is envisaged, according to which from the initial statement generally 12-month expected losses and in case of signifi cant credit risk deterioration the expected total losses are to be recognized. In order to illustrate the expected losses on trade receivables and on

the contract assets recognized in accordance with IFRS 15, a simplifi ed procedure is permitted, whereby the impairment can be determined by referring to what is known as a "Provision Matrix" that relies on historical defaults and future-oriented estimations.

From the application of the simplifi ed procedure on trade receivables in accordance with IFRS 15, at the time of the fi rst application of IFRS 9 there was an increase of impairments in the amount of EUR 4,102 thousand (after deferred taxes), which was recognized with no effect on profi t and loss in the revenue reserves. With regard to hedge accounting, IFRS 9 includes regulations that pursue a stronger orientation on the company's economic risk management. The foreign exchange forward contracts and interest swaps existing as of December 31, 2017 meet the requirements of IFRS 9 for cash fl ow hedges. The risk management strategies and hedging documentation are also coordinated with the new regulations. Therefore these hedging relationships can also be continued under IFRS 9.

In the foreign exchange forward contracts newly concluded in 2018, the BAUER Group designates only the spot component of the change of the fair value as a component of the cash fl ow hedge. The changes to the fair value occurring on the forward component and cross-currency basis spread (CCBS) component of the fair value are recognized in other income in the reserve for hedging costs.

The BAUER Group applies the modifi ed retrospective method when implementing IFRS 9 as of January 1, 2018. Accordingly, the reassignments and adjustments resulting from the new regulations are recognized in the opening balance sheet as of January 1, 2018. An adjustment of the comparative fi gures for the previous year is not carried out.

b) IFRS 15 "Revenue from Contracts with Customers"

In May 2014 the IASB published the standard IFRS 15 – "Revenue from Contracts with Customers." The standard stipulates a consistent, principle-based, fi ve-stage model for revenue determination and recording that is to be applied to contracts with customers and contains as a core principle that revenue must be recorded from the time at which the power of disposition over the goods or services is transferred to the customer. It replaces in particular standards IAS 11 and IAS 18 as well as the regulations contained in various interpretations.

The fi rst-time adoptions of IFRS 15 resulted in the following effects on the representation in the consolidated fi nancial statements:

If one of the contractual parties has fulfi lled a contractual obligation, the company must report the contract in accordance with IFRS 15 in the balance sheet as a contract asset or contract liability. A contract asset is the claim to the receipt of a consideration in exchange for goods or services that are transferred to a customer. A contract liability is the obligation to transfer goods or services to a customer for which a consideration is received (or is still to be received) from the customer. For this the positions "Contract assets" and "Contract liabilities" have been newly included in the balance sheet. As a result, in the future the former balance-sheet positions "Receivables from construction contracts (PoC)" and "Liabilities from construction contracts (PoC)" will be omitted. Insofar as the BAUER Group meets its obligations from contracts with customers before the respective contractual partner pays a consideration or this consideration is due, the BAUER Group will no longer record this contractual claim (minus all amounts recorded as trade receivables) as "Receivables from construction contracts (PoC)", but as "Contract asset".

If a company pays a consideration or if before the transfer of a good or the rendering of a service to the customer the BAUER Group has an unconditional claim to a certain consideration (i.e. a receivable), the BAUER Group must record the contract as a contract liability if the payment has been made or is due (depending on which of the two occurs fi rst). This means that in the future the BAUER Group will no longer record advances received under the balance sheet items "Liabilities from construction contracts (PoC)" but rather under "Contract liabilities."

In accordance with the regulations of IAS 11.22 in connection with 11.34 and 11.36, an expected loss from construction contracts was to be recognized in net income. In accordance with IAS 37.69, previously an impairment of the respective

position on the assets side was to be carried out before a separate provision for an onerous contract was to be created. In accordance with IFRS 15.107, from the fi nancial year 2018 the impairment of a "Contract asset" is evaluated according to the regulations of IFRS 9. After that there is no impairment of a "Contract asset" from onerous contracts as long as no default of contractually agreed payments is expected. For expected losses from onerous contracts that are not attributable to the default of contractually agreed payments, provisions must be created in the amount of the expected unavoidable costs in accordance with IAS 37.68. This did not affect the consolidated fi nancial statements of the BAUER Group.

Furthermore, contractual changes may affect the balance-sheet recording of effects (e.g. from supplements or claims). These affect in particular their valuation, e.g. the amount with which these must be included in the order amount to determine the period-based realization of revenues. Here IFRS 15 demands a higher degree of certainty than was the case under the previous regulations of IAS 11. In accordance with IFRS 15.56, such a consideration may only be included in the transaction price in whole or in part if it is highly likely that a signifi cant cancellation will not occur in the recorded cumulative revenues as soon as there is no longer uncertainty in connection with this consideration.

In the ongoing civil engineering business, excluding some insignifi cant exceptions, all the requirements for a period-based realization of revenues in accordance with IFRS 15 were met.

In the BAUER Group there were no signifi cant effects on the required adjustments as of January 1, 2018.

The BAUER Group applies the modifi ed retrospective method when implementing IFRS 15 as of January 1, 2018. Accordingly, the reassignments and adjustments resulting from the new regulations are recorded in the opening balance sheet as of January 1, 2018. An adjustment of the comparative fi gures for the previous year is not carried out.

c) Effects on the fi nancial statement

Due to the changes to the BAUER Group's accounting methods, the fi nancial statement for the previous year needed to be amended retroactively.

As explained in the fi gures above, IFRS 9 and IFRS 15 were generally applied for the fi rst time without respective adjustment of the comparative fi gures.

The following tables show the adjustments that were recorded for each individual item:

Assets in EUR '000	Dec. 31, 2017 as reported	IFRS 9 and IFRS 15	Jan. 1, 2018 adjusted retroactively
Intangible assets	21,021		21,021
Property, plant and equipment and investment property	407,429		407,429
Investments accounted for using the equity method	121,315		121,315
Participations	11,733		11,733
Deferred tax assets	45,607	1,601	47,208
Other non-current assets	7,653		7,653
Other non-current financial assets	14,389		14,389
Non-current assets	629,147	1,601	630,748
Inventories	430,606		430,606
Less Advances received for inventories	-13,883		-13,883
	416,723		416,723
Receivables and other assets	520,591	-5,703	514,888
of which: Receivables from construction contracts (PoC)	148,203	-148,203	0
of which: Contract assets	0	146,345	146,345
of which: Trade receivables	317,488	-3,779	313,709
of which: Receivables from enterprises in which the company has participating interests	4,175		4,175
of which: Payments on account	4,726		4,726
of which: Other current assets	33,673		33,673
of which: Other current financial assets	12,326	-66	12,260
of which: Effective income tax refund claims	3,976		3,976
Cash and cash equivalents	47,266		47,266
Current assets	988,556	-5,703	982,853
	1,617,703	-4,102	1,613,601

Equity and liabilities in EUR '000	Dec. 31, 2017 as reported	IFRS 9 and IFRS 15	Jan. 1, 2018 adjusted retroactively
Equity of BAUER AG shareholders	415,483	-4,102	411,381
Non-controlling interests	3,249		3,249
Shareholders' Equity	418,732	-4,102	414,630
Provisions for pensions	126,332		126,332
Financial liabilities	180,395		180,395
of which: Liabilities to banks	155,621		155,621
of which: Liabilities from fi nance lease agreements	20,356		20,356
of which: Other non-current fi nancial liabilities	4,418		4,418
Other liabilities	6,883		6,883
Deferred tax liabilities	20,789		20,789
Non-current liabilities	334,399		334,399
Financial liabilities	460,565		460,565
of which: Liabilities to banks	429,589		429,589
of which: Liabilities from finance lease agreements	14,324		14,324
of which: Other current liabilities	16,652		16,652
Other liabilities	364,998		364,998
of which: Liabilities from construction contracts (PoC)	51,083	-51,083	0
of which: Contract liabilities	0	51,083	51,083
of which: Trade payables	233,519		233,519
of which: Liabilities to enterprises in which the company has participating interests	690		690
of which: Other current liabilities	79,706		79,706
Effective income tax obligations	16,202		16,202
Provisions	22,807		22,807
Current debt	864,572		864,572
	1,617,703	-4,102	1,613,601

7. DISCLOSURES REGARDING FINANCIAL INSTRUMENTS

7.1 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, 2017.

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

7.2 Effects of IFRS 9 on the classifi cation and

measurement of the fi nancial statement

The following table represents a reconciliation of the fi nancial assets and liabilities of the evaluation categories of IAS 39 concerning the evaluation categories in accordance with IFRS 9 as of December 31/January 1, 2018:

Assets in EUR '000	Measurement category in accordance with IAS 39	Carrying amount as of Dec. 31, 2017	Measurement category in accordance with IFRS 9	Carrying amount as of Jan. 1, 2018
Participations	Available for Sale	11,733	Fair Value through OCI (without Recycling)	11,733
Other non-current financial assets	Loans and receivables	10,980	Amortised Cost	10,980
	n/a *	3,276	n/a *	3,276
	n/a *	133	n/a *	133
Non-current assets
	Loans and receivables	317,488	Amortised Cost	304,838
Trade receivables			Fair Value through Profit and Loss	8,871
Receivables from enterprises in which the company has participating interests	Loans and receivables	4,175	Amortised Cost	4,175
Other current financial assets	Financial Assets and Liabilities Held for Trading	897	Fair Value through Profit and Loss	897
	Loans and receivables	8,660	Amortised Cost	8,594
	n/a *	2,769	n/a *	2,769
Cash and cash equivalents	Loans and receivables	47,266	Amortised Cost	47,66
Current assets

Equity and liabilities in EUR '000	Measurement category in accordance with IAS 39	Carrying amount as of Dec. 31, 2017	Measurement category in accordance with IFRS 9	Carrying amount as of Jan. 1, 2018
Liabilities to banks	Other financial liabilities	155,621	Amortised Cost	155,621
	Financial Assets and Liabilities Held for Trading	3,588	Fair Value through Profit and Loss	3,588
Other non-current financial liabilities	Other financial liabilities	775	Amortised Cost	775
	n/a *	55	n/a *	55
Non-current liabilities
Liabilities to banks	Other financial liabilities	429,589	Amortised Cost	429,589
Trade payables	Other financial liabilities	233,519	Amortised Cost	233,519
Liabilities to enterprises in which the company has participating interests	Other financial liabilities	690	Amortised Cost	690
Other current liabilities	Financial Assets and Liabilities Held for Trading	285	Fair Value through Profit and Loss	285
	Other financial liabilities	16,303	Amortised Cost	16,303
	n/a *	64	n/a *	64
Current debt

* The shares in non-consolidated companies included in the other non-current financial assets (EUR 3,276 thousand) were not included during the assignment to the listed categories because neither IAS 39 nor IFRS 9 is applied for these financial assets. The same is true of the derivatives in the other non-current and current other financial assets and other non-current and other current liabilities included in hedge accounting.

The table below shows the effects on the reconciliation of fi nancial assets according to measurement categories as of January 1, 2018:

Financial assets in EUR '000	Amortised Cost (2017: Loans and receivables)	Fair Value through OCI (2017: Available for Sale) (with Recycling)	Fair Value through OCI (without Recycling)	Fair Value through Profit and Loss
Dec. 31, 2017 (as reported) – IAS 39	388,569	11,733 1)	0	897
Reassignment of the participations from "Available for Sale" into "Fair Value through OCI (without recycling)" and "Fair Value through Profit and Loss"	0	-11,733	11,733	0
Reassignment of the forfeited receivables from "Amortised Cost" into "Fair Value through Profit and Loss"	-8,871	0	0	8,871
Jan. 1, 2018 – IFRS 9 before revaluation effects	379,698	0	11,733	9,768
Revaluation effects 2)	-3,845	0	0	0
Jan. 1, 2018 (adjusted) – IFRS 9	375,853	0	11,733	9,768

1) In deviation from the assets classified as Available for Sale in the annual report for the year ended December 31, 2017, the shares in non-consolidated companies (EUR 3,276 thousand) are not included in the reconciliation shown here, because different valuation rules apply for these.

2) The revaluation effects include the adjustments from the retrospective application of the expected loss model.

The BAUER Group has exercised the option of representing changes to the fair value of all participations that were previously classifi ed as "Available for Sale" in other comprehensive income.

Furthermore, the intended trade receivables in the context of forfeitures for a sale are transferred from the category "Loans and receivables" into the fi nancial assets "Fair Value through Profi t and Loss".

The classifi cation of the fi nancial liabilities into the IFRS 9 measurement categories did not result in any changes.

Impairment of Financial Assets

The BAUER Group has three types of fi nancial assets that are subject to the new model of expected credit losses in accordance with IFRS 9:

• Trade receivables
• Contract assets
• Debt instruments recognized as amortised costs

The BAUER Group uses the simplifi ed approach in accordance with IFRS 9 to measure the expected credit losses; accordingly, for all trade receivables and contract assets the expected credit losses over the contract period are referred to. The expected credit losses are measured using a "Provision Matrix," which is based on historic defaults and future estimates. The other fi nancial assets that can be measured at amortised cost are seen as "subject to a low risk of default," which is why the valuation allowance recognized in the period was limited to the expected 12-month credit losses. Cash and cash equivalents are also subject to the impairment provisions of IFRS 9, however, for reasons of immateriality, no valuation allowances are recognized.

The impairment for trade receivables, contract assets and debt instruments recognized at amortised cost as of December 31, 2017 are transferred to the opening balance of the valuation allowance as of January 1, 2018 as follows:

in EUR '000	Trade receivables	Contract assets	Debt instruments recognized at amortised cost
Dec. 31, 2017 (as reported) – IAS 39	-47,371	0	0
Amounts adjusted retroactively via the opening balance of the revenue reserves	-3,779	-1,858	-66
Dec. 31, 2017 (adjusted) – IFRS 9	-51,150	-1,858	-66

7.3 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	Dec. 31, 2017		Jun. 30, 2018
	Carrying amount	Fair value	Carrying amount	Fair value	Level
Participations	11,733	n/a	11,299	11,299	3
Other non-current financial assets	10,980	9,808	15,049	14,041	3
Forfeited trade receivables	8,871	n/a	6,433	6,433	2
Derivatives not in hedge accounting	897	897	1,274	1,274	2
Derivatives in hedge accounting	2,902	2,902	232	232	2
Total	35,383	13,607	34,287	33,279

Equity and liabilities in EUR '000	Dec. 31, 2017		Jun. 30, 2018
	Carrying amount	Fair value	Carrying amount	Fair value	Level
Liabilities to banks	155,621	286,560	341,259	346,145	3
Other non-current financial liabilities	775	768	1,829	1,978	3
Derivatives not in hedge accounting	3,873	3,873	7,201	7,201	2
Derivatives in hedge accounting	119	119	2,112	2,112	2
Total	160,388	291,320	352,401	357,436

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.

Level 2 derivatives comprise foreign exchange forward contracts, foreign exchange options, interest 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 options are determined by recognized option price models.

The fair values of the interest 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 debt, 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 fi nancial assets and of other 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.

For participations the fair value is determined using the discounted cash fl ow model. The following table represents the balance sheet items measured at the fair value of level 3, which solely comprises the participation in AO Mostostrojindustria. For other participations there was no material change in the fair value on balance sheet date.

in EUR '000	Jan. 1, 2018	Additions	Disposals	Changes with no effect on profit and loss	Changes recognized in the income statement	Jun. 30, 2018
Financial assets	11,733	34	-1,083	615	0	11,299

8. SEASONALITY

Our Construction segment undertakes many projects in regions where winter and other hostile weather conditions impact on site results in the fi rst quarter of the year and at the start of the second quarter. As a general rule, the fi rst quarter is also weak for 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.

9. 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 as well as 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

In the Resources segment, the companies of the corporation that provide products and services in the water, environmental and mineral deposits sectors. They include environmental technology companies involved in the treatment of ground and groundwater as well as companies involved in exploration 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.

Other

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.

Consolidation

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.

The segment earnings after tax refl ect the fi nancial income and expenses as well as the net earnings of shares valued at-equity and the income tax expenditure. The segments' assets and liabilities incorporate all the assets and liabilities of the Group. The non-current assets stated in the segment report by region comprise intangible assets, property, plant and equipment and investment property.

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 basis 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% 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.

10. EVENTS AFTER JUNE 30, 2018

No events of special note which we would expect to have a material infl uence on the BAUER Group's balance sheet or earnings occurred after the balance sheet date.

11. 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.

12. CONTINGENT LIABILITIES

Contingent liabilities arising from guarantees to third parties exist in an amount of EUR 45,559 thousand (December 31, 2017: EUR 46,059 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 10, 2018

The Management Board

Prof. Thomas Bauer Vorsitzender des Vorstands Dipl.-Ing. (FH) Florian Bauer, MBA Dipl.-Betriebswirt (FH) Hartmut Beutler

Peter Hingott

FUTURE-RELATED STATEMENTS

This quarterly statement 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 future-related. 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 quarterly statement.

DATES 2018

November 13, 2018	Quarterly Statement 9M/Q3 2018
August 10, 2018	Half-Year Interim Report to June 30, 2018
June 28, 2018	Annual General Meeting
May 14, 2018	Quarterly Statement Q1 2018
	Annual Press Conference Analysts' Conference
April 12, 2018	Publication Annual Report 2017

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 (0)8252 97-1218 Fax: +49 (0)8252 97-2900 E-mail: investor.relations@bauer.de

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

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