Consolidated financial statement

Notes

1 Changes in scope of consolidation

Notes

1 Changes in scope of consolidation

During the year under review, the scope of consolidation changed as follows:

Additions (foundations) 2016

  • As of 26 January 2016, GF Linamar LLC, Mills River, USA
    Division: GF Automotive
  • As of 1 April 2016, Chinaust Automotive LLC, Troy, USA
    Division: GF Piping Systems
  • As of 1 September 2016, Chinaust Automotive GmbH, Düsseldorf, Germany
    Division: GF Piping Systems
  • As of 14 October 2016, Georg Fischer Bearbeitung Singen GmbH, Singen, Germany
    Division: GF Automotive
  • As of 28 October 2016, Chinaust Plastics Ltd, Xian, China
    Division: GF Piping Systems

Additions (acquisitions) 2016

  • As of 7 March 2016, Georg Fischer Hakan Plastik AS, Cerkezköy, Turkey
    Remaining 10% of the capital
    Division: GF Piping Systems 
  • As of 4 May 2016, Eurapipe Holdings Pte Ltd, Singapore, Singapore
    Division: Corporate Management
  • As of 4 May 2016, PT Eurapipe Solutions Indonesia, Karawang, Indonesia
    Pro rata sales 2016: CHF 12.4 million
    Division: GF Piping Systems
  • As of 11 May 2016, Microlution Inc, Chicago, USA
    Pro rata sales 2016: CHF 9.5 million
    Division: GF Machining Solutions
  • As of 30 September 2016, Lingyun Jingran Gas Valve Co. Ltd, Langfang, China
    Pro rata sales 2016: CHF 0.6 million
    Division: GF Piping Systems
  • As of 30 September 2016, Shuchang Auto Part Co. Ltd, Langfang, China
    Pro rata sales 2016: CHF 2.4 million
    Division: GF Piping Systems

Disposals (liquidations) 2016

  • As of 1 July 2016, System 3R Shanghai Co. Ltd., Shanghai, China
    Pro rata sales 2016: CHF 0 million
    Division: GF Machining Solutions 

During the previous year, the scope of consolidation changed as follows:

Additions (foundations) 2015

  • As of 25 February 2015, GF Export Inc., El Monte, USA
    Division: Corporate Management
  • As of 27 April 2015, GF Machining Solutions Co Ltd, Hanoi, Vietnam
    Division: GF Machining Solutions

2 Acquisitions and divestitures of Affiliated Companies

2 Acquisitions and divestitures of Affiliated Companies

Additions (acquisitions) 2016

Total cash-out for the acquisitions inclusive earn-out payments amounted to CHF 96 million in the year under review. 

Acquisition of Georg Fischer Hakan Plastik AS

On 7 March 2016, Georg Fischer Ltd, Schaffhausen (Switzerland), acquired the remaining 10% of the capital of Georg Fischer Hakan Plastik AS, Cerkezköy (Turkey). Georg Fischer Ltd owns now 100% of the capital of Georg Fischer Hakan Plastik AS.

Acquisition of PT Eurapipe Solutions Indonesia

Georg Fischer Ltd, Schaffhausen (Switzerland), acquired 100% of the capital of Eurapipe Holdings Pte Ltd, Singapore (Singapore). With the acquisition of the Eurapipe Holdings 100% of the capital of PT Eurapipe Solutions Indonesia, Karawang (Indonesia), was acquired. The closing date was 4 May 2016.

PT Eurapipe Solutions Indonesia, founded in 1992, generated sales of about CHF 19 million with a workforce of approximately 100 people, in 2015. PT Eurapipe Solutions Indonesia produces and distributes pipes and fittings made from polyethylene for the industry sector. The company holds a leading position in the mining business and other water related market segments.

The following table shows the assets and liabilities assessed at fair value at the time control was acquired. For this presentation, the translation of the original US dollar values into Swiss francs was calculated using the exchange rates of the respective transaction date:

CHF million

 

Acquired assets and liabilities

 

 

 

Cash and cash equivalents

 

6

Trade accounts receivable

 

4

Inventories

 

2

Other accounts receivable

 

1

Property, plant, and equipment

 

4

Deferred tax assets

 

1

Total assets

 

18

 

 

 

Non-interest bearing liabilities

 

3

Net assets

 

15

Acquisition of Microlution Inc

Georg Fischer Corporation, El Monte (USA), acquired 100% of the capital of Microlution Inc, Chicago (USA). The closing date was 11 May 2016.

Microlution Inc is a producer of micro-milling machines and laser hole-drilling and laser cutting machines. Microlution Inc, founded in 2005, generated sales of about CHF 9.6 million with a workforce of approximately 30 people, in 2015.

The following table shows the assets and liabilities assessed at fair value at the time control was acquired. For this presentation, the translation of the original US dollar values into Swiss francs was calculated using the exchange rates of the respective transaction date:

CHF million

 

Acquired assets and liabilities

 

 

 

Trade accounts receivable

 

2

Inventories

 

1

Total assets

 

3

 

 

 

Non-interest bearing liabilities

 

3

Interest-bearing liabilities

 

1

Net assets

 

–1

Acquisition of Lingyun Jingran Gas Valve Co. Ltd and Shuchang Auto Part Co. Ltd

Georg Fischer Ltd, Schaffhausen (Switzerland), acquired 40% of the capital of Lingyun Jingran Gas Valve Co. Ltd, Langfang (China) and 40% of the capital of Shuchang Auto Part Co. Ltd, Langfang (China). The transaction includes the acquisition of the remaining 10% outstanding shares of the two companies in two years. The closing date was 30 September 2016.

Both companies, Lingyun Jingran Gas Valve Co. Ltd and Shuchang Auto Part Co. Ltd are companies of the Chinaust group, a 50/50 joint venture of GF Piping Systems in China.

Lingyun Jingran Gas Valve Co. Ltd specializes on polyethylene ball valves for gas distribution networks. Shuchang Auto Part Co. manufactures quick connectors for automotive fuel lines. Together, they generated sales of approximately CHF 20 million with a total workforce of approximately 200 employees in 2015. Both have been trusted suppliers of the Chinaust group for years.

The following table shows the assets and liabilities assessed at fair value at the time control was acquired. For this presentation, the translation of the original Chinese renminbi yuan values into Swiss francs was calculated using the exchange rates of the respective transaction date:

CHF million

 

Acquired assets and liabilities (40%)

 

 

 

Trade accounts receivable

 

5

Inventories

 

3

Other accounts receivable

 

3

Prepayments to creditors

 

1

Property, plant, and equipment

 

4

Intangible assets

 

1

Total assets

 

17

 

 

 

Non-interest bearing liabilities

 

5

Interest-bearing liabilities

 

1

Net assets

 

11

Disposals (divestitures) 2016

During the year under review, there were no disposals of Affiliated Companies by divestitures.

Additions (acquisitions) and disposals (divestitures) 2015

In the previous year, there were neither additions of Affiliated Companies by acquisitions nor disposals by divestitures. 

3 Trade accounts receivable

3 Trade accounts receivable

Trade accounts receivable are value-adjusted, as shown in the table below, where necessary and allocated to the following regions: 

CHF million

 

2016

 

2015

 

 

 

 

 

Gross values

 

696

 

664

 

 

 

 

 

Individual value adjustments

 

–8

 

–6

Overall value adjustments

 

–22

 

–18

Net values

 

666

 

640

 

 

 

 

 

Europe

 

293

 

307

– Thereof Germany

 

88

 

98

– Thereof Switzerland

 

25

 

22

– Thereof Austria

 

13

 

15

– Thereof Rest of Europe

 

167

 

172

Americas

 

90

 

88

Asia

 

243

 

206

– Thereof China

 

180

 

141

Rest of world

 

40

 

39

Total

 

666

 

640

As of the balance sheet date, the aging structure of the trade accounts receivable, which are not subject to individual value adjustments, was as follows:

 

 

 

 

2016

 

 

 

2015

CHF million

 

Receivable after individual value adjustments

 

Overall value adjustment

 

Receivable after individual value adjustments

 

Overall value adjustment

 

 

 

 

 

 

 

 

 

Not yet due

 

551

 

 

 

531

 

 

1 to 30 days overdue

 

66

 

 

 

64

 

 

31 to 90 days overdue

 

36

 

 

 

32

 

 

91 to 180 days overdue

 

20

 

9

 

15

 

5

More than 180 days overdue

 

15

 

13

 

16

 

13

Total

 

688

 

22

 

658

 

18

Value adjustments on trade accounts receivable have changed as follows:

CHF million

 

2016

 

2015

 

 

 

 

 

Individual value adjustments

 

 

 

 

 

 

 

 

 

As of 1 January

 

6

 

8

Increase/decrease

 

2

 

–2

As of 31 December

 

8

 

6

 

 

 

 

 

Overall value adjustments

 

 

 

 

 

 

 

 

 

As of 1 January

 

18

 

18

Increase/decrease

 

4

 

As of 31 December

 

22

 

18

The individual value adjustments amounted to CHF 8 million (previous year: CHF 6 million). It is assumed that part of the underlying receivables will be paid. Receivables not due are mainly receivables arising from long-standing customer relationships. Based on experience, GF does not anticipate any significant defaults. For further information on credit management and trade accounts receivable, see the chapter Risk management.

4 Inventories

4 Inventories

CHF million

 

2016

 

2015

 

 

 

 

 

Raw materials and components

 

230

 

241

Work in progress

 

149

 

127

Finished goods

 

450

 

420

Gross value of inventories on hand

 

829

 

788

 

 

 

 

 

Valuation adjustments

 

–156

 

–148

Inventories

 

673

 

640

5 Income taxes receivable 

5 Income taxes receivable 

Of the total income taxes receivable of CHF 14 million, CHF 6 million relate to Switzerland, CHF 2 million each to Sweden and Germany, and CHF 1 million each to the USA, China, Turkey, and other countries.

6 Other accounts receivable 

6 Other accounts receivable 

CHF million

 

2016

 

2015

 

 

 

 

 

Tax credits from indirect taxes

 

29

 

25

Other current accounts receivable

 

23

 

24

Total

 

52

 

49

7 Movements in property, plant, and equipment

7 Movements in property, plant, and equipment

CHF million

 

Invest- ment properties

 

Un- developed property

 

Land

 

Buildings

 

Building com- ponents

 

Machinery and production equipment

 

Other equipment

 

Assets under construction

 

Assets held under finance leases

 

Property, plant, and equipment for own use

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of 31 December 2014

 

81

 

3

 

41

 

623

 

132

 

1'707

 

315

 

104

 

16

 

2'941

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additions

 

 

 

 

 

 

 

10

 

4

 

55

 

6

 

92

 

 

 

167

Disposals

 

–4

 

 

 

–2

 

–18

 

–2

 

–22

 

–5

 

 

 

 

 

–49

Changes in scope of consolidation

 

–2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other changes, reclassifications

 

1

 

 

 

 

 

16

 

5

 

182

 

–100

 

–90

 

 

 

13

Translation adjustment

 

–5

 

 

 

–3

 

–34

 

–8

 

–132

 

–11

 

–7

 

–2

 

–197

As of 31 December 2015

 

71

 

3

 

36

 

597

 

131

 

1'790

 

205

 

99

 

14

 

2'875

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additions

 

 

 

 

 

4

 

7

 

5

 

67

 

8

 

83

 

5

 

179

Disposals

 

 

 

 

 

 

 

–1

 

–2

 

–42

 

–7

 

 

 

–1

 

–53

Changes in scope of consolidation

 

 

 

 

 

 

 

2

 

 

 

5

 

1

 

 

 

 

 

8

Other changes, reclassifications

 

–2

 

 

 

1

 

18

 

3

 

68

 

7

 

–98

 

 

 

–1

Translation adjustment

 

 

 

 

 

–1

 

–9

 

–1

 

–21

 

–2

 

 

 

–1

 

–35

As of 31 December 2016

 

69

 

3

 

40

 

614

 

136

 

1'867

 

212

 

84

 

17

 

2'973

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated depreciation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of 31 December 2014

 

–37

 

 

 

–360

 

–84

 

–1'233

 

–249

 

 

–6

 

–1'932

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additions

 

–1

 

 

 

 

 

–16

 

–5

 

–87

 

–12

 

 

 

–2

 

–122

Disposals

 

3

 

 

 

 

 

16

 

1

 

21

 

5

 

 

 

 

 

43

Other changes, reclassifications

 

 

 

 

 

 

 

 

 

–1

 

–92

 

88

 

 

 

 

 

–5

Translation adjustment

 

2

 

 

 

 

 

18

 

4

 

97

 

9

 

 

 

1

 

129

As of 31 December 2015

 

–32

 

 

 

–342

 

–85

 

–1'294

 

–159

 

 

–7

 

–1'887

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additions

 

–1

 

 

 

 

 

–16

 

–5

 

–91

 

–12

 

 

 

–2

 

–126

Disposals

 

 

 

 

 

 

 

1

 

1

 

37

 

6

 

 

 

1

 

46

Changes in scope of consolidation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other changes, reclassifications

 

1

 

 

 

 

 

–1

 

 

 

3

 

 

 

 

 

 

 

2

Translation adjustment

 

 

 

 

 

 

 

4

 

1

 

12

 

1

 

 

 

 

 

18

As of 31 December 2016

 

–32

 

 

 

–354

 

–88

 

–1'333

 

–164

 

 

–8

 

–1'947

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Carrying amount

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of 31 December 2014

 

44

 

3

 

41

 

263

 

48

 

474

 

66

 

104

 

10

 

1'009

As of 31 December 2015

 

39

 

3

 

36

 

255

 

46

 

496

 

46

 

99

 

7

 

988

As of 31 December 2016

 

37

 

3

 

40

 

260

 

48

 

534

 

48

 

84

 

9

 

1'026

The insurance value of property, plant, and equipment amounted to CHF 4ʼ250 million (previous year: CHF 4ʼ001 million).

The lines “Changes in scope of consolidation” show exclusively the acquisitions at GF Piping Systems.

Investments in property, plant, and equipment in 2016 came to CHF 179 million (previous year: CHF 167 million). They were made primarily by the GF Automotive division with CHF 88 million (previous year: CHF 80 million) and the GF Piping Systems division with CHF 49 million (previous year: CHF 46 million). Investments in property, plant, and equipment with an effect on liquidity in the 2017–2020 period amount to CHF 98 million. This amount mainly relates to investments for the GF Piping Systems division in the amount of CHF 12 million and the GF Automotive division in the amount of CHF 82 million.

The values in the row “Other changes, reclassifications” are largely due to two movements. First, an investment property of GF Automotive was reclassified as “Property, plant, and equipment for own use”. Second, some of GF Machining Solutions demo machines earmarked for sale were reclassified from “Non-current assets” to “Inventories” (CHF 2 million net).

The fair value of investment properties, as determined by internal experts on the basis of capitalized and current market values, is CHF 61 million (previous year: CHF 62 million).

In the period under review, CHF 1 million of interest on assets under construction was capitalized.

8 Movements in the intangible assets

8 Movements in the intangible assets

CHF million

 

Land use rights

 

Software

 

Royalties, patents, others

 

Total

 

 

 

 

 

 

 

 

 

Cost

 

 

 

 

 

 

 

 

As of 31 December 2014

 

15

 

39

 

14

 

68

 

 

 

 

 

 

 

 

 

Additions

 

 

 

3

 

1

 

4

Disposals

 

 

 

–1

 

–1

 

–2

Translation adjustment

 

–1

 

–1

 

–1

 

–3

As of 31 December 2015

 

14

 

40

 

13

 

67

 

 

 

 

 

 

 

 

 

Additions

 

1

 

3

 

1

 

5

Disposals

 

–1

 

 

 

 

 

–1

Changes in scope of consolidation

 

 

 

 

 

1

 

1

Translation adjustment

 

1

 

 

 

 

 

1

As of 31 December 2016

 

15

 

43

 

15

 

73

 

 

 

 

 

 

 

 

 

Accumulated amortization

 

 

 

 

 

 

 

 

As of 31 December 2014

 

–3

 

–26

 

–12

 

–41

 

 

 

 

 

 

 

 

 

Additions

 

 

 

–3

 

–1

 

–4

Disposals

 

 

 

1

 

1

 

2

Translation adjustment

 

 

 

1

 

1

 

2

As of 31 December 2015

 

–3

 

–27

 

–11

 

–41

 

 

 

 

 

 

 

 

 

Additions

 

–1

 

–3

 

–1

 

–5

Impairment

 

 

 

 

 

–1

 

–1

Translation adjustment

 

 

 

–1

 

 

 

–1

As of 31 December 2016

 

–4

 

–31

 

–13

 

–48

 

 

 

 

 

 

 

 

 

Carrying amount

 

 

 

 

 

 

 

 

As of 31 December 2014

 

12

 

13

 

2

 

27

As of 31 December 2015

 

11

 

13

 

2

 

26

As of 31 December 2016

 

11

 

12

 

2

 

25

The intangible assets are subdivided into “Land use rights”, “Software”, and “Royalties, patents, others”. These are the major categories of the intangible assets.

Land use rights, in the amount of CHF 11 million, and the “Royalties, patents, others” category in the amount of CHF 2 million were completely unchanged from the previous year. “Software”, in the amount of CHF 12 million, remained almost unchanged compared with the previous year (previous year: CHF 13 million).

Impairment charges in the amount of CHF 1 million in the “Royalties, patents, others” category relate to an exclusive supplier agreement with the GF Piping Systems division, which had to be written down due to non-performance of a contract, and a sole agency agreement in Korea with the GF Machining Solutions division, which was written off due to the termination of the contract.

Goodwill

Goodwill from acquisitions is offset against the Corporation’s equity at the acquisition date. The theoretical amortization is based on the straight-line method over the useful life of five years. The adjustment in the year under review in the amount of CHF –1 million (previous year: CHF 29 million) is due to a belated adjustment of the conditional purchase price of Sterisol from the year 2013. The adjustment will be amortized together with the goodwill over the remaining period of amortization.

The theoretical capitalization of the goodwill would affect the result of the consolidated financial statements as follows:

Theoretical movements in goodwill

CHF million

 

2016

 

2015

 

 

 

 

 

Cost

 

 

 

 

As of 1 January

 

500

 

501

 

 

 

 

 

Additions from acquisitions

 

54

 

 

Adjustments

 

–1

 

29

Translation adjustment

 

–8

 

–30

As of 31 December

 

545

 

500

 

 

 

 

 

Accumulated amortization

 

 

 

 

As of 1 January

 

–441

 

–437

 

 

 

 

 

Additions regular

 

–38

 

–26

Translation adjustment

 

4

 

22

As of 31 December

 

–475

 

–441

 

 

 

 

 

Theoretical book values, net

 

 

 

 

As of 1 January

 

59

 

64

As of 31 December

 

70

 

59

Effect on income statement

CHF million

 

2016

 

2015

 

 

 

 

 

Operating result (EBIT)

 

311

 

296

Return on sales (EBIT margin) %

 

8.3

 

8.1

Amortization goodwill

 

–38

 

–26

Theoretical operating result (EBIT) incl. amortization of goodwill

 

273

 

270

Theoretical return on sales (EBIT margin) %

 

7.3

 

7.4

 

 

 

 

 

Net profit

 

225

 

198

Amortization goodwill

 

–38

 

–26

Theoretical net profit incl. amortization of goodwill

 

187

 

172

Effect on balance sheet

CHF million

 

2016

 

2015

 

 

 

 

 

Equity according to balance sheet

 

1'200

 

1'130

Theoretical capitalization of net book value of goodwill

 

70

 

59

Theoretical equity incl. net book value of goodwill

 

1'270

 

1'189

 

 

 

 

 

Equity as % of balance sheet total

 

37.5

 

36.7

Theoretical equity incl. net book value of goodwill as % of balance sheet total (incl. goodwill)

 

38.8

 

37.8

For goodwill positions, that are listed in the theoretical movements, an impairment test is performed, if there is any indication that these goodwill positions could be affected from such an impairment. If such indications exist, an impairment test is performed for the goodwill positions offset against equity to determine the recoverable amount.

On the basis of the impairment test made on the balance sheet date, no indications of impairment were found, therefore all goodwill positions have retained their recoverable value. The goodwill of Georg Fischer Hakan Plastik AS was tested for impairment in addition. The recoverable amount of Georg Fischer Hakan Plastik AS equals the value in use, which is determined based on future discounted cash flows.

As a basis for the calculation, business plans for the next five years are used. Subsequent years are included in the calculation using a perpetual annuity with a growth assumption of zero. The projections are based on knowledge and experience as well as on current judgments made by management as to the probable economic development of the relevant markets. It is assumed that there are no significant planned changes in the organization of any of the divisions, except for the measures already decided and announced.

By applying the capital asset pricing model, a specific rate for the cost of capital was calculated for Georg Fischer Hakan ­Plastik AS. The calculation of this discount rate refers to the data of a relevant peer group. Furthermore, specific values for the risk-free interest rate, the market risk premium, the borrowing costs, and the tax rate were applied.

Since the cash flow projections are based on cash flows after tax, the discount rate has also been determined taking tax ­effects into account. The discount rate for Georg Fischer Hakan Plastik AS was calculated at 16.0%.

It was confirmed that the theoretical goodwill of Georg Fischer Hakan Plastik AS retained its recoverable value.

9 Categories of financial instruments

9 Categories of financial instruments

The following table shows the carrying amount of all financial instruments per category. For details on the market values of the bonds, see note 13.

CHF million

 

2016

 

2015

 

 

 

 

 

Financial instruments (assets)

 

 

 

 

 

 

 

 

 

Cash and cash equivalents (excluding fixed-term deposits)

 

511

 

507

 

 

 

 

 

Fixed-term deposits

 

60

 

42

Other financial assets 1

 

8

 

11

Trade accounts receivable

 

666

 

640

Other accounts receivable 2

 

23

 

24

Accrued income

 

21

 

19

Loans and receivables stated at amortized cost

 

778

 

736

 

 

 

 

 

Marketable securities

 

3

 

4

Funds

 

1

 

1

Financial assets recognized in income statement at market value

 

4

 

5

 

 

 

 

 

Derivative financial instruments for hedging purposes

 

4

 

5

 

 

 

 

 

Financial instruments (liabilities)

 

 

 

 

 

 

 

 

 

Other financial liabilities

 

241

 

271

Trade accounts payable

 

470

 

420

Bonds

 

523

 

499

Other current/non-current liabilities 3

 

77

 

90

Accrued liabilities and deferred income 4

 

218

 

198

Liabilities stated at amortized cost

 

1'529

 

1'478

 

 

 

 

 

Derivative financial instruments

 

23

 

36

1 Relates to loans to third parties, security deposits, and long-term-invested securities for the settlement of pension liabilities. For more details, see note 10.

2 The balance sheet item "Other accounts receivable" includes tax credits. For more details, see note 6.

3 The balance sheet item "Other current/non-current liabilities" includes derivative financial instruments. For more details, see note 15.

4 For more details, see note 16.

The carrying amount of the securities and listed non-controlling interests recognized at their fair value is determined on the basis of the share prices at the balance sheet date. The market value of the foreign exchange contracts on the balance sheet is determined by the replacement value at the balance sheet date.

10 Other financial assets

10 Other financial assets

Other financial assets amounted to CHF 10 million and included investments in associates with a carrying value of CHF 1 million as well as long-term loans and receivables of CHF 5 million (previous year: CHF 7 million).

Investments in associates

The investments in detail are as follows:

  • Chinaust Automotive GmbH, Düsseldorf (Germany)
  • WIBILEA AG, Neuhausen (Switzerland)
  • Eisenbergwerk Gonzen AG, Sargans (Switzerland)
  • Mecartex SA, Losone (Switzerland)
  • Georg Fischer Corys LLC, Dubai (United Arab Emirates)
  • Polytherm Central Sudamericana SA, Buenos Aires (Argentina)
  • Chinaust Automotive LLC, Troy, MI (USA)
  • Liechti (Shanghai) Engineering Co Ltd, Shanghai (China)
  • GF Machining Solutions Co Ltd, Hanoi (Vietnam)

Long-term loans and receivables

CHF 3 million of the long-term loans and receivables fall due in the next three years and CHF 2 million at a later date. Using translated values, CHF 4 million were lent in euros and CHF 1 million in UAE dirhams. The interest rates for the loans granted were around 6%. 

Other financial assets also include long-term-invested securities for the settlement of pension liabilities in the amount of CHF 3 million (previous year: CHF 4 million).

11 Deferred tax assets and liabilities 

11 Deferred tax assets and liabilities 

Deferred tax assets and liabilities relate to the following balance sheet items:

CHF million

 

Tax assets

 

Tax liabilities

 

2016 net

 

Tax assets

 

Tax liabilities

 

2015 net

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment properties

 

 

 

7

 

–7

 

 

 

8

 

–8

Property, plant, and equipment for own use

 

11

 

37

 

–26

 

13

 

41

 

–28

Intangible assets

 

3

 

1

 

2

 

3

 

1

 

2

Tax loss carryforwards

 

5

 

 

 

5

 

7

 

 

 

7

Inventories

 

26

 

15

 

11

 

26

 

14

 

12

Provisions

 

16

 

4

 

12

 

16

 

3

 

13

Other interest-bearing liabilities

 

4

 

2

 

2

 

2

 

 

 

2

Other non-interest-bearing liabilities

 

33

 

8

 

25

 

38

 

7

 

31

Other balance sheet items

 

14

 

3

 

11

 

10

 

3

 

7

Total

 

112

 

77

 

35

 

115

 

77

 

38

 

 

 

 

 

 

 

 

 

 

 

 

 

Offsetting

 

–32

 

–32

 

 

 

–32

 

–32

 

 

Deferred tax assets/liabilities

 

80

 

45

 

35

 

83

 

45

 

38

Deferred tax assets and liabilities are offset within Corporate Companies when there is a legally enforceable right to offset current tax assets against current tax liabilities and the deferred taxes relate to the same fiscal authority. The effect of offsetting at the Corporate Company level amounted to CHF 32 million (previous year: CHF 32 million). Deferred tax assets and liabilities are calculated based on the actually expected income tax rates for each Corporate Company. For further information on the recognition of tax loss carryforwards, see note 28.

Temporary differences associated with investments in subsidiaries, for which no deferred tax liabilities have been recognized, amounted to CHF 378 million as of 31 December 2016 (previous year: CHF 355 million).

12 Movements in provisions

12 Movements in provisions

CHF million

 

Warranties

 

Onerous contracts

 

Legal cases

 

Restruc- turing provisions

 

Other provisions

 

Personnel and social security

 

Provisions

 

Deferred tax liabilities

 

Provisions and deferred tax liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of 31 December 2014

 

30

 

11

 

12

 

1

 

37

 

69

 

160

 

46

 

206

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reclassifications

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Increase

 

18

 

3

 

6

 

 

6

 

10

 

43

 

5

 

48

Interest expense arising from discounting

 

 

 

 

 

 

 

 

1

 

 

 

1

 

 

 

1

Use

 

–11

 

–3

 

–3

 

–1

 

–11

 

–5

 

–34

 

 

 

–34

Release

 

–5

 

–2

 

–2

 

 

 

–3

 

–1

 

–13

 

–6

 

–19

Translation adjustment

 

–2

 

–1

 

 

 

–2

 

–5

 

–10

 

 

 

–10

As of 31 December 2015

 

30

 

8

 

13

 

 

28

 

68

 

147

 

45

 

192

– Thereof current

 

17

 

6

 

1

 

 

10

 

4

 

38

 

 

38

– Thereof non-current

 

13

 

2

 

12

 

 

 

18

 

64

 

109

 

45

 

154

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of 31 December 2015

 

30

 

8

 

13

 

 

28

 

68

 

147

 

45

 

192

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reclassifications

 

 

 

 

 

 

 

 

 

 

 

1

 

1

 

 

 

1

Increase

 

19

 

6

 

9

 

 

 

4

 

9

 

47

 

5

 

52

Interest expense arising from discounting

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Use

 

–14

 

–3

 

–3

 

 

 

–4

 

–7

 

–31

 

 

 

–31

Release

 

–4

 

–1

 

–2

 

 

 

–5

 

–3

 

–15

 

–5

 

–20

Translation adjustment

 

 

 

 

 

 

 

 

 

 

 

–1

 

–1

 

 

 

–1

As of 31 December 2016

 

31

 

10

 

17

 

 

23

 

67

 

148

 

45

 

193

– Thereof current

 

21

 

10

 

1

 

 

6

 

5

 

43

 

 

43

– Thereof non-current

 

10

 

 

16

 

 

17

 

62

 

105

 

45

 

150

Provisions are classified as follows: “Warranties on series products” (machines, or similar), “Onerous contracts” (when the costs of meeting the contractual obligations exceed the expected economic benefits), “Legal cases”, “Restructuring provisions” (legal and constructive obligations with third parties, that have been communicated beforehand), “Personnel and social security” (provisions that are related to employee benefits), and “Other provisions”.

The valuation of provisions in all categories is based on actual data if available (e.g. claims that have occurred or been ­reported) or on the experience of recent years and management estimates. The deferred tax liabilities are based on temporary valuation differences, which are reported in the balance sheet at the Corporate Company level.

Warranty provisions amounting to CHF 31 million are nearly unchanged compared with the previous year. Due to the favorable claims outcome, it was possible to release CHF 4 million. At the same time, new warranty provisions of CHF 19 million had to be set aside, and CHF 14 million were utilized.

37% of the warranty provisions are for GF Machining Solutions and 28% for GF Automotive. They derive from complaints and claims for damages made to the various locations.

The non-current provisions in the “Personnel and social security” category in the amount of CHF 62 million (previous year: CHF 64 million) are expected to result in a cash outflow in an average of ten years, the non-current provisions in the other categories are expected to result in a cash outflow within the next two to three years.

Provisions in the “Legal cases” category relate to a number of individual cases involving the various divisions with an ­estimated cash outflow of less than CHF 6 million per case.

The “Other provisions” category contains provisions for pension plans in the amount of CHF 14 million and for other operating risks.

Expenditures not connected with pension plans in the narrow sense, such as awards for length of service and anniversary bonuses are recognized in the “Personnel and social security” category and amounted to CHF 67 million in 2016 (previous year: CHF 68 million).

13 Interest-bearing financial liabilities

13 Interest-bearing financial liabilities

Net debt, which is calculated as the difference between interest-bearing liabilities and the cash, and cash equivalents, and marketable securities, decreased by CHF 24 million to CHF 214 million in the year under review (previous year: CHF 238 million). The reason for this decrease is primarily the high free cash flow, in the amount of CHF 135 million. This was offset by the dividend payment to GF shareholders and minority shareholders amounting to CHF 89 million (previous year: CHF 77 million).

Interest-bearing financial liabilities consist of the following items:

CHF million

 

Within 1 year

 

Up to 5 years

 

Maturity over 5 years

 

2016

 

Within 1 year

 

Up to 5 years

 

Maturity over 5 years

 

2015

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other financial liabilities (at fixed interest rates) 1

 

16

 

72

 

19

 

107

 

17

 

73

 

33

 

123

Other financial liabilities (at variable interest rates)

 

129

 

5

 

 

 

134

 

141

 

6

 

1

 

148

Bonds (at fixed interest rates)

 

 

 

150

 

373

 

523

 

200

 

150

 

149

 

499

Loans from pension fund institutions

 

29

 

 

 

 

 

29

 

27

 

 

 

 

 

27

Total

 

174

 

227

 

392

 

793

 

385

 

229

 

183

 

797

1 This category comprises other financial liabilities with a fixed interest period of more than three months.

In order to secure non-current liabilities, assets valued at CHF 16 million (previous year: CHF 16 million) were pledged or ­assigned as collateral. These assets consisted of property, valued at CHF 2 million (previous year: CHF 2 million) and buildings valued at CHF 14 million (previous year: CHF 14 million).

Further information on pledged assets can be found in note 22.

The table below shows in detail the various categories of other financial liabilities by currency and interest rate:

CHF million

 

Issuing currency

 

Range interest rate %

 

2016

 

Issuing currency

 

Range interest rate %

 

2015

 

 

 

 

 

 

 

 

 

 

 

 

 

Other financial liabilities (at fixed interest rates) 1

 

 

 

 

 

107

 

 

 

 

 

123

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CHF

 

1.1–3.5

 

22

 

CHF

 

1.1–3.5

 

22

 

 

EUR

 

2.5–5.0

 

64

 

EUR

 

4.7–5.1

 

73

 

 

CNY

 

6.1–7.6

 

13

 

CNY

 

6.1–7.6

 

14

 

 

Other

 

4.3–13.3

 

8

 

Other

 

4.3–13.3

 

14

 

 

 

 

 

 

 

 

 

 

 

 

 

Other financial liabilities (at variable interest rates)

 

 

 

 

 

134

 

 

 

 

 

148

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CNY

 

3.9–5.3

 

74

 

CNY

 

5.0–6.0

 

54

 

 

TRY

 

12.6–14.5

 

23

 

TRY

 

9.2–14.7

 

63

 

 

EUR

 

1.0–2.0

 

32

 

EUR

 

1.1–2.0

 

25

 

 

Other

 

0.0–9.3

 

5

 

Other

 

0.0–17.3

 

6

 

 

 

 

 

 

 

 

 

 

 

 

 

Bonds (at fixed interest rates)

 

 

 

 

 

523

 

 

 

 

 

499

 

 

 

 

 

 

 

 

 

 

 

 

 

Bond (Georg Fischer Ltd) 3 3/8% 2010-2016 (12 May) Nominal value: CHF 200 million

 

 

 

 

 

 

 

CHF

 

3.7

 

200

Bond (Georg Fischer Finanz AG) 1 1/2% 2013-2018 (12 September) Nominal value: CHF 150 million

 

CHF

 

1.6

 

150

 

CHF

 

1.6

 

150

Bond (Georg Fischer Finanz AG) 2 1/2% 2013-2022 (12 September) Nominal value: CHF 150 million

 

CHF

 

2.6

 

149

 

CHF

 

2.6

 

149

Bond (Georg Fischer Finanz AG) 7/8% 2016-2026 (12 May) Nominal value: CHF 225 million

 

CHF

 

0.9

 

224

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans from pension fund institutions

 

 

 

 

 

29

 

 

 

 

 

27

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EUR

 

6.0

 

25

 

EUR

 

6.0

 

26

 

 

CHF

 

2.0

 

4

 

CHF

 

2.0

 

1

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

 

 

 

 

793

 

 

 

 

 

797

1 This category comprises other financial liabilities with a fixed interest period of more than three months.

In the year under review, the issue of a ten-year bond of over CHF 225 million allowed GF to improve the balance of the maturity structure. In addition, GF was able to benefit from significantly better conditions for this transaction.

GF has the following syndicated loan:

Debtors

 

Term

 

Credit

 

Thereof utilized

Georg Fischer Ltd/Georg Fischer Finanz AG

 

2015–2020

 

CHF 250 million

 

CHF 0 million

The syndicated loan gives GF the necessary financial security to be able to act swiftly in the event it wishes to make acquisitions. This line of credit was not drawn on in the year under review. In addition to other terms, the loan is subject to covenants with respect to the net debt ratio (ratio of net debt to EBITDA), the interest-coverage ratio (ratio of EBITDA to net interest expense), and the equity ratio (ratio of equity to total assets). The loan has additional terms such as are usual for a syndicated loan. Due to the improvement in EBITDA compared with the previous year and the low level of net debt, the expense relating to this loan could be further reduced.

The bonds placed on the market as well as the syndicated loan are subject to the usual cross-default clauses, whereby the outstanding amounts may all become due if early repayment of another loan is demanded of the company or one of its main Corporate Companies owing to a failure to meet the credit terms. As of the balance sheet date, the effective credit terms had been met.

The interest-bearing financial liabilities also include loans payable to employee benefit plans in the amount of CHF 29 million (previous year: CHF 27 million).

14 Employee benefit liabilities

14 Employee benefit liabilities

The overall employee benefits situation at the Corporation is as follows: 

Employer contribution reserves

The employer contribution reserves in the amount of CHF 1 million from the previous year were used entirely in the year under review for the transfer of the employees of Liechti Engineering AG, Langnau (Switzerland), to the Pension Fund GF Machining Solutions. In the previous year, the employer contribution reserves were recorded as non-current assets under “Other financial assets”.

Economic benefit/economic obligation and pension benefit expenses

The table below shows the economic benefit and the economic obligation at the end of the year under review and for the previous year, as well as the development of pension benefit expenses:

 

 

 

 

2016

 

2015

 

 

 

 

 

 

 

2016

 

2015

CHF million

 

Surplus/ deficit according to FER 26

 

Economic part of the Corporation

 

Economic part of the Corporation

 

Translation differences

 

Change to prior-year period or recognised in the current result of the period, respectively

 

Contri- butions concering the business period

 

Pension benefit expenses within personnel expenses

 

Pension benefit expenses within personnel expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Patronage funds

 

11

 

 

 

 

 

 

 

 

 

1

 

1

 

1

Employee benefit plans w/o surplus/deficit

 

 

 

 

 

 

 

 

 

 

 

12

 

12

 

19

Employee benefit plans with surplus

 

5

 

 

 

 

 

 

 

 

 

9

 

9

 

 

Employee benefit plans with deficit

 

–25

 

–20

 

–19

 

–2

 

3

 

1

 

4

 

1

Employee benefit plans without own assets

 

 

 

–99

 

–101

 

–1

 

–1

 

2

 

1

 

3

Loans from pension fund institutions

 

 

 

–29

 

–27

 

 

 

 

 

 

 

 

 

 

Total

 

–9

 

–148

 

–147

 

–3

 

2

 

25

 

27

 

24

The employee benefit plans with a deficit in the amount of CHF 25 million (previous year: CHF 18 million) relate to the defined benefit plans in the UK and the USA. The amount of the deficit depends largely on the value of the securities and on the discount rate applied to determine the pension obligations. The entire economic obligation covering the outflow of funds anticipated in the medium term corresponds to the reported deficit and amounts to CHF 20 million (previous year: CHF 19 million). The economic obligation for employee benefit plans without own assets, i.e. unfunded plans, as recognized in the balance sheet, amounts to CHF 99 million (previous year: CHF 101 million) and relates mainly to employee benefit plans in Germany. The loans from pension fund institutions in the amount of CHF 29 million (previous year: CHF 27 million) are from pension fund institutions in Germany that have invested their funds in Corporate Companies.

The table below summarizes the pension benefit expenses in the year under review and for the previous year:

CHF million

 

2016

 

2015

 

 

 

 

 

Contributions to employee benefit plans from Corporate Companies

 

24

 

23

Contributions to employee benefit plans from employer contribution reserves

 

1

 

 

Total contributions

 

25

 

23

+/- Change in ECR from asset developments, value adjustments, etc.

 

 

 

 

Contributions and change in employer contribution reserves

 

25

 

23

 

 

 

 

 

Decrease/increase in economic benefit of the Corporation from surplus

 

 

 

 

Increase/decrease in economic obligation of the Corporation from deficit

 

 

 

 

Increase/decrease in economic obligation of the Corporation (employee benefit plans without own assets)

 

2

 

1

Total change in economic effect of surplus/deficit

 

2

 

1

Pension benefit expenses within personnel expenses in the period under review

 

27

 

24

The change in the economic obligation from employee benefit plans and the employer contributions paid for the year under review, as recognized in the balance sheet, amount to CHF 27 million (previous year: CHF 24 million) and are included in the “Personnel expenses”.

15 Other liabilities

15 Other liabilities

CHF million

 

2016

 

2015

 

 

 

 

 

Social security

 

14

 

13

Other non-interest-bearing liabilities

 

36

 

55

Derivative financial instruments

 

23

 

36

Other tax liabilities (e.g. withholding tax)

 

27

 

22

Total

 

100

 

126

- Thereof short term

 

53

 

80

- Thereof long term

 

47

 

46

Derivative financial instruments

GF uses financial instruments as part of its Corporation-wide risk management approach. Currency risks from accounts receivable, accounts payable, and financing in foreign currencies are partially hedged. The only hedging instruments employed are forward exchange contracts and currency swaps with a maximum maturity of twelve months. The hedging of other underlying assets consists of hedging against price fluctuations relating to the purchase of raw materials and energy. 

Positive market values are reported in the balance sheet under the item “Marketable securities”, while negative values are recognized under “Other liabilities”.

The following table shows the (gross) market value of the derivative financial instruments as of 31 December 2016 and 2015, broken down by investment category:

 

 

 

 

 

 

2016

 

 

 

 

 

2015

CHF million

 

Contract- or nominal value

 

Positive market value

 

Negative market value

 

Contract- or nominal value

 

Positive market value

 

Negative market value

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative financial instruments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign exchange (e.g. forward exchange contracts)

 

367

 

2

 

–6

 

340

 

3

 

–2

Other underlyings

 

67

 

2

 

–17

 

104

 

2

 

–34

Total

 

434

 

4

 

–23

 

444

 

5

 

–36

16 Accrued liabilities and deferred income 

16 Accrued liabilities and deferred income 

CHF million

 

2016

 

2015

 

 

 

 

 

Overtime, holiday, bonuses, and sales-related premiums

 

89

 

79

Accrued expenses/deferred income for commissions and discounts

 

27

 

24

Accrued expenses/deferred income for annual audit fees

 

4

 

4

Other accrued expenses and deferred income

 

98

 

91

Total

 

218

 

198

17 Share capital/capital management

17 Share capital/capital management

Share capital

As of 31 December 2016, the share capital comprised 4ʼ100ʼ898 registered shares with a par value of CHF 1 each. Total dividend-bearing nominal capital amounted to CHF 4ʼ100ʼ898.

Capital management

The capital managed by the Corporation consists of the consolidated equity. The Corporation has set the following goals for the management of its capital:

  • maintain a healthy and sound balance sheet structure based on going concern values
  • ensure the necessary financial scope in order to make investments and acquisitions in the future
  • realize a return for investors commensurate with the risk

The Corporation uses two ratios to monitor equity: the equity ratio and the return on equity. The equity ratio represents equity as a percentage of total assets. Return on equity is net profit expressed as a percentage of average equity. These ratios are reported to the Executive Committee and the Board of Directors at regular intervals through the internal financial reporting. Both, total equity and the balance sheet total, increased slightly, resulting in an unchanged equity ratio of 37% as of 31 December 2016.

As an industrial group, GF strives to maintain a strong balance sheet with a high portion of equity. In the medium term, the Corporation aims to achieve an equity ratio of 35% to 40%. The medium-term target for return on equity is above 15%.

The ratios are shown in the table below:

CHF million

 

2016

 

2015

 

 

 

 

 

Equity attributable to shareholders of Georg Fischer Ltd

 

1'156

 

1'081

Non-controlling interests

 

44

 

49

Equity

 

1'200

 

1'130

 

 

 

 

 

Total assets

 

3'202

 

3'083

Equity ratio as %

 

37.5

 

36.7

 

 

 

 

 

Theoretical equity incl. net value of goodwill

 

1'270

 

1'189

Theoretical equity ratio incl. net value of goodwill as %, total assets incl. goodwill

 

38.8

 

37.8

 

 

 

 

 

Average reported equity

 

1'165

 

1'117

Net profit

 

225

 

198

Return on average reported equity as %

 

19.3

 

17.7

The Corporation does not have any financial covenants with minimal capital requirements. There is one financial covenant concerning the equity ratio.

The Board of Directors presents a proposal for the appropriation of retained earnings to the Annual Shareholders’ Meeting. GF pursues a results-oriented dividend policy and usually distributes about 30% to 40% of the Corporation’s consolidated net profit to shareholders. This may be distributed either in the form of a dividend payment from the retained earnings or from the reserves from capital contributions. The Board of Directors is proposing to the Annual Shareholders’ Meeting a dividend payment out of the retained earnings of CHF 20 in total per registered share for the fiscal year 2016 (previous year: CHF 18 in total per registered share). As of 31 December 2016, the par value of the Georg Fischer registered share amounts to CHF 1.

The authorized capital and the conditional capital consists of a maximum of 600ʼ000 shares. The maximum amount of the authorized or conditional capital is reduced by the amount that authorized or conditional capital is created through the issue of bonds or similar debt instruments or new shares.

By no later than 22 March 2018, the maximum authorized share capital will be CHF 600ʼ000 divided into no more than 600ʼ000 registered shares each with a par value of CHF 1.

The reserves which are not disposable respectively distributable amount to CHF 85 million as of 31 December 2016 (previous year: CHF 122 million). The decrease is caused by offsetting agio reserves with losses carry forward in Corporate Companies.

18 Earnings per share

18 Earnings per share

The earnings per share in the amount of CHF 53 (previous year: CHF 46) is calculated by dividing the portion of net profit attributable to Georg Fischer Ltd shareholders by the weighted average number of shares outstanding during the year under review (number of shares issued less number of own shares). The weighted average number of shares amounted to 4ʼ090ʼ412 in 2016 (previous year: to 4ʼ089ʼ244).

There was no dilution of earnings per share in either the year under review or the previous year.

19 Treasury shares 

19 Treasury shares 

 

 

 

 

 

 

2016

 

 

 

 

 

2015

 

 

Quantity

 

Transaction price (Ø) in CHF

 

Purchase cost (Ø) in CHF million

 

Quantity

 

Transaction price (Ø) in CHF

 

Purchase cost (Ø) in CHF million

 

 

 

 

 

 

 

 

 

 

 

 

 

As of 1 January

 

8'635

 

652.63

 

6

 

14'673

 

622.33

 

9

 

 

 

 

 

 

 

 

 

 

 

 

 

Purchases

 

20'467

 

820.60

 

17

 

20'104

 

663.58

 

13

Disposals

 

–6'785

 

811.92

 

–6

 

–17'715

 

663.63

 

–12

Transfers (share-based compensation)

 

–9'979

 

705.24

 

–7

 

–8'427

 

629.09

 

–5

Changes in share price

 

 

 

 

 

 

 

 

 

 

 

1

As of 31 December

 

12'338

 

834.00

 

10

 

8'635

 

652.63

 

6

As of year-end 2016, GF held 12ʼ338 treasury shares with a par value of CHF 1 (previous year: 8ʼ635 registered shares). In the year under review, 20ʼ467 treasury shares were purchased on the stock market at an average transaction price of CHF 820.60, and 6ʼ785 treasury shares were sold on the stock market at an average transaction price of CHF 811.92.

According the compensation model for the Board of Directors, members receive a fixed number of Georg Fischer registered shares. In accordance with the long-term incentive plan, members of the Executive Committee are entitled to a fixed number of restricted Georg Fischer registered shares (RS) and a number of performance restricted Georg Fischer registered shares (PS). The vesting of the performance restricted shares (PS) is based on an assumption of Earnings per Share (EPS) – values over prospective three years. Based on a plan defined by the Board of Directors, a fixed number of Georg Fischer registered shares are granted to members of senior management as long-term financial incentive.

Of the 12ʼ388 treasury shares (registered shares) held by GF as of year-end 2016, 7ʼ704 registered shares are foreseen for share based compensation of Executive Committee and members of senior mamangement.

The allocation for the share-based compensation is based on the relevant plan regulations. The share-based compensation for members of the Board of Directors, for the Executive Committee as well as the registered shares for the members of the senior management are stated at fair value and recognized as an expense at the allocation date. Such compensation is recorded under “Operating expenses” (see note 24) for the Board of Directors and under “Personnel expenses” (see note 25) for the Executive Committee and senior management. The total expense for the share-based compensation plans is CHF 8 million (previous year: CHF 6 million).

20 Contingent liabilities 

20 Contingent liabilities 

Contingent liabilities amount to CHF 7 million (previous year: CHF 4 million) and include take-back obligations from leasing transactions with third parties in the amount of CHF 5 million (previous year: CHF 2 million), as well as guarantees and securities granted to third parties of CHF 2 million (previous year: CHF 2 million). This contrasts with the contingent assets amounting to CHF 5 million (previous year: CHF 1 million) arising from litigation.

21 Leases 

21 Leases 

CHF million

 

2016

 

2015

 

 

 

 

 

Leasing obligations up to 1 year

 

16

 

17

Leasing obligations 1 to 5 years

 

37

 

41

Leasing obligations over 5 years

 

11

 

12

Operating leases (nominal values)

 

64

 

70

Liabilities relating to financial lease contracts in the amount of CHF 9 million (previous year: CHF 7 million) are mainly due to the leasing of the machines by GF Piping Systems and GF Automotive. The leasing obligations are included in “Other financial liabilities at fixed interest rates” and are disclosed in note 13.

22 Pledged or assigned assets 

22 Pledged or assigned assets 

Assets pledged or restricted on title in part or whole amount to CHF 20 million (previous year: CHF 21 million). In the year under review, CHF 16 million (previous year: CHF 15 million) relate to land and buildings and CHF 4 million (previous year: CHF 5 million) to accounts receivable. There are no pledged or assigned inventories (previous year: CHF 1 million).

The assets are pledged or restricted on title as collateral for bank loans.

23 Other operating income 

23 Other operating income 

CHF million

 

2016

 

2015

 

 

 

 

 

Sales of material, waste, and scrap

 

7

 

8

Income from insurance contracts

 

14

 

6

Income from services

 

9

 

11

Gains on disposals of property, plant, and equipment

 

1

 

23

Foreign exchange gains/losses

 

–2

 

–10

Other operating income

 

16

 

12

Total

 

45

 

50

24 Operating expenses

24 Operating expenses

CHF million

 

2016

 

2015

 

 

 

 

 

External services 1

 

162

 

145

Rent, leases

 

46

 

43

External energy supply

 

93

 

97

Selling costs, commissions

 

125

 

120

Advertisements, communication

 

93

 

84

Repair, maintenance

 

101

 

91

Other expenses 2

 

54

 

48

Total

 

674

 

628

1 External services include e.g. temporary employees, IT costs, R&D, insurance costs as well as consulting services.

2 Other expenses include compensation to the members of the Board of Directors of CHF 2.5 million.

25 Personnel expenses

25 Personnel expenses

CHF million

 

2016

 

2015

 

 

 

 

 

Salaries and wages

 

793

 

749

Employee benefits

 

27

 

24

Social security

 

158

 

152

Total

 

978

 

925

In accordance with a plan defined by the Board of Directors, Georg Fischer registered shares are granted to members of the Executive Committee and members of senior management as a long-term financial incentive. Taking into account the registered shares granted to members who left the firm during the year under review, a total of 7,890 shares (previous year: 6,790) were recognized as personnel expenses at their market value of CHF 6.6 million.

26 Financial result 

26 Financial result 

CHF million

 

2016

 

2015

 

 

 

 

 

Interest income

 

2

 

2

Financial income

 

2

 

2

 

 

 

 

 

Interest expenses

 

30

 

34

Net losses on financial instruments at market value recognized in income statement

 

1

 

7

Other financial expenses

 

2

 

9

Financial expenses

 

33

 

50

The accrued interest on bonds is recognized in the amount of CHF 1 million (previous year: CHF 1 million) under interest expenses.

Net losses on financial instruments at market value recognized in the income statement mainly relate to foreign exchange losses.

Financial expenses decreased by CHF 17 million to CHF 33 million in the year under review. This decrease was largely due to the lower interest rate on the refinanced bond, reduced foreign currency losses compared with the previous year and the elimination of the discount component for the earn-out paid in relation to the acquisition of Georg Fischer Hakan Plastik AS.

27 Non-operating result 

27 Non-operating result 

The non-operating result amounted to CHF 1 million (previous year: CHF 3 million). The income mainly results from the sale and the lease of various investment properties.

28 Income taxes

28 Income taxes

The difference between the expected income tax expense and the effective income tax expense recorded in the financial statements can be explained as follows:

 

 

 

 

 

 

2016

 

 

 

 

 

2015

CHF million

 

Total

 

Thereof current taxes

 

Thereof deferred taxes

 

Total

 

Thereof current taxes

 

Thereof deferred taxes

 

 

 

 

 

 

 

 

 

 

 

 

 

Tax rate reconciliation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Profit before taxes

 

281

 

 

 

 

 

251

 

 

 

 

Expected income tax rate in % (rounded)

 

22

 

 

 

 

 

21