Annual Report • Apr 25, 2014
Annual Report
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Annual Report 2013
engineering for a better world
The following table contains both the figures relating to continued operations and the pro forma figures for the group including GEA Heat Exchangers for comparison purposes.
| Continued operations | GEA Group 1 | |||||
|---|---|---|---|---|---|---|
| Change | Change | |||||
| (EUR million) | 2013 | 2012 2 | in % | 2013 | 2012 3 | in % |
| Results of operations | ||||||
| Order intake | 4,627.9 | 4,425.4 | 4.6 | 6,092.7 | 5,901.1 | 3.2 |
| Revenue | 4,320.0 | 4,142.3 | 4.3 | 5,772.2 | 5,720.1 | 0.9 |
| Order backlog | 2,015.5 | 1,829.9 | 10.1 | 2,810.9 | 2,751.6 | 2.2 |
| Operating EBITDA 4 | 530.1 | 494.4 | 7.2 | 688.3 | 661.9 | 4.0 |
| as % of revenue | 12.3 | 11.9 | – | 11.9 | 11.6 | – |
| EBITDA | 515.2 | 420.1 | 22.6 | 659.8 | 597.0 | 10.5 |
| Operating EBIT 4 | 458.8 | 425.8 | 7.8 | 582.1 | 560.8 | 3.8 |
| as % of revenue | 10.6 | 10.3 | – | 10.1 | 9.8 | – |
| EBIT | 419.6 | 314.3 | 33.5 | 525.0 | 453.9 | 15.7 |
| as % of revenue | 9.7 | 7.6 | – | 9.1 | 7.9 | – |
| EBT | 352.1 | 227.1 | 55.0 | 457.1 | 364.8 | 25.3 |
| Profit after tax from continued operations | 282.0 | 214.3 | 31.6 | 335.8 | 315.1 | 6.6 |
| Profit or loss after tax from discontinued operations | 54.4 | 100.9 | –46.2 | 0.6 | 0.1 | > 100 |
| Profit for the period | 336.4 | 315.2 | 6.7 | 336.4 | 315.2 | 6.7 |
| Net assets | ||||||
| Total assets | 6,464.6 | 6,429.3 | 0.6 | 6,464.6 | 6,429.3 | 0.6 |
| Equity | 2,315.7 | 2,166.9 | 6.9 | 2,315.7 | 2,166.9 | 6.9 |
| as % of total assets | 35.8 | 33.7 | – | 35.8 | 33.7 | – |
| Working capital (reporting date) | 363.3 | 355.7 | 2.1 | 531.1 | 533.2 | –0.4 |
| Working capital (average of the last 12 months) | 506.4 | 525.5 | –3.6 | 717.5 | 752.7 | –4.7 |
| as % of revenue (average of the last 12 months) | 11.7 | 12.7 | – | 12.4 | 13.2 | – |
| Net liquidity (+)/Net debt (-) | – | – | – | –178.6 | –325.5 | 45.1 |
| Gearing in % (net debt/equity) | – | – | – | 7.7 | 15.0 | – |
| Financial position | ||||||
| Cash flow from operating activities | 424.7 | 333.6 | 27.3 | 525.8 | 465.1 | 13.1 |
| Cash flow driver 5 | 413.8 | 207.2 | 99.7 | 543.8 | 368.1 | 47.7 |
| as % of revenue (last 12 months) | 9.6 | 5.0 | – | 9.4 | 6.4 | – |
| Capital employed (reporting date) | 2,550.2 | 2,545.2 | 0.2 | 3,552.6 | 3,559.5 | –0.2 |
| Capital employed (average of the last 12 months) | 2,687.3 | 2,733.5 | –1.7 | 3,722.4 | 3,836.5 | –3.0 |
| ROCE in % (EBIT/Capital employed) 6 | 15.6 | 11.5 | – | 14.1 | 11.8 | – |
| ROCE in % (goodwill adjusted) 7 | 22.1 | 16.7 | – | 20.8 | 17.8 | – |
| Capital expenditure on property, plant and equipment | 120.5 | 125.2 | –3.8 | 151.3 | 161.2 | –6.2 |
| Full-time equivalents (reporting date) excluding vocational trainees and inactive employment contracts |
17,750 | 17,168 | 3.4 | 24,951 | 24,498 | 1.9 |
| GEA shares | ||||||
| Earnings per share pre purchase price allocation (EUR) | – | – | – | 1.86 | 1.87 | –0.9 |
| Earnings per share (EUR) | – | – | – | 1.75 | 1.68 | 3.6 |
| Weighted average number of shares outstanding (million) | – | – | – | 192.5 | 185.8 | 3.6 |
1) Including the disposal group and the discontinued operations GEA Heat Exchangers respectively
2) Amounts adjusted due to first time classification of an operation as discontinued operation (see page 147 f.) and due to change in accounting policy for employee benefits (see page 118 f.)
3) Amounts adjusted due to change in accounting policy for employee benefits (see page 118 f.)
4) Before effects of purchase price allocations from revalued assets and liabilities and before one-offs (see page 200 f.)
5) Cash flow driver = EBITDA - Capital expenditure - Change in Working Capital (average of the last 12 months)
6) Capital employed including goodwill from the acquisition of the former GEA AG by the former Metallgesellschaft AG in 1999 (average of the last 12 months)
7) Capital employed excluding goodwill from the acquisition of the former GEA AG by the former Metallgesellschaft AG in 1999 (average of the last 12 months)
GEA Group is one of the largest suppliers to the food processing industry and a wide range of process industries. It generated consolidated revenues in excess of EUR 4.3 billion in 2013.
As an international technology group, the Company focuses on the development and production of process technology and components for sophisticated production methods in a variety of end markets. GEA generates more than 70 percent of its consolidated revenues from the food sector, which is a long-term growth industry.
The group employed around 18,000 people worldwide as of December 31, 2013. GEA Group is a market and technology leader in its business areas.
Order intake EUR 4,628 million
Revenue EUR 4,320 million
Operating EBITDA EUR 530.1 million
Operating EBITDA Margin 12.3 %
Earnings per share 1.75 EUR
Cover picture:
GEA powder handling and storage technology inside a dairy powder plant.
| 6 | Letter to Shareholders | |
|---|---|---|
| 10 | GEA Group Structure | |
| 12 | Executive Board of GEA Group Aktiengesellschaft | |
| Management | 13 | Combined Group Management Report |
| Report | 13 | Fundamental information about the group |
| 23 | Report on Economic Position | |
| 57 | Report on Post-Balance Sheet Date Events | |
| 58 | Corporate Governance Report | |
| including the Corporate Governance Declaration | ||
| 65 | Remuneration Report | |
| 75 | Report on Risks and Opportunities | |
| 86 | Report on Expected Developements | |
| 90 | GEA Shares/Investor Relations | |
| 95 | Sustainability Report | |
| Consolidated | 111 | Contents |
| Financial Statements 112 | Consolidated Balance Sheet | |
| 114 | Consolidated Income Statement | |
| 115 | Consolidated Statement of Comprehensive Income | |
| 116 | Consolidated Cash Flow Statement | |
| 117 | Consolidated Statement of Changes in Equity | |
| 118 | Notes to the Consolidated Financial Statements |
Independent Group Auditors' Report
The Company's Executive Bodies and their Appointments
Report of the Supervisory Board
Responsibility Statement
Key Figures by Quarter
See inside back cover for index
Jürg Oleas, CEO of GEA Group Aktiengesellschaft
2013 was another highly successful fiscal year for GEA Group. This is underlined by an increase in order intake to approximately EUR 6.1 billion and a further improvement in operating margin. Continued operations, i.e. operations excluding the GEA Heat Exchangers Segment that is about to be divested, have experienced around 7 percent year on year organic growth in order intake, which reflects the continued momentum in the food sector. Overall Group sales went up to nearly EUR 5.8 billion, which corresponds to organic growth of around 3 percent. In respect of continued operations, which are more significant to our future, organic growth even exceeded the level of 6 percent. With an operating EBITDA of EUR 701 million which adjusted for currency effects includes GEA Heat Exchangers, we have attained our envisaged target. And with a corresponding operating EBITDA margin of 12 percent, we have realized an excellent result by mechanical engineering standards. With regard to cash flow driver margin we most recently had announced a target of at least 9.0 percent. Ultimately, we were able to clearly exceed this target by attaining a level of 9.4 percent. These figures imply that we have achieved all our objectives set for the fiscal year. This is also mirrored in a 4 percent increase in earnings per share to EUR 1.75. It should be noted that strategic projects – in particular the envisaged separation from the GEA Heat Exchangers Segment and the one-time tax effects associated with it – adversely affected earnings per share. Adjusted for these expenses, earnings per share would have totaled EUR 1.99. This would correspond to an 18 percent increase.
Supported by the Group's even stronger focus on the food sector as communicated in June 2013 and the strong order intake experienced in the subsequent quarters, our share price climbed and closed at a new all-time high of EUR 34.89 on December 27. The closing price of EUR 34.60 on December 30 corresponds to a 41 percent increase in 2013. This means that, in the fiscal year just ended, our share outperformed both the DAX and the MDAX and clearly also surpassed the STOXX® Europe TMI Industrial Engineering, which is the most relevant benchmark for our Company. Due to this positive share price performance, GEA's market capitalization went up to approximately EUR 6.7 billion by the end of fiscal year 2013.
Nonetheless, the business environment in the fiscal year just ended was not exactly easygoing. For instance, the development of key regional sales markets proved less favorable than projected by independent sources in early 2013. This is why, amongst others, the International Monetary Fund was twice forced to revise its economic growth assumptions downwards in the course of the year. While the euro zone and China remained at previous year levels, the overall economic growth rates in the US, which is an important market to us, and emerging markets overall clearly remained below 2012 levels. The fact that GEA nonetheless attained its targets and was able to post a clear organic growth in order intake underlines the strength of GEA's product portfolio.
Broken down into segments, this development was subject to various dynamics. Although the profitability of our GEA Food Solutions Segment is still below Group average, the Segment achieved a positive EBITDA result in the fiscal year just ended. In this respect, we follow a clear roadmap aimed at successively increasing the Segment's earning power. In the previous fiscal year, the strongest growth in order intake was generated in the Segments with the highest return on investment. Thus, for the very first time, our GEA Mechanical Equipment Segment achieved an order intake in excess of EUR 1 billion on the basis of a nearly 7 percent organic growth rate, while GEA Process Engineering enjoyed even more dynamic growth. Based on organic growth that surpassed 14 percent and was mainly driven by the demand for dairy processing equipment, the Segment also succeeded in attaining a new all-time record high of more than EUR 2 billion in terms of order intake. With regard to revenue, the GEA Process Engineering and the GEA Refrigeration Technologies Segments performed above average with organic growth rates of 7.5 and 9.1 percent, respectively. In the GEA Process Engineering Segment, we one more time increased our operating EBITDA margin - which had already been extremely good in the two preceding years – by 90 basis points to currently 11.3 percent. This is a remarkable level of profitability for the engineering sector. The Segment achieved the highest return on capital employed amongst all Segments. Furthermore, the GEA Refrigeration Technologies Segment was also able to boost its operating EBITDA margin to a new record high of 9.6 percent.
In 2013, GEA once again received orders for important reference projects that rely on the application of our innovative solutions and technologies. Basically, this was a result of the rising global demand for dairy products. Thus, the largest individual orders placed with our Company embraced 7 dairy projects, each worth more than EUR 30 million, with a total value of approximately EUR 370 million that were awarded by leading international food groups in Europe and New Zealand. This development impressively underlines the trust our customers place in our process engineering know-how and capabilities.
In recent years we have increasingly focused the activities of the Group. This included the divestment of the business activities chemistry and the risk exposed turnkey plant engineering. Subsequently, the remaining business portfolio was subsumed under a new, clearly aligned segment structure. The next logical step was taken in 2012, when we put our entire technology and business portfolio to the test to obtain a clearer picture of which activities and competences would enable us to compete successfully in the future.
In our opinion, GEA's best chances for further growth lie in aligning the business portfolio with products and services in the field of sophisticated process technology that are most promising in terms of mutual synergy potentials. As the demand for processed food will continue to climb due to the rising global population and the growing middle class, we regard the food industry as our key market.
Basically, the segment GEA Heat Exchangers serves other customer industries and only supplies a very small fraction of the products required for our projects in the food sector, while being subject to competitive factors which differ from those of our core segments. In the light of these circumstances, we took the decision to separate from this Segment. Nonetheless, I would like to emphasize that the GEA Heat Exchangers Segment retains a strong market position, has outstanding products and is economically successful. Our restructuring measures conducted in recent years have been instrumental in this development.
As a result of this focusing process, we intend to faster expand our leading position as system provider for the food industry. In the long run, the proportion of revenue generated in the food sector will account for about three quarters of our overall revenue. At the same time we will also systematically further develop our other technologically demanding process technologies by means of applications outside the food sector.
As expected, the introduction of a new bonus system for our senior management in 2012 had a positive impact on cash generation in the fiscal year just ended. Since 2012, the cash flow driver margin has been a key metric in determining the amount of variable remuneration awarded to our managers. In 2013, the further improvement of the cash flow driver margin allowed us to create the necessary financial headroom for implementing our strategic growth targets.
As of December 31, 2013, our net debt – including the GEA Heat Exchangers Segment – was further down from EUR 325 million in the previous year to a level below EUR 180 million due to the fact that we continued to implement a policy of strict liquidity management. In this respect it must be taken into consideration that the dividends in the amount of EUR 106 million that were paid out in April 2013 for fiscal year 2012 again surpassed the record level of the previous year. These payments also included about EUR 59 million in cash-out for settling issues of formerly discontinued operations.
Moreover, we managed to reduce last year's average working capital as a ratio of revenue to a new record low of 12.4 percent, which is once again clearly below the sound level of 13.2 percent that had been reached in the previous year. Thus, in the fiscal year just ended, we were able to increase our cash flow from operating activities from EUR 465 million to EUR 526 million.
In the fiscal year just ended Niels Graugaard, my fellow Executive Board member, resigned from the Board due to retirement. Since 2007, Mr. Graugaard's remit had included the GEA Mechanical Equipment, GEA Process Engineering and GEA Refrigeration Technologies Segments. Before, he had been in charge of our former Process Engineering Division since 1999. On behalf of the Supervisory Board and my fellow Executive Board members, I would like to thank him for many years of extraordinarily successful service for the benefit of GEA. We wish him and his family all the best for the future.
The Supervisory Board appointed Markus Hüllmann as his successor. He joined GEA Group in 1995 and held various senior positions in sales and engineering at home and abroad, whereupon he became President of the GEA Mechanical Equipment Segment in 2010. Under his leadership, the Segment turned into a highly profitable and innovative business. For an interim period, he holds a dual role and continues to directly manage the Segment. As a member of the Executive Board, he is also responsible for the GEA Food Solutions and GEA Refrigeration Technologies Segments.
Investing in our highly engaged and committed staff remains our key priority. This also includes our talented young people. As in the previous year, we continued to take on more apprentices and trainees than we actually require for covering our own needs. In Germany, our apprentice-employee ratio remained unchanged at 6.2 percent. In addition, we promote various projects focused on acquainting children and young people with the fascination of technology to ensure that we will still find motivated employees willing to drive our innovations in the future.
In 2013 we conducted our first worldwide engagement survey amongst our current employees who dedicate themselves to GEA each and every day. Our objective was to measure employee commitment as well as satisfaction with various aspects of working life. Our survey response rate of 88 percent of all employees was outstanding. In 2014 we will derive targeted measures from our findings.
As in previous years, we have decided to reward our workforce for their outstanding performance by paying out a bonus to all our non-executive employees worldwide for fiscal year 2013. Once again, the amount awarded for the fiscal year just ended will amount to around EUR 5 million. On behalf of all members of the Executive Board, I would like to take this opportunity to thank all our staff for their commitment and excellent performance. I would also expressly include the employee representative bodies in my thanks.
Our plans for the current fiscal year 2014 assume continued positive business progress and a favorable economic trend in all our key sales markets. Without taking into account acquisition and non-recurring effects, and provided that there is no unexpected global economic downturn and 2013 exchange rates remain unchanged, we strive to attain a moderate growth in revenue as well as an operating EBITDA of between EUR 550 million and EUR 590 million in 2014. Under the same conditions, the cash flow driver margin is to reach a level of between 9 and 9.5 percent.
Our strategy of acquiring companies that open up new markets or actively complement GEA's portfolio in existing markets remains unchanged and valid. This way, we want to offer to our customers an increasingly broader range of services out of one hand. However, in the light of the uncertainties in the global financial markets, we will pay particular attention to the financial feasibility of such undertakings while striving to maintain GEA's sound credit rating in the capital markets.
For 2013, the Executive Board and the Supervisory Board will propose an increased dividend of EUR 0.60 per share to the Annual General Meeting. In terms of dividend payouts to our shareholders, this would be another record high of approximately EUR 115 million which is in line with our longterm target payout ratio of one third of the Group's earnings.
Sincerely,
Jürg Oleas
Chairman of the Executive Board
GEA Group is structured into segments and headed by the listed company GEA Group Aktiengesellschaft (G1A, WKN 660 200). This company performs all essential management functions for the entire group. The units making up GEA Group specialize in their respective core technologies and are leaders in their sales markets worldwide. Further information is available on the Internet at: www.gea.com
GEA Food Solutions
GEA Farm Technologies
GEA Mechanical Equipment
GEA Process Engineering
GEA Refrigeration Technologies
GEA Food Solutions
Thermoformers
Bowl cutters
Slicers
Spiral ovens
Milking equipment
Animal hygiene products
Automatic feeding systems
Barn equipment
Separators
Decanters
Homogenizers
Valves
Spray dryers
Aseptic filling
Beverage & dairy systems
Pharma systems
Compressors
Ice machines
Packages and skids
Freezers
Dr. Helmut Schmale Jürg Oleas Dr. Stephan Petri Markus Hüllmann
Jürg Oleas, a Swiss national born on December 8, 1957, in Quito, Ecuador, was appointed as Chairman of the Executive Board effective November 1, 2004. His period of office runs until December 31, 2016. Jürg Oleas has been a member of the Company's Executive Board since May 1, 2001. He is responsible for the GEA Process Engineering Segment and for the GEA Heat Exchangers Segment, which is now reported under discontinued operations.
Born on November 9, 1956, in Gelsenkirchen, Germany, Dr. Helmut Schmale became Chief Financial Officer on April 22, 2009, after joining the Executive Board on April 1, 2009. His period of office runs until March 31, 2015.
Markus Hüllmann, born on July 29, 1968, in Paderborn, Germany, has been a member of the Executive Board of GEA Group Aktiengesellschaft since April 1, 2013, and has headed the GEA Food Solutions, GEA Mechanical Equipment, and GEA Refrigeration Technologies segments since April 19, 2013. He succeeded Niels Graugaard who retired after the Annual General Meeting on April 18, 2013. Markus Hüllmann is also continuing in his position as Segment President for the GEA Mechanical Equipment Segment for a transitional period. His period of office runs until March 31, 2016.
Niels Graugaard, born on February 4, 1947, in Copenhagen, Denmark, was a member of the Executive Board between August 1, 2007, and his retirement after the Annual General Meeting on April 18, 2013.
Born on February 11, 1964, in Traben-Trarbach, Germany, Dr. Stephan Petri has been the Executive Board member responsible for Human Resources, Legal/Compliance, and the group's other companies since June 1, 2012. In addition, he is the Labor Relations Director. Dr. Stephan Petri has also headed operations in the GEA Farm Technologies Segment since April 19, 2013. His period of office runs until May 31, 2015.
The new German Accounting Standard 20 (GAS 20), "Group Management Report" has been employed for the first time in this Annual Report. This has led to various changes in the management report compared to the prior-year report. In particular, the structure of the report, the titles of certain chapters, and their sequence have changed. Furthermore, GAS 20 also requires additional information to be disclosed, which was provided accordingly. One major change is that a comparison is now made between the forecasts presented in the previous annual report and the actual business development with regard to the most important key performance indicators. In addition, the new requirements concerning the report on risks and opportunities were implemented in line with new standard.
GEA Group Aktiengesellschaft is the management company for the group. Profit and loss transfer agreements are in place with key domestic subsidiaries. In addition, GEA Group Aktiengesellschaft performs central financial and liquidity management. It also provides its subsidiaries with services on the basis of service agreements.
Since the course of business, the economic position, and the opportunities and risks associated with the future development of GEA Group Aktiengesellschaft do not differ from the course of business, the economic position, and the opportunities and risks associated with the future development of the group, the management report of GEA Group Aktiengesellschaft has been combined with that of the group in accordance with section 315(3) of the Handelsgesetzbuch (HGB – German Commercial Code). In contrast to the consolidated IFRS financial statements, the annual financial statements of GEA Group Aktiengesellschaft are based on the HGB, supplemented by the Aktiengesetz (AktG – German Stock Corporation Act).
At an organizational level, GEA Group is structured into segments and headed by the listed company GEA Group Aktiengesellschaft. This company performs all essential management functions for the entire group. These comprise the group-wide management of strategic, human resources, legal, and tax matters, mergers & acquisitions, central financial management, group financial control, group accounting, investor and public relations, and internal audit.
As an international technology group, GEA Group focuses on the development and production of process technology and components for sophisticated and efficient production methods in a variety of end markets. GEA Group is one of the largest suppliers of systems and components for the food processing industry and a wide range of other processing industries.
The units making up GEA Group specialize in their respective core technologies and hold leading positions in their sales markets worldwide. GEA Group consistently promotes a pronounced innovation culture and, by doing so, continuously renews its technological edge. GEA Group considers profitability more important than volume and practices systematic portfolio management and strict cost control. Active risk management, stability through diversification, and a focus on the markets of the future are binding principles for all GEA Group business units.
At the end of fiscal year 2013, the group was organized into five segments, which are allocated to continued operations. GEA Process Engineering was headed by Jürg Oleas; GEA Food Solutions, GEA Mechanical Equipment, and GEA Refrigeration Technologies by Markus Hüllmann; and GEA Farm Technologies by Dr. Stephan Petri.
The GEA Heat Exchangers Segment, which was also headed by Jürg Oleas, no longer forms part of the group's core business (see page 15).
The "Other" reporting segment comprises GEA Group Aktiengesellschaft and those companies with business activities that do not form part of the core business. In the main, this means internal service companies. Given that this area has no material impact on the group as a whole, the management report only refers to it selectively.
The group's enduring success is founded on a number of major global trends:
The group segments classified under continued operations are described in detail below:
GEA Food Solutions is a manufacturer of machinery for preparing, marinating, processing, cutting, and packaging meat, poultry, fish, cheese, and other foods. The segment's offering ranges from individual machines through to end-to-end production lines.
GEA Farm Technologies is one of the world's leading manufacturers of integrated product solutions for profitable milk production and livestock farming. The segment's combined expertise in the areas of milking and milk-cooling technology, automatic feeding systems, manure management systems, and barn equipment provides today's farmers with a complete range of products and solutions. Services and animal hygiene solutions round off its profile as a full-line systems provider for farms of all sizes. The segment's sales strategy is built upon a global network of specialist dealers and sales and service partners.
GEA Mechanical Equipment specializes in separators, decanters, valves, pumps, and homogenizers – high-quality process engineering components and their use in process technology systems that ensure seamless processes and cost-effective production in almost all major areas of industry worldwide. At the same time, such equipment helps reduce customer production costs and protect the environment in a sustainable manner.
GEA Process Engineering specializes in the design and development of process solutions for the dairy, brewing, food, pharmaceutical, and chemical industries. The segment is an acknowledged market and technology leader in its business areas: liquid processing, concentration, industrial drying, powder processing and handling, and emission control.
GEA Refrigeration Technologies is a market leader in the field of industrial refrigeration technology. The segment develops, manufactures, and installs innovative key components and technical solutions for its customers. To ensure complete customer satisfaction, GEA Refrigeration Technologies also offers a broad range of maintenance and other services. Its product range comprises the following core components: reciprocating and screw compressors, valves, chillers, ice generators, and freezing systems.
On June 20, 2013, the Executive Board of GEA Group Aktiengesellschaft resolved, with the approval of the Supervisory Board, to withdraw from the GEA Heat Exchangers Segment. This is the result of an in-depth technological and strategic review of the portfolio initiated by GEA last year. The aim of the review was to identify which core business areas have the greatest synergy potential. These are to be systematically driven forward and will form the foundation for GEA Group's profitable long-term growth.
The GEA Heat Exchangers Segment provides products and systems for numerous areas of use, ranging from air conditioning systems to cooling towers. Boasting one of the largest portfolios of heat exchangers worldwide, the segment supplies optimal single-source solutions for a large number of applications and also offers customers professional support with project planning. The segment represents 25 percent of the group's revenue.
Due in particular to the fact that the selling process has been initiated, the segment has been reported under discontinued operations. This affects all key performance indicators in fiscal year 2013. In the interest of improved comparability, the data from fiscal year 2012 have been modified accordingly. The notes to the consolidated financial statements deviate from the procedure adopted in the management report and follow the IFRS accounting standards in not modifying balance sheet figures of the previous year.
As in previous years, the remaining companies listed under discontinued operations cover the risks remaining from the sale of the plant engineering activities, the continued process of winding-up the business operations of Ruhr-Zink, and individual legal disputes.
GEA Group companies develop and produce components, machines, systems, and plants primarily on a make-to-order basis for a broad range of industries. The focus is on the food and beverage sectors. With its global engineering and production network, the group is able to provide customers with solutions that are precisely tailored to their individual requirements. Customers also benefit from our flexible production concepts, which ensure fast throughput and low costs, and minimize the capital tied up.
The new production building of GEA Food Solutions at Biedenkopf-Wallau
Investment in construction at the production plant in Biedenkopf-Wallau/Germany marks another clear statement of intent by GEA to focus its strategy more closely on the food industry. All in all, GEA Group is investing around EUR 10 million in the extensive modifications. The first phase of construction started in April 2013 and will be finished at the end of 2014. The completion of all construction is scheduled for the spring of 2015. Several production buildings were demolished to make way for the new facility, which will enable GEA Food
Solutions to significantly enhance the entire production process at the plant. Similarly, the construction of a new technology center offering individual product demonstrations, training courses, and seminars will help the segment to provide an even more customer-centered offering.
Following a two-year construction period, the world's most advanced separator plant has been completed in Oelde/Germany. This new plant for the GEA Mechanical Equipment Segment is the group's largest investment of recent years. The new facility is an exceptionally sustainable manufacturing operation, combining state-of-the-art engineering, optimized energy management, and an efficient infrastructure to produce separators for customers around the world. The project was implemented without interruption to normal operations and the new facility fully commissioned in the past fiscal year. The investment in the past fiscal year amounted to approximately EUR 10 million. Other major investments at GEA Mechanical Equipment included the creation of a new location in Wuqing/China and an expansion of capacity at the existing location in Bengaluru/India. Investment in these areas amounted to approximately EUR 11 million in 2013. In total, EUR 110 million were invested in connection with the Global Production Concept in recent years.
A major priority at the GEA Refrigeration Technologies Segment in 2013 was to synchronize and continuously improve business processes (lean production). This included a complete restructuring of the segment's reciprocating compressor plant in 's-Hertogenbosch/Netherlands.
GEA is continuing to focus on strategic procurement and on pooling orders so as to ensure long-term price stability and reliability on the part of our main suppliers. These measures also extend to hedging and risk diversification, which have helped to reduce price fluctuations, particularly with regard to the procurement of raw materials and semifinished products.
Procurement at GEA Group is conducted on a cross-segment basis, with the purchase of raw materials, components, semifinished products, and services being pooled both by region and by commodity groups. To achieve this goal, the GEA Procurement Council was set up in 2012 with the aim of consolidating the strategic procurement operations by individual segments. Teams specializing in specific raw materials cooperate on a cross-segment basis in order to make the best possible use of procurement synergies within GEA Group.
The introduction of a new purchasing portal in 2013 has increased the availability of specific procurement data and improved the sharing of information on a group-wide basis. As a result, employees working in procurement, project managers, and engineers are now able to compile the data relevant to their respective projects much more quickly.
GEA is continuously expanding and intensifying its procurement activities in emerging economies. To this end, the group has built up a reliable supplier base in these countries and is now increasingly exploiting the cost benefits offered by these markets.
GEA Group's total purchasing volume for its continued operations amounted to approximately EUR 2.1 billion in 2013. Prices for raw materials remained relatively stable in 2013, although the price of stainless steel fell continuously.
A key focus was on providing further training for employees working in procurement. Staff from GEA's procurement divisions worldwide took part in "best-in-class" training programs.
The past year also saw the rollout of GEA Class across the group as a whole. First introduced in fiscal year 2012, this group-wide classification system is designed to provide more meaningful procurement data and to establish a unified procurement system for materials and services. It provides detailed crosssegment analyses of procurement prices and conditions. The system is based on eCl@ss, an international standard for electronic data interchange between suppliers and customers that is used in 77 countries to classify a wide range of products, materials, and services. GEA Class was developed on the basis of this standard system and supplemented by the addition of a number of extra categories, resulting in a custom solution that enables the transparent and uniform classification of products and suppliers.
Group reports are prepared with the aid of standard applications that are precisely tailored to the needs of GEA Group and subject to continuous enhancement. Standard reports prepared on the basis of unified data are used throughout the group to report net assets, financial position, and results of operations. These standard reports are supplemented by special analyses as well as analyses and reports related to specific businesses and strategic measures. Corporate planning – which covers the current budget plus further two planning years – and risk reporting are both based on the same reporting and consolidation system that is used for the reporting of actual figures.
Routine reporting procedures are supplemented by committee meetings that provide members of the group management with an opportunity to share information on strategic and operational issues. Meetings of the Executive Board of GEA Group Aktiengesellschaft and of the Extended Management Board, which comprises the Executive Board members and segment heads, are held once a month. The Executive Board meetings concentrate on issues of relevance to the group as a whole, whereas decisions with a direct impact on the segments are prepared in meetings of the Extended Management Board, before passing to the Executive Board for approval. Additionally, regular meetings are held with the individual segments. These are attended by the Executive Board member responsible for the relevant segment along with the CFO, segment managers, and selected heads of department from the group management company. Such meetings entail detailed discussions of the net assets, financial position, results of operations, and business development of the segment concerned. Separate meetings for each segment are also held to discuss earnings for the latest fiscal year and the business plan for the following years.
GEA's overriding goal is to secure a sustainable increase in enterprise value. The operational management is based on the key drivers that have an immediate influence on value creation. To this end, the company focuses (see page 88) on growth, operating efficiency, and liquidity management. The most important key performance indicators are therefore revenue, earnings, and the cash flow driver margin. In the process, GEA takes an organic view of revenue trends, i.e., before acquisition and currency effects. With respect to earnings, the company focuses on operating EBITDA. GEA defines "operating" as adjusted for effects resulting from the remeasurement of assets added due to acquisitions, and for expenses that are non-recurring in terms of their nature or magnitude. For the purposes of analyzing and managing earnings, this performance indicator is also adjusted for acquisition and currency effects. The cash flow driver margin is defined as the net amount of EBITDA, the change in average working capital, and capital expenditure on property, plant and equipment as well as intangible assets (all as reported), calculated as a ratio to revenue. GEA also regularly collate a range of other performance indicators in order to obtain a meaningful picture of the overall situation.
Revenue is analyzed by region and customer industry on a monthly basis in order to identify emerging market trends as early as possible. In this context, we also evaluate, as leading indicators, the GEA Demand Index (GDI – see page 77 ) and order intake.
To enable a rapid response to developments, the segments are also required to return regular forecasts – for the quarters and for the year as whole – for the key performance indicators revenue and operating EBITDA. In addition, these reports include forecasts with respect to other performance indicators such as order intake and EBIT.
In order to create the requisite financial scope to achieve strategic growth and to focus the group even more closely on cash flow generation, a new key performance indicator – the cash flow driver margin – was introduced in 2012 and also incorporated into the new bonus system for senior management.
The return on capital employed (ROCE) provides a further performance indicator for measuring the value added that is generated by the group's operating activities. It therefore figures in both the group's regular reporting activities and the calculation of variable, performance-related elements of management remuneration. In order to anchor ROCE even more strongly at an operational level, the ROCE drivers EBIT and EBIT margin, working capital, and the ratio of working capital to revenue are monitored continuously. When calculating capital employed, effects arising from the acquisition of the former GEA AG by the former Metallgesellschaft AG in 1999 are not taken into account. Furthermore, as of 2011, the key performance indicators are also presented after adjustment for purchase price allocation effects. As a component of capital employed, capital expenditure is managed using a multilevel approval process.
The difference between expected ROCE and the weighted average cost of capital (WACC) is a key criterion for investment and portfolio decisions. The group calculates WACC on the basis of the following factors: the cost of equity, based on the return yielded by an alternative, risk-free investment plus a market risk premium and the beta factor, actual borrowing costs, and the rate used to discount pension obligations.
Resources are allocated within the group primarily on the basis of strategic and medium-term planning. This provides the framework for preparing key decisions on core technologies, sales markets, and other strategically important variables.
Acquisitions and expansion investments are assessed not only on the basis of key performance indicators showing potential returns, but also in terms of their importance for achieving the group's strategic goals. The key economic criterion for evaluating rationalization and expansion investments is the net present value. The payback period is also calculated as an additional benchmark for assessing the risk arising from changing economic conditions.
Working capital is another key element of capital employed. Working capital management begins before an order is accepted with the payment terms that are offered or negotiated.
In addition to general management with the aid of the key performance indicators described above, the group has established individual assessment and approval procedures for customer and investment projects, utilizing specific thresholds for the different hierarchy levels. Customer projects are evaluated primarily on the basis of their expected margins (gross margin on a fully absorbed cost basis) and of
their commercial and contractual risk profile, with a particular emphasis on cash flow. Project management is also backed up by extensive project control not only at operating unit level but also – depending on the size of the project involved – at segment or group level in the form of a separate reporting system for major contracts. In many cases, the findings gained from this analysis yield suggestions for improving internal processes, which can be used in subsequent projects. At group level, the analysis focuses on deviations between the calculated and the expected or realized contract margin.
Compliance – which is defined as measures to ensure adherence to legal, statutory, and internal requirements, as well as their observance by group companies – is a key management and supervisory task at GEA Group. For this purpose, a group-wide compliance organization was established some years ago. This is headed by the Chief Compliance Officer, who reports in this function to the Supervisory Board's Audit Committee. The Chief Compliance Officer is assisted by the Corporate Compliance Officer. Furthermore, a Segment Compliance Officer has been appointed for each segment and a Company Compliance Manager for each operating company. A Compliance Committee was also established in 2010 to advise the Chief Compliance Officer. GEA Group's extensive compliance program is rounded off by classroom and web-based training sessions for the group employees responsible for compliance. Further information on the issue of compliance can be found in the Corporate Governance Report (see page 58 ff.).
The performance of the key value drivers is also reflected in managers' remuneration. Variable salary components dependent on company performance are determined on the basis of the cash flow driver margin and ROCE. In addition, performance-related remuneration depends on the achievement of personal goals, of which at least one must be measurable in financial terms. A further component of management and Executive Board remuneration is based on the performance of GEA's share price in relation to the benchmark index, the STOXX® Europe TMI Industrial Engineering (TMI IE).
In today's global markets, an engineering corporation such as GEA needs to show an enduring commitment to permanently enhancing its own processes and technologies. It is this culture of innovation that helps secure its continued commercial success. In addition to pursuing its own intensive research and development (R&D) activities, the group also encourages cooperative research projects with its customers and suppliers.
At GEA, R&D activities are conducted locally by the individual segments and business units. This also facilitates direct cooperation with customers. The potential drawbacks of a decentralized R&D structure are avoided by ensuring cooperation between individual segments and a global exchange of knowledge throughout the group. All in all, GEA Group companies including GEA Heat Exchangers, filed applications for 85 new patents in the past fiscal year.
The culture of innovation at GEA is embodied in a uniform global ideas and improvement management system and three cross-segment innovation competitions.
The GEA Innovation Contest, which has been running with great success for a number of years now, provides a showcase for development projects that are potentially less than twelve months away from market launch. The winners at the segment level get to present their projects during a day at the annual international meeting of the group's senior managers. The three segments that present the most promising developments in terms of market opportunities, earnings potential, chances of realization, and level of innovation are awarded with a total prize money of EUR 1.5 million to boost their development budgets.
The overall winner in 2013 was an entry from the GEA Process Engineering Segment: a compact piece of machinery for manufacturing tablets in the pharmaceutical industry. It features innovations in a total of four areas: precision dosing of powdered substances, their continuous and careful blending, online monitoring of the homogeneity and the concentration of active ingredients of the mix, and, finally, the compression of the tablets. The second prize was awarded to the GEA Food Solutions Segment for an entry featuring a new tool material that expedites thermoforming of plastic packaging for foodstuffs and improves the quality of this process. Third prize went to the GEA Mechanical Equipment Segment, which has made its separators even easier to use by enhancing the related IT systems. A notable feature of this year's competition was that three of the six winning entries were based on the use of smart measurement and control engineering, rather than further mechanical enhancements.
The GEA Development Contest is designed to promote promising new product ideas that are at an early stage of the development process and that still require up to three years until market launch. This competition, too, involves group-wide presentation events and offers prize money of varying amounts. In 2013, the first prize went to GEA Mechanical Equipment. The team from this segment has developed a technique to isolate the valuable proteins remaining in the rapeseed oil cake that is left over when rapeseed is pressed. Crucially, the new process is so gentle that the proteins can be used in animal feed and are even fit for human consumption. As such, this resolves a problem in rapeseed processing: without purification, the bitter principles in rapeseed oil cake mean that it has only a limited suitability as feed, even for cattle. The second prize was awarded to GEA Farm Technologies for a new, modular service package developed specifically for its fully automatic milking stall module, GEA Dairy ProQ. The concept is based on a sustainable business model featuring long-term service contracts that extend over the module's entire lifetime and include regular maintenance by GEA technicians. In a further benefit, an individual milking stall can be exchanged for a preassembled replacement module in a mere 20 minutes. Third prize went to GEA Refrigeration Technologies for its
new compact screw compressor for use with ammonia. This new development comes in response to two key market trends: the choice of ammonia as a natural and therefore environmentally friendly refrigerant, and the growing use of compact screw compressors. There are two aspects to this landmark innovation: the development of a motor with copper components that are resistant to ammonia, and the integration of this motor within a compact screw compressor that operates with extreme efficiency at both full and part loads.
The GEA Investment Fund is the third group-wide innovation competition. It is aimed at product ideas that are still at an embryonic stage and which lead primarily to projects involving cooperation between individual group segments or with external companies and organizations. The 14-strong jury awarded the largest amount of funding to an idea submitted by GEA Process Engineering, followed by GEA Food Solutions and GEA Refrigeration Technologies. Most of these ideas are aimed at deepening our understanding of a customer's production process and thereby enhancing it. Such refinements might involve, for example, the addition of suitable sensors to improve the quality of the food produced or the efficient use by the process in its use of resources such as energy. The impetus for this can originate directly from the customer; or it might derive from new developments in the field of, for example, sensor technology, or from the hunt for new markets for existing GEA products.
In 2013, GEA also successfully took part once again in external competitions organized by industry associations, customers, and trade fairs.
At the World Dairy Expo, for example, which was held under the "Center of the Dairy Universe" banner in the U.S.A., both the Apollo Milking System and the MIone Automatic Milking System from GEA Farm Technologies won innovation awards.
In fiscal year 2013, direct expenses for research and development declined to EUR 73.9 million. This represents a fall of 10.6 percent on the previous year's expenditure of EUR 82.7 million. These figures also include refunded expenses (contract costs), which are reported in the production costs and which totaled EUR 11.4 million (previous year: EUR 11.8 million). The R&D expenses also comprise depreciation of EUR 8.5 million (previous year: EUR 7.5 million). The R&D ratio therefore amounted to a total of 1.7 percent of revenue (previous year: 2.0 percent). The capitalized development costs amounted to 0.5 percent of revenue (previous year: 0.6 percent).
| R&D ratio (as % of revenue) | 1.7 | 2.0 | – |
|---|---|---|---|
| Total R&D expenses | 73.9 | 82.7 | –10.6 |
| Non-refunded R&D expenses | 62.5 | 70.9 | –11.8 |
| Refunded expenses (contract costs) | 11.4 | 11.8 | –3.4 |
| Research and development (R&D) expenses (EUR million) |
2013 | 2012 * | Change in % |
*) Amounts adjusted due to first time classification of an operation as discontinued operation (see page 147 f.)
The forecast for fiscal year 2013 assumed that demand in GEA's sales markets would match the high levels seen in 2012. Contrary to this assumption, the performance of important regional sales markets was worse than forecast at the beginning of 2013. As a result, the International Monetary Fund (IMF) also had to revise its assumptions downward twice in the course of the year. Although the eurozone and China both remained roughly on a level with the previous year, macroeconomic growth rates in the United States, a key market for GEA, and in the emerging markets were significantly below the 2012 figures overall (see IMF, "World Economic Outlook", January 2014 update).
The outlook for business development in 2013 was based on GEA including the GEA Heat Exchangers Segment. Therefore, the indicators presented below also contain this segment in all cases.
GEA's forecast for fiscal year 2013 in the 2012 Annual Report assumed that there would be no slowdown in global economic growth. However, as the IMF's figures show, such easing did in fact take place in the course of the year. Despite this, the Company achieved the moderate organic revenue growth of 3.1 percent expected by the Executive Board.
The earnings (EBITDA) target given in the last Annual Report was around EUR 700 million. We were not anticipating any major non-recurring expenses at that time. In June 2013, the Supervisory Board approved the Executive Board's decision to withdraw from the GEA Heat Exchangers Segment over the medium term. As material non-recurring expenses in the low double-digit millions were therefore anticipated for this strategy and portfolio project, the EBITDA forecast was adjusted in line with this in the half-yearly financial report. After significant shifts in exchange rates over the course of the year, the financial report for the third quarter further specified that the forecast assumed constant currency exchange rates compared with 2012. The EBITDA amounted to EUR 660.1 million at the year-end; adjusted for non-recurring expenses of EUR 28.2 million, the figure for operating EBITDA was EUR 688.3 million. Adjusted for negative currency translation effects of EUR 12.9 million, operating EBITDA at constant exchange rates amounted to EUR 701.2 million in 2013. As a result, the adjusted forecast target for this performance indicator was also reached.
With respect to our cash flow drivers, we initially aimed for a ratio to revenue of at least 8.0 percent in 2013. We already raised our guidance for this to at least 9.0 percent in the financial report for the third quarter. Ultimately, this level was also clearly exceeded, at 9.4 percent.
In terms of trends for the individual segments, we were expecting a clear rise in revenue and an operational turnaround in the GEA Food Solutions Segment. Revenue in this segment increased by 5.3 percent in the fiscal year. A positive operating result was recorded at EBITDA level from the second quarter onwards; the figure for the year as a whole was EUR 3.8 million. We anticipated stable operating profit margins and moderate volume growth in all other core segments. The GEA Farm Technologies Segment fell short of the forecast, recording a slight 0.4 percent decline in organic revenue and an operating EBITDA margin that was down 21 basis points year-on-year. By contrast, organic revenue growth in the GEA Process Engineering and GEA Refrigeration Technologies segments was more than moderate, at 7.5 percent and 9.1 percent, respectively. The GEA Process Engineering Segment's operating EBITDA margin was significantly higher, up 90 basis points to 11.3 percent.
On April 18, 2013, GEA Group Aktiengesellschaft's Annual General Meeting approved the proposal by the Executive Board and Supervisory Board to pay an unchanged dividend of EUR 0.55 per share for fiscal year 2012. Due to the increase in the number of shares outstanding, the total dividend therefore increased by 4.7 percent to EUR 106 million. This means that the distribution to the shareholders for 2012 was once again in line with the long-term target of one-third of the group's earnings.
| Revenue | ||||
|---|---|---|---|---|
| (EUR million) | 2013 | 2012 | Outlook for 2013 | |
| Continued Operations | 4,320.0 | 4,142.3 | ||
| GEA Heat Exchangers | 1,489.1 | 1,608.8 | ||
| Consolidation/Others | –36.8 | –31.0 | ||
| GEA Group incl. GEA Heat Exchangers | 5,772.2 | 5,720.1 | ||
| Exchange rate changes | 148.0 | – | ||
| Acquisitions effects | –22.7 | – | ||
| GEA Group incl. GEA Heat Exchangers, | ||||
| adjusted | 5,897.5 | 5,720.1 | ||
| organic growth | 3.1% | moderate organic growth | ||
| EBITDA | ||||
| (EUR million) | 2013 | 2012 | Outlook for 2013 | |
| Continued Operations pre PPA | 515.5 | 421.6 | ||
| GEA Heat Exchangers pre PPA | 155.2 | 167.5 | ||
| Consolidation/Others | –10.6 | 9.4 | ||
| GEA Group incl. GEA Heat Exchangers | 660.1 | 598.5 | ||
| One-offs | 28.2 | 63.4 | ||
| Exchange rate changes | 12.9 | – | ||
| GEA Group incl. GEA Heat Exchangers, adjusted |
701.2 | 661.9 | around EUR 700 million, adjusted * | |
| Cash flow driver margin | ||||
| (EUR million) | 2013 | 2012 | Outlook for 2013 | |
| GEA Group incl. GEA Heat Exchangers | 543.8 | 368.1 | ||
| as % of revenue | 9.4 | 6.4 | at least 9.0 % |
The individual indicators can be reconciled as follows:
*) assuming constant currency exchange rates and before costs relating to portfolio and strategy projects
As a global engineering company, GEA considers growth in gross domestic product (GDP) and hence the IMF's associated assessments to be the key benchmark for its own development. GEA's objective is for its own growth to exceed that of the global economy.
In the past year, GDP was once again extremely weak across large parts of the world. In its January 2014 update to its World Economic Outlook for 2013, the IMF again predicted a slowdown in global economic growth. According to the IMF, the global economy grew by just 3.0 percent in 2013, after 5.2 percent in 2010, 3.9 percent in 2011, and 3.1 percent in 2012. Like a large number of economic researchers, both the IMF and GEA were still expecting higher growth as of the beginning of 2013. Thus a year ago, the IMF had projected 3.5 percent growth for the global economy, but then had to revise this expectation a number of times in the course of the year, as described. The main trigger for this was slower momentum in the emerging markets.
Specifically, the IMF forecasts a growth rate in industrialized countries of 1.3 percent in 2013 after 1.4 percent in the previous year. The eurozone only broke out of the longest recession in its history to date in the course of the year. Nevertheless, according to the IMF the economy in this region declined by 0.4 percent over the entire reporting period, after a decrease of 0.7 percent in 2012. The IMF's experts expect that economic growth in the emerging markets slowed to 4.7 percent in 2013 compared with 4.9 percent in the previous year.
The following explanation of the group's course of business relates initially to continued operations, i.e., to the group's five operating segments. As GEA no longer considers the GEA Heat Exchangers Segment to be part of its core business, the performance of this segment is presented separately in the section relating to discontinued operations (see page 45 ff.). The quarterly information contained in this management report is sourced from quarterly financial reports that were not audited or reviewed in accordance with the Wertpapierhandelsgesetz (WpHG – German Securities Trading Act). All amounts have been rounded using standard rounding rules. Adding together individual amounts may therefore result in rounding differences in certain cases.
In full-year 2013, order intake in the group increased by 4.6 percent to EUR 4,627.9 million (previous year: EUR 4,425.4 million). This growth of EUR 202.5 million resulted in particular from large orders of more than EUR 15 million each, which account for around 12 percent of total volume after some 7 percent in the previous year.
Portfolio changes contributed 0.5 percent to the increase in order intake. Changes in exchange rates impacted this figure by –2.7 percent. Organic order intake thus grew significantly by 6.8 percent compared with 2012.
Particularly worth mentioning here is the performance of the GEA Mechanical Equipment and the GEA Process Engineering segments – the former exceeded the EUR 1 billion mark and the latter the EUR 2 billion mark for the first time.
| Order intake | Change | ||
|---|---|---|---|
| (EUR million) | 2013 | 2012 * | in % |
| GEA Food Solutions | 349.7 | 375.9 | –7.0 |
| GEA Farm Technologies | 596.7 | 583.9 | 2.2 |
| GEA Mechanical Equipment | 1,018.5 | 971.9 | 4.8 |
| GEA Process Engineering | 2,061.0 | 1,850.2 | 11.4 |
| GEA Refrigeration Technologies | 726.3 | 756.2 | –4.0 |
| Total | 4,752.2 | 4,538.1 | 4.7 |
| Consolidation | –124.3 | –112.7 | –10.3 |
| GEA Group | 4,627.9 | 4,425.4 | 4.6 |
*) Amounts adjusted due to first time classification of an operation as discontinued operation (see page 147 f.)
The food and beverage sector expanded by nearly 9 percent, increasing its share of GEA's business by 2.6 percentage points to 74 percent. If the GEA Heat Exchangers Segment is included, this end market has a share of 57 percent. The milk processing customer industry recorded above-average growth in the core segments. In regional terms, the Western Europe food and beverage end market in particular grew significantly, up 27 percent. The increase in this end market also accounts for the group's total increase in order intake in fiscal year 2013.
The largest major orders worth over EUR 30 million were won by the GEA Process Engineering Segment in fiscal 2013 in the form of seven dairy orders for customers in Germany, the Netherlands, Denmark, Ireland, and New Zealand with an aggregate value of EUR 368 million. In the prior-year period, two major orders were received for over EUR 115 million.
by sector (average last 12 months, 3 most important industries)
The order backlog rose by a clear EUR 185.6 million or 10.1 percent compared with December 31, 2012 (EUR 1,829.9 million), to EUR 2,015.5 million. The effects of exchange rate movements amounted to EUR –63.0 million.
Expressed in terms of order intake for the fiscal year, the order backlog amounts to 5.2 months (previous year: 5.0 months). This figure increased in the GEA Process Engineering Segment in particular, as a result of the large number of major projects acquired. In line with the different types of business, the order backlog in the segments ranges from 1.7 months in the GEA Farm Technologies Segment up to 7.5 months in the GEA Process Engineering Segment.
| Order backlog | Change | Change | ||
|---|---|---|---|---|
| (EUR million) | 12/31/2013 | 12/31/2012 * | in % | (absolute) |
| GEA Food Solutions | 96.4 | 107.3 | –10.2 | –10.9 |
| GEA Farm Technologies | 85.6 | 79.9 | 7.2 | 5.7 |
| GEA Mechanical Equipment | 332.0 | 331.1 | 0.3 | 0.9 |
| GEA Process Engineering | 1,290.5 | 1,069.6 | 20.7 | 220.9 |
| GEA Refrigeration Technologies | 229.5 | 257.0 | –10.7 | –27.5 |
| Total | 2,034.1 | 1,844.9 | 10.3 | 189.2 |
| Consolidation | –18.6 | –15.0 | –24.2 | –3.6 |
| GEA Group | 2,015.5 | 1,829.9 | 10.1 | 185.6 |
*) Amounts adjusted due to first time classification of an operation as discontinued operation (see page 147 f.))
In general, the same regional and sector-specific trends apply to revenue as to order intake, although with different time lags. However, revenue is less volatile than order intake.
In full-year 2013, group revenue increased by 4.3 percent to EUR 4,320.0 million (previous year: EUR 4,142.3 million) – and was still 6.7 percent less than order intake. Portfolio changes contributed a total of 0.5 percent to this record revenue. The effects of exchange rate changes amounted to –2.7 percent. Organic revenue was thus up significantly by 6.5 percent year-on-year. Three segments – GEA Mechanical Equipment, GEA Process Engineering, and GEA Refrigeration Technologies – generated record revenue.
The share contributed by the service business (which grew by 3.5 percent) declined slightly to 26.7 percent (previous year: 26.9 percent).
At 1.07, the book-to-bill ratio – i.e., the ratio of order intake to revenue – was up slightly year-on-year in 2013.
| Revenue (EUR million) |
2013 | 2012 * | Change in % |
|---|---|---|---|
| GEA Food Solutions | 349.9 | 332.4 | 5.3 |
| GEA Farm Technologies | 577.7 | 580.9 | –0.5 |
| GEA Mechanical Equipment | 977.8 | 933.9 | 4.7 |
| GEA Process Engineering | 1,798.0 | 1,716.3 | 4.8 |
| GEA Refrigeration Technologies | 736.6 | 694.8 | 6.0 |
| Total | 4,440.0 | 4,258.3 | 4.3 |
| Consolidation | –120.0 | –116.0 | –3.5 |
| GEA Group | 4,320.0 | 4,142.3 | 4.3 |
*) Amounts adjusted due to first time classification of an operation as discontinued operation (see page 147 f.)
The food and beverage sector expanded by almost 4 percent, maintaining its 72 percent share of GEA's business. If the GEA Heat Exchangers Segment is included, this end market has a share of 55 percent. The liquid food products customer industry recorded above-average growth in the core segments. In regional terms, Western Europe in particular grew significantly, up 14 percent in the food and beverage end market.
The following chart shows the year-on-year shifts in revenue from 2012 to 2013.
The growth regions in 2013 were Western Europe, the Middle East, and the Asia/Pacific region. Western Europe increased its share by 1.8 percentage points to approximately 34 percent, while the share accounted for by the Middle East rose by 0.8 percentage points to approximately 5 percent. By contrast, the share accounted for by North America and Eastern Europe declined by 1.0 and 1.3 percentage points to 17 and 9 percent, respectively. In the remaining regions, the positive or negative changes in revenue shares amounted to less than half a percentage point in each case. The share of revenue accounted for by German customers rose again slightly, from 8.2 percent to 8.6 percent. As in the previous year, the U.S.A. is the country with the strongest sales, accounting for 15.9 percent (previous year: 16.7 percent).
by sector (average last 12 months, 3 most important industries)
Latin America 8.4 (6.0) Middle East 5.1 (7.0) Africa 1.5 (2.2)
Revenue in the GEA Food Solutions Segment amounted to EUR 349.9 million in 2013. This was 5.3 percent above the previous year (EUR 332.4 million). Adjusted for the effect of exchange rate changes of –1.2 percent, the segment's order intake grew organically by 6.5 percent in the period under review. The service business maintained the level it reached in the past fiscal year. It now accounts for a 40.2 percent share of the segment's revenue, after 37.6 percent in the previous year. The prior-year denominator was adjusted for the EUR 42.0 million change in estimates.
The segment operates in the food and beverage end market, with customers coming exclusively from the solid food industry. Its sales focuses in 2013 were on Western Europe (46 percent), as well as Eastern Europe, North America, and the Asia/Pacific region, which each have a share of between 10 percent and 16 percent.
2012 2013
The trends affecting revenue in the GEA Farm Technologies Segment are largely the same as those governing order intake, as the order backlog usually amounts to only 6 to 8 weeks' revenues. Adjusted for the effect of exchange rate changes of –3.1 percent and of 3.0 percent for the acquisition of the Milfos International Group, New Zealand, organic growth amounted to –0.4 percent in the past fiscal year after a very good prior year. The service business remained its share of total revenue to 40.7 percent in the reporting period (previous year: 41.1 percent).
The segment operates almost exclusively in the dairy industry and revenue in 2013 was focused on Western Europe (38 percent) and North America (33 percent). Momentum came from the Asia/Pacific region, which increased its share by 3.5 percentage points to almost 11 percent.
GEA Farm Technologies revenue EUR 577.7 million (previous year EUR 580.9 million)
by sector (average last 12 months, only external business)
The GEA Mechanical Equipment Segment significantly exceeded its strong prior-year level by 4.7 percent, hitting a new record high of EUR 977.8 million. After adjustments for the effects of exchange rate changes of –2.4 percent and of acquisitions of 0.6 percent, organic revenue growth in the past fiscal year amounted to an encouraging 6.5 percent. The service business recorded growth of 5.5 percent, lifting its share of total revenue from 33.0 percent to 33.2 percent.
The segment's most important end market is the food and beverage sector, at 54 percent. The thirdparty customer business in this end market is stable. Intragroup deliveries to the GEA Process Engineering Segment provided significant momentum, as did the energy end market (+15 percent) and, within the other industries end market, the pharmaceutical (+46 percent) and chemical (plus 36 percent) customer industries. The key growth regions were Western Europe and the Middle East, which grew by 13 and 43 percent respectively, increasing their revenue shares by 2.5 and 1.7 percentage points.
The GEA Process Engineering Segment also hit a new record figure for revenue, at EUR 1,798.0 million. Adjusted for the effect of exchange rate changes (–2.8 percent), organic growth amounted to 7.5 percent in the past fiscal year, the second-highest result among all of the segments. The service business – which grew by a clear 7.9 percent – increased its share of total revenue to 14.0 percent (previous year: 13.6 percent).
The food and beverage end market grew by over 8 percent, lifting its share by a further clear 2.2 percentage points to 71 percent. In regional terms, this growth was realized in Western Europe in particular. The strong growth recorded by the food and beverage end market in Western Europe has now lifted the region's share of total revenue by 3.1 percentage points to over 28 percent. The climate and environment customer industry also grew healthily, rising nearly 13 percent. At roughly 35 percent, the Asia/Pacific region once again accounted for the largest portion of revenue.
by sector (average last 12 months, 3 most important industries, only external business)
At 9.1 percent, the GEA Refrigeration Technologies Segment saw the highest organic growth of all the segments, generating revenue of EUR 736.6 million. This exceeded the EUR 700 million mark for the first time, despite being impacted by negative exchange rate changes of 3.1 percent. Revenue in the service business grew by 3.6 percent. This corresponds to a 27.1 percent share of total revenue.
The strongest momentum was recorded by the oil and gas customer industry (+42 percent), the climate and environment customer industry (+28 percent), and the other industries (+15 percent). All regions contributed to the segment's revenue growth. Growth was strongest in the Middle East, lifting the share accounted for by the region by 2.4 percentage points to 7 percent.
GEA Refrigeration Technologies revenue EUR 736.6 million (previous year EUR 694.8 million)
GEA remains committed to its policy of consciously selecting orders on the basis of their price quality and contract terms. This is reflected in the multi-stage approval process for major customer projects.
The key earnings figures for 2013 were adjusted for non-recurring expenses of EUR 14.6 million. These expenses are mainly attributable to consulting expenses incurred in relation to strategic projects (EUR 8.0 million), as well as the fact that the management fees and trademark fees previously allocated to GEA Heat Exchangers were also allocated to continued operations in the year under review, in accordance with IFRSs. In the year under review, these fees amounted to EUR 6.6 million (previous year: EUR 9.4 million; see page 200 f.). Other non-recurring expenses related to preparing for the separation of the GEA Heat Exchangers Segment were reported in profit from discontinued operations (see page 45 ff.). The significant non-recurring items in the previous year, were mainly attributable to the GEA Food Solutions Segment with an EBIT effect of EUR 66.5 million and an effect on EBITDA of EUR 63.4 million. The remaining effect was attributable to the allocation of the management and trademark fees mentioned above.
Whenever operating profit is referred to in the following, this relates on the one hand to the adjustment of the purchase price allocation effects, which were determined for all material past acquisitions, and on the other hand to the adjustment of expenses for strategic projects in the year under review, the non-recurring items in the GEA Food Solutions Segment in the previous year, and the allocation of the management fees and trademark fees required in accordance with IFRSs in both years.
EBITDA in fiscal year 2013 amounted to EUR 515.2 million, up 22.6 percent on the prior-year figure of EUR 420.1 million. This corresponds to an EBITDA margin of 11.9 percent and a year-on-year rise of 178 basis points (previous year: 10.1 percent). Adjusted for the recognition of the revalued amount of inventories resulting from purchase price allocation, which slightly reduced earnings, and the nonrecurring items mentioned in the amount of EUR 14.6 million, operating EBITDA amounted to EUR 530.1 million. This is EUR 35.6 million higher than the prior-year figure of EUR 494.4 million, which was adjusted for non-recurring items of EUR 72.8 million. As a result, the operating EBITDA margin improved by a further 33 basis points to 12.3 percent of revenue.
| Operating EBITDA/operating EBITDA margin 1 | Change | ||
|---|---|---|---|
| (EUR million) | 2013 | 2012 2 | in % |
| GEA Food Solutions | 3.8 | –6.0 | – |
| as % of revenue | 1.1 | – | – |
| GEA Farm Technologies | 56.9 | 58.5 | –2.6 |
| as % of revenue | 9.9 | 10.1 | – |
| GEA Mechanical Equipment | 210.9 | 205.3 | 2.7 |
| as % of revenue | 21.6 | 22.0 | – |
| GEA Process Engineering | 203.2 | 178.4 | 13.9 |
| as % of revenue | 11.3 | 10.4 | – |
| GEA Refrigeration Technologies | 71.0 | 65.2 | 8.8 |
| as % of revenue | 9.6 | 9.4 | – |
| Total | 545.8 | 501.4 | 8.8 |
| as % of revenue | 12.3 | 11.8 | – |
| Other and consolidation | –15.7 | –7.0 | < -100 |
| GEA Group | 530.1 | 494.4 | 7.2 |
| as % of revenue | 12.3 | 11.9 | – |
1) Before effects of purchase price allocations from revalued assets and liabilities and before one-offs (see page 200 f.)
2) Amounts adjusted due to first time classification of an operation as discontinued operation (see page 147 f.) and due to change in accounting policy for employee benefits (see page 118 f.)
The following table shows the reconciliation of EBITDA before purchase price allocation and nonrecurring items (operating EBITDA) through EBIT before purchase price allocation and non-recurring items (operating EBIT) to EBIT:
| Change in % |
||
|---|---|---|
| 530.1 | 494.4 | 7.2 |
| –71.0 | –67.6 | –5.0 |
| – | –0.6 | – |
| –0.3 | –0.5 | 40.3 |
| 458.8 | 425.8 | 7.8 |
| –23.9 | –23.5 | –1.8 |
| –0.4 | –10.5 | 96.1 |
| –0.3 | –1.6 | 82.3 |
| –14.6 | –75.9 | 80.7 |
| 419.6 | 314.3 | 33.5 |
| 2013 | 2012 1 |
1) Amounts adjusted due to first time classification of an operation as discontinued operation (see page 147 f.) and due to change in accounting policy for employee benefits (see page 118 f.) 2) Before effects of purchase price allocations from revalued assets and liabilities and before one-offs (see page 200 f.)
| Reconciliation of EBITDA to EBIT (EUR million) |
2013 | 2012 * | Change in % |
|---|---|---|---|
| EBITDA | 515.2 | 420.1 | 22.6 |
| Depreciation, amortization and impairment losses on property, plant, and equipment, impairment losses on intangible assets and goodwill, as reported in the statement of changes in non-current assets |
–95.3 | –105.3 | 9.5 |
| Other impairment losses and reversals of impairment losses | –0.3 | –0.5 | 40.3 |
| EBIT | 419.6 | 314.3 | 33.5 |
*) Amounts adjusted due to first time classification of a business area as discontinued operations (see page 147) and due to change in accounting policy for employee benefits (see page 118)
| Operating EBIT/Operating EBIT margin 1 | Change | ||
|---|---|---|---|
| (EUR million) | 2013 | 2012 2 | in % |
| GEA Food Solutions | –3.7 | –12.4 | 70.4 |
| as % of revenue | – | – | – |
| GEA Farm Technologies | 44.6 | 46.3 | –3.8 |
| as % of revenue | 7.7 | 8.0 | – |
| GEA Mechanical Equipment | 191.3 | 187.9 | 1.8 |
| as % of revenue | 19.6 | 20.1 | – |
| GEA Process Engineering | 188.3 | 162.7 | 15.7 |
| as % of revenue | 10.5 | 9.5 | – |
| GEA Refrigeration Technologies | 61.5 | 56.2 | 9.4 |
| as % of revenue | 8.4 | 8.1 | – |
| Total | 482.0 | 440.7 | 9.4 |
| as % of revenue | 10.9 | 10.3 | – |
| Other and consolidation | –23.2 | –14.9 | –55.3 |
| GEA Group | 458.8 | 425.8 | 7.8 |
| as % of revenue | 10.6 | 10.3 | – |
1) Before effects of purchase price allocations from revalued assets and liabilities and before one-offs (see page 200 f.)
2) Amounts adjusted due to first time classification of an operation as discontinued operation (see page 147 f.) and due to change in accounting policy for employee benefits (see page 118 f.)
Overall, EBIT rose by more than 30 percent in the past fiscal year to EUR 419.6 million (previous year: EUR 314.3 million). The EBIT margin improved accordingly by 213 basis points to 9.7 percent (previous year: 7.6 percent). Operating EBIT, which is adjusted for purchase price allocation effects of EUR 24.6 million (previous year: EUR 35.6 million) and non-recurring items of EUR 14.6 million (previous year: EUR 75.9 million), increased by 7.8 percent to EUR 458.8 million (previous year: 425.8 million). The operating EBIT margin improved accordingly by 34 basis points to 10.6 percent of revenue.
The segment generated operating EBITDA of EUR 3.8 million or 1.1 percent of revenue in 2013, following EUR –6.0 million in the previous year. The segment thus generated a positive result in the second half of the year, following the already loss-free second quarter. The improved operating result compared with 2012 was achieved by cutting the number of employees and reducing indirect costs, together with efficiency gains in manufacturing and delivery processes.
In the GEA Farm Technologies Segment, operating EBITDA and the operating EBITDA margin decreased by EUR 1.5 million to EUR 56.9 million and by 21 basis points to 9.9 percent in fiscal year 2013. This is primarily due to the lower revenue in the first half of the year. In the second half of the year, operating EBITDA and the corresponding margin were once again above the prior-year level.
The GEA Mechanical Equipment Segment increased operating EBITDA to EUR 210.9 million (previous year: EUR 205.3 million). The slight 41 basis point decline in the margin to 21.6 percent is mainly due to the startup of the new production locations in Oelde/Germany and Wuqing/China in the year under review and the smaller proportion of business accounted for by the higher margin food industry.
The GEA Process Engineering Segment increased operating EBITDA by EUR 24.8 million or around 14 percent to EUR 203.2 million (previous year: EUR 178.4 million). The already good operating EBITDA margin generated in the previous years improved by a further 90 basis points, reaching 11.3 percent, which is an impressive level for an engineering company. This earnings trend was driven in particular by the positive market environment, which made it possible to focus more strongly on high-margin products, and successful project management.
In the GEA Refrigeration Technologies Segment, operating EBITDA rose by around 9 percent to EUR 71.0 million (previous year: EUR 65.2 million). The operating EBITDA margin also increased by 25 basis points to a record high of 9.6 percent. This further improvement in earnings was largely due to volume growth, cost reductions, and economies of scale in selling and administrative expenses.
| Key figures: Results of operations (EUR million) |
2013 | 2012 1 | Change in % |
|---|---|---|---|
| Revenue | 4,320.0 | 4,142.3 | 4.3 |
| Operating EBITDA 2 | 530.1 | 494.4 | 7.2 |
| EBITDA pre purchase price allocation | 515.5 | 421.6 | 22.3 |
| EBITDA | 515.2 | 420.1 | 22.6 |
| Operating EBIT 2 | 458.8 | 425.8 | 7.8 |
| EBIT pre purchase price allocation | 444.2 | 349.9 | 27.0 |
| EBIT | 419.6 | 314.3 | 33.5 |
| Interest | 67.5 | 87.2 | –22.6 |
| EBT | 352.1 | 227.1 | 55.0 |
| Income taxes | 70.1 | 12.9 | > 100 |
| Profit after tax from continued operations | 282.0 | 214.3 | 31.6 |
| Profit/loss after tax from discontinued operations | 54.4 | 100.9 | –46.2 |
| Profit for the period | 336.4 | 315.2 | 6.7 |
1) Amounts adjusted due to first time classification of an operation as discontinued operation (see page 147 f.) and due to change in accounting policy for employee benefits (see page 118 f.)
2) Before effects of purchase price allocations from revalued assets and liabilities and before one-offs (see page 200 f.)
Full-year net interest income of EUR –67.5 million (previous year: EUR –87.2 million) includes EUR 26.6 million (previous year: EUR 45.0 million) of discount unwinding expenses relating to provisions, of which EUR 19.9 million (previous year: EUR 24.2 million) is attributable to obligations under pension plans and supplementary healthcare benefit plans. All other components of net interest income therefore resulted in a EUR 1.3 million reduction in the negative impact on earnings. This was attributable to the scheduled repayment of bank loans and the year-on-year decline in interest rates, among other things.
EBT in full-year 2013 amounted to EUR 352.1 million, EUR 125.0 million higher than the previous year's figure (EUR 227.1 million). The corresponding EBT margin improved by 267 basis points to 8.2 percent.
The income tax expense of EUR 70.1 million in fiscal year 2013 (previous year: EUR 12.9 million) comprised current taxes of EUR 70.4 million (previous year: EUR 58.1 million) and deferred taxes of EUR –0.3 million (previous year: EUR –45.2 million). Following a very low tax rate in 2012 (5.7 percent), in particular as a result of the recognition of deferred tax assets in respect of German tax loss carryforwards, the tax rate now stands at 19.9 percent. This low tax rate is largely attributable to the additional recognition of deferred tax assets in respect of tax loss carryforwards in the U.S.A., as it is assumed that higher use will be made of tax loss carryforwards there due to the extremely positive business performance.
As the IFRS criteria were met for the first time as of end-2013, the GEA Heat Exchangers Segment is now reported under discontinued operations. To enhance comparability, the income statement for the previous year has also been adjusted in accordance with IFRS requirements. Overall, discontinued operations generated a profit of EUR 54.4 million (previous year: EUR 100.9 million). Of this amount, EUR 53.8 million was attributable to the GEA Heat Exchangers Segment, compared with EUR 100.8 million in the previous year, and the remaining EUR 0.6 million to other discontinued operations (previous year: EUR 0.1 million). Further disclosures on the business performance of the GEA Heat Exchangers Segment can be found in the chapter entitled "Performance of Discontinued Operations" (see page 45 ff.).
Consolidated profit in the full year amounted to EUR 336.4 million (previous year: EUR 315.2 million), of which EUR 336.0 million (previous year: EUR 313.0 million) is attributable to GEA Group Aktiengesellschaft shareholders. Taking into account the 3.6 percent increase in the average number of shares compared with the previous year, this corresponds to earnings per share of EUR 1.75 (previous year: EUR 1.68).
In connection with the settlement of the award proceedings, the average number of GEA shares rose from 185,786,324 in fiscal year 2012 to 192,495,476 in 2013.
In addition to holding company costs in the narrower sense, the results of operations of GEA Group Aktiengesellschaft are primarily driven by net investment income and net interest income. Further details are presented in the section entitled "Net assets, financial position and results of operations of GEA Group Aktiengesellschaft" (see page 51 ff.).
The Executive Board and Supervisory Board are proposing to increase the dividend from EUR 0.55 to EUR 0.60 per share. This is in line with our ongoing goal of distributing around one-third of the group's earning to shareholders as a dividend.
Safeguarding liquidity and centralized financial management have been even more of a top priority for GEA Group since the crisis on the financial markets began in 2008. GEA Group's financial position continues to be stable. GEA Group continues to have sufficient financing options for its future business development.
To ensure long-term group financing, GEA Group Aktiengesellschaft took out a new syndicated credit line in the form of a club deal amounting to EUR 650 million in August 2013. This replaces the line with the same volume falling due in June 2015. This further enhanced the financing structure through improved margins and the renewed extension of the maturity.
The cash credit lines of GEA Group (including discontinued operations) and their utilization were as follows at the reporting date:
| GEA cash credit lines incl. discontinued operations | 12/31/2013 | 12/31/2013 | |
|---|---|---|---|
| (EUR million) | Maturity | approved | utilized |
| GEA Bond | April 2016 | 400 | 400 |
| Kreditanstalt für Wiederaufbau (KfW) (2016/05) | May 2016 | 60 | 60 |
| Kreditanstalt für Wiederaufbau (KfW) (2016/12) | December 2016 | 42 | 42 |
| European Investment Bank | July 2017 | 150 | 150 |
| Borrower's note loan (2017) | September 2017 | 300 | 300 |
| Syndicated credit line ("Club Deal") | August 2018 | 650 | – |
| Various (bilateral) credit lines including accured interests | Maximum of 1 year or "until further notice" |
138 | 22 |
| Total | 1,740 | 974 |
The group's financial management encompasses liquidity management, group financing, and the management of interest rate and exchange rate risks. As the group management company, GEA Group Aktiengesellschaft is responsible for GEA Group's central financial management, which aims to reduce financing costs as far as possible, to leverage economies of scale, to hedge interest rate and exchange rate risk exposures as effectively as possible, and to ensure that loan covenants are complied with. The goal of GEA Group's financing strategy is not only to be able to meet its payment obligations whenever they fall due, but also always to have sufficient cash reserves in the form of credit lines, in addition to maintaining a strategic cash position.
Cash flow from operating activities is the most important source of liquidity. Intragroup cash pooling aims to limit external cash investments and borrowings to as low a level as possible. To achieve this, GEA Group has established cash pooling groups in 13 countries that automatically balance the accounts of the participating group companies every day by crediting or debiting a target account at GEA Group Aktiengesellschaft. Any additional liquidity requirements are generally borrowed by group management, which also invests surplus liquidity. In a number of cases, however, liquidity peaks in individual countries cannot be reduced on a cross-border basis due to legal or tax-related reasons.
Net debt (including discontinued operations) as of December 31, 2012 (EUR 325.5 million) narrowed significantly by EUR 147.0 million to EUR 178.6 million as of December 31, 2013. This represents a EUR 337.3 million decline compared with September 30, 2013 (EUR 515.9 million).
| 12/31/2013 | 12/31/2012 |
|---|---|
| 795.8 | 743.5 |
| – | – |
| 564.1 | 659.4 |
| 410.2 | 409.6 |
| –178.6 | –325.5 |
| 7.7 | 15.0 |
Including discontinued operations, cash and cash equivalents plus marketable securities increased to EUR 795.8 million as of December 31, 2013, compared with EUR 743.5 million as of the end of the previous year. Liabilities to banks (EUR 263.8 million), from the bond issue (EUR 410.2 million, including accrued interest), and the borrower's note loan (EUR 300.4 million, including accrued interest) amounted to a total of EUR 974.3 million at the reporting date (previous year: EUR 1,069.0 million).
Detailed information on the maturity, currency, and interest rate structure of debt financing can be found in the notes to the consolidated financial statements (see pages 140 ff. and 177 ff.).
Guarantee lines – which are mainly for contract performance, advance payments, and warranties – of EUR 1,886.4 million (December 31, 2012: EUR 1,898.3 million) were available to GEA Group (including the GEA Heat Exchangers Segment) as of the reporting date, of which EUR 707.9 million (December 31, 2012: EUR 749.8 million) had been utilized.
In addition to the assets recognized in its consolidated balance sheet, GEA also uses non-owned assets. These are mainly assets leased or rented under operating leases. GEA uses factoring programs as offbalance-sheet financing instruments. The obligations resulting from rental and leasing obligations are explained in section 8.2 to the consolidated financial statements (see page 194 f.).
Working capital from continued operations amounted to EUR 363.3 million as of December 31, 2013, and thus remained on a level with the previous year (EUR 355.7 million). Trade receivables rose sharply, but this was almost fully offset by the lower inventories, higher trade payables, and higher advance payments received. The ratio of working capital to revenue was 8.4 percent at the end of the year (previous year: 8.6 percent). This indicator declined significantly from 12.7 percent to 11.7 percent on average during the year.
The key factors responsible for the change in net debt (including discontinued operations) are shown in the following chart:
Change in net liquidity/net debt, including discontinued operations (EUR million)
GEA Group Annual Report 2013
GEA Group Aktiengesellschaft's dividend payout in fiscal year 2013 was the highest in the Company's history, at EUR 105.9 million (previous year: EUR 101.1 million). With the dividend per share unchanged at EUR 0.55, this four percent increase is attributable to the increase in the number of shares due to the settlement of the award proceedings.
The consolidated cash flow statement can be summarized as follows:
| Overview of cash flow statement (EUR million) |
2013 | 2012 | Change absolute |
|---|---|---|---|
| Cash flow from operating activities | 424.7 | 333.6 | 91.0 |
| Cash flow from investing activities | –116.9 | –176.5 | 59.6 |
| Free cash flow | 307.7 | 157.1 | 150.6 |
| Cash flow from financing activities | –246.3 | 102.4 | –348.6 |
| Net cash flow from disposal group GEA Heat Exchangers | 79.3 | 95.9 | –16.6 |
| Net cash flow other discontinued operations | –58.9 | –41.2 | –17.7 |
| Change in unrestricted cash and cash equivalents | 58.3 | 309.3 | –251.0 |
Cash flow from operating activities attributable to continued operations amounted to EUR 424.7 million in the year under review, up EUR 91.0 million up on the previous year (EUR 333.6 million). This was primarily attributable to the EUR 95.1 million increase in EBITDA and the EUR 57.5 million change in provisions. The change in working capital moved in the opposite direction (EUR –74.9 million). The revenue-related rise in working capital negatively impacted cash flow, compared with a reduction in the previous year.
Cash flow from investing activities attributable to continued operations improved by EUR 59.6 million in the year under review, from EUR –176.5 million to EUR –116.9 million. The main reason for this was the EUR 61.3 million decrease in payments for acquisitions.
Cash flow from financing activities attributable to continued operations amounted to EUR –246.3 million in 2013, compared with EUR 102.4 million in 2012. The EUR 348.6 million decline was largely attributable to the EUR 341.2 million decrease in net total loans and loan repayments. This change is due in particular to bank loans of EUR 283.0 million in the previous year and repayments of EUR 89.0 million in the year under review.
Cash flow from discontinued operations amounted to EUR 20.4 million, comprising EUR 101.2 million from operating activities, EUR –75.7 million from investing activities, and EUR –5.1 million from financing activities. Cash flow from discontinued operations was EUR 34.4 million lower than the prior-year figure of EUR 54.8 million. The change in cash flow was attributed to GEA Heat Exchanger (EUR –16.6 million) and other discontinued operations (EUR -17.7 million).
GEA Group's overriding goal is to sustainably increase its enterprise value by growing profitably. In order to create the requisite financial scope for this and to focus the group even more closely on cash flow generation, a new key performance indicator – the "cash flow driver margin" – was introduced in fiscal year 2012 and was also incorporated into the management bonus system.
The cash flow driver margin is defined as the net amount of EBITDA, the change in average working capital, and capital expenditure on property, plant and equipment as well as intangible assets (all as reported), calculated as a ratio to revenue.
| as % of revenue (last 12 months) | 9.6 | 5.0 | – |
|---|---|---|---|
| Cash flow driver (EBITDA – Capex -/+Change in Working Capital) |
413.8 | 207.2 | 206.5 |
| Change in Working Capital (average of the last 12 months) | –19.1 | 87.6 | –106.7 |
| Capital expenditure on property, plant and equipment (last 12 months) | 120.5 | 125.2 | –4.7 |
| EBITDA (last 12 months) | 515.2 | 420.1 | 95.1 |
| Cash flow driver/Cash flow driver margin (EUR million) |
12/31/2013 | 12/31/2012 * | Change absolute |
*) Amounts adjusted due to first time classification of an operation as discontinued operation (see page 147 f.) and due to change in accounting policy for employee benefits (see page 118 f.)
The cash flow driver almost doubled in the year under review from EUR 207.2 million to EUR 413.8 million. The corresponding cash flow driver margin thus rose by 458 basis points from 5.0 percent to 9.6 percent. The main contributors to this improvement were the EUR 95.1 million increase in EBITDA and the reduction in average working capital achieved in the year under review, despite the higher revenue. Average working capital had significantly increased in 2012. The working capital effect contributed EUR 106.7 million to the improvement in the cash flow driver.
| Condensed balance sheet | as % of | as % of | Change | ||
|---|---|---|---|---|---|
| (EUR million) | 12/31/2013 | total assets | 12/31/2012 * | total assets | in % |
| Assets | |||||
| Non-current assets | 2,577.8 | 39.9 | 2,587.6 | 40.2 | –0.4 |
| of which goodwill | 1,312.6 | 20.3 | 1,320.1 | 20.5 | –0.6 |
| of which deferred taxes | 385.8 | 6.0 | 394.3 | 6.1 | –2.1 |
| Current assets | 3,886.8 | 60.1 | 3,841.6 | 59.8 | 1.2 |
| of which cash and cash equivalents | 683.5 | 10.6 | 595.3 | 9.3 | 14.8 |
| of which assets held for sale | 1,605.8 | 24.8 | 1,696.6 | 26.4 | –5.4 |
| Total assets | 6,464.6 | 100.0 | 6,429.3 | 100.0 | 0.6 |
| Equity and liabilities | |||||
| Equity | 2,315.7 | 35.8 | 2,166.9 | 33.7 | 6.9 |
| Non-current liabilities | 1,855.9 | 28.7 | 1,930.1 | 30.0 | –3.8 |
| of which financial liabilities | 957.8 | 14.8 | 1,000.1 | 15.6 | –4.2 |
| of which deferred taxes | 98.8 | 1.5 | 95.9 | 1.5 | 3.0 |
| Current liabilities | 2,293.0 | 35.5 | 2,332.3 | 36.3 | –1.7 |
| of which financial liabilities | 67.9 | 1.0 | 124.7 | 1.9 | –45.6 |
| of which liabilities held for sale | 619.9 | 9.6 | 668.6 | 10.4 | –7.3 |
| Total equity and liabilities | 6,464.6 | 100.0 | 6,429.3 | 100.0 | 0.6 |
*) Amounts adjusted due to first time classification of an operation as discontinued operation (see page 147 f.) and due to change in accounting policy for employee benefits (see page 118 f.)
Total assets as of December 31, 2013, rose slightly by EUR 35.4 million or 0.6 percent as against December 31, 2012, to EUR 6,464.6 million. This increase in total assets is attributable to higher trade receivables and cash and cash equivalents. The change in assets held for sale, inventories, and intangible assets moved in the opposite direction. The structure of non-current and current assets shifted slightly towards current assets.
The EUR 148.8 million increase in equity represents the consolidated profit of EUR 336.4 million on one hand, and the dividend payment of EUR 105.9 million on the other. Currency translation effects reduced equity by EUR 83.7 million. The equity ratio therefore improved by 2.1 percentage points compared with the end of 2012 (33.7 percent) to 35.8 percent.
Non-current liabilities decreased by EUR 74.2 million to EUR 1,855.9 million. This is mainly attributable to the utilization of non-current provisions and to the reclassification of liabilities to banks to current liabilities for maturity reasons.
As of the reporting date, current liabilities excluding liabilities held for sale were up EUR 9.5 million on the figure for December 31, 2012, at EUR 1,673.2 million. This was largely attributable to the higher trade payables and advance payments for orders that are recognized using the percentage of completion method and was partly offset by the reduction in liabilities to banks in the year under review. Although current liabilities to banks were increased due to reclassifications carried out for maturity reasons (EUR 34.0 million), they were reduced by EUR 89.0 million due to the redemption of borrower's note loans and loans from Kreditanstalt für Wiederaufbau (KfW).
Liabilities held for sale declined by EUR 48.7 million as against the previous year to EUR 619.9 million.
| (EUR million) | 2013 | 2012 |
|---|---|---|
| Order intake | 1,500.3 | 1,509.8 |
| Order backlog * | 805.1 | 933.3 |
| Revenue | 1,489.1 | 1,608.8 |
| Operating EBITDA | 158.2 | 167.5 |
| as % of revenue | 10.6 | 10.4 |
| Operating EBIT | 123.3 | 135.0 |
| as % of revenue | 8.3 | 8.4 |
| Employees * | 7,201 | 7,329 |
*) As of reporting date
At the beginning of the year, stagnating markets and a correspondingly weaker revenue and earnings trend were forecast for the GEA Heat Exchangers Segment. Although the markets developed as expected during the fiscal year, the implementation of extensive measures at an early stage meant that the EBITDA margin actually increased, despite the decline in revenue.
In fiscal year 2013, order intake in the GEA Heat Exchangers Segment amounted to EUR 1,500.3 million, almost matching the prior-year level of EUR 1,509.8 million. However, adjusted for the effect of exchange rate changes of –2.1 percent, organic growth amounted to 1.4 percent.
The largest single order in 2013, an LPG plant in Russia, amounted to more than EUR 40 million. In addition, subsequent orders for two power plant projects in the Middle East worth a total of just under EUR 60 million were signed. In the prior-year period, a major order with a volume of nearly EUR 40 million was received.
The order backlog declined by EUR 128.2 million or 13.7 percent compared with December 31, 2012 (EUR 933.3 million), to EUR 805.1 million. Expressed in terms of order intake for the fiscal year, the order backlog amounts to 6.4 months (previous year: 7.4).
The GEA Heat Exchangers Segment's revenue declined by 7.4 percent to EUR 1,489.1 million (previous year: EUR 1,608.8 million). Adjusted for the effect of exchange rate changes of -2.2 percent, the organic change amounted to –5.3 percent in the past fiscal year. This development is mainly attributable to the decline in revenue from major projects in South Africa.
In the power plant area, the segment was impacted by the weak market overall and the postponement of major projects, with this industry's share declining to 30 percent. In contrast, the development of the oil and gas customer industry was positive and its share increased by 4.7 percentage points to nearly 19 percent. Climate and environment is now the biggest customer industry, representing a share of 33 percent. Revenue in Eastern Europe rose by a clear 35 percent. However, this was unable to compensate for the weaker trend in other regions, particularly Africa and Latin America.
GEA Heat Exchangers revenue EUR 1,489.1 million (previous year EUR 1,608.8 million)
by sector(average last 12 months, 3 most important industries, only external business)
Operating EBITDA in the GEA Heat Exchangers Segment declined by 5.5 percent from EUR 167.5 million to EUR 158.2 million in the year under review. Thanks to the further improvement in structures and business processes, the operating EBITDA margin increased by 21 basis points to 10.6 percent, despite the lower revenue. Operating EBITDA does not include expenses of EUR 3.1 million, which mainly
relate to preparations for the planned sale of the segment. Operating EBIT amounted to EUR 123.3 million in the year under review, compared with EUR 135.0 million in the previous year. The corresponding operating EBIT margin remained virtually unchanged at 8.3 percent of revenue. In particular due to one-off expenses related to the preparation of the planned sale of the segment and related increase of tax rate from 26.7 percent to 48.7 percent the profit after taxes declined to EUR 53.8 million from EUR 100.8 million in prior year.
The number of employees in the GEA Heat Exchangers Segment amounted to 7,201 as of December 31, 2013. This represents a decrease of 128 employees compared with December 31, 2012 (7,329 employees). Changes in the basis of consolidation increased the number of employees by 29. The reduction in the number of employees is due to capacity adjustments in Brazil, South Africa, and the UK.
Net liquidity including intercompany receivables and liabilities rose by EUR 122.2 million to EUR 48.3 million at December 31, 2013 (previous year: EUR –73.9 million). This improvement was mainly driven by the EBITDA generated and by financial liabilities that are attributable to GEA Group in preparation for the planned sale.
Working capital amounted to EUR 173.2 million at year-end, EUR 9.7 million lower than the previous year's figure. The ratio of working capital to revenue was 11.6 percent at the end of the year (previous year: 11.4 percent). The average ratio during the year was 14.5 percent (previous year: 14.2 percent).
The cash flow driver declined in the year under review from EUR 150.6 million to EUR 137.3 million due to lower volumes. The corresponding cash flow driver margin remained virtually unchanged at 9.2 percent.
Total assets as of December 31, 2013, declined by EUR 227.8 million or 11.0 percent as against December 31, 2012, to EUR 1,838.3 million. This reduction in total assets is mainly due to the decline in receivables from affiliated companies, lower inventories, and lower cash and cash equivalents. The structure of non-current and current assets shifted very slightly towards non-current assets.
Equity increased by EUR 109.4 million to EUR 922.5 million as of December 31, 2013, which was due to the net income for the fiscal year, as well as shifts in net assets in the course of the legal restructuring measures to prepare for the planned sale. The equity ratio therefore improved significantly from 39.4 to 50.2 percent. The increase in affiliated company loans represents a further significant change in liabilities. Non-current liabilities thus represent a much smaller share of 4.9 percent as against 15.6 percent at December 31, 2012.
Other companies classified as discontinued operations did not have a material impact overall on consolidated profit in fiscal year 2013.
In accordance with the agreement entered into with the purchaser of Lurgi in 2012, tax risks in particular associated with the transaction remained with the group. These risks were further reduced in fiscal year 2013, so the relevant provisions were able to be reversed to a large extent.
Of the Lentjes portfolio, for which risks remained with GEA Group after the sale, a number of plants are still under warranty, and two plants are still subject to legal disputes. In addition, one order that did not form part of the sale of Lentjes was still being executed. This was handed over the customer in fiscal 2013 and is now under warranty.
The contract under public law with the environmental authority (District of Recklinghausen) for the forthcoming rehabilitation of the former Ruhr-Zink site was finalized at the end of 2013. The rehabilitation is to begin in early 2014. According to the current schedule, the operational rehabilitation phase involving "cut-off wall construction and surface sealing " will be completed by the end of 2016.
The Executive Board of GEA Group Aktiengesellschaft would like to thank all of the group's employees for their excellent work and active commitment in fiscal 2013. Our particular thanks go to the employee representatives in Germany and abroad for their responsible and constructive contributions.
There were 17,750 employees as of December 31, 2013 (excluding the GEA Heat Exchangers Segment). This represents an increase of 582 employees compared with December 31, 2012 (17,168 employees), including 84 in Germany and 267 in the Asia/Pacific region. Changes in the basis of consolidation increased the number of employees by five. This increase in the group's workforce is mainly attributable to the strong growth in the GEA Mechanical Equipment and GEA Process Engineering segments.
| Total Other |
3,325 17,445 305 |
3,267 16,867 301 |
|---|---|---|
| GEA Refrigeration Technologies | ||
| GEA Process Engineering | 5,949 | 5,566 |
| GEA Mechanical Equipment | 4,139 | 3,961 |
| GEA Farm Technologies | 2,293 | 2,286 |
| GEA Food Solutions | 1,739 | 1,787 |
| Employees 1 by segment | 12/31/2013 | 12/31/2012 2 |
1) Full-time equivalents (FTE) excluding vocational trainees and inactive employment contracts
2) Amounts adjusted due to first time classification of an operation as discontinued operation (see page 147 f.)
Overall, the share of the workforce in Germany decreased by 0.6 percentage points year-on-year, and by 0.4 percentage points in the rest of Western Europe, but increased in the Asia/Pacific growth region by 1.0 percentage points.
| Employees 1 by region | 12/31/2013 | 12/31/2012 2 | |||
|---|---|---|---|---|---|
| Western Europe | 11,230 | 63.3% | 11,035 | 64.3% | |
| Asia/Pacific | 3,069 | 17.3% | 2,802 | 16.3% | |
| North America | 1,964 | 11.1% | 1,893 | 11.0% | |
| Eastern Europe | 673 | 3.8% | 631 | 3.7% | |
| Latin America | 387 | 2.2% | 389 | 2.3% | |
| Africa | 361 | 2.0% | 354 | 2.1% | |
| Middle East | 66 | 0.4% | 65 | 0.4% | |
| Total | 17,750 | 100.0% | 17,168 | 100.0% |
1) Full-time equivalents (FTE) excluding vocational trainees and inactive employment contracts
2) Amounts adjusted due to first time classification of an operation as discontinued operation (see page 147 f.)
As of December 31, 2013, GEA Group employed 516 vocational trainees compared with 496 at the same date in the previous year. In Germany, the vocational trainee ratio was unchanged at a good 6.9 percent because providing first-rate training is very important to GEA, which considers it a key investment in the future of our employees and of our company. As in the past, the vocational training level exceeds GEA Group's own needs.
In July 2006, GEA Group Aktiengesellschaft launched a long-term remuneration program for first- and second-tier managers; this was extended to include third-tier management in 2008. As in previous years, all participants had to invest an amount equal to 20 percent of the issued performance shares. In July 2013, an eighth tranche was issued for these three management levels, with a participation rate of 66 percent. Each GEA Performance Share Plan runs for three years. The fifth tranche, which was issued in the summer of 2010, was paid out at a rate of 78.7 percent of the target value. This value was calculated by comparing GEA's relative share price performance in the relevant three-year reference period with that of MDAX companies.
Performance assessments are carried out at regular intervals for managers worldwide. Standardized procedures are used to assess key attributes such as a performance- and results-driven approach, assertiveness, communication skills, leadership, commitment, use of management tools, and creativity, from the perspective of both their superiors and their employees. The results are used as a basis for drawing up individual development plans and long-term personnel and succession planning.
A talent policy was developed in fiscal year 2013. In line with this, a process was implemented across the group to identify talent and to discuss it at talent management conferences. Individuals with confirmed talent are allocated to talent pools and receive specific support and training.
The "Professionals on Stage" development assessment center, which is designed to identify future managers and is geared towards employees worldwide with at least seven years' professional experience, has been enhanced by a new module focused on peer consulting and networking. The "First Professional Program" Talent identification and development program for high-potential individuals was held for the third time in 2013. Its three modules give young managers who have been with GEA Group for at least two years special training to develop their skills in communication, conflict resolution, leadership, and managing change processes.
Absolventa GmbH, which operates a career portal designed specifically for young graduates and students, recognized GEA's cross-segment "Move – GEA Graduate Program" trainee program for university graduates as a fair, career-enhancing program. Trainees are prepared at a cross-segment level for future management tasks in both commercial and technical areas, over a period of 18 months in GEA companies in Germany and abroad.
The GEA Academy offers a central professional development and training program for all employees. In fiscal year 2013, the GEA Academy offered training courses in a variety of management and leadership areas and expanded its offerings for onsite training sessions to include online support in the form of e-learning opportunities. As in previous years, these were organized in cooperation with an internationally recognized partner.
GEA participates in the London Business School's Global Business Consortium, in which top managers from prominent international companies can hone their strategic skills using case studies, among other things. Board members of the participating companies are actively included in the program, where they give presentations and take part in discussion groups.
GEA aims to ensure its young talent receives first-class training, which is why it offers twin-track courses of study in cooperation with Osnabrück University of Applied Sciences. Lasting six semesters, these twin-track training courses lead to bachelor degrees in various specialist areas.
At GEA, managers have the option of studying for a part-time MBA in an international environment. Corresponding cooperative agreements have been established with Mannheim University, the London Business School, INSEAD, and Harvard University.
Additional information can be found under the Career area of our website at www.gea.com.
GEA's online career portal and the corporate HR blog were expanded with a view to increasing the Company's attractiveness as an employer and facilitating initial contact with potential candidates. The "Fair Company" employer quality seal, which stands for fair treatment of applicants for an internship, was updated in fiscal 2013. In addition, GEA continued to exhibit regularly at university career fairs and product shows in 2013 and to expand its cooperation with universities.
GEA conducted a worldwide employee survey for the first time in 2013 in order to capture employee commitment to and satisfaction with the different aspects of working life. The survey had an excellent overall response rate of 88 percent. Targeted measures will be derived from the results in fiscal year 2014.
GEA Group promotes and harnesses the creativity and innovative capacity of each and every employee with its group-wide "i²m" ideas and improvement management scheme. I²m helps increase the group's profitability, product quality, and quality of work, as well as customer satisfaction, in the long term. GEA Improvement Projects (GIPs) are systematically documented in addition to individual employee ideas. Acquired companies are included in the improvement system's structures promptly.
In fiscal year 2013, GEA was singled out by Deutsches Institut für Betriebswirtschaft (dib – German Institute for Business Management) as the winner of the 2013 "Deutscher IdeenPreis" (German idea award) in the engineering category among companies with more than 5,000 employees.
In 2013, a total of some 13,700 ideas were submitted via i²m by employees throughout the group, and around 310 GIPs were also documented, of which around 44 percent were successfully implemented in 2013. The net benefit for GEA Group from the improvement system in 2013 was approximately EUR 20 million.
In addition to its economic benefits, i²m also strengthens the corporate culture by actively including employees and motivating them to become involved in shaping their Company. Their commitment was honored in 2013 by EUR 1.1 million in bonuses paid for implemented ideas, as well as recognition bonuses and numerous noncash bonuses.
In addition to the reporting by the group, the following section describes the performance of GEA Group Aktiengesellschaft (group management). The annual financial statements are prepared in accordance with the Handelsgesetzbuch (HGB – German Commercial Code) and the Aktiengesetz (AktG – German Stock Corporation Act). They are presented here in condensed form.
Report on Economic Position
| Total | 4,677.9 | 100.0 | 4,656.2 | 100.0 |
|---|---|---|---|---|
| Deferred income | 0.1 | – | 0.1 | – |
| Liabilities | 2,862.4 | 61.2 | 2,941.1 | 63.2 |
| Other liabilities | 20.9 | 0.4 | 20.4 | 0.4 |
| Liabilities to affiliated companies | 1,889.5 | 40.4 | 1,879.7 | 40.4 |
| Liabilities to banks | 552.0 | 11.8 | 641.0 | 13.8 |
| Bonds | 400.0 | 8.6 | 400.0 | 8.6 |
| Provisions | 191.1 | 4.1 | 188.1 | 4.0 |
| Equity | 1,624.3 | 34.7 | 1,526.9 | 32.8 |
| Net retained profits | 116.4 | 2.5 | 109.0 | 2.3 |
| Revenue reserves | 736.7 | 15.7 | 646.7 | 13.9 |
| Capital reserves | 250.8 | 5.4 | 250.8 | 5.4 |
| Subscribed capital | 520.4 | 11.1 | 520.4 | 11.2 |
| Equity and liabilities | ||||
| Total | 4,677.9 | 100.0 | 4,656.2 | 100.0 |
| Prepaid expenses | 5.1 | 0.1 | 5.9 | 0.1 |
| Current assets | 1,671.5 | 35.8 | 1,592.8 | 34.2 |
| Cash | 531.9 | 11.4 | 462.4 | 9.9 |
| Receivables and other assets | 1,139.6 | 24.4 | 1,130.4 | 24.3 |
| Other assets | 27.7 | 0.6 | 30.4 | 0.7 |
| Receivables from affiliated companies | 1,111.9 | 23.8 | 1,100.0 | 23.6 |
| Fixed assets | 3,001.3 | 64.1 | 3,057.5 | 65.7 |
| Long-term financial assets | 2,994.5 | 63.9 | 3,048.8 | 65.5 |
| Tangible fixed assets | 3.6 | 0.1 | 6.4 | 0.1 |
| Assets Intangible fixed assets |
3.2 | 0.1 | 2.3 | 0.1 |
| Net assets of GEA Group AG (HGB) (EUR million) |
31/12/2013 | as % of total assets |
31/12/2012 | as % of total assets |
Total assets increased by EUR 21.7 million year-on-year; this is primarily due to the increase in cash funds by EUR 69.5 million. By contrast, long-term financial assets decreased by EUR 54.3 million. Equity was up EUR 97.4 million, while liabilities declined by EUR 78.7 million.
In the long-term financial assets item, loans to affiliated companies declined due to repayments of EUR 69.3 million, while shares in affiliated companies rose by EUR 15.0 million, mainly a result of intragroup share acquisitions. The receivables from affiliated companies result in particular from short-term borrowings by subsidiaries participating in the group's cash pooling system. The EUR 69.5 million increase in cash funds and the EUR 89.0 million decrease in liabilities to banks were attributable to net income for the fiscal year and the associated cash inflows.
Net income for the fiscal year of EUR 203.2 million less the dividend of EUR 105.8 million paid out in fiscal year 2013 led to the EUR 97.4 million increase in equity to EUR 1,624.3 million. The ratio of equity to total assets therefore increased by 1.9 percentage points to 34.7 percent. By contrast, liabilities to banks decreased by EUR 89.0 million. This is due to the scheduled repayment of the borrower's note loan in the amount of EUR 55.0 million, and the partial repayments due to the Kreditanstalt für Wiederaufbau (KfW) in the amount of EUR 34.0 million.
There were only minor changes overall to the rest of the balance sheet items compared with the previous year.
The Executive Board and Supervisory Board transferred EUR 90.0 million to revenue reserves in fiscal year 2013.
| Income statement of GEA Group AG (HGB) | ||||
|---|---|---|---|---|
| (EUR million) | 31/12/2013 | in % | 31/12/2012 | in % |
| Other operating income | 120.7 | 54.9 | 116.3 | 49.7 |
| Personnel expenses | –31.8 | –14.5 | –26.2 | –11.2 |
| Amortization amd writedowns of intangible fixed assets and depreciation and writedowns of tangible fixed assets |
–1.6 | –0.7 | –1.6 | –0.7 |
| Other operating expenses | –143.6 | –65.3 | –116.0 | –49.6 |
| Investment income | 267.4 | 121.5 | 256.2 | 109.6 |
| Net interest income | 8.9 | 4.0 | 5.2 | 2.2 |
| Result from ordinary activities | 220.0 | 100.0 | 233.9 | 100.0 |
| Taxes on income | –16.8 | –7.6 | –17.2 | –7.4 |
| Net income for the fiscal year | 203.2 | 92.4 | 216.7 | 92.6 |
| Retained profits brought forward | 3.2 | 1.5 | 0.3 | 0.1 |
| Appropriation to other revenue reserves | –90.0 | –40.9 | –108.0 | –46.2 |
| Net retained profits | 116.4 | 52.9 | 109.0 | 46.6 |
Personnel expenses increased by EUR 5.6 million year-on-year, primarily due to higher additions to other provisions for personnel expenses.
Exchange rate gains and losses from own hedges and hedges for affiliated companies are reported gross within other operating income and expenses, as in the previous year. Gains of EUR 78.0 million and losses of EUR 76.1 million resulted in net exchange rate gains of EUR 1.9 million (previous year: EUR 8.1 million).
In addition to exchange rate gains, other operating income primarily includes income from the recharging of the intercompany management fee and the trademark fee to subsidiaries, from ancillary operations, and from the reversal of provisions. In addition to exchange rate losses, other operating expenses mainly comprise the cost of expert opinions and consulting, as well as third-party services.
Investment income is primarily composed of income and expenses from profit and loss transfer agreements and income from reversals of impairment losses on financial assets. Income from profit transfer agreements mainly contains the profits transferred by GEA Mechanical Equipment GmbH, GEA Group Holding GmbH, GEA Refrigeration Germany GmbH, GEA Heat Exchangers GmbH, and GEA Brewery Systems GmbH. Cost of loss absorption contains in particular the assumed losses of mg Altersversorgung GmbH, ZiAG Plant Engineering GmbH, GEA Diessel GmbH, and GEA Refrigeration Technologies GmbH.
Net interest income rose by EUR 3.7 million to EUR 8.9 million (previous year: EUR 5.2 million). This is due among other things to the scheduled repayment of bank loans and to the decline in interest rates year-on-year. The discount unwinding costs on long-term other provisions were EUR 1.9 million, as in the previous year.
| (EUR million) | 2013 | 2012 |
|---|---|---|
| Cash flow from operating activities | 207.1 | -140.4 |
| Cash flow from investing activities | 57.3 | 295.0 |
| Cash flow from financing activities | -194.9 | 162.9 |
| Liquid funds | 531.9 | 462.4 |
GEA Group Aktiengesellschaft's business development is primarily subject to the same risks and opportunities as the group. These are presented in the report on risks and opportunities. Additionally, the relationships with subsidiaries may result in negative effects due to statutory and contractual contingent liabilities (in particular finance).
The most important key performance indicator for GEA Group Aktiengesellschaft is (HGB) net income for the fiscal year, which allows it to pay out a dividend of roughly one-third of the (IFRS) consolidated profit. The same level as in the previous year is expected for fiscal year 2014.
Due to its overlap with the group as a whole, further details on the future business development of GEA Group Aktiengesellschaft can be found in the chapter entitled "Outlook" (see page 86 ff.).
GEA Group Aktiengesellschaft's annual financial statements in accordance with the HGB report net income for the fiscal year of EUR 203.2 million. The Executive Board and Supervisory Board appropriated EUR 90.0 million of this amount to other revenue reserves in accordance with section 58(2) sentence 1 of the AktG. The Executive Board and Supervisory Board will propose to the Annual General Meeting to pay a dividend of EUR 0.60 per share, up from EUR 0.55 year-on-year, to shareholders from the net retained profits of EUR 116.4 million for a total of 192,495,476 shares (previous year: 192,495,476 shares) and to carry forward the remaining net retained profits of EUR 0.9 million to new account.
The dividend will be paid from the contribution account for tax purposes (section 27 of the Körperschaftsteuergesetz (KStG – German Corporate Income Tax Act)) and therefore without deduction of investment income tax and the solidarity surcharge. In the case of shareholders in Germany, the dividend is not subject to current taxation in the year of payment. The opinion of the German tax authorities (see also the Federal Ministry of Finance (BMF) circular dated December 22, 2009, paragraph 92) is that the payment of dividends from the contribution account for tax purposes constitutes a repayment of shareholder contributions, which results in a retrospective reduction in the cost of the shares. This can lead to the imposition of higher capital gains taxes if the shares are sold at a later date.
As of December 31, 2013, the subscribed capital of GEA Group Aktiengesellschaft was EUR 520,375,765.57 and was composed of 192,495,476 no-par value bearer shares. All the shares are ordinary shares. The rights and obligations arising from these shares are defined in the AktG. The Executive Board is not aware of any restrictions affecting the voting rights. Participation in the GEA Performance Share Plan requires a personal investment by participants in GEA shares, which are subject to a holding period of three years. Participants who infringe the holding period lose their right to participate in the plan.
There were no interests in the Company exceeding 10 percent of the voting rights as of December 31, 2013.
The members of the Executive Board are appointed and dismissed in accordance with sections 84 and 85 of the AktG in conjunction with section 31 of the Mitbestimmungsgesetz (MitbestG – German Codetermination Act).
Under Article 20(1) of GEA Group Aktiengesellschaft's Articles of Association, amendments to the Articles of Association may – where legally permissible – be adopted by a simple majority of the share capital represented at the vote. Under Article 21 of the Articles of Association, the Supervisory Board may resolve amendments and additions to the Articles of Association that only affect their wording. In other respects, section 179 of the AktG applies to amendments to the Articles of Association.
In accordance with Article 4(3) of the Articles of Association, the Executive Board is authorized, with the approval of the Supervisory Board, to increase the share capital by up to EUR 77 million by issuing new no-par value shares against cash contributions on one or more occasions until April 23, 2017 (Authorized Capital I) and, in accordance with Article 5(4) of the Articles of Association, to define a starting date for profit rights in this case that differs from the date stipulated by law. The Executive Board is also entitled, with the approval of the Supervisory Board, to exclude fractions from shareholders' preemptive rights. The new shares may also be underwritten by banks with the obligation of offering them to the shareholders for subscription.
In accordance with Article 4(4) of the Articles of Association, the Executive Board is authorized, with the approval of the Supervisory Board, to increase the share capital by up to EUR 72 million by issuing new no-par value shares against cash or noncash contributions on one or more occasions until April 20, 2015 (Authorized Capital II) and, in accordance with Article 5(4) of the Articles of Association, to define a starting date for profit rights in this case that differs from the date stipulated by law. The Executive Board is also entitled, with the approval of the Supervisory Board, to exclude fractions from shareholders' preemptive rights. Furthermore, the Executive Board is authorized, with the approval of the Supervisory Board, to disapply shareholders' preemptive rights in a partial amount of EUR 50 million in the case of capital increases against noncash contributions for the purpose of business combinations or the acquisition of companies, parts of companies, or equity interests in companies. The new shares may also be underwritten by banks with the obligation of offering them to the shareholders for subscription.
In accordance with Article 4(5) of the Articles of Association, the Executive Board is authorized, with the approval of the Supervisory Board, to increase the share capital by up to EUR 99 million by issuing new no-par value shares against cash or noncash contributions on one or more occasions until April 21, 2014 (Authorized Capital III) and, in accordance with Article 5(4) of the Articles of Association, to define a starting date for profit rights in this case that differs from the date stipulated by law. The Executive Board is also authorized, with the approval of the Supervisory Board, to disapply shareholders' preemptive rights in the case of capital increases against noncash contributions for the purpose of business combinations or the acquisition of companies, parts of companies, or equity interests in companies. Furthermore, the Executive Board is authorized, with the approval of the Supervisory Board, to disapply shareholders' preemptive rights in the case of capital increases against cash contributions if the issue price of the new shares does not fall materially below the market price of the same class of shares of the Company at the time the issue price is set. This disapplication of preemptive rights in accordance with sections 203(1) and 186(3) sentence 4 of the AktG is limited to a maximum of 10 percent of the Company's share capital. The limit of 10 percent of the share capital is reduced by the proportion of the share capital attributable to the treasury shares of the Company that are sold during the term of Authorized Capital III while shareholders' preemptive rights are disapplied in accordance with sections 71(1) no. 8 sentence 5 and 186(3) sentence 4 of the AktG. The limit is also reduced by the proportion of the share capital attributable to those shares that are issued to settle bonds with warrants or convertible bonds with an option or conversion right or with an option or conversion obligation, provided that the bonds are issued during the term of Authorized Capital III and shareholders' preemptive rights are disapplied in accordance with section 186(3) sentence 4 of the AktG. Furthermore, the Executive Board is entitled, with the approval of the Supervisory Board, to exclude fractions from shareholders' preemptive rights. The new shares may also be underwritten by banks with the obligation of offering them to the shareholders for subscription.
Furthermore, the Executive Board is authorized, with the approval of the Supervisory Board, to stipulate the further details of the capital increase from Authorized Capital I, II, and III and the terms and conditions of the share issue.
Under a resolution adopted by the Annual General Meeting on April 21, 2010, the share capital was contingently increased by up to EUR 48,659,656.71, comprising up to 18 million bearer shares (Article 4(7) of the Articles of Association). The contingent capital increase will only be implemented to the extent that the holders or creditors of options or conversion rights or persons obliged to convert or exercise options under bonds with warrants or convertible bonds that are issued against cash contributions or guaranteed by the Company or a subordinate group company of the Company up to April 20, 2015, on the basis of the authorization of the Executive Board by the Annual General Meeting resolution dated April 21, 2010, exercise their options or conversion rights or, if they are obliged to convert or exercise options, satisfy their obligation to convert or exercise options, or if GEA Group Aktiengesellschaft exercises its option to grant shares of GEA Group Aktiengesellschaft in full or in part instead of payment of the monetary amount due, and if no cash settlement is granted or own shares or shares of another listed company are used in settlement. New shares will be issued at the option or conversion price to be determined in accordance with the authorizing resolution referred to above. The new shares carry dividend rights from the beginning of the fiscal year in which they are created. The Executive Board is authorized, with the approval of the Supervisory Board, to determine the further details of the implementation of the contingent capital increase.
Under Article 4(6) of the Articles of Association, the share capital was contingently increased by up to EUR 17,339,095.52, comprising up to 6,414,014 bearer shares. In accordance with the Articles of Association, the contingent capital increase serves to grant compensation in shares of the Company to the external shareholders of the former GEA AG, Bochum, in line with the settlement dated January 30, 2012, between the Company on the one hand, and on the other hand the applicants as well as the joint representatives of the award proceedings pending before the Dortmund Local Court with the case reference number 20 O 533/99, which will bring the award proceedings related to the control and profit transfer agreement dating from June 29, 1999, between the former Metallgesellschaft AG (now GEA Group AG) and the former GEA AG to a close and increase the previous exchange ratio. The issue of the last tranche of shares on December 3, 2012, in line with the settlement completed the implementation of the capital increase.
Under a resolution adopted by the Annual General Meeting dated April 21, 2010, GEA Group Aktiengesellschaft is authorized to purchase own shares up to a total of 10 percent of the share capital in accordance with section 71(1) no. 8 of the AktG. The authorization is valid until April 20, 2015. The shares may be purchased via the stock exchange or by means of a public purchase offer to all shareholders. The shares may subsequently be used for all purposes allowed by law. In particular they may be redeemed, used to service bonds with warrants or convertible bonds, transferred to third parties as part of business combinations or acquisitions, or disposed of in another manner. Further details on the resolutions on the share buyback adopted by the 2010 Annual General Meeting are available in the invitation to the Annual General Meeting, which was published in the electronic Federal Gazette on March 11, 2010.
Material agreements that take effect in the event of a change of control following a takeover bid The individual lenders of the syndicated credit line (club deal) amounting to EUR 650 million may refuse new drawdowns in the event of a change of control. The lenders may call in any amounts already drawn down and terminate the respective credit line giving 20 days' notice.
In the case of the bond in the amount of EUR 400 million, each bondholder has the right to require the repayment by the issuer of the nominal amount of their bonds, including accrued interest, if there is a change of control and, as a result, the credit rating is revised downwards to non-investment grade within 90 days of the change of control taking effect. To exercise this right to early repayment, the bondholder has to submit an appropriate exercise notice within 45 days of publication of the event by the issuer.
In the event of a change of control, the lenders of borrower's note loans in the total amount of EUR 300 million are entitled to require early repayment of their loan receivable, including interest accrued up to the date of the early repayment. The borrower determines the repayment date, which may not be fewer than 60 days and more than 90 days after the date on which the borrower was informed of the change of control and notified the lenders of this via the paying agent.
In relation to the loan agreements with Kreditanstalt für Wiederaufbau (KfW) in the current amounts of EUR 60 million and EUR 42 million as of December 31, 2013, the borrower is obliged, on written request by KfW, to repay the loan including accrued interest by no later than the date on which the next interest payment is due.
In the case of the loan agreement with the European Investment Bank (EIB) amounting to EUR 150 million, the EIB is entitled to call in the loan and require early repayment including accrued interest in the event of a change of control. In this case, the borrower is obliged to repay the amount on the date specified by the Bank, which may not be earlier than 30 days after the repayment request.
Under a master loan agreement for EUR 265 million, which is primarily used to issue guarantees for subsidiaries, the lender has the right in the event of an imminent change of control to negotiate the continuation of the agreement under changed terms. If no agreement is reached, the master loan agreement will fall due with immediate effect. In this case, the lender must be released from its obligations under guarantees furnished within two months or, at the discretion of the borrower, the latter shall make a cash deposit in the amount of the outstanding obligations under the guarantees furnished.
All Performance Shares under the GEA Performance Share Plan expire in the event of a change of control. Managers who have participated in the plan then receive a compensation payment for the expired Performance Shares. This payment corresponds to the allocated target value in each case.
A change of control within the meaning of these agreements and the GEA Performance Share Plan is deemed to have occurred in particular if a majority of voting rights or shares of the Company are transferred to a single person or group of persons.
Executive Board members' contracts include provisions on the calculation of bonuses in the event of a change of control. Additional details can be found in the remuneration report starting on page 65. Further compensation arrangements with employees have been agreed with regard to the Performance Shares under the GEA Performance Share Plan.
Key attributes of the internal control and risk management system relating to the financial reporting process
See the "Risk Management System" and "Internal Control System" sections starting on page 76 ff. of the management report.
Report on Economic Position / Report on Post-Balance Sheet Date Events
Demand from the customer markets of GEA Group's continued operations remained steady in fiscal year 2013. GEA achieved new records for both order intake and revenue at EUR 4.6 billion and EUR 4.3 billion, respectively. Almost all segments contributed to this development. At EUR 530.1 million, operating profit (EBITDA) from continued operations was up 7.2 percent on the prior-year figure. This corresponds to an operating EBITDA margin of 12.3 percent. GEA's profitability therefore remains very high compared with the rest of the industry. Debt was further reduced in the past fiscal year. With respect to our cash flow drivers, an excellent ratio to revenue of 9.6 percent was achieved. GEA therefore continues to be in robust economic shape.
The decision taken in June 2013 to withdraw from the GEA Heat Exchangers Segment represents a material change in the core business. Due to the progress made since then in this separation process, the segment was reclassified under discontinued operations in the fourth quarter. Nonrecurring expenses of EUR 28.2 million were incurred for the group's strategic projects and the planned discontinuation of GEA Heat Exchangers. As expected, there was no further negative impact on earnings attributable to discontinued operations.
Summing up, it can be said that all significant forecasts relating to revenue, profit, and cash flow drivers communicated at the beginning of fiscal year 2013 and refined in the course of the year were achieved and GEA Group Aktiengesellschaft's (HGB) net income for the fiscal year made it possible to propose a higher dividend. GEA's business development in 2013 is therefore considered to be favorable.
In January 2014, the Executive Board of GEA Group Aktiengesellschaft decided to combine its operating segments GEA Food Solutions and GEA Mechanical Equipment effective as of the beginning of fiscal year 2014.
There were no further significant events occurring in the period between the end of fiscal 2013 and the date the annual report was prepared that could have influenced the disclosures on the course of business and the expected development of the group.
The Declaration of Corporate Governance issued in accordance with section 289a of the Handelsgesetzbuch (HGB – German Commercial Code) does not form part of the annual audit pursuant to section 317 para. 2 sentence 3 of the German Commercial Code.
Transparent, responsible corporate governance and control geared towards long-term value enhancement are given high priority at GEA Group Aktiengesellschaft. In doing so, we align our actions with the generally accepted principles of corporate governance while complying with the suggestions and recommendations of the German Corporate Governance Code as amended on May 13, 2013 (published in the Federal Gazette on June 10, 2013) to the greatest possible extent.
On December 19, 2013, the Executive Board and Supervisory Board of GEA Group Aktiengesellschaft issued the following Declaration of Conformity in accordance with section 161 of the Aktiengesetz (AktG – German Stock Corporation Act); this Declaration of Conformity has been made permanently accessible to the general public on the Company's website at www.gea.com:
GEA Group Aktiengesellschaft complies with the recommendations of the German Corporate Governance Code (GCGC) as amended on May 13, 2013, and published by the Federal Ministry of Justice in the official section of the Federal Gazette with the following exemption and will continue to comply with these recommendations in the future with such exemption:
Currently, the compensation of the members of the Executive Board is not capped according to amount both overall and for all variable compensation components (item 4.2.3 para. 2 sent. 6 GCGC).
Explanation:
If the services of the Executive Board members lead to an extraordinary increase of value for the shareholders of the company, the Supervisory Board may, subject to its dutiful discretion, grant a discretionary bonus in accordance with the service agreements. The Executive Board members are not entitled to receive this extraordinary bonus. The respective clause in the service agreements of the Executive Board members only authorizes the Supervisory Board to make an adequate discretionary decision based on statutory provisions and within the limits of the jurisdiction of the highest courts. Currently, this special bonus which is only available in exceptional situations is not expressly capped according to amount in the service agreements of the Executive Board members. We are of the opinion that an amendment of existing service agreements is not justified taking into consideration both the restrictive statutory rules and the limits defined by the highest courts. The service agreements of the Executive Board members will be amended respectively, if Executive Board members are reappointed or appointed for the first time.
Since the issuance of the last Declaration of Conformity on December 13, 2012, GEA Group Aktiengesellschaft has complied with the recommendations of the GCGC as amended on May 15, 2012, and published by the Federal Ministry of Justice in the official section of the Federal Gazette as well as, since their publication in the Federal Gazette, as amended on May 13, 2013 with the exception explained above relating to item 4.2.3 para. 2 sent. 6 GCGC and with the following exception which was limited in time and disclosed with the update of the aforementioned Declaration of Conformity on June 20, 2013:
For a transitional period until August 31, 2013, Prof. Dr. Werner J. Bauer held more than three supervisory board mandates in non-group listed companies or in supervisory bodies of non-group companies which make similar requirements (item 5.4.5 sent. 2 GCGC).
Explanation:
Temporary deviation from this recommendation followed from the fact that Prof. Dr. Bauer, Executive Vice President and member of the Executive Board of Nestlé AG until August 31, 2013, had assumed further mandates on the Administrative Board and the Supervisory Board of Lonza Group AG and Bertelsmann Management SE respectively in addition to his three mandates relevant in terms of item 5.4.5 sentence 2 GCGC which he already held within GEA Group Aktiengesellschaft, Bertelsmann SE & Co. KGaA and Galderma Pharma S.A. However, since Prof. Dr. Bauer retired from the Executive Board of Nestlé AG on August 31, 2013, the deviation was limited in time.
Executive Board and Supervisory Board did not deem such temporary deviation from the recommendation a risk compromising Prof. Dr. Bauer's ability to properly discharge his responsibilities as a Supervisory Board member of GEA Group Aktiengesellschaft.
Düsseldorf, December 19, 2013
For the Supervisory Board For the Executive Board
Dr. Jürgen Heraeus Jürg Oleas Dr. Stephan Petri
The Executive Board and Supervisory Board have drawn up a Code of Conduct that stipulates that the Group's business activities shall comply with all laws and with high ethical standards. This Code of Conduct applies to all employees and bodies of GEA Group worldwide. It is supplemented by guidelines on individual topics, in particular by the Anticorruption Guideline. Finally, the Company and the European Works Council have jointly agreed general principles of social corporate responsibility ("codes of conduct") laying down ethical, social and legal standards that are binding on all GEA Group employees. The Code of Conduct, the Anticorruption Guideline and further information are published on the website of GEA Group Aktiengesellschaft under Investor Relations/Corporate Governance.
Compliance in the sense of measures designed to ensure adherence to legal, statutory and internal corporate policies, as well as compliance therewith by group companies, is considered to be a key management and supervisory responsibility at GEA Group. For this purpose, the Company established a compliance organization some years ago. The group-wide compliance organization is headed by the Chief Compliance Officer who reports to the Audit Committee of the Supervisory Board. The Chief Compliance Officer receives support from the Corporate Compliance Officer. In addition, a Compliance Committee advising the Chief Compliance Officer was established in 2010. Apart from that, a Segment Compliance Officer as well as a Company Compliance Manager were appointed for each segment and each operating company, respectively. In parallel, GEA set up a worldwide export control organization in 2011 that is also headed by the Chief Compliance Officer who is supported by the Corporate Export Control Officer and the Chief Foreign Trade Officer at group level. A Segment Export Manager for each segment and a Company Export Manager for each operational entity were appointed, respectively.
The members of the compliance organization meet regularly to discuss the latest developments and their potential impact and/or any need to supplement GEA Group's compliance program. At regular intervals, classroom and web-based training sessions are delivered to the group employees responsible for compliance; this training covers current issues and regulations relative to the law, the Code of Conduct and GEA Group's additional compliance guidelines. GEA Group's extensive compliance program is rounded off by computer-based IT tools (e.g. for the periodic identification of compliance risks) as well as direct talks held at a local level between representatives of the compliance organization and local managing directors for evaluating best practices within the Group.
Finally, the Company is in the process of setting up an environment, health and safety (EHS) organization, an undertaking initiated in 2010 and designed to develop and implement group-wide guidelines, programs and procedures in this field.
GEA Group Aktiengesellschaft has grown considerably in recent years. However, sustainable growth can only be achieved if both the opportunities and the risks of business activities are identified and adequately taken into account. For this reason, an effective control and risk management system represents one of the core elements of corporate governance at GEA Group Aktiengesellschaft. Further information is provided on pages 75 ff. of this Annual Report.
GEA Group Aktiengesellschaft is committed to transparent reporting. The Company's consolidated financial statements and quarterly reports are prepared in accordance with the International Financial Reporting Standards (IFRS) as adopted by the European Union. The single entity financial statements of GEA Group Aktiengesellschaft that are legally required and determine dividend payout are governed by the German Handelsgesetzbuch (HGB – German Commercial Code). The Supervisory Board engages the external auditor elected by the Annual General Meeting. The Audit Committee gives particular attention to the surveillance of the accounting process, the effectiveness of the internal control, risk management and internal audit systems, the audit of the annual financial statements as well as compliance; moreover, it agrees the key audit areas and the audit fee with the auditor, while ensuring that the auditor's work is not compromised by any conflicts of interest and that the auditor immediately reports on any and all significant findings and events relevant to the Supervisory Board's discharge of duties that have come to the attention of the auditor in the course of the audit. In addition to the consolidated and annual financial statements, the Audit Committee also discusses the half-yearly and quarterly reports with the Executive Board.
GEA Group Aktiengesellschaft communicates openly, actively and in detail. It regularly and promptly informs shareholders, shareholders' associations, analysts, and interested members of the public on equal terms about the Company's situation as well as any material changes to its business. In this respect, the Company's website constitutes an important means of communication. It contains annual and interim reports, press releases, ad hoc disclosures as well as other notifications required under the Wertpapierhandelsgesetz (WpHG – German Securities Trading Act), the financial calendar and other relevant information in German and English. Moreover, the Group also holds regular analyst meetings, press conferences and events for investors. All presentations delivered on these occasions can also be downloaded from our website under "Investor Relations".
Under section 15a of the Wertpapierhandelsgesetz (WpHG – German Securities Trading Act), Executive Board and Supervisory Board members as well as their related parties are obliged to disclose reportable transactions in shares of GEA Group Aktiengesellschaft or related financial instruments if the transactions concluded in one calendar year reach or exceed the threshold of EUR 5,000. The four transactions reported to the Company in fiscal year 2013 were published on the Company's website.
The total number of GEA Group Aktiengesellschaft shares held by all Executive Board and Supervisory Board members amounts to less than 1 percent of the shares issued by the Company.
With effect from July 1, 2006, GEA Group Aktiengesellschaft launched a long-term, share price-based remuneration program called "GEA Performance Share Plan" for managers on management levels one and two below Executive Board level. In fiscal year 2008, this scheme was extended to include level three managers. Details are available on page 49 and in note 6.3.3 (see page 174 f.) to the consolidated financial statements.
The Executive Board of GEA Group Aktiengesellschaft comprises four members and constitutes the Group's management body. The Supervisory Board – which is composed of twelve members, half of whom are shareholder representatives, while the other half comprises employee representatives – appoints and advises the Executive Board while overseeing its work. The Executive Board and the Supervisory Board cooperate closely for the benefit of the Company; their common goal is a sustainable increase in enterprise value.
The Executive Board holds overall responsibility for the management of the Company in accordance with legal requirements, the Articles of Association as well as the rules of procedure and the corporate policies that are in place. In line with the rules of procedure of the Executive Board, each Executive Board member has overall responsibility for and independently manages the area of responsibility assigned to him under the schedule of responsibilities, while keeping the entire Executive Board informed of any and all essential business matters. Decisions on subject-matters of fundamental importance or particular magnitude must be taken by the entire Executive Board. Executive Board resolutions are adopted at regular meetings or, should no member of the Executive Board raise any objections, in writing, orally (also via telephone), via telefax or by referring to other common means of communication such as email. Each member of the Executive Board must immediately disclose conflicts of interests to the Supervisory Board and inform the other members of the Executive Board accordingly.
The Executive Board reports to the Supervisory Board regularly, promptly and comprehensively on all issues relating to strategy, planning, business development, risk exposure, the risk management system as well as compliance that are relevant to the Company. Should important issues or business matters that may considerably impact on the situation of the Company arise, the Executive Board notifies the Chairman of the Supervisory Board without undue delay. The Articles of Association and the rules of procedure specify key transactions that require the Supervisory Board's approval. Further information on the individual members of the Executive Board can be found on pages 12 and 220 of this Annual Report.
The Supervisory Board advises the Executive Board on the management of the Company and oversees its conduct of the Company's business. Between the Supervisory Board meetings, the Chairman of the Supervisory Board maintains regular contact with the Executive Board, in particular the Chairman of the Executive Board, with whom he discusses matters of strategy, planning, business development, risk exposure, risk management and compliance that are of relevance to the company. The Supervisory Board usually holds five meetings per calendar year that are attended by the Executive Board members unless the Chairman of the Supervisory Board determines otherwise. As a rule, the Supervisory Board's resolutions are adopted at these meetings. Unless the majority of Supervisory Board members immediately object, the Chairman of the Supervisory Board can instruct the members to adopt resolutions in the course of a conference call or a video conference or outside meetings by casting their votes in writing, text form or by telephone. Resolutions require a simple majority of the votes cast unless law stipulates a different majority. After notice of the meeting has been given to all
members, the Supervisory Board has a quorum when a minimum of half of its members vote on a resolution by attending in person, by telephone or video conference or have casted their votes in writing or text form pursuant to Section 108 para. 3 of the Aktiengesetz (AktG – German Stock Corporation Act).
When appointing members to the Executive Board and proposing candidates for election to the Supervisory Board, the Supervisory Board and its committees take into account a balanced mix of specialist expertise and personal attributes as well as the criterion of diversity.
Pursuant to the recommendation under section 5.4.1 of the German Corporate Governance Code, the Supervisory Board had laid down concrete targets relating to its composition in December 2010 (see Corporate Governance Report for fiscal year 2010). During its meeting held on December 13, 2012, the Supervisory Board basically confirmed these targets, while adding a new target relative to the number of independent Supervisory Board members. The concrete targets that currently apply are outlined in the Corporate Governance Report for fiscal year 2012. Accordingly, the members of the Supervisory Board – while taking into account the specific situation of the Company – are to have the knowledge, skills and specialist expertise required to ensure the proper performance of their duties. In this context, the Supervisory Board also pays attention to industry knowledge, an adequate number of independent members, international experience as well as an appropriate consideration of women. With a view to the best interests of the Company, the decisive criterion for appointments shall always be the specialist expertise and personal suitability of the respective candidate.
The work of the Supervisory Board is supported by committees. These are primarily the Presiding Committee and the Audit Committee, as well as the statutory Mediation Committee and the Nomination Committee recommended by the German Corporate Governance Code. The Presiding Committee, the Audit Committee and the Mediation Committee each comprise four members and feature equal representation of shareholders and employees. The Nomination Committee consists of three members who are exclusively shareholder representatives in accordance with section 5.3.3 of the German Corporate Governance Code.
The Presiding Committee and the Audit Committee usually meet four times during a calendar year. During meetings, Presiding Committee and Audit Committee resolutions are adopted by a simple majority of the votes cast, while outside meetings they are passed by a simple majority of the members. Where there is a tied vote, the respective chairman has a casting vote on the same resolution if another vote is held. The Nomination Committee and the Mediation Committee only hold meetings when required.
The duties of the Presiding Committee, which is chaired by the Chairman of the Supervisory Board, include the preparation of the meetings of the Supervisory Board. Furthermore, the Presiding Committee's specific responsibility is to define the legal relationship between the Company and the individual Executive Board members, and to ensure succession planning for the Executive Board. Decisions on the Executive Board remuneration system, the total remuneration awarded to the individual Executive Board members, as well as their appointment and dismissal are to be taken by the full Supervisory Board.
The Audit Committee, whose chairman has special knowledge and experience in applying financial reporting standards and systems of internal control, is primarily responsible for overseeing the financial reporting process and dealing with matters regarding the efficiency of the internal control system, the risk management system, the internal audit process and the audit of the financial statements. In addition, it monitors compliance with key legislation and official regulations, as well as internal guidelines including GEA Group's Code of Conduct (compliance).
The Mediation Committee's duties are laid down in sections 27 and 31 of the Mitbestimmungsgesetz (MitbestG – German Co-determination Act). The task of the Nomination Committee is to propose suitable candidates to the Supervisory Board based upon which the latter submits its nominations to the Annual General Meeting.
Further information on the composition of the Supervisory Board and its committees can be found on the Company's website at www.gea.com and on pages 220 and 221 of this Annual Report. In addition, the Report of the Supervisory Board on pages 216 ff. of this Annual Report gives further details on the activities of the Supervisory Board and its committees in 2013, the year under review.
Following the recommendation of the Presiding Committee, the Supervisory Board determines the total remuneration of the individual Executive Board members and resolves on the remuneration system applicable to the Executive Board. The Supervisory Board reviews the appropriateness of the remuneration at regular intervals. Criteria for determining the appropriateness of the remuneration include the responsibilities of the individual Executive Board members, their respective personal performance, the economic situation, the success and the future prospects of the Company as well as the customary rate of remuneration on the basis of benchmarking against peer companies.
Creating an incentive geared towards successful and sustainable corporate governance represents an essential element of any decision taken with regard to the remuneration system. The latter is to ensure that the Executive Board members strive for the long-term success of the Company and participate in a subsequent sustainable value enhancement. For this reason, a significant part of total remuneration is tied to GEA's share performance as well as key performance indicators, in particular a combination of cash flow aspects and the return on capital employed (ROCE), i.e. a ratio for measuring return on capital. This ensures that outstanding performance is adequately rewarded and non-accomplishment of set targets results in a reduction in remuneration.
The remuneration system that was approved by a large majority of the votes at the Annual General Meeting on April 24, 2012, comprises a non-performance-related and various performance-related and/or variable components. The variable remuneration system seeks to provide for a highly balanced risk and opportunity profile from the shareholders' and Executive Board's perspective and to further enhance the sustainability of the remuneration system by separating the short-term and long-term bonus elements. In addition, it is comparatively easy to transfer the system to the management levels below Executive Board level, thereby guaranteeing a better steering of business operations.
In fiscal year 2013, the remuneration of the Executive Board members was composed as follows:
The non-performance-related component of remuneration consists of a fixed annual salary that is paid in twelve equal amounts at the end of each calendar month, respectively.
The fixed annual salary paid to Jürg Oleas in the year under review amounted to EUR 1,250 thousand. Dr. Helmut Schmale's fixed annual salary was EUR 675 thousand. Niels Graugaard, who retired from the Executive Board in compliance with the age limit after the Annual General Meeting on April 18, 2013, received a fixed annual salary in the amount of EUR 642,735. In the year under review, the fixed annual salaries drawn by Dr. Stephan Petri and Markus Hüllmann, the latter having joined the Executive Board on April 1, 2013, amounted to EUR 550 thousand, respectively. During the year under review, the fixed annual salaries of Niels Graugaard and Markus Hüllmann were paid pro rata temporis.
In addition, the Executive Board members receive fringe benefits. In the year under review, they mainly comprised the value of the company car use in accordance with tax regulations, accident insurance premiums, and – for Niels Graugaard and Markus Hüllmann – the reimbursement of costs incurred for the maintenance of two households. Besides, Niels Graugaard was reimbursed for flights home to his place of residence.
In addition, each member of the Executive Board receives a variable annual remuneration (bonus) whose level depends on the achievement of specific targets determined by the Supervisory Board. In terms of a target achievement of 100 percent, the level of variable remuneration equals that of the
fixed remuneration component (target bonus). To ensure that both positive and negative developments are taken into account, the proportion of variable remuneration increases or decreases in the event of over- or under-performance.
The bonus consists of three components. They comprise both one-year and multi-year criteria for evaluation. Each of the three components provides for a cap. Furthermore, all three bonus components applicable to a specific fiscal year are limited to 240 percent of the target bonus (overall cap). At its own discretion, the Supervisory Board takes into account extraordinary events and developments which indicate that a readjustment of the respective mathematically derived value is appropriate.
The individual component of variable remuneration is payable with the next regular salary payment following the date of the Supervisory Board meeting convened to adopt the financial statements for the preceding fiscal year. Its amount is calculated on the basis of 3 to 5 personal annual targets determined for the respective fiscal year by the Supervisory Board. When determining these individual targets, the Supervisory Board bases its decision on the sustainability of corporate governance, in particular. The Supervisory Board's definition of the individual targets also includes their respective weighting.
Under the variable remuneration component, the individual component has a weighting of 40 percent, i.e. 40 percent of the variable remuneration (target amount) are payable if 100 percent of the target set in relation to the individual component is achieved. The overall degree of target achievement and, thus, the amount paid out under the individual component, is limited to 200 percent of the target amount (cap).
After the end of the fiscal year, the Supervisory Board decides on the degree of target achievement. For 2013, the Supervisory Board has ascertained a 94.9 percent degree of target achievement for the members of the Executive Board.1
The multi-year component is payable with the next regular salary payment following the date of the Supervisory Board meeting convened to adopt the financial statements for the preceding fiscal year. Performance measurement under the multi-year component takes place retrospectively for the previous three fiscal years. The period of assessment covers the respective fiscal year just ended, as well as the two preceding fiscal years. The criteria for evaluation are tied to key performance indicators embracing a combination of cash flow aspects (the so-called "cash flow driver margin") and the return on capital employed (ROCE).
1) The degree of target achievement is a rounded figure.
earnings before interest and taxes (EBIT) to the capital employed. The degree of target achievement depends on the actual ROCE achieved compared with the target value or target achievement corridor of +/- 5 percentage points defined by the Supervisory Board. As for 2013, 100 percent of the target is achieved if the Group's ROCE averages 19 percent during the preceding three-year period. If the actual ROCE level is greater than or less than this percentage, but within the defined corridor of +/- 5 percentage points, the degree of target achievement is increased or reduced by up to 50 percentage points.
For calculating the overall degree of target achievement, the respective degrees of target achievement relevant to the individual key performance indicators CFDM and ROCE are multiplied. Under the variable remuneration component, the multi-year component has a weighting of 40 percent, i.e. 40 percent of variable remuneration are payable (target amount) if 100 percent of the target set in relation to the multiyear component are achieved. The overall degree of target achievement and, thus, the amount paid out under the multi-year component, is limited to 250 percent of this target amount (cap).
As to the variable remuneration awarded in 2013, the overall degree of target achievement under the multi-year component amounted to 84.0 percent, with CFDM totaling 78.6 percent and ROCE amounting to 106.8 percent for the year under review. 2
The long-term share price component is payable at the end of a three-year performance period with the next regular salary payment following the date of the Supervisory Board meeting convened to adopt the financial statements for the preceding fiscal year. Performance measurement relating to the long-term share price component is conducted by taking a forward-looking approach. The period of assessment covers a three-year performance period including the relevant fiscal year as well as the two subsequent fiscal years.
Under the variable remuneration component, the long-term share price component has a weighting of 20 percent, i.e. 20 percent of variable remuneration are payable (target amount) if 100 percent of the set target is achieved. The overall degree of target achievement and, thus, the amount paid out under the long-term share price component is limited to 300 percent of the target amount (cap).
Performance measurement for the relevant three-year period is conducted by means of a comparison between the performance of GEA shares (adjusted for dividends) and the performance of the STOXX® Europe TMI Industrial Engineering index (TMI IE), in which a large number of European industrial firms are listed. This comparison is computed on the basis of the respective arithmetic mean closing prices on the last 20 trading days preceding the start of the three-year performance period. 100 percent of the target is met if the evolution of the daily arithmetic mean closing prices of GEA's share fully (i.e. 100%) corresponds to the relevant TMI performance. In the event of outperformance of more than 100 percent, the amount paid out rises to a maximum of 300 percent of the target amount. If the increase in GEA's share price over the three-year period is less than 100 percent of the growth in the TMI IE, the amount payable is reduced accordingly down to a performance level of 75 percent: For each percentage point higher or lower than a 100 percent performance level, the degree of target achievement will rise or fall by 4 percent (subject to the 300 percent cap). Should GEA shares have dropped, the Supervisory Board may still award a payment if GEA shares have nonetheless outperformed the TMI IE.
In the year under review, no payment under the long-term share price component was made as the latter is measured over a three-year period. The amount paid out under the long-term share price component for the year under review is measured over the three-year period between 2013 and 2015; a payment is scheduled for fiscal year 2016. As of December 31, 2013, the computed degree of target achievement for the 2013 tranche amounted to 182.9 percent, while the 2012 tranche totaled 136.7 percent. 3
2) The degree of overall target achievement and/or degrees of target achievement are rounded figures, respectively.
3) The degrees of target achievement are rounded figures, respectively.
The following table summarizes the respective weighting and assessment periods applicable to the variable components:
| Variable remuneration | Assessment period | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| component | Target | Weighting | Cap | Overall cap | 2011 | 2012 | 2013 | 2014 | 2015 |
| Individual component | Personal targets | 40% | 200% | One year | |||||
| Multi-year component | Combination of cash flow driver margin and ROCE |
40% | 250% | 240% | Retrospective (3 years) | ||||
| Long-term share price component |
Share price in relation to TMI IE |
20% | 300% | Forward-looking (3 years) |
In exceptional circumstances, the Supervisory Board may also grant a special bonus to the members of the Executive Board if their activities have resulted in an extraordinary value enhancement for the benefit of the Company's shareholders. Exercising its discretionary powers dutifully, the Supervisory Board decides to grant this special bonus and sets the respective amount. At present, the service agreements concluded with the Executive Board members do not provide for an express cap on this potential special bonus, which may only be awarded in exceptional circumstances. However, a corresponding amendment to the service agreements of the Executive Board members that is to cap the special bonus to 100 percent of the target bonus will be made in connection with the reappointment or new appointment of the Executive Board members.
The contractual pension benefit of the Chairman of the Executive Board, Jürg Oleas, amounts to a maximum of EUR 360 thousand p.a., with full entitlement to the pension arising after 18 years of service (end of April 2019). Under this agreement, Mr. Oleas' pension is paid once his Executive Board service agreement ends when or after he reaches the age of 62 or if he becomes permanently unable to work. If Jürg Oleas' service agreement ends before he reaches 18 years of service, he will have vested rights to a pro rata annual pension payable once he reaches the age of 62. The respective amount is calculated based on the ratio of his actual years of service to the period of 18 years of service. If Jürg Oleas leaves after a minimum of 15 years of service, but before reaching the age of 62, he will receive a pension in the form of a transitional benefit of EUR 220 thousand p.a. until he reaches the age of 62. In the event of Mr. Oleas' premature departure, the agreed severance payment will be deducted from his transitional benefits. Any income from activities he engages in after leaving the Company, but prior to reaching the age of 62, will be fully deducted from the transitional benefits up to a maximum amount of half of the transitional payment awarded in the respective year. The ongoing pension is adjusted annually in line with the consumer price index.
The surviving dependents' benefits defined in Jürg Oleas' service agreement mainly provide for a lifelong widow's pension as well as an orphan's pension. The lifelong widow's pension amounts to 60 percent of the annual retirement pension. The orphan's pension is a specific percentage of the retirement pension and its amount depends on the number of children and on whether they are full or half orphans. In principle, entitlement to an orphan's pension expires on reaching the age of 18, or at the latest on reaching the age of 25 if the child in question is still at school or in vocational or professional training. Collectively, widow's and orphan's pensions must not exceed the amount of the retirement pension.
The contractual pension benefits of the Chief Financial Officer, Dr. Helmut Schmale, amount to a maximum of EUR 200 thousand p.a. Under this arrangement, a pension will be paid once his service agreement ends when or after Dr. Schmale reaches the age of 62 or if he becomes permanently unable
to work. Should Dr. Helmut Schmale's service agreement end before one of the above conditions for payment of his pension is met, he will have vested rights to a pro rata annual pension that becomes payable once he reaches the age of 62. The amount of this pension is calculated on the basis of the ratio of his actual term of service to the maximum possible term of service before reaching the age of 62. The ongoing pension is adjusted annually in line with the consumer price index.
Pension subsidies of up to half of the income threshold for contribution assessment under the statutory pension insurance scheme are granted to Dr. Helmut Schmale against evidence of the costs incurred.
In addition, Dr. Helmut Schmale is entitled to make a personal contribution to a deferred compensation pension scheme for Executive Board members for each fiscal year. No employer subsidy is paid.
The surviving dependents' benefits defined in Dr. Helmut Schmale's service agreement are in line with the provisions outlined above in relation to Jürg Oleas.
Niels Graugaard is not entitled to any pension benefits. Until the expiry of his service agreement in April 2013, the Company paid Niels Graugaard a monthly amount of 12.5 percent of his monthly fixed remuneration for the purpose of making provisions for old age. Furthermore, in the year under review, Niels Graugaard received a non-recurring payment in the amount of EUR 890 thousand in compensation for the absence of pension benefits. Moreover, Niels Graugaard was entitled to make a personal contribution per fiscal year to a deferred compensation pension scheme for Executive Board members. No employer subsidy was paid. Due to system-related reasons, he received the benefits under this pension scheme in the form of a non-recurring payment in the amount of EUR 219,301 at the date of his retirement.
The contractual pension benefits of Dr. Stephan Petri, member of the Executive Board, amount to a maximum of EUR 200 thousand p.a. Under this arrangement, a pension will be paid once the Executive Board service agreement ends when or after Dr. Petri reaches the age of 62 or if he becomes permanently unable to work. Should Dr. Stephan Petri's Executive Board service agreement end before one of the above conditions for payment of a pension is met, he will enjoy vested rights to a maximum annual pension of EUR 200 thousand that may be reduced subject to the ratio of his actual term of service as a member of the Executive Board to the term of service required for obtaining his full pension benefits and that becomes payable once he reaches the age of 62. The ongoing pension is adjusted annually in line with the consumer price index.
Pension subsidies of up to half of the income threshold for contribution assessment under the statutory pension insurance scheme or one of the pension schemes for the liberal professions are granted to Dr. Stephan Petri against evidence of the costs incurred. In addition, Dr. Stephan Petri is entitled to personal contributions under the deferred compensation pension scheme in connection with his participation in GEA's executive pension scheme prior to his appointment to the Executive Board.
In addition, Dr. Stephan Petri is entitled to make a personal contribution per fiscal year to a deferred compensation pension scheme for Executive Board members. No employer subsidy is paid.
The surviving dependents' benefits defined in Dr. Stephan Petri's service agreement are in line with the provisions outlined above in relation to Jürg Oleas.
The contractual pension benefits of Markus Hüllmann, member of the Executive Board, amount to a maximum of EUR 200 thousand p.a. Under this arrangement, a pension will be paid once the Executive Board service agreement ends when or after Markus Hüllmann reaches the age of 62 or if he becomes permanently unable to work. Should Markus Hüllmann's Executive Board service agreement end before one of the above conditions for payment of a pension is met, he will enjoy vested rights to a maximum annual pension of EUR 200 thousand that may be reduced subject to the ratio of his actual term of service as a member of the Executive Board to the term of service required for obtaining his full pension benefits and that becomes payable once he reaches the age of 62. The ongoing pension is adjusted annually in line with the consumer price index.
Pension subsidies of up to half of the income threshold for contribution assessment under the statutory pension insurance scheme are granted to Markus Hüllmann against evidence of the costs incurred. In addition, Markus Hüllmann is entitled to personal contributions under the deferred compensation pension scheme in connection with his participation in GEA's executive pension scheme prior to his appointment to the Executive Board.
In addition, Markus Hüllmann is entitled to make a personal contribution per fiscal year to a deferred compensation pension scheme for Executive Board members. No employer subsidy is paid.
The surviving dependents' benefits defined in Markus Hüllmann's service agreement are in line with the provisions outlined above in relation to Jürg Oleas.
The Company has set aside pension provisions for the future entitlements of Executive Board members. The amounts added to such pension provisions for active Executive Board members in accordance with IFRS are listed individually in the table below as of the end of fiscal year 2013. The corresponding amounts comprise service cost and interest cost.
| Pension benefits p.a. (as of 12/31/2013) Annual pension Addition to (annual entitlements at entitlements earned pension provisions in (EUR) start of pension) as of 12/31/2013 fiscal year 2013 Jürg Oleas 360,000 253,333 493,152 Dr. Helmut Schmale 200,000 162,460 250,199 Niels Graugaard – – 89,812 Dr. Stephan Petri 233,855 135,318 254,651 Markus Hüllmann * 213,082 146,213 1,454,177 |
Total | 1,006,937 | 697,324 | 2,541,991 | 17,878,151 |
|---|---|---|---|---|---|
| 3,232,471 | |||||
| 3,829,160 | |||||
| 0 | |||||
| 4,239,419 | |||||
| 6,577,101 | |||||
| Present value of pension benefits as of 12/31/2013 |
*) Niels Graugaard's pension benefits are based on his voluntary participation in a deferred compensation pension scheme and were paid out as a non-recurring payment upon his retirement. Along with their pension benefits as members of the Executive Board in the amount of EUR 200 thousand, each, Dr. Stephan Petri and Markus Hüllmann are entitled to benefits under the deferred compensation system in the amount of EUR 33,855 (Dr. Stephan Petri) and EUR 13,082 (Markus Hüllmann).
In fiscal year 2013, former members of the Executive Board and their surviving dependents received remunerations in the amount of EUR 5,129 thousand (previous year: EUR 5,039 thousand) from GEA Group. As of December 31, 2013, GEA Group had set up pension provisions totaling EUR 61,715 thousand (previous year: EUR 63,389 thousand) for former Executive Board members and their surviving dependents.
The Chairman of the Executive Board has a unilateral right of termination if the Supervisory Board revokes his appointment as Chairman of the Executive Board. Should he exercise his unilateral right of termination and leave the Executive Board, he is entitled to receive the corresponding fixed salary for the remaining months of his contractual term, but no longer than 8 months.
If the appointment of an Executive Board member is revoked for good cause with legal effect in accordance with section 84 para. 3 of the Aktiengesetz (AktG - German Stock Corporation Act) or an Executive Board member validly resigns from office in accordance with section 84 para. 3 of the AktG, the Executive Board member's service agreement ends on expiry of the statutory notice period under section 622 para.1, 2 of the Bürgerliches Gesetzbuch (BGB - German Civil Code).
In this event, the respective Executive Board member first of all receives the bonus he has earned and is entitled to up to the date of his departure. For calculating this bonus, an overall degree of target achievement in relation to the individual component is ascertained on the basis of the targets achieved by the Executive Board member up to the time of his departure. Subsequently, the corresponding pro rata bonus under the individual component is calculated by setting up the ratio of this overall degree of target achievement to the target amount set for the entire fiscal year. The pro rata bonus under the multi-year component for the relevant fiscal year is computed by applying the principle of pro rata temporis. As for annual tranches outstanding under the long-term share price component, a distinction is made between annual tranches in relation to which the first fiscal year (one-year vesting period) of the three-year performance period has not yet passed, and annual tranches in relation to which the first fiscal year has already passed. In the latter case, the pro rata bonus is fully vested and calculated without applying the principle of pro rata temporis, whereupon it will be paid out after the three-year performance period has elapsed. If the first fiscal year (one-year vesting period) has not yet passed, the pro rata bonus is ascertained by applying the principle of pro rata temporis (ratio of the actual period of service attained during the one-year vesting period to the full relevant one-year vesting period), whereupon it will be paid out after the three-year performance period.
In addition, the respective Executive Board member receives a severance payment amounting to the total remuneration agreed for the rest of the contractual term as a compensation for his premature departure from the Company. For calculating the corresponding bonus entitlement, an 85 percent degree of target achievement is assumed in relation to the respective target amounts set for bonus entitlements that have not yet vested and have been accrued over the course of the current year or further years, as the case may be. The total remuneration for the remaining term is limited to a maximum of two full years of remuneration (severance payment cap). In calculating the cap on severance payment, reference is made to the Executive Board member's respective total annual remuneration received during the two calendar years preceding the termination of the service agreement.
If the Executive Board service agreement is unilaterally terminated without good cause or terminated by the Company for good cause, any and all outstanding annual tranches not paid out under the long-term share price component will be forfeited. Moreover, there is no entitlement to any severance payment in the event of the Company exercising its right of lawful extraordinary termination of the Executive Board service agreement.
In the event of a change of control, the Executive Board can opt for an early payment at target value of any outstanding, fully vested tranches under the share price component. This option shall apply regardless of whether or not the respective Executive Board member leaves the Company in connection with the change of control event. A change of control is deemed to have occurred as soon as the Company is notified that a shareholder has reached or exceeded 50 percent or 75 percent of the voting rights in the Company in accordance with section 21 of the Wertpapierhandelsgesetz (WpHG – German
Securities Trading Act), that an intercompany agreement is entered into with the Company as a dependent company in accordance with sections 291 ff. of the AktG, or that absorption under section 319 of the AktG or a change of legal form of the Company in accordance with the Umwandlungsgesetz (UmwG - German Reorganization Act) is resolved with legal effect. In the event of a change of control, the Executive Board members have no right to unilaterally terminate their service agreements.
In the year under review, total remunerations paid to active Executive Board members of GEA Group Aktiengesellschaft amounted to EUR 5,877,650 and comprised both a fixed component of EUR 3,101,745 and a variable bonus of EUR 2,601,858. The bonus attributable to the long-term share price component is based on the fair value at grant date (January 1, 2013 and April 1, 2013, for Markus Hüllmann) and amounted to EUR 175,475 for Jürg Oleas, EUR 94,757 for Dr. Schmale, EUR 26,583 for Niels Graugaard, EUR 77,209 for Dr. Petri, and EUR 50,853 for Markus Hüllman, i.e. a total of EUR 424,877 in the year under review.
In fiscal year 2012, the total remuneration paid to active Executive Board members amounted to EUR 5,177,640 and comprised both a fixed component of EUR 2,863,389 and a variable bonus of EUR 2,078,764. The bonus accounted for by the long-term share price component was based on the fair value of the entitlement at grant date (March 8, 2012) and amounted to EUR 175,475 for Jürg Oleas, EUR 93,002 for Dr. Helmut Schmale, EUR 88,447 for Niels Graugaard as well as EUR 45,039 for Dr. Stefan Petri, i.e. a total of EUR 401,963 in fiscal year 2012.
The following table shows an individualized breakdown of the fixed remuneration, the variable component and other income:
| (EUR) | Fixed remuneration |
Variable components | Non-cash benefits |
Pension subsidies |
Total | ||
|---|---|---|---|---|---|---|---|
| Individual component |
Multi-year component |
Long-term share price based component 1 |
|||||
| Jürg Oleas | 1,250,000 | 474,466 | 419,946 | 175,475 | 25,414 | – | 2,345,301 |
| Previous year | 1,250,000 | 375,000 | 357,000 | 175,475 | 29,658 | – | 2,187,133 |
| Dr. Helmut Schmale | 675,000 | 256,211 | 226,771 | 94,757 | 45,953 | 6,448 | 1,305,140 |
| Previous year | 662,500 | 198,750 | 189,210 | 93,002 | 37,573 | 6,448 | 1,187,483 |
| Niels Graugaard | 214,245 | 56,808 | 54,082 | 26,583 | 16,601 | 26,781 | 395,100 |
| Previous year | 630,056 | 189,017 | 179,944 | 88,447 | 73,096 | 78,757 | 1,239,317 |
| Dr. Stephan Petri 2 | 550,000 | 208,765 | 184,776 | 77,209 | 22,143 | 6,586 | 1,049,479 |
| Previous year | 320,833 | 96,250 | 91,630 | 45,039 | 6,113 | 3,842 | 563,707 |
| Markus Hüllmann 2 | 412,500 | 156,574 | 138,582 | 50,853 | 24,121 | – | 782,630 |
| Previous year | – | – | – | – | – | – | – |
| Total | 3,101,745 | 1,152,824 | 1,024,157 | 424,877 | 134,232 | 39,815 | 5,877,650 |
| Previous year | 2,863,389 | 859,017 | 817,784 | 401,963 | 146,440 | 89,047 | 5,177,640 |
1) In the year under review, no payment under the long-term share price component was made, as the latter is computed over a three-year period between 2013 and 2015. The bonus payable under the long-term share price component is based on the fair value at grant date (January 1, 2013 and April 1, 2013 for Markus Hüllmann).
2) Based on their participation in the GEA Performance Share Plan 2010 during the period prior to their appointment to the Executive Board, Dr. Stephan Petri and Markus Hüllmann received additional amounts of EUR 74,309 and EUR 35,566, respectively. Apart from that, Markus Hüllmann receives a bonus in the amount of EUR 63,824 for his term as President of the Mechanical Equipment Segment between January 1, 2013 and March 31, 2013.
As in fiscal year 2012, share-based remuneration for the Executive Board was granted in the form of a long-term share price component in fiscal year 2013. Detailed information on existing entitlements of Executive Board members under these remuneration components is outlined in the table below.
| Long-term share price component (EUR) |
Fair value as of 12/31/2013 |
Fair value as of 12/31/2012 |
|---|---|---|
| Jürg Oleas | 798,775 | 121,225 |
| Dr. Helmut Schmale | 427,922 | 64,249 |
| Niels Graugaard | 241,448 | 61,103 |
| Dr. Stephan Petri | 288,830 | 31,114 |
| Markus Hüllmann | 150,860 | |
| Total | 1,907,835 | 277,691 |
In fiscal years 2010 and 2011, the members of the Executive Board received their share-based remuneration in the form of phantom shares. The remuneration system applicable until the end of fiscal year 2011 provided for a performance-related remuneration component that was awarded as a bonus. Only half of this bonus was payable with the first salary payment following the date of the Company's Supervisory Board meeting convened to adopt the financial statements for the relevant fiscal year ("short-term bonus"), while the second half of the bonus was converted into phantom shares in the Company whose payout amount was determined upon expiry of a holding period of three years ("long-term bonus"). Detailed clarifications on the remuneration system applicable until the end of fiscal year 2011 are provided in the 2011 Annual Report (cf. ibid. page 65 ff.) that may be accessed on the Company's website (www.gea.com).
Detailed information on existing entitlements of Executive Board members from long-term bonuses awarded for fiscal years 2010 and 2011 may be inferred from the table below.
| Phantom shares | Number of awarded shares | Fair value (EUR) | |
|---|---|---|---|
| 2010 and/or 2011 | 2013 | 2012 | |
| Jürg Oleas | |||
| Tranche 2010 (granted in 2010) | 26,589 | 943,766 | 675,892 |
| Tranche 2011 (granted in 2011) | 40,997 | 1,463,593 | 1,025,745 |
| Dr. Helmut Schmale | |||
| Tranche 2010 (granted in 2010) | 16,120 | 572,173 | 409,770 |
| Tranche 2011 (granted in 2011) | 20,498 | 731,779 | 512,860 |
| Niels Graugaard | |||
| Tranche 2010 (granted in 2010) | 15,178 | 538,737 | 385,825 |
| Tranche 2011 (granted in 2011) | 19,965 | 712,751 | 499,524 |
| Total | 139,347 | 4,962,799 | 3,509,616 |
In fiscal year 2013, the expenditure for share-based remuneration (i.e. the sum total of the fair value of share-based remuneration awarded in the fiscal year in question as of balance sheet date and the change in fair value in relation to entitlements under share-based remuneration in the fiscal year in question) recognized in the consolidated IFRS financial statements amounted to EUR 1,383 thousand for Jürg Oleas (previous year EUR 335 thousand), EUR 745 thousand for Dr. Schmale (previous year EUR 180 thousand), EUR 546 thousand for Niels Graugaard (previous year EUR 173 thousand), EUR 258 thousand for Dr. Petri (previous year EUR 31 thousand) and EUR 151 thousand for Markus Hüllmann.
Further information on the awarded phantom shares and the long-term share price component is outlined in note 6.3.3 (cf. page 175) to the consolidated financial statements.
The remuneration of the Supervisory Board members comprises solely a fixed compensation. It does not include any performance-related component.
In the year under review, the expenses incurred for the Supervisory Board amounted to EUR 1,168 thousand (previous year EUR 1,152 thousand). Under section 15 para. 1 of the Articles of Association, each member of the Supervisory Board receives a fixed annual fee of EUR 50 thousand payable after the end of each fiscal year, in addition to the reimbursement of expenses. The Chairman of the Supervisory Board receives two and a half times, his deputy one and a half times this amount. In accordance with section 15 para. 2 of the Articles of Association, members of the Presiding Committee and the Audit Committee each receive an additional EUR 35 thousand. The chairman of each of these committees receives twice the amount. No separate remuneration is paid to members of the Mediation Committee and the Nomination Committee. Members who join or leave the Supervisory Board or its committees during the year only receive a pro rata amount for the period of their membership. Under section 15 para. 3 of the Articles of Association, the Supervisory Board members also receive an attendance fee of EUR 1 thousand for each meeting of the Supervisory Board, the Presiding Committee and the Audit Committee that they have attended.
The following table shows the individual remuneration and its respective components for members of the Supervisory Board, the Presiding Committee and the Audit Committee for 2013 compared with the previous year:
| Supervisory Board |
Presiding Committee |
Audit Committee | |||
|---|---|---|---|---|---|
| (EUR) | remuneration | remuneration | remuneration Attendance fees | Totals | |
| Dr. Heraeus | 125,000 | 70,000 | 35,000 | 15,000 | 245,000 |
| Previous year | 125,000 | 70,000 | 35,000 | 12,000 | 242,000 |
| Siegers * | 75,000 | 35,000 | – | 11,000 | 121,000 |
| Previous year | 75,000 | 35,000 | – | 10,000 | 120,000 |
| Bastaki | 50,000 | – | – | 6,000 | 56,000 |
| Previous year | 50,000 | – | – | 5,000 | 55,000 |
| Prof. Dr. Bauer | 50,000 | – | – | 8,000 | 58,000 |
| Previous year | 50,000 | – | – | 6,000 | 56,000 |
| Eberlein | 50,000 | – | 70,000 | 12,000 | 132,000 |
| Previous year | 50,000 | – | 70,000 | 10,000 | 130,000 |
| Gröbel * | 50,000 | 35,000 | – | 12,000 | 97,000 |
| Previous year | 50,000 | 35,000 | – | 10,000 | 95,000 |
| Hunger * | 50,000 | – | 35,000 | 12,000 | 97,000 |
| Previous year | 50,000 | – | 35,000 | 11,000 | 96,000 |
| Kämpfert | 50,000 | – | – | 7,000 | 57,000 |
| Previous year | 50,000 | – | – | 6,000 | 56,000 |
| Kerkemeier * | 50,000 | – | – | 6,000 | 56,000 |
| Previous year | 50,000 | – | – | 6,000 | 56,000 |
| Löw * | 50,000 | – | 35,000 | 12,000 | 97,000 |
| Previous year | 50,000 | – | 35,000 | 11,000 | 96,000 |
| Dr. Perlet | 50,000 | 35,000 | – | 10,000 | 95,000 |
| Previous year | 50,000 | 35,000 | – | 9,000 | 94,000 |
| Spence | 50,000 | – | – | 7,000 | 57,000 |
| Previous year | 50,000 | – | – | 6,000 | 56,000 |
| Total | 700,000 | 175,000 | 175,000 | 118,000 | 1,168,000 |
| Previous year | 700,000 | 175,000 | 175,000 | 102,000 | 1,152,000 |
*) The employee representatives from the Works Council and the Union remit their remuneration in accordance with the guidelines drawn up by the Hans Böckler Foundation
GEA Group's ability to leverage its growth and earnings potential depends on it using the opportunities that arise, although this in turn is associated as a matter of principle with business risks. Taking calculated risks is therefore part of GEA Group's corporate strategy. To meet the objective of sustainably increasing enterprise value, it is necessary, as far as possible, to enter into only those risks that are calculable and matched by greater opportunities. This requires active risk and opportunity management, which avoids inappropriate risks, monitors and manages risks entered into, and ensures that opportunities are identified and utilized in good time.
GEA Group's strategic and medium-term planning are key components of the way in which it manages opportunities and risks. These processes are used to prepare decisions on core technologies and markets, along with the corresponding allocation of resources. The objective is to ensure stability by diversifying and by concentrating on markets of the future. At the same time, developments that may jeopardize GEA Group's continuing existence can be identified at an early stage.
Opportunities and risks arising from significant operating decisions – for example whether to take on orders or to implement capital expenditure projects – are assessed and hence actively managed by the relevant departments and decision-makers at all group levels in a decision-making process that takes materiality criteria into account.
The identified risks from operating activities and the negative impact on earnings that could result have not changed significantly as against the previous year. As in the previous year, the structure of GEA Group with its regional and industry diversification offers broad protection from individual risks clustering into a single risk that could threaten the group's continued existence as a going concern. In addition, GEA Group is not dependent on individual business partners, be they either suppliers or customers.
With regard to discontinued operations, the risks arising from the sale of the plant engineering business were reduced by the agreement reached with the purchaser of Lurgi and the further progress made in completing the Lentjes projects. Measurement uncertainties still exist in relation to individual legal disputes. These are described in greater detail in the "Legal risks" section below.
Overall, no risks to GEA Group or GEA Group Aktiengesellschaft were identified that, alone or in combination with other risks, could endanger the Company's continued existence as a going concern.
All group companies are integrated into GEA Group's risk management system. Quarterly and sizerelated ad hoc risk reports ensure that segment and group management decision-makers are informed promptly about material existing risks and potential risks affecting future development.
The basic principles of an orderly risk management system and the related workflows are documented in group-wide risk guidelines, which are broken down and structured in greater detail regularly by the segments to meet their specific requirements. These guidelines also document mandatory risk reporting and management requirements. Compliance with these requirements is monitored regularly by the Internal Audit function.
Risk management instruments such as the Risk Assessment and Advisory Committees (RAACs) are supplemented by a reporting system encompassing evaluated risk reports, consolidated financial projections, monthly consolidated financial statements, and regular meetings between the Executive Board and the segment heads to enable the various risks to be identified and analyzed.
The specific requirements of the group's project business are addressed by risk boards at segment and group management level. Before a binding quotation is submitted or an agreement signed, the commercial and contractual terms of potential orders are examined in detail by specialists from various departments so that risks that cannot be controlled are avoided. The risk management system therefore already comes into play before risks arise, in the form of a critical examination of the opportunity and risk profile of quotations. No agreement may be signed if the profile is inappropriate.
The risk management system is not only designed to identify risks that endanger the group's continued existence at an early stage, as required by law; it also captures all risks that might have a material adverse effect on the operating result of a segment or the group. The application of the risk management system at all levels is reviewed regularly by the Internal Audit function.
Additional modules were added to GEA Group's risk management system in fiscal year 2013 in order to capture non-specific risks and opportunities not covered by the existing systems; these make it possible to assess risk on a holistic basis.
Information is gathered and consolidated in an iterative process across all organizational units in a "Risk & Chance Scorecard." To identify risks that could endanger the continued existence of GEA Group as a going concern, all issues are assessed for their financial materiality (on a gross basis, i.e., excluding any risk-mitigating measures) and probability of occurrence. In addition, the timing of each risk is individually assessed, with a distinction made between risks that could occur in less than or more than one year.
Opportunities and risks Low Middle High Insignificant Moderate Considerable L L M L M H M H H Probability < 40% 40 - 60% > 60%
The following criteria are used to determine materiality:
| Insignificant | No material impact on financial and earnings position |
|---|---|
| Moderate | Noticeable impact on financial and earnings position |
| Considerable | Material or even critical impact on financial and earnings position |
This makes it possible to classify both risks and opportunities in accordance with their impact on GEA Group. Issues with short-term relevance that have a high ("H") materiality and probability rating are initially classified as a significant risk or significant opportunity.
In addition, the GEA Demand Index (GDI) is used to collate estimates by GEA Group's market experts on expected short- to medium-term market developments. The GDI makes it possible to obtain an early indication of positive or negative market developments in the industries and regions that are relevant for GEA Group.
The data gathered using the Risk & Chance Scorecard and the GDI is processed along with other internal and external information in a scenario and sensitivity analysis, which simulates the potential impact on the group's liquidity (see page 82).
Adequate provisions have been recognized for all identifiable risks arising from the group's operating activities provided that the recognition criteria for liabilities have been met. The following section provides details of existing risks. Risks that are not yet known or currently regarded as insignificant may also have an adverse effect on business activities.
GEA Group's internal control system (ICS) is based on the COSO framework and comprises the risk management system (RMS) as well as other principles, measures, and rules (other components of the ICS). While the RMS aims at identifying and classifying risks, the components comprising the rest of the ICS serve primarily to prevent or mitigate risk using control measures. The Internal Audit function is another component of the ICS.
The RMS comprises principles, measures, and rules relating to the early risk recognition system in accordance with section 91(2) of the Aktiengesetz (AktG – German Stock Corporation Act) as well as those relating to other components of the risk management system. In the other components of the ICS, a distinction is made between principles, measures, and rules that are related or unrelated to financial reporting.
GEA Group's ICS relevant for financial reporting encompasses all principles, measures, and rules that ensure the proper approval and recording of business transactions for monthly, quarterly, and annual financial statements. The goal of the implemented ICS is to ensure reliable financial reporting, compliance with the relevant laws and standards, and the cost-effectiveness of business workflows.
In addition to GEA Group Aktiengesellschaft, all Group companies are integrated into the ICS.
The following key principles of GEA Group's ICS must be applied in all business functions: clearly defined areas of responsibility, the separation of functions in all areas of activity, dual signature policies, compliance with guidelines, instructions, and procedural requirements (manuals), obligation to obtain comparative offers before awarding contracts, protection of data from unauthorized access, and the holding of training sessions to ensure uniform procedures within the group.
Key measures and rules that are relevant for financial reporting and are designed to ensure uniform accounting at all subsidiaries are: accounting and account allocation manuals, a uniform chart of accounts, consolidation and calculation manuals, the approval of entries using the dual control principle, and the fact that certain entries can only be made by selected persons. To prevent errors, standardized IT systems are used in GEA Group's accounting, financial control, and finance functions in all group companies. All guidelines and IT systems are updated on a continuous basis to reflect legal and business requirements.
Compliance with the principles, measures, and rules set out in the ICS as described above is monitored systematically; this takes the form of regular reviews by GEA Group's Internal Audit function, which reports directly to the Executive Board and regularly submits reports to the Audit Committee. The results enable the elimination of defects identified at the companies reviewed and the ongoing enhancement of the ICS in the group.
Overall, GEA Group's internal control system has been implemented in such a way as to ensure reliable financial reporting.
Since GEA's legal disputes relate to current litigation, legal risks are not quantified in detail, as disclosure of their probability of occurrence could have a material adverse effect on the group's position in the proceedings.
In connection with a major order, in South Africa, a subcontractor asserted substantial out-of-court claims in the previous year and in the current year against the GEA company that had been contracted. GEA's analysis that the alleged additional costs or claims should either be borne by the sub-contractor itself, or that the amounts are inflated or insufficiently specified remains unchanged. Furthermore, even if the amounts were to be substantiated, they could largely be passed through to GEA´s customer. During 2013 further delays arose at the construction site; however we do not believe that these are attributable to GEA Group.
An action brought by the insolvency administrator of Dörries Scharmann AG against GEA Group Aktiengesellschaft is pending at the Düsseldorf Regional Court. The former Metallgesellschaft AG, the legal predecessor to GEA Group Aktiengesellschaft, held an interest in Schiess AG, which later became Dörries Scharmann AG. On the basis of that interest, the insolvency administrator is asserting various claims under company law, in particular for equity substitution, which amount to approximately EUR 20 million including possible interest. GEA Group Aktiengesellschaft considers the claims that have been asserted to be unfounded. After the senior expert appointed by the court to decide matters relating to equity substitution fully confirmed GEA Group Aktiengesellschaft's opinion, the Higher Regional Court in Düsseldorf upheld a motion by the insolvency administrator to disqualify this expert in a ruling issued on November 27, 2012. How the Regional Court will proceed in this matter is currently unknown. GEA Group Aktiengesellschaft will continue to defend itself against all claims.
Further legal proceedings or official investigations have been or may be instituted against GEA Group companies as a result of earlier business disposals and operating activities.
Adequate provisions have been recognized for all risks arising from both the legal disputes described above and other legal disputes being pursued by GEA Group in the course of its ordinary operating activities. However, the outcome of these proceedings cannot be predicted with any degree of certainty. It is therefore possible that the conclusion of the proceedings may result in income or expenses if the amounts that have been set aside for them are higher or lower than required.
The performance risks presented below could take a wide variety of forms. The elements of the GEA risk management system are designed to help identify emerging risks before they materialize, so that appropriate measures can be implemented on a case-by-case basis to avoid negative effects on the group's financial position and results of operations. As a rule, potential business performance risks are minimized by avoiding significant dependencies and ensuring a balanced mix of fixed and flexible capacities.
GEA Group's sales markets have a diverse product and customer structure. This diversification moderates the impact on total demand of fluctuations in specific submarkets. However, the food industry is the main focus of the business. A significant decline in demand for food and beverages would have a material impact on GEA's financial position and results of operations. GEA considers the probability of a global decline in demand to be low. This risk is rated as medium overall.
A significant proportion of GEA's business consists of projects that depend on the financing available to GEA's customers. A general decline in demand or a shortage of credit could make it more difficult to implement such projects. For the same reason, existing orders could be deferred or even canceled. If such risks were to occur on a global level, they would have a material impact on GEA's financial position and results of operations. The probability of such risks occurring globally is considered to be low. This risk is rated as medium overall due to GEA's diversified positioning in particular.
Although country-specific conflict situations that may result in risks to the group are monitored continuously as part of the risk management process, the potential risks arising from such situations are difficult to quantify. However, no material impact on the group's results of operations is anticipated. This risk is rated as medium overall.
On the sales side, future prices will depend to a considerable extent on general economic trends. Any fall in capacity utilization in the industry could also have a significant negative impact on price levels and therefore on the financial position and results of operations of GEA Group. Thanks to the group's regional and industrial diversification, the probability of such a risk is considered to be low. This issue is rated as a medium risk overall.
GEA Group processes a number of materials, such as steel, copper, aluminum, and titanium. Purchase prices for these metals may fluctuate significantly depending on market conditions. Long-term supply agreements are entered into with selected suppliers in order to lock in the procurement prices used as the basis for costing orders. However, the potential risks arising from such situations are difficult to quantify. With respect to procurement, current expectations are that prices for key materials will not increase. This risk is rated as medium overall.
Long-term engineering orders are a significant element of GEA Group's business. Some of these contracts entail particular risks, as they involve assuming a significant portion of the risk associated with the project's completion. In addition, they may provide for warranty obligations that remain in force for several years after the project's acceptance. Technical problems, quality problems at subcontractors, and missed deadlines may lead to cost overruns. There is therefore an extensive risk management system in place at group management and segment level to closely monitor order-related risks. This comes into play before binding quotations are submitted. Adequate provisions have been recognized for all foreseeable risks in this area. This could give rise to both risks and opportunities in relation to the financial position and results of operations. As a whole, this issue is rated as a medium risk.
Furthermore, the Company sees risks in connection with macroeconomic trends. If a downturn in the economy leads to a reduction in order intake to below the level of the previous fiscal year, this could have a negative impact on earnings due to capacity underutilization and capacity adjustment measures. Thanks to the group's regional and industry diversification, and the fact that it is structured for flexibility, the probability of this significant risk occurring is considered to be low. This issue is rated as a medium risk overall.
As contractually agreed, defined risks relating to selected orders remained with the group following the sale of the former Lurgi and Lentjes divisions. The guarantee period for most of these Lentjes orders has already expired. The other orders have provisionally been handed over to the customers and are therefore under warranty. Under the final agreement entered into with the purchaser of Lurgi, the risks arising from the selected Lurgi orders have largely been eliminated for GEA Group. The remaining risks are rated as low overall.
Dedicated and qualified employees are a critical success factor for GEA Group. The group has various staff policy measures in place to counter the risk that it will be unable to fill vacant positions adequately or that it will lose skilled employees. The measures aim to position GEA as an attractive employer and foster employees' long-term loyalty to the group (see page 48 ff.). The probability of this significant risk occurring is considered to be low. This issue is rated as a medium risk overall.
Acquisitions and internal company reorganizations entail risks resulting from the integration of employees, processes, technologies, and products. It is possible, therefore, that the aims of the measures in question will not be achieved at all or within the timeframe envisaged. Moreover, such transactions may give rise to substantial administrative and other expenses. Portfolio measures may also result in the need for additional finance and may impact negatively on financing requirements and the financing structure.
These risks are countered by a structured integration concept and close supervision by internal experts, as well as specific training measures.
These risks could have a significant impact on the financial position and results of operations. Their probability of occurrence is rated as moderate. Potential risks from acquisitions and integration are rated as high overall.
Several properties in our portfolio entail risks relating to environmental contamination and mining damage, primarily as a result of earlier business activities. These risks are countered through appropriate measures and supervision by internal and external specialists. Adequate provisions were also recognized for the measures in 2013. This could give rise to both risks and opportunities in relation to the financial position and results of operations. As a whole, this issue is rated as a medium risk.
The Executive Board has put in place an effective set of guidelines to manage and hence largely limit or hedge financial risks throughout the group. The objectives with regard to protecting assets, eliminating gaps in security, and improving efficiency in identifying and analyzing risks are clearly defined, as are the relevant organizational structures, powers, and responsibilities. The guidelines are based on the principles of system security, the separation of functions, transparency, and immediate documentation.
Because it operates worldwide, GEA Group is exposed to currency, interest rate, commodity price, credit, and liquidity risk in the course of its ordinary activities. Financial risk management aims to reduce this risk through the appropriate use of derivative and nonderivative hedging instruments. The group's financial risks are quantified in section 3 of the notes to the consolidated financial statements (see pages 140 ff.).
Based on a gross assessment, the financial risks described below are considered in principle to be both significant and probable for GEA. These risks are therefore rated as high overall.
Because GEA Group operates internationally, its cash flows are denominated not only in euros, but also in a number of other currencies, particularly U.S. dollars. Hedging the resulting currency risk is a key element of risk management.
The uniform group guidelines for central currency management used within GEA Group require all group companies to hedge foreign-currency items as they arise in order to fix prices on the basis of hedging rates. Currency risks are hedged for recognized hedged items, unrecognized firm commitments, and highly probable forecast transactions. The hedging periods are determined by the maturity of the hedged items and are usually up to 12 months, but in exceptional cases may exceed that period significantly. Nevertheless, changes in exchange rates may affect sales opportunities outside the eurozone.
Affiliated group companies based in the eurozone are obliged to tender to GEA Group's central finance unit all outstanding exposures relating to transactions in goods and services in major transaction currencies. Most of these exposures are passed on directly to banks at matching maturities, depending on the hedging objective of the derivatives and the related accounting treatment; they may also be hedged as part of a portfolio. The hedging of financial transactions and transactions conducted by subsidiaries outside the eurozone is also closely coordinated with the central finance unit.
Because GEA Group operates worldwide, liquidity is raised and invested in the international money and capital markets in different currencies (but mainly in euros) and at different maturities. The resulting financial liabilities and investments are exposed to interest rate risk, which must be assessed and managed by central interest rate management. Derivative financial instruments may be used on a case-by-case basis to hedge interest rate risk and reduce the interest rate volatility and financing costs of the hedged items. Only the central finance unit is permitted to enter into such interest rate hedges.
Financial instruments are exposed to credit risk in that the other party to the contract may fail to fulfill its obligations. The counterparty limit system used by GEA Group's central finance unit aims to continuously assess and manage the counterparty default risk. A maximum risk limit has been defined for each counterparty, which in most cases is derived from the ratings from recognized credit rating agencies and credit default swaps (CDSs). Appropriate action is taken if the individual limit is exceeded.
The financial standing of potential customers is ascertained before orders are accepted using an internal risk board procedure. Active receivables management, including nonrecourse factoring, nonrecourse financing, and credit insurance, is also performed. In the case of export transactions, confirmed and unconfirmed letters of credit are used alongside sureties, guarantees, and cover notes, including from export credit agencies such as Euler Hermes. In addition to local monitoring by the subsidiary in question, GEA Group also oversees the main credit risks at group management level so that any accumulation of risk can be better managed.
Since trade receivables are usually due from a large number of customers in different sectors and regions, there is no concentration of risk. Valuation allowances take account of specific credit risks.
So as to reduce the credit risk involved, derivative financial instruments are only entered into with reputable financial institutions whose creditworthiness has been classified as reliable under the counterparty limit system described above; this is also continuously monitored.
The maximum exposure for the financial assets is limited to their carrying amount.
GEA Group is exposed to liquidity risk in that it may be unable to meet payment obligations because it has insufficient cash funds at its disposal. The central finance unit is responsible for managing this risk. Cash funds are arranged and credit lines managed on the basis of a multi-year financial plan and a rolling month-by-month cash forecast. The funds are then made available to the companies by group management. Cash pools have been established in a growing number of countries in order to optimize borrowing and the use of cash funds within GEA Group. To mitigate liquidity risk, GEA Group will continue to use various financing instruments in the future so as to diversify its sources of funding and stagger maturities.
The impact of potential risk scenarios on changes in liquidity is simulated on a quarterly basis. All internal risk management information and internal and external information on potential market and other external risks is taken into account. On the basis of this, the Executive Board and Supervisory Board have agreed strict rules regarding the level of cash and long-term credit lines to be held to cover potential liquidity risk.
The applicable national tax legislation may affect the use of loss carryforwards and thus the recoverability of the deferred taxes recognized in the consolidated financial statements and current taxation. Furthermore, future changes to the ownership structure could significantly reduce or even render impossible the use of German loss carryforwards (section 8c of the Körperschaftsteuergesetz (KStG – German Corporate Income Tax Act)). The ability to use U.S. loss carryforwards could also be restricted in the case of certain changes to the ownership structure of GEA Group Aktiengesellschaft under IRC section 382 (limitation on net operating loss carryforwards following an ownership change).
Moreover, in Germany and abroad, there is considerable uncertainty regarding future changes to, and the application of, tax legislation as a result of tighter public-sector finances, the resulting pressure for reform, and tangibly greater scrutiny by the tax authorities.
The tax risks presented could have a material effect on GEA's financial position and results of operations. The occurrence of material negative effects is considered to be relatively unlikely.
GEA Group's end markets offer a variety of opportunities for positive business performance over the long term. A key task of the opportunity and risk management system is to systematically evaluate internal and external information to identify opportunities at an early stage and appropriately assess the potential they offer (see page 76 f.). Specific measures are then developed to enable us to convert opportunities into actual economic success.
The identified opportunities from operating activities and the additional positive impact on earnings that could result have not changed significantly as against the previous year.
Planning of the group's economic development is based on certain assumptions regarding the development of the performance parameters described below. If these parameters develop more positively than expected overall, this could have a corresponding effect on GEA Group's financial position and results of operations.
GEA Group is entering fiscal year 2014 with a higher order backlog than in the previous year. Further growth is expected in the rapidly expanding Asian markets in the medium term. GEA Group will further expand its presence in these regions and thus participate in the growth of these markets.
If the expected moderate growth in the global economy materializes, GEA's continued focus on the food end market will allow it benefit more than average, especially in growth markets.
In the area of food process technology, GEA's growth will be driven not only by an increase in the standard of living and the trend toward high-quality foods, but also by the expected rise in production and quality standards as well as innovative process improvements and new product developments.
GEA's in-depth understanding of our customers' production processes is a cornerstone of its success. Increasing scarcity of resources means that ever more efficient use needs to be made of raw materials and energy. In addition, end consumers' rising demands require the implementation of higher quality standards in production processes. Growing awareness of our environmental impact means we must meet more stringent standards on CO2 emissions, for example. This creates additional opportunities for GEA Group, which can focus research and development activities on environmentally friendly technologies and production processes and thus offer specialist solutions.
GEA considers the probability of the performance opportunities exceeding the planning assumptions and therefore having a material positive impact on net assets, financial position, and results of operations to be medium overall.
With regard to the proceedings against U.S. company Flex-N-Gate Corp., the court of arbitration in fiscal year 2010 ordered Flex-N-Gate to compensate GEA Group Aktiengesellschaft for losses incurred as a result of the collapse of the sale of the Dynamit Nobel plastics business to Flex-N-Gate in the fall of 2004. The award was overturned by the Higher Regional Court in Frankfurt in 2011. In its decision dated October 2, 2012, the German Federal Court of Justice dismissed GEA Group Aktiengesellschaft's appeal against the decision. The Company then decided to continue the arbitration proceedings against Flex-N-Gate and filed a corresponding application with the Deutsche Institution für Schiedsgerichtsbarkeit (DIS – German Institution of Arbitration) on December 21, 2012.
GEA Group's Report on Expected Developments takes into account relevant facts and events that were known at the date of preparation of these consolidated financial statements and that could influence the future development of its business.
It should be noted that the forecasts – particularly for revenue, earnings, and the cash flow driver margin – no longer include the GEA Heat Exchangers Segment. This is due to the planned disposal of this operation (see page 15). In addition, the forecast for operating EBITDA does not contain any earnings effects resulting from the planned disposal. The key performance indicators for the GEA Heat Exchangers Segment's in fiscal year 2014 are not expected to diverge significantly from those of the group.
As described in the section on the macroeconomic environment in the report on the economic position (see page 25), GEA, as a global engineering company, considers global growth in gross domestic product (GDP) and the corresponding IMF forecasts to be key benchmarks for its own performance.
In its updated World Economic Outlook (January 2014), the IMF agreed with its sister organization, the World Bank, on the development of the global economy, drawing a highly optimistic picture for 2014. However, it also believes there are further risks. The IMF is predicting that global GDP growth, which was 3.0 percent in 2013, will rise to 3.7 percent. The industrialized nations and the emerging markets will continue to develop at different speeds. Whereas the former can expect a growth rate of 2.2 percent (up from 1.3 percent), the emerging markets and developing countries are now expected to grow by 5.1 percent after 4.7 percent in the past year. This largely confirms the IMF's expectations from its previous World Economic Outlook (October 2013). The economic experts see three reasons for this positive development: First, the pressure for budget consolidation is easing in many countries. Second, the financial system is gradually recovering. And finally, general uncertainty is on the decline.
According to the IMF, the recovery among the industrialized nations is more pronounced in the United States than in Europe. It says it is seeing increasingly sound growth, buoyant consumer demand, and a possible rise in the growth rate from 1.9 percent in 2013 to 2.8 percent in the current year. In turn, it says that this gives the Fed the requisite scope to exit its expansionary monetary policy. However, the IMF does not expect this to happen until 2015.
In Europe, the IMF is forecasting uneven development. The United Kingdom could grow by around 2.4 percent and Germany by 1.6 percent, while France can only expect to see around 0.9 percent growth. The economic experts are expecting bigger problems in southern Europe. Although they say that exports are growing in those regions, the need for budget consolidation, weak domestic demand, and struggling banks and companies continue to depress growth.
As mentioned, the IMF is anticipating continued strong growth for the emerging markets and developing countries, albeit not as dynamic as in years past. On the one hand, these countries are expected to benefit from the recovery of the industrialized nations, but on the other hand, they will also face more challenging financial markets once the Fed normalizes its monetary policy.
The Organization for Economic Cooperation and Development (OECD) and the UN's Food and Agriculture Organization (FAO) anticipate in their "OECD-FAO Agricultural Outlook 2013" that the global production of the agricultural commodities covered in the Outlook will rise by an average of 1.5 percent a year over the next decade. Market researchers from Euromonitor are also predicting continuing growth in demand in the beverage industry – i.e. juices, soft drinks, and hot drinks such as coffee and tea.
According to the specialists at the OECD and the FAO, commodity prices are currently high in historical terms. Crop prices are expected to decline due to increased production, while meat prices are likely to remain high due to depleted inventories. Over the longer term, prices for both animal and plant products are expected to continue their upward trend, although sharper price increases are projected for meat, fish, and biofuels.
Consumption of all products covered by the Outlook is expected to increase in the emerging markets due to global population growth, higher incomes, urbanization, and changing dietary habits. Per capita consumption is expected to be greatest in Eastern Europe and central Asia, followed by Latin America and the other Asian regions.
GEA's planning for the current 2014 fiscal year assumes that demand in its sales markets will be moderately higher than the high levels seen in 2013.
The group's enduring success is founded on a number of major global trends:
The United Nations assume that the world's population, currently more than some seven billion people, will rise over the coming years by around 80 million people per year (see World Population Prospects, 2012). According to UN estimates, the population should increase to nearly 8.2 billion in the period up to 2025. Linked to this is an increasing degree of urbanization, as already seen in past decades. This means that, in future, significantly more food will have to be produced on more or less the same cultivation area. For this reason, the methods and production processes used must become much more efficient – this is why innovative process technology is needed.
In addition, more and more foods must be preserved for longer and easier transport in order to secure the necessary supplies for metropolitan areas and to maintain world trade. Here, as well, only the state-of-the-art technologies can provide the capacity needed to cope with rising demand.
Another factor is that, as the middle class grows, so will the number of people who will be able to afford processed foods, beverages, and dairy products. This is equally true for pharmaceutical products, which must meet the needs of an increasingly health-conscious population.
Against the backdrop of the trends in the global economy and the food industry, and the impact of the various megatrends presented in this chapter on its direct sales markets, GEA is expecting growing demand for high-quality foods and, linked to this, ongoing high levels of investment in the food industry. Additionally, GEA is anticipating sustained customer interest in process optimization for improving efficiency, productivity, energy usage, and plant availability, which its technologies are able to provide.
With respect to commodities price trends, GEA is assuming that these will largely depend on economic developments in the U.S.A., future growth in China, and global political developments.
The Company does not believe that customer project finance will be significantly affected by uncertainty in the capital markets.
The proportion of GEA's revenue accounted for by the food industry in 2014 is expected to remain at its current high level. From a regional perspective, too, GEA is not anticipating any significant change in the current breakdown of revenue in 2014 as against the past fiscal year.
Provided that there is no slowdown in global economic growth and that exchange rates remain the same as in 2013, and excluding the effect of acquisitions and nonrecurring items, we are aiming for our key performance indicators to develop as follows in the current fiscal year:
We expect GEA Group's segments to register moderate revenue growth overall in fiscal year 2014, with the notable exception of GEA Process Engineering, which will grow more strongly than the other segments due to its very healthy order intake in the previous year.
We expect operating EBITDA to reach EUR 550 million to EUR 590 million during the period, compared with EUR 530 million in fiscal year 2013. All of GEA Group's segments will contribute to this year-on-year increase. The term "operating" means that the earnings figures are adjusted for the effects of the remeasurement of assets added due to acquisitions, as well as expenses that are nonrecurring in terms of their type or amount.
With respect to our cash flow drivers, i.e., the net amount of EBITDA, the change in working capital, and capital expenditure, we are aiming for a ratio to revenue of between 9.0 percent and 9.5 percent in 2014, after 9.6 percent in the year under review.
We are maintaining our strategy of acquiring companies that provide GEA with an entry into new markets or that selectively expand our range of offerings in existing markets. This will enable us to provide our customers with a single-source solution for an ever-broader range of products and services. However, given the uncertainties on the global financial markets, we shall focus closely on the financial feasibility of such projects with the aim of ensuring a stable credit rating for GEA in the debt markets.
The Executive Board and Supervisory Board will propose a dividend of EUR 0.60 per share for 2013 to the Annual General Meeting. This represents an increase in the total dividend by 9.1 percent to EUR 115.5 million. Consequently, the distribution to our shareholders for 2013 is once again around one-third of the group's earnings.
Provided that there is no slowdown in the global economy, we expect the group to achieve moderate organic growth. The further increase in profitability together with the ongoing focus on liquidity generation should help ensure we have the financial leeway to successfully implement our strategic growth targets. In addition, we are maintaining our long-term target of distributing around one-third of the group's earnings to shareholders as a dividend.
Düsseldorf, February 26, 2014
The Executive Board
Jürg Oleas Dr. Helmut Schmale Markus Hüllmann Dr. Stephan Petri
The international stock markets continued their positive performance at the beginning of 2013 and reached interim highs in the period up to the end of May, driven by the unchanged expansionary monetary policies adopted by central banks around the world and positive economic data. Initial indications that the U.S. Federal Reserve might end its expansionary monetary policy and emerging fears of a liquidity squeeze in the Chinese banking market then saw share prices decline around the world from May to the beginning of July, before the stock markets rallied to new record highs at the end of the fiscal year on the back of a further dynamic upswing. Key factors driving up share prices were the global recovery of various leading indicators, together with the European Central Bank's decision to keep its key interest rate at its current low level for some time, and the U.S. Federal Reserve's surprising decision to continue its large-scale bond-buying activities. The DAX reached an all-time high of 9,589 points on December 27. It closed on December 30 at 9,552 points, up 25.5 percent over the course of the year. The MDAX also reached its highest-ever level on December 27, at 16,626 points. It closed on December 30 at 16,574 points, a 39.1 percent gain. The STOXX® Europe TMI Industrial Engineering Index – the more relevant index for GEA – recorded a record high of 354.37 points on September 19 and closed the year at 345.86 points, an 11.9 percent increase during the year. 150 %
GEA shares also performed extremely well in 2013 in the wake of the general recovery in the global stock markets. The share price rose sharply at the beginning of the year in particular, before profit taking resulting from what was considered to be a conservative business outlook for 2013 led to a low for the year of EUR 24.66 on April 17. Better-than-expected results for the second quarter boosted the share price and hence led to strong gains, allowing GEA Group Aktiengesellschaft's shares to clearly break through their resistance level of EUR 30. The publication of further excellent order figures in the third quarter lifted GEA shares to a new high of EUR 34.89 on December 27. They closed at EUR 34.60 on December 30, an increase of 41.4 percent in 2013. After adjustment for the reinvestment of the dividend, GEA shares actually increased by 44.5 percent, significantly outperforming both the DAX and the MDAX by a considerable amount, as well as the even more important STOXX® Europe TMI Industrial Engineering benchmark index in the past fiscal year. 90 % 100 % 110 % 120 % 130 % 140 % GEA Group STOXX MDAX ® Europe TMI Industrial Engineering Jan. Feb. Mär. Apr. Mai Jun. Jul. Aug. Sep. Okt. Nov. Dez. Jan.
GEA Group Annual Report 2013
| GEA Group shares compared to STOXX ® Europe TMI Industrial Engineering | ||||||
|---|---|---|---|---|---|---|
| Balance sheet date (12/31/2013) | Share development | Market capitalization * | ||||
| Last 3 months | +13.5 | +13.5 | percentage points | |||
| Last 6 months | +16.1 | +16.1 | percentage points | |||
| Last 9 months | +31.0 | +31.0 | percentage points | |||
| Last 12 months | +29.5 | +29.5 | percentage points | |||
| Last 24 months | +21.5 | +28.9 | percentage points | |||
| Last 36 months | +47.1 | +54.7 | percentage points |
10 percentage points 3 to 10 percentage points 3 to -3 percentage points -3 to -10 percentage points > -10 percentage points
*) Based on shares issued by GEA Group Aktiengesellschaft as of the particular reporting date
As of December 31, 2013, GEA Group Aktiengesellschaft did not hold any treasury shares, meaning that the number of outstanding shares was unchanged at the end of the year, at 192,495,476. This corresponded to a market capitalization of EUR 6.7 billion as of the end of December compared with EUR 4.7 billion in December 2012, a 41.4 percent increase. In the monthly index ranking of all listed German companies in the DAX, MDAX, SDAX, and TECDAX published by Deutsche Börse on December 30, GEA Group Aktiengesellschaft was ranked 32nd (previous year: 34th) in terms of market capitalization and 41st (previous year: 34th) in terms of trading volume. At 0.4 million shares, the average daily trading volume in official exchange trading in fiscal 2013 was below the prior-year figure of 0.5 million shares. The main reasons for this are the general decline in trading volumes on official stock exchanges and the growing importance of alternative trading platforms.
As in recent years, GEA Group Aktiengesellschaft once again performed detailed analyses of its shareholder structure in 2013. GEA Group Aktiengesellschaft has a stable shareholder structure, which has changed only slightly over time. The current analysis from the fourth quarter of 2013 identified 82 percent of the Company's shareholders. Institutional investors held 74 percent of the shares and Kuwait Investment Office accounted for an unchanged figure of around 7.9 percent. Institutional investors headquartered in the UK remained the largest investor group, holding 24 percent of all shares (previous year: 23 percent). Scandinavian investors now hold second place with nearly 14 percent of all GEA shares (previous year: 12 percent), followed by French investors, who hold around 11 percent of the shares (previous year: 15 percent). The share of American investors rose from 8 percent to nearly 11 percent, while that of institutional investors from Germany fell from 11 percent to 8 percent.
Sixty-four percent of all GEA Group Aktiengesellschaft shares were held by institutional investors with a long-term orientation (previous year: 65 percent). Less than 1 percent of shares were held by hedge funds.
GEA Group takes its task of maintaining close contact with capital market participants and correspondingly close relationships to its shareholders, investors, and analysts extremely seriously. In 2013, for example, GEA Group's investor relations activities again facilitated an ongoing, effective dialog with the capital markets. The Company used these to inform its shareholders and investors about developments within the group in a transparent manner above and beyond its quarterly, halfyearly, and annual reports. It also kept in close contact with investors by taking part in international conferences and roadshows, which were regularly attended by the CEO and the CFO. The Company held a total of 39 roadshows in 2013, communicating directly with shareholders, potential investors, and analysts. GEA representatives also took part in 22 conferences, as well as holding 509 one-on-one meetings. In addition, analysts and investors had the opportunity to experience the Company's capabilities for themselves at GEA Group Aktiengesellschaft's headquarters in Düsseldorf. Investor Relations activities in 2013 focused in particular on the planned separation of the GEA Heat Exchangers Segment as well as the transformation of GEA to an even stronger provider of process technology for the food industry, its most important customer industry. This attracted the attention of new investors in GEA shares, some of whom also became new shareholders. In addition, GEA held another Capital Markets Day in June 2013 featuring presentations to analysts and investors on the GEA Mechanical Equipment Segment's structure, business strategies, market environment, and products, as well as explanations of the strategic decision behind the planned separation of the GEA Heat Exchangers Segment.
Earnings per share (EPS) amounted to EUR 1.75 in the past fiscal year. They are calculated by dividing consolidated profit for the period by the weighted average number of shares outstanding in the course of the fiscal year. An average of 192.5 million no-par value shares (previous year: 185.8 million) were outstanding in the reporting period.
| Key performance indicators for GEA Group shares | 2013 | 2012 |
|---|---|---|
| Shares issued (December 31, million) | 192.5 | 192.5 |
| Average shares outstanding (million) | 192.5 | 185.8 |
| Share price (December 31, EUR) 1 | 34.60 | 24.47 |
| High (EUR) | 34.89 | 26.27 |
| Low (EUR) | 24.66 | 19.69 |
| Market capitalization (December 31, EUR billion) 2 | 6.66 | 4.71 |
| Average daily trading volume (million) | 0.4 | 0.5 |
| Earnings per share pre purchase price allocation (EUR) | 1.85 | 1.87 |
| Earnings per share (EUR) | 1.75 | 1.68 |
| Earnings per share from continued operations (EUR) | 1.47 | 1.15 |
| Earnings per share from discontinued operations (EUR) | 0.28 | 0.53 |
| Dividend per share (EUR) 3 | 0.60 | 0.55 |
| Total dividend (EUR million) 3 | 115.5 | 105.9 |
| Pay-out ratio 3 (%) | 34.4 | 32.6 |
1) Or on the last trading day of reporting period 2) Based on shares issued
3) Based on dividend proposal Prices: XETRA closing prices
The Executive Board and Supervisory Board of GEA Group Aktiengesellschaft will propose to the Annual General Meeting on April 16, 2014, that an increased dividend of EUR 0.60 per no-par value share be paid for fiscal year 2013 (2012: EUR 0.55). As a result, the distribution ratio is once again within the target range of one-third of the group's earnings. This represents a dividend yield of 1.7 percent on the share price of EUR 34.60 on December 30, 2013.
The dividend will be paid from the contribution account for tax purposes (section 27 of the Körperschaftsteuergesetz (KStG – German Corporate Income Tax Act)), meaning that investment income tax and the solidarity surcharge will not be deducted. In the case of shareholders in Germany, the dividend is not subject to current taxation in the year of payment. The opinion of the German tax authorities (see also the Federal Ministry of Finance (BMF) circular dated December 22, 2009, paragraph 92) is that the payment of dividends from the contribution account for tax purposes constitutes a repayment of shareholder contributions, which results in a subsequent reduction of the costs of the shares. This may lead to taxation of higher capital gains when shares are sold subsequently.
GEA Group Aktiengesellschaft offers a long-term share-based payment program for first-, second- and third-tier managers (see page 48 f.). In July 2013, the eighth tranche was issued for these three management levels, with a participation rate of 66 percent. Each GEA Performance Share Plan runs for three years. The fifth tranche, which was issued in the summer of 2010, ended in June 2013 with a payout rate of 79 percent.
Two international agencies, Moody's and Fitch, have rated GEA Group Aktiengesellschaft's ability to meet its financial obligations. These ratings serve as evidence of the Company's creditworthiness to existing and potential debt capital providers. The two agencies gave the following unchanged ratings to GEA Group:
| 2013 | 2012 | |||
|---|---|---|---|---|
| Agency | Rating | Outlook | Rating | Outlook |
| Moody's | Baa3 | stable | Baa3 | stable |
| Fitch | BBB- | stable | BBB- | stable |
These ratings ensure that GEA Group has unlimited access to the international financial markets.
The bond issued in 2011 offered investors a yield of 1.23 percent as of December 31, 2013 (bond price: EUR 106.76) following an issue yield of 4.33 percent.
To further optimize its group financing structure in the long term, GEA Group Aktiengesellschaft took out a new syndicated credit line in the form of a club deal amounting to EUR 650 million in fiscal year 2013. This replaces the credit line with the same volume falling due in June 2015. In addition, it again allowed the financing structure to be enhanced ahead of schedule and in a forward-looking manner through improved margins and the renewed extension of the maturity. The loan has a five-year term and also includes two prolongation options for one year in each case until August 2020 overall. In total, GEA thus has credit lines (including bonds and borrower's note loans) in the amount of EUR 1,740 million, of which EUR 974 million had been utilized as of the balance sheet date. Further information on the credit lines and their utilization can be found in note 3 to the consolidated financial statements beginning on page 140.
GEA Group Annual Report 2013
Lasting success goes hand in hand with responsible corporate behavior. As an international technology group and one of the world's largest suppliers of process technology to the food industry, GEA is acutely aware of its responsibility with respect to the economy, society, and the environment. One of its prime enterprise goals is therefore to supply solutions that combine a high level of efficiency and social benefit with assisting our customers to protect the environment.
Sustainability for GEA means securing its future viability on the basis of a stable economic and social foundation and an intact environment. Sustainability management also serves to limit economic, social, and reputational risks to the group. Major global trends such as constant population growth, increasing urbanization, and advancing climate change present the world with mounting challenges. In the future, people will continue to require an adequate supply of food, energy, and pharmaceutical products, all of which will have to be produced in a manner that helps to conserve precious resources. GEA has its own companies and production sites in the world's growth regions and directly supplies local markets. Its product portfolio of technical components, machinery, and systems provides key solutions to these challenges. At the same time, the Company regards its commitment to corporate social responsibility (CSR) as an investment in the economy, society, and the environment, and hence in its own future – in line with the group motto "engineering for a better world."
Society
Ecology - Climate protection - Resource-efficient products - Environmentally friendly production
GEA aims to safeguard the interests of its shareholders, customers, and employees for the long-term future, and to fulfill its responsibility toward society, by strengthening its international competitiveness and boosting its business performance. The group pursues this objective first and foremost by being a dependable partner for its customers with an attractive and sustainable product line, as an exemplary employer to its global workforce of, in future, approximately 18,000 employees, as a taxpayer, and as a supporter of charitable projects.
Although energy consumption and emissions during production are relatively low in the engineering sector, GEA regularly examines all areas for opportunities to improve efficiency in this sphere as well. The group's workforce provides a vital contribution to this process via the ideas and improvement management system.
The group not only ensures that its own processes along the value chain are based on ecological principles, but also helps its customers to protect the environment by providing efficient products and process solutions. As a rule, these customers employ very energy-intensive technologies and processes, with the result that potential energy savings and reductions in emissions and waste now play an increasingly significant role in their capital investment decisions. For many years now, GEA solutions have served as the benchmark for the successful combination of economic and ecological factors (see page 106 ff.).
The production of processed foods and beverages is one of the world's most stable growth markets, and one that can also be expected to see continuous growth over the coming decades. As a technology leader, GEA Group supplies this market with machinery, components, systems, and plant that guarantee safe process management and the highest standards of efficiency and hygiene.
Detailed information on GEA's basic principles, its segment structure, and its business orientation can be found in the chapter entitled "Organization and Structure" (see page 13 ff.).
GEA places the highest priority on transparent and responsible corporate governance and management aimed at long-term value enhancement. Its activities are based on recognized corporate governance principles and comply fully with the recommendations of the German Corporate Governance Code. In addition, GEA Group has an extensive compliance organization.
A detailed presentation of the topic of corporate governance can be found in the Corporate Governance Report included in this Annual Report (see page 58 ff.).
Together with its European Works Council, GEA Group Aktiengesellschaft issued a code of conduct in March 2006, which formulates a binding set of values, principles, and modes of behavior that govern corporate conduct at the GEA group. With these ethical and legal standards, GEA is making a clear commitment to free and open world trade as a vital precondition for continued global economic growth. Wherever possible, the group supports measures designed to combat underdevelopment in the countries of the Third World and fully accepts its corporate social responsibility. Likewise, GEA welcomes the principles of the UN Global Compact and, as part of the process of progressive internationalization, endorses all internal and external corporate social responsibility (CSR) initiatives. The group pledges to respect human rights and the core labor standards developed by the International Labour Organization (ILO). In addition, GEA fully complies with the OECD guidelines for multinational enterprises. In order to ensure the greatest possible transparency, GEA Group has also published its Global Business Conduct Policy on the company website (www.gea.com/en/investoren/corporate_ governance.html).
Compliance is accorded the highest priority at GEA. All managers and employees must comply with the law and the relevant guidelines. GEA has drawn up detailed guidelines with binding principles for conduct, including, in particular, an anticorruption guideline. Regular training measures and monitoring help to provide early warning of, or prevent, improper behavior.
Further information on the issue of compliance can be found in the Corporate Governance Report included in this Annual Report (see page 58 ff.).
In addition to the compliance organization described in the separate Corporate Governance Report, there are areas within group management dedicated to diversity, company values, and crisis management. Moreover, an environment, health, and safety (EHS) organization has been established.
At GEA, we are convinced that much more can be achieved by working with, rather than merely alongside, one another. In order to establish this kind of corporate culture, GEA has defined clear principles which managers must follow, and has created the core competencies necessary for this.
All our managers are committed to information exchange and cooperation, strengthening the GEA group as a whole. This, too, has been a key factor in cementing GEA's position as one of the most successful engineering companies worldwide – an achievement from which all segments and every single employee profits.
To ensure optimal human resources' development, we have taken the five principal requirements for managers at GEA and broken them down into 12 qualities that, ideally, they should already possess when joining us. These qualities also serve as the basis for our management training and continuous professional development modules. They are: a down-to-earth mentality/respect for others, integrity/ authenticity, vitality, drive, empathy, intuition, good communication skills, a sense of the big picture, an appreciation of the efforts of others, a commitment to sustainably developing our management culture, an ability to reason, and resilience. All 12 of these qualities have been defined in a detailed and intuitive manner that precisely conveys what the group expects with regard to each of them.
Unexpected incidents such as natural disasters or terrorist attacks can also have extreme consequences for GEA. Such incidents can also endanger the safety, health, and even the lives of group employees. The topic of employee safety is presented in detail on page 100 f.
In order to prepare as effectively as possible for such material corporate risks, GEA Group has implemented a comprehensive safety management strategy at all levels of the company. The group's Major Incident Manual provides clearly defined criteria for all employees regarding the detection, evaluation, and reporting of critical incidents. This manual also contains measures and detailed contingency plans designed to ensure a rapid and appropriate response in an emergency, and names qualified contact persons within GEA Group.
GEA fully accepts its obligation to make a contribution towards the sustainable development of society, both within the Company as a responsible employer, and in the wider social context.
With its large number of companies, some of them very small, GEA has a special structure. In addition, many of our employees are deployed on external construction sites or work on service contracts at our customers' production plants.
Detailed information on the topics of personnel marketing and human resources development at GEA can be found in the "Employees" chapter (see page 48 ff.).
Fair Company label: widely recognized seal of quality for GEA
GEA operates in a challenging international market environment with a large number of players who influence the Company in many different ways – ranging from customers, competitors, and employees down to the government and society in general. Companies can rise to the many challenges associated with this culturally extremely diverse environment by being aware of diversity and by actively creating it within its own ranks. Diversity is defined as the composition of the workforce in terms of nationality, gender, age, and qualifications. GEA recognizes that diversity is a strategic success factor – that diversity is strength.
The Corporate Diversity Management function at group management level is responsible for making diversity a firmly established part of GEA's corporate culture and hence supporting the business activities of all its segments. A diversity organization in all segments helps to ensure diversity management. This international team of diversity managers, comprising women and men from a whole range of functions, represents the spirit of diversity throughout the Company.
In order to promote diversity on as many levels as possible and, for example, to create an attractive working environment, GEA also intends to introduce more flexible working hours and to increase mobility within the Company.
Diversity criteria are included as a matter of course when recruiting and appointing staff. One of the objectives is to recruit more women to GEA and to involve a greater number of talented female employees in internal employee development initiatives. Furthermore, diversity management is one of the key ways in which employee potential and talent can be reliably identified. In line with this, the entire pool of future executives is to receive training on the GEA diversity criteria, as described above.
A catalog of GEA diversity performance indicators is used to measure achievements and progress in the area of diversity management. Applied on the group management, segment, and company level, these determine the degree to which targets have been met and the success of diversity measures, which are evaluated in all cases on the basis of three criteria: performance, potential, and diversity.
The current proportion of women in the total workforce is 19 percent. At the management level, they account for a total of 13 percent. At the more narrowly defined level of the top 400 executives, however, the proportion of woman falls to around seven percent. With regard to the international composition of the workforce, there are over 90 different nationalities employed at GEA. Over 60 percent of employees come either from Germany (32 percent) or the rest of Western Europe, and around 16 percent from the Asia/ Pacific region. At the level of the top 400 executives, over 45 percent are from Germany and, for example, 7 percent from the Asia/Pacific region.
In a further measure intended to institutionalize diversity management at the Company, an official diversity policy has been introduced, together with guidelines for managers. This policy describes the overriding aims and the progress made to date in diversity management at GEA. The guidelines provide managers with an instrument for implementing diversity management at all group levels.
On account of its importance to corporate culture at GEA, the topic of diversity is closely entwined with the group's company values. In this respect, diversity is a force for change, promoting greater pluralism in thought and action.
GEA's vision and its company values are the mainstays of its management philosophy. They are the key elements of a shared corporate identity. GEA has built on its values – "excellence", "responsibility", "integrity", "passion", and "GEA-versity" – to create an orientation system and frame of reference that provide managers and employees with a shared understanding of, and guidelines for, how to behave at an individual level. Translated into action, these values mean: We are committed to
excellence in every respect; we are passionate about our work; we practice what we preach; we are responsible for the consequences of our actions; and we break down barriers.
GEA Group Annual Report 2013
GEA's company values give both managers and employees greater security in their dealings with one another. Ultimately, the company values are designed to boost efficiency and professionalism in all GEA segments and companies as well as to promote a constructive dialog within the Company and with the world at large.
GEA has implemented a host of measures to help employees reconcile the demands of work and family life, such as company-organized childcare, flexible working hours, and opportunities to work while on the move.
As of March 1, 2013, for example, employees of GEA Farm Technologies have been able to place their young children in daycare at the "Merschzwerge" nursery on the Siemensstrasse in Bönen/Germany. This joint initiative is run by the nonprofit association GK Merschzwerge e.V., which was set up for the purpose by GEA and the other participating companies. Three child care workers provide daycare for children of under three years old from 6:30 a.m. to 6:30 p.m. The nursery's long opening hours and its proximity to the workplace help parents to accommodate the demands of work and home. In August of last year, the nursery started providing daycare for a second group of nine infants, allowing up to 18 children, divided into two groups of nine, to be cared for.
In order to work productively and develop their potential to the full, employees need a pleasant and safe working environment. The requirement to offer all employees safe conditions in the workplace is enshrined in GEA's code of conduct, which obligates our managers to guarantee the best possible health and safety conditions in every GEA Group workplace worldwide. Even in countries with less stringent safety requirements, locations are still subject to GEA Group's higher standards. In addition, group employees regularly receive first-aid training, thereby ensuring that competent help is rapidly available in an emergency.
GEA Safety Management also provides a comprehensive service for all employees traveling worldwide on behalf of the group. This includes detailed travel and safety information for every region of the world. Should a group employee become caught up in an emergency situation nonetheless, he or she can contact the 24-hour GEA Group Security and Support Hotline. If necessary, this service can also rapidly organize personal protection for any employee and at any location worldwide. The Medical Support Service Hotline provides assistance with health-related issues and, in the event of illness, provides appropriate medical care or even transport back home. Using a security app and a mobile device, GEA employees can also obtain medical and safety information on a group location at any time or directly contact, via an emergency button, the 24-hour hotline at the GEA Security Center. This fills a gap in the chain of communication, further enhancing the service provided to employees by the GEA Security Center.
GEA also maintains a continuously updated database with the locations of all employees on business trips worldwide. In the event of a regional crisis, this so-called Travel Tracker enables it to respond rapidly and provide employees with active assistance.
Employees who suddenly get into difficulties, following, for example, a severe accident or a sudden illness, require rapid and unbureaucratic financial assistance. In a group-wide agreement with the Works Council, GEA has pledged to provide this form of assistance in such cases. Employees affected in this way, and also the families of employees who suddenly die, can apply to the GEA Aid Commission.
GEA wants all its employees to be able to enjoy their well-deserved retirement. This also includes the financial security to enjoy an appropriate standard of living. In many countries, however, the impact of demographic change, increased life expectancy, and high unemployment is placing a growing financial burden on the state pension system. Private and, especially, company pension plans are playing an increasingly significant role in making up the shortfall. The Company therefore provides an efficient pension plan for all employees.
The company pension plan for GEA managers is, like the remuneration system, based on a mixture of fixed components and performance-related parameters.
GEA Group also offers an attractive performance-related pension plan for employees below senior management level. In Germany, for example, this is based on an employee-financed deferred compensation plan. Employees can opt not to be paid out part of their salary, instead putting the money toward their pension. If an employee chooses this option, GEA Group tops up the basic employee contribution with an additional employer (company-financed, performance-related) contribution.
A health-conscious workforce is important for the long-term, sustainable development of a company, because healthy employees are more productive, more reliable, and more motivated. GEA therefore supports its employees with a variety of active healthcare offerings.
This program to promote employee health comprises a broad range of measures to prevent illness. These include cancer screening, seminars on how to give up smoking, instruction on ergonomics in the workplace, and the provision of GEA Care menus in employee restaurants.
In the fall of 2013, the GEA Care healthcare program was awarded the "Dortmunder Personalmanagement Prädikat", a prize for excellence in the field of human resources. In addition to applauding the above measures, the jury also commended the fact that GEA takes into account the wishes and ideas of employees when designing its healthcare offerings. Jury members also saw GEA Care as an excellent instrument for attracting employees to the group and promoting their retention. The prize, which was awarded for the seventh time, is partly supported by funds from the European Regional Development Fund.
As part of GEA Care, a Health Day was held for the first time at GEA Food Solutions Germany GmbH in Wallau/Germany. The event, which drew an enthusiastic response from the workforce, was held under the banner "GEA – Gesundheit erleben am Arbeitsplatz" (GEA – Experiencing Healthcare in the Workplace). Two types of examination were offered: an ultrasound examination of the thyroid, and a cardiovascular risk assessment. Over 100 examinations were conducted in the course of the day. There are now plans for additional Health Days in the future.
There was also support for the initiative "Denk an mich – Dein Rücken" (Think of Me – Your Back): to mark the launch, there was a newsletter, followed by a period of over a month with one or two tips a day describing short exercises, for the workplace or at home, and relaxation techniques. Safety topics are also addressed. These include safe travel, on foot and by car, during the winter; information on the topic of noise; protective clothing to prevent cuts; and neatness and cleanliness in the workplace.
Programs held in special development and assessment centers, and with the assistance of external coaches, provide employees with a range of information on the beneficial effects of exercise, greater fitness, and a healthy diet. Where possible, the theoretical information is supplemented by practical exercises. All preventive measures are based on the actual living and working environments of the employees concerned. In addition, the group offers individual coaching with fitness tests or health checks.
GEAktiv is an online portal established by GEA to help employees meet up for joint sporting activities. Hosted in the GEA intranet, it enables people to easily find training partners in their specific sporting activity or to post their own events. GEAktiv already covers more than 30 different sports and is growing all the time.
As a global enterprise, GEA is also involved in a host of projects outside its own companies, where support is given directly to local people.
GEA and its employees help people in many different ways. GEA Goedhart B.V. in Sint-Maartensdijk/ Netherlands, for example, staged four fundraising cycle tours on its open day. The four-figure sum raised was donated the Duchenne Parent Project, which supports research into, and the treatment of, muscular dystrophy. Similarly, GEA Food Solutions in Wallau/Germany donated used carpentry tools and equipment for a training workshop in Korogwe/Tanzania, which provides young people with free training in a manual trade. In a further initiative, GEA employees collected donations at the summer festival in Bochum/Germany for the nonprofit organization St. Vinzenz e.V.. Elsewhere, Dutch and German employees of GEA Westfalia Separator collected donations to purchase special exercise machines for the pediatric oncology ward at the Radboud Hospital in Nijmegen/Netherlands. Last but not least, GEA Air Treatment in Wurzen/Germany ran a project employing school students in areas of administration and production for a day. The students then donated the money they had earned to a nationwide scheme that supports, among other causes, the construction of healthcare facilities in Africa and Latin America.
GEA focuses particularly on projects with children and adolescents, including schemes to introduce them as early as possible to the fascinating world of engineering. For visitors to the "Stöbertage" (Exploration Days) at the GEA Mechanical Equipment Segment, this starts even before they reach school age. Groups of kindergarten children are invited
GEA's "Stöbertage" are a fun experience for kids
along to learn about tools and machinery, and to discover the world of engineering. At the same time, GEA also supports a variety of establishments such as schools and kindergartens.
By easing the transition between school and the world of work, and by encouraging school students to think about their future vocation or program of study, cooperation between schools and industry helps ensure that companies – especially in technical fields – are able to recruit a sufficient supply of new labor. This is why GEA is involved in the School-Business Cooperation Network. This covers activities such as information events at participating schools, assistance for students with job applications, and joint projects between school students and the Company's vocational trainees. In addition, the cooperation network is involved in staging a special exhibition of works by students and in organizing the program to mark the opening of the art exhibition "Family and Friends" in Bochum.
In future years, GEA Group will continue to need creative young people with a passion for science and engineering. In order to convince students of the variety and appeal of a career in engineering and to show them the career opportunities on offer, GEA has joined forces with other companies in a variety of projects, including the "Technik ist Zukunft" (Technology is the Future) initiative. In addition to the Company's financial support for the initiative, its employees go to meet potential recruits face to face at the various "Technik ist Zukunft" action days that are held at schools. Here, students can learn from their graphic accounts about the work of the group, the products and services it offers, and the career openings available. GEA also regularly invites groups of school students on tours of group locations, offering them a comprehensive overview of production operations and the daily working routine at GEA Group.
All GEA Group segments participate in the German Girls' Day, an initiative designed to encourage girls from year five onward to think about their future career options. It provides them with an opportunity to find out more about a wide variety of professions in science and engineering. This mix of open day and detailed information event offers participants a hands-on encounter with technology and is intended to stimulate an interest in an engineering career at an early age.
True to its principles of diversity management, GEA is also helping to improve the economic situation of disadvantaged members of society in South Africa. As part of this initiative, the group has been involved since 2009 in a program to provide work opportunities for young black people with disabilities.
Participants receive job training from specially trained instructors and also have the opportunity to earn money at the same time. The trainees, accompanied by a mentor, are employed for a one-year training period. Regular monitoring ensures that the program's quality standards are being met. Graduates of the program receive the national certificate in Business Administration Services and are regularly taken on by GEA Group.
The American Cancer Society provides support for cancer sufferers and their families. One of the society's regular fund-raising events is the Relay for Life. For many years now, a team from GEA has taken part in this run. GEA pays the entry fee and provides a donation to support the team. In addition, group employees also donate to this cause. The money is large-
GEA employees in the U.S.A. support the American Cancer Society
ly raised on so-called Blue Jeans Days, when normal dress code is suspended. Anyone wishing to come to work in jeans and sneakers donates five dollars.
GEA Group's "Kunst in der Rotunde" (Art in the Rotunda) exhibition program has been enlivening the art world in the Ruhr region since August 2000. The program derives its name from the glass rotunda at GEA's administrative building in Bochum. It offers an ideal forum for paintings, graphic art, sculpture, found objects, photography, and installations.
Even now that group management has relocated to Düsseldorf, GEA still organizes several exhibitions a year in the GEA Center Bochum. A major selection criterion is whether an artist has a connection to the Ruhr region. Each exhibition features, as a rule, two or three artists, and kicks off with a vernissage and an introductory presentation of the works. An accompanying booklet is also published.
Works of art purchased from previous exhibitions now adorn the corridors, offices, and conference rooms of a number of GEA locations. GEA also has a scheme enabling employees to rent out works from this collection and to buy them at the end of the rental period.
Closely connected to "Kunst in der Rotunde" is a special exhibition regularly held in the summer by the name of "Family and Friends." This program is intended to offer all GEA employees with a creative bent, along with their family and friends, a platform to present the fruits of their artistic labors. The "Family and Friends" exhibitions have also been held since the year 2000. Over the years, they have become increasingly popular among the global GEA family and are now a firm fixture in the events calendar.
Sustainability in the ecological sense is based on the principle of protecting nature and conserving its limited resources. GEA's innovative products make an important contribution to this cause. In the world of process technology and engineering, the days are long gone when economics and ecology were conflicting goals. Our customers can help promote climate protection by using machinery, components, systems, and plants produced by the group. Equally, environmental protection is accorded its proper status within the Company.
GEA's main environmental objectives are saving energy, optimizing plant design, and conserving resources. At GEA, all key environmental parameters are monitored locally and their significance and impact on products and services analyzed to identify ways of improvement. Monitored environmental parameters include
Measures taken at the group's production operations to protect the environment frequently exceed the statutory requirements – as confirmed by the environmental certifications obtained in accordance with DIN EN ISO l400l. In-process environmental protection, resource conservation, and comprehensive health and safety measures are all standard practice throughout the group. Production waste is sorted and, wherever possible, recycled. Any further environmental impact is largely avoided through the use of exhaust gas filters and collecting vessels, and through the treatment and recycling of process liquids.
As in previous years, GEA Group took part in the Carbon Disclosure Project (CDP) survey in 2013. CDP is an independent, not-for-profit organization currently representing more than 700 institutional investors. Each year, it gathers information on the greenhouse gas emissions of major listed corporations and their strategies to combat climate change. The results are then made available to current and potential investors. In the survey, GEA Group also provided an assessment of the opportunities and risks related to climate change, and information on the measures it employs to protect the climate. From GEA's perspective, any potential risks arising from a shift in demand will at the very least be offset by equally large opportunities to supply customers with energy-efficient solutions for their production processes from our wide range of products.
As yet, there is no uniform system in place throughout the group to measure CO2 emissions. However, CO2 emissions are measured in the segments on the basis of national and international standards such as ISO 14001 or the CO2 Saver Certificate.
GEA Group is an alliance member of Blue Competence, an initiative of the German Engineering Federation (VDMA). The members of the initiative have pledged to develop and promote sustainable engineering solutions in accordance with economic, ecological, and societal demands. In this way, they are
also assuming responsibility for prosperity, education, safety, and nature. The industry associations, organizations, and companies involved in this initiative – including GEA – are also factoring in the consequences of urbanization and globalization into their strategies.
GEA Refrigeration Technologies is a member of the COOL-SAVE energy conservation project. Founded as part of the European-wide Intelligent Energy Europe (IEE) program, this project aims to increase the energy efficiency of refrigeration systems used in the food industry. This is being done by collecting
The IEE's COOL-SAVE energy conservation project
data at the refrigeration plants of selected food producers that will serve as a benchmark in developing best-practice measures to improve the efficiency of refrigeration systems. Like the IEE program, the COOL-SAVE project is intended to boost the competitiveness of climate-friendly and sustainable energy technology. A total of nine companies from six EU member states are partners in the COOL-SAVE project.
As of 2013, new fleet management software has meant that key data on parameters such as kilometers driven, fuel consumption, and the related CO2 emissions for each vehicle can be recorded on a central basis. This system was introduced initially in Germany, where the largest share of the vehicle fleet is in operation, thereby creating the basis for ecological fleet management.
Energy consumption is an increasingly important factor in the total cost of ownership of a machine or item of equipment. GEA believes that global climate change creates major potential for the use of its energy-efficient products.
Water is a key factor in the sustainability of GEA's products. A large part of consolidated revenue is generated by products that are related in some way to the careful management of this precious resource. These include bottling systems that require substantially less water for cleaning purposes, air-cooled condensers whose closed-circuit design prevents water loss, efficient generator coolers, and separators and decanters for drinking water production or for wastewater treatment plants.
The following examples show the savings potential for a variety of resources that is provided by machinery, components, systems, and plants from GEA Group.
Worldwide, GEA SmartPacker vertical baggers have already packed more than 130 million bags and sealed them using ultrasound. Now these machines are also available with continuous film transport for gauges of OPP film as thin as 30 microns. Demand for these extremely thin and more environmentally friendly films is on the increase because they not only cost less than thicker gauges but also lead to significantly less waste. The move to reduce the environmental impact of packaging is being led by various governments, supermarket chains, customers, and consumers.
The bagger's Zero Reject Sealing System guarantees an airtight seal even if contaminants like water or leaf are present in the seal area, thereby enabling automatic case packaging without the need for prior seal checking. Moreover, a narrower sealing zone is required – as a rule, a 70 percent reduction in width compared to conventional heat sealing. In combination with a reduction in the number of reject bags, this not only cuts waste by 2 to 8 percent but also lowers costs on account of reduced film usage. Altogether, this increases packaging output by as much as 10 percent. The narrower sealing zone also provides customers with more scope for an attractive packaging design. Given optimal production conditions, it is possible to recoup the necessary capital expenditure in less than 18 months.
GEA Farm Technologies' IntelliBlend system is now providing farmers with a sustainable method for using teat dip products. Supplied to dairy farms in concentrated form, the dip is prepared – following an analysis of water quality – by the addition of electrolyzed water. With the IntelliBlend system, dairy farmers can individually adjust the concentration of dip product according to their precise needs.
This method brings a range of benefits both for the farmer and the environment. The use of concentrate as opposed to ready-to-use dip reduces the product volume by 86 percent.
This cuts transportation requirements by a major factor, since a much greater amount of product can be supplied in a single delivery. At the same time, this saves on production and packaging materials, thereby reducing total costs by 15 percent. Individual adjustability of dip concentration enables a more targeted use of product with enhanced results. In turn, this improves milk quality, since the degree of teat disinfection can be precisely tailored to the current requirements. This form of fine tuning is not an option with ready-to-use products.
The combination of a diminished environmental impact – through savings in packaging material and transportation requirements and greater efficiency through a dip product dosage tailored to precise needs – marks another innovative contribution to sustainable dairy farming. GEA Farm Technologies is currently working on further initiatives as part of its sustainability strategy. These focus on the areas of energy, water, efficiency, and, in particular, animal health.
The GEA Mechanical Equipment segment unveiled its new gMaster CF4000 decanter at the drinktec 2013 trade show. Suitable for a host of applications in the beverage industry, the gMaster CF4000 is a member of the ecoforce generation of decanters, which sets new standards in terms of performance, easy cleaning, product quality, gentle processing, and energy efficiency.
Equipped with a high-torque summationdrive, the decanter reliably delivers the ideal differential speed for the process in question, thereby ensuring optimal operation. Furthermore,
the motors are only supplied with the power they actually require, with the result that the drive system operates in an extremely energy-efficient manner. Similarly, no additional electrical components are required for energy recovery or belt drives, which circulate power. With its compact dimensions, the decanter saves on installation space. At the same time, shaft loads are reduced and costs cut as a result of lower energy losses. Finally, the use of "energy jets" – specially shaped weir plates providing integrated flow deflection – along with enhanced rotor geometry (super-deep pond design) reduce the decanter's energy requirements even more. All in all, this means a reduction in specific energy consumption by ecoforce decanters of up to 30 percent.
Freeze concentration is a gentle process by which pure water is extracted from liquid foods in the form of ice crystals. It can be used to produce a liquid concentrate, which keeps longer than the original food and is also easier to transport due to the reduced volume. As a rule, this process is used for applications that require exceptionally gentle heat processing so as to avoid product damage through, for example, loss of aroma. The process runs as a completely closed system at subzero temperatures and therefore ensures that the quality, taste, and freshness of sensitive foods such as coffee or fruit juice are fully preserved.
Following a full revamp of the entire process, GEA Process Engineering has been able to substantially reduce the overall costs of freeze concentration by up to 50 percent. The operating costs have fallen by up to 40 percent. The lion's share of this saving has come from a reduction in energy consumption. At the same time, the space requirements for the process have been cut by 30 percent. As a result, the process is now a real option for customers who wish to provide a concentrated product of exceptional quality but who have faced difficulties in the past financing the additional expense. The revamped freeze concentration process, marketed as IceConTM, now has major growth potential for use in a whole range of niche sectors in a variety of industries.
A hydraulic combination of refrigeration system and heat pump offers big potential for energy savings in trade and industry. Using the waste heat from refrigeration systems – which, on account of its low temperature, generally remains unused in other setups – the systems from GEA Refrigeration Technologies can, in many instances, deliver useful heat for use as process heat, for heating buildings, or for producing hot water. This minimizes the consumption of resources and reduces CO2 emissions. In the food industry, for example, heat pumps from GEA Refrigeration Technologies make
a twofold contribution to sustainability. GEA Grasso compressors and chillers with natural refrigerants are the industry standard – even when it comes to managing large temperature differences at optimal energy efficiency. Using the waste heat, 1 kilowatt of additional electricity will generate over 35 kilowatts of hot water at +65 °C.
A comparison between a dairy with an old refrigeration system plus gas-fired boiler and a dairy with a new refrigeration system plus add-on heat pump has shown that, for the new configuration, power consumption for refrigeration is around 20 percent lower, gas consumption is reduced to one-fifth, and water consumption declines by over half. Additionally, configurations with heat pumps make it possible to dispense with the use of a gas-fired boiler altogether. Wherever there is a need for refrigeration and heat generated in an economic and sustainable manner, GEA Refrigeration Technologies is able to provide its customers with a true win-win situation.
| Assets | |||
|---|---|---|---|
| (EUR thousand) | Section | 12/31/2013 | 12/31/2012 * |
| Property, plant and equipment | 5.1 | 490,420 | 738,479 |
| Investment property | 5.2 | 13,448 | 10,571 |
| Goodwill | 5.3 | 1,312,554 | 1,846,051 |
| Other intangible assets | 5.4 | 319,840 | 375,756 |
| Equity-accounted investments | 5.5 | 13,690 | 14,681 |
| Other non-current financial assets | 5.6 | 42,068 | 48,846 |
| Deferred taxes | 7.7 | 385,822 | 445,401 |
| Non-current assets | 2,577,842 | 3,479,785 | |
| Inventories | 5.7 | 551,055 | 752,058 |
| Trade receivables | 5.8 | 929,156 | 1,249,863 |
| Income tax receivables | 5.9 | 8,332 | 19,350 |
| Other current financial assets | 5.6 | 108,939 | 166,234 |
| Cash and cash equivalents | 5.10 | 683,520 | 743,524 |
| Assets held for sale | 4. | 1,605,786 | 18,447 |
| Current assets | 3,886,788 | 2,949,476 | |
| Total assets | 6,464,630 | 6,429,261 |
*) Amounts adjusted due to change in accounting policy for employee benefits (see page 118 f.)
| Equity and liabilities (EUR thousand) |
Section | 12/31/2013 | 12/31/2012 * |
|---|---|---|---|
| Subscribed capital | 520,376 | 520,376 | |
| Capital reserve | 1,218,073 | 1,217,864 | |
| Retained earnings | 627,612 | 398,159 | |
| Accumulated other comprehensive income | –53,026 | 27,960 | |
| Non-controlling interests | 2,667 | 2,552 | |
| Equity | 6.1 | 2,315,702 | 2,166,911 |
| Non-current provisions | 6.2 | 123,777 | 165,824 |
| Non-current employee benefit obligations | 6.3 | 672,711 | 702,053 |
| Non-current financial liabilities | 6.4 | 957,785 | 1,005,445 |
| Other non-current liabilities | 6.7 | 2,834 | 5,214 |
| Deferred taxes | 7.7 | 98,779 | 124,039 |
| Non-current liabilities | 1,855,886 | 2,002,575 | |
| Current provisions | 6.2 | 170,651 | 270,220 |
| Current employee benefit obligations | 6.3 | 152,644 | 180,370 |
| Current financial liabilities | 6.4 | 67,868 | 132,465 |
| Trade payables | 6.5 | 646,529 | 839,143 |
| Income tax liabilities | 6.6 | 32,038 | 39,912 |
| Other current liabilities | 6.7 | 603,446 | 797,665 |
| Liabilities held for sale | 4. | 619,866 | – |
| Current liabilities | 2,293,042 | 2,259,775 | |
| Total equity and liabilities | 6,464,630 | 6,429,261 |
*) Amounts adjusted due to change in accounting policy for employee benefits (see page 118 f.)
GEA Group Annual Report 2013
| (EUR thousand) | Section | 01/01/2013 - 12/31/2013 |
01/01/2012 - 12/31/2012 * |
|---|---|---|---|
| Revenue | 7.1 | 4,319,994 | 4,142,317 |
| Cost of sales | 2,957,551 | 2,869,167 | |
| Gross profit | 1,362,443 | 1,273,150 | |
| Selling expenses | 456,565 | 483,853 | |
| Research and development expenses | 62,498 | 70,855 | |
| General and administrative expenses | 455,721 | 433,755 | |
| Other income | 7.2 | 194,915 | 188,139 |
| Other expenses | 7.3 | 169,169 | 162,999 |
| Share of profit or loss of equity-accounted investments | 1,942 | 1,455 | |
| Other financial income | 7.5 | 5,202 | 3,977 |
| Other financial expenses | 7.6 | 958 | 953 |
| Earnings before interest and tax (EBIT) | 419,591 | 314,306 | |
| Interest income | 7.5 | 8,935 | 8,015 |
| Interest expense | 7.6 | 76,390 | 95,188 |
| Profit before tax from continued operations | 352,136 | 227,133 | |
| Income taxes | 7.7 | 70,097 | 12,876 |
| of which current taxes | 70,364 | 58,102 | |
| of which deferred taxes | –267 | –45,226 | |
| Profit after tax from continued operations | 282,039 | 214,257 | |
| Profit or loss after tax from discontinued operations | 4. | 54,354 | 100,938 |
| Profit for the period | 336,393 | 315,195 | |
| of which attributable to shareholders of GEA Group AG | 336,042 | 313,018 | |
| of which attributable to non-controlling interests | 351 | 2,177 | |
| Weighted average number of ordinary shares used to calculate basic and diluted earnings per share (million) |
192.5 | 185.8 | |
|---|---|---|---|
| Basic and diluted earnings per share | 7.8 | 1.75 | 1.68 |
| Basic and diluted earnings per share from discontinued operations | 0.28 | 0.53 | |
| Basic and diluted earnings per share from continued operations | 1.47 | 1.15 | |
| (EUR) |
*) Amounts adjusted due to first time classification of an operation as discontinued operation (see page 147 f.) and due to change in accounting policy for employee benefits (see page 118 f.)
| (EUR thousand) | Section | 01/01/2013 - 12/31/2013 |
01/01/2012 - 12/31/2012 * |
|---|---|---|---|
| Profit for the period | 336,393 | 315,195 | |
| Items that will not be reclassified to profit or loss in the future: | |||
| Actuarial gains/losses on pension and other post-employment benefit obligations | 6.3.1 | –716 | –103,380 |
| of which changes in actuarial gains and losses of which tax effect |
–875 159 |
–145,493 42,113 |
|
| Items that will be reclassified subsequently to profit or loss when specific | |||
| conditions are met: Exchange differences on translating foreign operations |
–83,503 | –19,526 | |
| of which changes in unrealized gains and losses | –83,503 | –19,526 | |
| Result of available-for-sale financial assets | 6.8 | –225 | –272 |
| of which changes in unrealized gains and losses | –325 | –388 | |
| of which tax effect | 100 | 116 | |
| Result of cash flow hedges | 2,909 | 4,167 | |
| of which changes in unrealized gains and losses | 7,436 | 2,348 | |
| of which realized gains and losses | –3,465 | 4,368 | |
| of which tax effect | –1,062 | –2,549 | |
| Other comprehensive income | –81,535 | –119,011 | |
| Total comprehensive income | 254,858 | 196,184 | |
| of which attributable to GEA Group AG shareholders | 254,340 | 193,945 | |
| of which attributable to non-controlling interests | 518 | 2,239 |
*) Amounts adjusted due to first time classification of an operation as discontinued operations (see page 147) and due to change in accounting policy for employee benefits (see page 118)
| (EUR thousand) | Section | 01/01/2013 - 12/31/2013 |
01/01/2012 - 12/31/2012 1 |
|---|---|---|---|
| Profit for the period | 336,393 | 315,195 | |
| plus income taxes | 70,097 | 12,876 | |
| minus profit or loss after tax from discontinued operations | –54,354 | –100,938 | |
| Profit before tax from continued operations | 352,136 | 227,133 | |
| Net interest income | 7.5/7.6 | 67,455 | 87,173 |
| Earnings before interest and tax (EBIT) | 419,591 | 314,306 | |
| Depreciation, amortization, impairment losses, and reversal of impairment losses | |||
| on non-current assets | 95,518 | 105,861 | |
| Other non-cash income and expenses | 7,643 | 4,209 | |
| Employee benefit obligations | –38,759 | –39,238 | |
| Change in provisions | 26,553 | –30,941 | |
| Losses and disposal of non-current assets | –882 | –1,600 | |
| Change in inventories including unbilled construction contracts 2 | –2,600 | 38,780 | |
| Change in trade receivables | –91,631 | 25,665 | |
| Change in trade payables | 72,074 | –11,726 | |
| Change in other operating assets and liabilities | 8,486 | –621 | |
| Tax payments | –71,343 | –71,080 | |
| Cash flow from operating activities of continued operations | 424,650 | 333,615 | |
| Cash flow from operating activities of discontinued operations | 101,167 | 131,437 | |
| Cash flow from operating activities | 525,817 | 465,052 | |
| Proceeds from disposal of non-current assets | 4,464 | 8,838 | |
| Payments to acquire property, plant and equipment, and intangible assets | –120,508 | –124,996 | |
| Payments to acquire non-current financial assets | –5,006 | –800 | |
| Interest income | 5,176 | 4,897 | |
| Dividend income | 4,420 | 2,298 | |
| Payments to acquire subsidiaries and other businesses | –5,465 | –66,739 | |
| Cash flow from investing activities of continued operations | –116,919 | –176,502 | |
| Cash flow from investing activities of discontinued operations | –75,672 | –71,999 | |
| Cash flow from investing activities | –192,591 | –248,501 | |
| Dividend payments | –105,873 | –101,094 | |
| Payments from finance leases | –4,408 | –4,980 | |
| Proceeds from finance loans | 20,378 | 505,056 | |
| Repayments of borrower's note loans | –55,000 | – | |
| Repayments of finance loans | –56,882 | –255,317 | |
| Interest payments | –44,495 | –41,314 | |
| Cash flow from financing activities of continued operations | –246,280 | 102,351 | |
| Cash flow from financing activities of discontinued operations | –5,072 | –4,655 | |
| Cash flow from financing activities | –251,352 | 97,696 | |
| Effect of exchange rate changes on cash and cash equivalents | –23,542 | –4,940 | |
| Change in unrestricted cash and cash equivalents | 58,332 | 309,307 | |
| Unrestricted cash and cash equivalents at beginning of period | 735,981 | 426,674 | |
| Unrestricted cash and cash equivalents at end of period | 5.10 | 794,313 | 735,981 |
| Restricted cash and cash equivalents | 5.10 | 1,464 | 7,543 |
| Cash and cash equivalents total | 795,777 | 743,524 | |
| minus cash and cash equivalents classified as held for sale | –112,257 | – | |
| Cash and cash equivalents reported in the balance sheet | 5.10 | 683,520 | 743,524 |
1) Amounts adjusted due to first time classification of an operation as discontinued operation (see page 147 f.) and due to change in accounting policy for employee benefits (see page 118 f.) 2) Including advanced payments received
| Accumulated other comprehensive income | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| (EUR thousand) | Subscribed capital |
Capital reserves |
Retained earnings |
Translation of foreign operations |
Result of available-for sale financial assets |
Result of cash flow hedges |
Equity attributable to shareholders of GEA Group AG |
Non controlling interests |
Total |
| Balance at Jan. 1, 2012 (183,807,845 shares) |
496,890 | 1,333,359 | 288,660 | 49,585 | 759 | –6,687 | 2,162,566 | 1,026 | 2,163,592 |
| Adjustments and corrections 1 | – | – | 573 | –4 | – | – | 569 | – | 569 |
| Adjusted balance at Jan. 1, 2012 |
496,890 | 1,333,359 | 289,233 | 49,581 | 759 | –6,687 | 2,163,135 | 1,026 | 2,164,161 |
| Income | – | – | 313,018 | – | – | – | 313,018 | 2,177 | 315,195 |
| Other comprehensive income | – | – | –103,380 | –19,588 | –272 | 4,167 | –119,073 | 62 | –119,011 |
| Total comprehensive income | – | – | 209,638 | –19,588 | –272 | 4,167 | 193,945 | 2,239 | 196,184 |
| Dividend payment by GEA Group Aktiengesellschaft |
– | – | –101,094 | – | – | – | –101,094 | – | –101,094 |
| Change in non-controlling interests |
– | – | – | – | – | – | – | –713 | –713 |
| Share-based payments | – | 64 | – | – | – | – | 64 | – | 64 |
| Award proceedings 2 | 23,486 | –115,559 | 382 | – | – | – | –91,691 | – | –91,691 |
| Balance at Dec. 31, 2012 (192,495,476 shares) |
520,376 | 1,217,864 | 398,159 | 29,993 | 487 | –2,520 | 2,164,359 | 2,552 | 2,166,911 |
| Income | – | – | 336,042 | – | – | – | 336,042 | 351 | 336,393 |
| Other comprehensive income | – | – | –716 | –83,670 | –225 | 2,909 | –81,702 | 167 | –81,535 |
| Total comprehensive income | – | – | 335,326 | –83,670 | –225 | 2,909 | 254,340 | 518 | 254,858 |
| Dividend payment by GEA Group Aktiengesellschaft |
– | – | –105,873 | – | – | – | –105,873 | – | –105,873 |
| Change in non-controlling interests |
– | 230 | – | – | – | – | 230 | –403 | –173 |
| Share-based payments | – | –21 | – | – | – | – | –21 | – | –21 |
| Award proceedings 2 | – | – | – | – | – | – | – | – | – |
| Balance at Dec. 31, 2013 (192,495,476 shares) |
520,376 | 1,218,073 | 627,612 | –53,677 | 262 | 389 | 2,313,035 | 2,667 | 2,315,702 |
1) Amounts adjusted due to change in accounting policy for employee benefits (see page 118 f.)
2) See section 6.1
The accompanying consolidated financial statements include GEA Group Aktiengesellschaft, Düsseldorf/Germany, and its subsidiaries, which together make up the GEA Group. GEA Group Aktiengesellschaft is a listed corporation. The consolidated financial statements were prepared in accordance with the International Financial Reporting Standards (IFRSs) and related Interpretations issued by the International Accounting Standards Board (IASB), as adopted by the EU in compliance with Regulation (EC) No. 1606/2002 of the European Parliament and the Council on the application of international accounting standards. The additional provisions of section 315a of the HGB were also complied with.
The accompanying consolidated financial statements have been prepared in euros (EUR). All amounts, including the prior-year figures, are presented in thousands of euros (EUR thousand), except for the segment information. All amounts have been rounded using standard rounding rules. Adding together individual amounts may therefore result in differences in the order of EUR 1 thousand in certain cases.
To improve the clarity of presentation, various items in the consolidated balance sheet and income statement have been aggregated and are explained accordingly in the notes. Assets and liabilities are classified into current and non-current items. The income statement is prepared using the cost of sales method.
The cash flow statement is prepared using the indirect method for cash flow from operating activities and the direct method for cash flow from investing and financing activities.
The Executive Board of GEA Group Aktiengesellschaft approved these consolidated financial statements for publication on February 26, 2014.
The accounting standards presented below were applied by GEA Group for the first time in the year under review: The accounting pronouncements to be applied for the first time in fiscal year 2013 did not – with the exception of the effects from the initial application of the revised IAS 19 presented below – have a material effect on the group's net assets, financial position and results of operation. The initial application of the revised IAS 1 only affected the presentation in the statement of comprehensive income. Additional disclosures were included in the notes to the consolidated financial statements as a result of the initial application of IFRS 13.
The revised IAS 19 contains new requirements for the recognition of the effect of changes in actuarial assumptions. Under this standard, actuarial gains and losses must be recognized directly in other comprehensive income and must therefore be taken directly to equity. Immediate or deferred recognition in the income statement under the corridor approach, which was previously permitted, is no longer allowed. Following the change in accounting policy in fiscal year 2011, this amendment did not have an effect on GEA Group. In addition, the revised IAS 19 replaces the expected return on plan assets and the interest expense from discounting of the pension obligation by a single net interest component. Moreover, any past service cost is now recognized in full in the period in which the relevant changes to the plan are made. Finally, the revision to IAS 19 changes the requirements for recognizing termination benefits and
extends the disclosure and explanation requirements to include, among other things, the presentation of the main characteristics of the pension plans and potential funding risks.
The changes are being applied retrospectively pursuant to the transition requirements of IAS 19, in accordance with IAS 8.
The effects of the change in accounting policy for employee benefit obligations on the balance sheets as of the respective 2012 reporting dates and on the 2012 earnings figures for the complete group can be seen in the following tables. The effect on diluted and basic earnings per share from discontinued operations amounted to EUR 0.00 for fiscal year 2012. Diluted and basic earnings per share from continuing operations declined by EUR -0.01 for fiscal year 2012.
| (EUR thousand) | 01/01/2012 | 12/31/2012 |
|---|---|---|
| Deferred tax assets | –308 | –242 |
| Non-current employee benefit obligations | –877 | –855 |
| Retained earnings and net retained profits | 573 | 605 |
| Accumulated other comprehensive income | –4 | 11 |
| (EUR thousand) | 2012 | |
| Cost of sales | 314 | |
| General and administrative expenses | 508 | |
| EBIT | –822 | |
| Interest income | –6,103 | |
| Interest expenses | –4,755 | |
| EBT | –2,170 | |
| Income taxes | –788 | |
| Profit for the period | –1,382 | |
| Other comprehensive income | 1,427 |
The tables below show what changes would have arisen for the complete group if the superseded version of IAS 19 had still been applied in fiscal year 2013. The effect on diluted and basic earnings per share from discontinued operations would have amounted to EUR 0.00 for fiscal year 2013. Diluted and basic earnings per share from continuing operations would have declined by EUR 0.01 for fiscal year 2013.
| (EUR thousand) | 12/31/2013 |
|---|---|
| Deferred tax assets | –383 |
| Non-current employee benefit obligations | –1,283 |
| Retained earnings and net retained profits | –375 |
| (EUR thousand) | 2013 |
| Cost of sales | 530 |
| General and administrative expenses | –603 |
| EBIT | 73 |
| Interest income | 7,060 |
| Interest expenses | 4,125 |
| EBT | 3,008 |
| Income taxes | 383 |
| Profit for the period | 2,625 |
| Other comprehensive income | –3,000 |
The new standard sets out the methodology for determining fair value and increases fair value disclosures. With IFRS 13 a framework for measuring fair value is now contained in a single IFRS. The requirements do not apply to share-based payment transactions within the scope of IFRS 2 "Sharebased Payment", leasing transactions within the scope of IAS 17 "Leases", or other measurements required by other standards that have some similarities to fair value but are not fair value, such as net realizable value in IAS 2 "Inventories", or value in use in IAS 36 "Impairment of Assets."
The standard was applied prospectively for the first time in fiscal year 2013 in accordance with the transitional provisions. Accordingly, comparative information for the previous year has not been disclosed.
Under the revised IAS 1, other comprehensive income is classified into profit or loss that may be reclassified subsequently to profit or loss as income or expense or that will not be reclassified to profit or loss.
The additions to IAS 32 specify in more detail the conditions under which financial assets and financial liabilities must be offset. In addition, they clarify which gross settlement systems may be considered equivalent to net settlement within the meaning of the standard. The relevant disclosure requirements in IFRS 7 were also modified in line with these clarifications.
As part of the introduction of IFRS 13 "Fair Value Measurement", a new mandatory disclosure requirement relating to the goodwill impairment test was introduced in IAS 36. Under this standard, the recoverable amount of a cash-generating unit had to be disclosed regardless of whether an impairment had actually been recognized. Since this disclosure had been introduced inadvertently, it was removed again with the May 2013 amendment.
On the other hand, the amendment to IAS 36 introduces additional disclosure requirements for cases where an impairment has been recognized or reversed and for which the recoverable amount is determined on the basis of fair value.
This collection of improvements was issued by the IASB in 2012 as part of its annual improvements process to make minor amendments to standards and interpretations (Annual Improvements Cycle). It comprises minor amendments to a total of five standards.
The interpretation governs the accounting for waste removal costs incurred during the production phase of surface mining activity. It clarifies the conditions under which an asset has to be recognized for stripping activities and how such an asset must be measured.
The accounting standards and interpretations, as well as amendments to existing standards and interpretations presented below, were issued but not yet required to be applied to the preparation of the IFRS consolidated financial statements as of December 31, 2013.
Unless otherwise stated, the new standards and interpretations have been endorsed by the EU.
GEA Group is currently examining the effects of the revised accounting standards on the consolidated financial statements and will determine the date of initial application. At this point in time, GEA Group does not believe that application of the new or revised pronouncements will have a material effect on its consolidated financial statements.
IFRS 9 is intended to replace the accounting treatment of financial instruments set out in IAS 39.
In the future, there will only be two classification and measurement categories for financial assets: at amortized cost or at fair value. Financial assets at amortized cost comprise those financial assets that give rise solely to payments of principal and interest at specified dates and are also held within a business model for managing financial assets whose objective is to hold those financial assets and collect the associated contractual cash flows. All other financial assets are classified as at fair value. Under certain circumstances, a fair value option is available for financial assets falling under the first category, as at present.
Changes in financial assets belonging to the fair value category must generally be recognized in profit or loss. However, there is an optional right to measure certain equity instruments at fair value through other comprehensive income; in this case, dividend income from these assets is recognized in profit or loss. The provisions governing financial liabilities have basically been taken over from IAS 39. The most important difference relates to the treatment of changes in value of financial liabilities measured at fair value. In future, the amount of the change relating to changes in own credit risk must be recognized in other comprehensive income, while the remaining amount of the change in fair value is recognized in profit or loss.
The amendments no longer require restatement of prior-period figures upon initial application of IFRS 9. When an entity chooses to apply this exemption, additional disclosures are required under IFRS 7 to allow for assessment of the effects of the first-time application of IFRS 9.
Subject to its endorsement by the EU, which is still outstanding, the effective date of IFRS 9 was delayed to fiscal years beginning on or after January 1, 2015; earlier application is permitted. The mandatory effective date for IFRS 9 has in the meantime been delayed again by further pronouncements outlined below.
The amendments focus on the introduction of a new general hedge accounting model in IFRS 9. This is intended to align hedge accounting more closely with the risk management system. The new model opens up further options to apply hedge accounting: In particular, groups of hedged items that meet the qualifying criteria individually, as well as net positions and nil net positions, may now be designated in a hedging relationship. Generally, every financial instrument carried at fair value is suitable to be a hedged item.
New requirements are being introduced in relation to the effectiveness of hedging relationships; stipulation of the ranges for the measurement of effectiveness is being dispensed with, so that a retrospective effectiveness test no longer has to be performed. The prospective effectiveness test as well as recognition of any ineffectiveness continue to be required.
A hedging relationship may only be terminated when the defined conditions for this are met; this means that it is mandatory to continue hedging relationships if risk management objectives remain unchanged.
Enhanced disclosures are required in relation to the risk management strategy, the effects of risk management on future cash flows, as well as the effects of hedge accounting on the financial statements.
In addition, accounting for own credit risk for financial liabilities under the fair value option in other comprehensive income is only possible in isolated cases, i.e., without applying the other requirements in IFRS 9.
Provided the conditions and qualitative characteristics continue to be met, hedging relationships do not have to be terminated as a result of the transition from IAS 39 to IFRS 9. The existing requirements under IAS 39 may also, as an option, continue to be applied under IFRS 9.
Subject to its endorsement by the EU, which is still outstanding, the initial application of the new hedge accounting requirements follows the requirements concerning the initial application of IFRS 9.
When the new hedge accounting requirements were published, the mandatory effective date for IFRS 9 was also removed; IFRS 9 had previously been effective for fiscal years beginning on or after January 1, 2015. In addition, the IASB, at its November 2013 meeting, decided that mandatory application of IFRS 9 will at the earliest apply to fiscal years beginning on or after January 1, 2017.
IFRS 10 "Consolidated Financial Statements", IFRS 11 "Joint Arrangements", IFRS 12 "Disclosure of Interests in Other Entities", consequential amendments to IAS 27 "Separate Financial Statements", and IAS 28 "Investments in Associates" – revised standards on accounting for interests in other entities and the corresponding disclosures in the notes to the financial statements – issued by the IASB in May 2011
The new standard replaces the consolidation requirements of IAS 27 "Consolidated and Separate Financial Statements" and SIC-12 "Consolidation – Special Purpose Entities." The new IFRS 10 affects the definition of the basis of consolidation. As currently required by IAS 27, consolidated financial
statements must include those entities that are controlled by the parent. The definition of control in IFRS 10 differs from that used in IAS 27, where control is defined as the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. Under IFRS 10, control exists when an investing entity is exposed, or has rights, to variable returns from involvement with the investee on the one hand, and has the ability to affect those returns through its power over the investee on the other. The new concept of control applies to all entities, including special purpose entities. It can lead to differing assessments, especially in cases of potential voting rights, agency relationships, and in situations where substantial, but not majority voting rights are held. No material impact is expected from the new requirements, because, as a rule, GEA Group Aktiengesellschaft has control, directly or indirectly, of all voting rights in its consolidated entities.
The new standard supersedes IAS 31 "Interests in Joint Ventures" and SIC-13 "Jointly Controlled Entities – Nonmonetary Contributions by Venturers." In contrast to IAS 31, accounting for joint arrangements under IFRS 11 depends not on the legal form of the arrangement but on the nature of the rights and duties arising under the arrangement. IFRS 11 makes a distinction between joint operations and joint ventures. Joint operations are joint arrangements in which the parties with joint control have rights to the assets and obligations for the liabilities relating to that arrangement. In line with this, these parties account for their shares of the respective assets, liabilities, income, and expenditure as they did previously. A joint venture exists when the parties with joint control have rights to the net assets of the arrangement. Joint ventures now have to be accounted for using the equity method. The previous option to account for joint ventures using proportionate consolidation has been removed. GEA Group does not expect the implementation of these new requirements to materially affect its financial reporting.
The new standard revises the disclosure requirements for all types of interests in other entities, including joint arrangements, associates, structured entities, and off-balance sheet vehicles. The objective is to help users of financial statements to understand the nature of, and risks associated with, the entity's interest in other entities, and the effects of these interests on its financial positions, financial performance, and cash flows.
Following publication of the new IFRS 10, the revised IAS 27 now only contains the requirements governing accounting for subsidiaries, joint ventures, and associated companies in separate financial statements prepared according to IFRSs.
The changes contained in IAS 28 arise from the publication of IFRS 10, IFRS 11, and IFRS 12. In addition, under the revised version of the standard, an investment in or portion of an associate or joint venture must be classified as held for sale if the criteria of IFRS 5 are met. Any remaining portion of the associate or joint venture must be accounted for using the equity method until the portion classified as held for sale has been disposed of.
The new IFRS 10, 11, and 12, and the revised IAS 27 and IAS 28 are required to be applied for the first time retroactively in the first period of a fiscal year beginning on or after January 1, 2013. The new IFRS 10, 11, 12, and revised IAS 27 and IAS 28 must all be applied at the same time.
In the EU, the new IFRS 10, 11, and 12, and the revised IAS 27 and IAS 28 are required to be applied for the first time for fiscal years beginning on or after January 1, 2014 – contrary to the date of initial application of the original standards; earlier application is permitted.
In June 2012, the IASB published clarifications and revised transitional arrangements for the first-time application of the IFRS 10, 11, and 12. The amendments are required to be applied for fiscal years beginning on or after January 1, 2013.
In October 2012, the IASB added a definition of investment entities to IFRS 10 and introduced an exception to the mandatory consolidation of these entities. The associated consequential amendments to IFRS 12 and IAS 27 (2011) introduce additional disclosures on investment entities. Contrary to the date of initial application of the original standards, these amendments are required to be applied for the first time for fiscal years beginning on or after January 1, 2014; earlier application is permitted.
There is currently no standard in IFRS that addresses the accounting for rate-regulated activities. If rate regulation leads to a situation where expenditure in the current fiscal year has an effect on the rates of an entity may charge in future fiscal years, this may result in economic benefits or disadvantages for the entity. In some countries, national GAAP permits or requires that such economic benefits are capitalized or deferred.
The new standard aims to improve the comparability between financial statements of entities that engage in rate-regulated activities. IFRS 14 permits a first-time adopter of IFRSs to continue to present rate-regulated activities in accordance with its previous GAAP accounting policies applied on transition to IFRSs. However, effects from the capitalization or deferral of economic advantages must then be reported separately. As the IASB is currently carrying out a project on accounting for rate-regulated activities, IFRS 14 represents an interim solution. Subject to endorsement by the EU, IFRS 14 must be applied by first-time adopters of IFRSs from January 1, 2016; earlier application is permitted.
The amendments concern requirements relating to contributions from employees or third parties that are linked to service and clarify the corresponding requirements for attributing such contributions to periods of service. In addition, the accounting for contributions that are independent of the number of years of service has been simplified. Subject to their endorsement by the EU, which is still outstanding, the amendments will be required to be applied retrospectively for the first time in fiscal years beginning on or after July 1, 2014; earlier application is permitted.
As a result of the amendments to IAS 39, derivatives will still continue to be designated as hedging instruments in a hedging relationship when the hedging instrument is novated to a central counterparty. For this to apply, the central counterparty must become involved as a result of legal or regulatory requirements. The amendments to IAS 39 are required to be applied retrospectively for the first time for fiscal years beginning on or after January 1, 2014; earlier application is permitted.
The collections of improvements arise from the IASB's annual improvements process to make minor amendments to standards and interpretations (Annual Improvements Cycle). They comprise minor amendments to a total of seven (Improvements to IFRSs 2012) and four (Improvements to IFRSs 2013) standards. Subject to their endorsement by the EU, which is still outstanding, the requirements of both collections of improvements will be required to be applied in fiscal years beginning on or after July 1, 2014, whereby initial application will be mainly prospective.
This new interpretation provides more specific guidance on the general accounting principles for liabilities to pay levies set out in IAS 37. IFRIC 21 defines a levy as an outflow of resources embodying economic benefits that is imposed by governments. Payment of the levy is due to the unilateral obligation resulting from the sovereign rights of the government. Payments attributable to contractual arrangements between a government and an entity, fines and penalties, as well as payment obligations that are governed by other standards such as IAS 12 "Income Taxes" do not fall within the scope of IFRIC 21.
Subject to endorsement by the EU, IFRIC 21 must be applied retrospectively for fiscal years beginning on or after January 1, 2014; earlier application is permitted.
GEA Group's consolidated financial statements include all significant companies in which GEA Group Aktiengesellschaft directly or indirectly holds the majority of voting rights or is otherwise able to directly or indirectly control the financial and operating policy decisions. Subsidiaries are consolidated from the date on which the group obtains the ability to control them. They are deconsolidated from the date on which control is lost.
Acquired subsidiaries are accounted for using the purchase method. The consideration paid is measured on the basis of the fair value of the assets received, the liabilities assumed to the seller, and the equity instruments issued at the transaction date. The identifiable assets acquired and liabilities and contingent liabilities assumed in the business combination are recognized at their fair value at the transaction date, irrespective of any noncontrolling interests. Any contingent consideration agreed is recognized at fair value at the acquisition date. Subsequent changes in fair value are recognized in profit or loss.
The excess of cost over the share of the fair value of the subsidiary's net assets acquired is recognized as goodwill. If, after a further examination, cost is lower than the share of the fair value of the subsidiary's acquired net assets measured at fair value, the difference is recognized as a gain in profit or loss.
Intragroup receivables, liabilities, income, and expenses are eliminated, as are profits and losses from intragroup transactions.
If consolidated subsidiaries have a different reporting date to the parent, they are included on the basis of interim financial statements as of December 31, 2013.
The consolidated group changed as follows in fiscal year 2013:
| Number of companies | 2012 | |
|---|---|---|
| Consolidated group as of January 1 | 293 | 305 |
| German companies (including GEA Group Aktiengesellschaft) | 49 | 56 |
| Foreign companies | 244 | 249 |
| Initial consolidation | 8 | 10 |
| Merger | -12 | -13 |
| Liquidation | -1 | -5 |
| Sale | -1 | 0 |
| Deconsolidation | 0 | -4 |
| Consolidated group as of December 31 | 287 | 293 |
| German companies (including GEA Group Aktiengesellschaft) | 49 | 49 |
| Foreign companies | 238 | 244 |
A total of 70 subsidiaries (previous year: 74) were not consolidated since their effect on the group's net assets, financial position, and results of operations is not material even when viewed in the aggregate. Their consolidated revenue amounts to 0.2 percent (previous year: 0.4 percent) of the group's aggregate
consolidated revenue, while their earnings, as in the previous year, account for 1.6 percent of recognized earnings before tax of the complete group, and their equity accounts for 1.4 percent (previous year: 1.8 percent) of consolidated equity. The subsidiaries are measured at cost and recognized as noncurrent other financial assets, as their fair value cannot be determined with sufficient certainty.
A complete list of all subsidiaries, associates, and joint ventures can be found in section 11.4.
Investments in material companies over which significant influence can be exercised are accounted for using the equity method at the group's share of adjusted equity. They are initially recognized at cost. Entities over which a group company can exercise significant influence, i.e., it can participate in the investee's financial and operating policy decisions, are accounted for as associates. This generally relates to companies in which GEA Group directly or indirectly holds 20 to 50 percent of the voting rights.
The group's share of the profit or loss of associates is recognized and presented separately in the income statement. The group's share of income and expenses recognized outside profit or loss is reported directly in other comprehensive income. If the group's share of an associate's loss exceeds the carrying amount of the net investment in the associate, no further losses are recognized. Any goodwill arising on acquisition is included in the carrying amount of the investment.
Where necessary, the accounting policies of associates are adjusted to comply with uniform group accounting principles.
As of the reporting date, two investments in associates were accounted for in the consolidated financial statements using the equity method (previous year: two).
The group exercised the option to account for interests in joint ventures using the equity method.
As of the reporting date, 13 investments in joint ventures were accounted for in the consolidated financial statements (previous year: 12).
The group companies prepare their annual financial statements on the basis of their respective functional currencies.
Foreign currency transactions entered into by companies included in the consolidated financial statements are translated into the functional currency at the exchange rate prevailing at the transaction date. Monetary assets and liabilities are translated at the applicable exchange rate at each reporting date. The exchange rate gains and losses resulting from these items are generally reported in the income statement under other income or expenses.
All financial statements of companies whose functional currencies differ from the reporting currency are translated into the reporting currency used in GEA Group's consolidated financial statements. The assets and liabilities of the companies included in the consolidated financial statements are translated at the middle rates prevailing at the reporting date. The income statements of these companies are translated at the average rates for the period under review. If these average rates are not a reasonable approximation of the actual transaction rates, the income statements are translated at the relevant transaction rates. Any translation differences are reported in equity under other comprehensive income and adjusted.
Goodwill from the acquisition of foreign subsidiaries is translated at the closing rate as an asset attributable to these companies..
Items of property, plant and equipment are recognized at cost less cumulative depreciation and impairment losses, plus reversals of impairment losses.
Expenses for major regular maintenance are amortized over the remaining useful life of the asset concerned or over the period to the next maintenance date.
The carrying amount of items of property, plant and equipment is reviewed if it is likely to have been impaired by events or changes in circumstances. An impairment test is performed by comparing the asset's carrying amount with its recoverable amount. The recoverable amount is defined as the higher of internal value in use and fair value less costs to sell (net realizable value). Fair value is primarily determined on the basis of the current local market price for used machinery or commercial real estate. If the carrying amount exceeds the recoverable amount, an impairment loss is recognized. To assess impairment, assets are grouped at the lowest level for which separate cash flows can be identified. If the reason for the impairment subsequently ceases to apply, the impairment loss is reversed up to a maximum of the amortized historical cost.
Leases are agreements that grant the right to use an asset for a defined period in return for a payment. Leases are accounted for as finance leases if substantially all the risks and rewards incidental to using the leased asset, and therefore beneficial ownership, are attributable to the lessee. As a result, the GEA Group companies that, as lessees, bear substantially all the risks and rewards associated with the leased asset, recognize the asset at the lower of fair value or the present value of minimum lease payments, and depreciate the asset in subsequent periods over the shorter of the lease term or the asset's estimated useful life. A corresponding liability is recognized, which is amortized in the following periods using the effective interest method. Payments to the lessor are divided into an interest and a principal repayment element, with the interest element being recognized in profit or loss over the lease term as a continuous interest payment on the residual lease liability. All other leases under which GEA Group is a lessee are treated as operating leases. In these cases, the lease payments are recognized as an expense using the straight-line method.
Lease transactions under which GEA Group companies are the lessor and substantially all the risks and rewards associated with the leased asset are transferred to the lessee are accounted for as sales and financing business. A receivable is reported in the amount of the net investment under the lease. The interest income subsequently generated is recognized in profit or loss. All other lease transactions under which the group is the lessor are treated as operating leases. In this case, the asset leased for use remains on the balance sheet and is depreciated. The lease payments are recognized as income using the straightline method over the term of the lease.
Various companies included in the consolidated financial statements have sold and leased back items of property, plant and equipment in the past. Depending on the allocation of risk, these sale and leaseback
GEA Group Annual Report 2013
transactions resulted in a finance lease or an operating lease. In the case of operating leases, the entire gain was recognized immediately if the asset was sold at fair value. If the asset was sold above its fair value, the difference between the selling price and fair value was deferred and recognized over the lease term.
Property that is held to earn rentals or for capital appreciation is reported as investment property. In the case of property that is held partly to earn rentals and partly to produce or supply goods or services or for administrative purposes, the entire property is classified as investment property if the proportion of owner-occupation is insignificant. This is assumed to be the case if the proportion is below 10 percent.
Cost is depreciated using the straight-line method over a period of between 10 and 50 years. The same measurement method is applied as for property, plant and equipment.
Goodwill arising from business combinations is recognized as an intangible asset.
Goodwill is tested for impairment at segment level at least once a year at the end of the fiscal year and if there are any indications of impairment. The recoverable amount of a segment is compared with the carrying amount including goodwill. The recoverable amount corresponds to the higher of internal value in use and fair value less costs to sell. Fair value less costs to sell is the measure for the impairment of business units classified as "held for sale." If the carrying amount of the segment's assets exceeds the recoverable amount, an impairment loss in the amount of the difference is recognized in profit or loss.
An impairment loss initially reduces the carrying amount of goodwill. Any amount exceeding goodwill is allocated proportionately to the carrying amounts of non-current nonfinancial assets.
The value in use of the business units classified as continuing operations is calculated annually at the end of the fiscal year using the discounted cash flow method. It is only necessary to estimate a selling price for the business units classified as continuing operations if the value in use is less than the carrying amount.
Other intangible assets include both internally generated and purchased assets. Internally generated intangible assets comprise capitalized development costs. In addition to contract-based rights, purchased intangible assets mainly contain technologies, brand names, and customer relationships. Technologies, brand names, and customer relationships are usually acquired in connection with takeovers. Internally generated and purchased intangible assets are recognized at cost.
If the useful life of an intangible asset can be determined, the asset is amortized on a straight-line basis over its useful life. Intangible assets whose useful life cannot be determined are recognized at cost.
The carrying amount of an intangible asset is reviewed if it is likely to have been impaired by events or changes in circumstances. Intangible assets with an indefinite useful life are tested for impairment at least once a year. This requires the recoverable amount of the assets to be determined. The recoverable
amount corresponds to the higher of internal value in use and fair value less costs to sell. If the carrying amount is higher than the recoverable amount, the asset is written down to the recoverable amount. Previously recognized impairment losses are reversed if the reasons for the impairment no longer apply. Impairment losses are reversed up to a maximum of the amortized historical cost.
Indefinite-lived intangible assets are also examined each year to determine whether the classification of the asset as indefinite-lived can be retained. Any change to a finite useful life is applied prospectively.
Other financial assets include investments in unconsolidated subsidiaries and other equity investments, other securities, financial receivables (except trade receivables), and derivative financial instruments.
Shares in unconsolidated subsidiaries and other equity investments are allocated to the "available-forsale financial assets" measurement category. They are measured at cost because the shares in these corporations are not traded in an active market and their fair value cannot be reliably measured. This is due to the significant margin of fluctuation for fair value measurement; the probabilities of the various estimates cannot be reliably determined within the margin of fluctuation. A reliable fair value can only be determined during sale negotiations. The group does not intend to sell these financial assets.
Securitized debt instruments that are intended to be held to maturity are allocated to the "held-tomaturity investments" measurement category and measured accordingly at amortized cost using the effective interest method. All other securities are measured at fair value and any fluctuations in value are recognized directly in other comprehensive income.
Financial receivables are allocated to the "loans and receivables" measurement category and measured at amortized cost using the effective interest method.
Derivative financial instruments are used exclusively for hedging purposes, in particular to hedge currency risk and to mitigate the risk of interest rate fluctuations resulting from financing transactions. They are always carried at fair value. If derivative financial instruments are not included in a documented hedging relationship, they are allocated to the "financial assets at fair value through profit or loss" measurement category, and their fair value changes are recognized in the income statement. If the derivative financial instruments included in a recognized hedging relationship are used to hedge future cash flows, the fair value fluctuations are recognized in other comprehensive income.
Embedded financial derivatives are separated from their host contracts if certain qualifying criteria relating to their recognition and measurement are met.
Financial assets are recognized as soon as GEA Group has received a cash payment or it has the right to receive cash flows. In the case of regular way purchases of nonderivative financial assets, the settlement date, i.e., the delivery date of the financial assets, is decisive. Assets are derecognized as soon as the right to receive cash payments or other financial assets expires as a result of payment, waiver, statutory limitation, offsetting, or any other factor, or the right is transferred to another person, with the risks passing in full to the purchaser. In the case of regular way sales of nonderivative financial assets, the settlement date is taken to be the date of derecognition, in line with the principle used for recognition.
Items are originally recognized at fair value or, in the case of financial assets not measured at fair value, including directly attributable transaction costs.
Financial assets or groups of financial assets are tested for indications of impairment at each reporting date. Impairment losses are recognized in the income statement. Financial assets are impaired if, following one or more events that occurred after initial recognition of the asset, there is objective evidence that the expected future cash flows have declined. Objective evidence of impairment may be, for example, significant financial difficulties of the debtor or payment default. In the case of financial assets measured at amortized cost (e.g., unquoted equity instruments), the impairment loss corresponds to the difference between the carrying amount of the financial instrument and the present value of the future cash flows discounted at the original effective interest rate.
If the reasons for impairment no longer apply, impairment losses on financial assets – with the exception of equity instruments – are reversed to income up to the amount of the amortized cost that would have applied if no impairment loss had been charged.
At the time they are entered into, derivative financial instruments that are included in a recognized hedging relationship are designated either as a hedge against changes in the fair value of assets, liabilities, or binding agreements (fair value hedge) or as a hedge of future cash flows in connection with assets and liabilities (cash flow hedge).
In an effective hedge of the risk of a change in fair value, the change in the fair value of both the derivative and the hedged item is recognized in the income statement. Changes in fair value offset each other in a perfect hedge.
If derivatives are used to hedge future cash flows, the effective portion of the change in the derivative's fair value is recognized in other comprehensive income. The ineffective portion of the change in fair value is reported as a gain or loss. The item recognized in other comprehensive income arising from the effective portion of the change in fair value is recognized in the income statement as soon as the hedged item is settled. If settlement of the hedged item leads to the recognition of a nonfinancial asset, the changes in value previously recognized in other comprehensive income are offset against the cost of the nonfinancial asset. If, contrary to previous assumptions, the hedged transaction is not executed, the changes in value previously recognized in equity are reversed directly to profit or loss.
The group predominantly uses cash flow hedges to hedge foreign currency and interest rate risk. GEA Group also enters into hedging transactions in accordance with its risk management principles that offer economic hedges of existing risks, but do not meet the strict hedge accounting requirements of IAS 39. Currency forwards that are used to hedge currency risk arising from monetary assets and liabilities are not aggregated into a recognized hedging relationship. Effects arising from the translation of balance sheet items that are recognized in the income statement are largely offset by changes in the fair values of currency forwards that are also recognized in the income statement.
GEA Group does not currently apply hedge accounting for fair value hedges.
Deferred tax assets and liabilities are recognized for all temporary differences between the carrying amounts in the respective national tax accounts and those in the IFRS financial statements that are included in the consolidated financial statements. Deferred tax assets are also recognized for tax loss carryforwards. Deferred tax assets arising from deductible temporary differences and tax loss carryforwards are recognized only to the extent that there is likely to be sufficient taxable income available in future.
Deferred tax liabilities are not recognized on taxable temporary differences arising from investments in subsidiaries, associates, or joint ventures as long as the reversal of temporary differences is unlikely in the foreseeable future.
Inventories are recognized at the lower of cost and net realizable value. Acquisition cost is calculated at average cost or using the first-in, first-out (FIFO) method. Production cost includes direct costs plus materials and production overheads, depreciation, and production-related administrative costs. Net realizable value is calculated as the estimated sale proceeds less costs incurred until completion, and selling expenses. Previously recognized impairment losses must be reversed if the reasons for the impairment no longer apply. Impairment losses are reversed up to a maximum of the amortized historical cost.
Trade receivables include no interest component and are recognized in the balance sheet at their principal amount less appropriate allowances for bad debts.
Trade receivables that are sold to financial services companies under factoring agreements are derecognized once substantially the majority risks and rewards have been transferred to the financial services company.
Receivables and revenues from construction contracts are recognized using the percentage of completion (PoC) method.
The percentage of completion is determined using the cost-to-cost method, which is derived from the ratio of contract costs incurred to the total estimated contract costs. Contracts are measured at production cost plus a profit in proportion to the stage of completion. Losses on construction contracts are immediately recognized in full in the fiscal year in which they are identified, regardless of the stage of completion. If the contract costs incurred and the gains or losses recognized exceed the progress billings, the excess amount is capitalized and reported under "trade receivables." If the progress payments received exceed the capitalized costs and recognized gains or losses at the reporting date, they are reported as a liability under "other liabilities." Advance payments on construction contracts are reported separately as a liability.
If the contract margin cannot be estimated reliably, revenue is recognized only in the amount of the contract costs incurred (zero-profit method). A profit is only recognized once the contract margin can be estimated reliably.
Payments for differences in the overall contract, claims, and premiums are included in the contract revenue insofar as these will probably result in revenue that is capable of being estimated reliably.
.
Cash and cash equivalents comprise cash, demand deposits, and financial assets that can be converted into cash at any time and that are subject to only slight fluctuations in value. They are recognized at fair value.
Non-current assets or groups of assets classified as "held for sale" within the meaning of IFRS 5 are recognized at the lower of carrying amount and fair value less costs to sell. Classification as "held for sale" is made when the carrying amount of a non-current asset or disposal group will be recovered principally through a sale transaction rather than through continuing use, and the criteria defined in IFRS 5 have been met overall. The corresponding assets as well as the liabilities of a disposal group are reported separately in the balance sheet as "assets held for sale" and "liabilities held for sale." On initial classification as held for sale, non-current assets or assets and liabilities of disposal groups are first measured in accordance with the applicable IFRSs. They are measured at the lower of their carrying amount and fair value less costs to sell, with disposal groups being measured as a whole. As the carrying amount of held-for-sale depreciable assets is principally realized by the disposal rather than the use of these assets, they are no longer depreciated once they have been reclassified.
If a disposal group represents a separate major line of business or geographical area of operation, it qualifies as a discontinued operation. The results of discontinued operations are reported separately in the income statement as profit or loss after tax from discontinued operations. In addition, the prior-year comparatives are adjusted in the income statement so that the results of these operations are also reported under discontinued operations. Cash flows from discontinued operations are reported separately in the cash flow statement; in this case as well the prior-year comparatives are adjusted accordingly. Revenue and expenditures from intragroup transactions are taken into account when presenting results from discontinued operations if they will continue to arise after the disposal of a discontinued operation.
As a general principle, the disclosures in the notes to the consolidated financial statements relate to the assets or liabilities recognized in the corresponding line items and to continuing operations. Where disclosures relate to GEA Group including assets held for sale, as well as the associated liabilities, and discontinued operations, this is indicated either by a statement that the disclosures refer to the complete group, or by another comment.
Ordinary shares are classified as equity. Treasury shares are deducted from the equity attributable to the shareholders of GEA Group Aktiengesellschaft.
Obligations under pension plans relate to post-employment benefit obligations. Defined benefit obligations are calculated using the projected unit credit method. The present value of these obligations reflects expected future salary and pension trends, since the entitlements earnable in the period up to the retirement age depend on these. Claims under supplementary healthcare benefit insurance are included in the actuarial measurement of assumptions made in respect of healthcare cost trends. The pension obligations are measured on the basis of actuarial reports by independent actuaries.
In order to provide these pension benefits, the company in some cases holds financial assets in longterm funds outside GEA Group and qualifying insurance policies. Insofar as the entitlements are funded by such external assets (plan assets), their fair value is offset against the present value of the defined benefit obligation. The resulting balance is reported under non-current employee benefit obligations or other non-current financial assets (net carrying amount).
Actuarial gains and losses from the remeasurement of the net carrying amount are recognized in other comprehensive income in the year in which they arise and reported in retained earnings after adjustment for tax effects. This also applies to the recognition of the difference between the actual returns on plan assets and the returns calculated using the discount factor. Costs from unwinding the discount on the net carrying amount are recognized in interest expenses; income is recognized in interest income. Current and past service cost for the period, as well as gains and losses from settlements, are recognized in the relevant function costs.
Other employee benefit obligations comprise other long-term benefits and all short-term benefits. Short-term employee benefit obligations are expected to be settled in full no more than 12 months after completion of the service rendered. They include wages, salaries, social insurance contributions, paid vacation, and profit-sharing arrangements. They are recognized as an expense at the same time as the work is remunerated. Any expenditure in excess of the payments already made is reported as a deferred liability at the reporting date. Other long-term employee benefits, such as jubilee payments or partial retirement arrangements, are recognized at the actuarial present value of the obligation at the reporting date. Securities are pledged to the beneficiaries to protect vested partial retirement credits against the employer's insolvency. The fair value of these securities is offset against the corresponding liability.
Provisions for uncertain liabilities are recognized where there is a legal or constructive obligation to a third party, a future outflow of resources is likely, and the expected settlement value can be estimated reliably. The present value of the settlement amount is recognized if the time value of money is material. Amounts are discounted at the market rates for the appropriate maturity and currency. The interest unwinding costs are presented under interest expense.
The cost of creating warranty provisions is included in the cost of sales when revenue is recognized. In all other cases, provisions are recognized when the product is accepted. The provision is measured on the basis of both the warranty cost actually incurred in the past and on the evaluated overall risk inherent in the system or product. Provisions are also recognized if a claim is made under a warranty and a loss is likely. Recourse claims against suppliers are capitalized if their services are subject to a warranty and it is highly likely that the claim can be enforced.
Provisions for expected losses from onerous contracts are recognized if the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be received under it. The unavoidable costs also include the unavoidable overheads needed to meet the obligations.
Financial liabilities comprise bonds, liabilities to banks, and liabilities under finance leases. They are initially recognized at fair value less transaction costs. They are subsequently measured at amortized cost using the effective interest method. Liabilities under finance leases are initially measured at the lower of the fair value of the leased asset and the present value of minimum lease payments.
The recognition and subsequent measurement of other liabilities is the same as for financial liabilities, with the exception of advance payments and the gross amount due to customers for contract work. Advance payments are stated at their principal amount. Please see the information provided on the recognition of construction contracts for the measurement of the gross amount due to customers for contract work.
Trade payables also include liabilities for goods received or services rendered that have not yet been invoiced, as there is only slight uncertainty as to the amount of the liability. Trade payables are recognized at fair value. This corresponds to the settlement amount in the case of liabilities due within one year.
Revenue from the sale of goods is recognized when the risks and rewards inherent in ownership of the goods sold are transferred to the customer. This normally occurs when the goods are handed over to the customer. Revenue from services is recognized when the service is rendered. Revenue is measured at the fair value of the consideration received or to be received. Customer bonuses, discounts, or rebates reduce the amount of revenue recognized.
Revenue from construction contracts is generally recognized using the percentage of completion method under which revenue is recognized in accordance with the stage of completion. The stage of completion is determined using the ratio of contract costs incurred as of the reporting date to the total estimated contract costs as of the reporting date (cost-to-cost method). Contract costs include direct costs plus materials and construction overheads, depreciation, production-related administrative costs, and such other costs that are specifically chargeable to the customer under the terms of the contract. Where a construction contract is performed over a long period and where the contract is
largely financed by GEA Group, contract costs also include directly attributable borrowing costs. Conversely, income from the investment of advance payments received is offset against contract costs where this has a material influence on the contract margin. Adjustments are made for variations in contract work, claims, and incentive payments insofar as these will probably result in revenue that is capable of being reliably estimated.
In line with the percentage of completion method, construction contracts are measured as the contract costs incurred as of the reporting date plus the profit attributable to the proportion of work completed. Revenue recognized is reported under trade payables, less progress billings. If the outcome of a construction contract cannot be reliably estimated, the probable recoverable revenue is recognized up to the amount of the costs incurred. Contract costs are recognized as an expense in the period in which they are incurred. If it is foreseeable that the total contract costs will exceed the contract revenue, the expected loss is recognized immediately as an expense.
Interest income is recognized ratably over the remaining maturity based on the effective interest rate and the amount of the remaining receivable. Dividend income on equity instruments is recognized if the right to receive payment is based on legally assertable claims.
Revenue from royalties is recognized in the period in which it arises in accordance with the underlying contracts
GEA Group has a share-based payment program under which selected managers are granted performance shares. The fair value of these rights is calculated at the grant date and allocated as an expense over the vesting period using the straight-line method; a corresponding provision is recognized. The provision is remeasured at each reporting date and at the payment date. Furthermore, in fiscal years 2010 and 2011, part of the bonuses earned by Executive Board members was converted into phantom shares. The entitlement from phantom shares is measured at the current share price at the reporting date. In fiscal year 2012, a long-term share price component was introduced as part of the revision of the variable remuneration system for Executive Board members. Payment from this remuneration component is dependent on the performance of GEA shares compared with a benchmark index. The entitlement from the long-term share price component is measured at fair value at the reporting date. Changes in the fair value of the provision for share-based payment programs are recognized as interest expense or income (see section 6.3.3).
In addition, one group company grants its employees options on shares of the company via a trustee. The cost of this share-based payment is estimated at the grant date and amortized using the straightline method up to the exercise date (see section 6.1).
Research expenditures are recognized immediately as an expense. Development costs that are designed to significantly enhance a product or process are capitalized if completion of the product or process is technically and economically feasible, the development is marketable, the expenditures can be measured reliably, and adequate resources are available to complete the development project. All other development expenditures are recognized immediately as expenses. Capitalized development expenditures for
completed projects are reported at cost less cumulative amortization and impairment losses. Capitalized development costs for intangible assets not yet available for use are tested for impairment once a year.
Development costs that are required under construction contracts are capitalized as part of the cost of the asset.
Government grants are recognized at fair value provided that the group meets the conditions necessary to receive the grant. Government grants to cover expenses are recognized over the period in which the costs for which the grants were awarded are incurred. Government grants for capital expenditure are deducted from the cost of purchasing the corresponding asset.
Preparation of financial statements requires management to make certain estimates and exercise judgment that may affect the Company's assets, liabilities, provisions, and deferred tax assets and liabilities, as well as its income and expenses and contingent liabilities.
Factors that may cause amounts to fall below estimates might include a deterioration in the global economy, movements in exchange rates and interest rates, as well as material litigation and changes in environmental or other legislation. Production errors, the loss of key customers, and rising borrowing costs may also adversely affect the group's future performance.
The recognition and measurement of the following assets and liabilities are in some cases based on management judgment. All assumptions represent the best of management's knowledge and belief in order to convey a true and fair view of the Company's net assets, financial position, and results of operations. If actual circumstances subsequently differ from those forecast, this will affect the recognition and measurement of assets and liabilities. Depending on the item concerned, earnings may also be affected.
Management judgment was applied in defining the basis of consolidation (see section 2.1).
Goodwill is reported in the balance sheet as a result of acquisitions. When an acquired company is initially consolidated, all its identifiable assets, liabilities, and contingent liabilities are recognized at their acquisition-date fair value. A basic problem is estimating these fair values. As a rule, land and buildings are measured on the basis of independent appraisals. If intangible assets are identified, their fair values are calculated using an appropriate measurement method. These measurements are made on the basis of assumptions by management with respect to the future value of the relevant assets and the discount rate. Obligations for contingent consideration are recognized on the basis of the current planning.
The group tests goodwill for impairment annually. The recoverable amounts calculated for this purpose for segments classified as continuing operations are determined based on value in use. Value in use is calculated using assumptions by management (see section 5.3).
GEA Group operates in a large number of countries and is therefore subject to different tax jurisdictions. Calculating tax liabilities requires management to make various estimates. Management believes that it has made a reasonable estimate of tax uncertainties. However, no assurance can be given that the actual outcome of these uncertainties will correspond to the estimates made. Any deviations may have an impact on the level of tax liabilities or deferred taxes in the year of the decision.
When assessing the recoverability of deferred tax assets, management judges the extent to which realization of the deferred tax assets is sufficiently likely. The question of whether the deferred tax assets can actually be realized depends on whether sufficient future taxable income can be generated against which the temporary differences or tax loss carryforwards can be offset. Management therefore analyzes the times at which the deferred tax liabilities reverse, and expected future taxable income. Management forecasts whether deferred tax assets can be realized on the basis of expected future taxable income. Deferred tax assets decline if the estimate of planned taxable income decreases, if tax benefits available as a result of tax strategies are reduced, or the amount or timing of future tax benefits is restricted by changes in the law (see section 7.7).
Assets and disposal groups classified as held for sale are measured at the lower of carrying amount and fair value less costs to sell. Assumptions by management are taken into account when determining fair value less costs to sell. The classification as held for sale or the classification of activities as attributable to discontinued operations also require estimates by management. These estimates relate in particular to the question of whether the carrying amount of a non-current asset or a disposal group will be recovered principally through a sale transaction rather than through continuing use, and whether the criteria set out under IFRS 5 have been met overall.
Changes in estimates of the probability of a present obligation or of an outflow of resources embodying economic benefits could mean that items previously classified as contingent liabilities must be reported as provisions, or that the amount of provisions must be adjusted (see section 6.2). This also applies in particular to environmental obligations.
GEA Group Annual Report 2013
The present value of pension obligations depends on actuarial assumptions. These assumptions comprise discount rates, expected wage and salary increases, as well as the pension increase rate and mortality rates. These assumptions could differ significantly from actual future outcomes as a result of changes in market and economic conditions, and could therefore have a material effect on the level of the obligation and the related expenses.
The discount rate of the net carrying amount is calculated at the end of each year. This is the rate used to calculate the present value of future cash outflows expected to be required to settle the obligation. In order to calculate the discount rate, the group uses the interest rate on high-quality corporate bonds denominated in the same currency in which the benefits are paid and whose terms to maturity correspond to those of the pension obligations.
Other significant assumptions relating to pension obligations are partly based on market conditions (see section 6.3.1).
The recognition of construction contracts using the percentage of completion method is based on management's estimates of the cost of such contracts. Changes in estimates or differences between the estimated cost and the actual cost have a direct effect on recognized earnings from construction contracts. The operating units continuously review the estimates and adjust them if required.
In some cases, GEA Group companies are parties to litigation. The outcome of this litigation could have a material effect on the group's net assets, financial position, and results of operations. Management regularly analyzes current information on these legal disputes and recognizes provisions for probable obligations, including estimated legal costs. Both internal counsel and external lawyers are used to make this assessment. When deciding on the need to recognize provisions, management takes into account the probability of an unfavorable outcome and its ability to estimate the amount of the obligation with sufficient reliability. The filing of a suit or the formal assertion of a claim against a GEA Group company does not necessarily mean that a provision must be recognized for the related risk (see section 8.4).
The Executive Board has put in place an effective set of guidelines to manage and hence largely limit or hedge financial risks throughout the group. The objectives with regard to protecting assets, eliminating gaps in security, and improving efficiency in identifying and analyzing risks are clearly defined, as are the relevant organizational structures, powers, and responsibilities. The guidelines are based on the principles of system security, the separation of functions, transparency, and immediate documentation. For further information, please see the discussion of the risk management system in the management report.
Because it operates worldwide, GEA Group is exposed to currency, interest rate, commodity price, credit, and liquidity risk in the course of its ordinary activities. Financial risk management aims to reduce this risk through the appropriate use of derivative and nonderivative hedging instruments.
Because GEA Group operates internationally, its cash flows are denominated not only in euros, but also in a number of other currencies, particularly U.S. dollars. Hedging the resulting currency risk is a key element of risk management.
The uniform group guidelines require all group companies to hedge foreign-currency items as they arise in order to fix prices on the basis of hedging rates. Currency risks are hedged for recognized hedged items, unrecognized firm commitments, and highly probable forecast transactions. The hedging periods are determined by the maturity of the hedged items and are usually up to 12 months, but in exceptional cases may exceed that period significantly. Despite the hedging requirement, changes in exchange rates may affect sales opportunities outside the eurozone.
Group companies based in the eurozone are obliged to tender to GEA Group's central finance unit all outstanding exposures relating to transactions in goods and services in major transaction currencies. Most of these exposures are passed on directly to banks at matching maturities, depending on the hedging objective of the derivatives and the related accounting treatment; they may also be hedged as part of a portfolio. The hedging of financial transactions and transactions conducted by subsidiaries outside the eurozone is also closely coordinated with the central finance unit.
Because GEA Group operates worldwide, liquidity is raised and invested in the international money and capital markets in different currencies (but mainly in euros) and at different maturities. The resulting financial liabilities and investments are exposed to interest rate risk, which must be assessed and managed by central financial management. Derivative financial instruments may be used on a case-by-case basis to hedge interest rate risk and reduce the interest rate volatility and financing costs of the hedged items. Only the central finance unit is permitted to enter into such interest rate hedges.
All interest rate derivatives are allocated to individual loans. The hedging relationships are documented and recognized as cash flow hedges. Overall, the interest expense from the loans and the allocated derivatives reported in the income statement represents the fixed interest rate for the hedging relationship.
Cross-currency swaps were used in connection with the financing of acquisitions in Canada and the UK. They are recognized at fair value. However, they are not included in any documented hedging relationship with intragroup hedged items. The earnings effects arising from changes to currency parities that have occurred since the beginning of the cross-currency swaps, and the earnings effects due to the related intragroup receivables, do not match due to different calculation bases (forward rate relative to spot rate). The difference in value amounted to EUR –653 thousand in fiscal year 2013 (previous year: EUR 2,163 thousand).
GEA Group requires various metals such as aluminum, copper, and steel, whose purchase prices can be subject to substantial fluctuations depending on the market situation. Long-term supply agreements have been entered into with various suppliers in order to hedge commodity price risk.
Financial instruments are exposed to credit risk in that the other party to the contract may fail to fulfill its obligations. The counterparty limit system used by GEA Group for financial management aims to continuously assess and manage the counterparty default risk. A maximum risk limit has been defined for each counterparty, which in most cases is derived from the ratings from recognized credit rating agencies and credit default swaps (CDSs). Appropriate action is taken if the individual limit is exceeded.
The financial standing of potential customers is ascertained before orders are accepted using an internal risk board procedure. Active receivables management, including nonrecourse factoring, and credit insurance, is also performed. In the case of export transactions, confirmed and unconfirmed letters of credit are used alongside sureties, guarantees, and cover notes, including from export credit agencies such as Euler Hermes. In addition to local monitoring by the subsidiary in question, GEA Group also oversees the main credit risks at group management level so that any accumulation of risk can be better managed.
Since trade receivables are usually due from a large number of customers in different sectors and regions, there is no concentration of risk. Valuation allowances take account of specific credit risks.
So as to reduce the credit risk involved, derivative financial instruments are only entered into with reputable financial institutions.
The maximum exposure for the financial assets is limited to their carrying amount.
GEA Group is exposed to liquidity risk in that it may be unable to meet payment obligations because it has insufficient cash funds at its disposal. GEA Group is responsible for managing this risk. Cash funds are arranged and credit lines managed on the basis of a multi-year financial plan and a rolling month-by-month cash forecast. The funds are then made available to the companies by group management. Cash flow from operating activities is the most important source of liquidity. Cash pools have been established in 13 countries in order to optimize borrowing and the use of cash funds within GEA Group. To achieve this, the cash pools automatically balance the accounts of the participating
group companies every day by crediting or debiting a target account at GEA Group Aktiengesellschaft. This prevents separate cash investments and borrowings by these companies to a large extent. Any additional liquidity requirements are generally borrowed by the GEA Group Aktiengesellschaft, which also invests surplus liquidity.
The following tables show the undiscounted contractually agreed interest and principal payments for financial liabilities, including derivative financial instruments with negative fair values:
| Cash flows | |||||||
|---|---|---|---|---|---|---|---|
| (EUR thousand) | Carrying amount |
< 1 year | 1-2 years | 2-3 years | 3-4 years | 4-5 years | > 5 years |
| 2013 | |||||||
| Trade payables | 646,529 | 645,985 | 544 | – | – | – | – |
| Borrower's note loan | 300,358 | 6,978 | 7,472 | 8,589 | 307,737 | – | – |
| Bonds | 410,220 | 17,000 | 17,000 | 417,000 | – | – | – |
| Liabilities to banks | 260,756 | 44,223 | 37,124 | 36,056 | 150,863 | 70 | – |
| Liabilities under finance leases | 36,198 | 4,172 | 4,500 | 3,908 | 3,906 | 3,906 | 59,203 |
| Liabilities to investees | 1,130 | 1,130 | – | – | – | – | – |
| Currency derivatives not included in a recognized hedging relationship |
5,775 | 348,450 | 196 | – | – | – | – |
| Currency derivatives included in a cash flow hedge | 2,741 | 124,500 | 5,482 | – | – | – | – |
| Interest rate and cross-currency derivatives not included in a recognized hedging relationship |
5,210 | 8,146 | 7,769 | 7,406 | 26,095 | 3,559 | – |
| Interest rate and cross-currency derivatives included in a cash flow hedge |
3,265 | 1,238 | 1,238 | 1,241 | 926 | – | – |
| Commodity derivatives not included in a recognized hedging relationship |
– | – | – | – | – | – | – |
| Other financial liabilities | 59,748 | 58,088 | 1,660 | – | – | – | – |
| 2012 | |||||||
| Trade payables | 839,143 | 824,924 | 14,219 | – | – | – | – |
| Borrower's note loan | 355,543 | 62,609 | 6,935 | 7,436 | 8,194 | 307,308 | – |
| Bonds | 409,601 | 17,000 | 17,000 | 17,000 | 417,000 | – | – |
| Liabilities to banks | 303,889 | 53,314 | 37,895 | 37,218 | 36,408 | 151,159 | 267 |
| Liabilities under finance leases | 42,625 | 5,116 | 5,664 | 4,876 | 4,865 | 4,820 | 64,165 |
| Liabilities to investees | 1,955 | 1,955 | – | – | – | – | – |
| Currency derivatives not included in a recognized hedging relationship |
5,689 | 313,249 | 8,887 | 517 | – | – | – |
| Currency derivatives included in a cash flow hedge | 1,728 | 110,445 | 8,348 | – | – | – | – |
| Interest rate and cross-currency derivatives not included in a recognized hedging relationship |
11,244 | 9,060 | 8,659 | 8,263 | 7,881 | 28,779 | 3,636 |
| Interest rate and cross-currency derivatives included in a cash flow hedge |
5,538 | 2,475 | 1,238 | 1,238 | 1,242 | 926 | – |
| Commodity derivatives not included in a recognized hedging relationship |
98 | 98 | – | – | – | – | – |
| Other financial liabilities | 83,150 | 79,548 | 3,602 | – | – | – | – |
All financial liabilities outstanding as of December 31, 2013, are included in the above table to the extent that payments have already been contractually agreed. Projected figures for future new liabilities are not taken into account. Foreign currency amounts are translated at the closing rates. In the case of financial liabilities that can be repaid at any time, it is assumed that they will be repaid within one year.
Payments for derivative financial instruments totaling EUR 536,246 thousand (previous year: EUR 514,941 thousand) were partially offset by payments received from the same instruments of EUR 518,477 thousand (previous year: EUR 488,582 thousand).
As of December 31, 2013, the group held cash credit lines of EUR 1,740,182 thousand (previous year: EUR 1,845,745 thousand), EUR 974,277 thousand of which has been utilized (previous year: EUR 1,069,033 thousand). The cash credit lines are composed of the following items:
| (EUR thousand) | Maturity | 12/31/2013 approved |
12/31/2013 utilized |
12/31/2012 approved |
12/31/2012 utilized |
|---|---|---|---|---|---|
| Borrower's note loan (2013) | August 2013 | – | – | 55,000 | 55,000 |
| GEA Bond | April 2016 | 400,000 | 400,000 | 400,000 | 400,000 |
| Kreditanstalt für Wiederaufbau (KfW) (2016/05) | May 2016 | 60,000 | 60,000 | 80,000 | 80,000 |
| Kreditanstalt für Wiederaufbau (KfW) (2016/12) | December 2016 | 42,000 | 42,000 | 56,000 | 56,000 |
| European Investment Bank | July 2017 | 150,000 | 150,000 | 150,000 | 150,000 |
| Borrower's note loan (2017) | September 2017 | 300,000 | 300,000 | 300,000 | 300,000 |
| Syndicated credit line ("Club Deal") | August 2018 | 650,000 | – | 650,000 | – |
| Various (bilateral) credit lines including accured interests | Maximum of 1 year or "until further notice" |
138,182 | 22,277 | 154,745 | 28,033 |
| Total | 1,740,182 | 974,277 | 1,845,745 | 1,069,033 |
GEA Group Aktiengesellschaft took out a new syndicated credit line in the form of a club deal amounting to EUR 650 million in August 2013. This replaces the line with the same volume falling due in June 2015. The loan has a five-year term and also includes two prolongation options for one year in each case until August 2020 overall.
As of December 31, 2013, guarantee lines for the performance of contracts, advance payments, and warranty obligations of EUR 1,886,355 thousand were available to the complete group (previous year: EUR 1,898,285 thousand), EUR 707,924 thousand of which has been utilized (previous year: EUR 749,782 thousand). The guarantees are generally payable at first demand. As is generally customary for this type of order collateral and financing instrument, guarantees have only been drawn down by GEA Group in extremely rare exceptional cases in recent years.
As of the year-end, EUR 284 thousand (previous year: EUR 292 thousand) of bank guarantees under GEA Group Aktiengesellschaft credit lines and EUR 88,101 thousand (previous year: EUR 92,074 thousand) of group guarantees were granted to Lurgi AG's customers to collateralize that company's contractual obligations. EUR 284 thousand of the bank guarantees (previous year: EUR 292 thousand) is payable at first demand. The purchaser of the Lurgi Group has granted bank guarantees in favor of GEA Group Aktiengesellschaft that cover the liable amount concerned in the unlikely event of default. EUR 9,669 thousand (previous year: EUR 12,933 thousand) of bank guarantees under GEA Group Aktiengesellschaft credit lines and EUR 69,582 thousand (previous year: EUR 70,251 thousand) of group guarantees were granted to Lentjes GmbH's customers to collateralize that company's contractual obligations. EUR 3,265 thousand of the bank guarantees (previous year: EUR 3,765 thousand) is payable at first demand.
Future payments from operating leases are reported separately under other financial liabilities (see section 8.2).
GEA Group companies are always exposed to foreign currency risk if their cash flows are denominated in a currency other than their own functional currency. Foreign currency risk is hedged using suitable instruments, thus largely offsetting fluctuations arising from the hedged item and the hedging transaction over their term.
The foreign currency risk presented in the sensitivity analysis results from the following transactions:
Although swaps are matched by intragroup receivables as hedged items, they are not included in a documented hedging relationship. While receivables are measured using the spot rate, the currency components of the swaps are measured on the basis of the forward rates. The two rates could differ significantly depending on the interest rate difference between the two currencies.
only equity is affected by exchange rate risk.
The translation of foreign currency receivables or liabilities at the closing rate has a direct effect on earnings.
The currency pairs in which the major part of the foreign currency cash flows are settled are included as relevant risk variables in the foreign currency sensitivity analysis. The following table shows the sensitivity of a 10 percent increase or decrease in the relevant foreign currency in relation to the relevant base currency from the perspective of the complete group:
| (EUR thousand) | Nominal amount | Profit/loss for the year | Equity | |||
|---|---|---|---|---|---|---|
| Base currency | Foreign currency | 2013 | 2013 | |||
| + 10% | - 10% | + 10% | - 10% | |||
| EUR | USD | 422,789 | 175 | –214 | 5,901 | –7,213 |
| EUR | GBP | 174,846 | 1,913 | –2,338 | –1,183 | 1,445 |
| EUR | NZD | 103,328 | –17 | 20 | –946 | 1,152 |
| EUR | CNY | 79,052 | 776 | –949 | –986 | 1,205 |
| EUR | CAD | 27,240 | 2,843 | –3,475 | – | – |
| EUR | INR | 5,069 | 461 | –563 | – | – |
| (EUR thousand) | Nominal amount | Profit/loss for the year | Equity | |||
|---|---|---|---|---|---|---|
| Base currency | Foreign currency | 2012 | 2012 | |||
| + 10% | - 10% | + 10% | - 10% | |||
| EUR | USD | 377,842 | 658 | –804 | 7,476 | –9,137 |
| EUR | GBP | 91,982 | 2,720 | –3,324 | –659 | 805 |
| EUR | CAD | 33,009 | 3,492 | –4,269 | 6 | –7 |
| HKD | CNY | 24,418 | – | – | –216 | 264 |
| EUR | RUB | 15,355 | 1,247 | –1,524 | 65 | –79 |
| EUR | INR | 9,437 | 857 | –1,047 | – | – |
The nominal amount relates to all contractually agreed foreign currency cash flows as of the reporting date, which are translated into euros at the closing rate.
The potential fluctuations in the profit or loss for the year result primarily from derivatives that are not included in a designated hedging relationship, but are used to avoid currency risk as part of the general hedging strategy.
The interest rate sensitivity analysis presents the effects of changes in market interest rates on interest income and expenses, and equity. The sensitivity analyses are based on the following assumptions:
The sensitivity analysis assumes a linear shift in the yield curves for all currencies of +100 or –10 basis points as of December 31, 2013, and of +100 or –100 basis points as of December 31, 2012. Relatively speaking, there is less of a downward shift in the yield curve shift assumed for the sensitivity analysis than an upward shift. The low, near 0 percent interest rate level avoids a shift to a negative interest rate. This results in the following effects for the simulated scenarios:
| 12/31/2013 | 12/31/2012 | |||
|---|---|---|---|---|
| (EUR thousand) | + 100 basis points | - 10 basis points | + 100 basis points | - 100 basis points |
| Equity interest rate risk | 1,705 | –161 | 2,712 | –1,428 |
| Interest rate risk recognized in profit or loss | –2,218 | 233 | –1,515 | 2,436 |
The calculation is based on a net volume of EUR 475,411 thousand (previous year: EUR 557,674 thousand).
GEA Group Aktiengesellschaft's key financial objective is to sustainably increase its enterprise value in the interests of investors, employees, customers, and suppliers, while safeguarding and securing the group's solvency at all times.
Improving profitability and, as a result, increasing the return on capital employed therefore takes priority in all business decisions. Our strict focus on contract margin quality is also derived from this. Equally, external growth through potential acquisitions is viewed from the perspective of this goal.
Capital management, in the form of generating sufficient liquidity reserves, plays a crucial role in the pursuit of these enterprise goals. Not only does it ensure GEA Group's long-term existence, it also creates the entrepreneurial flexibility needed to enhance and update current business activities and to take advantage of strategic opportunities. It is achieved by managing liquidity reserves and available credit lines on an ongoing basis using short- and medium-term forecasts of future liquidity trends and borrowing requirements.
The capital structure is monitored regularly using various key financial indicators so as to optimize capital costs. Core indicators include the equity ratio and the net debt to equity ratio (gearing). Net debt for the complete group is calculated as follows:
| (EUR thousand) | 12/31/2013 | 12/31/2012 |
|---|---|---|
| Liabilities to banks | –263,750 | –303,889 |
| thereof liabilities held for sale | –2,994 | – |
| Borrower's note loan | –300,358 | –355,543 |
| Bonds | –410,220 | –409,601 |
| Cash and cash equivalents | 795,777 | 743,524 |
| thereof assets held for sale | 112,257 | – |
| Net liquidity (+)/Net debt (-) | –178,551 | –325,509 |
| Equity | 2,315,702 | 2,166,911 |
| Equity ratio | 35.8% | 33.7% |
| Gearing | 7.7% | 15.0% |
As of December 31, 2013, net debt narrowed by EUR 146,958 thousand from EUR 325,509 thousand in the previous year to EUR 178,551 thousand.
Two international rating agencies, Moody's and Fitch, again rated GEA Group Aktiengesellschaft's ability to meet its financial obligations. The two agencies have awarded the following unchanged ratings to GEA Group:
| 2013 | 2012 | ||||
|---|---|---|---|---|---|
| Agency | Rating | Outlook | Rating | Outlook | |
| Moody's | Baa3 | stable | Baa3 | stable | |
| Fitch | BBB- | stable | BBB- | stable |
GEA Group's investment grade rating in the "BBB" range ensures that it has good financing opportunities both with banks and directly on the capital markets. The current ratings reflect GEA Group's strong solvency and ensure access to the international financial markets.
Following a comprehensive technological and strategic review of GEA Group's segments, the Executive Board of GEA Group Aktiengesellschaft resolved, with the agreement of the Supervisory Board, to withdraw from the GEA Heat Exchangers Segment (GEA HX) in June 2013.
The GEA HX Segment has one of the largest heat exchanger portfolios in the world and provides products and systems for numerous applications and areas of use, ranging from air conditioning systems to cooling towers. There is however only a limited potential for synergies between GEA HX and the other segments in GEA Group's portfolio due to the differing business profiles.
The Executive Board of GEA Group Aktiengesellschaft expects the disposal of the GEA HX Segment to take place in fiscal year 2014. The intention is to dispose of the segment as a whole in one transaction.
As the IFRS 5 conditions were met for the first time at the year end, the GEA HX Segment was classified as a discontinued operation as of this date. This means that income and expenses from the GEA HX segment are reported in the income statement under profit or loss after tax from discontinued operations. The prior-year comparatives in the income statement were adjusted accordingly. The assets and liabilities of the GEA HX disposal group are reported in the balance sheet as of December 31, 2013, under "assets held for sale" and "liabilities held for sale". Measurement of the GEA HX disposal group at the lower of its carrying amount and fair value less costs to sell did not result in a requirement to recognize an impairment loss.
The assets and liabilities of the GEA HX disposal group as of December 31, 2013, are outlined in the table below:
| (EUR thousand) | 12/31/2013 |
|---|---|
| Property, plant and equipment | 255,378 |
| Investment property | 281 |
| Goodwill | 524,423 |
| Other intangible assets | 44,771 |
| Equity-accounted investments | 6,466 |
| Other non-current financial assets | 8,265 |
| Deferred taxes | 46,412 |
| Inventories | 142,285 |
| Trade receivables | 403,516 |
| Income tax receivables | 4,225 |
| Other current financial assets | 44,709 |
| Cash and cash equivalents | 112,257 |
| Assets held for sale | 1,592,988 |
| Non-current provisions | 10,516 |
| Non-current employee benefit obligations | 27,718 |
| Non-current financial liabilities | 5,178 |
| Other non-current liabilities | 470 |
| Deferred taxes | 26,716 |
| Current provisions | 81,703 |
| Current employee benefit obligations | 38,220 |
| Current financial liabilities | 4,300 |
| Trade payables | 233,131 |
| Income tax liabilities | 9,220 |
| Other current liabilities | 182,694 |
| Liabilities held for sale | 619,866 |
| (EUR thousand) | 01/01/2013 - 12/31/2013 |
01/01/2012 - 12/31/2012 |
|---|---|---|
| Revenue | 1,489,067 | 1,608,769 |
| Other income | 30,182 | 37,759 |
| Expenses | 1,414,305 | 1,508,902 |
| Profit or loss before tax from discontinued operations | 104,944 | 137,626 |
| Income taxes | 51,142 | 36,783 |
| Profit or loss after tax from discontinued operations | 53,802 | 100,843 |
| of which attributable to shareholders of GEA Group AG | 53,449 | 98,654 |
| of which attributable to non-controlling interests | 353 | 2,189 |
As of December 31, 2013 the accumulated expenses recognized in other comprehensive income linked to the disposal group GEA HX amount to 8,502 EUR thousand (previous year: income EUR 12,777 thousand). This amount includes accumulated actuarial losses of 4,933 EUR thousand (previous year: 5,504 EUR thousand).
In addition to the GEA HX disposal group, other assets held for sale are reported at a carrying amount of EUR 12,798 thousand as of December 31, 2013 (previous year: EUR 18,447 thousand). Of this amount, EUR 8,342 thousand relates to a property in Turkey that is not required for operating purposes. These assets will be disposed of since it has no further use.
In addition to the GEA HX Segment, discontinued operations comprise the risks remaining from the sale of the plant engineering activities, especially Lurgi and Lentjes, the continued process of winding-up the business operations of Ruhr-Zink, and individual legal disputes arising from past discontinued operations. Profit after tax from these discontinued operations of EUR 552 thousand (previous year: EUR 95 thousand) did not have a material impact on consolidated profit. Tax income attributable to these discontinued operations amounted to EUR 3,504 thousand. In the previous year, there was an income tax expense in the amount of EUR 311 thousand.
Consolidated balance sheet disclosures: Assets
Property, plant and equipment changed as follows:
| (EUR thousand) | Land and buildings (owner occupied) |
Technical equipment and machinery |
Other equipment, operating and office equipment |
Assets under construction |
Total | Supplemental information: Disposal groups, discontinued operations |
|---|---|---|---|---|---|---|
| Jan. 1, 2012 | ||||||
| Cost | 652,576 | 616,545 | 360,198 | 82,882 | 1,712,201 | – |
| Cumulative depreciation and | ||||||
| impairment losses | –288,724 | –423,492 | –269,528 | –2,985 | –984,729 | – |
| Carrying amount | 363,852 | 193,053 | 90,670 | 79,897 | 727,472 | – |
| Changes in 2012 | ||||||
| Additions | 7,006 | 21,737 | 24,589 | 78,732 | 132,064 | – |
| Disposals | –2,518 | –2,065 | –11,089 | –1,121 | –16,793 | – |
| Depreciation | –19,619 | –37,461 | –26,280 | –136 | –83,496 | – |
| Impairment losses | –2,052 | –6 | –87 | –15 | –2,160 | – |
| Reversal of impairment losses | 2,176 | 664 | 353 | – | 3,193 | – |
| reclassification as held for sale | –12,893 | –401 | – | – | –13,294 | – |
| Changes in consolidated Group | 2,208 | 839 | 630 | – | 3,677 | – |
| Currency translation | –470 | –929 | –373 | 109 | –1,663 | – |
| Other changes | 14,711 | 13,507 | 2,807 | –41,546 | –10,521 | – |
| Carrying amount at Dec. 31, 2012 | 352,401 | 188,938 | 81,220 | 115,920 | 738,479 | – |
| Jan. 1, 2013 | ||||||
| Cost | 655,535 | 629,922 | 366,220 | 119,160 | 1,770,837 | 557,480 |
| Cumulative depreciation and impairment losses |
–303,134 | –440,984 | –285,000 | –3,240 | –1,032,358 | –300,283 |
| Carrying amount | 352,401 | 188,938 | 81,220 | 115,920 | 738,479 | 257,197 |
| Changes in 2013 | ||||||
| Additions | 20,636 | 25,604 | 32,278 | 38,221 | 116,739 | 41,292 |
| Disposals | –496 | – | –908 | –397 | –1,801 | –1,303 |
| Depreciation | –20,718 | –38,267 | –25,673 | –403 | –85,061 | –30,481 |
| Impairment losses | – | – | –18 | – | –18 | –18 |
| Reversal of impairment losses | – | – | – | – | – | – |
| Reclassification as held for sale | –136,926 | –93,212 | –15,854 | –9,470 | –255,462 | – |
| Changes in consolidated Group | 260 | –102 | 162 | 16 | 336 | –3,090 |
| Currency translation | –7,552 | –5,084 | –2,109 | –447 | –15,192 | – |
| Other changes | 68,368 | 20,290 | 9,470 | –105,728 | –7,600 | –8,219 |
| Carrying amount at Dec. 31, 2013 | 275,973 | 98,167 | 78,568 | 37,712 | 490,420 | 255,378 |
| Dec. 31, 2013 | ||||||
| Cost | 501,289 | 385,850 | 311,854 | 38,234 | 1,237,227 | 580,144 |
| Cumulative depreciation and | ||||||
| impairment losses | –225,316 | –287,683 | –233,286 | –522 | –746,807 | –324,766 |
| Carrying amount | 275,973 | 98,167 | 78,568 | 37,712 | 490,420 | 255,378 |
EUR 255,378 thousand of the items of property, plant and equipment reclassified as held for sale relates to the GEA Heat Exchangers Segment, which has been allocated to discontinued operations.
The other changes are primarily attributable to reclassifications from assets under construction to other items of property, plant and equipment, to investment property, and to intangible assets.
As in the previous year, items of property, plant and equipment are depreciated on a straight-line basis using the relevant residual values and the following useful lives:
| Useful life in | |
|---|---|
| years | |
| Buildings and parts of buildings | 2 to 50 |
| Technical equipment and machinery, other equipment | 2 to 30 |
| Operating and office equipment | 3 to 40 |
The underlying residual values and useful lives are reviewed at each reporting date and adjusted if necessary.
Property, plant and equipment includes land and buildings, technical equipment and machinery, and office and operating equipment leased under finance leases:
| Carrying amount | 35,332 | 45,082 |
|---|---|---|
| Reclassification as held for sale | –7,337 | – |
| Cumulative depreciation and impairment losses | –17,569 | –17,284 |
| Cost - capitalized leased assets under finance leases | 60,238 | 62,366 |
| (EUR thousand) | 2013 | 2012 |
EUR 29,799 thousand (previous year: EUR 38,219 thousand) of the carrying amount of the leased items of property, plant and equipment relates to buildings. The leases for the buildings extend beyond 2030. The leases do not include extension options, escalation clauses, or the option to acquire the leased asset.
The corresponding lease liabilities are explained under financial liabilities (see section 6.4).
The carrying amount of property, plant and equipment that serves as collateral for credit lines amounted to EUR 4,202 thousand as of the reporting date (previous year: EUR 6,266 thousand). Most of these assets relate to land and buildings.
Consolidated balance sheet disclosures: Assets
The following table shows the changes in investment property:
| (EUR thousand) | Land | Buildings | Total |
|---|---|---|---|
| Jan. 1, 2012 | |||
| Cost | 14,982 | 7,175 | 22,157 |
| Cumulative depreciation and impairment losses | –5,352 | –4,968 | –10,320 |
| Carrying amount | 9,630 | 2,207 | 11,837 |
| Changes in 2012 | |||
| Additions | – | – | – |
| Disposals | –360 | – | –360 |
| Depreciation | – | –152 | –152 |
| Impairment losses | –754 | – | –754 |
| Currency translation | – | – | – |
| Reclassification as held for sale | – | – | – |
| Other changes | – | – | – |
| Carrying amount at Dec. 31, 2012 | 8,516 | 2,055 | 10,571 |
| Jan. 1, 2013 | |||
| Cost | 15,310 | 7,175 | 22,485 |
| Cumulative depreciation and impairment losses | –6,794 | –5,120 | –11,914 |
| Carrying amount | 8,516 | 2,055 | 10,571 |
| Changes in 2013 | |||
| Additions | 45 | – | 45 |
| Disposals | –2 | – | –2 |
| Depreciation | – | –152 | –152 |
| Impairment losses | – | – | – |
| Currency translation | –37 | –198 | –235 |
| Reclassification as held for sale | –25 | –256 | –281 |
| Other changes | 561 | 2,941 | 3,502 |
| Carrying amount at Dec. 31, 2013 | 9,058 | 4,390 | 13,448 |
| Dec. 31, 2013 | |||
| Cost | 15,851 | 9,704 | 25,555 |
| Cumulative depreciation and impairment losses | –6,793 | –5,314 | –12,107 |
| Carrying amount | 9,058 | 4,390 | 13,448 |
The fair value of investment property is EUR 18,922 thousand (previous year: EUR 15,830 thousand). Since these fair values are calculated on the basis of comparable market-based prices that are determined internally, they are categorized within Level 2 of the fair value hierarchy.
The following amounts are reported in the income statement in connection with investment property:
| Total | 728 | 759 |
|---|---|---|
| of which: properties used to generate rental income | 2,486 | 3,085 |
| Operating expenses | 2,486 | 3,085 |
| Rental income | 3,214 | 3,844 |
| (EUR thousand) | 01/01/2013 - 12/31/2013 |
01/01/2012 - 12/31/2012 |
The following table shows the allocation of goodwill to the segments and changes in goodwill:
| GEA Food |
GEA Farm |
GEA Heat |
GEA Mechanical |
GEA Process |
GEA Refrigeration |
||
|---|---|---|---|---|---|---|---|
| (EUR thousand) | Solutions | Technologies | Exchangers | Equipment | Engineering | Technologies | Total |
| Carrying amount at Dec. 31, 2011 | 238,495 | 187,833 | 557,190 | 324,098 | 402,715 | 189,817 | 1,900,147 |
| Additions | – | 5,651 | – | 29,158 | 751 | – | 35,560 |
| Disposals | – | –10,101 | –31,999 | –20,951 | –17,841 | –8,579 | –89,471 |
| Currency translation | – | –529 | 776 | –114 | 108 | –426 | –185 |
| Carrying amount at Dec. 31, 2012 | 238,495 | 182,854 | 525,967 | 332,191 | 385,733 | 180,811 | 1,846,051 |
| Additions | – | 385 | 808 | – | – | 285 | 1,478 |
| Disposals | – | – | – | – | – | –138 | –138 |
| Currency translation | – | –3,608 | –2,352 | –301 | –2,018 | –2,135 | –10,414 |
| Reclassification as held for sale | – | – | –524,423 | – | – | – | –524,423 |
| Carrying amount at Dec. 31, 2013 | 238,495 | 179,631 | – | 331,890 | 383,715 | 178,823 | 1,312,554 |
Goodwill in the amount of EUR 524,423 thousand reclassified to the held for sale balance sheet item is attributable to the GEA Heat Exchangers Segment, which was classified as a discontinued operation at the end of the year.
Purchase price allocation for Milfos International Ltd., Hamilton/New Zealand, which was acquired on November 19, 2012, and is allocated to the GEA Farm Technologies Segment, was completed in the second quarter of 2013 with some minor adjustments.
Goodwill recoverability was tested at the end of fiscal year 2013. The segments were identified as cashgenerating units for this impairment test. The recoverable amounts for the segments were compared with their carrying amounts, which included any goodwill allocated to them.
The recoverable amount of a segment is determined by calculating value in use using the discounted cash flow method. The cash flows used are the after-tax operating cash flows from the consolidated medium-term planning (three-year period) planned on a bottom-up basis and prepared by the Executive Board. The Supervisory Board approved this planning for 2014 and has taken note of it for 2015 and 2016. Assumptions for the period beyond the planning horizon are based on the cash flows in the previous planning year, extrapolated using a uniform growth rate of 1.5 percent (previous year 1.5 percent). The underlying growth rates do not exceed the average long-term growth rates for the markets in which the segments operate.
The planning assumes continued stable growth in the food and drink sales markets. This assumption is based on an expectation of growing demand for processed foods. All GEA Group segments will profit from these underlying trends with the exception of GEA Heat Exchangers, which has been classified as a discontinued operation. Although less strong in comparison to the food industry, growth is also assumed for other customer industries. By contrast, declining growth rates have been factored in for the energy and marine sectors. In addition, planned growth for individual segments also takes account of actual past growth rates. Compared with the reporting period, a marked increase in revenue and profitability has been factored into the medium-term planning for the GEA Food Solutions Segment.
With regard to raw material prices, it is assumed that any increase can be offset by increased selling prices. Future business acquisitions were not included in the planning.
The total cost of capital assumed for discounting is based on a risk-free interest rate of 2.75 percent (previous year: 2.25 percent) and a market risk premium of 5.75 percent (previous year: 6.25 percent). In addition, beta factors derived from the respective peer group, a borrowing risk premium, as well as capital structure were taken into account for each segment. Segment-specific tax rates were also applied.
Cash flows for the individual segments are discounted using the following after-tax rates:
| Discount rate | ||
|---|---|---|
| (%) | 12/31/2013 | 12/31/2012 |
| GEA Food Solutions | 7.83 | 7.76 |
| GEA Farm Technologies | 9.02 | 9.61 |
| GEA Heat Exchangers | - | 8.57 |
| GEA Mechanical Equipment | 9.31 | 9.50 |
| GEA Process Engineering | 8.59 | 7.89 |
| GEA Refrigeration Technologies | 8.70 | 8.60 |
In the GEA Food Solutions Segment, to which goodwill of EUR 238,495 thousand (previous year: EUR 238,495 thousand) has been allocated, the recoverable amount exceeds the carrying amount of net segment assets by EUR 25,753 thousand (previous year: EUR 82,302 thousand. A 0.61 percent reduction in the EBIT margin defined in the perpetual annuity at 11.5 percent, an increase in the discount rate by more than 0.32 percentage points to over 8.15 percent, or the use of a growth rate of less than 1.0 percent would have resulted in the recoverable amount being lower than the carrying amount of the net segment assets.
The carrying amount of intangible assets changed as follows:
| (EUR thousand) | Market related intangible assets |
Customer related intangible assets |
Contract based intangible assets |
Technology based intangible assets |
Internally generated intangible assets |
Total | Supplemental information: Disposal groups, discontinued operations |
|---|---|---|---|---|---|---|---|
| Jan. 1, 2012 | |||||||
| Cost | 76,851 | 172,667 | 85,828 | 159,517 | 44,822 | 539,685 | – |
| Cumulative amortization and impairment losses | –7,366 | –31,565 | –62,350 | –61,924 | –16,904 | –180,109 | – |
| Carrying amount | 69,485 | 141,102 | 23,478 | 97,593 | 27,918 | 359,576 | – |
| Changes in 2012 | |||||||
| Additions | 13 | – | 13,869 | 5,329 | 17,479 | 36,690 | – |
| Disposals | – | – | –50 | –23 | – | –73 | – |
| Amortization | –342 | –16,858 | –8,676 | –13,532 | –6,052 | –45,460 | – |
| Impairment losses | –11,807 | – | – | –1 | –2,122 | –13,930 | – |
| Reversal of impairment losses | – | – | 54 | 2 | 270 | 326 | – |
| Reclassification as held for sale | – | – | – | – | – | – | – |
| Changes in consolidated Group | 10,458 | 6,642 | – | 10,280 | –3 | 27,377 | – |
| Currency translation | 537 | 165 | –6 | 211 | –71 | 836 | – |
| Other changes | – | – | 6,781 | –4,427 | 8,060 | 10,414 | – |
| Carrying amount at Dec. 31, 2012 | 68,344 | 131,051 | 35,450 | 95,432 | 45,479 | 375,756 | – |
| Jan. 1, 2013 | |||||||
| Cost | 87,984 | 179,277 | 106,978 | 170,467 | 70,418 | 615,124 | 107,559 |
| Cumulative amortization and impairment losses | –19,640 | –48,226 | –71,528 | –75,035 | –24,939 | –239,368 | –61,109 |
| Carrying amount | 68,344 | 131,051 | 35,450 | 95,432 | 45,479 | 375,756 | 46,450 |
| Changes in 2013 | |||||||
| Additions | 13 | – | 7,608 | 7,255 | 24,649 | 39,525 | 6,107 |
| Disposals | –338 | –201 | –8 | 325 | – | –222 | 334 |
| Amortization | –576 | –16,910 | –9,140 | –13,685 | –6,852 | –47,163 | –6,977 |
| Impairment losses | –2,480 | – | – | – | – | –2,480 | –2,071 |
| Reversal of impairment losses | 336 | – | – | – | – | 336 | 336 |
| Reclassification as held for sale | –14,305 | –3,667 | –4,232 | –16,934 | –5,633 | –44,771 | – |
| Changes in consolidated Group | 232 | 117 | –22 | –25 | – | 302 | 348 |
| Currency translation | –1,613 | –1,073 | –411 | –1,283 | –136 | –4,516 | –761 |
| Other changes | –1 | – | 626 | 1,586 | 862 | 3,073 | 1,005 |
| Carrying amount at Dec. 31, 2013 | 49,612 | 109,317 | 29,871 | 72,671 | 58,369 | 319,840 | 44,771 |
| Dec. 31, 2013 | |||||||
| Cost | 62,061 | 166,606 | 87,536 | 132,045 | 85,969 | 534,217 | 112,740 |
| Cumulative amortization and impairment losses | –12,449 | –57,289 | –57,665 | –59,374 | –27,600 | –214,377 | –67,969 |
| Carrying amount | 49,612 | 109,317 | 29,871 | 72,671 | 58,369 | 319,840 | 44,771 |
The additions to internally generated intangible assets are primarily attributable to two segments: In the GEA Food Solutions Segment, the additions relate to the capitalization of internally generated software and development costs. The capitalized development costs are due to a series of enhancements, especially in the area of forming and injecting of food. In the GEA Farm Technologies Segment, costs relating to developments in automated milking and health and fertility management were capitalized.
As in the previous year, intangible assets with finite useful lives are amortized on a straight-line basis using the following useful lives:
| Useful life in | |
|---|---|
| years | |
| Market-related intangible assets | 3 to 20 |
| Customer-related intangible assets | 1 to 10 |
| Contract-based intangible assets | 1 to 18 |
| Technology-based intangible assets | 1 to 25 |
Amortization of intangible assets attributable to the complete group in the amount of EUR 47,163 thousand in fiscal year 2013 (previous year: EUR 45,460 thousand) is reported in cost of sales and, where this relates to discontinued operations, in profit or loss from discontinued operations.
Market-related intangible assets amounting to EUR 46,558 thousand (previous year: EUR 64,863 thousand) are not amortized because their useful life cannot be determined. These assets are company and product names of the acquired companies. These are established brands in their respective sectors and will continue to be used indefinitely after the company in question has been acquired.
The carrying amount of intangible assets with indefinite useful lives is broken down as follows:
| 12/31/2013 | 12/31/2012 | ||||
|---|---|---|---|---|---|
| Segment | Carrying amount (EUR thousand) |
Proportion of total carrying amount (%) |
Carrying amount (EUR thousand) |
Proportion of total carrying amount (%) |
|
| GEA Food Solutions | 4,397 | 9.4 | 4,397 | 6.8 | |
| GEA Farm Technologies | 5,961 | 12.8 | 6,429 | 9.9 | |
| GEA Heat Exchangers | – | – | 16,556 | 25.5 | |
| GEA Mechanical Equipment | 8,509 | 18.3 | 8,644 | 13.3 | |
| GEA Process Engineering | 13,649 | 29.3 | 13,885 | 21.4 | |
| GEA Refrigeration Technologies | 14,042 | 30.2 | 14,952 | 23.1 | |
| Total | 46,558 | 100.0 | 64,863 | 100.0 |
These brands are tested for impairment at least once a year. For this purpose, their internal value in use is determined using the relief from royalty method. Under this approach, the value of a brand is calculated on the basis of the future royalties that GEA Group would have to pay if it had to license the brands from third parties. The brand-related revenue is multiplied by the estimated license fee installments. The brand-related revenue is derived from the medium-term planning prepared by the Executive Board. The Supervisory Board approved this planning for 2014 and has taken note of it for 2015 and 2016. The assumed license fee installments generally correspond to those of the initial measurement. The payments saved calculated in this way are then discounted using a brand-specific pre-tax discount rate. Valuation is based on the following assumptions:
| (%) | 12/31/2013 | 12/31/2012 |
|---|---|---|
| Discount rate | 9.35 - 19.08 | 9.74 - 20.71 |
| Royalty rate | 0.20 - 3.00 | 0.20 - 3.00 |
The impairment test performed at the end of the year led to a writedown of EUR 394 thousand.
Equity-accounted investments are reported at a carrying amount of EUR 13,690 thousand as of December 31, 2013 (previous year: EUR 14,681 thousand).
The following overview presents the key figures for equity-accounted associates as of December 31, 2013. The relevant figures are stated at 100 percent and are based on the most recently available annual financial statements.
| 01/01/2013 - | 01/01/2012 - | |
|---|---|---|
| (EUR thousand) | 12/31/2013 | 12/31/2012 |
| Revenue | 43,541 | 27,826 |
| Profit after tax | 9,489 | 4,408 |
| (EUR thousand) | 12/31/2013 | 12/31/2012 |
|---|---|---|
| Assets | 101,722 | 94,049 |
| Liabilities | 32,274 | 34,613 |
The proportionate total assets and the group's share of the profit of equity-accounted investments are insignificant in relation to the group's total assets and profit.
The following overview presents the proportionate key figures for equity-accounted joint ventures:
| 01/01/2013 - | 01/01/2012 - | |
|---|---|---|
| (EUR thousand) | 12/31/2013 | 12/31/2012 |
| Revenue | 22,934 | 36,964 |
| Profit after tax | 2,040 | 1,821 |
| (EUR thousand) | 12/31/2013 | 12/31/2012 |
|---|---|---|
| Assets | ||
| Non-current assets | 632 | 2,244 |
| Current assets | 17,621 | 32,251 |
| Liabilities | ||
| Non-current liabilities | – | 401 |
| Current liabilities | 11,855 | 22,954 |
Other financial assets are composed of the following items:
| (EUR thousand) | 12/31/2013 | 12/31/2012 |
|---|---|---|
| Investments in unconsolidated subsidiaries and other equity investments | 27,408 | 30,799 |
| Other securities | 9,575 | 11,063 |
| Derivative financial instruments | 465 | 190 |
| Miscellaneous other financial assets | 4,620 | 6,794 |
| Other non-current financial assets | 42,068 | 48,846 |
| Derivative financial instruments | 10,794 | 6,927 |
| Miscellaneous other financial assets | 98,145 | 159,307 |
| Other current financial assets | 108,939 | 166,234 |
| Total | 151,007 | 215,080 |
Derivative financial instruments are explained in section 6.8.
Miscellaneous other financial assets with a carrying amount of EUR 102,765 thousand (previous year: EUR 166,101 thousand) were recognized as of the reporting date. They are broken down into noncurrent and current assets as follows:
| (EUR thousand) | 12/31/2013 | 12/31/2012 |
|---|---|---|
| Other receivables from unconsolidated subsidiaries | 130 | – |
| Other receivables from equity investments | – | 308 |
| Receivables from tax authorities | 469 | 3,959 |
| Sundry miscellaneous other financial assets | 4,021 | 2,527 |
| Other non-current financial assets | 4,620 | 6,794 |
| Other receivables from unconsolidated subsidiaries | 1,493 | 3,276 |
| Other receivables from equity investments | 4,592 | 3,889 |
| Other receivables from tax authorities | 40,469 | 74,098 |
| Sundry miscellaneous other financial assets | 51,591 | 78,044 |
| Other current financial assets | 98,145 | 159,307 |
| Total | 102,765 | 166,101 |
Receivables from tax authorities primarily comprise VAT receivables.
Sundry miscellaneous other financial assets include prepaid expenses totaling EUR 24,852 thousand (previous year: EUR 26,957 thousand).
Consolidated balance sheet disclosures: Assets
| (EUR thousand) | 12/31/2013 | 12/31/2012 | |
|---|---|---|---|
| Carrying amount before impairment losses | 57,823 | 85,460 | |
| Impairment losses | 2,211 | 4,889 | |
| Carrying amount | 55,612 | 80,571 | |
| of which not overdue at the reporting date | 55,502 | 80,304 | |
| of which past due at reporting date | 110 | 267 | |
| less than 30 days | 32 | – | |
| between 31 and 60 days | 12 | 7 | |
| between 61 and 90 days | 7 | – | |
| between 91 and 180 days | – | 9 | |
| between 181 and 360 days | 1 | 1 | |
| more than 360 days | 58 | 250 |
Inventories are composed of the following items:
| (EUR thousand) | 12/31/2013 | 12/31/2012 |
|---|---|---|
| Raw materials, consumables, and supplies | 113,459 | 204,858 |
| Work in progress | 89,281 | 152,491 |
| Assets for third parties under construction | 13,721 | 19,725 |
| Finished goods and merchandise | 287,857 | 314,290 |
| Advance payments | 46,737 | 60,694 |
| Total | 551,055 | 752,058 |
Inventories of EUR 2,652 million were recognized as an expense in fiscal year 2013 (previous year: EUR 2,568 million). Impairment losses on inventories were EUR 7,924 thousand in the reporting period (previous year: EUR 19,089 thousand). Impairment losses on inventories in previous years amounting to EUR 2,098 thousand (previous year: EUR 2,436 thousand) were reversed due to increased market prices. The reversals were recognized in cost of sales.
Trade receivables are composed of the following items:
| Total | 929,156 | 1,249,863 |
|---|---|---|
| Gross amount due from customers for contract work | 265,576 | 340,016 |
| of which from unconsolidated subsidiaries | 18,264 | 21,977 |
| of which from third parties | 645,316 | 887,870 |
| Trade receivables | 663,580 | 909,847 |
| (EUR thousand) | 12/31/2013 | 12/31/2012 |
Trade receivables include receivables of EUR 4,844 thousand (previous year: EUR 25,466 thousand) that will not be realized until more than one year after the reporting date. Bad debt allowances on trade receivables totaled EUR 42,142 thousand (previous year: EUR 66,535 thousand).
The average payment period and volume of receivables outstanding are in line with the general market.
The maturity structure of trade receivables – with the exception of receivables from affiliated companies and equity investments – is as follows:
| (EUR thousand) | 12/31/2013 | 12/31/2012 | |
|---|---|---|---|
| Carrying amount before impairment losses | 687,458 | 954,405 | |
| Impairment losses | 42,142 | 66,535 | |
| Carrying amount | 645,316 | 887,870 | |
| of which not overdue at the reporting date | 471,796 | 666,297 | |
| of which past due at reporting date | 173,520 | 221,573 | |
| less than 30 days | 82,760 | 99,341 | |
| between 31 and 60 days | 29,421 | 44,397 | |
| between 61 and 90 days | 11,139 | 18,578 | |
| between 91 and 180 days | 18,971 | 28,210 | |
| between 181 and 360 days | 18,292 | 15,947 | |
| more than 360 days | 12,937 | 15,100 |
The gross amount due from and to customers for contract work is composed of the following items:
| (EUR thousand) | 12/31/2013 | 12/31/2012 |
|---|---|---|
| Capitalized production cost of construction contracts | 1,949,863 | 2,905,411 |
| plus net gain from construction contracts | 381,482 | 479,240 |
| minus anticipated losses | 4,253 | 13,988 |
| minus progress billings | 2,354,477 | 3,369,684 |
| Total | –27,385 | 979 |
| Gross amount due from customers for contract work (included in trade receivables) |
265,576 | 340,016 |
| Gross amount due to customers for contract work (included in other liabilities) |
–292,961 | –339,037 |
| Total | –27,385 | 979 |
Advance payments received on construction contracts amounted to EUR 29,489 thousand at December 31, 2013 (previous year: EUR 37,128 thousand). Customer retention money amounted to EUR 12,946 thousand (previous year: EUR 32,750 thousand). Revenue of EUR 2,103,347 thousand (previous year: EUR 1,982,545 thousand) was generated from construction contracts in the reporting period.
Income tax receivables amounted to EUR 8,332 thousand at the reporting date (previous year: EUR 19,350 thousand). EUR 8,332 thousand (previous year: EUR 19,331 thousand) of this amount is due within one year. In the previous year, income tax receivables of EUR 19 thousand were due after more than one year.
Consolidated balance sheet disclosures: Assets
Cash and cash equivalents were composed of the following items at the reporting date:
| Restricted cash 1,436 |
|---|
| Unrestricted cash 682,084 735,981 |
| (EUR thousand) 12/31/2013 12/31/2012 |
Cash and cash equivalents comprise cash funds and overnight deposits. Restricted cash consists of term deposits and bank deposits.
During the year, the standard market interest rate for short-term bank deposits in the eurozone lay between 0.0 and 0.5 percent (previous year: between 0.0 and 0.5 percent). The average interest rate at the end of the year was 0.3 percent (previous year: 0.3 percent).
There were no changes to subscribed capital in fiscal year 2013. In the previous year, the subscribed capital increased by EUR 23,486 thousand through the issuance of 8,687,631 no-par value bearer shares.
The subscribed capital of GEA Group Aktiengesellschaft amounted to EUR 520,376 thousand as of December 31, 2013 (previous year: EUR 520,376 thousand). The shares are composed of 192,495,476 no-par value bearer shares (previous year: 192,495,476). All the shares are fully paid up.
As in the previous year, the shares have a notional value of EUR 2.70 each (rounded).
All shares convey the same rights. Shareholders are entitled to receive dividends as declared and are entitled to one vote per share at the Annual General Meeting.
| (EUR thousand) | Annual General Meeting resolution |
Expiring on | Amount (EUR thousand) |
|---|---|---|---|
| Authorized Capital I | April 24, 2012 | April 23, 2017 | 77,000 |
| Authorized Capital II | April 21, 2010 | April 20, 2015 | 72,000 |
| Authorized Capital III | April 22, 2009 | April 21, 2014 | 99,000 |
| Total | 248,000 |
Under Authorized Capital I, the Executive Board is authorized, with the approval of the Supervisory Board, to increase the share capital by issuing new no-par value shares against cash contributions on one or more occasions and, in accordance with Article 5(4) of the Articles of Association, to define a starting date for profit rights in this case that differs from the date stipulated by law. The Executive Board is also entitled, with the approval of the Supervisory Board, to exclude fractions from shareholders' preemptive rights. Furthermore, the Executive Board is authorized, with the approval of the Supervisory Board, to stipulate the further details of the capital increase from Authorized Capital I and the terms and conditions of the share issue. The new shares may also be underwritten by banks with the obligation of offering them to the shareholders for subscription.
Under Authorized Capital II, the Executive Board is authorized, with the approval of the Supervisory Board, to increase the share capital by issuing new no-par value shares against cash or noncash contributions on one or more occasions and, in accordance with Article 5(4) of the Articles of Association, to define a starting date for profit rights in this case that differs from the date stipulated by law. The Executive Board is also entitled, with the approval of the Supervisory Board, to exclude fractions from shareholders' preemptive rights. Furthermore, the Executive Board is authorized, with the approval of the Supervisory Board, to disapply shareholders' preemptive rights in a partial amount of EUR 50,000 thousand in the case of capital increases against noncash contributions for the purpose of business combinations or the acquisition of companies, parts of companies, or equity interests in companies. Additionally, the Executive Board is authorized, with the approval of the Supervisory Board, to stipulate the further details of the capital increases from Authorized Capital II and the terms and conditions of the share issue. The new shares may also be underwritten by banks with the obligation of offering them to the shareholders for subscription.
Under Authorized Capital III, the Executive Board is authorized, with the approval of the Supervisory Board, to increase the share capital by issuing new no-par value shares against cash or noncash
contributions on one or more occasions and, in accordance with Article 5(4) of the Articles of Association, to define a starting date for profit rights in this case that differs from the date stipulated by law. The Executive Board is also authorized, with the approval of the Supervisory Board, to disapply shareholders' preemptive rights in the case of capital increases against noncash contributions for the purpose of business combinations or the acquisition of companies, parts of companies, or equity interests in companies. Furthermore, the Executive Board is authorized, with the approval of the Supervisory Board, to disapply shareholders' preemptive rights in the case of capital increases against cash contributions if the issue price of the new shares does not fall materially below the market price of the same class of shares of the Company at the time the issue price is set. This disapplication of preemptive rights in accordance with sections 203(1) and 186(3) sentence 4 of the AktG is limited to a maximum of 10 percent of the Company's share capital. The limit of 10 percent of the share capital is reduced by the proportion of the share capital attributable to the treasury shares of the Company that are sold during the term of Authorized Capital III while shareholders' preemptive rights are disapplied in accordance with sections 71(1) no. 8 sentence 5 and 186(3) sentence 4 of the AktG. The limit is also reduced by the proportion of the share capital attributable to those shares that are issued to settle bonds with warrants or convertible bonds with an option or conversion right or with an option or conversion obligation, provided that the bonds are issued during the term of Authorized Capital III and shareholders' preemptive rights are disapplied in accordance with section 186(3) sentence 4 of the AktG. Furthermore, the Executive Board is entitled, with the approval of the Supervisory Board, to exclude fractions from shareholders' preemptive rights. The Executive Board is also authorized, with the approval of the Supervisory Board, to stipulate the further details of the capital increases from Authorized Capital III and the terms and conditions of the share issue. The new shares may also be underwritten by banks with the obligation of offering them to the shareholders for subscription.
| (EUR thousand) | 12/31/2013 | 12/31/2012 |
|---|---|---|
| Compensation to external shareholders of GEA AG in line with the settlement dated January 30, 2012, resolved by the Annual General Meeting on April 24, 2012 |
17,339 | 17,339 |
| Bonds with warrants and convertible bonds according Annual General Meeting resolution April 21, 2010 | 48,660 | 48,660 |
| Total | 65,999 | 65,999 |
Under Article 4(6) of the Articles of Association, the share capital was contingently increased by up to EUR 17,339,095.52, comprising up to 6,414,014 bearer shares. In accordance with the Articles of Association, the contingent capital increase serves to grant compensation in shares of the Company to the external shareholders of the former GEA AG, Bochum, in line with the settlement dated January 30, 2012, between the Company on the one hand, and on the other hand the applicants as well as the joint representatives of the award proceedings pending before the Dortmund Local Court with the case reference number 20 O 533/99, which will bring the award proceedings related to the control and profit transfer agreement dating from June 29, 1999, between the former Metallgesellschaft AG (now GEA Group Aktiengesellschaft) and the former GEA AG to a close and increase the previous exchange ratio. The issue of the last tranche of shares on December 3, 2012, in line with the settlement completed the implementation of the capital increase.
Under a resolution adopted by the Annual General Meeting on April 21, 2010, the share capital was contingently increased by up to EUR 48,660 thousand, comprising up to 18,000,000 bearer shares. The contingent capital increase will only be implemented to the extent that the holders or creditors of options or conversion rights or persons obliged to convert or exercise options under bonds with warrants or convertible bonds that are issued against cash contributions or guaranteed by the Company or a subordinate group company of the Company up to April 20, 2015, on the basis of the authorization of the Executive Board by the Annual General Meeting resolution dated April 21, 2010, exercise their options or conversion rights or, if they are obliged to convert or exercise options, satisfy their obligation to convert or exercise options, or if GEA Group Aktiengesellschaft exercises its option to grant shares of GEA Group Aktiengesellschaft in full or in part instead of payment of the monetary amount due, and if no cash settlement is granted or own shares or shares of another listed company are used in settlement. New shares will be issued at the option or conversion price to be determined in accordance with the authorizing resolution referred to above. The new shares carry dividend rights from the beginning of the fiscal year in which they are created. The Executive Board is authorized, with the approval of the Supervisory Board, to determine the further details of the implementation of the contingent capital increase.
As in the previous year, no bonds with warrants or convertible bonds were issued in fiscal year 2013.
Capital reserves primarily reflect the effects from the business combination of the former Metallgesellschaft Aktiengesellschaft and the former GEA AG as well as premiums from issuing shares of the former Metallgesellschaft AG.
Capital reserves rose by EUR 209 thousand compared with the previous year and amounted to EUR 1,218,073 thousand (previous year: EUR 1,217,864 thousand). The increase is due to the change in non-controlling interests (EUR 230 thousand), less EUR 21 thousand (previous year: increase of EUR 64 thousand) from the offsetting of income from an employee share-based payment plan in South Africa, which is attributable to discontinued operations. Under the major "Medupi" order received at the end of 2007, GEA Group undertook to meet certain assessment criteria defined by the Broad Based Black Economic Empowerment Act of 2003. To do this, GEA Group launched a sharebased payment plan for staff at its South African company, among other things. The shares granted to these employees are held indirectly via a trustee, which in turn issues options on these shares to the employees. The options vest after a five-year holding period. Twenty percent of the options will be exercised each year after the holding period expires. The exercise price corresponds to the fair value of the shares at the grant date. The options lapse if employees leave the company before the five-year period expires.
10,315 options were outstanding at December 31, 2012. Of these, 3,505 options expired in fiscal year 2013. At the same time, 3,150 options were allocated to a second tranche, of which 75 options expired in fiscal year 2013. The number of options outstanding at December 31, 2013, was therefore 9,885.
The weighted average fair value of the options issued amounted to EUR 36.69 at the grant date of May 6, 2009. The fair value of the options was determined using a Monte Carlo simulation. Income of EUR 21 thousand (previous year: expenses of EUR 64 thousand) was recognized to reflect expected staff turnover in fiscal year 2013.
The changes in retained earnings and net retained profits are reported in the statement of changes in equity. Actuarial gains and losses on the measurement of non-current employee benefit obligations are included in retained earnings.
The distribution of profits is based on the annual financial statements of GEA Group Aktiengesellschaft prepared in accordance with the HGB.
Changes in equity outside profit or loss are reported in accumulated other comprehensive income if they do not relate to capital transactions with shareholders. Other comprehensive income comprises the gains or losses on financial assets measured at fair value and recognized directly in equity, the effective portion of the change in fair value of derivatives designated as cash flow hedges, and exchange rate gains or losses from the translation of the financial statements of foreign subsidiaries.
Non-controlling interests in GEA Group companies amounted to EUR 2,667 thousand (previous year: EUR 2,552 thousand).
The change in accumulated other comprehensive income attributable to non-controlling interests totaled EUR 167 thousand. This amount resulted primarily from exchange differences on foreign currency translation, which contributed EUR 167 thousand in fiscal year 2013 to the change in accumulated other comprehensive income.
The following table shows the composition of and changes in provisions in 2013:
| (EUR thousand) | Guarantees, warranties |
Financial guarantee contracts |
Litigation risks |
Follow-up costs |
Environ mental protection, mining |
Other provisions |
Total | Supplemental information: Disposal groups, discontinued operations |
|---|---|---|---|---|---|---|---|---|
| Balance at Jan. 1, 2013 | 123,009 | 47,907 | 23,045 | 56,401 | 84,404 | 101,278 | 436,044 | 99,555 |
| of which non-current | 17,356 | 24,438 | 6,471 | 5,260 | 75,942 | 36,357 | 165,824 | 9,687 |
| of which current | 105,653 | 23,469 | 16,574 | 51,141 | 8,462 | 64,921 | 270,220 | 89,868 |
| Additions | 67,578 | 5,111 | 18,573 | 24,055 | 447 | 46,275 | 162,039 | 43,842 |
| Utilization | –34,503 | –16,027 | –17,958 | –20,070 | –3,159 | –52,123 | –143,840 | –29,036 |
| Reversal | –24,662 | –12,294 | –782 | –8,975 | –7,133 | –10,640 | –64,486 | –20,634 |
| Changes in consolidated Group | 13 | – | – | 1,013 | – | 90 | 1,116 | 635 |
| Unwinding of discount | – | 5 | 18 | –4 | 1,876 | 400 | 2,295 | – |
| Exchange differences | –3,554 | –2 | –261 | –733 | –21 | –1,950 | –6,521 | –2,143 |
| Reclassification as held for sale | –56,142 | – | –21 | –26,363 | –125 | –9,568 | –92,219 | – |
| Balance at Dec. 31, 2013 | 71,739 | 24,700 | 22,614 | 25,324 | 76,289 | 73,762 | 294,428 | 92,219 |
| of which non-current | 10,217 | 10,283 | 8,424 | 4,931 | 66,495 | 23,427 | 123,777 | 10,516 |
| of which current | 61,522 | 14,417 | 14,190 | 20,393 | 9,794 | 50,335 | 170,651 | 81,703 |
Provisions for guarantees and warranties relate to warranty commitments for products and equipment. As is customary in the industry, the guarantees and warranties on which they are based are granted in connection with certain performance criteria relating to products or equipment (e.g., guaranteed output volume, quality of product manufactured). Warranties usually have a contractual term of between one and two years from the date on which the products or equipment are accepted. In addition to warranties explicitly agreed under contract, product liability rules apply in many sales countries and may also stipulate that the manufacturer is liable beyond the contractually defined term of the warranty. In some cases, recourse claims exist in the form of insurance refunds or subcontractor guarantees. The level of provisions is based on management's best estimate. As of December 31, 2013, refund claims amounting to EUR 433 thousand (previous year: EUR 355 thousand) against nongroup third parties were recognized. GEA Group expects to settle most of the provisions for guarantees and warranties in the coming year.
Provisions for financial guarantee contracts comprise obligations under indemnification agreements as well as warranties and undertakings relating to the sale of business activities. The changes in these provisions in fiscal year 2013 are primarily due to the resolution of uncertainties relating to risks from the sale of the plant engineering activities. An outflow of approximately 60 percent of the provisions for financial guarantee contracts is expected in fiscal year 2014.
Provisions are recognized for risks arising from expected or pending litigation against GEA Group companies if it is believed that there is likely to be an unfavorable outcome to the proceedings. Assessments by counsel for the Company or legal experts were used to determine the likelihood of such litigation. The probable damages or sanctions have been recognized as a liability. The timing of cash outflows relating to provisions for litigation risks often cannot be reliably determined.
This item comprises the cost of residual work that is incurred after a contract has already been invoiced and the profit from the contract has been recognized. The amount of the expected cost is stated. Payments are made almost in their entirety in the following year.
This item mainly comprises provisions for the clean-up of pit water from past mining activities, the clean-up of other instances of groundwater contamination, and the removal of contamination resulting from zinc production by Ruhr-Zink, including related measures to safeguard groundwater. Due to a lack of legal precedents, the law is unclear in some cases as to the amount and duration of the Company's obligation to clean up pit and ground water. The amount of the obligation will be influenced by the legal clarification of this issue, which the Company aims to achieve in cooperation with the authorities and the state of North Rhine-Westphalia. A contract under public law to remove contamination by Ruhr-Zink was entered into in fiscal year 2013. The level of provisions is based on the best estimate. Around one-third of the expected cash outflows are anticipated to be within the next three years. The expected settlement dates for the remaining provisions are largely dependent on the contracts under public law that are still to be entered into. The obligations are expected to extend to well beyond 2030.
Other provisions comprise provisions for a range of individual items. In the previous year, this item included provisions for repayments of investment subsidies of EUR 24,713 thousand and provisions for expected losses of EUR 3,557 thousand. Around 68 percent of other provisions are expected to be settled in fiscal year 2014.
Employee benefit obligations are composed of the following items:
| (EUR thousand) | 12/31/2013 | 12/31/2012 |
|---|---|---|
| Obligations under pension plans and supplementary healthcare benefits | 639,757 | 665,666 |
| of which defined benefit pension plans | 621,112 | 645,072 |
| of which obligations under supplementary healthcare benefits | 16,043 | 17,762 |
| of which defined contribution pension plans | 2,602 | 2,832 |
| Other employee benefit obligations | 3,339 | 5,778 |
| Partial retirement | 10,910 | 13,180 |
| Jubilee benefits | 7,748 | 9,041 |
| Other non-current obligations to employees | 10,957 | 8,388 |
| Non-current employee benefit obligations | 672,711 | 702,053 |
| Redundancy plan and severance payments | 3,584 | 5,972 |
| Outstanding vacation, flexitime/overtime credits | 55,764 | 65,419 |
| Bonuses | 75,488 | 82,383 |
| Other current obligations to employees | 17,808 | 26,596 |
| Current employee benefit obligations | 152,644 | 180,370 |
| Total employee benefit obligations | 825,355 | 882,423 |
Wherever possible, defined benefit pension obligations and obligations under supplementary healthcare benefits are disclosed below in the aggregate and explained together.
Furthermore, the amounts are presented including assets held for sale and liabilities held for sale. Where a reconciliation to line items in the financial statements is required, this is presented in a separate line as "reclassified as held for sale."
All obligations were actuarially valued as of December 31, 2013, and as of December 31, 2012.
GEA Group employees are offered various benefit options, mainly in the form of defined benefit and defined contribution pension plans.
Defined benefit pension plan obligations exist in Germany and, outside of Germany, mainly in the U.S.A., Switzerland, and the United Kingdom. In addition, other foreign companies have typical country-specific pension plans that are funded in part by plan assets. Benefits and investments correspond to the country-specific economic environment and requirements.
GEA Group views granting pension benefits as an opportunity to foster employee loyalty and engagement. It is therefore a standard feature of the remuneration concept and has an employee contribution component, where this is appropriate. In connection with this, GEA Group monitors developments on the human resources market and regularly checks that the benefits it grants are appropriate and in line with the market.
GEA Group does not believe that the pension obligations pose any risks over and above the customary extent and the general risks described.
In Germany, GEA Group grants old-age, disability, and survivors' benefits to many of its employees. New employees are generally only granted benefits that are partly funded by employee contributions.
As part of the general benefits provided, all employees have the opportunity to voluntarily defer part of their compensation. Under this arrangement, an agreed amount of their salary plus an employer contribution of up to 100 percent of the deferred amount is converted into a pension benefit. A corresponding collective bargaining agreement was entered into in 2002 and revised in 2008.
Managers receive benefits comprising an income-related employer-funded basic amount, an employerfunded top-up, and a matching amount funded through deferred compensation with an employer contribution of up to 100 percent of the deferred amount. The additional contributions from the top-up and matching amounts are determined annually and converted into a pension benefit by the employer. These commitments are granted in the form of identical individual commitments.
For both commitments, the post-retirement benefits are adjusted by 1 percent each year.
In addition to the currently open benefit plans, there are a number of historical pension plans in the company. These plans are generally closed to new employees, but are maintained unchanged for employees who were members at the time the plan was closed. These include obligations under "Bochumer Verband" and "Essener Verband" as well as obligations established independently by their predecessors.
The pension obligations are partly funded by pension liability insurances.
Pension benefits outside Germany mainly exist in the U.S.A., the United Kingdom, and Switzerland.
In the U.S.A., there are pension obligations from various pension plans that were closed in succession up to December 31, 2000. No further benefits are earned from a defined benefit pension plan for periods of service after the respective closure date. Old-age and survivors' benefits accrued at the closure date of the respective plan were fixed on the basis of pensionable income at the closure date. Benefits may be paid out in the form of annuities or lump-sum payments. Existing pension obligations are partly funded by plan assets. The assets are held separately from the company in an external trust. The companies have appointed independent trustees in accordance with statutory provisions to manage the funding of obligations and the investment of assets according to the company's specifications. Any funding deficit is established annually in accordance with legal requirements and spread over a fixed time period if required. The statutory basis for minimum funding was last amended in 2012 by the Moving Ahead for Progress in the 21st Century Act (MAP-21).
In the United Kingdom, there are pension obligations from two UK pension plans, one of which has been closed for a number of years and applies exclusively to former employees. The second plan is closed to new employees, but continues to provide old-age and survivors' benefits to the currently active participants based on pensionable income in the year before the employment relationship ends; these benefits are funded by salary-dependent employee contributions to plan assets. The accrued entitlements and current benefits in the United Kingdom are adjusted in accordance with statutory requirements on the basis of inflation. Pension obligations from both plans are partly funded by plan assets. The companies appointed independent trustees in accordance with statutory provisions to manage the funding of obligations and the investment of assets according to the company's
specifications. Company pension plans are valued every three years in accordance with legal requirements, and any deficit is established. If the plan is underfunded, the trustee prepares a funding plan to regulate the funding of the deficit, taking account of the actuary's recommendation and the type and circumstances of the respective plan.
In Switzerland, there are pension obligations from the second pillar of the Swiss pension system, the compulsory occupational pension plan. Implementation is by means of foundations that are independent from the companies; employers and employees pay income-dependent contributions to the foundations. Interest is applied, in accordance with legal provisions, to the individual amounts saved, and on retirement the total is converted into an old-age, invalidity, and survivor's pension based on predetermined annuity tables. Investment and management of the assets is guided by the statutory provisions on occupational pension plans. Due to significant legal requirements concerning the design of pension plans, companies only have a small number of options available to them for varying the design (e.g., level of employee contribution, level of contributions according to age band). A board of trustees, comprising employer and employee representatives, decides on the distribution of surpluses, or on changes to the design of the plan within the legal framework. The plans come under the Bundesgesetz über die berufliche Vorsorge (BVG – Swiss Federal Law on Occupational Benefits), which regulates the minimum benefits to be provided by companies by defining the minimum contributions required and the returns on them. The GEA Group companies that are affected by this have insured their employees with the AXA Winterthur group foundation. All employers may have to contribute "stabilization payments" if there is insufficient cover for the obligations. No "stabilization plan" is required at present as the cover is currently sufficient.
In addition to occupational pension benefits, certain retired employees are granted health insurance subsidies. New entitlements to health insurance subsidies are no longer granted. There are now only a few employees with such benefits in active employment. Existing obligations are not funded by plan assets. GEA Group does not see these benefits posing a particular risk due to the low level of the obligations.
All remaining obligations under supplementary healthcare benefits in the U.S.A. were settled during the year. This means that such obligations no longer exist outside of Germany.
The changes in the present value of the defined benefit obligation, the plan assets, and the provisions were as follows:
| 12/31/2013 | 12/31/2012 | |||
|---|---|---|---|---|
| (EUR thousand) | Germany Other countries | Germany Other countries | ||
| Present value of defined benefit obligation at beginning of fiscal year | 632,091 | 155,017 | 493,347 | 132,861 |
| Current service cost | 10,629 | 3,203 | 8,045 | 2,703 |
| Interest cost from discounting unwinding on obligations | 20,008 | 4,987 | 24,309 | 5,665 |
| Employee contributions | – | 787 | – | 807 |
| Remeasurement of present value of obligation | 6,047 | –55 | 138,689 | 16,361 |
| Actuarial gains (losses) from changes in demographic assumptions | – | 543 | 4 | 360 |
| Actuarial gains (losses) resulting from changes in financial assumptions | –383 | –2,583 | 133,978 | 16,768 |
| Actuarial gains (losses) resulting from experience adjustments | 6,430 | 1,985 | 4,707 | –767 |
| Past service cost | – | –63 | 1,257 | – |
| Payments without settlements | –33,617 | –8,628 | –32,832 | –7,770 |
| Transfer of assets | 311 | 694 | –724 | – |
| Changes in combined group due to acquisitions | – | –377 | – | 3,687 |
| Other changes in combined group | – | – | – | 1,612 |
| Exchange differences | – | –4,611 | – | –909 |
| Present value of defined benefit obligation at end of fiscal year | 635,469 | 150,954 | 632,091 | 155,017 |
| Fair value of plan assets at beginning of the fiscal year | 17,869 | 106,405 | 17,155 | 91,065 |
| Interest income on plan assets | 581 | 3,479 | 864 | 3,889 |
| Employer contributions | 421 | 5,347 | 857 | 5,787 |
| Employee contributions | – | 787 | – | 807 |
| Remeasurement: return from plan assets in excess of interest income | 34 | 4,230 | –184 | 9,333 |
| Payments without settlements | –949 | –7,506 | –823 | –6,657 |
| Transfer of assets | – | 509 | – | – |
| Changes in combined group due to acquisitions | – | – | – | 2,636 |
| Exchange differences | – | –3,505 | – | –455 |
| Fair value of plan assets at the end of fiscal year | 17,956 | 109,746 | 17,869 | 106,405 |
| Funded status/ Net carrying amount | 617,513 | 41,208 | 614,222 | 48,612 |
| Reclassification as held for sale | –19,466 | –2,100 | – | – |
| Net carrying amount | 598,047 | 39,108 | 614,222 | 48,612 |
The net carrying amount of obligations under defined benefit pension plans and supplementary healthcare benefits changed as follows in fiscal years 2013 and 2012:
| 12/31/2013 | 12/31/2012 | |||
|---|---|---|---|---|
| (EUR thousand) | Germany Other countries | Germany Other countries | ||
| Net carrying amount at beginning of fiscal year | 614,222 | 48,612 | 476,192 | 41,796 |
| Changes through profit or loss | 30,056 | 4,648 | 32,747 | 4,479 |
| Current service cost | 10,629 | 3,203 | 8,045 | 2,703 |
| Past service cost | – | –63 | 1,257 | – |
| Net interest on net defined benefit liability | 19,427 | 1,508 | 23,445 | 1,776 |
| Changes through OCI | 6,013 | –4,285 | 138,873 | 7,028 |
| Return from plan assets in excess of interest income | –34 | –4,230 | 184 | –9,333 |
| Actuarial gains (losses) from changes in demographic assumptions | – | 543 | 4 | 360 |
| Actuarial gains (losses) resulting from changes in financial assumptions | –383 | –2,583 | 133,978 | 16,768 |
| Actuarial gains (losses) resulting from experience adjustments | 6,430 | 1,985 | 4,707 | –767 |
| Cash-effective changes | –33,089 | –6,469 | –32,866 | –6,900 |
| Employer contributions | –421 | –5,347 | –857 | –5,787 |
| Payments without settlements | –32,668 | –1,122 | –32,009 | –1,113 |
| Other changes | 311 | –1,298 | –724 | 2,209 |
| Transfer of assets | 311 | 185 | –724 | – |
| Changes in combined group due to acquisitions | – | –377 | – | 1,051 |
| Other changes in combined group | – | – | – | 1,612 |
| Exchange differences | – | –1,106 | – | –454 |
| Funded status/ Net carrying amount | 617,513 | 41,208 | 614,222 | 48,612 |
| Reclassification as held for sale | –19,466 | –2,100 | – | – |
| Net carrying amount | 598,047 | 39,108 | 614,222 | 48,612 |
The following overview shows the net carrying amount broken down into plans with and without plan assets:
| 12/31/2013 | 12/31/2012 | |||
|---|---|---|---|---|
| (EUR thousand) | Germany Other countries | Germany Other countries | ||
| Present value of funded obligations | 139,255 | 138,934 | 145,082 | 142,865 |
| Fair value of plan assets | 17,956 | 109,746 | 17,869 | 106,405 |
| Funded status/ Net carrying amount of funded obligations | 121,299 | 29,188 | 127,213 | 36,460 |
| Present value of unfunded obligations | 496,214 | 12,020 | 487,009 | 12,152 |
| Funded status/ Net carrying amount of unfunded obligations | 496,214 | 12,020 | 487,009 | 12,152 |
| Funded status/ Net carrying amount | 617,513 | 41,208 | 614,222 | 48,612 |
| Reclassification as held for sale | –19,466 | –2,100 | – | – |
| Net carrying amount | 598,047 | 39,108 | 614,222 | 48,612 |
As in the previous year, no asset ceiling in accordance with IAS 19.64 (b) applies. In addition, there are no reimbursement claims within the meaning of IAS 19.116.
The following overview shows the present value of the defined benefit obligation broken down into active employees, former employees with terminated vested benefits, and benefit recipients:
| 12/31/2013 | 12/31/2012 | ||||
|---|---|---|---|---|---|
| (EUR thousand) | Germany | Other countries |
Germany | Other countries |
|
| Active Employees | 180,214 | 70,392 | 172,831 | 70,693 | |
| Vested terminated employees | 77,086 | 34,202 | 75,068 | 36,298 | |
| Pensioners | 378,169 | 46,360 | 384,192 | 48,026 | |
| Total | 635,469 | 150,954 | 632,091 | 155,017 |
The plan assets used to cover the pension obligations were as follows at the respective reporting dates:
| 12/31/2013 | 12/31/2012 | |||||
|---|---|---|---|---|---|---|
| (Percent) | Germany | Other countries |
Germany | Other countries |
||
| Quoted prices in active markets | 5.2 | 74.8 | 5.7 | 65.7 | ||
| Equity instruments | 1.9 | 27.6 | 1.9 | 29.1 | ||
| Debt instruments | 3.2 | 36.7 | 3.8 | 36.6 | ||
| Other | 0.1 | 10.5 | 0.0 | 0.0 | ||
| No quoted prices in active markets | 94.8 | 25.2 | 94.3 | 34.3 | ||
| Equity instruments | 0.0 | 0.7 | 0.0 | 0.7 | ||
| Debt instruments | 0.0 | 0.4 | 0.0 | 0.5 | ||
| Real estate | 0.0 | 1.8 | 0.0 | 2.0 | ||
| Insurance | 94.6 | 20.9 | 94.1 | 31.1 | ||
| Other | 0.2 | 1.4 | 0.2 | 0.0 | ||
| Total | 100.0 | 100.0 | 100.0 | 100.0 |
Particularly in Germany, GEA Group has decided to utilize the internal financing effect of the pension provisions and supplementary healthcare benefits and only to fund a relatively small proportion of the pension obligations using plan assets.
In the U.S.A., the United Kingdom, and Switzerland, a large proportion of the pension obligations is funded by plan assets in accordance with the legal framework. The above table shows how the plan assets have been invested. A proportion of both the German and foreign plan assets is managed by insurance companies in accordance with their specific investment guidelines. In Germany, this is the predominant form of investment for plan assets. Part of the plan assets of German pension plans is also managed by pension funds and an endowment fund, and is mainly invested in fixed-income securities and term deposits, with only a relatively small proportion invested in equities. The objective of these external investments is to ensure secure returns and preserve the value of the underlying assets in order to fund current and future pension benefits. There are currently no plans to change this investment strategy.
Assets invested in the capital markets are exposed to general capital market and investment risk. GEA Group is constantly monitoring market developments and has developed corresponding investment policies that adequately balance risk and income expectations while taking the respective statutory and regulatory frameworks into account.
In fiscal year 2014, EUR 436 thousand is expected to be added to the plan assets of German pension plans and EUR 5,565 thousand to plans outside Germany.
The actual return on plan assets in 2013 was EUR 8,324 thousand (previous year: EUR 13,902 thousand).
GEA Group Annual Report 2013
As of the relevant reporting date, the following weighted actuarial assumptions were used to calculate the present value of the defined benefit obligations. These assumptions are used to calculate net pension expenses in the following year.
| 12/31/2013 | 12/31/2012 | |||
|---|---|---|---|---|
| (Percent) | Germany | Other countries |
Germany | Other countries |
| Discount factor | 3.25 | 3.52 | 3.25 | 3.31 |
| Inflation | 2.00 | 1.42 | 2.00 | 1.78 |
| derived: wage and salary growth rate | 3.00 | 1.58 | 3.00 | 1.98 |
| derived: pension growth rate | 1.66 | 0.43 | 1.66 | 0.53 |
| derived: growth rate in cost of health care benefits | 3.75 | – | 4.00 | – |
The actuarial measurement factors for German plans are established by GEA Group in consultation with actuarial experts. The corresponding assumptions for plans outside Germany are determined taking into account country-specific conditions with the help of local experts in consultation with the global experts and GEA Group. The discount rate is established using a recognized method based on the return on high quality corporate bonds determined as of the reporting date, taking into account the currency and maturities of the underlying liabilities. For countries that do not have a liquid market in corporate bonds that are suitable for setting the discount rate, interest rates on government bonds are referred to instead to define the rate.
All other assumptions correspond to the long-term expectations of GEA Group. The nominal rate of wage and salary increases is calculated based on expected inflation and a real rate of increase. The rate of pension increases in Germany is also determined based on inflation, provided that the pension adjustments are determined in accordance with the rise in the cost of living. In addition, the financial position of the relevant company is also taken into account. If a firm pension adjustment commitment has been made, this is taken into account accordingly. Outside of Germany, the pension adjustment is also generally determined on the basis of inflation. The growth rate assumed for the costs of supplementary healthcare benefits in Germany equates to forecast inflation plus a growth rate based on historical data. Based on this data, the growth rate is not expected to change in the future.
As in the previous year, Klaus Heubeck's 2005G mortality tables were used as a basis for measuring all German plans as of December 31, 2013. On this basis, the life expectancy of a 65-year-old pensioner as of the reporting date is 18.89 years for men and 22.97 years for women (previous year: 18.75 years/22.83 years). Country-specific measurement bases were used for pension liabilities outside Germany.
The sensitivities presented below apply to the discount rate and inflation, which have been identified as actuarial assumptions that have a significant influence on GEA Group's benefit obligations. Since the wage and salary increase rate, the pension increase rate, and the growth rate in the cost of supplementary health benefits are derived from inflation, sensitivity to inflation was used to measure the sensitivity of these assumptions together. The same calculation methods were used for sensitivities as for the recognized provisions. The ranges used to compute the sensitivities of the assumptions are based on the changes that are deemed possible until the next reporting date, given historical experience. The meaningfulness of historical experience for forecasts of future outcomes and neglecting to update a number of assumptions simultaneously may represent limitations of these methods.
| (EUR thousand) | 2013 | ||
|---|---|---|---|
| Increase (+)/ Decrease (-) of DBO | Other countries |
||
| Increase of discount factor by 50 basis points | –41,955 | –6,019 | |
| Decrease of inflation by 25 basis points | –12,805 | –935 |
The sensitivity effect from an age reduction of one year is on average around 4 percent of the present value of the obligation.
The following benefit payments are expected to be made under the German and foreign plans in the coming years:
| (EUR thousand) | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 - 2023 |
|---|---|---|---|---|---|---|
| German plans | 33,190 | 32,597 | 32,460 | 32,271 | 32,138 | 158,224 |
| Foreign plans | 7,175 | 7,036 | 6,696 | 7,187 | 7,326 | 40,792 |
The average weighted duration of pension obligations and supplementary healthcare benefits is:
| (Years) | 12/31/2013 | 12/31/2012 | ||
|---|---|---|---|---|
| Germany Other countries | Germany Other countries | |||
| Duration | 14.3 | 13.1 | 14.5 | 13.7 |
Various companies – especially in the U.S.A. and Scandinavia – operate defined contribution pension plans. Under these plans, the obligation does not lie with GEA Group, but with the respective pension funds. Contributions from continuing operations totaling EUR 17,347 thousand were paid in fiscal year 2013 (previous year: EUR 19,462 thousand). Contributions from continuing operations of EUR 41,721 thousand were paid to state pension insurance systems (previous year: EUR 39,389 thousand). These contributions are recognized as personnel expenses at the same time as the relevant service is rendered.
Two multi-employer pension plans operated by several employers in the Netherlands were recognized as defined contribution pension plans because the respective managers of the plans do not provide sufficient information to the participating companies on the amount of the obligation and of the plan assets for them to be recognized as defined benefit pension plans.
In the first plan, neither a surplus nor a deficit would have any effect on the level of future contributions. Contributions amounting to EUR 2,255 thousand (previous year: EUR 2,135 thousand) were made to this multi-employer pension plan in fiscal year 2013. It is expected that contributions for fiscal year 2014 will be at a similar level.
The second multi-employer pension plan has around 1.2 million beneficiaries, of whom around 600 belong to GEA Group. The asset/liability ratio of this plan must amount to at least 105 percent. Neither a surplus nor a deficit in the plan would result in additional payments from or into the plan for the participating companies. However, if the minimum funding level is not met, future contributions to be paid by the participating companies may be increased. Contributions amounting to EUR 3,091 thousand (previous year: EUR 3,134 thousand) were made to the multi-employer pension plan in fiscal year 2013. Contributions are expected to be at a similar level for fiscal year 2014.
Share-based payments in fiscal year 2013 for the complete group totaled EUR 8,240 thousand (previous year: EUR 3,135 thousand). Of this amount, EUR 729 thousand was attributable to GEA HX (previous year: EUR 440 thousand). The income of EUR 21 thousand (previous year: expense of EUR 64 thousand) recognized by the complete group for equity-settled share-based payment transactions (see section 6.1) was solely attributable to the discontinued GEA HX Segment. The carrying amount of liabilities arising from share-based payment transactions in the complete group amounted to EUR 12,408 thousand as of December 31, 2013 (previous year: EUR 8,529 thousand). Of this amount, EUR 758 thousand (previous year: EUR 779 thousand) related to the GEA HX disposal group.
Effective July 1, 2006, GEA Group Aktiengesellschaft launched a long-term remuneration program entitled "GEA Performance Share Plan", a cash-settled share-based payment plan for all first- and second-level managers below the Executive Board. Third-level managers were also eligible to participate starting with the third tranche of the program as of July 1, 2008. The eighth tranche was issued on July 1, 2013. The goal of the GEA Performance Share Plan is to link managers' remuneration with the long-term success of the Company and to align their interests with those of the shareholders.
Under the plan, participants are granted a defined number of Performance Shares at the beginning of the performance period. The number of Performance Shares allotted is determined by the participants' management level. To participate in the plan, managers must invest 20 percent of the amount of the allotted Performance Shares in shares of GEA Group Aktiengesellschaft. The personal investment must then be held for three years (performance period).
The performance of GEA Group Aktiengesellschaft's shares relative to the MDAX companies over the three-year performance period is measured on the basis of their total shareholder return (TSR). TSR is a suitable indicator for investors to compare the performance and appeal of different companies. It measures the total percentage return that an investor earns from a share over a certain period. In addition to share price performance, dividends and adjustments such as share splits are included in the calculation of TSR. This method of comparison eliminates share price performance that is due to general market volatility and enables the effects of different profit retention strategies to be compared. The relative performance of GEA Group Aktiengesellschaft's shares determines the number of Performance Shares finally paid out (between 0 percent and 300 percent).
The Performance Shares are paid out once the three-year performance period has expired. At that time, performance of GEA Group Aktiengesellschaft's shares relative to the MDAX determines how many Performance Shares are paid out: If the performance of the Company's shares equals the median in the TSR comparison, 50 percent of the Performance Shares are issued; if it reaches the third quartile, 100 percent of the Performance Shares are paid out. If GEA Group Aktiengesellschaft's shares outperform the MDAX companies, 300 percent of the Performance Shares are issued. Other performance figures are interpolated between these values. The total amount paid out corresponds to the number of Performance Shares allotted to a participant multiplied by the average share price over the last quarter of the three-year performance period. Once the performance period has expired, participants may freely dispose of their personal investment in GEA Group Aktiengesellschaft shares.
The 2010 tranche expired on June 30, 2013. The TSR comparison over the three-year performance period resulted in a payout ratio of 78.71 percent (previous year: 2009 tranche, 87.95 percent). The payout amounted to EUR 4,381 thousand (previous year: EUR 6,387 thousand). EUR 772 thousand (previous year: EUR 1,078 thousand) of the 2013 payout was attributable to the GEA HX Segment which is allocated to discontinued operations.
The number of Performance Shares changed as follows in fiscal year 2013:
| Total | 533,287 | 175,360 | 5,434 | 205,480 | – | 497,733 | 61,293 |
|---|---|---|---|---|---|---|---|
| 2013 tranche | – | 175,360 | 516 | – | – | 174,844 | 16,113 |
| 2012 tranche | 162,150 | – | 1,250 | – | – | 160,900 | 20,725 |
| 2011 tranche | 165,657 | – | 3,668 | – | – | 161,989 | 24,455 |
| 2010 tranche | 205,480 | – | – | 205,480 | – | – | – |
| (Number of shares) | 12/31/2012 | Additions | Expired | Paid Out | Changes in consolidated Group |
12/31/2013 | Thereof HX |
The total expense for the complete group for fiscal year 2013 amounts to EUR 5,178 thousand (previous year: EUR 2,351 thousand), taking into account the fair value as of December 31, 2013, of EUR 23.36 (previous year: EUR 13.37) for the 2011 tranche, EUR 19.91 (previous year: EUR 12.11) for the 2012 tranche, and EUR 25.19 for the 2013 tranche, as well as EUR 21.32 (previous year: EUR 19.71) for the 2010 tranche (previous year: 2009 tranche) at the payment date. EUR 750 thousand of this total expense (previous year: EUR 376 thousand) is attributable to the discontinued GEA HX Segment.
The fair value of the Performance Shares is determined using a Monte Carlo simulation. The following valuation assumptions are applied:
| Tranche | 2013 | 2012 | ||||
|---|---|---|---|---|---|---|
| 2011 | 2012 | 2013 | 2010 | 2011 | 2012 | |
| Share price (EUR) | 36.16 | 35.37 | 34.60 | 25.76 | 25.35 | 24.47 |
| Dividend yield (%) | 1.880 | 1.880 | 1.880 | 2.800 | 2.800 | 2.800 |
| Risk-free interest rate (%) | 0.105 | 0.170 | 0.335 | 0.017 | –0.055 | –0.009 |
| Volatility GEA shares (%) | 19.06 | 19.06 | 19.06 | 27.44 | 27.44 | 27.44 |
As the payout ratio of GEA Group Aktiengesellschaft's Performance Shares is linked to the MDAX, the volatilities of all MDAX shares and their correlations to GEA Group Aktiengesellschaft shares are also calculated. The calculation of volatilities and correlations is based on historical market data. Risk-free interest rates were determined from German government bond yields.
A long-term incentive component was added to the bonus arrangements for Executive Board members in fiscal years 2010 and 2011. Under this, half of the bonus was payable with the regular salary payment and the other half was converted into phantom shares of the Company. It was calculated as the arithmetic mean of the daily closing prices of GEA Group shares in Xetra trading operated by the Frankfurt Stock Exchange on the trading days in the three-month period that ended one month before the date of the Supervisory Board meeting convened in fiscal year 2013 to adopt the financial statements.
The payout value of the phantom shares is calculated following the expiration of a lock-up period of three years following the conversion into phantom shares. The amount of the payout is calculated as the arithmetic mean of the daily closing prices of GEA Group Aktiengesellschaft shares in Xetra trading operated by the Frankfurt Stock Exchange on the trading days in the three-month period that ends one month before the date of the relevant Supervisory Board meeting convened to adopt the financial statements in the fiscal year in which the lock-up period expires. The dividends payable per share during the lock-up period are added to the value calculated in this way. The amount to be paid out under these arrangements is limited to 300 percent of the annual basic bonus. In the event of termination of the Executive Board member's contract of service, the three-year vesting period is reduced to one year as from the date of termination.
Because the exercise price is zero and this share-based payment program does not feature a vesting period, the fair value of the phantom shares corresponds to the quoted market price of GEA Group Aktiengesellschaft shares. The fair value of the liability for the 2011 tranche is calculated by multiplying the number of phantom shares by the relevant closing price, plus dividends paid during the lock-up period. In addition, the fact that some of the closing prices in the three-month period that are relevant for the amount of the payout were already known as of the reporting date was factored in the measurement of the 2010 tranche.
The number of phantom shares changed as follows in fiscal year 2013:
| (Number of shares) | 12/31/2012 | Additions | Expired | Paid Out | 12/31/2013 |
|---|---|---|---|---|---|
| 2010 tranche | 57,887 | – | – | – | 57,887 |
| 2011 tranche | 81,460 | – | – | – | 81,460 |
| Total | 139,347 | – | – | – | 139,347 |
The relevant price for the phantom shares issued in fiscal year 2010 was EUR 35.49 (previous year: EUR 25.42), and EUR 35.70 for phantom shares issued in fiscal year 2011 (previous year: EUR 25.02). In fiscal year 2013, expenses of EUR 1,453 thousand (previous year: EUR 442 thousand) were recognized in respect of phantom shares. The liability as of December 31, 2013, amounted to EUR 4,963 thousand (previous year: EUR 3,510 thousand). This amount is reported in non-current employee benefit obligations under bonuses.
The long-term share price component was introduced as part of the revision of the variable remuneration system for Executive Board members in fiscal year 2012. The payout from the long-term share price component is measured over a three-year performance period that includes the relevant fiscal year and the two subsequent years.
Performance is measured by comparing the performance of the GEA share price, adjusted for dividends, with the performance of the STOXX® Europe TMI Industrial Engineering (TMI IE) index over a three-year performance period. The starting value for the comparison calculation is the arithmetic mean of the closing prices of the last 20 trading days before the commencement of the three-year performance period. 100 percent of the target is achieved if the performance of the arithmetic mean of the GEA share daily closing prices is equal to 100 percent of the corresponding TMI performance over the three-year performance period. In the event of outperformance by more than 100 percent, the bonus increases up to a maximum of 300 percent of the target amount. If the increase in GEA's share price over the three-year comparison period is less than 100 percent of the growth in the TMI IE, the bonus is reduced up to a performance of 75 percent: For each percentage point over or under 100 percent performance, the degree of target achievement increases or decreases by 4 percent. The total degree of target achievement and thus the payout level for the long-term share price component is limited to 300 percent of this target amount (cap).
Starting from a target amount of EUR 1,188 thousand (previous year: EUR 573 thousand), the fair value of claims arising from the long-term share price component amounted to EUR 1,908 thousand (previous year: EUR 278 thousand) as of the reporting date.
The fair value of the claims arising from the long-term share price component is determined using a Monte Carlo simulation. The following valuation assumptions are applied:
| 2013 | 2012 | ||
|---|---|---|---|
| 2013 tranche | 2012 tranche | 2012 tranche | |
| Share price (arithmetic mean) (EUR) | 29.58 | 27.06 | 23.90 |
| STOXX TMI IE (arithmetic mean) (index points) | 332.15 | 306.89 | 281.73 |
| Risk-free interest (%) | 0.243 | 0.125 | –0.044 |
| Volatility GEA share (%) | 19.92 | 19.92 | 27.44 |
| Volatility STOXX TMI IE (%) | 15.68 | 15.68 | 20.42 |
| Correlation between GEA share and STOXX TMI IE (percent) | 50.74 | 50.74 | 80.32 |
The calculation of volatilities and correlation is based on historical market data. Risk-free interest rates were determined on the basis of German government bond yields.
Financial liabilities as of December 31, 2013, were composed of the following items:
| (EUR thousand) | 12/31/2013 | 12/31/2012 |
|---|---|---|
| Borrower's note loan | 299,508 | 299,477 |
| Bonds | 398,343 | 397,724 |
| Liabilities to banks | 218,781 | 253,799 |
| Liabilities under finance leases | 32,543 | 38,519 |
| Liabilities from derivatives | 8,610 | 15,926 |
| Non-current financial liabilities | 957,785 | 1,005,445 |
| Borrower's note loan | 850 | 56,066 |
| Bonds | 11,877 | 11,877 |
| Liabilities to banks | 41,975 | 50,090 |
| Liabilities under finance leases | 3,655 | 4,106 |
| Liabilities from derivatives | 8,381 | 8,371 |
| Liabilities to equity investments | 1,130 | 1,955 |
| Current financial liabilities | 67,868 | 132,465 |
| Total financial liabilities | 1,025,653 | 1,137,910 |
| (EUR thousand) | Carrying amount 12/31/2013 |
Carrying amount 12/31/2012 |
Notional value 12/31/2013 |
Fair value 12/31/2013 |
Maturity |
|---|---|---|---|---|---|
| Borrower's note loan (2013) | – | 56,066 | – | – | August 16, 2013 |
| GEA Bond | 410,220 | 409,601 | 400,000 | 438,866 | April 21, 2016 |
| Kreditanstalt für Wiederaufbau (KfW) (May 2016) | 60,023 | 80,099 | 60,000 | 61,024 | yearly installments until Mai 31, 2016 |
| Kreditanstalt für Wiederaufbau (KfW) (December 2016) | 42,003 | 56,004 | 42,000 | 42,798 | from March 31, 2013 quarterly installments until December 30, 2016 |
| European Investment Bank | 150,353 | 150,344 | 150,000 | 154,728 | July 14, 2017 |
| Borrower's note loan (2017) | 300,358 | 299,477 | 300,000 | 316,475 | September 19, 2017 |
On April 14, 2011, GEA Group Aktiengesellschaft issued a bond amounting to EUR 400,000 thousand. The bond has a five-year term and a fixed coupon of 4.25 percent. The bond is unsecured. It is listed on the regulated market of the Luxembourg Stock Exchange.
In 2012, GEA Group Aktiengesellschaft placed borrower's note loans with a nominal amount of EUR 300,000 thousand. EUR 73,000 thousand of the borrower's note loans in the aggregate amount of EUR 128,000 thousand originally falling due in August 2013 was extended until September 2017. In addition, two further borrower's note loans were placed; they amounted to EUR 137,000 thousand and EUR 90,000 thousand and mature in September 2017.
EUR 55,000 thousand was repaid in August 2013 at maturity. The total nominal volume of the borrower's note loans thus amounted to EUR 300,000 thousand as of December 31, 2013. A partial amount of EUR 210,000 thousand bears interest at 170 basis points above 3M Euribor. The borrower's note loan in the amount of EUR 90,000 thousand has a fixed interest rate of 2.725 percent.
The maturities of liabilities to banks are as follows:
| < 1 year 41,975 1 - 2 years 34,494 2 - 3 years 34,081 3 - 4 years 150,136 4 - 5 years 70 > 5 years – |
Total | 260,756 | 303,889 |
|---|---|---|---|
| 256 | |||
| 150,279 | |||
| 34,315 | |||
| 34,464 | |||
| 34,485 | |||
| 50,090 | |||
| (EUR thousand) | 12/31/2013 | 12/31/2012 |
The amounts falling due in the next three years relate primarily to the amortizable loans from Kreditanstalt für Wiederaufbau (KfW). The amount due after three years is the loan of EUR 150,000 thousand from the European Investment Bank (EIB). This loan bears interest based on 3M Euribor plus a premium that is dependent on GEA Group's rating. For a partial amount of EUR 50,000 thousand, the weighted average interest rate was fixed at 3.29 percent for the full term using two interest rate swaps.
None of the credit lines drawn down are secured. GEA Group has undertaken in the loan agreements to comply with a certain covenant. Compliance with the covenant must be reviewed at the end of each quarter. The covenant was met as of December 31, 2013.
Transaction costs for the unused syndicated credit line (club deal) as of the end of the year are allocated on a straight-line basis over the term.
Other liabilities to banks in the eurozone bore interest rates of between 0.1 percent and 4.6 percent, depending on their maturity and financing purpose (previous year: between 0.5 percent and 4.6 percent). The group additionally had foreign currency liabilities in Indian rupees and Brazilian real that also bear standard market interest rates in those countries of around 12.0 percent (previous year: 12.0 percent) and 13.0 percent (previous year: 12.0 percent), respectively.
Liabilities to banks totaling EUR 22 thousand (previous year: EUR 83 thousand) were secured.
Including the borrower's note loans and the syndicated credit lines, the complete group had cash credit lines of EUR 1,740,182 thousand as of December 31, 2013 (previous year: EUR 1,845,745 thousand). Of this amount, cash credit lines of EUR 765,905 thousand (previous year: EUR 776,712 thousand) are unutilized (see section 3). In addition, guarantee credit lines for the performance of contracts, advance payments, and warranty obligations of EUR 1,886,355 thousand (previous year: EUR 1,898,285 thousand) were available to the complete group, of which EUR 1,178,431 thousand (previous year: EUR 1,148,503 thousand) has not been utilized.
The following table shows a breakdown of future payments under finance leases:
| Minimum lease payments | Present value of minimum lease payments |
|||||
|---|---|---|---|---|---|---|
| (EUR thousand) | 12/31/2013 | 12/31/2012 | 12/31/2013 | 12/31/2012 | 12/31/2013 | 12/31/2012 |
| Not later than one year | 4,172 | 5,116 | 516 | 981 | 3,656 | 4,135 |
| Between one and five years | 16,220 | 20,225 | 4,191 | 5,351 | 12,029 | 14,874 |
| Later than five years | 59,203 | 64,165 | 38,689 | 40,549 | 20,514 | 23,616 |
| Total future payments under finance leases | 79,595 | 89,506 | 43,396 | 46,881 | 36,199 | 42,625 |
Liabilities under finance leases relate mainly to land and buildings. The present value of minimum lease payments as of December 31, 2013, relating to leases for land and buildings amounted to EUR 35,447 thousand (previous year: EUR 40,043 thousand).
As the interest rates used in leases are constant, the fair value of lease liabilities may be exposed to interest rate risk. All leases comprise contractually agreed payments.
Liabilities under finance leases are effectively secured because the rights to the leased asset revert to the lessor if the terms and conditions of the lease are breached.
Derivative financial instruments are explained in section 6.8.
Trade payables were as follows as of December 31, 2013:
| (EUR thousand) | 12/31/2013 | 12/31/2012 |
|---|---|---|
| Trade payables | 646,529 | 839,143 |
| of which to unconsolidated companies | 5,195 | 4,794 |
Trade payables of EUR 645,985 thousand (previous year: EUR 824,924 thousand) are due within one year. The balance of EUR 544 thousand (previous year: EUR 14,219 thousand) is due after more than one year.
Trade payables in the amount of EUR 54,033 thousand (previous year: EUR 49,919 thousand) are secured.
Income tax liabilities relate to current taxes and amounted to EUR 32,038 thousand as of the reporting date (previous year: EUR 39,912 thousand).
.
Other liabilities as of December 31, 2013, are composed of the following items:
| (EUR thousand) | 12/31/2013 | 12/31/2012 |
|---|---|---|
| Other non-current liabilities | 2,834 | 5,214 |
| Payments on account received in respect of orders and construction contracts | 177,433 | 290,458 |
| Gross amount due to customers for contract work | 292,961 | 339,037 |
| Other liabilities to unconsolidated subsidiaries | 22,047 | 21,781 |
| Liabilities from other taxes | 52,165 | 55,357 |
| Other liabilities | 58,840 | 91,032 |
| of which social security | 13,429 | 19,126 |
| of which other liabilities to employees | 7,156 | 10,515 |
| Other current liabilities | 603,446 | 797,665 |
| Total other liabilities | 606,280 | 802,879 |
Payments on account received in respect of orders amounting to EUR 74,955 thousand (previous year: EUR 28,569 thousand) and other liabilities amounting to EUR 20,786 thousand (previous year: EUR 9,379 thousand) are secured.
The gross amount due to customers for contract work is the aggregate amount of orders whose progress billings exceed the capitalized cost plus the contract gains and losses recognized.
The following tables provide an overview of the composition of financial instruments as of December 31, 2013, by class within the meaning of IFRS 7 as well as by measurement category. The tables also include financial assets and liabilities, as well as derivatives that are included in recognized hedging relationships, that do not belong to any of the IAS 39 measurement categories.
| Measurement in accordance with IAS 39 | ||||||
|---|---|---|---|---|---|---|
| (EUR thousand) | Carrying amount 12/31/2013 |
Amortized cost | Fair value through profit or loss |
Fair value recognized in other comprehensive income |
Measurement in accordance with other IFRSs |
Fair value 12/31/2013 |
| Assets | ||||||
| Trade receivables | 929,156 | 663,580 | – | – | 265,576 | 929,156 |
| of which PoC receivables | 265,576 | – | – | – | 265,576 | 265,576 |
| Income tax receivables | 8,332 | – | – | – | 8,332 | 8,332 |
| Cash and cash equivalents | 683,520 | 683,520 | – | – | – | 683,520 |
| Other financial assets | 151,007 | 64,383 | 4,809 | 16,025 | 65,790 | 151,007 |
| of which derivatives included in hedging relationships |
6,450 | – | – | 6,450 | – | 6,450 |
| By IAS 39 measurement category | ||||||
| Loans and receivables | 1,384,075 | 1,384,075 | – | – | – | 1,384,075 |
| of which cash and cash equivalents | 683,520 | 683,520 | – | – | – | 683,520 |
| of which trade receivables | 663,580 | 663,580 | – | – | – | 663,580 |
| of which other financial assets | 36,975 | 36,975 | – | – | – | 36,975 |
| Available-for-sale investments | 36,983 | 27,408 | – | 9,575 | – | 36,983 |
| Financial assets at fair value through profit or loss (derivatives not included in a recognized hedging relationship) |
4,809 | – | 4,809 | – | – | 4,809 |
| Liabilities | ||||||
| Trade payables | 646,529 | 646,529 | – | – | – | 646,529 |
| Financial liabilities | 1,025,653 | 972,464 | 10,985 | 6,006 | 36,198 | 1,076,221 |
| of which liabilities under finance leases | 36,198 | – | – | – | 36,198 | 36,198 |
| of which derivatives included in hedging relationships |
6,006 | – | – | 6,006 | – | 6,006 |
| Income tax liabilities | 32,038 | – | – | – | 32,038 | 32,038 |
| Other liabilities | 606,280 | 59,748 | – | – | 546,532 | 606,280 |
| By IAS 39 measurement category | ||||||
| Financial liabilities at amortized cost | 1,678,741 | 1,678,741 | – | – | – | 1,729,309 |
| of which trade payables | 646,529 | 646,529 | – | – | – | 646,529 |
| of which bonds and other securitized liabilities | 710,578 | 710,578 | – | – | – | 755,341 |
| of which liabilities to banks | 260,756 | 260,756 | – | – | – | 266,561 |
| of which loan liabilities to unconsolidated subsidiaries |
1,130 | 1,130 | – | – | – | 1,130 |
| of which other liabilities to affiliated companies | 22,047 | 22,047 | – | – | – | 22,047 |
| of which other liabilities | 37,701 | 37,701 | – | – | – | 37,701 |
| Financial liabilities at fair value through profit or loss (derivatives not included in a hedging relationship) |
10,985 | – | 10,985 | – | – | 10,985 |
| Measurement in accordance with IAS 39 | ||||||
|---|---|---|---|---|---|---|
| (EUR thousand) | Carrying amount 12/31/2012 |
Amortized cost | Fair value through profit or loss |
Fair value recognized in other comprehensive income |
Measurement in accordance with other IFRSs |
Fair value 12/31/2012 |
| Assets | ||||||
| Trade receivables | 1,249,863 | 909,847 | – | – | 340,016 | 1,249,863 |
| of which PoC receivables | 340,016 | – | – | – | 340,016 | 340,016 |
| Income tax receivables | 19,350 | – | – | – | 19,350 | 19,350 |
| Cash and cash equivalents | 743,524 | 743,524 | – | – | – | 743,524 |
| Other financial assets | 215,080 | 91,886 | 3,237 | 14,943 | 105,014 | 215,567 |
| of which derivatives included in hedging relationships |
3,880 | – | – | 3,880 | – | 3,880 |
| By IAS 39 measurement category | ||||||
| Loans and receivables | 1,714,458 | 1,714,458 | – | – | – | 1,714,458 |
| of which cash and cash equivalents | 743,524 | 743,524 | – | – | – | 743,524 |
| of which trade receivables | 909,847 | 909,847 | – | – | – | 909,847 |
| of which other financial assets | 61,087 | 61,087 | – | – | – | 61,087 |
| Available-for-sale investments | 41,862 | 30,799 | – | 11,063 | – | 42,349 |
| Financial assets at fair value through profit or loss (derivatives not included in a recognized hedging relationship) |
3,237 | – | 3,237 | – | – | 3,237 |
| Liabilities | ||||||
| Trade payables | 839,143 | 839,143 | – | – | – | 839,143 |
| Financial liabilities | 1,137,910 | 1,070,988 | 17,031 | 7,266 | 42,625 | 1,199,443 |
| of which liabilities under finance leases | 42,625 | – | – | – | 42,625 | 42,625 |
| of which derivatives included in hedging relationships |
7,266 | – | – | 7,266 | – | 7,266 |
| Income tax liabilities | 39,912 | – | – | – | 39,912 | 39,912 |
| Other liabilities | 802,879 | 83,150 | – | – | 719,729 | 802,879 |
| By IAS 39 measurement category | ||||||
| Financial liabilities at amortized cost | 1,993,281 | 1,993,281 | – | – | – | 2,054,814 |
| of which trade payables | 839,143 | 839,143 | – | – | – | 839,143 |
| of which bonds and other securitized liabilities | 765,144 | 765,144 | – | – | – | 818,947 |
| of which liabilities to banks | 303,889 | 303,889 | – | – | – | 311,619 |
| of which loan liabilities to unconsolidated subsidiaries |
1,955 | 1,955 | – | – | – | 1,955 |
| of which other liabilities to affiliated companies | 21,781 | 21,781 | – | – | – | 21,781 |
| of which other liabilities | 61,369 | 61,369 | – | – | – | 61,369 |
| Financial liabilities at fair value through profit or loss (derivatives not included in a hedging relationship) |
17,031 | – | 17,031 | – | – | 17,031 |
The fair values of the financial instruments recognized under assets held for sale and liabilities held for sale are not presented separately, since their carrying amounts represent reasonable approximations of their fair value.
Financial assets and liabilities that are measured at fair value, or for which a fair value is disclosed in the notes to the consolidated financial statements, are required to be categorized according to the fair value hierarchy described in the following. Categorization within the levels of the fair value hierarchy is based on the measurement of the underlying inputs:
Level 1 inputs: quoted prices (unadjusted) in active markets for identical financial assets and liabilities.
Level 2 inputs: quoted market prices that are observable as direct (prices) or indirect (derived from prices) inputs used to measure fair value and that are not quoted prices as defined by Level 1.
Level 3 inputs: inputs that are not based on observable market data.
The following table shows the categorization of financial assets and financial liabilities into the three-level fair value hierarchy:
| Recurring fair value measurements | 12/31/2013 | 12/31/2012 | ||||||
|---|---|---|---|---|---|---|---|---|
| Carrying | Fair value | Fair value | ||||||
| (EUR thousand) | amount | Level 1 | Level 2 | Level 3 | Carrying amount |
Level 1 | Level 2 | Level 3 |
| Financial assets measured at fair value | ||||||||
| Derivatives included in hedging relationships | 6,450 | – | 6,450 | – | 3,880 | – | 3,880 | – |
| Derivatives not included in hedging relationships | 4,809 | – | 4,809 | – | 3,237 | – | 3,237 | – |
| Available-for-sale financial assets valued at fair value | 9,575 | – | – | 9,575 | 11,063 | – | – | 11,063 |
| Financial liabilities measured at fair value | ||||||||
| Derivatives included in hedging relationships | 6,006 | – | 6,006 | – | 7,266 | – | 7,266 | – |
| Derivatives not included in hedging relationships | 10,985 | – | 10,985 | – | 17,031 | – | 17,031 | – |
| Financial liabilities not measured at fair value | ||||||||
| Bonds | 410,220 | 438,866 | – | – | 409,601 | 445,980 | – | – |
| Promissory note bonds | 300,358 | – | 316,475 | – | 355,543 | – | 372,967 | – |
| Liabilities to banks | 260,756 | – | 266,561 | – | 303,889 | – | 311,619 | – |
There were no transfers into or out of the levels of the fair value hierarchy in fiscal year 2013.
The fair value of the bond is calculated on the basis of quoted bid prices on an active market and is therefore categorized within Level 1. The fair value includes the interest deferred as of the reporting date.
The fair value of derivatives is calculated using quoted exchange rates and yield curves observable in the market. Accordingly, these are categorized within Level 2 of the fair value hierarchy.
The fair value of borrower's note loans and liabilities to banks is measured on the basis of the yield curve, taking into account credit spreads. They are therefore categorized within Level 2 of the fair value hierarchy. The interest deferred as of the reporting date is included in the fair values.
The fair values of trade receivables, cash and cash equivalents, and other financial receivables and liabilities essentially correspond to the carrying amounts; this is due to the predominantly short remaining maturities.
A receivable relating to the former raw material activities of Metallgesellschaft AG that had previously been written off was allocated to Level 3 financial instruments; its fair value is determined by means of a present value calculation on the basis of the debtor's payment plan.
The following table shows the changes in fair value in fiscal year 2013:
| (EUR thousand) | |
|---|---|
| Fair value 12/31/2012 | 11,063 |
| Redemption | –494 |
| Interest income | 346 |
| Currency translation | –1,016 |
| Revaluation | –325 |
| Fair value 12/31/2013 | 9,575 |
As the debtor operates a copper mine, its payment plan is influenced by the price of copper.
Unrealized gains recognized directly in equity for this financial instrument amounted to EUR 370 thousand as of the reporting date (previous year: EUR 695 thousand).
GEA Group Aktiengesellschaft has entered into netting agreements with banks under the German Master Agreement for Financial Derivatives Transactions. As a general rule, the amounts owed under such agreements by each counterparty from all outstanding transactions in the same currency on a single day are aggregated to a single net amount payable by one party to the other.
The following table shows the financial assets and liabilities for which the complete group has entered into netting agreements:
| (EUR thousand) | Gross amounts of financial assets/liabilities |
Net amounts of financial assets/liabilities, presented in the balance sheet |
Respective amounts not netted in the balance sheet |
Net amounts |
|---|---|---|---|---|
| 12/31/2013 | ||||
| Receivables from derivates | 9,049 | 9,049 | 5,378 | 3,671 |
| Liabilities from derivates | 17,110 | 17,110 | 5,378 | 11,732 |
| 12/31/2012 | ||||
| Receivables from derivates | 6,137 | 6,137 | 3,701 | 2,436 |
| Liabilities from derivates | 24,297 | 24,297 | 3,701 | 20,596 |
The carrying amount of the trade receivables and other financial assets that are subject to the IAS 39 measurement requirements corresponds to their fair value. Assets allocated to the "available-for-sale financial assets" category are measured at amortized cost. These are shares in unconsolidated subsidiaries and other equity investments whose fair value cannot be determined reliably.
The carrying amount of the trade payables and other current liabilities that are subject to the measurement rules of IAS 39 corresponds to their fair value. The fair value of fixed-rate liabilities is the present value of their expected future cash flows. They are discounted at the rates prevailing at the reporting date. The carrying amount of variable-rate liabilities corresponds to their fair value.
The fair value of currency forwards at the reporting date is calculated on the basis of the spot exchange rate, taking into account forward premiums and discounts corresponding to the relevant remaining maturities. Forward premiums and discounts are derived from yield curves observable at the reporting date. The fair value of currency options is calculated on the basis of recognized valuation models. Fair value is affected by the remaining term of the option, the current exchange rate, the volatility of the exchange rate, and the underlying yield curves.
The fair value of interest rate swaps and options is determined on the basis of discounted expected future cash flows. Market interest rates applicable to the remaining maturities of these financial instruments are used. Cross-currency swaps also include the exchange rates of the relevant foreign currencies in which the cash flows are generated.
The fair value of commodity futures and options is calculated by measuring these at the market terms prevailing at the reporting date, and thus corresponds to its value at the end of the fiscal year. The fair value of exchange-traded contracts is derived from their quoted market price. Measurements are performed both internally and by external financial institutions as of the reporting date.
GEA Group uses derivative financial instruments, including currency forwards, interest rate swaps, cross-currency swaps, and commodity futures. Derivative financial instruments serve to hedge foreign currency risk, interest rate risk, and commodity price risk for existing or planned underlying transactions.
The following table presents the notional values and fair values of the derivative financial instruments in use as of the reporting date. The notional value in foreign currency is translated at the closing rate.
| 12/31/2013 | 12/31/2012 | |||
|---|---|---|---|---|
| (EUR thousand) | Notional value | Fair value | Notional value | Fair value |
| Assets | ||||
| Currency derivatives not included in a hedging relationship | 192,880 | 4,809 | 314,322 | 3,233 |
| Currency derivatives included in a cash flow hedge | 231,089 | 6,450 | 172,492 | 3,880 |
| Interest rate and cross-currency derivatives not included in a hedging relationship | – | – | 1,440 | 4 |
| Interest rate and cross-currency derivatives included in a cash flow hedge | – | – | – | – |
| Commodity derivatives not included in a hedging relationship | – | – | – | – |
| Total | 423,969 | 11,259 | 488,254 | 7,117 |
| Equity and liabilities | ||||
| Currency derivatives not included in a hedging relationship | 344,011 | 5,775 | 318,964 | 5,689 |
| Currency derivatives included in a cash flow hedge | 128,657 | 2,741 | 118,052 | 1,728 |
| Interest rate and cross-currency derivatives not included in a hedging relationship | 43,348 | 5,210 | 52,379 | 11,244 |
| Interest rate and cross-currency derivatives included in a cash flow hedge | 50,000 | 3,265 | 178,000 | 5,538 |
| Commodity derivatives not included in a hedging relationship | – | – | 691 | 98 |
| Total | 566,016 | 16,991 | 668,086 | 24,297 |
Derivative financial instruments included in recognized hedging relationships serve exclusively to hedge foreign currency risks from future sale and procurement transactions, as well as interest rate risks from long-term financing (cash flow hedges). Fair value hedges are recognized to hedge changes in the fair value of assets, liabilities, or firm commitments. As in the previous year, the group had not entered into any fair value hedges as of December 31, 2013.
Derivatives are measured at fair value, which is split into an effective and an ineffective portion. The effective portion and any change in this amount are recognized in other comprehensive income until the hedged item is recognized in the balance sheet. The ineffective portion is recognized in the income statement. When the hedged item is recognized in the balance sheet, gains and losses recognized in equity are realized and the hedge is unwound. In the case of a sale transaction, the effective portion is recognized as revenue, whereas in the case of a procurement transaction the cost is adjusted accordingly. In the case of interest rate derivatives, the gains and losses recognized in equity are reversed to net interest income.
As of December 31, 2013, the complete group recognized gains of EUR 7,860 thousand (previous year: EUR 4,229 thousand) and losses of EUR 7,168 thousand (previous year: EUR 7,420 thousand) from currency and interest rate derivatives directly in equity.
In the course of fiscal year 2013, EUR 1,956 thousand (previous year: EUR 1,910 thousand) was recognized in the income statement due to the hedged items being recognized in the balance sheet, and EUR 2,335 thousand (previous year: EUR −6,233 thousand) was offset against the cost of assets. The amounts recognized in the income statement resulted in an increase in revenue of EUR 1,010 thousand (previous year: EUR 1,939 thousand). In addition, gains of EUR 4,330 thousand (previous year: gains of EUR 9,829 thousand) and losses of EUR −4,061 thousand (previous year: losses of EUR −9,858 thousand) were reported in net exchange rate gains/losses. EUR −826 thousand (previous year: EUR −45 thousand) from interest rate derivatives was recognized in net interest income.
As in the previous year, there was no significant hedge ineffectiveness.
93 percent (previous year: 91 percent) of the hedged cash flows from the underlying transactions designated at the reporting date are expected to fall due in the following year. The remaining 7 percent (previous year: 9 percent) are due by 2017 (previous year: 2017). If financial assets are hedged, the derivatives are recognized in the income statement at the same time as the hedged items are recognized in the income statement and balance sheet. If financial liabilities from procurement transactions are hedged, the derivatives are recognized in the income statement when the purchased goods or services are recognized in the income statement.
If the criteria for recognizing a hedging relationship are not met, any change in fair value is recognized in the income statement
The measurement effects from financial instruments have largely been recognized in profit or loss. The following table shows net income from financial instruments, broken down by the IAS 39 measurement categories:
| 12/31/2013 | 12/31/2012 | ||||||
|---|---|---|---|---|---|---|---|
| (EUR thousand) | Net income | of which interest income/ expense |
of which impairment losses/ reversals of impairment losses |
Net income | of which interest income/ expense |
of which impairment losses/ reversals of impairment losses |
|
| Loans and receivables | 5,949 | 5,132 | –3,104 | 3,188 | 6,000 | –6,192 | |
| Available-for-sale investments | –1,660 | 7 | –280 | 752 | 579 | –469 | |
| Financial assets/liabilities at fair value through profit or loss |
–2,469 | 555 | – | –8,074 | –2,670 | – | |
| Financial liabilities at amortized cost | –44,500 | –43,453 | – | –43,946 | –42,852 | – | |
| Total | –42,680 | –37,759 | –3,384 | –48,080 | –38,943 | –6,661 |
The income statement for fiscal year 2012 was adjusted retrospectively due to the initial classification of GEA HX as a discontinued operation (see section 4).
Revenue is composed of the following items:
| Total | 4,319,994 | 4,142,317 |
|---|---|---|
| From service agreements | 1,152,984 | 1,114,205 |
| From sale of goods and services | 1,063,663 | 1,045,567 |
| From construction contracts | 2,103,347 | 1,982,545 |
| (EUR thousand) | 01/01/2013 - 12/31/2013 |
01/01/2012 - 12/31/2012 |
Other income is composed of the following items:
| 01/01/2013 - | 01/01/2012 - | |
|---|---|---|
| (EUR thousand) | 12/31/2013 | 12/31/2012 |
| Exchange rate gains | 96,419 | 76,302 |
| Gains on the measurement of foreign currency derivatives | 37,931 | 51,284 |
| Rental and lease income | 4,496 | 9,624 |
| Income from payments received on reversals previously written off | 2,364 | 4,794 |
| Income from disposal of non-current assets | 1,738 | 2,313 |
| Income from compensation payments and cost reimbursements | 2,413 | 952 |
| Miscellaneous other income | 49,554 | 42,870 |
| Total | 194,915 | 188,139 |
Other expenses are composed of the following items:
| Total | ||
|---|---|---|
| Miscellaneous other expenses | 23,514 | 18,807 |
| Losses on the disposal of non-current assets | 856 | 558 |
| Cost of money transfers and payment transactions | 1,297 | 1,282 |
| Bad debt allowances on trade receivables | 5,468 | 10,986 |
| Losses on the measurement of foreign currency derivatives | 40,955 | 56,688 |
| Exchange rate losses | 97,079 | 74,678 |
| (EUR thousand) | 01/01/2013 - 12/31/2013 |
01/01/2012 - 12/31/2012 |
Miscellaneous other expenses primarily comprise additions to provisions.
The cost of materials included in cost of sales increased by EUR 22,985 thousand in the reporting period to EUR 2,135,809 thousand (previous year: EUR 2,112,824 thousand). Cost of materials was 49.4 percent of gross revenue and was therefore lower than the previous year's figure of 50.8 percent.
Personnel expenses increased by EUR 33,320 thousand in 2013 to EUR 1,177,675 thousand (previous year: EUR 1,144,355 thousand). The cost of unwinding the discount on expected pension obligations is not recognized under personnel expenses, but under financial and interest expenses. Personnel expenses include wages and salaries in the amount of EUR 968,273 thousand (previous year: EUR 933,738 thousand) as well as social security contributions and expenses for post-employment benefits of EUR 209,402 thousand (previous year: EUR 210,625 thousand). The ratio of personnel expenses to revenue thus declined to 27.3 percent of gross revenue (previous year: 27.5 percent)
Depreciation, amortization, and impairment losses totaling EUR 95,317 thousand (previous year: EUR 105,298 thousand) were charged on property, plant and equipment, investment property, and intangible assets in the reporting period. Depreciation, amortization, and impairment losses are largely included in cost of sales.
Impairment losses on nonderivative financial assets excluding trade receivables amounted to EUR 280 thousand in the reporting period (previous year: EUR 693 thousand). Of this amount, EUR 280 thousand (previous year: EUR 469 thousand) was attributable to non-current financial assets. Impairment losses on equity investments and marketable securities are contained in the financial expenses item. Inventories were written down by EUR 7,924 thousand (previous year: EUR 19,089 thousand). These impairment losses and the remaining impairment losses were recognized in cost of sales.
Financial income is composed of income from profit transfers and investment income from other equity investments:
| Total | 5,202 | 3,977 |
|---|---|---|
| of which from unconsolidated subsidiaries | 4,563 | 3,793 |
| Income from other equity investments | 4,607 | 3,810 |
| Income from profit transfer agreements | 595 | 167 |
| (EUR thousand) | 01/01/2013 - 12/31/2013 |
01/01/2012 - 12/31/2012 |
Interest and similar income is composed of the following items:
| (EUR thousand) | 01/01/2013 - 12/31/2013 |
01/01/2012 - 12/31/2012 |
|---|---|---|
| Interest income on receivables, cash investments, and marketable securities | 6,961 | 4,407 |
| of which from unconsolidated subsidiaries | 321 | 420 |
| Other interest income | 1,974 | 3,608 |
| Total | 8,935 | 8,015 |
The following table shows the interest income on financial instruments broken down by the IAS 39 measurement categories, along with the interest income on assets measured in accordance with other pronouncements:
| Total | 8,935 | 8,015 |
|---|---|---|
| Financial assets not measured in accordance with IAS 39 | – | – |
| Financial assets at fair value through profit or loss | 3,796 | 1,436 |
| Available-for-sale investments | 7 | 579 |
| Loans and receivables | 5,132 | 6,000 |
| (EUR thousand) | 01/01/2013 - 12/31/2013 |
01/01/2012 - 12/31/2012 |
Financial expenses for fiscal year 2013 amounted to EUR 958 thousand (previous year: EUR 953 thousand) and comprised impairment losses on financial assets (excluding trade receivables) of EUR 280 thousand (previous year: EUR 469 thousand) and expenses from loss absorption of EUR 678 thousand (previous year: EUR 484 thousand).
Interest and similar expenses comprised the following items:
| Total interest expenses | 76,390 | 95,188 |
|---|---|---|
| of which to unconsolidated subsidiaries | 108 | 134 |
| Other interest expenses | 17,633 | 16,514 |
| Interest cost from discount unwinding on discounted provisions and other employee benefit obligations | 6,631 | 20,811 |
| Interest cost from discount unwinding on pension and medical care obligations | 19,939 | 24,217 |
| Interest expenses on liabilities to banks | 32,187 | 33,646 |
| (EUR thousand) | 01/01/2013 - 12/31/2013 |
01/01/2012 - 12/31/2012 |
The following table shows the interest expenses on financial instruments broken down by the IAS 39 measurement categories, along with the interest expenses on liabilities measured in accordance with other pronouncements:
| Total | 76,390 | 95,188 |
|---|---|---|
| Financial liabilities not measured in accordance with IAS 39 | 29,696 | 48,224 |
| Financial liabilities at fair value through profit or loss | 3,241 | 4,112 |
| Financial liabilities at amortized cost | 43,453 | 42,852 |
| (EUR thousand) | 01/01/2013 - 12/31/2013 |
01/01/2012 - 12/31/2012 |
If finance can be allocated to a specific investment, the actual borrowing costs are capitalized as part of the cost of the investment. Where no direct relationship can be established, the average interest rate for group borrowings in the current period is used as the capitalization rate due to GEA Group's central financing function. This amounted to 3.5 percent in fiscal year 2013 (previous year: 3.8 percent). Interest income generated on advance payments and progress payments received reduces the cost of the asset. No material borrowing costs were capitalized in fiscal year 2013 or in the previous year.
In fiscal year 2013, expenses totaling EUR 1,297 thousand (previous year: EUR 1,282 thousand) were incurred for fees that were not included in the calculation of the effective interest rate.
Income taxes for continuing operations are composed of the following items:
| Total | 70,097 | 12,876 |
|---|---|---|
| Deferred taxes | –267 | –45,226 |
| Other countries | 64,186 | 49,903 |
| Germany | 6,178 | 8,199 |
| Current taxes | 70,364 | 58,102 |
| (EUR thousand) | 01/01/2013 - 12/31/2013 |
01/01/2012 - 12/31/2012 |
The expected tax expense is calculated using the tax rate of 29.85 percent (previous year: 29.60 percent) applicable to German group companies. This includes an average trade tax rate of 14.02 percent (previous year: 13.77 percent) in addition to the uniform corporate income tax rate of 15.00 percent (previous year: 15.00 percent) and the solidarity surcharge of 0.825 percent (previous year: 0.825 percent). The following table shows a reconciliation of the expected tax rate to the effective tax rate of 19.91 percent (previous year: 5.67 percent):
| 01/01/2013 - 12/31/2013 |
01/01/2012 - 12/31/2012 |
|||
|---|---|---|---|---|
| (EUR thousand) | (%) | (EUR thousand) | (%) | |
| Profit before tax | 352,136 | – | 227,133 | – |
| Expected tax expense | 105,113 | 29.85 | 67,231 | 29.60 |
| Non-tax deductible expense | 7,447 | 2.12 | 10,562 | 4.65 |
| Tax-exempt income | –7,394 | –2.10 | –1,504 | –0.66 |
| Change in valuation allowances | –37,689 | –10.70 | –69,816 | –30.74 |
| Change in tax rates | –1,854 | –0.53 | –639 | –0.28 |
| Foreign tax rate differences | –538 | –0.15 | 889 | 0.39 |
| Other | 5,012 | 1.42 | 6,153 | 2.71 |
| Income tax and effective tax rate | 70,097 | 19.91 | 12,876 | 5.67 |
The change in valuation allowances in the amount of EUR –37,689 thousand (previous year: EUR –69,816 thousand) was primarily due to a revised assessment of the recoverability of the deferred tax assets on tax loss carryforwards in the U.S.A.
The effects of changes in tax rates in the amount of EUR –1,854 thousand (previous year: EUR –639 thousand) in the reporting period were mainly due to the change in the tax rate in Germany.
The foreign tax rate differences are due to different tax rates outside Germany in comparison to the German tax rate of 29.85 percent. The tax rates for foreign companies vary between 1.00 percent (UAE) and 40.91 percent (U.S.A.).
The other reconciliation effects include nondeductible withholding taxes in the amount of EUR 3,861 thousand and nondeductible prior-period taxes in the amount of EUR 1,830 thousand.
Deferred tax assets and liabilities during the year under review can be broken down by maturity as follows:
| Net deferred tax assets | 287,043 | 321,362 |
|---|---|---|
| Total deferred tax liabilities | 98,779 | 124,039 |
| Non-current deferred tax liabilities | 50,761 | 75,308 |
| Current deferred tax liabilities | 48,018 | 48,731 |
| Total deferred tax assets | 385,822 | 445,401 |
| Non-current deferred tax assets | 323,933 | 354,488 |
| Current deferred tax assets | 61,889 | 90,913 |
| (EUR thousand) | 12/31/2013 | 12/31/2012 |
Deferred tax assets and liabilities as of December 31, 2013, and 2012, are composed of the following items:
| Deferred tax assets | Deferred tax liabilities | ||||
|---|---|---|---|---|---|
| (EUR thousand) | 2013 | 2012 | 2013 | 2012 | |
| Property, plant and equipment | 6,536 | 10,411 | 20,513 | 34,655 | |
| Investment property | 225 | 223 | – | – | |
| Intangible assets | 1,302 | 1,725 | 62,544 | 75,697 | |
| Goodwill | 23,072 | 41,844 | 45,028 | 45,582 | |
| Other non-current financial assets | 595 | 734 | 4,480 | 5,765 | |
| Non-current assets | 31,730 | 54,937 | 132,565 | 161,699 | |
| Inventories | 25,286 | 36,778 | 3,416 | 2,557 | |
| Trade receivables | 4,780 | 12,221 | 44,928 | 49,194 | |
| Other current financial assets | 6,084 | 18,572 | 14,137 | 6,409 | |
| Cash and cash equivalents | 3 | 134 | 17 | 9 | |
| Current assets | 36,153 | 67,705 | 62,498 | 58,169 | |
| Total assets | 67,883 | 122,642 | 195,063 | 219,868 | |
| Provisions | 15,003 | 19,996 | 17 | 91 | |
| Employee benefits | 84,964 | 91,640 | 277 | 411 | |
| Non-current financial liabilities | 5,487 | 8,087 | 2,678 | 3,533 | |
| Other non-current financial liabilities | 685 | 406 | 1,703 | 2,567 | |
| Non-current liabilities | 106,139 | 120,129 | 4,675 | 6,602 | |
| Provisions | 22,007 | 27,405 | 3,067 | 3,378 | |
| Employee benefits | 9,986 | 11,277 | 216 | 161 | |
| Current financial liabilities | 6,746 | 9,650 | 987 | 13,794 | |
| Trade payables | 3,773 | 5,233 | 1,181 | 13,153 | |
| Other current financial liabilities | 15,700 | 18,789 | 9,293 | 5,963 | |
| Current liabilities | 58,212 | 72,354 | 14,744 | 36,449 | |
| Total liabilities | 164,351 | 192,483 | 19,419 | 43,051 | |
| Valuation allowances on temporary differences | –8,022 | –11,372 | – | – | |
| Deferred taxes on temporary differences | 224,212 | 303,753 | 214,482 | 262,919 | |
| Tax loss carryforwards | 943,554 | 1,025,981 | – | – | |
| Valuation allowances on tax loss carryforwards | –666,241 | –745,453 | – | – | |
| Offsetting of deferred taxes | –115,703 | –138,880 | –115,703 | –138,880 | |
| Recognized deferred taxes | 385,822 | 445,401 | 98,779 | 124,039 |
EUR 23,017 thousand of the EUR 34,319 thousand decline in deferred taxes is attributable to the reclassification of deferred taxes to assets held for sale and liabilities held for sale, as well as the presentation of GEA HX as a discontinued operation.
In addition to changes of EUR 267 thousand recognized in profit or loss (previous year: EUR 45,226 thousand), other changes resulted mainly from changes of EUR –1,175 thousand (previous year: EUR 37,471 thousand) recognized in other comprehensive income. In addition, deferred taxes of EUR –6,056 thousand were taken directly to equity on initial consolidation in the previous year.
Deferred tax liabilities in the amount of EUR 5,986 thousand were recognized as of the reporting date as a result of the planned sale of the GEA HX Segment. The related tax expense was reported in profit or loss from discontinued operations.
Net deferred taxes on temporary differences attributable to the GEA HX disposal group amounted to EUR 15,311 thousand (before valuation allowances) as of December 31, 2013, and were presented under assets held for sale and liabilities held for sale. Valuation allowances on the deferred tax assets included in this figure amounted to EUR 278 thousand as of the reporting date.
Deferred tax assets on tax loss carryforwards attributable to the GEA HX disposal group amounted to EUR 23,678 thousand (before valuation allowances) as of December 31, 2013, and were presented under assets held for sale. Valuation allowances on these deferred tax assets amounted to EUR 19,015 thousand as of the reporting date.
Deferred tax liabilities of EUR 1,272 thousand were recognized as of December 31, 2013, for expected dividend payments from subsidiaries.
No deferred taxes were recognized for taxable temporary differences arising from investments in subsidiaries in the amount of EUR 348,647 thousand (previous year: EUR 350,432 thousand) as of December 31, 2013, since the company is able to control their reversal and no reversals will be made in the foreseeable future.
Deferred tax assets and liabilities are offset if there is a legally enforceable right to set off current tax assets against current tax liabilities and if the deferred taxes relate to income taxes levied by the same taxation authority.
As of December 31, 2013, GEA Group recognized deferred tax assets in the amount of EUR 277,313 thousand (previous year: EUR 280,528 thousand) on tax loss carryforwards:
| Total | 277,313 | 280,528 |
|---|---|---|
| Deferred tax assets on foreign tax loss carryforwards | 133,313 | 128,528 |
| Trade tax | 66,452 | 70,143 |
| Corporate income tax | 77,548 | 81,857 |
| Deferred tax assets on domestic tax loss carryforwards | ||
| (EUR thousand) | 12/31/2013 | 12/31/2012 |
The decrease in deferred tax assets on German tax loss carryforwards relates to an updated assessment of the extent to which tax loss carryforwards can be utilized in future periods.
No deferred tax assets were recognized for corporate income tax loss carryforwards in the amount of EUR 1,550,352 thousand (previous year: EUR 1,819,019 thousand) and trade tax loss carryforwards in the amount of EUR 1,139,187 thousand (previous year: EUR 1,111,988 thousand) as their utilization is not sufficiently certain. The tax loss carryforwards of the German companies can be carried forward for an indefinite period. Foreign tax loss carryforwards can generally only be utilized for a limited period. The significant tax loss carryforwards of the foreign companies are expected to expire in 2029.
Earnings per share are calculated as follows:
| 01/01/2013 - 12/31/2013 |
01/01/2012 - 12/31/2012 |
|---|---|
| 336,042 | 313,018 |
| 282,041 | 214,269 |
| 54,001 | 98,749 |
| 192,495 | 185,786 |
| 1.75 | 1.68 |
| 1.47 | 1.15 |
| 0.28 | 0.53 |
| 336,042 | 313,018 |
| 282,041 | 214,269 |
| 54,001 | 98,749 |
| 192,495 | 185,786 |
The weighted average number of shares outstanding rose by 6,709 thousand to 192,495 thousand in 2013 (previous year: EUR 185,786 thousand). This increase is attributable to a capital increase implemented in fiscal year 2012 (see section 6.1).
GEA Group Aktiengesellschaft reported net income for the fiscal year of EUR 203,200 thousand in accordance with the HGB (previous year: EUR 216,775 thousand). The Executive Board and the Supervisory Board of GEA Group Aktiengesellschaft have appropriated an amount of EUR 90,000 thousand (previous year: EUR 108,000 thousand) to other retained earnings in accordance with section 58(2) of the AktG. Including the profit brought forward of EUR 3,176 thousand (previous year: EUR 273 thousand), the net retained profits amounted to EUR 116,376 thousand (previous year: EUR 109,048 thousand).
The Executive Board and Supervisory Board will propose to the Annual General Meeting that the net retained profits be appropriated as follows:
| Appropriation (EUR thousand) | 2013 | 2012 |
|---|---|---|
| Dividend payment to shareholders | 115,497 | 105,872 |
| Profit carried forward | 879 | 3,176 |
| Total | 116,376 | 109,048 |
The dividend payment corresponds to the payment of a dividend of 60 cents per share for a total of 192,495,476 shares (previous year: 192,495,476 shares). The dividend will be paid from the contribution account for tax purposes (section 27 of the Körperschaftsteuergesetz (KStG – German Corporate Income Tax Act)) and therefore without deduction of investment income tax and the solidarity surcharge. In the case of shareholders in Germany, the dividend is not subject to current taxation in the year of payment. The opinion of the German tax authorities (see also the Federal Ministry of Finance (BMF) circular dated December 22, 2009, paragraph 92) is that the payment of dividends from the contribution account for tax purposes constitutes a repayment of shareholder contributions, which results in a retrospective reduction in the cost of the shares. This can lead to the imposition of higher capital gains taxes if the shares are sold at a later date.
GEA Group Aktiengesellschaft has issued or instructed the issue of both bank and group guarantees in favor of customers or lenders. The obligations presented in the following table relate to contingent liabilities for which the primary debtor is not a consolidated company of the complete group.
| Bank guarantees | |||||
|---|---|---|---|---|---|
| (EUR thousand) | 2013 | 2012 | 2013 | 2012 | |
| Guarantees for prepayments | 6,993 | 3,959 | 248 | 3,858 | |
| Warranties | 230 | 3,931 | 221 | 42 | |
| Performance guarantees | 14,385 | 11,583 | 164,885 | 169,511 | |
| Other declarations of liability | 2,207 | 729 | 9,339 | 9,348 | |
| Total | 23,815 | 20,202 | 174,693 | 182,759 | |
| of which attributable to Lurgi/Lentjes | 9,953 | 13,225 | 157,683 | 162,325 |
A significant proportion of the bank guarantees and most of the group guarantees are attributable to Lurgi and Lentjes (see section 3).
The other guarantees relate mainly to customers of unconsolidated companies and to banks. The beneficiaries are entitled to asset claims under the guarantees if the primary debtor fails to meet its contractual obligations, for example, in the case of late or defective delivery, noncompliance with warranted performance parameters, or failure to repay loans in accordance with the contractual requirements.
The guarantees include contingent liabilities of EUR 9,818 thousand resulting from joint ventures (previous year: EUR 1,677 thousand); there is no further liability above and beyond this.
All guarantees issued by or on the instructions of GEA Group Aktiengesellschaft are issued on behalf of and with recourse against the relevant primary debtor.
In addition to the liability risks resulting from bank and group guarantees, there are risks in particular from court, arbitration, or out-of-court disputes (see section 8.4) that could result in cash outflows.
The other financial obligations of the complete group as of December 31, 2013, are composed of the following items:
| Total | 458,103 | 504,151 |
|---|---|---|
| Purchase commitments | 297,499 | 313,510 |
| Rental and lease obligations | 160,604 | 190,641 |
| (EUR thousand) | 12/31/2013 | 12/31/2012 |
The obligations under rental and lease agreements of the complete group amount to EUR 160,604 thousand (previous year: EUR 190,641 thousand) and relate primarily to land and buildings, and to a lesser extent to technical equipment and machinery. As of December 31, 2013, EUR 54,232 thousand of this amount is attributable to the GEA HX Segment, which has been allocated to discontinued operations. The leases run until no later than 2031 (previous year: 2031). Payments are spread over future fiscal years as follows:
| Later than five years Total |
32,728 160,604 |
42,057 190,641 |
|---|---|---|
| Between one and five years | 79,896 | 96,722 |
| Not later than one year | 47,980 | 51,862 |
| (EUR thousand) | 12/31/2013 | 12/31/2012 |
The expenses related to rental and lease agreements of the complete group in fiscal year 2013 amounted to EUR 88,361 thousand (previous year: EUR 79,356 thousand). Of this amount, EUR 23,621 thousand (previous year: EUR 16,042 thousand) was attributable to variable rents, which are primarily adjusted based on consumer price indexes. Subleases resulted in income of EUR 2,011 thousand for the complete group in the fiscal year (previous year: EUR 4,545 thousand). These subleases give rise to claims for rental income of EUR 764 thousand (previous year: EUR 1,898 thousand) over the coming years.
The expenses relating to rental and lease agreements of the GEA HX Segment, which has been allocated to discontinued operations, amounted to EUR 24,470 thousand, of which EUR 4,231 thousand was attributable to variable rents.
Sale and leaseback transactions relating to buildings resulted in future payments for the complete group of EUR 29,124 thousand at the reporting date (previous year: EUR 32,350 thousand).
EUR 293,958 thousand (previous year: EUR 307,884 thousand) of the purchase commitments is attributable to inventories and EUR 1,862 thousand (previous year: EUR 3,680 thousand) to items of property, plant and equipment. Purchase commitments attributable to inventories of EUR 134,306 thousand and purchase commitments attributable to items of property, plant and equipment of EUR 1,279 thousand relate to the GEA HX Segment, which has been allocated to discontinued operations.
With regard to the proceedings against U.S. company Flex-N-Gate Corp., the court of arbitration in fiscal year 2010 ordered Flex-N-Gate to compensate GEA Group Aktiengesellschaft for losses incurred as a result of the collapse of the sale of the Dynamit Nobel plastics business to Flex-N-Gate in the fall of 2004. The award was overturned by the Higher Regional Court in Frankfurt in 2011. In its decision dated October 2, 2012, the German Federal Court of Justice dismissed GEA Group Aktiengesellschaft's appeal against the decision. The Company then decided to continue the arbitration proceedings against Flex-N-Gate and filed a corresponding application with the Deutsche Institution für Schiedsgerichtsbarkeit (DIS – German Institution of Arbitration) on December 21, 2012.
In connection with a major order, in South Africa, a subcontractor asserted substantial out-of-court claims in the previous year and in the current year against the GEA company that had been contracted. GEA's analysis that the alleged additional costs or claims should either be borne by the sub-contractor itself, or that the amounts are inflated or insufficiently specified remains unchanged. Furthermore, even if the amounts were to be substantiated, they could largely be passed through to GEA´s customer. During 2013 further delays arose at the construction site; however we do not believe that these are attributable to GEA Group.
An action brought by the insolvency administrator of Dörries Scharmann AG against GEA Group Aktiengesellschaft is pending at the Düsseldorf Regional Court. The former Metallgesellschaft AG, the legal predecessor to GEA Group Aktiengesellschaft, held an interest in Schiess AG, which later became Dörries Scharmann AG. On the basis of that interest, the insolvency administrator is asserting various claims under company law, in particular for equity substitution, which amount to approximately EUR 20 million including possible interest. GEA Group Aktiengesellschaft considers the claims that have been asserted to be unfounded. After the senior expert appointed by the court to decide matters relating to equity substitution fully confirmed GEA Group Aktiengesellschaft's opinion, the Higher Regional Court in Düsseldorf upheld a motion by the insolvency administrator to disqualify this expert in a ruling issued on November 27, 2012. How the Regional Court will proceed in this matter is currently unknown. GEA Group Aktiengesellschaft will continue to defend itself against all claims.
Further legal proceedings or official investigations have been or may be instituted against GEA Group companies as a result of earlier business disposals and operating activities.
Adequate provisions have been recognized for all risks arising from both the legal disputes described above and other legal disputes being pursued by GEA Group in the course of its ordinary operating activities. However, the outcome of these proceedings cannot be predicted with any degree of certainty. It is therefore possible that the conclusion of the proceedings may result in expenses that exceed the amounts that may have been set aside for them.
GEA Group's business activities are divided into the following seven segments:
GEA Food Solutions is a leading manufacturer of machinery for preparing, marinating, processing, cutting, and packaging meat, poultry, fish, cheese, and other foods. Specializing in performance-driven solutions, its offering ranges from individual machines through to end-to-end production lines.
GEA Farm Technologies is one of the world's leading manufacturers of integrated product solutions for profitable milk production and livestock farming. The segment's combined expertise in the areas of milking and milk-cooling technology, automatic feeding systems, manure management systems, and barn equipment provides today's farmers with a complete range of products and solutions. Services and animal hygiene solutions round off its profile as a full-line systems provider for farms of all sizes. The segment's sales strategy is built upon a global network of specialist dealers and sales and service partners.
GEA Heat Exchangers provides products and systems for numerous areas of use, ranging from air conditioning systems to cooling towers, boasting what is probably the largest portfolio of heat exchangers worldwide. The segment supplies optimal single-source solutions for a large number of applications and also offers customers professional support with project planning. The GEA Heat Exchangers Segment was allocated to discontinued operations at the end of fiscal year 2013 (see section 4).
GEA Mechanical Equipment specializes in separators, decanters, valves, pumps, and homogenizers – high-quality process engineering components that ensure seamless processes and cost-effective production in almost all major areas of industry worldwide. At the same time, such equipment helps reduce customer production costs and protect the environment in a sustainable manner.
GEA Process Engineering specializes in the design and development of process solutions for the dairy, brewing, food, pharmaceutical, and chemical industries. The segment is an acknowledged market and technology leader in its business areas: liquid processing, concentration, industrial drying, powder processing and handling, and emission control.
GEA Refrigeration Technologies is a market leader in the field of industrial refrigeration technology. The segment develops, manufactures, and installs innovative key components and technical solutions for its customers. To ensure complete customer satisfaction, GEA Refrigeration Technologies also offers a broad range of maintenance and other services. Its product range comprises the following core components: reciprocating and screw compressors, valves, chillers, ice generators, and freezing systems.
The "Other" segment comprises the companies with business activities that do not form part of the core business. In addition to the holding and service companies, it contains companies that report investment property held for sale, pension obligations, and residual mining obligations.
The figures for the segments attributable to continuing operations are presented first in segment reporting. These are then aggregated in the consolidated balance sheet and the income statement following consolidation and reclassification in the "GEA Group" column. The "GEA HX" column contains the figures for the GEA HX Segment, which has been allocated to discontinued operations. These are adjusted for consolidation and reclassification and are aggregated in the group figures for all segments in the "GEA Group including GEA HX" column.
| (EUR million) | GEA FS | GEA FT | GEA ME | GEA PE | GEA RT | Other | Consoli dation/ Reclassi fication |
GEA Group | GEA HX 1 | Consoli dation/ Reclassi fication |
GEA Group incl. GEA HX |
|---|---|---|---|---|---|---|---|---|---|---|---|
| 01/01/2013 - 12/31/2013 | |||||||||||
| Order intake 2 | 349.7 | 596.7 | 1,018.5 | 2,061.0 | 726.3 | – | –124.3 | 4,627.9 | 1,500.3 | –35.4 | 6,092.7 |
| External revenue | 349.9 | 577.3 | 862.6 | 1,798.1 | 732.0 | – | – | 4,320.0 | 1,452.2 | – | 5,772.2 |
| Intersegment revenue | –0.0 | 0.3 | 115.3 | –0.2 | 4.6 | – | –120.0 | – | 36.8 | –36.8 | – |
| Total revenue | 349.9 | 577.7 | 977.8 | 1,798.0 | 736.6 | – | –120.0 | 4,320.0 | 1,489.1 | –36.8 | 5,772.2 |
| Share of profit or loss of equity-accounted investments |
– | 0.3 | – | –0.1 | 1.2 | 0.5 | – | 1.9 | 0.6 | – | 2.6 |
| Operating EBITDA 3 | 3.8 | 56.9 | 210.9 | 203.2 | 71.0 | –15.7 | – | 530.1 | 158.2 | –0.1 | 688.3 |
| as % of revenue | 1.1 | 9.9 | 21.6 | 11.3 | 9.6 | – | – | 12.3 | 10.6 | – | 11.9 |
| EBITDA pre PPA | 3.8 | 56.9 | 210.9 | 203.2 | 71.0 | –30.3 | – | 515.5 | 155.2 | –10.6 | 660.1 |
| EBITDA | 3.8 | 56.7 | 210.9 | 203.2 | 71.0 | –30.3 | – | 515.2 | 155.2 | –10.6 | 659.8 |
| Operating EBIT 3 | –3.7 | 44.6 | 191.3 | 188.3 | 61.5 | –23.2 | 458.8 | 123.3 | –0.1 | 582.1 | |
| as % of revenue | –1.0 | 7.7 | 19.6 | 10.5 | 8.4 | – | – | 10.6 | 8.3 | – | 10.1 |
| EBIT pre PPA | –3.7 | 44.6 | 191.3 | 188.3 | 61.5 | –37.8 | – | 444.2 | 120.3 | –10.5 | 553.9 |
| as % of revenue | –1.0 | 7.7 | 19.6 | 10.5 | 8.4 | – | – | 10.3 | 8.1 | – | 9.6 |
| EBIT | –17.3 | 41.2 | 188.9 | 185.7 | 59.0 | –38.0 | – | 419.6 | 116.0 | –10.5 | 525.0 |
| as % of revenue | –4.9 | 7.1 | 19.3 | 10.3 | 8.0 | – | – | 9.7 | 7.8 | – | 9.1 |
| ROCE in % 4 | –3.5 | 12.7 | 38.1 | 73.2 | 22.7 | – | – | 22.1 | 12.7 | – | 20.8 |
| Interest income | 0.4 | 1.2 | 1.1 | 3.5 | 1.3 | 42.7 | –41.2 | 8.9 | 8.5 | –6.0 | 11.4 |
| Interest expense | 9.1 | 12.4 | 10.0 | 8.8 | 7.1 | 60.2 | –31.3 | 76.4 | 18.8 | –15.9 | 79.3 |
| EBT | –26.0 | 30.0 | 179.9 | 180.4 | 53.2 | –65.3 | – | 352.1 | 105.6 | –0.7 | 457.1 |
| Income taxes | 0.1 | 5.5 | 27.3 | 47.4 | 13.4 | –4.3 | –19.4 | 70.1 | 27.6 | 23.5 | 121.2 |
| Profit or loss from discontinued operations | – | – | – | – | – | –11.5 | 65.9 | 54.4 | – | –53.8 | 0.6 |
| Segment assets | 653.1 | 630.3 | 1,308.3 | 1,719.7 | 968.2 | 3,883.8 | –2,698.7 | 6,464.6 | 1,838.3 | –1,838.3 | 6,464.6 |
| of which reclassification GEA HX | – | – | – | – | – | – | 1,593.0 | – | 1,593.0 | –1,593.0 | – |
| Segment liabilities | 313.4 | 327.6 | 648.8 | 1,084.2 | 496.8 | 3,387.9 | –2,109.8 | 4,148.9 | 915.8 | –915.8 | 4,148.9 |
| of which reclassification GEA HX | – | – | – | – | – | – | 619.9 | – | 619.9 | –619.9 | – |
| Carrying amount of equity-accounted investments |
– | 6.2 | – | 2.2 | 2.3 | 3.0 | – | 13.7 | 6.5 | – | 20.2 |
| Working capital (reporting date) 5 |
54.9 | 135.2 | 203.8 | –113.5 | 93.2 | –14.5 | 4.1 | 363.3 | 173.2 | –5.3 | 531.1 |
| Additions in property, plant and equip ment, intangible assets, and goodwill |
21.8 | 14.4 | 47.7 | 16.1 | 14.2 | 7.9 | – | 122.0 | 40.2 | –7.7 | 154.5 |
| Depreciation and amortization | 21.0 | 15.2 | 22.0 | 17.4 | 11.6 | 7.8 | –0.1 | 94.9 | 37.5 | –0.0 | 132.4 |
| Impairment losses | – | 0.3 | – | – | 0.4 | – | – | 0.7 | 2.1 | – | 2.8 |
| Additions to provisions | 5.0 | 18.6 | 49.3 | 75.9 | 33.3 | 56.7 | –0.0 | 238.6 | 79.3 | –0.0 | 317.8 |
| (EUR million) | GEA FS | GEA FT | GEA ME | GEA PE | GEA RT | Other | Consoli dation/ Reclassi fication |
GEA Group | GEA HX 1 | Consoli dation/ Reclassi fication |
GEA Group incl. GEA HX |
|---|---|---|---|---|---|---|---|---|---|---|---|
| 01/01/2012 - 12/31/2012 6 | |||||||||||
| Order intake 2 | 375.9 | 583.9 | 971.9 | 1,850.2 | 756.2 | – | –112.7 | 4,425.4 | 1,509.8 | –34.1 | 5,901.1 |
| External revenue | 332.4 | 580.5 | 832.2 | 1,710.9 | 686.3 | – | – | 4,142.3 | 1,577.8 | – | 5,720.1 |
| Intersegment revenue | – | 0.3 | 101.7 | 5.3 | 8.6 | – | –115.9 | – | 31.0 | –31.0 | – |
| Total revenue | 332.4 | 580.9 | 933.9 | 1,716.3 | 694.8 | – | –116.0 | 4,142.3 | 1,608.8 | –31.0 | 5,720.1 |
| Share of profit or loss of equity-accounted investments |
– | 0.2 | – | –0.1 | 1.3 | – | – | 1.5 | 0.9 | – | 2.3 |
| Operating EBITDA 3 | –6.0 | 58.5 | 205.3 | 178.4 | 65.2 | –7.0 | – | 494.4 | 167.5 | –0.0 | 661.9 |
| as % of revenue | –1.8 | 10.1 | 22.0 | 10.4 | 9.4 | – | – | 11.9 | 10.4 | – | 11.6 |
| EBITDA pre PPA | –69.4 | 58.5 | 205.3 | 178.4 | 65.2 | –16.4 | – | 421.6 | 167.5 | 9.4 | 598.5 |
| EBITDA | –69.4 | 58.2 | 204.3 | 178.1 | 65.2 | –16.4 | – | 420.1 | 167.5 | 9.4 | 597.0 |
| Operating EBIT 3 | –12.4 | 46.3 | 187.9 | 162.7 | 56.2 | –14.9 | – | 425.8 | 135.0 | 0.0 | 560.8 |
| as % of revenue | –3.7 | 8.0 | 20.1 | 9.5 | 8.1 | – | – | 10.3 | 8.4 | – | 9.8 |
| EBIT pre PPA | –78.9 | 46.3 | 187.9 | 162.7 | 56.2 | –24.3 | – | 349.9 | 135.0 | 9.4 | 494.3 |
| as % of revenue | –23.7 | 8.0 | 20.1 | 9.5 | 8.1 | – | – | 8.4 | 8.4 | – | 8.6 |
| EBIT | –102.8 | 42.9 | 184.9 | 159.8 | 54.0 | –24.5 | – | 314.3 | 130.3 | 9.4 | 453.9 |
| as % of revenue | –30.9 | 7.4 | 19.8 | 9.3 | 7.8 | – | – | 7.6 | 8.1 | – | 7.9 |
| ROCE in % 4 | –19.8 | 13.4 | 43.0 | 55.9 | 21.2 | – | – | 16.7 | 19.4 | – | 17.8 |
| Interest income | 0.6 | 1.5 | 2.0 | 3.1 | 0.8 | 40.2 | –40.3 | 8.0 | 7.5 | –5.0 | 10.5 |
| Interest expense | 7.6 | 13.5 | 10.7 | 7.7 | 5.6 | 77.8 | –27.6 | 95.2 | 22.2 | –17.7 | 99.7 |
| EBT | –109.8 | 30.9 | 176.3 | 155.2 | 49.2 | –74.8 | – | 227.1 | 115.6 | 22.1 | 364.8 |
| Income taxes | –17.6 | 6.2 | 25.1 | 28.5 | 11.5 | –31.0 | –9.9 | 12.9 | 25.0 | 11.8 | 49.7 |
| Profit or loss from discontinued operations | – | – | – | – | – | 0.1 | 100.8 | 100.9 | – | –100.8 | 0.1 |
| Segment assets | 914.1 | 619.7 | 1,312.6 | 1,578.6 | 883.4 | 3,906.9 | –2,786.0 | 6,429.3 | 2,066.2 | –2,066.2 | 6,429.3 |
| of which reclassification GEA HX | – | – | – | – | – | – | 1,691.4 | – | 1,691.4 | –1,691.4 | – |
| Segment liabilities | 577.2 | 322.3 | 688.9 | 967.5 | 492.8 | 3,145.2 | –1,931.5 | 4,262.4 | 1,253.1 | –1,253.1 | 4,262.4 |
| of which reclassification GEA HX | – | – | – | – | – | – | 668.6 | – | 668.6 | –668.6 | – |
| Carrying amount of equity-accounted investments |
– | 1.4 | – | 2.4 | 2.6 | 8.3 | – | 14.7 | 5.8 | –5.8 | 14.7 |
| Working capital (reporting date) 5 |
48.0 | 145.9 | 179.9 | –86.9 | 84.0 | –16.4 | 178.6 | 533.2 | 182.9 | –182.9 | 533.2 |
| Additions in property, plant and equip ment, intangible assets, and goodwill |
13.9 | 20.5 | 126.1 | 15.2 | 13.5 | 9.5 | 36.3 | 235.0 | 36.3 | –36.3 | 235.0 |
| Depreciation and amortization | 20.2 | 15.1 | 18.9 | 18.3 | 11.2 | 7.5 | –0.1 | 91.1 | 38.0 | –0.0 | 129.1 |
| Impairment losses | 13.2 | 0.2 | – | – | – | 0.8 | 2.6 | 16.9 | 2.6 | –2.6 | 16.9 |
| Additions to provisions | 23.3 | 27.9 | 87.6 | 84.9 | 34.3 | 98.9 | – | 356.8 | 88.5 | – | 445.3 |
1) Reported under discontinued operations
2) Unaudited supplemental information 3) Before effects of purchase price allocations and before one-offs
4) ROCE = EBIT in the last 12 months / (capital employed - goodwill from the acquisition of the former GEA AG by the former Metallgesellschaft in 1999 (both at average of the last 12 months));
capital employed = non-current assets + working capital
5) Working capital = inventories + trade receivables - trade payables - advance payments received 6) Amounts adjusted due to change in accounting policy for employee benefits (see page 118 f.)
199
Consolidation primarily comprises the elimination of intercompany revenue and interest income and expense. Intersegment revenue is calculated using standard market prices.
| Revenues (EUR million) |
2013 | 2012 |
|---|---|---|
| Revenues from construction contracts | ||
| GEA Food Solutions | 92.6 | 93.9 |
| GEA Heat Exchangers | 477.9 | 536.4 |
| GEA Mechanical Equipment | 164.2 | 141.0 |
| GEA Process Engineering | 1,512.2 | 1,440.0 |
| GEA Refrigeration Technologies | 336.8 | 317.9 |
| Other and consolidation | –8.4 | –12.1 |
| Total revenue from construction contracts | 2,575.2 | 2,517.1 |
| Revenues components | ||
| GEA Food Solutions | 116.5 | 97.7 |
| GEA Farm Technologies | 342.8 | 342.2 |
| GEA Heat Exchangers | 833.0 | 869.6 |
| GEA Mechanical Equipment | 488.7 | 485.0 |
| GEA Process Engineering | 33.5 | 42.5 |
| GEA Refrigeration Technologies | 199.9 | 183.8 |
| Other and consolidation | –148.5 | –134.8 |
| Total revenue components | 1,865.8 | 1,886.0 |
| Total revenues from service agreements | ||
| GEA Food Solutions | 140.8 | 140.8 |
| GEA Farm Technologies | 234.9 | 238.6 |
| GEA Heat Exchangers | 178.2 | 202.8 |
| GEA Mechanical Equipment | 325.0 | 308.0 |
| GEA Process Engineering | 252.3 | 233.8 |
| GEA Refrigeration Technologies | 200.0 | 193.0 |
| Total revenue from service agreements | 1,331.2 | 1,317.0 |
| Total revenue | 5,772.2 | 5,720.1 |
| Reconciliation of revenue according to segment reporting to revenue | ||
| (EUR million) | 2013 | 2012 * |
| Revenue GEA incl. GEA HX | 5,772.2 | 5,720.1 |
| minus revenue GEA HX | –1,489.1 | –1,608.8 |
| plus revenue GEA HX with continued operations | 36.8 | 31.0 |
| plus revenue continued operations with GEA HX | – | – |
| Revenue | 4,320.0 | 4,142.3 |
*) Amounts adjusted due to first time classification of a business area as discontinued operation (see page 147 f.)
The segment asset recognition and measurement policies are the same as those used in the group and described in the accounting policies section. The profitability of the individual group segments is measured using "earnings before interest, tax, depreciation, and amortization" (EBITDA), "earnings before interest and tax" (EBIT), and "profit or loss before tax" (EBT) as presented in the income statement, irrespective of reclassification to profit or loss from discontinued operations.
Impairment losses include all impairment losses on property, plant and equipment, intangible assets, and investment property.
EBIT for fiscal year 2013 was adjusted for nonrecurring items in the amount of EUR 14.6 million. Nonrecurring items comprise EUR 8.0 million for strategic projects, largely due to consulting expenses, and the contingent allocation of management and trademark fees totaling EUR 6.6 million to continuing operations in accordance with IFRS 5. In addition, nonrecurring expenses of EUR 20.2 million were recognized in profit or loss from discontinued operations in connection with preparations for the separation of the GEA HX Segment.
In fiscal 2012, the GEA Food Solutions Segment's EBIT included costs totaling EUR 76.8 million that management believes will not be incurred in this amount in the coming fiscal year ("nonrecurring items"). These nonrecurring items include writedowns of items capitalized in the course of purchase price allocation amounting to EUR 10.3 million. Of the remaining EUR 66.5 million, EUR 35.8 million is attributable to the changes in estimates recognized in the first quarter of 2012. This figure also includes impairment losses of EUR 3.1 million charged on property, plant and equipment, and intangible assets, and impairment losses of EUR 8.6 million on inventories, as well as severance payment expenses of EUR 4.3 million and personnel expenses for employees who left the Company in fiscal year 2012 and were not replaced totaling EUR 8.9 million. All other effects amount to EUR 5.9 million. Furthermore, the contingent allocation of management and trademark fees totaling EUR 9.4 million to continuing operations in accordance with IFRS 5 was recognized as a nonrecurring item.
| Reconciliation of Operating EBITDA according to segment reporting to EBIT | ||
|---|---|---|
| (EUR million) | 2013 | 2012 * |
| Operating EBITDA GEA incl. GEA HX | 688.3 | 661.9 |
| Depreciation of property, plant and equipment, investment property, and amortization of intangible assets | –105.9 | –103.2 |
| Impairment losses on property, plant and equipment, investment property, intangible assets, and goodwill | –0.0 | 2.6 |
| Other impairment losses and reversals of impairment losses | –0.3 | –0.6 |
| Operating EBIT GEA incl. GEA HX | 582.1 | 560.8 |
| Depreciation and amortization on capitalization of purchase price allocation | –26.5 | –25.9 |
| Impairment losses on capitalization of purchase price allocation | –2.1 | –12.8 |
| Realization of step-up amounts on inventories | –0.3 | –1.6 |
| One-offs | –28.2 | –66.5 |
| EBIT GEA incl. GEA HX | 525.0 | 453.9 |
| minus EBIT GEA HX | –116.0 | –130.3 |
| Consolidation | 10.5 | –9.4 |
| EBIT | 419.6 | 314.3 |
*) Amounts adjusted due to first time classification of an operation as discontinued operation (see page 147 f.) and due to change in accounting policy for employee benefits (see page 118 f.)
| Reconciliation of EBITDA according to segment reporting to EBITDA (EUR million) |
2013 | 2012 * |
|---|---|---|
| EBITDA GEA incl. GEA HX | 659.8 | 597.0 |
| minus EBITDA GEA HX | –155.2 | –167.5 |
| Consolidation | 10.6 | –9.4 |
| EBITDA | 515.2 | 420.1 |
*) Amounts adjusted due to first time classification of an operation as discontinued operation (see page 147 f.) and due to change in accounting policy for employee benefits (see page 118 f.)
| Reconciliation of EBITDA to EBIT | ||
|---|---|---|
| (EUR million) | 2013 | 2012 * |
| EBITDA | 515.2 | 420.1 |
| Depreciation of property, plant and equipment and investment property, and amortization of intangible assets (see notes 5.1, 5.2, 5.4) |
–132.4 | –129.1 |
| Impairment losses on property, plant and equipment, investment property, intangible assets, and goodwill (see notes 5.1, 5.2, 5.3, 5.4) |
–2.2 | –13.3 |
| Impairment losses on non-current financial assets | –0.3 | –0.6 |
| Reversals of impairment losses on non-current financial assets | – | 0.0 |
| Plus depreciation, amortization and impairment losses contained in profit from discontinued operations | 39.2 | 37.2 |
| EBIT | 419.6 | 314.3 |
*) Amounts adjusted due to first time classification of an operation as discontinued operation (see page 147 f.) and due to change in accounting policy for employee benefits (see page 118 f.)
The following table shows the reconciliation of working capital to total assets:
| Reconciliation of working capital to total assets | ||
|---|---|---|
| (EUR million) | 12/31/2013 | 12/31/2012 * |
| Working capital (reporting date) GEA incl. GEA HX | 531.1 | 533.2 |
| Working capital (reporting date) of Ruhr-Zink | –0.0 | 0.1 |
| Non-current assets | 2,577.8 | 3,479.8 |
| Income tax receivables | 8.3 | 19.4 |
| Other current financial assets | 108.9 | 166.2 |
| Cash and cash equivalents | 683.5 | 743.5 |
| Assets held for sale | 1,605.8 | 18.4 |
| plus trade payables | 646.5 | 839.1 |
| plus advance payments in respect of orders and construction contracts | 177.4 | 290.5 |
| plus gross amount due to customers for contract work | 293.0 | 339.0 |
| minus working capital (reporting date) GEA HX reclassified as held for sale | –173.2 | – |
| Consolidation | 5.3 | – |
| Total assets | 6,464.6 | 6,429.3 |
*) Amounts adjusted due to change in accounting policy for employee benefits (see page 118 f.)
In the presentation of segment disclosures by geographic region, revenue is allocated by the destination of the goods or place of performance of the services, or by customer domicile. Assets are allocated by their location. The figures quoted relate to the complete group.
| (EUR millions) | Germany | Europe (excluding Germany) |
North America |
Latin America |
Middle East |
Asia/ Pacific |
Africa | Total |
|---|---|---|---|---|---|---|---|---|
| 01/01/2013 - 12/31/2013 | ||||||||
| External revenue | 599.1 | 2,072.2 | 845.1 | 348.8 | 306.5 | 1,369.7 | 230.7 | 5,772.2 |
| Non-current assets (property, plant and equipment, intangible assets and investment property) |
1,651.9 | 914.4 | 213.6 | 6.1 | 2.9 | 168.6 | 3.7 | 2,961.1 |
| 01/01/2012 - 12/31/2012 | ||||||||
| External revenue | 557.8 | 1,992.1 | 857.5 | 396.9 | 302.8 | 1,321.0 | 292.0 | 5,720.1 |
| Non-current assets (property, plant and equipment, intangible assets and investment property) |
1,628.3 | 935.1 | 225.7 | 7.4 | 3.6 | 165.1 | 5.8 | 2,970.9 |
In the reporting period, revenue of EUR 788.7 million (previous year: EUR 789.1 million) was attributable to the United States of America and EUR 622.6 million (previous year: EUR 556.3 million) was attributable to the People's Republic of China. The carrying amounts of non-current assets (property, plant and equipment, intangible assets, and investment property) in the Netherlands amounted to EUR 490.7 million (previous year: EUR 494.8 million) as of the reporting date. There are no relationships with individual customers whose revenue can be considered material in comparison to total group revenue.
Cash flow from discontinued operations mainly comprises the aggregate net cash flow of the GEA HX Segment. Cash flow from the operating activities of other discontinued operations includes payments of EUR 10,885 thousand (previous year: EUR 868 thousand). Cash flow from investing activities includes outflows of EUR 48,007 thousand (previous year: EUR 40,626 thousand) from the sale of discontinued operations. These outflows relate to payments linked to the sale of business activities in previous periods. The majority of this amount, at EUR 25,153 thousand (previous year: EUR 0 thousand), is attributable to the repayment of a grant received; EUR 20,852 thousand (previous year: EUR 40,611 thousand) is attributable to the former Lurgi and Lentjes operations and results almost entirely from project-related indemnifications.
Government grants related to income amounting to EUR 1,587 thousand were received in fiscal year 2013 (previous year: EUR 2,094 thousand). This item contains an amount of EUR 0 thousand (previous year: EUR 8 thousand) for grants related to short-time working. The grants received were deducted from the corresponding expenses. Grants related to assets amounting to EUR 164 thousand (previous year: EUR 98 thousand) were deducted from the carrying amounts of the assets concerned. In fiscal year 2013, expenses of EUR 295 thousand (previous year: EUR 669 thousand) were incurred for the potential repayment of grants received.
Transactions between GEA Group Aktiengesellschaft and its consolidated subsidiaries have been eliminated in the course of consolidation. Revenue and expenses from transactions between continuing and discontinued operations were not eliminated if they will continue to be incurred following the disposal of the discontinued operation.
Transactions with unconsolidated subsidiaries and joint ventures mainly relate to regular deliveries of goods and services. Income and expenses from transactions between the complete group and these companies are composed of the following items:
| (EUR thousand) | Revenue | Other income | Other expenses |
|---|---|---|---|
| 01/01/2013 - 12/31/2013 | |||
| Unconsolidated subsidiaries | 64,876 | 1,000 | 4,164 |
| Joint ventures | 17,447 | 7 | – |
| Total | 82,323 | 1,007 | 4,164 |
| 01/01/2012 - 12/31/2012 | |||
| Unconsolidated subsidiaries | 71,391 | 2,779 | 2,792 |
| Joint ventures | 15,539 | 11 | – |
| Total | 86,930 | 2,790 | 2,792 |
Related party transactions resulted in the following outstanding items in the complete group as of December 31, 2013:
| (EUR thousand) | Trade receivables |
Trade payables |
Other receivables |
Other liabilities |
|---|---|---|---|---|
| 12/31/2013 | ||||
| Unconsolidated subsidiaries | 18,836 | 5,723 | 8,274 | 23,362 |
| Joint ventures | 3,232 | 396 | 425 | – |
| Total | 22,068 | 6,119 | 8,699 | 23,362 |
| of which current | 22,068 | 6,119 | 8,569 | 23,362 |
| 12/31/2012 | ||||
| Unconsolidated subsidiaries | 18,806 | 4,041 | 6,735 | 23,383 |
| Joint ventures | 2,965 | 699 | 709 | – |
| Total | 21,771 | 4,740 | 7,444 | 23,383 |
| of which current | 21,771 | 4,740 | 7,136 | 23,383 |
The outstanding amounts will be settled by bank transfer and are unsecured.
The Executive Board and Supervisory Board of GEA Group Aktiengesellschaft received total remuneration of EUR 12,277 thousand in fiscal year 2013 (previous year: EUR 8,903 thousand). This is composed of the following components
| (EUR thousand) | 2013 | 2012 |
|---|---|---|
| Short-term employee benefits | 6,581 | 5,838 |
| Post-employment benefits | 2,582 | 2,325 |
| Share-based payments | 3,114 | 740 |
| Total | 12,277 | 8,903 |
Former Executive Board members and their surviving dependents received remuneration from the GEA Group amounting to EUR 5,129 thousand (previous year: EUR 5,039 thousand). Pension provisions were recognized for former Executive Board members and their surviving dependents in accordance with IFRSs totaling EUR 61,715 thousand (previous year: EUR 63,389 thousand).
The expenses incurred for the Supervisory Board amounted to EUR 1,168 thousand in fiscal year 2013 (previous year: EUR 1,152 thousand).
Other information on the remuneration of the Executive Board and the Supervisory Board can be found in the remuneration report.
There were no other transactions by members of the Executive Board or Supervisory Board or their related parties in either the reporting or the comparative period.
The Executive Board and the Supervisory Board issued an updated declaration of conformity in accordance with section 161 of the Aktiengesetz (AktG – German Stock Corporation Act) on December 19, 2013, and made it permanently available to the shareholders on the Company's website.
The average number of employees during the year was as follows:
| Total | 24,799 | 24,474 |
|---|---|---|
| Discontinued operations | 7,259 | 3 |
| Salaried employees | 4,085 | – |
| Hourly workers | 3,174 | 3 |
| Continued operations | 17,540 | 24,471 |
| Salaried employees | 11,411 | 14,913 |
| Hourly workers | 6,129 | 9,558 |
| Average number of employees during the year * | 2013 | 2012 |
*) Full-time equivalents (FTEs) excluding vocational trainees and inactive employment contracts
| Total | 24,954 | 24,501 |
|---|---|---|
| Discontinued operations | 7,204 | 3 |
| Salaried employees | 4,038 | – |
| Hourly workers | 3,166 | 3 |
| Continued operations | 17,750 | 24,498 |
| Salaried employees | 11,572 | 15,068 |
| Hourly workers | 6,178 | 9,430 |
| Employees at reporting date * | 2013 | 2012 |
*) Full-time equivalents (FTEs) excluding vocational trainees and inactive employment contracts
The fees charged worldwide by the auditors of the consolidated financial statements, KPMG AG Wirtschaftsprüfungsgesellschaft, for fiscal year 2013 are broken down as follows:
| Total | 7,146 | 8,238 |
|---|---|---|
| Other services | 868 | 404 |
| Tax consulting services | 954 | 1,310 |
| Other audit related services | 423 | 844 |
| Audit | 4,901 | 5,680 |
| (EUR thousand) | 2013 | 2012 |
EUR 0.02 million of the fees listed for audits in fiscal 2013 is attributable to the audit of the 2012 consolidated financial statements.
The following list shows all subsidiaries, associates, and joint ventures. With the exception of other equity investments within the meaning of section 313(2) no. 4 of the HGB, it does not contain investments in companies that GEA Group neither controls nor over which it can exercise significant influence.
| Company | Head Office | Country | Shares % |
|---|---|---|---|
| Subsidiary | |||
| "SEMENOWSKY VAL" Immobilien- Verwaltungs-GmbH | Bochum | Germany | 100.00 |
| Beijing GEA Energietechnik Co., Ltd. | Beijing | China | 100.00 |
| Beijing Tetra Laval Food Machinery Company Limited | Beijing | China | 90.00 |
| Bliss & Co. Ltd. | Fareham | United Kingdom | 100.00 |
| Bliss Refrigeration Ltd. | Fareham | United Kingdom | 100.00 |
| Bloksma Asia Ltd. | Hong Kong | China | 100.00 |
| Bock Australia Pty. Ltd. | Rosebery | Australia | 100.00 |
| Breconcherry Ltd. | Bromyard, Herefordshire | United Kingdom | 100.00 |
| Brouwers Equipment B.V. | Leeuwarden | Netherlands | 100.00 |
| Brückenbau Plauen GmbH | Frankfurt am Main | Germany | 100.00 |
| CFS Asia Ltd. | Bangna, Bangkok | Thailand | 100.00 |
| CFS Commercial (Beijing) Limited | Beijing | China | 100.00 |
| Convenience Food Systems K.K. | Tokyo | Japan | 100.00 |
| Convenience Food Systems S.A. de C.V. | Mexico-City | Mexico | 100.00 |
| Dairy Technology Services Pty Limited | Kyabram, Victoria | Australia | 100.00 |
| DE GEA Westfalia Separator Ukraine | Kiev | Ukraine | 100.00 |
| Diessel Aktiengesellschaft | Zug | Switzerland | 100.00 |
| Dixie-Union (UK) Ltd. | Newport Pagnell | United Kingdom | 100.00 |
| Dobbelenberg S.A./N.V. | Haren, Brussels | Belgium | 100.00 |
| Ecodelta Ltd. | Zarechny | Russia | 62.00 |
| EGI Cooling System (China) Co. Ltd. | Tianjin | China | 100.00 |
| EGI Cooling Systems Trading (Beijing) Co. | Beijing | China | 100.00 |
| EGI Enerji Ins. Ic Ve Dis Tic. Ltd. Sti. i.L. | Ankara | Turkey | 90.00 |
| EGI Structura Kft. i.L. | Budapest | Hungary | 76.00 |
| Farmers Industries Limited | Mt. Maunganui South, Tauranga | New Zealand | 100.00 |
| GEA (Philippines) Inc. | Manila | Philippines | 100.00 |
| GEA (Shanghai) Farm Technologies Company Ltd. | Shanghai | China | 100.00 |
| GEA 2H Water Technologies GmbH | Wettringen | Germany | 100.00 |
| GEA 2H Water Technologies Ltd. | Northampton | United Kingdom | 100.00 |
| GEA 2H Water Technologies s.r.o. | Jilove | Czech Republic | 91.94 |
| GEA 2H Water Technologies Sp. z.o.o. | Bytom | Poland | 63.00 |
| GEA Abfülltechnik GmbH | Büchen | Germany | 100.00 |
| GEA Air Treatment GmbH | Herne | Germany | 100.00 |
| GEA Air Treatment Production GmbH | Wurzen | Germany | 100.00 |
| GEA Aircooled Systems (Pty) Ltd. | Germiston | South Africa | 74.999 |
| GEA Airflow Services SAS | Nantes | France | 100.00 |
| GEA Aseptomag AG | Kirchberg | Switzerland | 100.00 |
| GEA Aseptomag Holding AG | Kirchberg | Switzerland | 100.00 |
| GEA ATG UK Holdings Limited | Cheshire, Warrington | United Kingdom | 100.00 |
| GEA Avapac Ltd. | Hamilton | New Zealand | 100.00 |
| GEA AWP GmbH | Prenzlau | Germany | 100.00 |
| GEA Barr-Rosin Ltd. | Maidenhead, Berkshire | United Kingdom | 100.00 |
| GEA Batignolles Technologies Thermiques Qatar L.L.C. | Doha | Qatar | 100.00 |
| GEA Batignolles Technologies Thermiques S.A.S. | Nantes | France | 100.00 |
| GEA Batignolles Thermal Technologies (Changshu) Co. Ltd. | Changshu | China | 100.00 |
| GEA Beteiligungsgesellschaft AG | Bochum | Germany | 100.00 |
| GEA Beteiligungsgesellschaft I mbH | Bochum | Germany | 100.00 |
| GEA Beteiligungsgesellschaft II mbH | Düsseldorf | Germany | 100.00 |
| GEA Bischoff GmbH | Essen | Germany | 100.00 |
| GEA Bischoff Oy | Helsinki | Finland | 100.00 |
| GEA Bloksma B.V. | Almere | Netherlands | 100.00 |
| GEA Bock (India) Private Limited | Vadodara, Gujarat | India | 100.00 |
| GEA Bock (Thailand) Co., Ltd. | Bangkok | Thailand | 49,00 * |
*) 51% of voting rights
| Company | Head Office | Country | Shares % |
|---|---|---|---|
| GEA Bock Compressors (Hangzhou) Co., Ltd. | Hangzhou, Zhejiang | China | 100.00 |
| GEA Bock Czech s.r.o. | Stribro | Czech Republic | 100.00 |
| GEA Bock GmbH | Frickenhausen | Germany | 100.00 |
| GEA Bock Malaysia Sdn. Bhd. | Petaling Jaya | Malaysia | 100.00 |
| GEA Brewery Systems GmbH | Kitzingen | Germany | 100.00 |
| GEA Canada Inc. | Lethbridge, Alberta | Canada | 100.00 |
| GEA Central America S.A. | Panama | Panama | 100.00 |
| GEA CFS International B.V. | Bakel | Netherlands | 100.00 |
| GEA Colby Pty. Ltd. | Sydney | Australia | 100.00 |
| GEA DELBAG SAS | Montry | France | 100.00 |
| GEA Diessel GmbH | Hildesheim | Germany | 100.00 |
| GEA do Brasil Intercambiadores Ltda. | Franco da Rocha | Brazil | 100.00 |
| GEA Dutch Holding B.V. | 's-Hertogenbosch | Netherlands | 100.00 |
| GEA Ecoflex (Asia) SDN. BHD. | Shah Alam, Selangor | Malaysia | 100.00 |
| GEA Ecoflex China Co. Ltd. | Shanghai | China | 100.00 |
| GEA Ecoflex GmbH | Sarstedt | Germany | 100.00 |
| GEA Ecoflex India Private Limited | Rabale Navi, Mumbai | India | 98.00 |
| GEA Ecoflex Middle East FZE | Dubai | United Arab Emirates | 100.00 |
| GEA EcoServe België | Zele | Belgium | 100.00 |
| GEA EcoServe Nederland B.V. | Belfeld | Netherlands | 100.00 |
| GEA EGI Energiagazdálkodási Zrt. | Budapest | Hungary | 99.744 |
| GEA Energietechnik Anlagen- und Betriebs-GmbH | Bochum | Germany | 100.00 |
| GEA Energietechnik Australia Pty. Ltd. | McDowall, Queensland | Australia | 100.00 |
| GEA Energietechnik GmbH | Bochum | Germany | 100.00 |
| GEA Energietechnik UK Limited | Moreton-On-Lugg, Hereford | United Kingdom | 100.00 |
| GEA Engenharia de Processos e Sistemas Industriais Ltda. | Campinas, Sao Paulo | Brazil | 100.00 |
| GEA Ergé-Spirale et Soramat S.A. | Wingles | France | 100.00 |
| GEA Erste Kapitalbeteiligungen GmbH & Co. KG | Bochum | Germany | 100.00 |
| GEA Eurotek Ltd. | Aylsham | United Kingdom | 100.00 |
| GEA Exergy AB | Gothenburg | Sweden | 100.00 |
| GEA Farm Technologies (Ireland) Ltd. | County Kildare | Ireland | 100.00 |
| GEA Farm Technologies (UK) Limited | Warminster | United Kingdom | 100.00 |
| GEA Farm Technologies Acier SAS | Château-Thierry | France | 100.00 |
| GEA Farm Technologies Argentina S.R.L. | Buenos Aires | Argentina | 100.00 |
| GEA Farm Technologies Australia Pty. Ltd. | Tullamarine, Victoria | Australia | 100.00 |
| GEA Farm Technologies Austria GmbH | Plainfeld | Austria | 100.00 |
| GEA Farm Technologies Belgium N.V. | Olen | Belgium | 100.00 |
| GEA Farm Technologies Bulgaria EOOD | Sofia | Bulgaria | 100.00 |
| GEA Farm Technologies Canada Inc. | Drummondville, Quebec | Canada | 100.00 |
| GEA Farm Technologies Chile SpA | Osorno | Chile | 100.00 |
| GEA Farm Technologies Croatia d.o.o. | Dugo Selo | Croatia | 100.00 |
| GEA Farm Technologies CZ, spol. s.r.o. | Napajedla | Czech Republic | 100.00 |
| GEA Farm Technologies do Brasil, Industria e Comercio de Equipamentos | |||
| Agricolas e Pecuarios Ltda. | Jaguariúna | Brazil | 100.00 |
| GEA Farm Technologies France SAS | Château-Thierry | France | 100.00 |
| GEA Farm Technologies GmbH | Bönen | Germany | 100.00 |
| GEA Farm Technologies Ibérica S.L. | Granollers | Spain | 100.00 |
| GEA Farm Technologies Japy SAS | Saint-Apollinaire | France | 100.00 |
| GEA Farm Technologies Mullerup A/S | Ullerslev | Denmark | 100.00 |
| GEA Farm Technologies Nederland B.V. | Zeewolde | Netherlands | 100.00 |
| GEA Farm Technologies New Zealand Limited | Frankton, Hamilton | New Zealand | 100.00 |
| GEA Farm Technologies România S.R.L | Alba Julia | Romania | 100.00 |
| GEA Farm Technologies Serbia d.o.o. | Beograd | Serbia | 100.00 |
| GEA Farm Technologies Slovakia spol. s.r.o. | Piestany | Slovakia | 100.00 |
| GEA Farm Technologies Sp. z o.o. | Bydgoszcz | Poland | 100.00 |
| GEA Farm Technologies Suisse AG | Ittigen | Switzerland | 100.00 |
| GEA Farm Technologies, Inc. | Wilmington, Delaware | USA | 100.00 |
| GEA FarmTechnologies Tarim Ekip.Mak.Kim. Tek.Dan.San.Tic.Ltd.Sti. | Kemalpasa, Izmir | Turkey | 100.00 |
| GEA Food Solutions Asia Co. Limited | Hong Kong | China | 100.00 |
| GEA Food Solutions Bakel B.V. | Bakel | Netherlands | 100.00 |
| GEA Food Solutions Brasil Comércio de Equipamentos Ltda. | Campinas, Sao Paulo | Brazil | 100.00 |
| GEA Food Solutions Chile Comercializadora Limitada | Santiago de Chile | Chile | 100.00 |
| GEA Food Solutions Czech s.r.o. | Prague | Czech Republic | 100.00 |
| Company | Head Office | Country | Shares % |
|---|---|---|---|
| GEA Food Solutions Denmark A/S | Slagelse | Denmark | 100.00 |
| GEA Food Solutions France SAS | Beaucouzé | France | 100.00 |
| GEA Food Solutions Germany GmbH | Biedenkopf-Wallau | Germany | 100.00 |
| GEA Food Solutions GmbH | Düsseldorf | Germany | 100.00 |
| GEA Food Solutions International A/S | Slagelse | Denmark | 100.00 |
| GEA Food Solutions Italy S.r.l. | Grumello Del Monte | Italy | 100.00 |
| GEA Food Solutions Korea Co., Ltd. | Seoul | South Korea | 100.00 |
| GEA Food Solutions Middle East F.Z.E. | Dubai | United Arab Emirates | 100.00 |
| GEA Food Solutions Netherlands B.V. | Bakel | Netherlands | 100.00 |
| GEA Food Solutions Nordic A/S | Slagelse | Denmark | 100.00 |
| GEA Food Solutions North America, Inc. | Frisco | USA | 100.00 |
| GEA Food Solutions Poland Sp. z o.o. | Warsaw | Poland | 100.00 |
| GEA Food Solutions RUS ZAO | Moscow | Russia | 100.00 |
| GEA Food Solutions South Africa (Pty) Ltd. | Johannesburg | South Africa | 100.00 |
| GEA Food Solutions Switzerland AG | Rothrist | Switzerland | 100.00 |
| GEA Food Solutions UK & Ireland Ltd. | Newport Pagnell | United Kingdom | 100.00 |
| GEA Food Solutions Ukraine LLC | Kiev | Ukraine | 100.00 |
| GEA Food Solutions Weert B.V. | Weert | Netherlands | 100.00 |
| GEA Goedhart B.V. | Sint Maartensdijk | Netherlands | 100.00 |
| GEA Goedhart Holding B.V. | Sint Maartensdijk | Netherlands | 100.00 |
| GEA Grasso Indonesia, PT | Jakarta Barat, Cengkareng | Indonesia | 100.00 |
| GEA Grasso TOV | Kiev | Ukraine | 100.00 |
| GEA Grasso UAB | Vilnius | Lithuania | 100.00 |
| GEA Grenco Ltd. | Sittingbourne, Kent | United Kingdom | 100.00 |
| GEA Group Holding France SAS | Montigny le Bretonneux | France | 100.00 |
| GEA Group Holding GmbH | Bochum | Germany | 100.00 |
| GEA Group Holdings (UK) Limited | Eastleigh, Hampshire | United Kingdom | 100.00 |
| GEA Happel Belgium N.V. | Haren, Brussels | Belgium | 100.00 |
| GEA Happel Nederland B.V. | Capelle an der Yssel | Netherlands | 100.00 |
| GEA Happel SAS | Roncq | France | 100.00 |
| GEA Heat Exchangers (China) Co., Ltd. | Wuhu | China | 97.39 |
| GEA Heat Exchangers a.s. | Liberec | Czech Republic | 100.00 |
| GEA Heat Exchangers AB | Kalmar | Sweden | 100.00 |
| GEA Heat Exchangers GmbH | Bochum | Germany | 100.00 |
| GEA Heat Exchangers Limited | Moreton-On-Lugg, Hereford | United Kingdom | 100.00 |
| GEA Heat Exchangers OÜ | Tallinn | Estonia | 100.00 |
| GEA Heat Exchangers Oy | Vantaa | Finland | 100.00 |
| GEA Heat Exchangers Pte. Ltd. | Singapur | Singapore | 100.00 |
| GEA Heat Exchangers S.r.l. | Monvalle | Italy | 100.00 |
| GEA Heat Exchangers, Inc. | Lakewood, Colorado | USA | 100.00 |
| GEA Heat Exchangers, S.A.U. | Igorre | Spain | 100.00 |
| GEA Industriebeteiligungen GmbH | Bochum | Germany | 100.00 |
| GEA Insurance Broker GmbH | Frankfurt am Main | Germany | 100.00 |
| GEA Ireland Limited | Kildare | Ireland | 100.00 |
| GEA ISISAN TESISAT INSAAT TAAHHÜT TICARET VE SANAYI A.S. | Istanbul | Turkey | 100.00 |
| GEA IT Services GmbH | Oelde | Germany | 100.00 |
| GEA klima rashladna tehnika d.o.o. | Zagreb | Croatia | 100.00 |
| GEA Klima Sanayi ve Ticaret Anonim Sirketi | Istanbul | Turkey | 100.00 |
| GEA Klimatechnik GmbH | Gaspoltshofen | Austria | 100.00 |
| GEA Klimatechnika Kft. | Budapest | Hungary | 100.00 |
| GEA Klimatizacia s.r.o. | Bratislava | Slovakia | 100.00 |
| GEA Klimatizacijska tehnika d.o.o. | Ljubljana | Slovenia | 100.00 |
| GEA Klimatyzacja Spolka z o.o. | Wroclaw | Poland | 100.00 |
| GEA Küba GmbH | Baierbrunn | Germany | 100.00 |
| GEA Luftkühler GmbH | Bochum | Germany | 100.00 |
| GEA Lyophil (Beijing) Ltd. | Beijing | China | 100.00 |
| GEA Lyophil GmbH | Hürth | Germany | 100.00 |
| GEA Maschinenkühltechnik GmbH | Bochum | Germany | 100.00 |
| GEA Mashimpeks OOO | Solnechnogorsk | Russia | 100.00 |
| GEA Mechanical Equipment Canada, Inc. | Saint-John, New Brunswick | Canada | 100.00 |
| GEA Mechanical Equipment GmbH | Oelde | Germany | 100.00 |
| GEA Mechanical Equipment Italia S.p.A. | Parma | Italy | 100.00 |
| GEA Mechanical Equipment UK Limited | Milton Keynes | United Kingdom | 100.00 |
| Company | Head Office | Country | Shares % |
|---|---|---|---|
| GEA Mechanical Equipment US, Inc. | Wilmington, Delaware | USA | 100.00 |
| GEA Mechnical Equipment (Tianjin) Co., Ltd. | Tianjin | China | 100.00 |
| GEA Messo GmbH | Duisburg | Germany | 100.00 |
| GEA Middle East FZE | Dubai | United Arab Emirates | 100.00 |
| GEA mts flowtec AG | Kirchberg | Switzerland | 100.00 |
| GEA NEMA Wärmetauscher GmbH | Netzschkau | Germany | 100.00 |
| GEA Nilenca (Pty) Ltd. | Germiston | South Africa | 74.833 |
| GEA NIRO GmbH | Müllheim | Germany | 100.00 |
| GEA Niro PT B.V. | 's-Hertogenbosch | Netherlands | 100.00 |
| GEA North America, Inc. | Delaware | USA | 100.00 |
| GEA Nu-Con Ltd. | Penrose, Auckland | New Zealand | 100.00 |
| GEA Nu-Con Manufacturing Limited | Mairangi Bay, Auckland | New Zealand | 100.00 |
| GEA Nu-Con Pty. Ltd. | Sutherland, Sydney | Australia | 100.00 |
| GEA of Alabama, L.L.C. | Montgomery | USA | 100.00 |
| GEA Pharma Systems (India) Private Limited | Vadodara, Gujarat | India | 100.00 |
| GEA Pharma Systems AG | Bubendorf | Switzerland | 100.00 |
| GEA Pharma Systems Limited | Eastleigh Hampshire | United Kingdom | 100.00 |
| GEA Polacel Cooling Towers B.V. | Doetinchem | Netherlands | 100.00 |
| GEA Polacel Cooling Towers FZCO | Dubai | United Arab Emirates | 100.00 |
| GEA Polska Sp. z o.o. | Swiebodzice | Poland | 100.00 |
| GEA Power Cooling de Mexico S. de R.L. de C.V. | San Luis Potosí | Mexico | 100.00 |
| GEA POWER COOLING TECHNOLOGY (CHINA) LTD. | Langfang | China | 100.00 |
| GEA Process Engineering (India) Private Limited | Vadodara, Gujarat | India | 100.00 |
| GEA Process Engineering (Philippines) Inc. | Manila | Philippines | 100.00 |
| GEA Process Engineering (Pty) Ltd. | Midrand | South Africa | 100.00 |
| GEA Process Engineering (Thailand) Co., Ltd. | Bangkok | Thailand | 100.00 |
| GEA Process Engineering A/S | Soeborg | Denmark | 100.00 |
| GEA Process Engineering Asia Ltd. | Hong Kong | China | 100.00 |
| GEA Process Engineering CEE Kft. | Budaörs | Hungary | 100.00 |
| GEA Process Engineering Chile S.A. | Santiago de Chile | Chile | 100.00 |
| GEA Process Engineering China Limited | Shanghai | China | 100.00 |
| GEA Process Engineering China Ltd. | Shanghai | China | 100.00 |
| GEA Process Engineering Inc. | Columbia | USA | 100.00 |
| GEA Process Engineering Italia S.P.A. | Segrate | Italy | 100.00 |
| GEA Process Engineering Japan Ltd. | Tokyo | Japan | 100.00 |
| GEA Process Engineering Ltd. | Penrose, Auckland | New Zealand | 100.00 |
| GEA Process Engineering Ltd. | Birchwood, Cheshire, Warrington | United Kingdom | 100.00 |
| GEA Process Engineering N.V. | Halle | Belgium | 100.00 |
| GEA Process Engineering Nederland B.V. | Deventer | Netherlands | 100.00 |
| GEA Process Engineering OOO | Moscow | Russia | 100.00 |
| GEA Process Engineering Oy | Vantaa | Finland | 100.00 |
| GEA Process Engineering Pte. Ltd. | Singapur | Singapore | 100.00 |
| GEA Process Engineering Pty. Ltd. | Blackburn, Victoria | Australia | 100.00 |
| GEA Process Engineering S.A. | Buenos Aires | Argentina | 100.00 |
| GEA Process Engineering S.A. | Alcobendas, Madrid | Spain | 100.00 |
| GEA Process Engineering S.A. de C.V. | Naucalpan de Juárez, Mexico | Mexico | 100.00 |
| GEA Process Engineering S.A.S. | Saint-Quentin en Yvelines Ced. | France | 100.00 |
| GEA Process Engineering S.A.S. | Bogota D.C. | Colombia | 100.00 |
| GEA Process Engineering s.r.o. | Brno | Czech Republic | 100.00 |
| GEA Process Engineering Taiwan Ltd. | Taipeh | Taiwan | 100.00 |
| GEA Process Engineering Trading (Shanghai) Limited | Shanghai | China | 100.00 |
| GEA Process Engineering Z o.o. | Warsaw | Poland | 100.00 |
| GEA PROCESS MÜHENDISLIK MAKINE INSAAT TAAHÜT ITHALAT IHRACAT DANIS. SAN. VE TIC. LTD. STI. |
Kemalpasa, Izmir | Turkey | 100.00 |
| GEA Process Technologies Ireland Limited | Dublin | Ireland | 100.00 |
| GEA Procomac S.p.A. | Sala Baganza | Italy | 100.00 |
| GEA Real Estate GmbH | Frankfurt am Main | Germany | 100.00 |
| GEA Refrigeration (Thailand) Co. Ltd. | Nonthaburi | Thailand | 99.9994 |
| GEA Refrigeration Africa (Pty) Ltd. | Capetown | South Africa | 100.00 |
| GEA Refrigeration Australia Pty. Ltd. | Carrum Downs, Victoria | Australia | 100.00 |
| GEA Refrigeration Canada Inc. | Richmond | Canada | 100.00 |
| GEA Refrigeration Components (Nordic) A/S | Kolding | Denmark | 100.00 |
| GEA Refrigeration Components (UK) Ltd. | Ross-on-Wye, Herfordshire | United Kingdom | 100.00 |
| Company | Head Office | Country | Shares % |
|---|---|---|---|
| GEA Refrigeration Czech Republic s.r.o. | Prague | Czech Republic | 100.00 |
| GEA Refrigeration France SAS | Les Sorinières | France | 100.00 |
| GEA Refrigeration Germany GmbH | Berlin | Germany | 100.00 |
| GEA Refrigeration Hong Kong Ltd. | Hong Kong | China | 100.00 |
| GEA Refrigeration Ibérica S.A. | Alcobendas, Madrid | Spain | 100.00 |
| GEA Refrigeration Ireland Limited | Cavan | Ireland | 100.00 |
| GEA Refrigeration Italy S.p.A. | Castel Maggiore, Bologna | Italy | 100.00 |
| GEA Refrigeration Maghreb Sarlau | Casablanca | Morocco | 100.00 |
| GEA Refrigeration Netherlands N.V. | 's-Hertogenbosch | Netherlands | 100.00 |
| GEA Refrigeration North America, Inc. | York , Pennsylvania | USA | 100.00 |
| GEA Refrigeration Poland Sp. z o.o. | Gdynia | Poland | 100.00 |
| GEA Refrigeration Romania S.R.L. | Cluj-Napoca | Romania | 100.00 |
| GEA Refrigeration Singapore Pte. Ltd. | Singapur | Singapore | 100.00 |
| GEA Refrigeration Technologies GmbH | Bochum | Germany | 100.00 |
| GEA Refrigeration Technology (Suzhou) Co., Ltd. | Suzhou | China | 100.00 |
| GEA Refrigeration UK Ltd. | London | United Kingdom | 100.00 |
| GEA Refrigeration Vietnam Co. Ltd. | Ho Chi Min City | Vietnam | 100.00 |
| GEA Renzmann & Grünewald GmbH | Monzingen | Germany | 100.00 |
| GEA Saudi Arabia Limited | Al Khobar | Saudi Arabia | 100.00 |
| GEA Searle Ltd. | Fareham | United Kingdom | 100.00 |
| GEA Segment Management Holding GmbH | Düsseldorf | Germany | 100.00 |
| GEA Services and Components OOO | Moscow | Russia | 100.00 |
| GEA Shanxi Dry Cooling Design Ltd. | Taiyuan, Shanxi | China | 60.00 |
| GEA Sistemas de Resfriamento Ltda. | Indaiatuba | Brazil | 100.00 |
| GEA TDS GmbH | Sarstedt | Germany | 100.00 |
| GEA Technika Cieplna Spolka z o.o. | Opole | Poland | 100.00 |
| GEA Thermal Engineering Investments (Pty) Ltd. | Germiston | South Africa | 100.00 |
| GEA Tuchenhagen France | Hoenheim | France | 100.00 |
| GEA Tuchenhagen GmbH | Büchen | Germany | 100.00 |
| GEA Tuchenhagen Polska sp. z o.o. | Koszalin | Poland | 100.00 |
| GEA West Africa Limited | Lagos | Nigeria | 100.00 |
| GEA Westfalia Separator (China) Ltd. | Wanchai,Hong Kong | China | 100.00 |
| GEA Westfalia Separator (Malaysia) SDN. BHD. | Petaling Jaya | Malaysia | 100.00 |
| GEA Westfalia Separator (S.E.A.) PTE. LTD. | Singapur | Singapore | 100.00 |
| GEA Westfalia Separator (Thailand) Ltd. | Bangkok | Thailand | 97.30 |
| GEA Westfalia Separator (Tianjin) Co., Ltd. | Tianjin | China | 100.00 |
| GEA Westfalia Separator Argentina S.A. | Buenos Aires | Argentina | 100.00 |
| GEA Westfalia Separator Australia Pty. Ltd. | Thomastown, Victoria | Australia | 100.00 |
| GEA Westfalia Separator Austria GmbH | Wien | Austria | 100.00 |
| GEA Westfalia Separator Belgium N.V. | Schoten | Belgium | 100.00 |
| GEA Westfalia Separator Chile S.A. | Santiago de Chile | Chile | 100.00 |
| GEA Westfalia Separator CIS Ltd. | Moscow | Russia | 100.00 |
| GEA Westfalia Separator CZ s.r.o. | Prague | Czech Republic | 100.00 |
| GEA Westfalia Separator Deutschland GmbH | Oelde | Germany | 100.00 |
| GEA Westfalia Separator DK A/S | Skanderborg | Denmark | 100.00 |
| GEA Westfalia Separator do Brasil Industria de Centrifugas Ltda. | Campinas, Sao Paulo | Brazil | 100.00 |
| GEA Westfalia Separator France | Château-Thierry | France | 100.00 |
| GEA Westfalia Separator Group GmbH | Oelde | Germany | 100.00 |
| GEA Westfalia Separator Hellas A.E. | Athen | Greece | 100.00 |
| GEA Westfalia Separator Hungária Kft. | Budaörs | Hungary | 100.00 |
| GEA Westfalia Separator Ibérica, S.A. | Granollers | Spain | 100.00 |
| GEA Westfalia Separator Iceland ehf | Reykjavik | Iceland | 100.00 |
| GEA Westfalia Separator India Private Limited | New Delhi | India | 100.00 |
| GEA Westfalia Separator Indonesia, PT | Jakarta | Indonesia | 100.00 |
| GEA Westfalia Separator Ireland Ltd. | Ballincollig Cork | Ireland | 100.00 |
| GEA Westfalia Separator Japan K.K. | Minato-ku,Tokyo | Japan | 100.00 |
| GEA Westfalia Separator Korea Ltd. | Seoul | South Korea | 100.00 |
| GEA Westfalia Separator Mexicana S.A. de C.V. | Cuernavaca,Morelos | Mexico | 100.00 |
| GEA Westfalia Separator Nederland B.V. | Cuijk | Netherlands | 100.00 |
| GEA Westfalia Separator Nederland Services B.V. | Cuijk | Netherlands | 100.00 |
| GEA Westfalia Separator Nordic AS | Oslo | Norway | 100.00 |
| GEA Westfalia Separator NZ Ltd. | Mount Wellington, Auckland | New Zealand | 100.00 |
| GEA Westfalia Separator Phils. Inc. | Manila | Philippines | 100.00 |
| Company | Head Office | Country | Shares % |
|---|---|---|---|
| GEA Westfalia Separator Polska Sp. z o.o. | Warsaw | Poland | 100.00 |
| GEA Westfalia Separator Production France | Château-Thierry | France | 100.00 |
| GEA Westfalia Separator Romania S.R.L. | Bukarest | Romania | 100.00 |
| GEA Westfalia Separator Sanayi ve Ticaret Ltd. Sti. | Kemalpasa, Izmir | Turkey | 100.00 |
| GEA Westfalia Separator South Africa (Pty) Ltd. | Midrand | South Africa | 100.00 |
| GEA Westfalia Separator Sweden AB | Gothenburg | Sweden | 100.00 |
| GEA Wiegand GmbH | Ettlingen | Germany | 100.00 |
| GEA WTT GmbH | Nobitz-Wilchwitz | Germany | 100.00 |
| Grasso Componentes Ibéria Lda. | Cascais | Portugal | 100.00 |
| Hovex B.V. Engineering | Veendam | Netherlands | 100.00 |
| HX Holding GmbH | Bochum | Germany | 100.00 |
| KET Marine Asia Pte. Ltd. | Singapur | Singapore | 100.00 |
| KET Marine International B.V. | Zevenbergen | Netherlands | 100.00 |
| Kupferbergbau Stadtberge zu Niedermarsberg GmbH | Frankfurt am Main | Germany | 100.00 |
| Kupferexplorationsgesellschaft mbH i.L. | Bochum | Germany | 100.00 |
| LL Plant Engineering (India) Private Limited | Mumbai Maharashtra | India | 100.00 |
| LL Plant Engineering AG | Ratingen | Germany | 100.00 |
| LL Plant Engineering France S.A.S. | Sartrouville | France | 100.00 |
| mg Altersversorgung GmbH | Bochum | Germany | 100.00 |
| mg capital gmbh | Bochum | Germany | 100.00 |
| MG Stahlhandel GmbH | Bochum | Germany | 100.00 |
| mg venture capital ag | Bochum | Germany | 100.00 |
| mg vv Projektgesellschaft Hornpottweg GmbH | Frankfurt am Main | Germany | 100.00 |
| mgvv Projektentwicklung Daimlerstrasse GmbH & Co. KG | Frankfurt am Main | Germany | 100.00 |
| mgvv Projektentwicklung Daimlerstrasse Verwaltungs GmbH | Frankfurt am Main | Germany | 100.00 |
| Milfos Australia Pty. Limited | Sydney | Australia | 100.00 |
| Milfos International Limited | Frankton, Hamilton | New Zealand | 100.00 |
| Milfos UK Limited | Droitwich, Worcestershire | United Kingdom | 100.00 |
| Milk 'N' Water Services Stratford Limited | Stratford | New Zealand | 100.00 |
| Niro Sterner Inc. | Columbia | USA | 100.00 |
| Nu-Con (Shanghai) Trading Co. Ltd. | Pudong, Shanghai | China | 100.00 |
| Nu-Con Systems Pte. Limited | Singapore | Singapore | 100.00 |
| Nu-Con Systems SDN. BHD. | Shah Alam, Selangor | Malaysia | 100.00 |
| OOO GEA Energietechnik | Moscow | Russia | 100.00 |
| OOO GEA Farm Technologies Rus | Moscow | Russia | 100.00 |
| OOO GEA Farm Technologies Ukraine | Bila Zerkva | Ukraine | 100.00 |
| OOO GEA Refrigeration RUS | Moscow | Russia | 100.00 |
| Paul Pollrich GmbH | Herne | Germany | 100.00 |
| Pelacci S.R.L. i.L. | Sala Baganza | Italy | 67.00 |
| Royal de Boer Stalinrichtingen B.V. | Leeuwarden | Netherlands | 100.00 |
| Ruhr-Zink GmbH | Datteln | Germany | 100.00 |
| Sachtleben Bergbau Verwaltungsgesellschaft mit beschränkter Haftung | Lennestadt | Germany | 100.00 |
| SC GEA KLIMATECHNIK S.R.L. | Timisoara | Romania | 100.00 |
| SCI Sartrouville | Sartrouville | France | 100.00 |
| TOV GEA-Ukrayina | Kiev | Ukraine | 100.00 |
| Trennschmelz Altersversorgung GmbH | Bochum | Germany | 100.00 |
| Tuchenhagen (Thailand) Co. Ltd. i.L. | Bangkok | Thailand | 100.00 |
| UAB GEA Klimatechnik | Vilnius | Lithuania | 100.00 |
| VDM-Hilfe GmbH | Frankfurt am Main | Germany | 100.00 |
| Wilarus OOO | Kolomna | Russia | 100.00 |
| Wolfking Limited | Newport Pagnell | United Kingdom | 100.00 |
| Wolfking LLC | Frisco | USA | 100.00 |
| ZiAG Plant Engineering GmbH | Frankfurt am Main | Germany | 100.00 |
| Accociated Companies | |||
| IMAI S.A. | Buenos Aires | Argentina | 20.00 |
| Polyamid 2000 Handels- und Produktionsgesellschaft Premnitz AG i.L. | Premnitz | Germany | 49.90 |
| Technofrigo Abu Dhabi i.L. | Abu Dhabi | United Arab Emirates | 49.00 |
| ZAO Moscow Coffee House | Moscow | Russia | 29.00 |
| Joint Ventures | |||
| Blue Glacier Technology, LLC | Durham | USA | 50.00 |
| Crismil S.A. | Montevideo | Uruguay | 49.00 |
| GEA Cooling Tower Technologies (India) Private Limited | Chennai, Madras | India | 51.00 |
| GEA Middle East LLC | Abu Dhabi | United Arab Emirates | 49.00 |
| Company | Head Office | Country | Shares % |
|---|---|---|---|
| GEA ORION Farm Technologies Co., Ltd. | Nagano | Japan | 49.00 |
| GEA Shanxi Thermal Equipment Company Ltd. | Taiyuan, Shanxi | China | 48.00 |
| GRADE Grasso Adearest Limited | Dubai | United Arab Emirates | 50.00 |
| GRADE Refrigeration LLC | Sharjah | United Arab Emirates | 49.00 |
| Merton Wohnprojekt GmbH | Frankfurt am Main | Germany | 50.00 |
| RSZ Rott Sarstedt Zerspanung GmbH | Sarstedt | Germany | 50.00 |
| SNKS-Procomac K.K. | Osaka | Japan | 50.00 |
| TANSA-CALDEMON UTE | Muriedas Ayuntamentos de Camargo | Spain | 50.00 |
| Wuhan Bloksma Heat Exchangers Co. Ltd. | Wuhan | China | 50.00 |
| Other equity investments under section 313(2) no. 4 of the HGB | |||
| Arbeitsgemeinschaft Zellenkühleranlage KKW Isar GEA Energietechnik GmbH-Alpine Bau Deutschland AG |
Bochum | Germany | 55.02 |
| Bauverein Oelde GmbH | Oelde | Germany | 35.50 |
| Ehrfeld Mikrotechnik AG i.I. | Wendelsheim | Germany | 26.00 |
| EPSA Empresa Paulista de Servicos Ambientais S.A. | Sao Paulo | Brazil | 47.50 |
| Indo Technofrigo Ltd. i.L. | Rajkot | India | 49.00 |
| KOS – GEA Korea Ltd. | Seoul | South Korea | 25.00 |
| TPK Mashimpeks | Moscow | Russia | 34.00 |
The following German companies are exempted from the duty to comply with the supplementary accounting, audit, and publication provisions applicable to corporations and certain partnerships in accordance with sections 264(3) and 264b of the HGB:
GEA Messo GmbH, Duisburg
GEA NEMA Wärmetauscher GmbH, Netzschkau
Düsseldorf, February 26, 2014
The Executive Board
Jürg Oleas Dr. Helmut Schmale Markus Hüllmann Dr. Stephan Petri
We have audited the consolidated financial statements prepared by the GEA Group Aktiengesellschaft, Düsseldorf – comprising the consolidated balance sheet, consolidated income statement, consolidated statement of comprehensive income, notes to the consolidated statements, consolidated cash flow statement and consolidated statement of changes in equity – together with the group management report combined with the management report of the parent company (combined group management report) for the financial year from January 1, 2013 to December 31, 2013. The preparation of the consolidated financial statements and the combined group management report in accordance with IFRSs as adopted by the EU, and the additional requirements of German commercial law pursuant to section 315a (1) of the German Commercial Code [HGB] and supplementary provisions of the articles of incorporation are the responsibility of the parent company`s management. Our responsibility is to express an opinion on the consolidated financial statements and on the combined group management report based on our audit.
We conducted our audit of the consolidated financial statements in accordance with section 317 of the German Commercial Code [HGB] and German generally accepted standards for the audit of financial statements promulgated by the German Institute of Public Auditors [IDW]. Those standards require that we plan and perform the audit such that misstatements materially affecting the presentation of the net assets, financial position and results of operations in the consolidated financial statements in accordance with the applicable financial reporting framework and in the combined group management report are detected with reasonable assurance. Knowledge of the business activities and the economic and legal environment of the Group and expectations as to possible misstatements are taken into account in the determination of audit procedures. The effectiveness of the accounting-related internal control system and the evidence supporting the disclosures in the consolidated financial statements and the combined group management report are examined primarily on a test basis within the framework of the audit. The audit includes assessing the annual financial statements of those entities included in consolidation, the determination of entities to be included in consolidation, the accounting and consolidation principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements and combined group management report. We believe that our audit provides a reasonable basis for our opinion.
Our audit has not led to any reservations.
In our opinion, based on the findings of our audit, the consolidated financial statements comply with IFRSs as adopted by the EU, the additional requirements of German commercial law pursuant to section 315a (1) of the German Commercial Code [HGB] and supplementary provisions of the articles of incorporation and give a true and fair view of the net assets, financial position and results of operations of the Group in accordance with these requirements. The combined group management report is consistent with the consolidated financial statements and as a whole provides a suitable view of the Group's position and suitably presents the opportunities and risks of future development.
Düsseldorf, February 26, 2014
KPMG AG Wirtschaftsprüfungsgesellschaft
Guido Moesta Dr. Markus Zeimes Wirtschaftsprüfer Wirtschaftsprüfer (German public auditor) (German public auditor)
To the best of our knowledge, and in accordance with the applicable reporting principles, the consolidated financial statements give a true and fair view of the assets, liabilities, financial position, and profit or loss of the Group, and the management report of the Group, which has been combined with the management report of the Company, includes a fair review of the development and performance of the business and the position of the Group, together with a description of the principal opportunities and risks associated with the expected development of the group.
Düsseldorf, February 26, 2014
The Executive Board
Jürg Oleas Dr. Helmut Schmale Markus Hüllmann Dr. Stephan Petri
Yet again, the Supervisory Board performed the monitoring and advisory functions incumbent upon it by virtue of the law, the Articles of Association and the rules of procedure with due care and diligence in the year under review. In doing so, it dealt in depth with the situation and the prospects of the Company as well as all specific material issues relevant to the latter. The Supervisory Board continuously advised the Executive Board on the management of the Company while overseeing its conduct of the Company's business on an ongoing basis.
This task was facilitated by the fact that, apart from engaging in deliberations during the meetings, the Executive Board complied with its obligation to inform by providing written or oral reports on all relevant matters and measures relating to the Company, its course of business, corporate planning and strategy as well as the situation of the Group on a regular, timely and comprehensive basis. The Supervisory Board was directly involved in all decisions of fundamental importance to the Company. It was at all times given sufficient opportunity to critically discuss the reports and motions submitted by the Executive Board and to give recommendations through its committees and at the meetings of the full Supervisory Board. At the respective following meeting of the Supervisory Board, the chairmen of the Presiding Committee and the Audit Committee reported on the main points of discussion and the results of their committee meetings which assisted the full board in making informed decisions.
Furthermore, the Chairmen of the Supervisory Board and the Audit Committee maintained constant contact with the Executive Board and kept each other informed of essential matters. Between the meetings, the Chairman of the Supervisory Board and the Chairman of the Executive Board regularly discussed issues relating to strategy, the current state of play in the divestiture of the GEA Heat Exchangers Segment, planning, business development, risk exposure, risk management and compliance. In this context, the Chairman of the Supervisory Board was regularly and promptly informed of the outlook for the individual segments and Group prospects, as well as further important developments and imminent decisions. Outside meetings, the Chairman of the Audit Committee remained in contact with the members of the Executive Board, in particular the Chief Financial Officer, to keep abreast of current developments relevant to the work of the Audit Committee and to discuss them, if necessary. In preliminary meetings, the employee representatives regularly deliberated on agenda items prior to the plenary meetings of the Supervisory Board.
On a regular basis, the Supervisory Board was provided with comprehensive information especially on order intake, revenue, earnings and employment trends of the Group, its segments and the other companies, as well as the discontinued operations. On the basis of supporting documents, the Supervisory Board received detailed explanations on any deviation of business performance from set plans or targets. The future prospects and the strategic further development of the Company and its business units, as well as corporate planning, were extensively discussed and agreed with the Supervisory Board after previous consideration in the Committees. In fiscal year 2013, one focus of the work of the Supervisory Board as well as of the meetings of the Presiding Committee preparing the Supervisory Board meetings was the progress of the strategy processes that had been initiated the year before, in particular on the decisions to focus on the food sector and to divest the GEA Heat Exchangers Segment that had been taken in this context. Furthermore, the Supervisory Board and the Audit Committee extensively examined and addressed the Company's risk management and internal control systems.
After extensively scrutinizing and discussing the reports and motions submitted by the Executive Board respectively after previous discussion in the Committees, the Supervisory Board cast their respective votes insofar as this was appropriate or required by law, the provisions of the Articles of Association or the rules of procedure, as the case may be. Prior to and between meetings, the Executive Board provided reports on significant events in writing or in text form. For reasons duly substantiated, in particular in matters of special urgency, resolutions were adopted by written procedure.
In the year under review, there were no conflicts of interest involving members of the Executive Board or the Supervisory Board that would have required immediate disclosure to the Supervisory Board and communication to the Annual General Meeting.
During the 2013 year under review, the Supervisory Board held seven meetings, one of them being a conference call meeting. On these occasions, the Supervisory Board regularly discussed matters relating to the Company's business progress, its financial position, share price performance, the strategic development of the Group, the divestment of the GEA Heat Exchangers Segment as well as the implementation of a worldwide employee engagement survey.
Key items on the agenda of the conference call Supervisory Board meeting on February 5, 2013, were the early information on the capital market as well as the dividend distribution proposal.
The two key items on the agenda of the Supervisory Board meeting held on March 7, 2013, were the approval and adoption of the annual financial statements and the consolidated financial statements for fiscal year 2012, including the appropriation of net earnings and the agenda for the Annual General Meeting in April 2013, as well as the extension of the mandate and renewal of contract with Jürg Oleas in his capacity as Chairman of the Executive Board until December 31, 2016. At this meeting, the Supervisory Board also finally determined and weighted the Executive Board members' personal targets for fiscal year 2013 and conducted the examination of efficiency recommended under section 5.6 of the German Corporate Governance Code in relation to the activities of the Supervisory Board.
On April 17, 2013, the Supervisory Board held an extraordinary meeting that was exclusively focused on strategy – with a particular emphasis on application strategy and the portfolio review.
The Supervisory Board meeting on April 18, 2013, mainly served the purpose of preparing the Annual General Meeting which took place immediately afterwards. Apart from that, the Executive Board was informed of the current business progress.
The meeting held on June 20, 2013, focused on the strategic reorientation of GEA Group Aktiengesellschaft. At this meeting, the Supervisory Board approved the resolution of the Executive Board to separate from the GEA Heat Exchangers Segment in the medium run. Besides, the Supervisory Board addressed current legal disputes.
On September 24, 2013, the Supervisory Board held a meeting at GEA Westfalia Separator in Oelde. Immediately prior to the meeting, the Supervisory Board paid a visit to the new production hall of the GEA Mechanical Equipment Segment. The previous day, the Supervisory Board had visited the headquarters of the GEA Farm Technologies Segment in Bönen. The main emphasis of the actual Supervisory Board meeting in Oelde was on reports on the progress made in connection with the strategy process. In addition, the Supervisory Board extensively discussed the further development of the risk management system.
The meeting held on December 19, 2013, focused on two main topics, i.e. the approval of the 2014 budget including a preview of medium-term planning as well as the definition of a strategic target footprint for the further development of the Group. As in previous years, the December meeting also centered on current developments in terms of corporate governance, including the adoption of the 2013 Declaration of Compliance in line with the Corporate Governance Code. Further topics included the achievement of the targets set for the members of the Executive Board, the Executive Board targets for the year 2014 as well as a preview of the results of the worldwide employee engagement survey.
The Presiding Committee met on five occasions, including one extraordinary meeting in May that was exclusively focused on strategy. Apart from the preparation of the Supervisory Board meetings, the main topics of the meetings embraced deliberations on the extension of the mandate and renewal of the contract with Jürg Oleas in his capacity as Chairman of the Executive Board, the approval of the early refinancing of the Club Deal as well as information on the pending legal disputes of the Group. Most notably, however, the Presiding Committee continued its in-depth discussions in connection with the strategy process and prepared the corresponding meetings of the plenum.
The Audit Committee met five times. In the presence of the auditor, the Chairman of the Executive Board, the Chief Financial Officer as well as the Labor Relations Director, it focused on the annual financial statements and the consolidated financial statements for fiscal year 2012 and the 2013 quarterly financial statements. Furthermore, the Committee's key activities included monitoring the accounting process, while addressing issues relative to the effectiveness of the internal audit system, the audit of the annual financial statements, as well compliance. Moreover, the Committee obtained detailed information on the Company's opportunities and risks including the Group's pending legal disputes. The Committee obtained in-depth information on GEA Group's financial planning. The auditors extensively elaborated on their auditing activities and the audit process. In addition, the Audit Committee submitted its proposal for the appointment of an auditor to the Supervisory Board, dealt with the award of the audit contract to the auditor, the determination of the audit process including the audit fee, as well as the necessary independence of the auditor. Moreover, the meeting agenda of the Audit Committee regularly included an item on the progress of the GEA Food Solutions Segment. Apart from that, the Audit Committee considered GEA Group's tax strategy and obtained comprehensive reports on the Group's internal audit as well as compliance.
The Nomination Committee was not convened in the year under review.
The Mediation Committee did not have to be convened during the year under review.
The committee chairmen rendered an account of the activities undertaken by their specific committees to the Supervisory Board at the respective subsequent Supervisory Board meetings.
The Supervisory Board is continuously monitoring the development of the Corporate Governance Standards. At its meeting held on December 19, 2013, it discussed the recommendations and suggestions of the German Corporate Governance Code. In particular, it dealt with the current amendments to the Code. Subsequently, the Executive Board and the Supervisory Board issued an updated Declaration of Compliance in accordance with section 161 Aktiengesetz (AktG – German Stock Corporation Act) at that meeting and made it permanently accessible to the public on the Company's website. Further information on corporate governance can be found in the Corporate Governance Report (page58 ff).
The 2013 annual financial statements of GEA Group Aktiengesellschaft, the consolidated financial statements prepared in accordance with IFRS and the combined management report have been audited by KPMG AG Wirtschaftsprüfungsgesellschaft and received an unqualified audit opinion.
In the presence of the auditors, the combined management report, the annual financial statements of GEA Group Aktiengesellschaft, the proposal for the appropriation of net earnings as well as the consolidated financial statements and the audit reports for fiscal year 2013 were extensively discussed and examined at the meeting of the Audit Committee on February 26, 2014, and at the annual accounts adoption meeting of the Supervisory Board held on March 6, 2014. The auditors reported on the procedures applied and the material findings of their audit. They were also available to answer questions.
On the basis of the final results of the examination performed by the Audit Committee and after conducting its own scrutiny, the Supervisory Board agreed with the auditors' findings at its meeting on March 6, 2014, and found that there were no objections to be raised. The Supervisory Board approved the 2013 consolidated financial statements, the 2013 annual financial statements of GEA Group Aktiengesellschaft, as well as the combined management report. The annual financial statements of GEA Group Aktiengesellschaft are hereby adopted. The Supervisory Board considers the proposal for the appropriation of net earnings to be reasonable.
As of April 1, 2013, Markus Hüllmann became a full member of the Executive Board of GEA Group Aktiengesellschaft. Thereby he succeeded Niels Graugaard who retired after the Annual General Meeting held on April 18, 2013.
The Supervisory Board wishes to express its gratitude and appreciation to the management teams, employee representative bodies and, in particular, to all employees of the GEA Group companies for their hard work and personal commitment in a difficult environment.
Düsseldorf, March 6, 2014
Dr. Jürgen Heraeus Chairman of the Supervisory Board
b) – GEA Segment Management Holding GmbH, Düsseldorf, Germany Managing Director (from April 20, 2013) – GEA North America, Inc., Delaware, U.S.A., Member of the Board of Directors (from April 20, 2013)
Reinhold Siegers, Mönchengladbach, Germany, Deputy Chairman of the Supervisory Board Chairman of the Works Council of GEA Group Aktiengesellschaft
Ahmad M.A. Bastaki, Safat, Kuwait, Executive Director, Office of the Managing Director, Kuwait Investment Authority
Hartmut Eberlein, Gehrden, Germany, Chairman of the Audit Committee of GEA Group Aktiengesellschaft
Rainer Gröbel, Sulzbach/Ts., Germany, Departmental Head, IG Metall, Management Board
a) – Schunk GmbH, Heuchelheim, Germany, Deputy Chairman of the Supervisory Board
Klaus Hunger, Herne, Germany, Chairman of the Central Segment Works Council of GEA Heat Exchangers GmbH
Michael Kämpfert, Düsseldorf, Germany, Vice President Human Resources/Legal Affairs, GEA Food Solutions Segment
Eva-Maria Kerkemeier, Bochum-Herne, Germany, First Authorized Representative of IG Metall, Herne
Kurt-Jürgen Löw, Ebernhahn, Germany, Chairman of the Works Council of GEA Westfalia Separator Group GmbH
a) – GEA Westfalia Separator Group GmbH, Oelde, Deputy Chairman of the Supervisory Board
a) – Allianz SE, Munich, Germany, Chairman of the Supervisory Board – Commerzbank AG, Frankfurt am Main, Germany, Member of the Supervisory Board
Jean Spence, Wilmette/IL, U.S.A., Executive Vice President Research, Development & Quality Mondeléz International
Dr. Helmut Perlet Reinhold Siegers Klaus Hunger
Dr. Jürgen Heraeus, Chairman Dr. Helmut Perlet Reinhold Siegers Rainer Gröbel
Hartmut Eberlein, Chairman (financial expert within the meaning of section 100(5) of the Aktiengesetz (AktG – German Stock Corporation Act)) Dr. Jürgen Heraeus Kurt-Jürgen Löw Klaus Hunger
Dr. Jürgen Heraeus, Chairman Dr. Helmut Perlet Prof. Dr. Ing. Werner Bauer
a) Membership of statutory German supervisory boards
b) Membership of comparable German or foreign supervisory bodies of business entities
| Q1 2013 |
Q1 2012 |
Q2 2013 |
Q2 2012 |
Q3 2013 |
Q3 2012 |
Q4 2013 |
Q4 2012 |
2013 | 2012 | 2011 | |
|---|---|---|---|---|---|---|---|---|---|---|---|
| Order intake (EUR million) | |||||||||||
| GEA Food Solutions | 75.8 | 97.4 | 89.6 | 95.8 | 89.5 | 81.7 | 94.8 | 101.0 | 349.7 | 375.9 | 329.8 |
| GEA Farm Technologies | 138.8 | 148.1 | 155.7 | 145.7 | 150.7 | 147.4 | 151.6 | 142.6 | 596.7 | 583.9 | 527.4 |
| GEA Mechanical Equipment | 253.9 | 238.7 | 256.8 | 233.2 | 268.2 | 245.4 | 239.5 | 254.6 | 1,018.5 | 971.9 | 874.9 |
| GEA Process Engineering | 481.3 | 511.3 | 570.0 | 401.2 | 515.2 | 468.5 | 494.6 | 469.2 | 2,061.0 | 1,850.2 | 1,709.9 |
| GEA Refrigeration Technologies | 177.9 | 177.9 | 181.2 | 180.4 | 174.9 | 200.1 | 192.3 | 197.8 | 726.3 | 756.2 | 650.4 |
| GEA Group | 1,095.1 | 1,146.0 | 1,220.0 | 1,028.6 | 1,168.3 | 1,111.6 | 1,144.4 | 1,139.2 | 4,627.9 | 4,425.4 | 3,986.7 |
| Revenue (EUR million) | |||||||||||
| GEA Food Solutions | 79.7 | 52.7 | 93.4 | 101.6 | 89.8 | 90.1 | 87.0 | 88.0 | 349.9 | 332.4 | 346.0 |
| GEA Farm Technologies | 110.8 | 117.8 | 133.8 | 133.1 | 156.9 | 157.8 | 176.2 | 172.3 | 577.7 | 580.9 | 509.8 |
| GEA Mechanical Equipment | 218.5 | 216.7 | 240.5 | 217.6 | 246.5 | 238.5 | 272.3 | 261.2 | 977.8 | 933.9 | 844.7 |
| GEA Process Engineering | 394.3 | 373.2 | 435.6 | 401.2 | 441.3 | 423.6 | 526.7 | 518.3 | 1,798.0 | 1,716.3 | 1,577.2 |
| GEA Refrigeration Technologies | 152.1 | 149.5 | 189.2 | 165.2 | 184.8 | 177.0 | 210.6 | 203.1 | 736.6 | 694.8 | 647.2 |
| GEA Group | 924.2 | 880.5 | 1,064.6 | 994.1 | 1,089.1 | 1,060.5 | 1,242.2 | 1,207.2 | 4,320.0 | 4,142.3 | 3,828.3 |
| EBITDA (EUR million) | |||||||||||
| GEA Food Solutions | –4.0 | –43.1 | 0.9 | –0.8 | 3.5 | –4.8 | 3.3 | –20.7 | 3.8 | –69.4 | 7.4 |
| GEA Farm Technologies | 2.8 | 5.0 | 8.5 | 11.2 | 17.6 | 17.8 | 27.8 | 24.2 | 56.7 | 58.2 | 45.2 |
| GEA Mechanical Equipment | 42.6 | 40.1 | 47.3 | 44.3 | 53.3 | 53.1 | 67.7 | 66.8 | 210.9 | 204.3 | 178.7 |
| GEA Process Engineering | 29.4 | 20.1 | 45.0 | 39.4 | 46.3 | 42.7 | 82.5 | 75.9 | 203.2 | 178.1 | 163.2 |
| GEA Refrigeration Technologies | 9.6 | 11.0 | 16.8 | 13.4 | 17.1 | 16.0 | 27.5 | 24.9 | 71.0 | 65.2 | 59.0 |
| GEA Group | 71.1 | 29.4 | 113.8 | 104.1 | 130.0 | 123.0 | 200.3 | 163.5 | 515.2 | 420.1 | 440.3 |
| Operating EBITDA (EUR million) 2 | |||||||||||
| GEA Food Solutions | –4.0 | –7.3 | 0.9 | 2.9 | 3.5 | 1.4 | 3.3 | –2.9 | 3.8 | –6.0 | 26.2 |
| GEA Farm Technologies | 3.1 | 5.0 | 8.5 | 11.2 | 17.6 | 17.8 | 27.8 | 24.5 | 56.9 | 58.5 | 45.2 |
| GEA Mechanical Equipment | 42.6 | 40.2 | 47.3 | 44.7 | 53.3 | 53.6 | 67.7 | 66.8 | 210.9 | 205.3 | 178.7 |
| GEA Process Engineering | 29.4 | 20.1 | 45.0 | 39.4 | 46.3 | 43.0 | 82.5 | 75.9 | 203.2 | 178.4 | 163.2 |
| GEA Refrigeration Technologies | 9.6 | 11.0 | 16.8 | 13.4 | 17.1 | 16.0 | 27.5 | 24.9 | 71.0 | 65.2 | 60.0 |
| GEA Group | 72.4 | 68.0 | 118.4 | 110.7 | 133.5 | 132.3 | 205.7 | 183.5 | 530.1 | 494.4 | 469.6 |
| Operating EBITDA margin (%) 2 | |||||||||||
| GEA Food Solutions | –5.1 | –13.9 | 1.0 | 2.9 | 3.9 | 1.5 | 3.8 | –3.3 | 1.1 | –1.8 | 7.6 |
| GEA Farm Technologies | 2.8 | 4.2 | 6.4 | 8.5 | 11.2 | 11.3 | 15.8 | 14.2 | 9.9 | 10.1 | 8.9 |
| GEA Mechanical Equipment | 19.5 | 18.6 | 19.7 | 20.6 | 21.6 | 22.5 | 24.9 | 25.6 | 21.6 | 22.0 | 21.2 |
| GEA Process Engineering | 7.5 | 5.4 | 10.3 | 9.8 | 10.5 | 10.1 | 15.7 | 14.6 | 11.3 | 10.4 | 10.3 |
| GEA Refrigeration Technologies | 6.3 | 7.3 | 8.9 | 8.1 | 9.3 | 9.0 | 13.1 | 12.2 | 9.6 | 9.4 | 9.3 |
| GEA Group | 7.8 | 7.7 | 11.1 | 11.1 | 12.3 | 12.5 | 16.6 | 15.2 | 12.3 | 11.9 | 12.3 |
1) Amounts adjusted due to first time classification of an operation as discontinued operation (see page 147 f.) and due to change in accounting policy for employee benefits (see page 118 f.) 2) Before effects of purchase price allocations from revalued assets and liabilities and before one-offs
| April 16, 2014 | Annual Shareholders' Meeting for 2013 |
|---|---|
| May 06, 2014 | Quarterly Financial Report for the period to March 31, 2014 |
| July 28, 2014 | Half-yearly Financial Report for the period to June 30, 2014 |
| October 28, 2014 | Quarterly Financial Report for the period to September 30, 2014 |
| The GEA Group Stock: Key data | American Depository Receipts (ADR) | |||||
|---|---|---|---|---|---|---|
| WKN | 660 200 | CUSIP | 361592108 | |||
| ISIN | DE0006602006 | Symbol | GEAGY | |||
| Reuters code | G1AG.DE | Sponsor | Deutsche Bank Trust Company Americas | |||
| Bloomberg code | G1A.GR | ADR-Level | 1 | |||
| Xetra | G1A.DE | Ratio | 1:1 | |||
| Public Relations | Investor Relations | |||
|---|---|---|---|---|
| Tel. | +49 (0)211 9136-1492 | Tel. | +49 (0)211 9136-1492 | |
| Fax | +49 (0)211 9136-31492 | Fax | +49 (0)211 9136-31492 | |
| [email protected] | [email protected] |
This report includes forward-looking statements on GEA Group Aktiengesellschaft, its subsidiaries and associates, and on the economic and political conditions that may influence the business performance of the GEA Group. All these statements are based on assumptions made by the Executive Board using information available to it at the time. Should these assumptions prove to be wholly or partly incorrect, or should further risks arise, actual business performance may differ from that expected. The Executive Board therefore cannot assume any liability for the statements made.
| Published by | GEA Group Aktiengesellschaft Investor and Public Relations Peter-Müller-Straße 12 40468 Düsseldorf Germany www.gea.com |
|---|---|
| Design | www.kpad.de |
| Printed by | WAZ-Druck, Duisburg |
| Picture credits | Page 12: Andreas Dillhöfer Page 97: Fotolia All other pictures: GEA Group Aktiengesellschaft |
This report is a translation of the German original; in the event of variances, the German version shall take precedence over the Englisch translation.
We live our values. Excellence • Passion • Integrity • Responsibility • GEA-versity
GEA Group is a global engineering company with multi-billion euro sales and operations in more than 50 countries. Founded in 1881 the company is one of the largest providers of innovative equipment and process technology. GEA Group is listed in the STOXX® Europe 600 Index.
GEA Group Aktiengesellschaft
Peter-Müller-Straße 12, 40468 Düsseldorf Germany Phone: +49 211 9136-0 [email protected], www.gea.com
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