The Group’s business performance was satisfactory in 2014 in the Board of Management’s view.
Adjusted for HOMAG Group AG, which was consolidated for the first time on October 3, 2014, the Dürr Group reached new highs in terms of earnings, EBIT margin and roce. Similarly, order intake was strong.
COMPARISON OF TARGETS AND ACTUAL FIGURES FOR 2014 EXCLUDING THE HOMAG GROUP
The following analysis compares the targets formulated at the beginning of the year for 2014 and the figures achieved by Dürr without the HOMAG Group. By contrast, the comparison of the targets with actual figures including the HOMAG Group, which is set out in table 2.16, does not permit any meaningful conclusions to be drawn.
At € 2,574.8 million, order intake exceeded the original forecast range (€ 2.3 to 2.5 billion). This is particularly gratifying given the difficult market conditions in Russia, India and Brazil. We registered the strongest growth in China, Europe and, to a lesser extent, in the United States.
At € 2,322.1 million, sales fell short of the original target range of € 2.4 to 2.5 billion but still mar-ginally exceeded the target revised in the fall of € 2.3 billion. The decline in sales was caused by customer-induced project delays in plant engineering. However, we should be able to recoup these in 2015. EBIT rose by 12.7 % to € 228.8 million, reflecting the quality of our order execution,
pro-P. 257
/ Sales revenues € million 2,406.9 2,400 – 2,500 2,322.1 2,574.9
/ Order intake € million 2,387.1 2,300 – 2,500 2,574.8 2,793.0
/ Orders on hand (Dec. 31) € million 2,150.1 1,950 – 2,250 2,421.3 2,725.3
/ EBIT margin % 8.4 8.0 – 8.5 9.9 8.6
/ ROCE2 % 76.2 30 – 40 161.9 38.7
/ Net finance expense € million –18.4 Slightly weaker –14.2 –16.2
/ Earnings after tax € million 140.9 Stable 160.0 150.3
/ Cash flow from operating activities
€ million 329.1 Substantially weaker 241.7 291.3
/ Free cash flow € million 261.9 Slightly negative 185.6 221.1
/ Net financial status (Dec. 31)
€ million 280.5 + 150 – + 250 424.0 167.8
/ Liquidity € million 458.5 330 – 430 700.1 522.0
/ Capital expenditure3 € million 51.2 40 – 50 42.1 54.9
1 HOMAG Group / Woodworking Machinery and Systems was consolidated for the first time on October 3, 2014.
2 The method for calculating ROCE was modified in 2014 as we eliminated financial assets from assets on the grounds that net finance income/finance expense is not included in EBIT. The comparison figures for 2013 have been adjusted accordingly.
3 On property, plant and equipment and on intangible assets (excluding acquisitions)
CONSOLIDATED FINANCIAL STATEMENTS
COMBINED MANAGEMENT REPORT Overall assessment by the Board of Management 82
ductivity gains in mechanical engineering, the earnings turnaround in cleaning technology and continued growth in service business. The EBIT margin reached a high 9.9 %. We had originally projected a figure of 8.0 to 8.5 % at the beginning of 2014, but raised this to around 9 % in November.
At 161.9 %, roce far exceeded the target of 30 to 40 % thanks to strong EBIT and a low capital lock-up.
Net finance expense came to € 14.2 million and was thus somewhat better than expected. Earnings after tax rose by 13.6 %; at the beginning of the year, we had been expecting it to remain steady.
The high EBIT and declining net working capital provided the underpinnings for cash flow from operating activities of € 241.7 million, which outstripped our expectations again substantially. At
€ 185.6 million, free cash flow was also good despite high capital expenditure. The same thing applies to the net financial status, which at € 424.0 million was substantially beyond the target corridor. This does not include the outflow of € 228.1 million for the acquisition of the majority interest in the HOMAG Group. At € 700.1 million (before the acquisition of the HOMAG Group), cash and cash equivalents were also well up on the target formulated at the beginning of the year. The capital expenditure (excluding equity investments) of € 42.1 million was at the lower end of the tar-get corridor. Roughly half of this was for the expansion of our network of facilities and internally- sourced production – also in connection with the entry into industrial painting business.
KEY PERFORMANCE INDICATORS
The key performance indicators used for managing the Dürr Group are:
■Order intake ■Sales
■EBIT and EBIT margin
■ROCE (EBIT to capital employed).
Cash flow from operating activities and free cash flow are also important parameters particularly at the Group level.
DIVISION ORDER INTAKE TARGETS ACHIEVED OR EXCEEDED
The following analysis of targets and actual figures refers to the four divisions forming part of the Group throughout all of 2014. The Woodworking Machinery and Systems division was not included as the HOMAG Group was only consolidated for the first time on October 3, 2014.
Order intake for Paint and Final Assembly Systems exceeded expectations substantially as the global automotive industry spent heavily on expanding and converting paint shops. In the three other divisions, order intake matched expectations.
Sales in the Measuring and Process Systems and Clean Technology Systems divisions reached the target corridor in 2014. By contrast, Paint and Final Assembly Systems fell short of the planned range due to the aforementioned project delays. Application Technology sales were only slightly below the target figure.
P. 256
P. 257
P. 257
P. 257
COMBINED MANAGEMENT REPORT Overall assessment by the Board of Management
83
Paint and Final Assembly Systems and Measuring and Process Systems substantially outperformed their EBIT margin targets with figures of 9.8 % and 12.1 %, respectively (2013: 8.4 % and 7.9 %, respectively). Key factors in this respect were our growing service business, productivity gains and good order execution. Moreover, the earnings turnaround in the industrial cleaning technology field spurred Measuring and Process Systems. At 10.5 %, the EBIT margin in the Application Tech-nology division reached a high level but fell slightly short of the target corridor due to start-up costs for the new activities in industrial painting. At 5.6 %, Clean Technology Systems achieved the target level. The targets for the divisions for 2015 can be found in the report on expected future development.
MAIN EVENTS DRIVING BUSINESS PERFORMANCE
The growth in automotive production and, in tandem with this, heavy capital spending throughout the sector were the main driving forces behind our business performance in 2014. The acquisition of a majority interest in the HOMAG Group affected sales and earnings for only part of the year as the company was not consolidated until October 3, 2014. With total business valued at over € 950 mil-lion, the HOMAG Group will have a significant impact on Dürr’s figures in 2015. The consolidation of the HOMAG Group was fully reflected in Dürr’s financial condition and net assets as at the 2014 balance sheet date. Further details can be found in the chapter entitled financial development. All in all, the Dürr Group’s balance sheet and financial ratios can still be considered to be solid after the acquisition of the majority interest in the HOMAG Group.
P. 139
P. 97 2.17 TARGET ACHIEVEMENT OF THE DIVISIONS 20141
sAles (€ million) order intAke (€ million) eBit mArgin (%) 2014 target 2014 act. 2014 target 2014 act. 2014 target 2014 act.
Paint and Final Assembly Systems 1,100 to 1,200 1,078.2 1,050 to 1,150 1,291.8 7 to 8.4 9.8
Application Technology 550 to 580 526.0 550 to 600 560.9 11 to 12 10.5
Measuring and Process Systems 580 to 630 581.9 560 to 620 577.1 8 to 9 12.1
Clean Technology Systems 120 to 140 136.0 120 to 150 144.9 5 to 6 5.6
1 No targets have been defined for Woodworking Machinery and Systems as this division was only established on October 3, 2014, with the consolidation of the HOMAG Group.
CONSOLIDATED FINANCIAL STATEMENTS
COMBINED MANAGEMENT REPORT
IFRS, REPORTING PR ACTICE, CONSOLIDATION OF THE HOMAG GROUP
The charts and tables in this management report generally contain IFRS figures for the years from 2012 through 2014. EBIT is defined as earnings before interest, income taxes and income from investments.
Amendments to the IFRS did not have any material impact on the presentation of our economic position in 2014. Relatively few reporting options are available under the IFRs and their utilization impacts our net assets, financial position and results of operations only minimally. Reporting op-tions are available, for example, in connection with items such as inventories or property, plant and equipment. In the case of important balance-sheet items, we exercise options in such a way that the greatest possible measurement continuity is preserved. For example, financial instruments are measured at amortized cost as far as possible rather than at fair values. We made use of all report- ing options in unchanged form in 2014. The use of accounting measures has virtually no influence on the presentation of our results of operation. Moreover, it is inconsistent in many cases with our commitment to continuity and cross-period transparency.
The HOMAG Group has been fully consolidated by Dürr AG since October 3, 2014. It is included in the Dürr Group’s segment report as the Woodworking Machinery and Systems division. Naturally enough, the HOMAG Group is not included in the following figures relating to the Dürr Group for 2013 and 2012. For this reason, there are considerable differences in absolute figures and growth rates between 2014 (including the HOMAG Group) and earlier years in some cases.
SUBSTANTIAL INCREASE IN ORDER INTAKE IN 2014
Order intake rose by 17 % to € 2,793.0 million in 2014. A good half of this growth came from the consolidation of the HOMAG Group from October 3, 2014. In the Dürr Group excluding the HOMAG Group, the growth in order intake was particularly accounted for by the Paint and Final Assembly Systems division, which received several major contracts from China, Germany, Italy, Mexico, Poland and elsewhere. Most of the Group’s new orders were generated in the automotive industry, where capital spending remained at a high level. Roughly two thirds of the orders received from this sector entailed capacity expansion projects, although modernization spending is also growing in impor-tance. We operated at full capacity utilization in 2014 thanks to the high order intake.
€ million 2014 2013 2012
Germany 411.9 323.1 387.1
Other European countries 856.1 566.3 742.0 North / Central America 438.5 507.1 381.1
South America 91.8 224.9 102.6
Asia, Africa, Australia 994.7 765.7 984.0
Total 2,793.0 2,387.1 2,596.8
HOMAG Group AG / Woodworking Machinery and Systems was consolidated for the first time on October 3, 2014.
2.18 CONSOLIDATED ORDER INTAKE BY REGION