SHARP CASH FLOW IMPROVEMENT

In 2013, cash flow from operating activities reached an exceptionally high level of € 329.1 million (2012: € 117.6 million). After € – 29.7 million in the first quarter, it steadily improved in the course of the year. This was based on the sharp rise in earnings and revenues; in addition, we received extraordinarily high prepayments and progress payments from customers in the fourth quarter.

This caused the level of net working capital to decrease by € 122.6 million after having risen by

€ 69.1 million in the preceding year. The other items of our cash flow from operating activities do not reflect any major changes on balance, as shown in table 2.41.

Cash flow from investing activities amounted to € – 111.4 million in fiscal 2013 (2012: € – 23.4 mil-lion). The substantially higher investments in property, plant and equipment as well as in holdings were a key influential factor. Moreover, we invested in fixed-term deposits and other financial investment assets (such as bonds), whereas in the previous year, fixed-term deposits had been cancelled.

P. 204 2.4 0 FINANCIAL LIABILITIES (DECEMBER 31)

€ million 2013 2012 2011

Bond 225.2 225.4 225.5

Liabilities to banks 41.9 56.5 57.2

Liabilities to associated companies accounted for according to the equity method 0.0 0.0 0.0

Liabilities under finance leases 4.0 4.2 3.5

Total 271.1 286.1 286.2

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104

Cash flow from financing activities amounted to € – 100.9 million (2012: € – 43.6 million). Aside from the fund outflows for interest and the dividend, this includes the payment for the remaining shares in Agramkow Fluid Systems A/S. The reduction of current financial liabilities is likewise taken into account in the cash flow from financing activities.

Owing to the high cash flow from operating activities, free cash flow rose to € 261.9 million in 2013 (2012: € 65.9 million). This key figure shows what means are available for dividend payout, stock redemptions, acquisitions and improvement in the Net fiNaNcial status. In addition 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 expenditure (included in the cash flow from financing activities). The other cash flows (€ – 78.1 million) in table 2.41 comprise, among other things, outflows for acquisitions of holdings, finance leases and the dividend payout.

Thanks to the high free cash flow, the net financial status improved by € 183.8 million as at Decem-ber 31, 2013, to € 280.5 million.

In assessing the exceptionally high cash flow in 2013, the following facts and circumstances should be taken into account: thanks to the extensive payment receipts from customers in the fourth quar-ter, the prepayments reported as liabilities at the end of 2013 increased to € 596.8 million. On the other hand, the assets side of our balance sheet includes future receivables from construction con-tracts that correspond directly to the prepayments reported under liabilities. For this reason, the prepayments reported under liabilities should not be viewed separately. A more meaningful figure is the balance of future receivables from construction contracts and prepayments received. It re-flects the amount by which orders are pre-financed by our customers. As at December 31, 2013, the negative balance (including small series production) increased by € 97.3 million year-on-year, to reach € – 206.5 million. This additional figure of just under € 100 million exceeds the typical level and, for improved comparability, should be deducted from the free cash flow reported as it will translate into outflows again in the coming months in the wake of orders being executed.

OPER ATING PERFORMANCE INDICATORS: INCOMING ORDERS, SALES, EBIT AND ROCE In controlling our company, the primary focus is on four key financials: incoming orders, sales, EBIT/EBIT margin and roce (EBIT to capital employed). Moreover, we assign a great deal of impor-tance, particularly at Group level, to operating cash flow (cash flow from operating activities) and free cash flow. At the level of the divisions and business units, the focus is on the margins of indi-vidual orders and EBIT. Other non-financial performance indicators such as employee satisfaction

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P. 245

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2.41 CASH FLOW

€ million 2013 2012 2011

Earnings before income taxes 184.6 147.7 85.8

Depreciation and amortization 27.4 28.5 20.6

Interest result 19.0 29.6 21.3

Income tax payments – 35.9 – 21.3 – 14.3

Change in provisions 12.8 – 17.2 0.6

Change in net working capital 122.6 – 69.1 – 2.3

Other – 1.4 19.4 16.2

Cash flow from operating activities 329.1 117.6 127.9

Interest payments (net) – 16.2 – 20.3 – 16.5

Investments in property, plant and equipment and intangible assets – 51.0 – 31.4 – 19.6

Free cash flow 261.9 65.9 91.8

Other cash flows – 78.1 – 21.0 – 63.6

Change in net financial status +183.8 + 44.9 + 28.2

GROUP MANAGEMENT REPORT Financial development

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1 In accordance with IAS 36, WACC is calculated on the basis of the parameters of our peer group, in other words not taking Dürr Group’s capital structure into account. In contrast, according to the literature a company’s weighted arithmetical average cost of equity and debt is normally used to calculate WACC for valuation purposes.

2.42 PERFORMANCE INDICATORS

    2013 2012 2011

Incoming orders € million 2,387.1 2,596.8 2,684.9

Sales € million 2,406.9 2,399.8 1,922.0

EBIT € million 203.0 176.9 106.5

ROCE % 66.2 43.9 28.4

or key ecological figures are likewise determined within the Group on a regular basis but are not included in our monthly business management. For further particulars, please refer to the chapter on sustaiNability.

The analysis of incoming orders and the resulting sales is particularly important for managing our capacity utilization in a forward-looking manner. In 2013, both these key figures were within the planned scope. By looking at EBIT and the EBIT margin, we assess the quality of the results of our operating activities; both figures were above our original expectations in the year under review.

ROCE provides information on whether we generate an appropriate return on the capital employed for our operating activities. Using this as a basis, our allocation of resources can be effectively controlled. In 2013, ROCE of the Dürr Group, at 66.2 %, was substantially higher year-on-year and also reached an exceptionally high level compared to the industry standard. The decisive factors in this were, firstly, the high EBIT level and, secondly, the extensive prepayments and progress pay-ments made by customers at the end of the year, which caused the capital employed to decline to

€ 306.4 million in spite of high investments (December 31, 2012: € 402.6 million).

ROCE (in %) is calculated as follows:

EBIT 100

Capital Employed

Capital employed is the capital tied down in our operating activities. It takes account of all assets except cash and cash equivalents less non-interest-bearing liabilities.

Due to the sharp EBIT increase, the economic value added (EVA) was clearly positive at € 121.6 mil-lion. The EVA reflects the value that a company creates or destroys in a financial year and is calcu-lated as follows:

EVA = NOPAT – (WACC Capital Employed)

■NOPAT = Net Operating Profit After Taxes / EBIT after fictitious taxes ■WACC = Weighted Average Cost of Capital

WACC¹ share of equity cost of equity share of debt cost of debt 1 tax rate

82.5 % 7.44 % 17.5 % 4.53 % 1 29.50 % 6.69 %

Cost of equity = risk-free interest (2.75 %) + risk premium (6.00 %) beta factor (0.781) = 7.44 %

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CONSOLIDATE D FINAN

CIAL

STATEM EN

TS

GROUP MANAGEMENT REPORT Financial development

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2.43 VALUE ADDED

    2013 2012 2011

Capital employed (Dec. 31) € million 306.4 402.6 374.8

ROCE % 66.2 43.9 28.4

NOPAT € million 142.1 123.8 74.6

Weighted average cost of capital (WACC) % 6.69 6.58 7.64

EVA € million 121.6 97.3 45.9

2.4 4 ROCE BY DIVISION

% 2013 2012 2011

Paint and Assembly Systems¹ > 100 > 100 > 100

Application Technology 43.2 41.1 25.9

Measuring and Process Systems 16.2 18.0 9.2

Clean Technology Systems 17.1 15.6 > 100

1 negative capital employed

In the Application Technology and Clean Technology Systems divisions, due to higher earnings, roce increased to 43.2 % and 17.1 %, respectively. In view of the decline in earnings, in the Mea-suring and Process Systems division it declined to 16.2 % but exceeded the cost of capital substan-tially. It is not feasible to calculate the ROCE for the Paint and Assembly Systems division since the capital employed was negative. The different ROCE levels of the divisions are due to the fact that the capital tied up in plant construction is usually lower than in mechanical engineering.