5. Other information

The GF Corporation maintains pension plans in various countries. The accounting for Swiss pension plans is based on the financial statements of the pension plan according to Swiss GAAP FER 26. Plans in other locations are accounted for according to their local regulations. The employee benefit plan in the US was closed as planned in the second half of 2020. Most of the employee pension plans have their own assets in addition to the respective pension obligations.

The table shows the economic benefit and the economic obligation as of the end of the year under review and for the previous year, as well as the changes in pension benefit expenses.

The economic part of the Corporation in the patronage funds amounted to CHF 0 million (previous year: CHF 0 million). 

One pension plan has a surplus. The Georg Fischer Pension Fund is overfunded by CHF 24 million (previous year: CHF 0 million). This is mainly due to the good performance of the financial investments.

The pension plan underfunded in the amount of CHF 20 million (previous year: CHF 21 million) is based on the defined benefit plan in the UK. The amount of the underfunding depends significantly on the value of the securities and on the discount rate and the expected mortality rate used in the calculation of the pension liabilities. The total economic obligation, which represents the expected cash outflow in the medium term, amounts to CHF 16 million (previous year: CHF 16 million). The data of the previous year includes the employee benefit plan in the US which was closed in the meantime.

The recognized economic obligation from the pension plans with no assets of their own, i.e. unfunded plans, amounted to CHF 36 million (previous year: CHF 34 million) and concerns primarily the employee pension plans in Germany and Sweden. The CHF 2 million increase in the economic obligation is included in the pension fund expenses for the period.

Loans from pension funds in the amount of CHF 3 million (previous year: CHF 1 million) are current account balances of employee benefit plans and patronage foundations at Georg Fischer AG. 

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

Changes in the recognized economic obligations from pension plans and the employer-paid contributions for the year under review amounted to CHF 34 million (previous year: CHF 32 million) and are included in “Personnel expenses”.

The employee benefit plans of the Corporation comply with the legislation in force in each country. Employee benefit plans are mostly institutions and foundations that are independent of the Corporation. They are usually financed by both employee and employer contributions.

The economic impact of the employee benefit plans is assessed each year. Surpluses or deficits are determined by means of the annual statements of each specific benefit plan, which are based either on Swiss GAAP FER 26 (Swiss benefit plans) or on the accepted methods in each foreign country (foreign plans). An economic benefit is capitalized if it is permitted and intended to use the surplus to reduce the employer contributions. Any employer contribution reserves are also capitalized. An economic obligation is recognized as a liability if the conditions for a provision are met. They are reported under “Employee benefit obligations”. Changes in the economic benefit or economic obligation, as well as the contributions incurred for the period, are recognized in “Personnel expenses” in the income statement.

In 2019, the non-current loans to associates related to loans granted to a management buy-out company (Fondium group) that acquired the two German iron foundries divested in 2018 and where GF retained an ownership of 20%.

In 2020, GF supported an operational and financial restructuring of the Fondium group. The financial restructuring included the sale of all remaining investments in these associates, see also note 4.1 (4.1.1 Additions, disposals and mergers). Consequently, the non-current loans are no longer related to associates but to third parties. In addition to the sale of the investments in the Fondium group, the loan terms were modified. CHF 72 million of subordinated loans before value adjustments were converted into mezzanine financing, which bears a conditional interest of up to 5% but no guaranteed interest and has an expected maturity of 7 to 10 years. For other subordinated loans over CHF 8 million before value adjustments, the maturity was extended to the end of 2024 and the interest was waived.

As a result of these modifications, overall value adjustments of CHF 8 million (previous year: CHF 7 million) were recorded, see note 3.2. In addition, the total change in these loans from CHF 75 million to CHF 64 million is further explained by a net repayment of CHF 4 million as well as impacts from foreign currency movements and interest rates effects.

The recoverability of non-current loans and receivables is assessed based on the debtor’s ability to repay on time and in full. In order to build this assessment, management regularly observes the debtor’s adherence to the interest payments and principal amortization schedule. As well as in the case of investments in associates, management also assess the debtor’s ability to continue as a going concern. Assessing the debtor’s going concern assumptions requires the management to assess the viability of the debtor’s business model, which is inherently subject to a higher level of estimation uncertainty.

Non-current loans and receivables are recognized at amortized cost. In addition, an impairment is recorded in case the assumed present value of expected cash flows is below the carrying value of the non-current loans and receivables.

Investments in associates and non-current loans to associates are assessed for their recoverability holistically (net investment approach). Initially, investments and non-current loans are recorded at their actual values. Subsequently, the value of the investment is increased for the proportionate share in undistributed profits and reduced for the proportionate share in incurred losses as well as dividends obtained. If the value of the investment is reduced to zero, further proportionate shares in losses are allocated to the non-current loans. The value of the investment and the non-current loans are further reduced in case of impairments.

Deferred tax assets and liabilities are offset within GF Corporate Companies when there is a legally enforceable right to offset current tax assets against current tax liabilities and the deferred taxes related to the same fiscal authority. The effect of offsetting at the GF Corporate Company level amounted to CHF 55 million (previous year: CHF 46 million). Deferred tax assets and liabilities are calculated based on the actually expected income tax rates for each GF Corporate Company. For further information on the recognition of tax loss carryforwards, see note 1.5.

Temporary differences associated with investments in subsidiaries, for which no deferred tax liabilities have been recognized, amounted to CHF 459 million as of 31 December 2020 (previous year: CHF 479 million).

The consolidated financial statements were approved and released for publication by the Board of Directors on 25 February 2021. They must also be approved at the Annual Shareholders’ Meeting.

On 16 December 2020, GF Piping Systems announced the acquisition of FGS Brasil Indústria e Comércio Ltda. (FGS), Cajamar (Brazil). FGS has become Brazil’s leading manufacturer of high-density polyethylene pipes (HDPE), fittings, and additional equipment within a few years. FGS generates sales of approximately BRL 160 million (approx. CHF 27 million) with a workforce of 240 employees. Both parties have agreed not to disclose any financial details of the transaction. Closing is expected in the first quarter of 2021.

Regarding the adjustment of the Board of Directors after the balance sheet date, reference is made to the corresponding explanation in the Corporate Governance Report (Changes after the balance sheet date).