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Consolidated financial statements

1 Performance

This section explains the performance and results as well as the segment results, which are reported on the same basis as GF’s internal management structure. It also provides details on selected income and expense items and shows the earnings per share for the period.

1.1Segment information

Sales per segment in CHF million

2021

2020

Sales per region in CHF million

Filter 1

2021

2020

Filter 2

Corporation

GF Piping Systems

GF Casting Solutions

GF Machining Solutions

Income statement in CHF million

2021

2020

Balance sheet in CHF million

2021

2020

Investments in CHF million

2021

2020

Investments per region in CHF million

Filter 1

2021

2020

Filter 2

Corporation

GF Piping Systems

GF Casting Solutions

GF Machining Solutions

Other investments

The reportable segments are the three operating divisions GF Piping Systems, GF Casting Solutions, and GF Machining Solutions.

GF Piping Systems focuses on system solutions and high-quality plastic and metal components. Its portfolio of fittings, valves, pipes, automation, and jointing technologies covers all water cycle applications. The division further offers specialized solutions, including engineering, customizing, and prefabrication. Customers are served globally by the following customer segments: Utility, Industry, and Building Technology.

GF Casting Solutions provides lightweight components to the mobility and energy industries. The division serves its customers in all global key markets and categorizes its offering into the customer segments Automotive, Industrial Applications, and Aerospace/Energy.

GF Machining Solutions provides complete solutions to the global tool and mold making industries and manufacturers of precision components. The division manufactures high-precision machine tools for milling and EDM (electro discharge machining) applications. The division further offers spindles, laser texturing, laser micromachining, additive manufacturing, automation, and tooling, as well as digitalized solutions. Customers are served globally by the following customer segments: Milling, EDM, Customer Services, and Advanced Manufacturing/Automation & Tooling.

Segment reporting

	GF Piping Systems		GF Casting Solutions		GF Machining Solutions		Total segments
CHF million	2021	2020	2021	2020	2021	2020	2021	2020

Order intake 1	2’211	1’716	907	740	941	706	4’060	3’162
Orders on hand at year-end 1	326	116	276	251	213	147	815	514

Sales per region
Europe	702	626	556	492	398	307	1’655	1’425
– Thereof Germany	176	157	258	217	123	89	557	463
– Thereof Switzerland	118	113	22	18	64	46	204	177
– Thereof rest of Europe	407	356	276	257	211	172	894	785
Americas	469	382	129	74	150	149	749	605
Asia	647	568	194	186	298	246	1’139	1’000
– Thereof China	498	450	187	176	238	188	924	814
– Thereof rest of Asia	149	118	7	10	60	58	216	186
Rest of world	153	132	1		27	23	180	155
Sales	1’971	1’708	880	752	873	725	3’724	3’185

EBITDA	302	245	63	26	61	34	426	305
Depreciation on tangible fixed assets	–52	–49	–58	–59	–12	–12	–121	–120
Amortization on intangible assets	–3	–3	–1	–1	–3	–2	–6	–6
Operating result (EBIT)	247	193	5	–34	47	20	298	179

Assets	1’563	1’399	946	948	744	613	3’252	2’960
– Thereof current assets	942	827	404	349	469	401	1’814	1’577
– Thereof non-current assets	621	572	542	599	275	212	1’438	1’383

Investments per region
Europe	25	30	17	27	18	9	60	66
– Thereof Germany	2	1	3	5	4		9	6
– Thereof Switzerland	17	23	2	4	12	8	31	35
– Thereof rest of Europe	6	6	13	18	2	1	20	25
Americas	14	15	16	31	0	4	30	50
Asia	16	10	23	12	2	2	41	24
– Thereof China	15	9	23	12	2	1	40	22
– Thereof rest of Asia	1	1			0	1	1	2
Rest of world	9	5			0		9	5
Investments	64	60	56	70	20	15	141	145
– Thereof capital expenditures	60	57	56	67	16	13	132	137
– Thereof in intangible assets	4	3	0	3	5	2	9	8

Liabilities	828	724	680	653	505	386	2’012	1’763
– Thereof current liabilities	532	442	265	272	340	243	1’137	957
– Thereof non-current liabilities	296	282	414	381	164	143	874	806

Research and development	47	46	12	17	54	49	113	112

1 Order intake and orders on hand at year-end were not included in the scope of the audit by the statutory auditor.

Reconciliation to the consolidated income statement and the consolidated balance sheet

CHF million	2021	2020

Sales
Sales of reportable segments	3’724	3’185
Elimination of intercompany sales	–2	–1
Consolidated sales	3’722	3’184

Operating result (EBIT)
Total EBIT for reportable segments	298	179
Total EBIT Corporate Center and Corporate Services	–19	–13
Consolidated operating result (EBIT)	278	166

Assets
Assets of reportable segments	3’252	2’960
Elimination of intercompany positions	–423	–395
Other assets
– Current assets (mainly cash and cash equivalents)	667	592
– Non-current assets	271	288
Consolidated assets	3’767	3’445

Liabilities
Liabilities of reportable segments	2’012	1’763
Elimination of intercompany positions	–608	–571
Other liabilities
– Current liabilities	192	35
– Non-current liabilities	661	812
Other unallocated amounts	15	17
Consolidated liabilities	2’271	2’056

Sales by customer segment

CHF million	2021	2020

Industry	774	646
Utility	722	648
Building Technology	474	414
GF Piping Systems	1’971	1’708

Automotive	702	596
Industrial Applications	110	82
Aerospace/Energy	69	74
GF Casting Solutions	880	752

Customer Services	263	224
EDM	249	185
Milling	220	213
Advanced Manufacturing/Automation & Tooling	140	103
GF Machining Solutions	873	725

Elimination of intercompany sales	–2	–1
Total	3’722	3’184

There are no single customers whose sales account for 10% or more of GF Corporation’s sales.

Accounting principles revenue recognition

Billings for goods and services are recognized as sales when they are delivered or when the principal risks and rewards incidental to ownership are transferred. An assessment as to whether the principal risks and rewards were transferred for a particular delivery is made separately for each sales transaction on the basis of the contractual agreement underlying the transaction. The transfer of legal ownership alone does not necessarily result in the transfer of the principal risks and rewards. This is the case, for instance, if:

the recipient of the delivery makes a claim against insufficient quality of the delivered item that exceeds a normal warranty claim
the receipt of the proceeds depends on the resale of the goods by the buyer
the installation of the goods at the recipient is an essential part of the contract
the buyer has the right to return the item for a contractually specified reason and the likelihood of such a return cannot be assessed with any certainty

Services rendered are recognized as sales depending on the degree of their completion if the result of the service can be reliably assessed. Sales are stated before value-added tax, sales tax, and after the deduction of discounts and credits. Appropriate warranty provisions are recognized for anticipated claims.

Accounting principles segment reporting

In accordance with the management structure and the reporting to the Executive Committee and the Board of Directors, the divisions represent the reportable segments. Segment accounting is prepared up to the level of operating result (EBIT), as this is the key figure used for management purposes. All operating assets and liabilities that are directly attributable or can be allocated on a reasonable basis to the segments are reported in the corresponding divisions. Customer segments manufacture similar products with comparable production processes and supply them to similar customer groups using similar distribution methods.

1.2Other operating income

CHF million	2021	2020

Sales of material, waste, and scrap	14	9
Income from insurance contracts	4	4
Income from services	8	8
Gains on disposals of property, plant, and equipment	6	14
Government grants	13	5
Foreign exchange gains/losses	–12	–6
Other	11	9
Total	42	43

The position “Other” primarily includes other income from suppliers and customers. In the previous year, a large part of the gains on disposals of property, plant, and equipment is attributable to the sale of a building by GF Machining Solutions in Switzerland.

1.3Operating expenses

CHF million	2021	2020

External services 1	162	142
Selling costs, commissions	135	115
Repair, maintenance	83	71
Advertisements, communication	71	61
External energy supply	84	77
Rent, leases	46	45
Other expenses	58	65
Total	640	576

1 External services mainly include temporary employees, IT costs, research and development, insurance costs as well as consulting services.

The total compensation of the Board of Directors is recognized as other expenses and amounts to CHF 2.9 million (previous year: CHF 2.7 million). The Members of the Board of Directors received a fixed remuneration paid in cash and a fixed number of GF restricted shares. The valuation of the restricted shares of CHF 1.7 million (previous year: CHF 1.6 million) is based on the year-end share price of CHF 1’385 (previous year: CHF 1’140). A total of 1’247 restricted shares were granted to the Board of Directors (previous year: 1’396).

1.4Personnel expenses

CHF million	2021	2020

Salaries and wages	807	715
Employee benefits	25	34
Social security	163	134
Total	995	883

Expenses for share-based payment to Members of the Executive Committee and Members of the Senior Management amounted to CHF 8.1 million (previous year: CHF 7.2 million) and are recognized as personnel expenses. Thereof CHF 0.9 million (previous year: CHF 1.4 million) were recognized for 1’988 performance shares (previous year: 1’764) granted to Members of the Executive Committee as long-term share-based incentive (LTI). The LTI had a grant value of CHF 2.1 million (previous year: CHF 1.4 million).

Accounting principles

The compensation for the Executive Committee consists of a fixed base salary, a short-term cash incentive, and a long-term share-based incentive (LTI) and is recognized as personnel expenses. In 2021, the LTI was revised. The revised LTI is based on a grant value corresponding to a percentage of the base salary per member, which at the beginning of the period is translated into a specific number of future subscription rights in the form of Performance Shares (PS). The PS are subject to a three-year vesting period. The vesting is further conditional on the achievement of non-market conditions (diluted earnings per share target) as well as market conditions (relative shareholder return target). Depending on the level of target achievement, the PS will be settled in shares of GF at a conversion rate of between 50% (threshold) and 150% (maximum payout). If the threshold is not met, no settlement will take place. After vesting, vested PS are blocked for additional two years. The current cost of the LTI at grant date is determined by applying a Monte Carlo simulation. Anticipated dividends are included in the model. Subsequent to the grant date, non-market conditions are remeasured at each reporting date. Adjustments from the remeasurement are recognized prospectively. Market conditions are already included in the calculation of actual value at the time they are granted and no subsequent revaluation is done. The expenses for PS are recognized over the three-year vesting period as salaries and wages against other retained earnings. Additional information on the functionality of the LTI plan is provided in the Compensation Report.

The payments under share-based compensation for Senior Management are reported as personnel expenses. Costs are recognized fully in the year in which service is rendered.

Entitlements to state compensation programs at the level of individual GF Corporate Companies due to the adverse economic effects of the COVID-19 pandemic are reported under salaries and wages.

1.5Non-operating result

The non-operating result includes the result of investment properties of CHF -2 million. In the previous year, the result of CHF 3 million included profits from the sale of investment properties, see also note 2.6 Property, plant, and equipment.

1.6Income taxes

			2021	2020
CHF million	Total	Thereof current taxes	Thereof deferred taxes	Total	Thereof current taxes	Thereof deferred taxes

Tax rate reconciliation
Profit before taxes	253			143
Statutory tax rate in %	14			14

Income tax expense at statutory tax rate	35	37	–2	20	18	2

Effect of income taxed at different rates 1	20	26	–6	6	3	3
Non-tax deductible expenses/tax exempted income	–3	–3
Use of unrecognized tax loss carryforwards	–7	–8	1	–4	–4
Effect of non-recognition of tax losses in current year	6	6		10	17	–7
Recognition of previously unrecognized tax loss carryforwards				–1		–1
Tax charges and credits related to prior periods	–1	–1		–1	–1
Non-creditable foreign withholding tax	4	4		5	5
Other effects	–1	–2	1	–4	–1	–3
Effective income tax expense	53	59	–6	31	37	–6

Effective income tax rate in %	21			22

1 The GF Corporation operates worldwide and is subject to income tax in many different tax jurisdictions. The effect of income taxed at different rates may vary from year to year due to varying results of the individual GF Corporate Companies and changes in local tax rates.

The table shows the main elements that cause the GF Corporation’s effective tax rate to differ from the statutory tax rate. The statutory tax rate is the ordinary tax rate applicable in the canton of Schaffhausen in Switzerland, where GF Corporation is headquartered. The above reconciliation starts with the statutory tax rate as it provides more meaningful information than a weighted average tax rate.

The decrease in the effective income tax rate was mainly due to the fact that the effective income tax rate in the previous year was influenced by tax losses at individual GF Corporate Companies due to the COVID-19 pandemic, which were not fully capitalized.

The unrecognized tax loss carryforwards in 2021 totaling CHF 141 million (previous year: CHF 159 million) have a potential tax relief effect of CHF 34 million (previous year: CHF 41 million), of which CHF 93 million (previous year: CHF 113 million) can be utilized for an indefinite period. CHF 1 million is to expire within one year (previous year: CHF 4 million).

As of 31 December 2021, tax loss carryforwards of CHF 46 million (previous year: CHF 51 million) were capitalized, resulting in a deferred tax asset of CHF 11 million (previous year: CHF 12 million).

Management assumptions and estimates

Current tax liabilities are calculated based on an interpretation of the tax regulations in place in the relevant countries. The adequacy of such an interpretation is assessed by the tax authorities in the course of the final assessment or tax audits. This can result in material changes to tax expense. Furthermore, in order to determine whether tax loss carryforwards may be capitalized, it is necessary to critically assess the probability of future taxable profits that can be offset. This assessment depends on a variety of influencing factors and developments.

Accounting principles

Income taxes include current and deferred taxes. Current income taxes are calculated on the taxable profit. Deferred taxes are calculated by applying the balance sheet liability method for any temporary difference between the carrying amount according to Swiss GAAP FER and the tax basis of assets and liabilities. Tax loss carryforwards are recognized only to the extent that it is probable that future taxable profits or deferred tax liabilities will be available against which they can be offset. The calculation of deferred taxes is based on the country-specific tax rates.

1.7Earnings per share

	2021	2020

Net profit attributable to shareholders of Georg Fischer Ltd	214	116
Weighted average number of shares	4’092’407	4’093’471
Basic earnings per share in CHF	52	28
Diluted earnings per share in CHF	52	28

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

Accounting principles

Earnings per share are calculated by dividing the portion of net profit attributable to shareholders of GF by the weighted average number of shares outstanding in the reporting period. Diluted earnings per share take into account any potential additional shares that may result, for instance, from exercised options or conversion rights.