Consolidated financial statements
2 Operating assets and liabilities
This section provides information on current assets and liabilities that support the ongoing operational liquidity of the GF Corporation. The section further describes the non-current tangible and intangible assets required at the GF Corporate Companies to provide products and services to their customers. Furthermore, it provides a summary of the different goodwill items and the theoretical impact of a capitalization and subsequent amortization of goodwill.
CHF million |
31.12.2022 |
31.12.2021 |
|
|
|
Cash and bank accounts |
536 |
541 |
Cash on fixed-term deposits |
309 |
343 |
Checks and drafts |
31 |
48 |
Cash and cash equivalents |
877 |
932 |
Accounting principles
Cash and cash equivalents consists of cash on hand, balances on bank accounts and short-term, highly liquid cash equivalents, which are subject to an insignificant risk of change in value and that are readily convertible to cash. Cash equivalents have a maturity of 90 days or less from the balance sheet date.
CHF million |
31.12.2022 |
31.12.2021 |
|
|
|
Gross value |
693 |
645 |
Individual value adjustments |
–5 |
–5 |
Overall value adjustments |
–28 |
–28 |
Net value |
660 |
611 |
|
|
|
Europe |
256 |
237 |
– Thereof Germany |
52 |
35 |
– Thereof Switzerland |
24 |
27 |
– Thereof rest of Europe |
180 |
175 |
Americas |
93 |
98 |
Asia |
286 |
251 |
– Thereof China |
179 |
165 |
– Thereof rest of Asia |
107 |
85 |
Rest of world |
25 |
26 |
Total |
660 |
611 |
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:
|
|
31.12.2022 |
31.12.2021 |
|
CHF million |
Receivable after individual value adjustments |
Overall value adjustments |
Receivable after individual value adjustments |
Overall value adjustments |
|
|
|
|
|
Not yet due |
535 |
|
490 |
|
1 to 30 days overdue |
66 |
|
71 |
|
31 to 90 days overdue |
50 |
|
39 |
|
91 to 180 days overdue |
18 |
13 |
18 |
14 |
More than 180 days overdue |
19 |
15 |
21 |
14 |
Total |
688 |
28 |
639 |
28 |
The individual value adjustments amounted to CHF 5 million (previous year: CHF 5 million). It is expected that part of the underlying receivables will be paid. Receivables not due are mainly receivables arising from long lasting customer relationships. Based on experience, GF does not anticipate any significant defaults. For further information on credit management and trade accounts receivable, see note 3.7.
Accounting principles
Accounts receivable are stated at nominal value. Value adjustments for doubtful accounts are established based on maturity structure and identifiable credit risks. Besides individual value adjustments with respect to specific known risks, other value adjustments are recognized based on historical experience of default risk.
CHF million |
31.12.2022 |
31.12.2021 |
|
|
|
Tax credits from indirect taxes |
33 |
38 |
Other current accounts receivable |
29 |
36 |
Total |
62 |
74 |
CHF million |
31.12.2022 |
31.12.2021 |
|
|
|
Raw materials and components |
307 |
279 |
Unfinished goods |
164 |
158 |
Finished goods |
556 |
522 |
Gross value |
1’027 |
959 |
|
|
|
Valuation adjustments |
–195 |
–182 |
Total |
833 |
776 |
Accounting principles
Goods held for trading are generally stated at average cost and internally manufactured products at standard cost, including direct labor and materials used, as well as a commensurate share of the related overhead costs. Cash discount deductions are treated as reductions in the purchase cost. If the net realizable value is lower than the above, a corresponding valuation adjustment is made. Inventories with an insufficient turnover rate are partly or fully value-adjusted.
CHF million |
31.12.2022 |
31.12.2021 |
|
|
|
Social security |
26 |
22 |
Derivative financial instruments |
2 |
2 |
Other tax liabilities |
33 |
32 |
Other non-interest-bearing liabilities |
32 |
40 |
Total |
93 |
96 |
- Thereof current |
65 |
68 |
- Thereof non-current |
28 |
28 |
CHF million |
Investment properties |
Land |
Buildings and building components |
Machinery and production equipment |
Other equipment |
Assets under construction |
Assets held under finance leases |
Property, plant, and equipment |
|
|
|
|
|
|
|
|
|
Cost at 1.1.2022 |
210 |
50 |
762 |
1’480 |
228 |
107 |
22 |
2’648 |
Additions |
1 |
1 |
19 |
25 |
8 |
118 |
9 |
180 |
Disposals |
–65 |
–0 |
–4 |
–114 |
–7 |
|
–0 |
–126 |
Changes in scope of consolidation |
|
–6 |
–54 |
–103 |
–15 |
–4 |
1 |
–180 |
Reclassifications |
–1 |
0 |
26 |
51 |
10 |
–87 |
–1 |
0 |
Translation differences |
–7 |
–2 |
–20 |
–47 |
–7 |
–6 |
–1 |
–83 |
Cost at 31.12.2022 |
138 |
43 |
729 |
1’292 |
218 |
128 |
29 |
2’440 |
|
|
|
|
|
|
|
|
|
Accumulated depreciation at 1.1.2022 |
–134 |
|
–395 |
–1’042 |
–168 |
|
–14 |
–1’619 |
Additions |
–2 |
|
–24 |
–69 |
–14 |
|
–2 |
–108 |
Impairment |
–1 |
|
|
–0 |
|
|
|
–0 |
Disposals |
45 |
|
2 |
111 |
7 |
|
0 |
120 |
Changes in scope of consolidation |
|
|
6 |
20 |
6 |
|
|
31 |
Reclassifications |
1 |
|
–1 |
–0 |
0 |
|
0 |
–0 |
Translation differences |
5 |
|
10 |
35 |
5 |
|
1 |
51 |
Accumulated depreciation at 31.12.2022 |
–87 |
|
–402 |
–946 |
–163 |
|
–15 |
–1’525 |
|
|
|
|
|
|
|
|
|
Carrying amount at 31.12.2022 |
51 |
43 |
328 |
346 |
55 |
128 |
15 |
915 |
|
|
|
|
|
|
|
|
|
Cost at 1.1.2021 |
194 |
44 |
779 |
1’446 |
238 |
80 |
24 |
2’612 |
Additions |
0 |
2 |
4 |
34 |
6 |
89 |
0 |
135 |
Disposals |
–0 |
–1 |
–5 |
–33 |
–22 |
|
–0 |
–60 |
Changes in scope of consolidation |
|
0 |
1 |
5 |
1 |
0 |
|
7 |
Reclassifications |
24 |
6 |
–16 |
40 |
6 |
–62 |
–1 |
–27 |
Translation differences |
–8 |
–1 |
–3 |
–12 |
–1 |
1 |
–1 |
–17 |
Cost at 31.12.2021 |
210 |
50 |
762 |
1’480 |
228 |
107 |
22 |
2’648 |
|
|
|
|
|
|
|
|
|
Accumulated depreciation at 1.1.2021 |
–121 |
|
–391 |
–1’004 |
–176 |
–1 |
–13 |
–1’585 |
Additions |
–3 |
|
–26 |
–78 |
–15 |
|
–3 |
–122 |
Impairment |
|
|
|
–6 |
–0 |
|
|
–6 |
Disposals |
0 |
|
4 |
31 |
22 |
|
0 |
57 |
Changes in scope of consolidation |
|
|
–0 |
–0 |
–0 |
|
|
–1 |
Reclassifications |
–16 |
|
15 |
1 |
1 |
1 |
0 |
17 |
Translation differences |
5 |
|
3 |
14 |
1 |
–0 |
1 |
19 |
Accumulated depreciation at 31.12.2021 |
–134 |
|
–395 |
–1’042 |
–168 |
|
–14 |
–1’619 |
|
|
|
|
|
|
|
|
|
Carrying amount at 31.12.2021 |
76 |
50 |
367 |
438 |
60 |
107 |
7 |
1’029 |
Additions to property, plant, and equipment for GF Piping Systems included investment in equipment in Schaffhausen (Switzerland) in the amount of CHF 12 million, in Little Rock (USA) in the amount of CHF 10 million and Shawnee (USA) in the amount of CHF 5 million as well as investment in new buildings or expansion of buildings in Yangzhou (China) in the amount of CHF 9 million and in Bani Suwayf (Egypt) in the amount of CHF 9 million. Additions for GF Casting Solutions included investment in equipment in Souzhou (China) in the amount of CHF 14 million, in Shenyang (China) in the amount of CHF 12 million and in Altenmarkt (Austria) in the amount of CHF 9 million as well as investment in buildings or expansion of buildings in Altenmarkt (Austria) in the amount of CHF 3 million. Additions for GF Machining Solutions included investment in the expansion of buildings in Losone (Switzerland) in the amount of CHF 9 million. Additions for GF Corporate Management included investment in renovation of one building in Schaffhausen (Switzerland) in the amount of CHF 14 million.
In 2022, there were additions to property, plant, and equipment with outstanding payments of CHF 11 million and non-cash additions to assets held under finance leases of CHF 9 million.
The movements in "Changes in scope of consolidation" result from acquisitions and divestments explained in more detail in note 4.1. In the previous year, the movements in "Changes in scope of consolidation" under "Accumulated depreciation" resulted from the ownership increase of Langfang Shuchang Auto Parts Co Ltd and Beijing Jingran Lingyun Gas Equipment Co Ltd.
Land includes CHF 4 million of undeveloped properties (previous year: CHF 4 million).
In the previous year, the overall movements in "Reclassifications" were explained by the reclassification of a building from property, plant, and equipment to investment properties in Werdohl (Germany), as well as demo machines earmarked for sale reclassified to inventories.
In investment properties, properties in Singen (Germany) were disposed in a non-cash transaction, see note 5.2. The actual value of investment properties, as determined by internal assessments on the basis of capitalized and current market values, is CHF 100 million (previous year: CHF 117 million).
In the previous year, impairments amounting to CHF 6 million related mostly to obsolescence of equipment due to phase-outs of product groups.
Accounting principles
Property, plant, and equipment are stated at cost or manufacturing cost less depreciation and impairment. The recoverability of property, plant, and equipment is reviewed at least once a year. If there is any indication of an impairment, an impairment test is performed immediately. If the carrying amount exceeds the recoverable amount, an impairment loss is recognized in the income statement. Financing costs of assets under construction are part of the costs of the asset if material. Assets held under finance lease contracts are capitalized at the lower of the present value of the minimum lease payments and fair value. The related outstanding finance lease obligations are presented as liabilities. See also note 3.2.
Assets are depreciated on a straight-line basis over their estimated useful lives or lease terms:
- Investment properties: 30–40 years
- Buildings: 30–40 years
- Building components: 8–20 years
- Machinery and production equipment: 6–20 years
- Other equipment (vehicles, IT systems, etc.): 1–5 years
Land and assets under construction are usually not depreciated. When components of larger assets have different useful lives, these are depreciated separately. Useful lives and residual values are reviewed annually on the balance sheet date and adjustments are recognized in the income statement. Any gains or losses on the disposal of items of property, plant, and equipment are recognized in the income statement.
Management assumptions and estimates
The recoverability of property, plant, and equipment are reviewed whenever there are indications that their carrying amount may no longer be recoverable due to changed circumstances or events. If such a situation arises, the recoverable amount is determined. It corresponds to the higher of the discounted value of expected future net cash flows and the expected net selling price. If the recoverable amount is lower than the carrying amount, a corresponding impairment loss is recognized in the income statement. The main assumptions on which these measurements are based include growth rates, margins, and discount rates. The actual future cash flows can differ considerably from discounted projections.
CHF million |
Land use rights |
Software |
Royalties, patents, others |
Intangible assets |
|
|
|
|
|
Cost at 31.12.2022 |
19 |
67 |
12 |
98 |
Accumulated amortization at 31.12.2022 |
–6 |
–47 |
–8 |
–62 |
Carrying amount at 31.12.2022 |
13 |
20 |
4 |
36 |
|
|
|
|
|
Cost at 31.12.2021 |
20 |
64 |
14 |
98 |
Accumulated amortization at 31.12.2021 |
–6 |
–43 |
–9 |
–58 |
Carrying amount at 31.12.2021 |
14 |
21 |
5 |
40 |
Accounting principles
Land use rights are amortized on a straight-line basis over the duration of the usage rights granted. For this item, useful lives can be up to 50 years. Software is amortized on a straight-line basis over the estimated useful lives of 1 to 5 years. Acquired royalties, patents, and similar rights are capitalized and amortized on a straight-line basis over their estimated useful lives of 3 to 15 years. The recoverability of intangible assets is reviewed at least once a year. If there is any indication of an impairment, an impairment test is performed immediately. If the carrying amount exceeds the recoverable amount, an impairment loss is recognized in the income statement. All research costs are recognized in the income statement in the period in which they were incurred. Development costs are recognized as an asset only to the extent that the following specific recognition criteria are all met cumulatively:
- costs are clearly defined, clearly attributable to the product or process, and can be separately identified and measured reliably
- the technical feasibility can be demonstrated
- the required internal resources are available
- the amount recognized is covered by future cash flows
The theoretical capitalization of goodwill would affect the consolidated financial statement as follows:
Theoretical movements in goodwill
CHF million |
2022 |
2021 |
|
|
|
Cost at 1.1. |
641 |
615 |
Additions from acquisitions |
5 |
41 |
Adjustments |
|
1 |
Translation differences |
–11 |
–16 |
Cost at 31.12. |
635 |
641 |
|
|
|
Accumulated amortization at 1.1. |
–596 |
–574 |
Additions regular |
–18 |
–37 |
Translation differences |
13 |
15 |
Accumulated amortization at 31.12. |
–601 |
–596 |
|
|
|
Theoretical carrying amount at 31.12. |
34 |
45 |
Effect on income statement
CHF million |
2022 |
2021 |
|
|
|
Operating result (EBIT) |
391 |
278 |
Return on sales (EBIT margin) % |
9.8 |
7.5 |
Amortization goodwill |
–18 |
–37 |
Theoretical operating result (EBIT) incl. amortization/impairment of goodwill |
373 |
241 |
Theoretical return on sales (EBIT margin) % |
9.3 |
6.5 |
|
|
|
Net profit |
280 |
200 |
Amortization goodwill |
–18 |
–37 |
Theoretical net profit incl. amortization/impairment of goodwill |
262 |
163 |
Effect on balance sheet
CHF million |
31.12.2022 |
31.12.2021 |
|
|
|
Equity according to balance sheet |
1’656 |
1’496 |
Theoretical capitalization of goodwill |
34 |
45 |
Theoretical equity incl. goodwill |
1’690 |
1’541 |
|
|
|
Equity as % of balance sheet total |
44.8 |
39.7 |
Theoretical equity incl. goodwill as % of balance sheet total incl. goodwill |
45.3 |
40.4 |
The theoretical amortization is based on the straight-line method over the useful life of five years. The addition in 2022 is attributable to the acquisition of VAM Control S.r.l. (CHF 5 million). In the previous year, the additions were mainly related to the acquisitions of F.G.S. Brasil Indústria e Comércio Ltda (CHF 31 million) and Oxford Flow Utility & Industries Ltd (CHF 9 million).
In 2022, no indications of impairment were found.
In 2021, the impairment tests for the former Global Supply Company LLC (merged into Georg Fischer LLC), GF Casting Solutions SRL, and Symmedia GmbH revealed that the resulting recoverable amounts based on value in use calculations exceeded the respective carrying amounts.
Accounting principles
When acquiring a GF Corporate Company or an associate, goodwill as of the date of acquisition is calculated as follows: the acquisition price plus transaction costs incurred in connection with the acquisition less the value of revalued net assets.
The positive or negative goodwill resulting from acquisitions and changes in ownership are offset in equity against retained earnings at the date of acquisition. Upon the disposal of a GF Corporate Company or an associate, the goodwill previously offset in equity is transferred to the income statement. If parts of the purchase price are dependent on future results, they are estimated as accurately as possible at the acquisition date and recognized in the balance sheet. In the event of disparities when the definitive purchase price is settled, the goodwill offset in equity is adjusted accordingly.
The recoverability of the goodwill reported in the theoretical movement table is reviewed at least once a year. If there is any indication of an impairment, an impairment test is performed immediately. If the carrying amount exceeds the recoverable amount, an impairment loss is recognized. As the goodwill is already offset in equity at the date of the acquisition, an impairment of the goodwill does not affect the income statement, but leads to a disclosure in the notes only.
Management assumptions and estimates
For goodwill, an impairment test is performed if there is any indication that the theoretical book value is no longer recoverable. As a basis for the calculation, business plans for the next five years are used. 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.
CHF million |
Personnel |
Warranties |
Legal |
Onerous contracts |
Restructuring |
Other |
Provisions |
|
|
|
|
|
|
|
|
Balance at 1.1.2022 |
54 |
36 |
9 |
7 |
2 |
17 |
125 |
Increase |
9 |
16 |
4 |
4 |
0 |
4 |
38 |
Use |
–4 |
–9 |
–1 |
–2 |
–2 |
–2 |
–21 |
Release |
–2 |
–5 |
–2 |
–2 |
|
–1 |
–12 |
Changes in scope of consolidation |
1 |
|
|
|
|
|
1 |
Translation differences |
–3 |
–1 |
–0 |
–0 |
–0 |
–1 |
–5 |
Balance at 31.12.2022 |
55 |
37 |
9 |
6 |
0 |
17 |
125 |
– Thereof current |
4 |
28 |
2 |
4 |
0 |
7 |
45 |
– Thereof non-current |
51 |
10 |
7 |
1 |
0 |
11 |
79 |
|
|
|
|
|
|
|
|
Balance at 1.1.2021 |
56 |
39 |
7 |
9 |
12 |
17 |
140 |
Increase |
7 |
19 |
3 |
3 |
0 |
5 |
37 |
Use |
–5 |
–12 |
–1 |
–1 |
–10 |
–3 |
–32 |
Release |
–2 |
–8 |
–1 |
–4 |
–0 |
–1 |
–16 |
Changes in scope of consolidation |
|
0 |
0 |
|
|
0 |
0 |
Translation differences |
–2 |
–1 |
–0 |
–0 |
–0 |
–1 |
–5 |
Balance at 31.12.2021 |
54 |
36 |
9 |
7 |
2 |
17 |
125 |
– Thereof current |
3 |
24 |
1 |
5 |
2 |
6 |
42 |
– Thereof non-current |
50 |
12 |
8 |
1 |
0 |
11 |
83 |
Personnel
Includes provisions for employee retirement benefits and other service-related employee benefits which are not provided by pension funds or similar institutions, as well as anniversary bonuses and provisions for work accidents. For employee benefits provided by pension funds, refer to note 5.1.
Warranties
Cover expected expenses for warranty benefits such as repairs and replacements. All three divisions provide warranty benefits to their customers: 45% of the provisions relate to GF Piping Systems (previous year: 39%), 27% to GF Casting Solutions (previous year: 28%), and 28% to GF Machining Solutions (previous year: 33%).
Legal
Includes all obligations deriving from legal cases and litigations. None of the individual provisions should lead to an outflow of more than CHF 5 million (previous year: CHF 5 million).
Onerous contracts
Summarizes contracts for which the fulfillment leads to unavoidable costs that exceed the associated economic benefits.
Restructuring
Summarizes provisions for legal and/or constructive obligations deriving from restructurings. A constructive obligation arises when a detailed and formal plan for a restructuring exists and a legitimate expectation of third parties that the obligation will be fulfilled was raised. The use of provision in 2022 and 2021, were related to restructuring and relocation activities in Europe.
Other
Includes all other events that give rise to a provision such as non-warranty claims by customers and risks from business activities not allocated to the warranties, legal, or onerous contract categories.
Accounting principles
Provisions are recognized if a legal or constructive obligation exists as a result of a past event that makes it probable that an outflow of resources will be required to settle this obligation and the amount can be estimated reliably. 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. Possible obligations whose occurrence cannot be assessed on the balance sheet date or obligations whose amount cannot be reliably estimated are disclosed as contingent liabilities.
Management assumptions and estimates
In the course of their ordinary operating activities, GF Corporate Companies can become involved in litigation. Provisions for pending legal proceedings are measured on the basis of professional expertise of internal and external lawyers and a best estimate of the expected outflow of resources (considering available insurance coverage). The assessment may change in the following year depending on the future development of ongoing legal proceedings. If there are any contractual obligations for which the unavoidable costs of meeting the obligations exceed the expected economic benefits (e.g. onerous contracts), provisions are made for the agreed amounts over the entire period or over a prudently estimated period.
CHF million |
31.12.2022 |
31.12.2021 |
|
|
|
Overtime, holiday, and bonuses |
132 |
119 |
Accrued liabilities/deferred income for commissions and discounts |
59 |
51 |
Other accrued liabilities and deferred income |
119 |
103 |
Total |
310 |
273 |
Contingent liabilities amounted to CHF 66 million (previous year: CHF 90 million) and include guarantees to third parties.