FUNDING AND LIQUIDIT Y MANAGEMENT
Our centralized funding and liquidity management system has two main objectives: the optimization of earnings and costs as well as the reduction and prevention of financial risks. In addition, its purpose is to achieve transparency concerning the Group’s funding and liquidity needs. An essential principle of liquidity management at Dürr is to always have adequate liquidity reserves available so as to meet our payment obligations at all times.
The cash flow from our operating activities is our key source of funding. As a rule, debt finance is raised by Dürr AG and made available to the Group companies as required.
Dürr AG is also responsible for liquidity management. The company organizes a cash pooling system in which – to the extent legally possible – all cash and cash equivalents of the Group are consolidated. Companies located in coun-tries subject to statutory restrictions on capital flows (for instance China, India, South Korea) obtain their funding locally. In 2015, the HOMAG Group was integrated into the finance and liquidity management and into the cash pool-ing system of the Dürr Group.
The investment of surplus liquidity is governed by a guide-line for financial asset management and is the task of Group Treasury. Our partners are only banks with good credit ratings, and we use a limit system to reduce coun-terparty risks. While our volume of cash and cash equi-valents at the end of 2015 came to € 435.6 million, down on the previous year, it nevertheless remained at a com-fortable level. Its share of total assets amounted to 14.6 % (Dec. 31, 2014: 17.5 %). Our total liquidity, which also extends to include time deposits and securities held to final maturity, amounted to € 469.2 million at the end of 2015 (Dec. 31, 2014: € 582.0 million).
We conduct systematic net working capital management to optimize our internal funding capabilities and reduce the volume of funds tied down. This has a beneficial effect on key figures such as our balance sheet structure and return on capital employed. Net working capital[ p. 221 ] management is the responsibility of the divisions and, in addition to operating finance needs, it also takes account
For information on the deployment of financial instruments, please refer to the section entitled “Currency, interest rate and liquidity risks as well as financial instruments for risk mitigation purposes” in the Risk report [ p. 81 ].
FUNDING STRUCTURE OF THE DÜRR GROUP
As at December 31, 2015, our funding structure comprised the following components:
• Corporate bond: Our corporate bond issued in 2014 in the amount of € 300 million in nominal terms has a term to maturity until 2021 and a coupon of 2.875 % (effec-tive interest rate: 3.085 %). At the end of 2015 it had a yield of 2.0 %. Early termination is not possible.
• Syndicated loan: The syndicated loan with a current to-tal volume of € 465 million has also been in place since 2014. It comprises a cash credit line of € 250 million and a guarantee line of € 215 million. In 2015, we extended the term to maturity with the approval of the banks and without incurring any additional costs by one year, until 2020. A further extension, until 2021, was granted in the first quarter of 2016 – also without incurring any addi-tional costs.
• Real estate loans: When the Dürr Campus in Bietig heim-Bissingen was purchased in 2011, we assumed the associated real-estate loans. Their book value totaled
€ 37.7 million as at December 31, 2015 (Dec. 31, 2014:
€ 39.9 million). The long-term fixed and annuity loans are due to mature on September 30, 2024. As at Septem-ber 30, 2017, we have an early redemption option at the end of the interest lock-in period without having to pay a premature repayment penalty.
• Leasing: At the end of 2015, liabilities from finance leases amounted to € 10.8 million. In addition, there were money and capital market instruments as well as off-bal-ance sheet financing instruments in the form of operat-ing leases (Dec. 31, 2015: € 122.1 million) and forfaitoperat-ing transactions (Dec. 31, 2015: € 17.4 million).
• Bilateral credit facilities: Their volume as at the 2015
Financial development 61
. . . .Combined management report
CONSOLIDATED FINANCIAL STATEMENTSCONSOLIDATED FINANCIAL STATEMENTS
We implemented a major change to our funding structure in the second quarter of 2015. In the course of the HOMAG Group’s integration, the syndicated loan of HOMAG Group AG for € 210.0 million was terminated effective May 29, 2015. The HOMAG Group has since been using the more favorable funding available from the Dürr Group instead.
To this end, the volume of the syndicated loan of Dürr AG was increased from € 300 million originally to the above-mentioned € 465 million (increase in the cash credit line from € 100 million to € 250 million, and increase in the guarantee line from € 200 million to € 215 million).
The restructuring of funding arrangements in 2015 in-volved non-recurring expense of € 3.7 million. As table 2.36 shows, it led to a decline in financial liabilities by
€ 75.6 million at the end of 2015. From 2016 we expect the new structure to generate an annual relief of € 2.3 million to our financial result.
As at December 31, 2015, the total volume of all credit and guarantee lines available reached € 1,034.9 million. Of this sum, € 359.9 million was actually utilized. The cash credit line of the syndicated loan remained unutilized in 2015.
The total volume of our guarantee lines amounted to € 745.9 million. In addition to the guarantee line from the syndi-cated loan, it comprises additional guarantee lines amount-ing to € 520.9 million that were made available by insurers and banks.
We complied with the financial covenant of our syndicated loan at every reference date in fiscal 2015. Interest corre-sponds to the refinancing rate with matching maturities plus a variable margin. Further particulars on debt funding are listed in item 31[ p. 170 ] of the notes to the consolidated financial statements.
2. 36 – FINANCIAL LIABILITIES (DEC. 31)
€ million 2015 2014 2013
Bond 296.9 296.4 225.2
Liabilities to banks 43.2 118.4 41.9
Liabilities under finance leases 10.8 11.7 4.0
Total 350.9 426.5 271.1
of which due within one year 6.8 17.1 2.5
HOMAG Group / Woodworking Machinery and Systems was consolidated for the first time on October 3, 2014.
2. 37 – CASH FLOW
€ million 2015 2014 2013
Earnings before income taxes 244.5 204.7 184.6
Depreciation and amortization 80.5 42.0 27.4
Interest result 25.2 17.7 19.0
Income tax payments – 88.6 – 51.6 – 35.9
Change in provisions 20.6 – 4.6 12.8
Change in net working capital – 137.8 74.3 122.6
Other 28.6 8.8 – 1.4
Cash flow from operating activities 173.0 291.3 329.1
Interest payments (net) – 10.4 – 16.6 – 16.2
Investment in property, plant and
equipment and intangible assets – 99.8 – 53.6 – 51.0
Free cash flow 62.8 221.1 261.9
Other cash flows – 101.2 – 333.8 – 78.1
Change in net financial status – 38.4 – 112.7 183.8
HOMAG Group / Woodworking Machinery and Systems was consolidated for the first time on October 3, 2014.
POSITIVE FREE CASH FLOW DESPITE NWC NORMALIZATION
The cash flow from operating activities, at € 173.0 million, met our expectations. The decline in relation to the high previous-year level resulted from the unusually high voicing volume in plant engineering and an associated in-crease in net working capital (nwc)[ p. 221 ] by € 137.8 mil-lion. As at December 31, 2014, we had reported a high level of surplus liquidity due to extensive prepayments. A large share of this liquidity went into order execution in 2015, as planned. Accordingly, surplus liquidity as at December 31, 2015, came to approx. € 200 million and was thus only about € 100 million above the normal level. In 2014, NWC had declined by € 74.3 million; adjusted for the large NWC fluctuations, operating cash flow would have soared to a record level in 2015. For 2016, we anticipate a further but more moderate NWC increase. The high level of depreciation and amortization in 2015 is due, firstly, to the extensive investments in expansion in previous years. Secondly, the full-year consolidation of the HOMAG Group was reflected in this item; among other things, it includes depreciation and amortization due to the purchase price allocation.
62 Combined management report . . . .Financial development
Cash flow from investing activities amounted to € – 94.4 million in 2015 (2014: € –224.3 million). It includes inflows of funds due to the cancellation of fixed-term deposits and the outflow of funds for acquisitions as well as higher investments in property, plant and equipment, and intan-gible assets. In the previous year, the takeover of the majority stake in the HOMAG Group for € 228.1 million was the main reason for our negative cash flow from investing activities.
Cash flow from financing activities reached € – 162.4 mil-lion (2014: € – 20.0 milmil-lion). Key contributory factors were the outflow of the dividend payment, the redemption of the syndicated loan of HOMAG Group AG from funds sourced from Dürr’s cash and cash equivalents, as well as interest payments.
Based on the positive operating cash flow, we achieved a free cash flow[ p. 221 ] of € 62.8 million in 2015 (2014:
€ 221.1 million). It indicates what means are available for dividend payouts, stock redemptions, acquisitions and improvements in the net financial status[ p. 221 ]. In addi-tion to the cash flow from operating activities, free cash flow also includes interest income and capital expenditure (included in the cash flow from investing activities) as well as interest payments (included in the cash flow from financing activities).
At € 129.4 million, the net financial status as at December 31, 2015, was in clearly positive territory. The decline in relation to the previous year’s effective date only amounted to € 38.4 million, even though outflows of € 39.7 million were recorded for acquisitions (in particular iTAC) as well as € 57.1 million for the dividend payment.
OPER ATING PERFORMANCE INDICATORS:
INCOMING ORDERS, SALES, EBIT, AND ROCE
The key figures for managing the Dürr Group are incom-ing orders, sales, EBIT / EBIT margin and ROCE (EBIT to capital employed) [ p. 221 ]. Operating cash flow and free cash flow also play a central role, especially at Group level.
At divisional level, the focus is on order margins and EBIT.
2. 38 – PERFORMANCE INDICATORS
2015 2014 2013
Incoming orders € million 3,467.5 2,793.0 2,387.1
Sales € million 3,767.1 2,574.9 2,406.9
EBIT € million 267.8 220.9 203.0
EBIT margin % 7.1 8.6 8.4
ROCE1 % 45.3 38.7 76.2
HOMAG Group / Woodworking Machinery and Systems was consolidated for the first time on October 3, 2014.
1 There was a change in the ROCE calculation in 2014: we eliminated financial assets from assets as a whole since the financial result is not taken into account in EBIT either.
The comparative values for 2013 were adjusted accordingly.
Non-financial performance indicators are also regularly tracked. They assist us in managing and shaping the long-term strategic orientation of the company. Examples are key figures on employee satisfaction, advanced training, ecology / sustainability and R&D / innovations. However, the non-financial performance indicators do not serve primar-ily to control the company. Instead, they provide extended findings on the situation of the Group and allow decisions to be made on that basis. The non-financial performance indicators are discussed in the chapters entitled Sustain-ability[ p. 77 ] and Employees[ p. 74 ], among other places.
The analysis of incoming orders and resulting sales enable forward-looking capacity planning. In 2015, incoming orders reached the upper end of the original target corri-dor, with sales exceeding the level targeted. One reason for the good sales trend was that we fully eliminated the effects of the customer-induced project delays which had arisen in 2014
We measure our operating earnings capacity according to EBIT and EBIT margin. In 2015, EBIT reached a new all-time high. The EBIT margin was within the target range. In com-parison with the extraordinarily high level of the previous year, it declined, however, as the margin situation in Paint and Final Assembly Systems returned to normal, with Woodworking Machinery and Systems still reporting a below-average EBIT margin.
Financial development 63
. . . .Combined management report
CONSOLIDATED FINANCIAL STATEMENTSCONSOLIDATED FINANCIAL STATEMENTS
The ROCE[ p. 221 ] shows whether we generate an appro-priate interest yield on our capital employed, and this con-stitutes the basis for effective capital allocation. Capital employed[ p. 221 ] takes account of all assets excluding cash and cash equivalents and financial assets, less non- interest-bearing liabilities. In 2015, ROCE reached 45.3 %, a further high value by international comparison, exceed-ing both the previous year’s level and our target range of 30 to 40 %. The decisive factor here was the EBIT contri-bution made by Woodworking Machinery and Systems (HOMAG Group), amounting to € 36.6 million (2014: € – 7.9 million). In 2013 we achieved an extremely high ROCE of 76.2 %; this level could not be matched on account of the below-average ROCE level of the HOMAG Group.
ROCE (in %) is calculated as follows:
EBIT 100
Capital Employed
The economic value added (EVA) reflects the value gener-ated by an enterprise in a financial year. In the past three years we always succeeded in generating high growth in the triple-digit million range. The increase to € 146.2 mil-lion in 2015 came about because the contribution to earn-ings (NOPAT) soared, whereas the level of capital employed remained more or less constant. The higher weighted cap-ital costs are mainly the result of a changed composition of the relevant peer group.
EVA is calculated as follows:
EVA = NOPAT – (WACC Capital Employed)
• NOPAT = Net Operating Profit After Taxes / EBIT after fictitious taxes
• WACC = Weighted Average Cost of Capital
2. 39 – VALUE ADDED
2015 2014 2013
Capital employed (Dec. 31) € million 590.6 571.5 266.4
ROCE % 45.3 38.7 76.2
NOPAT € million 187.5 154.6 142.1
Weighted average cost of
capital (WACC) % 6.98 5.78 6.69
EVA € million 146.2 121.6 124.3
HOMAG Group / Woodworking Machinery and Systems was consolidated for the first time on October 3, 2014.
2.4 0 – CAPITAL EMPLOYED BY DIVISION
€ million 2015 2014 2013
Paint and Final Assembly Systems – 104.4 – 216.5 – 162.1
Application Technology 188.3 170.8 138.8
Measuring and Process Systems 283.8 250.9 278.2
Clean Technology Systems 49.4 43.7 35.8
Woodworking Machinery and Systems 413.1 430.2 –
HOMAG Group / Woodworking Machinery and Systems was consolidated for the first time on October 3, 2014.
2.41 – ROCE BY DIVISION
% 2015 2014 2013
Paint and Final Assembly Systems1 >100 >100 >100
Application Technology 32.3 32.3 42.9
Measuring and Process Systems 24.6 28.0 16.7
Clean Technology Systems 11.7 17.5 16.9
Woodworking Machinery and Systems 8.9 – 1.8 –
HOMAG Group / Woodworking Machinery and Systems was consolidated for the first time on October 3, 2014.
1 negative capital employed
In all five divisions, the return on capital employed exceed-ed capital costs. In the Paint and Final Assembly Systems division, the ROCE calculation does not produce a meaning-ful result as the capital employed was in negative territory.
This is due to the high level of prepayments from custom-ers and the structurally low requirements of plant, prop-erty and equipment. The ROCE of Application Technology reached 32.3 %, matching the previous year’s level. In the Measuring and Process Systems division, ROCE declined slightly on more or less constant EBIT but reached a good level at 24.6 %. In Clean Technology Systems, the EBIT decline occurred in tandem with a lower ROCE value. The ROCE of Woodworking Machinery and Systems (8.9 %) still has scope for improvement, even though the division reflects the highest capital employed throughout the Group;
this is due to its significant manufacuting depth[ p. 220 ].
x 100 64 Combined management report . . . .Financial development
SOLID BALANCE SHEET
At € 2,986.7 million, total assets remained virtually un-changed in relation to December 31, 2014, even though exchange rate changes pushed up tangible fixed assets, inventories, and cash and cash equivalents. The corporate acquisitions and shareholding purchases in 2015 had no material impact on the balance sheet. An overview of these transactions is listed in the section “Acquisitions and divestments” in the chapter entitled The Group at a glance [ p. 51 ].
The balance sheet structure as at December 31, 2015, in comparison with the same date a year earlier was charac-terized in particular by three factors:
1. Increase of net working capital: Trade receivables and inventories increased by a total of € 68.3 million as planned, whereas trade payables declined by € 82.2 mil-lion. Consequently, net working capital[ p. 221 ] adjust-ed for exchange-rate fluctuations was up by € 137.8 mil-lion, to reach € 236.8 million. The number of days work-ing capital, at 22.6 days, was within the target range of 20 to 25 days.
2. Decline in cash and cash equivalents: Cash and cash equivalents declined by € 86.4 million, to € 435.6 mil-lion. The main reason for this was the repayment of the syndicated loan of HOMAG Group AG as part of the op-timization of the financing structure.
3. Domination and profit and loss transfer agreement:
The domination and profit and loss transfer agreement with HOMAG Group AG entered into force on March 17, 2015. We subsequently eliminated from non-controlling interests the interests attributable to those sharehold-ers of HOMAG Group AG (22.1 %) who are outside the Schuler / Klessmann shareholder group and therefore not parties to the pooling arrangements with Dürr. These interests are valued at € 91.5 million. At the same time, we recognized a sundry financial liability for the obliga-tion to acquire these shares and to pay a corresponding settlement plus tax. The difference between the derecog-nized non-controlling interests and the new sundry financial liability resulted in a reduction of a further
€ 35.0 million in the retained earnings in the Group´s equity. The reason for the reclassification is that Dürr controls the HOMAG Group and the free shareholders of the HOMAG Group receive a guaranteed dividend of
2.42 – KEY BALANCE SHEET FIGURES
2015 2014 2013
Net financial status (Dec. 31) € million 129.4 167.8 280.5
Net financial liabilities to EBITDA – – –
Gearing (Dec. 31) % – 22.1 – 30.1 – 121.5
Net working capital (NWC) (Dec. 31) € million 236.8 87.6 – 33.1
Days working capital Days 22.6 12.2 – 4.9
Inventory turnover Days 37.0 51.0 22.1
Days sales outstanding Days 51.9 67.8 47.6
Equity assets ratio (Dec. 31) % 60.4 64.6 86.5
Asset coverage (Dec. 31) % 109.9 121.8 153.3
Asset intensity (Dec. 31) % 39.6 37.8 29.7
Current assets to total assets (Dec. 31) % 60.4 62.2 70.3
Degree of asset depreciation % 32.1 30.7 43.9
Depreciation expense ratio % 6.4 4.2 4.3
Cash ratio (Dec. 31) % 26.4 32.6 42.4
Quick ratio (Dec. 31) % 80.8 85.7 104.5
Equity ratio (Dec. 31) % 23.9 24.4 25.7
Total assets (Dec. 31) € million 2,986.7 2,976.1 1,991.8
HOMAG Group / Woodworking Machinery and Systems was consolidated for the first time on October 3, 2014.
The ROCE[ p. 221 ] shows whether we generate an appro-priate interest yield on our capital employed, and this con-stitutes the basis for effective capital allocation. Capital employed[ p. 221 ] takes account of all assets excluding cash and cash equivalents and financial assets, less non- interest-bearing liabilities. In 2015, ROCE reached 45.3 %, a further high value by international comparison, exceed-ing both the previous year’s level and our target range of 30 to 40 %. The decisive factor here was the EBIT contri-bution made by Woodworking Machinery and Systems (HOMAG Group), amounting to € 36.6 million (2014: € – 7.9 million). In 2013 we achieved an extremely high ROCE of 76.2 %; this level could not be matched on account of the
below-average ROCE level of the HOMAG Group.
ROCE (in %) is calculated as follows:
EBIT 100
Capital Employed
The economic value added (EVA) reflects the value gener-ated by an enterprise in a financial year. In the past three years we always succeeded in generating high growth in the triple-digit million range. The increase to € 146.2 mil-lion in 2015 came about because the contribution to earn-ings (NOPAT) soared, whereas the level of capital employed remained more or less constant. The higher weighted cap-ital costs are mainly the result of a changed composition of the relevant peer group.
EVA is calculated as follows:
EVA = NOPAT – (WACC Capital Employed)
• NOPAT = Net Operating Profit After Taxes / EBIT after fictitious taxes
• WACC = Weighted Average Cost of Capital
2. 39 – VALUE ADDED
2015 2014 2013
Capital employed (Dec. 31) € million 590.6 571.5 266.4
ROCE % 45.3 38.7 76.2
NOPAT € million 187.5 154.6 142.1
Weighted average cost of
capital (WACC) % 6.98 5.78 6.69
EVA € million 146.2 121.6 124.3
HOMAG Group / Woodworking Machinery and Systems was consolidated for the first time on October 3, 2014.
x 100
Financial development 65
. . . .Combined management report
CONSOLIDATED FINANCIAL STATEMENTSCONSOLIDATED FINANCIAL STATEMENTS
2.43 – NON-CURRENT AND CURRENT ASSETS (DEC. 31)
€ million 2015
% of
total assets 2014 2013
Intangible assets 648.9 21.7 617.9 322.0
Property, plant and equipment 394.7 13.2 362.1 173.8
Other non-current assets 138.4 4.6 144.2 95.1
Non-current assets 1,182.0 39.6 1,124.2 590.9
Inventories 386.7 12.9 364.8 148.0
Trade receivables 895.8 30.0 849.4 675.7
Cash and cash equivalents 435.6 14.6 522.0 458.5
Other current assets 86.4 2.9 115.7 118.7
Current assets 1,804.6 60.4 1,851.9 1,400.9
HOMAG Group / Woodworking Machinery and Systems was consolidated for the first time on October 3, 2014.
2.4 4 – EQUIT Y (DEC. 31)
€ million 2015
% of
total assets 2014 2013
Subscribed capital 88.6 3.0 88.6 88.6
Other equity 608.5 20.4 526.7 415.9
Equity attributable to shareholders 697.1 23.3 615.3 504.5
Non-controlling interest 17.3 0.6 110.4 6.9
Total equity 714.4 23.9 725.8 511.4
HOMAG Group / Woodworking Machinery and Systems was consolidated for the first time on October 3, 2014.
2.45 – CURRENT AND NON-CURRENT LIABILITIES (DEC. 31)
€ million 2015
% of
total assets 2014 2013
Financial liabilities (incl. bond) 350.9 11.7 426.5 271.1
Provisions (incl. pensions) 185.7 6.2 180.8 122.8
Trade payables 1,046.1 35.0 1,128.3 856.8
of which prepayments received 647.0 21.7 763.3 596.8
Income tax liabilities 41.7 1.4 29.5 30.7
Other liabilities (incl. deferred taxes, deferred income) 647.8 21.7 485.3 199.0
Total 2,272.2 76.1 2,250.4 1,480.4
HOMAG Group / Woodworking Machinery and Systems was consolidated for the first time on October 3, 2014.
66 Combined management report . . . .Financial development
Assets Liabilities
As at the 2015 balance sheet date, equity attributable to shareholders of Dürr AG increased by 13.3 %, to € 697.1 million. The reasons for this were the retained Group net
As at the 2015 balance sheet date, equity attributable to shareholders of Dürr AG increased by 13.3 %, to € 697.1 million. The reasons for this were the retained Group net