www.kloecknerwerke.de
Achtung: Rückenstärke noch anlegen
ANNUAL REPORT 2007
KONZERN-KENNZAHLEN 2007 2007
2006
Auftragseingang
Mio. €
1.076,1
1.016,2
Außenumsatz
Mio. €
1.115,5
872,5
Inland
Mio. €
184,4
157,6
Ausland
Mio. €
931,1
714,9
Mitarbeiter im Jahresdurchschnitt Inland
3.355
3.257
Ausland
2.342
2.106
T€
197
164
Mio. €
52,4
21,3
Gesamtleistung je Mitarbeiter Operatives Ergebnis (EBIT) vor Sondereinflüssen Umsatzrendite EBITDA Umsatzrendite
%
4,7
2,4
Mio. €
70,8
37,9
%
6,4
4,3
Ergebnis vor Steuern (EBT)
Mio. €
43,9
-345,9
Jahresüberschuss
Mio. €
21,9
-347,2
0,0
0,0
Investitionen Sachanlagen
Mio. €
21,4
25,2
Immaterielle Vermögenswerte
Mio. €
9,0
26,8
Abschreibungen
Mio. €
18,4
16,6
Cashflow aus laufender Geschäftstätigkeit
Mio. €
-37,2
37,7
Bilanzsumme
Mio. €
791,8
776,8
Eigenkapital
Mio. €
304,6
280,5
%
38,5
36,1
Kurs zum Ende des Geschäftsjahres
€
15,28
11,10
Höchstkurs im Geschäftsjahr
€
16,90
12,31
Tiefstkurs im Geschäftsjahr
€
10,69
9,95
€
0,46
-10,26
Eigenkapitalquote Klöckner-Aktie
Ergebnis je Aktie
GROUP KEY FIGURES 2007 2007
2006
Incoming Orders
€ million
1,076.1
1,016.2
External sales
€ million
1,115.5
872.5
Germany
€ million
184.4
157.6
Abroad
€ million
931.1
714.9
Average number of employees during the year Germany
3,355
3,257
Abroad
2,342
2,106
T€
197
164
€ million
52.4
21.3
%
4.7
2.4
€ million
70.8
37.9
Total operating performance per employee EBIT Return on sales EBITDA
%
6.4
4.3
Earnings before taxes (EBT)
Return on sales
€ million
43.9
-345.9
Net income for the year
€ million
21.9
-347.2
Property, plant and equipment
€ million
21.4
25.2
Financial assets
€ million
9.0
26.8
Investments
Depreciation and amortisation expense
€ million
18.4
16.6
Cashflow from operating activities
€ million
-37.2
37.7
Balance sheet total
€ million
791.8
776.8
Shareholders’ equity
€ million
304.6
280.5
%
38.5
36.1
Share price at the end of the financial year
€
15.28
11.10
Highest closing rate for the financial year
€
16.90
12.31
Lowest closing rate for the financial year
€
10.69
9.95
€
0.46
-10.26
Capital ratio Klöckner shares
Earnings per share
06
FOREWORD OF THE MANAGEMENT BOARD
12
GROUP MANAGEMENT REPORT 12 18 19 23 24 25 25 26 28 30
Our Business General Trading Conditions Financial Situation of the Klöckner Group Filling and Packaging Technology Segment Other Industrial Holdings Segment Holdings Supplementary Report Capital and Ownership Structure Risk Management Forecast Report
34
KLÖCKNER-WERKE SHARES
35
CORPORATE GOVERNANCE REPORT
38
SUPERVISORY BOARD REPORT
44
CONSOLIDATED FINANCIAL STATEMENTS 44 46 48
49
Consolidated Balance Sheet Consolidated Income Statement Consolidated Cash Flow Statement
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
108
AUDITOR’S REPORT
109
FURTHER INFORMATION 109 110 113 116 117
Significant Consolidated Group Companies Supervisory Board and Management Board and their Mandates Notes to the annual financial statements of Klöckner-Werke AG Key Word Index Dates & Contact
06 12
34 35 38 44
49 108 109
03
COMPACT: THE KLÖCKNER GROUP OVERVIEW OUR INTERNATIONAL PLANTS
HIGHLIGHTS 2007
EUROPE
• Billion reached: strong upturn of 27.8% takes sales over the billion mark for the first time
Germany 11 Slovakia 1
• Increased efficiency: EBIT more than doubled to reach € 52.4 million • Innovation increasing: roughly 150 new patents and patent applications increase expertise to a total of 1,300 property rights
USA Waukesha Hebron Sarasota
• Basis strengthened: new parent company Salzgitter secures extended scope of action and expansion
MEXICO Zinacantepec
INVESTMENT STRUCTURE KLÖCKNER GROUP
BRAZIL
89.2%
São Paulo
10.8%
Filling and Packaging Technology
•
INDIA Ahmedabad 2
CHINA Shantou Guangzhou
KHS GROUP Filling and packaging technology for the beverage, food and non-food industries
Other Industrial Holdings
•
Klöckner DESMA Elastomertechnik GmbH Rubber and silicon injection molding machines
•
Klöckner DESMA Schuhmaschinen GmbH Machines and operating equipment for manufacturing shoes and soles
•
Klöckner Hänsel Processing GmbH Systems for confectionary production
06
FOREWORD OF THE MANAGEMENT BOARD KLÖCKNER-WERKE AG
DEAR SHAREHOLDERS, LADIES AND GENTLEMEN,
If we take a look back today at the over 120 years his-
ates profitably around the world. This provides a sta-
tory at the Klöckner Group, it is clear that both its
ble basis for action and growth at our Group.
business areas and also its ownership structure has
Salzgitter AG is one of the leading steel tech-
changed several times in a fundamental fashion over
nology groups in Europe. It decided to diversify its
the decades. In the process the Company, as it exists
business areas and to include less cyclical markets in
today, has left its origins in steel production behind
its business focus. The acquisition of Klöckner-Werke
it and has overcome the lows it experienced in the
AG as a core element of a new “Technology” division
1990s.
forms an important step in this strategy. The sales Today, the Klöckner Group is a top-class
markets of the two company differ in composition
machine construction company. With its subsidiaries
and development, but can supplement each other
it operates as one of the world leaders in the produc-
well without contradictions.
tion of filling and packaging machines and even more
A few months after making its investment in
specialised machine production in elastomer technol-
Klöckner-Werke AG, Salzgitter AG has already taken
ogy as well as for the shoe and confectionary indus-
further steps to strengthen its new division. In Janu-
try. Its customers include globally renowned compa-
ary 2008, it acquired a stake in the SIG Beverages
nies. Over the years, Klöckner has developed a net-
Group with its headquarters in Germany. SIG Bever-
work of production and distribution facilities,
ages is made up of companies which excellently sup-
securing international presence and direct proximity
plement the positioning of the Klöckner Group, and
to the customer on a local basis.
KHS AG in particular. For Klöckner-Werke AG and in
We are pleased to be able to report on the
particular its fully owned subsidiary, the globally oper-
financial year which has come to an end, one which
ating KHS AG, the new cooperation means a consid-
brought further important and positive changes for
erable improvement of the product portfolio, with
the Klöckner Group.
the previous product gap now being closed. For the areas of PET blow moulding technology, suitable
COOPERATION GENERATES OPPORTUNITIES
components were still acquired from specialised
At this point, the change in the owner structure
third-party companies. The cooperation with SIG Bev-
should be mentioned. This further strengthens the
erages creates the conditions for KHS AG being able
good prospects for our Group. The new majority
to supply its filling technology customers all products
shareholder is Salzgitter AG, a company which oper-
and services from one source.
07
Valentin Reisgen and Roland Flach
08
FOREWORD OF THE MANAGEMENT BOARD KLÖCKNER-WERKE AG
Thus all the companies involved – Salzgitter, Klöckner
aligned to customers and individual orders. Quality,
and SIG Beverages – are benefiting from the new par-
efficiency, eco-friendliness, ability to adjust – all
ticipation structure and we are confidently looking
these are criteria of state-of-the-art machines, and
forward to a common successful future.
thus the benchmark for the products of our subsidiaries. These benchmarks will retain their relevance
SUCCESS FROM OPENNESS
in the future. To do justice to them, it is necessary to
The past financial year saw not only structural
advance our research and development and to prac-
changes, but also pleasing operating success of our
tise the stated openness to the requirements of
Company:
changing over the course of time.
We realised our plans and moved past the € 1 billion mark in terms of sales. € 1,115.5 million sales were generated within the Klöckner Group in
WORKING WITH VALUES
2007, 27.8 % up on the successful previous year. EBIT
However, openness in thought and action as a crite-
more than doubled to € 52.4 million. The fact that
ria for the success of our work will prove its value not
incoming orders are again higher also shows that our
only in reference to modern, fast-moving consumer
market position has been consolidated and opportu-
products which place increasing demand on
nities to grow are in place and need to be taken
machines. Our openness will also distinguish itself in
advantage of.
the sense of a changing distribution of global eco-
The success of the Klöckner Group is based
nomic forces.
on the contributions of our subsidiaries and our
In the industrialised countries demand for
employees. Our most important subsidiary, KHS, as
packaged beverages, for which we chiefly build our
representative of the Filling and Packaging segment,
machines, is developing moderately in line with the
contributed almost 89.2 % to Group sales. The
general economic trend. On the other hand, in the
remaining 10.8 % is distributed over the three com-
less industrialised countries of Asia, Africa and South
panies of the Other Industrial Holdings segment.
America which are experiencing an enormous up-
These are Klöckner DESMA Elastomertechnik GmbH,
swing, we expect above-average growth of the bev-
Klöckner DESMA Schuhmaschinen GmbH and Klöck-
erages industry and correspondingly high demand for
ner Hänsel Processing GmbH.
our specialised machines.
All Group companies defended again their
In many of these newly industrialising and
position well against international competition in the
emerging countries, the hygienic situation is fre-
financial year. In additional to ongoing optimisation
quently difficult, particularly in the provision of drink-
of products and process flows, key criteria here are
ing water. An increased range of clean, packaged
open thinking and action. Our products and services
beverages means a considerable improvement in the
are not static objects, but flexible individual solutions
quality of life for the people in these regions. With
09
this objective, specialised machine-making companies
now reached a point which stands for a new and
such as ourselves can prepare the ground. In coop-
fixed identity. An identity which manifests itself in sta-
eration with our business associates in the beverages
ble internal structures, internationality, quality, effi-
industry, who use our facilities to fill beverages, we
ciency and customer orientation. An identity for a
would like to make a contribution here.
promising future in the premier league of special
Thus we see it as an obligation to operate in
machine production.
a way which is as close to demand and the customer
Against the background of successful past
as possible. Our experience and expertise in the pro-
and future business years, at this point we would like
duction of special systems should be deployed on a
to take the opportunity of thanking our customers,
local basis so as to save the customer long transporta-
business associates and employees. All form the
tion and communication routes, so that they can ben-
foundation for the success of our business and the
efit very directly from our expertise. For this reason,
good outlook offered for the Klöckner Group in the
our subsidiaries operate production facilities not only
future.
in Europe, but round the world: in the USA, Mexico, Brazil, China and India.
Duisburg, March 2008
IDENTITY AND FUTURE The growth of our own Group will react to our val-
The Management Board
ues, strategies and measures. This will result in an expanding global market presence, increasing earnings optimisation and a strong market positioning. After the record sales in the last financial year,
Roland Flach (Chairman)
for 2008 we expect sales at approximately the same level and a further upturn of the operating result. After many decades of change and a development with ups and downs, the Klöckner Group has
Valentin Reisgen
12
GROUP MANAGEMENT REPORT KLÖCKNER-WERKE AG
GROUP MANAGEMENT REPORT
OUR BUSINESS
• Further packaging (e.g. in cartons) and • Exact paletting.
DIVISIONS AND PRODUCTS
In the Other Industrial Holdings segment the
Today the name Klöckner stands for a globally oper-
product variety is also extensive and relates to various
ating mechanical engineering company. It has two
sales markets. On KDE machines, our customer ma-
business areas: the Filling and Packaging Technology
nufacture not only elements for automobile produc-
segment and the Other Industrial Holdings segment.
tion, but also various other plastic products. KDS
The both segments special-purpose machinery and
machines operate primarily in direct soling of shoes,
systems of the highest quality are products with a
but with the new “DESMA Tec” line are now increas-
strong market positioning.
ingly designed for other products, e.g. for the techni-
Once again the four Group companies KHS AG (KHS), Klöckner DESMA Elastomertechnik GmbH
cal industry. KHP machines are deployed for the manufacture of confectionary.
(KDE), Klöckner DESMA Schuhmaschinen GmbH
On request, the four subsidiaries construct
(KDS) and Klöckner Hänsel Processing GmbH (KHP)
individual machines, but also take on the planning
can look back at a successful financial year.
and construction of entire facilities, which can well be
The focus of the machines and systems we
as large as a football pitch.
produce worldwide is that of filling and packaging beverages (KHS). In this special area we offer our customers all components which lie between production
STRATEGIC OVERVIEW
of its product – e.g. a fruit juice – to its being deliv-
The key elements of the economy such as ongoing
ered to retailers. This means that KHS equipment can
globalisation and healthy competition form the basis
be deployed for the following steps in the process
for our strategic development. For the Klöckner
chain:
Group, the basis of success is the close interconnec-
• Preparation of the product (e.g. pasteurisation)
tion of the elements growth, quality and efficiency
• Cleaning of the container (sterilisation)
and which are the leitmotivs of all our specialist units
• Pasteurisation and filtration technology
and locations.
• Filling the product
We want to achieve growth not only in sales
• Transportation technology
and earnings, but also in the number of orders given
• Labelling the bottle, tin or packaging
to us and the trust that our customers are thus plac-
• Closing the container
ing in us. We will increase the number of employees
• Inspection
and trainees so as to operation on the international
13
stage with short routes and in a varied and optimised
subsidiary KHS, some of the concrete measures for
fashion in terms of product range and service. The
the near future are the increasing entry into the
market growth relevant to KHS, the largest sub-
attractive food and non-food segment, the further
sidiary, which is estimated in various market studies
expansion of the after-sales and service business and
at around 5% to 6% per year as a result of the
the greater presence in the PET filling lines sector.
global rise in demand for packaged drinks and thus
The Other Industrial Holdings segment at
also for corresponding machines, provides clear
Klöckner-Werke AG also aligns its strategy to the tar-
prospects for organic growth in the KHS Group. Fur-
gets of growth, quality and efficiency, especially in
thermore, the strategy is also geared towards further
respect to process optimisation along the procure-
acquisitions, provided that they enable useful addi-
ment and value-added chain and on the specific
tions to the product range or an extension of market
expansion of the product portfolio and the customer
penetration.
base. The objective here is not only to generate
High demand on the quality of our machines
organic growth in the market. It is also to achieve a
and services are not only our strategy, but also our
more flexible and broader product range by opening
corporate philosophy. After being commissioned, the
up new markets. For example, at KDE not only
machines must realise top performance in terms of
machines for the direct soling of shoes are products,
speed, functionality and duration and also generate
but with the new “DESMA Tec” lines, its technologies
perfect results . We secure this quality on the basis
are also marketed in other industrial areas.
of many years of experienced, trained staff, intensive research and standards set internationally. The objectives of technology leadership and increasing modu-
RESEARCH AND DEVELOPMENT
larisation of the product portfolio is part and parcel
Innovation is the driving force in the market for bev-
of our high claim to quality.
erage filling machines. With the bottle forms and
Efficiency is the accompanying element of
equipment changing continuously, this is a must for
growth and delivery quality. Our customer should
companies in the mechanical engineering and plant
benefit from short order fulfilment and service perfor-
construction sectors, and at the same the benchmark
mance as well as cost optimisation. Streamlining
for flexibility which the marketing of our customers
internal processes, focussing development expenses
requires.
on tangible customer benefits are two steps which
The Klöckner Group has meet this require-
have taken us to this objective. Furthermore our
ment in its 13 competence centres of its most impor-
machines are designed on the premises of saving
tant company KHS for all product series. An excerpt
resources. Ongoing new and further developments
for completed projects includes:
target designs the machines in as manageable and
• In filling technology, the new Design line with spi-
flexible manner as possible, at the same time minimis-
ral tubing vessel is now also offered for the volumet-
ing the impact on the environment.
ric can filler. In addition, automatic CIP cap fitting is
All the three target components – growth,
possible with over 70% of our machines. The auto-
quality and efficiency – accompany our work at all
matic changeover from 28 to 38 bottle mouths for
times and are the basis of our measures. At our largest
PET bottles without having to change the format part
14
GROUP MANAGEMENT REPORT KLÖCKNER-WERKE AG
design. Considerably higher temperature precision
More than
1,300
and a much reduced reaction time of the control systems is thereby achieved. • In the packaging machines, cardboard partition inserters with cycle rates up to 70 per minute are now
property rights for innovative developments are held
also available. The power consumption of the shrink
by Klöckner-Werke AG subsidiaries.
tunnel was practically halved by a gas firing process and the availability was significantly increased due to shorter heating times. • The pallet system range was expanded by dolly pal-
is also new at Klöckner. The product range has also
lets as are used in the retail industry. Also new to the
been supplemented by a hot filling machine.
range is a system for palletising loose bottles, which
• In the ACF range, the wet aseptic process with PES
are also fitted with a cardboard handle in the same
is now also available in the mini-isolator housing.
machine.
• A rapid changeover to other formats is also offered
• In Keg technology, the PET keg was able to
by the tunnel pasteurizer thanks to the new “on-the-
demonstrate its numerous advantages with the sale
fly change”.
of the first system to the brewery in Nuremberg.
• In inspection technology, the linear sniffer was suc-
In addition to product innovations, many pro-
cessfully put into operation at Coca-Cola Mexico for
posals stemming from our customers were realised
the detection of foreign substances.
through the order-related further development of
• The cleaning machine for glass bottles now oper-
machines. In this connection, it was simultaneously
ates even more quietly and has a hygienic cross-flow
possible to further press ahead with the already
spraying.
started product standardisation. The number of vari-
• In the case of labelling machines, the roll feed
ants in the product portfolio was reduced by approx.
machines have been significantly changed. The con-
35%, without any functions being lost. The corre-
version is facilitated by magnetically positioned cen-
spondingly flexible assemblies and components also
tring rings. Non-slip film section transfers increase the
contributed to this. At the same time, the foundation
output, the vacuum drum has a divided design so that
for a harmonisation, also of the products produced at
the weights, which the operator has to move during
the global locations, was created. The appropriate
format change, are reduced by 75% to a maximum
processes for a global rollout of a worldwide stan-
of 3 to 5 kg.
dardised product range were defined and coordi-
• In addition, self-sharpening blades have been
nated and adopted by the international production
developed for the film cutting.
sites. This process will be continued in 2008.
• The other labelling versions have also undergone
The innovative strength of the Klöckner
significant improvements and experienced innova-
Group showed itself once again this year in the over
tions. The machines are in the meantime lubricant-
150 patents and patent applications. The current
free, an important argument for availability and costs.
number of industrial property rights thus increases to
The glue roller heaters have an interior inductive
over 1,300.
15
In-company processes were, however, also improved
mental protection is an important element of the
in addition to the product innovations and portfolio
company’s responsibility in society.
changes. The design of variants by means of config-
On the basis of this voluntary commitment, in
uration and pre-defined automated procedures sig-
the past financial year our subsidiaries again further
nificantly reduced through-put times and costs. The
development the environmental compatibility of our
cooperation with research institutes and universities
processes and products on the basis of technical and
both in Germany and abroad helps the affiliates of
economically viable investments and improvements.
Klöckner-Werke AG to continuously examine their
A further important objective has the same standing
products and processes and ensure they remain cut-
– to minimise detrimental effects on the health of
ting edge. In the course of this cooperation, the
employees, those of our customers and people living
Group has, in the past year, again provided young
in the vicinity of our plants.
students with educational endowments in the form
A fundamental principle in the Klöckner
of traineeships, student research projects and degree
Group are its endeavours not to deploy materials and
dissertations and facilitated externally directed docto-
consumables in its production process which are haz-
rial dissertations for engineers. This cooperation has
ardous materials or which could generate products
become an important image factor in the recruiting
during the production period which may have detri-
of future top engineering executives.
mental effects on humans or the environment. If
The Klöckner Group pays great attention
there is not replacement, the consumption of these
with and in its development to the demands of its
materials as minimised to the extent that this allows
customers, who serve the end users as consumers.
optimised procedures. An example is that by the
For this reason, great importance is attached to safe-
increased use of cooling lubricants for saws is pre-
guarding resources in terms of energy and media
vented. Large amounts of cooling lubricants are not
consumption and thus to sustainability; an impor-
saved due to these measures, but we regard even
tant aspect for our customers in terms of competi-
such smaller measures as a sign that we want to ful-
tiveness with other suppliers. For this reason, the
fil our responsibility vis-à-vis the environment and our
operational and utilisation duration of systems is
employees. Some examples of our active engagement
considered an important criteria for economic eval-
can be found in the following:
uations with regard to service life costs. KHS sup-
• A new surface treatment facility was built at the
plies the data for a combined examination of capi-
KHS site in Bad Kreuznach. It consists of a pickling
tal budgeting and operating cost analysis, which
plant with adjacent neutralisation system and a
increasingly serve as a decision-making criteria for
paintshop. In addition to complying with the most
our customers.
recent legal environmental protection regulations, the systems are also cutting edge in terms of the consumption of service products like pickling baths, sol-
ENVIRONMENT
vents and paintwork. The systems simultaneously
Hand in hand with the objectives of our Research and
comply with the health and safety at work require-
Development are environmental concerns to which
ments for our employees thanks to modern extraction
we are committed. For the Klöckner Group, environ-
systems.
16
GROUP MANAGEMENT REPORT KLÖCKNER-WERKE AG
• At the different sites, optimisation measures were
through design measures which in turn resulted in a
also implemented in the last fiscal year in terms of
lengthening of the cleaning intervals.
energy and water consumption.
• The shrink tunnel in the packaging machines is
• At the Hamburg site, a CIP system was installed.
heated by means of electricity. In the future, KHS will
The water required during plant final acceptance and
optionally offer customers a gas-heated shrink tun-
plant commissioning was guided in the closed loop
nel. In Germany within the scope of the energy bal-
via this cleaning system. The consumption of fresh
ance, the use of gas-heated shrink tunnels in contrast
water and resulting wastewater could be significantly
with electrically heated shrink tunnels results in a
lowered in this process step.
clear CO2 saving.
• A new compressor system and a new blasting sys-
• In the PET bottle filler for soft drinks, an air con-
tem were procured at the Kriftel site. The new com-
sumption saving of around 4,000 mn3/h was achieved
pressor uses less current in spite of its high output.
through the discontinuation of the conventional lift-
The air consumption in the blasting system is lower
ing elements for lifting the bottles. The machine sur-
and the dust load of the discharge air is also reduced
faces are reduced due to the new shape of the filler
thanks to improved filtering.
vessel, the machine is easier to clean and less clean-
The specific objective of the Group remains
ing fluid is required.
the support of the interests of our customers with regard to environmental protection. With this objective, KHS has already in recent years carried out devel-
INVESTMENTS
opments which are extremely advantageous in terms
In the 2007 financial year, the performance focus of
of energy savings or the consumption of water and
the Klöckner Group was targeted on processing opti-
greenhouse gases.
misation of our locations and on perfecting our tech-
The use of filling systems with lower green-
nical equipment and machinery. With this intention,
house gas (CO2) consumption and the use of assem-
last year the focus was more on strengthening exis-
blies which save or recover energy has proven itself
ting potential and less on new acquisitions. Invest-
time and again in practice and is gladly embraced by
ments of the Klöckner Group in the area of intan-
our customers. Here we would like to highlight the
gible assets and property, plant and equipment
use of regenerative process technology in our clean-
totalled € 30.4 million in 2007.
ing and pasteurisation machines. Some examples
With intangible assets, in view of global stan-
from the fiscal year 2007:
dardisation there were higher investments in soft-
• Thanks to the implementation of new energy sav-
ware to achieve uniform construction worldwide.
ing concepts in pasteurisation machines, energy sav-
Extensive investments were also again made in
ings of up to 10 % were achieved, new water savings
research and development, something which resulted
concepts reduce water consumption by up to 30 %.
in an extensive list of patent-protected innovations,
A new concept was also introduced for chemical dos-
as was the case in the previous year. In 2007, the
ing in pasteurizers which lead to a 40% reduction in
focus of investments in property, plant and equip-
the required amount of chemicals. Furthermore, the
ment was construction the new workshops for build-
hygiene standards of the machines were increased
ing labelling machines, assembly and packaging at
17
the Dortmund location. At our Bad Kreuznach location, investments were made in a new processing centre for large parts. Furthermore, in the last financial year, various new precision machines were
€
bought for the production. In financial assets the global organisation was extended by a new subsidiary
30.4 million In 2007, the Group invested € 30.4 million
in Argentina and a joint venture in Bulgaria.
in its business. Almost 10% of this went into intensive Research & Development work.
OUR CUSTOMERS The customers of our Group include numerous renowned companies which operate on an international basis. Most of our customers operate in the beverages industry. Orders here include KHS filling and packaging systems and the relevant additional services. However, the customers of this subsidiary
INVESTMENTS € million
Intangible assets (thereof development attainments) Property, plant and equipment
2007
2006
9.0 (2.7) 21.4
26.8 (6.5) 25.2
also include a consistently growing number from the food and non-food production sector. The market for economical and ecological packaging solutions for all varieties of products is virtually boundless.
KLÖCKNER-CUSTOMERS In Percent
The other industrial subsidiaries of KlöcknerWerke AG develop solutions for the automobile sup-
0.8% Electrical industries
plier industry, the electrical engineering industry, sil-
3.4% Shoe producers
icon/elastomer processing, shoe producers and confectionary manufacturers.
1.9% Confectionary manufacturers
KLOCKNER GROUP EMPLOYEES Our employees with their specialised knowledge, their experience and their commitment form an important basis for the success of our Group. In order to retain and expand these assets for our company, thus being ready for the increasing challenges of the future, our employees are challenged at a high level. Over and beyond these Human Resource measures, much value is attached to training qualified young staff. For examples, the headquarters of our most important subsidiary is deliberately operating in a way
84.8% Beverages industry 3.3% Other 3.4% Food and Non-Food 2.4% Automobile and automobile supplier industries
18
GROUP MANAGEMENT REPORT KLÖCKNER-WERKE AG
Board receive payments in kind, which essentially
EMPLOYEES WORLDWIDE
comprise the value recognised by tax guidelines for the usage of a company car. Performance-related
Average during the year
remuneration is the variable component. It is geared 897 America
towards the attainment of performance-dependent
1,223 Asia
and personal targets. Furthermore, the members of the Management Board received pension commit-
45 Other countries
ments in the form of individually agreed fixed amounts. An overview of the remuneration of the Management Board and Supervisory Board can be found in the “Remuneration Paid to Members of the Management and Supervisory Boards” section in the notes of this annual report.
3,355 Germany 177 Other European countries
GENERAL TRADING CONDITIONS GLOBAL ECONOMY 2007 In 2007, the global economy achieved almost the same growth rates as was generated in the previous year. Gross domestic product increase by just over
contrary to the German trend of insufficient trainee
5% worldwide. On the one hand the economic
jobs being offered, increasing the number of trainees
expansion in the industrialising countries was again
and apprentices by 25% in 2007. The strategy is quite
very dynamic. On the other hand, production in the
consciously targeting retaining a highly qualified team
industrial countries also expanded considerably.
of employees.
The
economic
climate
was
negatively
The average number of employees in the
impacted by the ongoing crisis on the property mar-
Group during 2007 was 5,697, including 245
ket in the USA and the tense situation on interna-
apprentices and trainees. The year-on-year increase
tional financial markets. What is more the manufac-
of 6.2% is mainly due to the acquisition of the Chi-
turing sector has had to cope with another strong
nese company GLM2 in autumn 2006. 23 of the staff
upturn in commodity prices.
were employed in at Klöckner-Werke AG (previous year: 27). The remuneration system for members of the
MECHANICAL ENGINEERING STILL SET
Management Board consists of fixed and variable
FOR GROWTH
components. The fixed allowance is paid as non-per-
The mechanical engineering sector continued on from
formance-related basic remuneration as a monthly
its excellent development in the previous year.
salary. In addition, the members of the Management
Growth in real production accelerated globally to
19
roughly 8%, in Germany by as much as approximately 11% (source: German Engineering Federation (VDMA)). With growth of this order utilisation rates of domestic production facilities increased – an average
€
of 92% – close to full levels, with the result there were cases of bottlenecks in the provision of materials. After Germany already rose to second place
1.1billion
Group sales resulted in a strong sales
(after the US and ahead of Japan) in the ranking of
upturn of 27.8 %.
machine producing nations, sales surged massively again in 2007. Both exports and the revived domestic market produced outstanding results. Exports into the USA, the largest customer of German machinery and plants, declined slightly as a result of the economic weakness there and the strong euro. Exports into Europe developed very well. It was particularly the old member states in the EU where pent up demand was released. The strongest growth rates among mechanical engineering companies worldwide was again
KEY DATA OF THE RESULTS OF OPERATIONS
2007
2006
Incoming order
1,076.1
1,016.2
5.9
Sales
1,115.5
872.5
27.8
EBITDA
70.8
37.9
87.0
EBIT
52.4
21.3
146.0
€ million
China, which exceeded 25% (Source: VDMA).
THE BUSINESS ENVIRONMENT OF THE KLOCKNER GROUP
in our sales sectors and regions. These developed well
Within their special sectors, the subsidiaries of the
overall in 2007. The international market for filling
Klöckner Group continue to play at the top of the
and packaging machinery is continuing to grow at a
premier global leagues. Regional growth, best qual-
rate of approximately 6% per year (source: Global
ity, secured by intensive research and development
Industry Analyst). On a regional basis, our orders still
work as well as a high level of efficiency of all
originate primarily from Europe. The American and
processes continue to cement this status. Klöckner
Asian regions posted excellent growth rates.
customers value our international presence. Production facilities on a local basis offer the enormous advantage of short delivery, service and communication. Our machines are already produced in seven
FINANCIAL SITUATION OF THE KLOCKNER GROUP
countries on four continents. In addition, there are of course service and sales outlets the world over.
RESULTS OF OPERATIONS
But it is not only our position in the competi-
The level of income orders which has existed since the
tive environment which has developed satisfactorily.
autumn of 2006 continue in 2007, pushing Group
Our economic success is also fuelled by the situation
sales in a pleasing fashion. Year-on-year sales
Change%
20
GROUP MANAGEMENT REPORT KLÖCKNER-WERKE AG
In 2007, cost of materials rose by 32 % to € 634.7
GLOBAL SALES
million. The somewhat higher rise in cost of materi-
2007
2006
Change %
Germany
184.4
157.6
17.0
Other European countries
432.4
340.0
27.2
America
237.4
175.7
35.1
Asia
185.7
117.6
57.9
75.6
81.6
-7.4
€ million
Other countries
als compared with total operating performance led to an increase in the cost of materials ratio from 54.6% to 56.6%. Staff costs also increased to a lesser extent than total operating performance, by around 7.5% to € 272.5 million. The staff cost ratio thus declined from 28.9% to 24.3%. At 13.1% of total operating performance, the ratio of other expenses and income is approximately at the level of the previous year. Other income was also realised by the sale of financial assets.
improved by 27.8% and as forecast moved passed
DIVIDEND
the billion threshold for the first time – with
We want our shareholders to participate regularly in
€ 1,115.5 million being achieved. The Filling and
the successes of our operating business. In the 2007
Packaging Technology segment gained 32.4% and
financial year good sales were generated, which
Other Industrial Holdings 1.1%. Details on the busi-
resulted in earnings of € 21.9 million in line with IFRS
ness development of the individual divisions can be
accounting regulations. However, the differences to
found in the following individual reports on the seg-
accounting under German commercial law – due
ments.
especially to the different way of posting profits – In regional terms, the sales breakdown was
result in Klöckner-Werke AG posting a negative
16.5% for Germany, 38.8% for other European
annual result. For this reason, no dividend will be dis-
countries and 21.3% for America. Asia accounted for
tributed in the 2007 financial year.
16.6% of sales, and other countries had a share of 6.8%. In the 2007 financial year, total operating
ORDER SITUATION
performance (sales, changes in inventories and own
The Klöckner Group had a very satisfactory order sit-
work capitalised) amounted to € 1,122.1 million, up
uation in the 2007 financial year. Overall, the Group
27.8% on the previous year.
received orders totalling € 1,076.1 million in 2007,
EBIT recovered strongly, after it had been
up 5.9% on the previous year. A total of 88.9% of
strongly and negatively impacted in 2006 by special
orders came from the Filling and Packaging Techno-
items arising from the insolvency of the former par-
logy segment, which generated a 7.8% increase,
ent company WCM AG. But even against the 2006
bringing the figure to € 956.9 million. The Other
EBIT before special items, the 2007 figures more than
Industrial Holdings segment posted a decline in
doubled to € 52.4 million.
incoming orders which were down 7.1% to € 119.2
21
million, thus contributing 11.1% to consolidated incoming orders. The decline in the Other Industrial
+ 5.9 %
Holdings segment is due to the disposal of REMAK GmbH. As at December 31, 2007, orders on hand totalled € 446.6 million, thus slightly under the level of the previous year. The book-to-bill ratio (ratio of
more orders achieved by the operating subsidiaries in 2007.
incoming orders and sales) was 0.96 (previous year: 1.16).
Almost 90 % of the incoming orders originate from customers of the Filling and Packaging Technology segment.
High demand is due to the ongoing boom in the mechanical engineering industry and the rising economic power of many of the target regions. At the same time, we see the success as confirmation of the correction of our strategies and measures. On the basis of this trend, we are expecting good order figures for 2008.
EXPENSE STRUCTURE In % of total operating performance
2007
2006
Cost of materials
-56.6
-54.6
Staff costs
-24.3
-28.9
Depreciation and amortisation Net other expenses / income
FINANCIAL POSITION
EBIT
-1.6
-1.9
-13.1
-12.3
4.7
2.4
At the balance sheet date, the Klöckner Group had liquidity of € 35.4 million, which is invested at banks.
ORDER BOOK SITUATION
In addition, the Group has high financing potential and, as required, access to sufficient credit lines for
In € million
financing and working capital of its German and foreign companies, especially that provided by Salzgitter
1,100
Mannesmann GmbH.
1,000
The 2007 financial year produced cash out-
900
flows from operating activities of € 37.2 million. The
800
expansion of operating activities with a 27% sales
887.9
956.9
128.3
119.2
700 600
upturn resulted in cash outflows which resulted pri-
500
marily in an increase of receivables and inventories.
400
The cash outflows from investment activities
300
totalled € 14.2 million. € 30.4 million was invested in
200 100
property, plant and equipment and intangible assets. Net cash received from investing amounted to € 22.1 million, primarily due to the assumption of financial liabilities from Salzgitter Mannesmann GmbH.
2006
Filling and Packing Technology Other Industrial Holdings
2007
22
GROUP MANAGEMENT REPORT KLÖCKNER-WERKE AG
assets were disposed of in the 2007 financial year,
KEY DATA OF THE FINANCIAL POSITION
together with all the related debts.
2007
€ million
2006
Noncurrent assets declined by € 8.8 million (3.4%) to € 251.6 million. The tax assets from other
Cash flow from operating activities
-37.2
37.7
Cash flow from investing activities
-14.2
-42.0
Cash flow from financing activities
22.1
-14.9
taxes in the amount of € 6.4 million reported under noncurrent assets as at December 31, 2006 were reclassified to other current assets as it is expected that they will be realised within the next twelve months. Deferred tax assets were down by € 2.7 mil-
KEY DATA OF THE NET ASSETS POSITION
lion partly due to the reduction of the tax rate from 31.12.
39% to 30% as a result of the 2008 Corporate Tax
2007
31.12. 31.12.2006
Change %
Reform Act. On the other hand, the carrying amounts
Balance sheet total
791.8
776.8
1.9
for intangible assets and property, plant and equip-
Noncurrent assets
251.6
260.5
-3.4
ment increased year-on-year by € 5.2 million and
Current assets
540.2
491.8
9.8
Shareholders’ equity
304.6
280.5
8.6
At € 540.2 million, current assets are up
Noncurrent liabilities
229.3
226.3
1.3
€ 48.4 million (9.8%) on the previous year. Due to the
Current liabilities
257.9
245.3
5.1
strong upturn of business activity, trade and other
Equity ratio in %
38.5
36.1
2.3
receivables as well as inventories increased by € 59.3
€ million
€ 3.8 million respectively.
million and € 4.2 million respectively on the previous year. As at December 31, 2007, cash and cash equivalents were down 54.0% year-on-year at € 35.4 million. At € 304.6 million, consolidated shareholdExchange rate risks from export transactions were
ers’ equity was up 8.6% on the previous year’s fig-
hedged and continuously monitored in the context
ure of € 280.5 million. The main reason for the
of our risk management system. Detailed statements
increase in shareholders’ equity is the positive consol-
on the Group’s risk management system can be
idated net income of the year of € 21.9 million. At
found in the “Risk Management” section of this
the balance sheet date, the equity ratio was 38.5%
management report.
(previous year: 36.1%). Noncurrent liabilities totalled € 229.3 million, up € 3.0 million (1.3%) on the previous year. This
NET ASSETS POSITION
was due primarily to the upturn in deferred tax liabi-
The balance sheet total at the Klöckner Group
lities by € 18.5 million due to higher receivables from
increased by € 15.0 million (1.9%) to € 791.8 million
contract manufacturing. On the other hand there was
as at December 31, 2007.
a decline in noncurrent provisions of € 14.3 million.
In the previous year, assets of the “Phoenix
This was due almost exclusively to the reduction of
Office Garden” real estate project totalling € 24.6
pension provisions resulting from the higher interest
million were reported as assets held for sale. These
rate used in its calculation.
23
Current liabilities were up € 12.6 million (5.1%) to € 257.9 million. This increase was due primary to financial liabilities which increased by € 12.6 million
+103.3 %
to € 32.8 million.
FILLING AND PACKAGING TECHNOLOGY SEGMENT
KHS, the largest subsidiary, pushed EBIT by 103.3%. A good indication of our enhanced efficiency.
BUSINESS AND TRADING CONDITIONS OF THE SEGMENT Our subsidiary with the strongest sales, KHS AG, and its subsidiaries (KHS) continues to contribute almost 90% of Klöckner Group sales. KHS is one of the global market leaders in filling and packaging technology. It manufacturing focus is in special-purpose machines for the beverages industry. Here KHS generated approximately 95% of its sales in 2007. But increasingly special machines are being built for the
KEY DATA: FILLING AND PACKAGING TECHNOLOGY € million
2007
2006
Incoming orders
956.9
887.9
7.8
Sales
995.5
751.8
32.4
EBIT
39.6
19.5
103.3
4,929
4,584
7.5
Average number of employees during the year
food and non-food industries to take account of growth in these markets. KHS is the company with the strongest international representation in the Klöckner Group. Close proximity to the customers is a key element of the
year-on-year growth of 32.4%. All important KHS
corporate strategy. There are production facilities in
international locations increased their sales volume in
Germany, the USA, Mexico, Brazil, India and China.
the reporting period. Despite the financial crisis of the
In addition, there are service and sales locations
USA, the America generated good results with a sales
throughout the world.
contribution of € 217.2 million. The Asian companies
In 2007, the markets relevant to KHS con-
contributed € 164,0 million to KHS Group sales. In
tinue to develop in a very positive fashion. With both
Germany € 160.2 million sales were generated, in the
demand and the general price level across the indus-
other European countries € 381.0 million and in
try already increasing in 2006, our incoming orders
these rest of the world € 73.1 million.
grew further in 2007, so that we enjoyed intensive capacity utilisation.
Change %
EBIT increased to € 39.6 million, thus increasing by more than 100% as against the previous year. On the one hand this was due to due the strong sales figures. But an addition factor were further positive
RESULTS OF OPERATIONS OF THE SEGMENT
effects from the KHS 2010plus change process which
2007 sales totalled € 995.5 million, representing
was initiated in 2005.
24
GROUP MANAGEMENT REPORT KLÖCKNER-WERKE AG
OTHER INDUSTRIAL HOLDINGS SEGMENT
+105.7%
BUSINESS AND TRADING CONDITIONS
Companies in the Other Industrial
tributed 10.8% to Group sales. The segment consists
Holdings segment posted a 105.7 %
of the three companies Klöckner DESMA Elas-
improvement in 2007 EBIT.
tomertechnik GmbH (KDE), Klöckner DESMA Schuh-
OF THE SEGMENT In 2007, our Other Industrial Holdings segment con-
maschinen GmbH (KDS) and Klöckner Hänsel Processing GmbH (KHP), all of which operate successfully in
KEY DATA OTHER INDUSTRIAL HOLDINGS
2007
€ million
their markets for special-purpose machines.
2006
Change %
Incoming orders
119.2
128.3
-7.1
Sales
119.9
118.6
1.1
7.0
3.4
105.7
EBIT Average number of employees during the year
The product portfolio of our Other Industrial Holdings segment includes machinery and technologies for rubber and silicon processing (KDE), for the direct soling of shoes (KDS) and for confectionary production (KHP). By way of agreement dated May 7, 2007, the
745
752
-0.9
shares in REMAK Maschinenbau GmbH were sold to a company of the Hähn Group, Rheinböllen. The shares were transferred effective May 31, 2007. The company thus is no longer part of the Klöckner Group scope of consolidation.
Incoming orders of the KHS Group were up year-on-
The three companies KDE, KDS and KHP are
year by 7.8% and totalled € 956.9 million. With the
among the market leaders in their respective sectors.
trend reversal having taken place in the autumn of
Production is mainly carried out in Germany, but also
2006 with the price competition within the industry
in the USA, India, China and Slovakia. The principal
being defused, the incoming order volume increased
sales sectors include the automobile industry and its
steadily with a normalised price level.
suppliers as well as the electrical industry, shoe and
In 2007, sales in the aseptic cold filling sec-
confectionary producers. Most markets delivered
tor (ACF dry sterilisation) were in line with expecta-
good results and positive incoming orders figures.
tions, and KHS further extended its leading position
The economic development of the North American
in this highly innovative sterilisation procedure with
automobile industry was disappointing. Sales of our
hydrogen peroxide.
machinery declined significantly there, and the price level fell considerably. As the largest of the three companies, KDE asserted its market position as world market leader, expanding its market share especially in the electrical
25
industry. For the second-largest company of the segment, KDS, 2007 was the most successful financial
5,697
year for many years. This was the case despite the detrimental development of the dollar with the export rate increasing at the same time.
employees contributed to the success
RESULTS OF OPERATIONS OF THE SEGMENT
of the group companies in 2007.
The sales contribution of our Other Industrial Holdings segment increased further in 2007. It generated total sales of € 119.9 million, up 1.1% year-on-year. For the operating result (EBIT), a total of € 7.0 million was generated, corresponding to a good increase of 105.7% against 2006. This confirms the strategic objectives and measures of the company. The massive upturn of incoming orders from the previous year was not fully continued. The decline is due to the disposal of REMAK GmbH. Even so
KEY DATA HOLDINGS € million
2007
2006
Sales
0.7
2.3
-70.2
EBIT
5.8
-1.6
-472.9
Average number of employees during the year
23
27
-14.8
incoming orders at a level of € 119.2 million is to be noted as positive. The pleasing key ratios in the segment was fuelled by the ongoing boom across the mechanical engineering sector and the strong sales sector performance in Europe and the accelerated
year: € 2.3 million). In 2008, EBIT improved further to
growth of markets in Asia.
€ 5.8 million. The improvement in earnings was achieved through lower consulting and administrative expenses as well as through income from the sale of
HOLDINGS
securities and the reversal of accrued liabilities.
BUSINESS AND TRADING CONDITIONS OF THE SEGMENT
Change %
SUPPLEMENTARY REPORT
The holding companies of the Klöckner Group, Klöckner-Werke AG and Klöckner Mercator Maschinenbau
Salzgitter AG, with more then 85% the majority
GmbH, concern themselves with Group management
shareholder in Klöckner-Werke AG, acquired SIG Bev-
and the administration of real estate, assets and sub-
erages from the Swiss SIG Group in January 2008.
sidiaries.
Key elements of this purchase include SIG Corpoplast GmbH & Co. KG and SIG Asbofill GmbH with sales
RESULTS OF OPERATIONS OF THE SEGMENT
of approximately € 150 million. With this acquisition,
Sales generated in 2007 total € 0.7 million (previous
Salzgitter AG has strengthened its new “Technology”
26
GROUP MANAGEMENT REPORT KLÖCKNER-WERKE AG
division, which also includes the Klöckner Group. The
no shares with special rights which grant control. In
plan to expand the division was announced by
the 2007 financial year, there also was no control of
Salzgitter AG in 2007 on the occasion of acquiring
voting rights in accordance with Section 315 no. 4 (5).
the majority stake in Klöckner.
With regard to the appointment and dismissal
For Klöckner-Werke AG and in particular its
of members of the Management Board, reference is
fully owned subsidiary, the globally operating KHS
made to the statutory regulations in Sections 84 and
AG, means a considerable improvement of the prod-
85 of the German Stock Corporation Act. Further-
uct range in the area of PET technology as the long-
more, Section III (6) of the Articles of Association of
established KHS AG can now close its existing pro-
the company specifies that the Management Board
duct gap.
shall consist of at least two members and, in addition,
KHS AG is one of the global market leaders in
that the Supervisory Board shall define the number of
filling technology for beverages. For the areas of PET
members of the Management Board. The Supervisory
blow moulding technology, suitable components
Board can appoint a Chairman of the Management
were still acquired from specialised third-party com-
Board. All provisions regarding amendment of the
panies. After a successful 2007 financial year, this
Articles of Association arise from Sections 133 and
thus creates another condition for KHS AG supplying
179 of the German Stock Corporation Act.
everything related to filling technology from one source.
In accordance with the resolution of the Annual General Meeting of July 5, 2006, the Management Board is authorised to acquire treasury shares representing up to 10% of the current share
CAPITAL AND OWNERSHIP STRUCTURE
capital by January 4, 2008. In accordance with Section II (5) of the Articles of Association of KlöcknerWerke AG, the Management Board is authorised,
DETAILS ACCORDING TO SECTION 315 (4) OF
with the approval of the Supervisory Board, to
THE GERMAN COMMERCIAL CODE (HGB)
increase the share capital by June 15, 2010 by a total
At the balance sheet date, the subscribed capital
of up to € 50,000,000 through the issue of new
(share capital) of the company amounts to
bearer shares against cash contributions on one or
€ 234,570,035.20 and is divided into 45,814,460
several occasions (Authorised Capital I). Shareholders
bearer shares. The notional amount relating to one
are to be granted subscription rights. However, the
share is € 5.12. The share capital is fully paid in. In the
Management Board is authorised, with the approval
2007 financial years there were no restrictions to the
of the Supervisory Board, to exclude fractional
voting rights or the transfer of shares.
amounts from the shareholders’ subscription rights.
On December 31, 2007, more than 85% of the
The Management Board is further authorised, with
shares of the company were owned by the Salzgitter
the approval of the Supervisory Board, to exclude the
Group. The Management Board was not informed of
subscription rights of shareholders for an amount of
further shareholders who held more than 10% of
up to 10% of the available share capital at the com-
the share capital either directly or indirectly on the
ing into force of this authorisation and at the first res-
reporting date. In the 2007 financial year, there were
olution on the utilisation of Authorised Capital I, if the
27
issue price of the new shares is not significantly below
Company if they so desire under certain conditions,
the listed price of the already listed shares of the same
receiving remuneration for the remaining term of
category and features at the time of the final estab-
their contracts. There is no compensation agreement
lishment of the issue price, which should be estab-
of the company which impacts members of the Man-
lished as close as possible to the placing of the shares.
agement Board or employees in the case of a
Shares that are issued or sold during the term of this
takeover agreement. No member of the Manage-
authority are to be included in the calculation of the
ment Board or the Supervisory Board of Klöckner-
maximum amount of 10% of the share capital until
Werke AG were granted any cash performance or
the time of their exercising with the exclusion of sub-
other non-cash benefits from Salzgitter Mannesmann
scription rights in accordance with Section 186 (3) of
GmbH, Salzgitter, or persons acting in concert in con-
the German Stock Corporation Act or its correspond-
nection with the takeover offer published on April 30,
ing application. The Management Board is also
2007 and no such grant has been promised to a Man-
authorised to establish further details of the capital
agement Board or Supervisory Board member at
increase and its implementation with the authorisa-
Klöckner-Werke AG.
tion of the Supervisory Board. The Management Board is also authorised, with the approval of the Supervisory Board, to
RELATED PARTIES
increase the share capital by June 15, 2010 by a total
The announced change of our shareholder structure
of up to € 50,000,000 through the issue of new
was successfully implemented in March 2007 on the
bearer shares on one or several occasions against
basis of active cooperation with the responsible per-
cash contributions or non-cash contributions (Autho-
sons and bodies in the sales process of the stake in
rised Capital II). Shareholders are to be granted sub-
Klöckner-Werke AG.
scription rights. However, the Management Board is
The preliminary contract on the acquisition of
authorised, with the approval of the Supervisory
78% of Klöckner shares was signed on March 8,
Board, to exclude fractional amounts from the share-
2007. In addition, on April 30, 2007, Salzgitter Man-
holders’ subscription rights. The Management Board
nesmann GmbH, a full subsidiary of Salzgitter AG,
is further authorised, with the approval of the Super-
published a voluntary offer to the remaining Klöck-
visory Board, to exclude the subscription right in cap-
ner-Werke AG shareholders on the acquisition of
ital increases against non-cash contributions for the
their shares against cash. The offer, which had an
purpose of the acquisition of companies, parts of
acceptance period from April 30 to July 9, 2007, pro-
companies or investments in companies. The Man-
posed a purchase price of € 15 per share for small
agement Board is also authorised to establish further
shareholders. After the expiry of the acceptance
details of the capital increase and its implementation
period (July 30, 2007) Salzgitter AG reported an
with the authorisation of the Supervisory Board.
acceptance rate of 2.57%.
There is a change of control agreement for
Following the successful transfer of the
the Management Board members Roland Flach and
majority of Klöckner shares to Salzgitter and the
Valentin Reisgen for the event of a change in the
voluntary takeover offer to the free shareholders,
majority shareholder, whereby they can leave the
Salzgitter now holds more than 85% of Klöckner
28
GROUP MANAGEMENT REPORT KLÖCKNER-WERKE AG
shares. The cooperation between the two companies
Group. In the context of regular risk inventories, risks
has been highly productive so far and is having a sta-
are identified and assessed in terms of their proba-
bilising effect, both directly and indirectly, on our
bility of occurrence and possible damage level. The
business and working conditions. Naturally, our cus-
development of the inventoried risks as well as the
tomers are also noticing a change for the better.
efficiency of the risk management measures are man-
In the 2007 financial year, the Management
aged by the holding company. Klöckner-Werke AG
Board reported separately on links with affiliated
thus ensures the essential transparent information
companies in accordance with Article 312 of the Ger-
flow in the Group.
man Stock Corporation Act. The report contains the following statement: “We declare that in relation to each of the
OPERATING AND FUNCTIONAL
legal transactions listed in the report on the links with
RISK STRUCTURE
affiliated companies, our Company received an
One of the factors impacting the company’s deve-
appropriate counter performance according to the
lopment is the momentum of the global economy.
circumstances known to us at the time of the legal
Thus market risk is a key element of the risk structure
transaction or measure, and that there was no detri-
for each business unit.
mental impact on the Company as a result of the measures stated that were taken or not taken.”
On the basis of intensive market and competitive observance, regular strategy talks with customers and suppliers and the appropriate presentation of the company on trade fairs, the market risk
RISK MANAGEMENT
is minimised and monitored appropriately. The product portfolio of our subsidiaries competes on price
INTEGRATED RISK AND OPPORTUNITY
with other market participants. To counteract the
MANAGEMENT SYSTEM
risks implied here, work is done on an ongoing basis
Risks and opportunities form two basic conditions of
to reduce costs in a sustained fashion and to opti-
entrepreneurial activity. In order to identify them at an
mise the manufacturing and procurement processes.
early stage for our Group and respond to them
From the current vantage point, due to full order
promptly and appropriately, we introduced a proper
books volume risks are not anticipated, as in previous
risk management system which is being developed on
years.
an ongoing basis. Risk management has been inte-
The repercussions of the US mortgage crisis
grated in all planning, controlling and reporting sys-
and the related extraordinary negative impact on
tems in the individual companies and at holding com-
financing banks could also make it more difficult to
pany level. This system ensures responsible corporate
finance our machines.
management in line with the German Corporate Gov-
To capture existing and new customer seg-
ernance Code and corresponds to the provisions of
ments, the company implements and enhances new
the German Control and Transparency Act.
sales initiatives that are designed in particular to pro-
Principles, processes and responsibilities are regulated in a guideline applicable throughout the
vide additional impetus for replacement part and service business.
29
The acquisition of the Chinese company GLM2 in the
and handling, each relevant department of the com-
last financial year was another important step in
pany is involved in a timely manner. Interest rate,
implementing a future-driven alignment. Activities of
exchange rate and liquidity risks are managed
this sort are necessary for growth within the group.
throughout the Group in the context of active trea-
However, due to the related uncertainties (e.g. polit-
sury management. The backup measures include a
ical restrictions), they are also entail risk.
wide range of management mechanisms. This include
Examining the feasibility of acquisitions (due
hedging transactions and interest rate swaps. Proac-
diligence) and the analysis of risks is accompanies in
tive receivables management and securing payment
advance by a corresponding standardised process and
obligations minimise the occurrence of bad debts.
external consultancy so as to manage and reduce risks accordingly.
The future commercial success of the Klöckner Group largely depends on the commitment, moti-
Furthermore, it as an objective to diversify risk
vation and the specialist expertise of the employees
by opening accessing new sales possibilities along the
and qualified staff in key positions. The increasing
beverages industry, also in the food and non-food
competition in the market, also involving the risk of
segment.
a lack of qualified staff in personnel recruitment,
Technological developments constitute a
must be countered by taking appropriate action
major success factor of our company. With the intro-
throughout the Group. To minimise the risk of fluctu-
duction of new developments, in the context of
ation of individual employees, especially in key roles,
responsible management there is an awareness that
an open corporate culture prevails. In addition, the
there are not only opportunities, but also risks.
Group provides its employees with wide-ranging
Through a high level of employee training and invest-
opportunities for further qualifications and training.
ments in the research and development area, the
The operating business can be limited by
opportunities of the successful introduction of tech-
deliveries and services being incorrectly provided. In
nological innovations are maximised and correspond-
order to limit warranty and liability risks, these are
ing risks, such as market entry risks, are minimised.
limited in the General Terms and Conditions, and if
The presence of imitations is also countered by inten-
necessary, by individual regulations.
sive research and development work with the resulting competitive advantage.
Action for annulment and rescission against resolutions of the Annual General Meetings on June
We see the primary risks in the procurement
16, 2005 and July 5, 2006 was rejected in the first
market as being price increases in the raw materials
instance by the Duisburg district court. The appeal
and energy sector and in the context of increased
procedures are ongoing at the Düsseldorf higher
capacity utilisation at key suppliers which provide
regional court. Action for annulment and rescission
technical components which are difficult to substi-
against resolutions of the Annual General Meeting on
tute. We counteract these risks by appropriate
June 14, 2007 has been referred to the Duisburg dis-
backup measures, for example cooperation with sup-
trict court
pliers and the joint optimisation of the supply chain.
IT risks are primarily defined as those result-
In order to avoid or minimise risks in terms of
ing from the outage of networks and program and
finance and contracts, in the context of clarification
operating errors which can be caused internally and
30
GROUP MANAGEMENT REPORT KLÖCKNER-WERKE AG
striking. Thus growth of 2.2% is expected for the
+7-8 %
industrial countries against an upturn of up to 7% to
economic growth is forecast for the emerging countries in
nical engineering industry. The sharp rise in some
2008. On the other hand, there will be a slight deceleration
domestic orders across the industry is expected to
in the upswing of the industrial nations.
lose some momentum, but still continue moving up.
8 % in the industrialising countries. With its industry holdings, the Klöckner Group is embedded in the growth-oriented mecha-
The estimates are based on the planned investment in equipment in Germany of approximately 5%. For foreign orders which developed very well despite declining demand from the USA, ongoing growth is externally. To keep this risk as low as possible, regu-
expected, primarily from orders in Europe and the
lar investments are made in a modern hardware and
industrialising countries .
software infrastructure and regular backups made.
Negative factors for the German mechanical engineering sector will be not only the consequences of the real estate and finance crisis, but also the high
OVERALL RISK
valuation of the euro against the yen and dollar and
Risks that are not yet known or risks which we still
an ongoing risk of energy and raw material prices
regard as insignificant could impair our business activ-
(e.g. stainless steel). Furthermore, with the order situ-
ities in the future.
ation remaining good, measures have to be taken for
However, the risk situation has not changed in a material fashion since the last report. Overall when the report was created no risks are apparent which could jeopardise the future of the Group.
possible bottlenecks at key suppliers and thus in the mechanical engineering sector itself. Overall the trend for the international mechanical engineering sector is very promising for 2008, even taking the usual risks into account. On the basis of the various factors, for real mechanical engi-
FORECAST REPORT
neering production, the VDMA anticipates for Germany and also international a plus of 5%. If this fore-
GOOD FORECAST FOR MECHANICAL
cast becomes reality, this would means a 40% pro-
ENGINEERING
duction increase for the German mechanical
For the global economic development it is particularly
engineering sector within five years.
the ongoing tension on the financial markets which is establishing barriers for unhindered or even accelerated growth. For 2008, the United Nations expects
OPPORTUNITIES FOR THE KLOCKNER GROUP
growth to slow to 3.4% or less. The difference of the
The propensity to invest within the global beverages
contributions from the different regions will again be
industry – our largest customer group with some
31
+5,0 % 85% of sales – remains very vigorous. Over the next
The international mechanical engineering
few years, global requirements for filling and packag-
industry is expected to increase by 5% in 2008.
ing machines are expected to risk by an annual fig-
A stable environment for the Klöckner Group.
ure of approximately 6%. Except for the restrained development of the North American market as a result of the difficult economic situation there, the expectation is for increase order levels internationally. It is particularly in the industrialising countries where the rapid turn in affluence pushes demand for pack-
The restructuring programme started at KHS at the
aged beverages and thus the market for our
end of 2005 and set up for several years has already
machines. The positive trend will also be able to com-
borne further considerable fruit, and there are various
pensate part of the increased expenses resulting from
growth and earnings improvement initiatives within
rising material and wage costs.
the Other Industrial Holdings segment.
Our measures to realise growth, the highest level of quality deliveries and enhanced efficiency well equip the company for future tasks and new markets.
OVERALL OUTLOOK
In addition to adaptation of the Group to regional
The prospects for our Group are still good both
requirements of economic forces, further investment
nationally and internationally. Our measures and
in technological developments is a key factor. Our
plans are being supported by a dynamic global and
customers demand increasing flexibility of machinery
regional economic recovery as well as optimistic fore-
and systems. Short production paths and deployment
casts for our industries. Despite competitive pressure
are to be supported by versatility and ease of use of
and a slight impairment of international economic
machinery. In addition, there are new guidelines and
momentum, all the Group’s operating companies are
our own requirements for environmentally sound
assuming a continuing positive business performance
processes. The best innovations will also continue to
and a strengthening of their market positioning.
influence the market position in future. Here, we see a good reason to continue to invest heavily in research
Duisburg, February 25, 2008
and development in forthcoming financial years.
Klöckner-Werke AG
With a good equity ratio (38.5%) and a finan-
The Management Board
cial strong parent company, we see well prepared to face the challenges of the future and our own high objectives. After the record sales in the last financial year,
Roland Flach (Chairman)
for 2008 we expect sales a approximately the same level and a further upturn of the operating result. From 2009, we plan an expansion of sales with the corresponding rise in earnings.
Valentin Reisgen
34
KLÖCKNER SHARES/CORPORATE GOVERNANCE REPORT KLÖCKNER-WERKE AG
KLÖCKNER SHARES
PERFORMANCE IN 2007
In the finance year 2007, earnings per Klöckner share
Klöckner shares are listed on all German stock
recovered, after it had suffered from the impact of
exchanges in the Prime All Share index. During the
the insolvency of its former majority shareholder last
year, the share price moved between € 10.69 and
year. This year the basic earnings per share are
€ 16.90 per share, establishing a stable position at
€ 0.46.
just over € 15 to the end of the year. The closing price of € 15.28 (December 28, 2007) was 37.7% up against the reference date of the previous year.
TRADING VOLUME
The enormous leap of the stock price was
Trading of the Klöckner share was much brisker than
triggered primarily as a result of the positive decision
in the previous year. It was impacted chiefly by its for-
for a new majority shareholder in March last year.
mer parent company announcing insolvency and the
Since the contract for the share transfer was con-
announcement of a new majority shareholder,
cluded, the Klöckner Group operates with the back-
Salzgitter Mannesmann GmbH. At € 93.9 million and
ing of the new, internationally successful and pro-
around 6 million shares, the trading volume in XETRA
fitable parent company, Salzgitter AG.
trading was well above that of the previous year. In
STOCK MARKET DEVELOPMENT
160
140
120
100
80 02. Jan. 2007
06. Febr. 2007
13. März 2007
19. April 2007
25. Mai 2007
02. Juli 2007
06. Aug. 2007
German DAX indexed
German SDAX indexed
German MDAX indexed
Klöckner indexed
10. Sept. 2007
15. Okt. 2007
17. Nov. 2007
27. Dez. 2007
German Prime Standart indexed
35
DATA ON KLÖCKNER SHARES
ISIN / WKN
DE0006780000 / 678000
Share type
Ordinary no-par value share
Number of shares addition, Salzgitter group assumed a majority hold-
45,814,460
Free float
14 %
ing. It now has a 85.6% stake in Klöckner-Werke AG.
INVESTOR RELATIONS Various communication and information options are available to Klöckner-Werke AG investors. In addition
KEY DATA ON KLÖCKNER SHARES €
2006
0.46
-10.26
Market price at end of year*
15.28
11.10
information on the situation of the Company and new
High
16.90
12.31
developments from the Company’s web site, quarterly
Low
10.69
9.95
and annual reports as well as press releases and ad hoc notifications. In addition, the Annual General Meeting
Market capitalisation at end of year
is an important platform for an exchange and active
* Closing prices on Xetra
to the direct contact of our Investor Relations team, investors and other interested parties can also obtain
Basic earnings per share
2007
700 million 509 million
participation in all matters relating to the Company.
CORPORATE GOVERNANCE REPORT
The term “Corporate Governance” stands for the
the Company’s individual executive bodies. The
implementation of common standards in managing
Klöckner Group meets fully the recommendations
and monitoring German companies. The objective is
and proposals stated in the German Corporate Gov-
responsible corporate management within the frame-
ernance Code, with three exceptions.
work of legal and ethical standards, aiming at the same time to achieve a sustained increase in the enterprise value. The Management Board and Super-
DECLARATION OF COMPLIANCE IN ACCOR-
visory Board of Klöckner-Werke AG are committed to
DANCE WITH SECTION 161 OF THE GERMAN
the principles of company management and organi-
STOCK CORPORATION ACT
sation stated in the Code. Key guidelines such as
In December 2007, the Management Board and
transparency and respecting shareholders’ interests
Supervisory Board issued the latest declaration of
are just as important as ensuring the independence of
compliance of Klöckner-Werke AG, which refers to
36
CORPORATE-GOVERNANCE-BERICHT KLÖCKNER-WERKE AG
the version of the German Corporate Governance
GROUP MANAGEMENT
Code amended July 14, 2007. Klöckner-Werke AG
The Klöckner-Werke AG Management Board consists
complied with the recommendations of the Code
of two members. Together they make corporate de-
with the exceptions published in the
cisions and set targets for Klöckner-Werke AG. The
• 2002 declaration of compliance (Code version
Management Board works together closely with the
amended November 7, 2002), • 2003 and 2004 declaration of compliance (Code version amended May 21, 2003) • 2005 declaration of compliance (Code version amended June 2, 2005) and • 2006 declaration of compliance (Code version amended June 12, 2006).
Company’s Supervisory Board, which it provides with regular and detailed reports on the ongoing business and strategic orientation of the Group. Both executive bodies of the Company have an obligation to the welfare of the Company, increasing its enterprise value in the long term and the interests of its shareholders and employees.
The declarations of compliance were published in the
The Supervisory Board and the Audit and
Federal Gazette (Bundesanzeiger) and can also still be
General Committees establish monitor and advise
viewed on the Company’s Web site.
the Management Board on the management of the Company. Various actions and decisions of the Man-
“Die Klöckner-Werke AG will comply with the
agement Board require the approval of the Supervi-
recommendation of the Government Commission of
sory Board. These include financial planning, funda-
the German Corporate Governance Code in the ver-
mental structural changes in the Group, control and
sion of June 14, 2007 with the following exceptions:
profit transfer agreements, larger investments, loans
3.8
(2) If the Company takes out a D&O policy for
and guarantees, agreements and measures of partic-
the Management Board and Supervisory
ular significance to the Group. The Management
Board, a suitable deductible shall be agreed.
Board reports business development and the Group’s
The Supervisory Board should establish a
planning to the Supervisory Board at regular inter-
Nomination Committee which is made up
vals. The cooperation in the Management Board and
exclusively of shareholder representatives and
the apportionment of business is regulated in the
which proposes the Supervisory Board suit-
business apportionment plan, which is specified on
able candidates for its election proposals to
the basis of the Rules of Procedure for the Manage-
the Annual General Meeting.
ment Board set up by the Supervisory Board. The
5.3.3
5.4.7
(2) The members of the Supervisory Board
mandates of the Management Board and Supervi-
shall receive fixed and performance-related
sory Board members and relations to related parties
remuneration. [...]
is shown in the notes of the Group financial statements. In the matter of elections to the Supervisory
Duisburg, December 2007
Board, the Management Board and the Supervisory Board jointly propose candidates to the Annual Ge-
The Supervisory Board
The Management Board
neral Meeting. It is not planned to transfer this function to a Nomination Committee as proposed by the German Corporate Governance Code. In accordance
37
with the German Codetermination Act, the Supervi-
and third parties up-to-date information on the devel-
sory Board consists of twelve members, six of which
opment and strategy of the Klöckner Group in quar-
are shareholder representatives and six of which are
terly and annual reports. The Company’s homepage
employee representatives.
(and the members of the investor relations team are also available for more detailed and quick information on the Company. The information flow is rounded off
RISK MANAGEMENT
by regular ad hoc disclosures and press releases. The
The Klöckner-Werke AG Management Board ensures
Annual General Meeting also provides an opportunity
appropriate risk management and risk controlling in
for direct discussion between the Company’s ma-
the Company . When the general conditions change,
nagement and investors.
these are adjusted and developed. The Supervisory Board is informed regularly on these matters. Details on risk management are to be found in the chapter
ANNUAL GENERAL MEETING
with the same name in the management report.
The Annual General Meeting serves to provide investors with information and gives them the opportunity to play a role in key corporate decisions. The
REMUNERATION AND SHAREHOLDINGS OF THE
Management Board and the Supervisory Board report
MANAGEMENT BODIES
on the past financial year and the Company’s plan-
Detailed information on the remuneration system can
ning and answer questions. Issues resolved by the
be found in the notes to this Annual Report. No stock
Annual General Meeting include the appropriation of
option programmes are intended for members of the
retained earnings, the discharge of the Management
Management Board and Supervisory Board or the
Board and the Supervisory Board, the choice of audi-
employees of Klöckner-Werke AG.
tor for the current financial year, the election of mem-
In the 2007 financial year, the Company received the following notification in respect to Klöckner-Werke AG securities:
bers of the Supervisory Board and amendments to the Articles of Association. Shareholders unable to participate in the
• August 8 2007, Valentin Reisgen, sale 8,000 shares.
Annual General Meeting personally can transfer their
The total holdings of all members of both executive
voting rights to the Company’s proxies or third par-
bodies amount to less than 1% of shares issued by
ties. Information on the progress and results of the
the Company.
Annual General Meeting can be obtained from the Investor Relations team after the meeting is over.
TRANSPARENCY At Klöckner-Werke AG transparency is regarded as a key objective for active communication and cooperation with shareholders and the capital market. Our shareholders, media and the interested public are informed regularly by means of the important recurring dates in the Finance Calendar. We offer investors
38
SUPERVISORY BOARD REPORT KLÖCKNER-WERKE AG
SUPERVISORY BOARD REPORT
A key element in the 2007 reporting year was major
regularly informed on the course of busienss and key
changes in the ownership structure of our Company.
transactions outside the meetings of the Supervisory
This also impacted the composition of the Supervisory
Board. In separate strategy talks, the outlook and
Board and its issues.
future orientation for individual group segments were
The Supervisory Board of Klöckner-Werke AG
discussed together with the Management Board.
performed the duties incumbent on it under legislation, the Company’s Articles of Association and its Rules of Procedure. We monitored and regularly
MEETINGS OF THE SUPERVISORY BOARD AND
advised the Management Board in its management of
ITS COMMITTEES
the Company. The Supervisory Board was directly
There were a total of six meetings of the Supervisory
involved in all decisions of fundamental importance
Board in financial year 2007. As required, the Super-
to the Company. The Management Board reported to
visory Board made resolutions using the written pro-
the Supervisory Board, both verbally and in writing,
cedure. All members of the Supervisory Board took
regularly, promptly and comprehensively on the
part in all meetings, with one exception. Mr. Miebach
course of business, the Group’s situation including its
did not participate in the meeting on January 8, 2008.
performance, the risk situation and risk management.
In plenary sessions of the Supervisory Board,
Deviations from planning and targets in business
the situation at Klöckner-Werke AG and its sub-
development were explained to us in detail. Signifi-
sidiaries was discussed in connection with sales, ear-
cant transactions were discussed extensively in ple-
nings and employment trends as well as in respect to
nary sessions using reports from the Management
key investment projects and the financial situation. A
Board. The Management Board discussed the strate-
key topic was the change in shareholders. The Ma-
gic and, in particular, international orientation of the
nagement Board reported regularly on the course of
Company together with us.
Group business and corporate planning.
To the extent required by law, the Articles of
In its meeting on January 8, 2007, the Super-
Association or other conditions, the Supervisory
visory Board dealt with the status of the restructuring,
Board cast votes on reports and proposed resolutions
which had been almost completely implemented in
by the Management Board after thorough examina-
2006, but which was then reversed in January 2007.
tion and intensive consultation. Both Mr. Rainer Laufs
The agenda for the Supervisory Board mee-
– as Chairman to July 5, 2007 – and myself, were in
ting on March 27, 2007 included not only the regu-
close contact with the Management Board in addition
lar reporting on the business and finance situation,
to the meetings of the Supervisory Board and were
but also the resolutions on the annual statements of
39
2006, the agenda of the Annual General Meeting
The Audit Committee met three times in the report-
and the report of the Supervisory Board.
ing year. In particular, its work focused on the annual
The main item in the June 13, 2007 meeting
and consolidated financial statements, the manage-
was the status report on the Salzgitter AG takeover
ment report and the Group management report and
bid to the outstanding Klöckner-Werke AG share-
the dependent companies report. Other issues dis-
holders as well as issues relating to the Annual Ge-
cussed at the meetings included the quarterly reports,
neral Meeting on June 14, 2007.
the ongoing development of risk management. In
In its meeting on August 2, 2007, after the
addition to awarding the audit contract to the audi-
personnel changes, the executive body elected a new
tor, it also determined the amount of remuneration.
Chairman of the Supervisory Board and determined
The General Committee, which met twice in
the persons on the Audit, General and Mediation
the reporting year, is responsible for concluding,
Committees.
amending and terminating agreements with mem-
The October 26, 2007 meeting dealt with the
bers of the Management Board, granting the Super-
status report on the receivables to the insolvency
visory Board’s approval in matters under Sections 89,
administrator of WCM AG i. Ins. as well as a report
114 and 115 of the German Stock Corporation Act
from the General Committee on the examination of
and any other duties assigned to it by the Supervisory
the cash pool previously in place between Klöckner
Board.
and WCM. In addition an examination was made of the Rules of Procedure for the Management Board. In its December 14, 2007 meeting, the Super-
The Mediation Committee met once and dealt with the appointment of a Human Resources manager.
visory Board approved the financial, investment and human resources planning to 2010, the appointment of a Human Resources manager and the business
ANNUAL FINANCIAL STATEMENTS AND CON-
apportionment plan of the Management Board. It
SOLIDATED FINANCIAL STATEMENTS
also passed the declaration of compliance for 2007.
The annual financial statements prepared by the
Meeting topics also included the actions for
Management Board for the financial year from Janu-
annulment and rescission against resolutions of the
ary 1 to December 31, 2007 and the management
Annual General Meetings in 2005, 2006 and 2007.
report of Klöckner-Werke AG were audited by Price-
The Supervisory Board sanctioned the defence of
waterhouseCoopers Aktiengesellschaft Wirtschafts-
these.
prüfungsgesellschaft, Frankfurt/Main. The audit manIn accordance with the Corporate Gover-
date was awarded by the Supervisory Board in line
nance Code, the Supervisory Board also discussed the
with the resolution by the Annual General Meeting
efficiency of its own work. In order to perform its
on June 14, 2007. The auditor issued an unqualified
duties efficiently, the Supervisory Board formed a total
audit opinion.
of three committees to prepare the resolutions of the
The consolidated financial statements and the
Supervisory Board and issues to be discussed in the
Group management report of Klöckner-Werke AG
plenary. The committees each consist of equal num-
were prepared in accordance with the International
bers of shareholder and employee representatives.
Financial Reporting Standards (IFRS), audited by the
40
BERICHT DES AUFSICHTSRATS KLÖCKNER-WERKE AG
auditor and issued with an unqualified audit opinion.
2008. The auditor reported on the key findings of its
The financial statement documents and the audit
audit. The Supervisory Board examined the report of
reports were sent to all members of the Supervisory
the Management Board. It approved the report as
Board in a timely manner. They were explained by the
well as the result of the audit produced by the audi-
Management Board and intensively discussed by the
tor. The auditor issued the dependent companies
Audit Committee on March 18, 2008 and in the
report of the Management Board with the following
meeting of the Supervisory Board on March 19, 2008.
unqualified audit opinion:
The auditors who signed the audit reports took part
“On completion of our audit in accordance with pro-
in both discussions of the annual financial statements
fessional standards, we confirm that
and the consolidated financial statements and
1. the factual statements of the report are correct,
reported on the key findings of their audit; they were
2. the Company’s remuneration with respect to the
also available to answer any questions and to provide
transactions listed in the report was not inappro-
additional information.
priately high, or disadvantages have been adjusted
With regard to the early detection system for
3. with regard to the measures listed in the report,
risks, the auditors stated that the Management Board
there were no circumstances that would justify a
appropriately complied with the measures required in
materially different opinion than that of the Man-
accordance with Article 91 (2) of the German Stock
agement Board.”
Corporation Act, in particular those relating to the establishment of a monitoring system, and that the
On completion of its examination, the Supervisory
monitoring system is suitable for the early detection
Board raised no objections to the findings of the Ma-
of developments that could jeopardise the future of
nagement Board at the end of its report on the ties
the Company.
with affiliated companies for the 2007 financial year.
Following extensive discussion and its own audit of the annual financial statements, the consolidated financial statements, the management report
CORPORATE GOVERNANCE
and the Group management report, the Supervisory
In the corporate governance report, the Management
Board concurred with the results of the audit by the
Board also reports on behalf of the Supervisory Board
auditors and, at the recommendation of the Audit
in accordance with 3.10 of the German Corporate
Committee, approved the annual financial state-
Governance Code. On December 14, 2007, the Ma-
ments and the consolidated financial statements in its
nagement Board and the Supervisory Board issued an
meeting on March 19, 2008. The annual financial
updated declaration of compliance in accordance
statements are thereby adopted.
with Section 161 of the German Stock Corporation
The report of the Management Board report
Act and made it permanently available to sharehold-
on ties with affiliated companies for the 2007 finan-
ers on the company’s web site. Klöckner-Werke AG
cial year in accordance with Section 312 of the Ger-
complies with the recommendations of the Govern-
man Stock Corporation Act and the report on this by
ment Commission of the German Corporate Gover-
the auditor were also submitted to the Supervisory
nance Code, amended as at June 14, 2007, with
Board and discussed in the meeting on March 19,
three exceptions.
41
CHANGES IN THE SUPERVISORY BOARD AND
In its August 2, 2007 meeting, Dr. Fuhrmann was
THE MANAGEMENT BOARD
elected Chairman of the Supervisory Board. The Ge-
In accordance with Section 96 (1) of the German
neral and Audit Committees were also reappointed.
Stock Corporation Act in conjunction with Section 7
After the retirement of Maternus Gemmel,
(1) of the German Codetermination Act, the Super-
since January 1, 2008, the Klöckner-Werke AG Ma-
visory Board of the Company is composed of an equal
nagement Board has consisted of two persons,
number of representatives of the shareholders and of
Roland Flach (Chairman) and Valentin Reisgen.
the employees. Detailed information on these individ-
The Supervisory Board would like to express
uals, their professions and their mandates can be
its gratitude to the Management Board, managers
found in the “Further information”.
and all employees and the employee representatives
In the year under review, there were changes
for their work during the reporting year.
in the members of the Supervisory Board as a result of the changes in the ownership structure. The former members of the Supervisory Board, Dr. Dirk Geitner, Dr. Jochen Melchior, Peter H. Miebach, Karl-Ernst Schweikert and Rainer Laufs resigned their offices. By
Frankfurt am Main, March 19, 2008
resolution of July 12, 2007, the Duisburg district court appointed Dr. Heinz Jörg Fuhrmann, Heinz Groschke, Peter-Jürgen Schneider, Karl Spanke and Dr. Ulrich
The Supervisory Board
Schaarschmidt as members of the Supervisory Board. Thus the Supervisory Board will propose to the Annual General Meeting on June 26, 2008, that the above gentlemen will be elected for the remaining period of office of the departed Supervisory Board members.
Dr. Heinz Jörg Fuhrmann (Chairman)
44
CONSOLIDATED FINANCIAL STATEMENTS KLÖCKNER-WERKE AG
CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEET - ASSETS
€ thousand
Notes
31.12.2007
31.12.2006
Adjustment
adjusted
IFRS 3
31.12.2006
Noncurrent assets Intangible assets
1
74,740
69,530
7,499
62,031
Property, plant and equipment
2
116,089
112,324
0
112,324
Investment property
3
18,373
19,180
0
19,180
Shares on associated companies
4
9,779
9,000
0
9,000
Financial assets
5
3,989
12,660
0
12,660
Other assets
6
154
6,588
0
6,588
Deferred tax
33
28,464
31,179
0
31,179
251,588
260,461
7,499
252,962
Current assets Inventories
7
154,224
150,033
127
149,906
Trade and other receivables
8
305,430
246,114
-658
246,772
Financial assets
9
3,255
1,340
0
1,340
Other assets
10
32,183
26,820
-1,729
28,549
Income tax recoverable
33
9,754
1,918
0
1,918
Cash and cash equivalents
11
Assets held for sale
12
35,381
65,568
-249
65,817
540,227
491,793
-2,509
494,302
0
24,570
0
24,570
540,227
516,363
-2,509
518,872
791,815
776,824
4,990
771,834
45
CONSOLIDATED BALANCE SHEET - LIABILITIES
€ thousand Shareholders' equity
Notes
31.12.2006
Adjustment
31.12.2007
adjusted
IFRS 3
31.12.2006
234,570
234,570
0
234,570
13
Equity attributable to Klöckner-Werke AG shareholders Subscribed capital Reserves Minority interests
68,459
45,037
170
44,867
303,029
279,607
170
279,437
1,521
932
-3,091
4,023
304,550
280,539
-2,921
283,460
Liabilities Noncurrent liabilities Provisions
14
167,211
181,490
0
181,490
Financial liabilities
15
38,064
38,618
16,641
21,977
Other liabilities
16
4,050
4,723
0
4,723
Tax liabilities
33
1,202
1,204
0
1,204
Deferred tax
33
18,803
270
0
270
229,330
226,305
16,641
209,664
Current liabilities Provisions
17
39,958
36,852
1,121
35,731
Financial liabilities
18
32,809
20,166
-10,948
31,114
Trade payables
19
135,537
143,533
-5,574
149,107
Tax liabilities
33
6,828
4,490
3,131
1,359
Other liabilities
20
42,803
40,269
3,540
36,729
257,935
245,310
-8,730
254,040
Liabilities in connection with assets held for sale
12
0
24,670
0
24,670
257,935
269,980
-8,730
278,710
791,815
776,824
4,990
771,834
46
CONSOLIDATED FINANCIAL STATEMENTS KLÖCKNER-WERKE AG
CONSOLIDATED INCOME STATEMENT € thousand
Notes
1.1.-31.12.2007
1.1.-31.12.2006
Sales
21
1,115,474
872,541
Changes in inventories and other own work capitalised
22
6,602
5,782
Other operating income
23
54,225
49,855
Cost of materials
24
-634,690
-479,426
Staff costs
25
-272,497
-253,569
Other operating expenses
27
-200,805
-157,665
Income from associates at equity
28
2,185
0
Income from other equity holdings
29
343
363
70,837
37,881
-18,402
-16,567
Earnings before interest, taxes, depreciation and amortisation (EBITDA) Depreciation and amortisation expense
30
Earnings before interest and taxes (EBIT) before non-recurring effects Non-recurring effects of the insolvency of WCM AG
31
Earnings before interest and taxes (EBIT) after non-recurring effects
52,435
21,314
0
-363,852
52,435
-342,538
Interest income
32
3,631
8,306
Interest expense
32
-12,195
-11,640
43,871
-345,872
33
-22,003
-1,048
21,868
-346,920
Earnings before taxes (EBT)*1 Income taxes Net result of current business operations Net result of discontinued business operations
0
-232
Consolidated net income for the year*2
21,868
-347,152
Thereof attributable to Klöckner-Werke AG shareholders
21,222
-346,820
646
-332
0.46
-10.26
43,871
17,980
21,868
16,700
Thereof attributable to minority interests Basic and diluted earnings per share *1 Earnings before taxes (EBT) without non-recurring effects 2
* Consolidated net income for the year without non-recurring effects
34
47
SUMMARY OF RECOGNISED INCOME AND EXPENSE REPORTED IN THE CONSOLIDATED FINANCIAL STATEMENTS
€ thousand
1.1.-31.12.2007
1.1.-31.12.2006
Consolidated net income for the year
21,868
-347,152
Gains/losses on currency translation
-4,534
-6,319
-110
-3,269
Fair value of securities available for sale Derivative financial instruments
0
0
Actuarial losses from pension obligations
11,897
-5,086
Deferred taxes on actuarial losses from pension obligations
-5,487
1,992
Adjustment IFRS 3
0
170
1,766
-12,512
Overall result for period
23,634
-359,664
- Attributable to shareholders of Klöckner-Werke AG
23,692
-359,643
-57
-20
Changes in value recognised directly in equity
- Minority interests
48
CONSOLIDATED FINANCIAL STATEMENTS KLÖCKNER-WERKE AG
CONSOLIDATED CASH FLOW STATEMENT See note 35 1.1.-31.12.2007
1.1.-31.12.2006
Net result of current business operations
€ thousand
21,868
-346,920
Depreciation and amortisation/reversals
11,051
16,865
Decrease in provisions
-4,899
-6,673
Total income tax expense
22,002
-1,240
2,740
367,874
Profit on disposal of noncurrent assets
-2,805
-6,591
Interest income
-3,631
-8,314
-343
-604
Interest expense
12,195
11,640
Share in profit of holdings reported at equity
-2,185
0
Increase (-)/decrease in inventories
-11,797
-834
Increase (-)/decrease in receivables and other assets not attributable to investment or financing activities
-73,782
10,401
Other non-cash transactions
Income from participating interests
Increase/decrease (-) in liabilities not attributable to investment or financing activities Interest paid Income tax paid Cash inflows or outflows (-) from operating activities
5,855
7,055
-4,864
-4,400
-8,610
-579
-37,204
37,681
876
1,748
Inflows from the disposal of property, plant and equipment, intangible assets and investment property Outflows for investments in property, plant and equipment, intangible assets and investment property
-30,286
-29,313
Inflows from the disposal of financial assets
9,680
11,192
Outflows for investments in financial assets
-3,264
-9,798
Alienation of subsidiaries Acquisition of subsidiaries less purchased net cash funds Interest received Income from participating interests Cash inflows or outflows (-) from investment activities
5,203
445
-334
-21,528
3,631
4,660
343
604
-14,151
-41,990
Dividends paid to minority shareholders of the parent company
0
-5,029
Dividends paid to minority shareholders
0
-11
Proceeds from the taking on of financial liabilities
26,546
561
Repayment of financial liabilities
-4,452
-10,373
Cash inflows or outflows (-) from financing activities
22,094
-14,852
-29,261
-19,161
-844
-1,164
-82
1,710
0
-249
Cash and cash equivalents at the beginning of the period
65,568
84,432
Cash and cash equivalents at the end of the period
35,381
65,568
Change in cash and cash equivalents Exchange-rate related changes in cash and equivalents Change in cash and equivalents (excluding acquisition-related changes deducted from purchase price) as a result of changes in consolidated group Adjustment previous year IFRS 3
49
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
ACCOUNTING POLICIES Klöckner-Werke AG's head office is located at Klöcknerstraße 29 in 47057 Duisburg Germany. The Klöckner Group is an international industrial company. The Group's main activity consists of the planning, construction and installation of filling and packaging systems for the food and non-food industry. The Group also owns machine construction companies, which construct special machines for hard rubber parts, shoe machines as well as process machinery for the confectionary industry. These consolidated financial statements of Klöckner-Werke AG for the financial year from January 1 to December 31, 2007 including the information on the previous year has been prepared in accordance with the International Financial Reporting Standards (IFRS) of the International Accounting Standards Board (IASB) in compliance with the interpretations of the International Financial Reporting Interpretations Committee (IFRIC) as required to be applied in the European Union (EU). All mandatory standards and interpretations of the IASB and its committees as at December 31, 2007 have been applied. The provisions of German commercial law applicable under Section 315a (1) HGB and the standards of the German Accounting Standards Committee (GASC) and their interpretations have been applied. The IASB has made a number of amendments to the existing IFRS and passed some new IFRS to be applied from January 1, 2007 onwards. Specifically, these standards are: • Amendments to IAS 1, presentation of financial statements: capital disclosures • IFRS 4, insurance contracts. • IFRS 7, financial instruments: disclosures • IFRIC 7, applying the restatement approach under IAS 29 financial reporting in hyperinflationary economies • IFRIC 8, scope of IFRS 2 • IFRIC 9, reassessment of embedded derivatives • IFRIC 10, interim financial reporting and impairment
Apart from the extensive comments and additional disclosures on financial instruments, the amended and new IFRS applicable from January 1, 2007 did not have any material effect on the consolidated financial statements as at December 31, 2007. The International Accounting Standards Board (IASB) and the International Financial Reporting Interpretations Committee (IFRIC) have issued other standards and interpretations that are not yet mandatory for the financial year 2007. The application of these IFRS requires the endorsement of the EU, which has not yet been issued in some cases (***). The option to apply standards and interpretations issued on December 31, 2007 early has not been exercised in these consolidated financial statements. Specifically, these standards are:
50
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS KLÖCKNER-WERKE AG
• IFRS 8, operating segments • ***IAS 1 (R), presentation of financial statements • ***IAS 23 (R), borrowing costs • IFRIC 11, IFRS 2 – group and treasury share transactions • ***IFRIC 12, service concession arrangements • ***IFRIC 13, customer loyalty programs • *** IFRIC 14, IAS 19 - the limit of a defined benefits asset, minimum funding requirements and their interaction
With the exception of changes in the presentation of information given in the consolidated financial statements, the future adoption of the new standards and interpretations will not have any material effect on the consolidated financial statements of KlöcknerWerke AG. The reporting dates of the individual financial statements of the companies included in consolidation are the same as the reporting date used for the consolidated financial statements (December 31). Subsidiaries with different year-end reporting dates prepare interim financial statements as at the reporting date of the consolidated financial statements. The consolidated financial statements are prepared on the basis of historical cost, restricted by the fair value of financial assets available for sale and the measurement in income of financial assets and liabilities (including derivative financial securities) at fair value. Assets and liabilities are measured on the going concern principle. The income statement is classified in accordance with the nature of expense method. In order to improve the clarity of presentation, items are summarised in the consolidated balance sheet and income statement and explained separately below. The individual amounts in the balance sheet and income statement as well as in the tables showing the breakdown of items contained in the notes are stated in thousands of euro (€ thousand). Minor differences or apparent addition errors are the result of rounding differences. The consolidated financial statements and the Group Management Report have been published in the electronic Federal Gazette (elektronischer Bundesanzeiger) and filed with the commercial register. The Management Board approved the consolidated financial statements and Group Management Report for forwarding to the Supervisory Board on February 25, 2008.
51
SIGNIFICANT TRANSACTIONS IN THE CONTEXT OF RESTRUCTURING THE WCM GROUP In connection with the restructuring of the WCM Group that was initiated at the end of 2005, the following significant transactions occurred into the financial year 2007. The option agreement with WCM AG, under which Klöckner-Werke AG has the right to sell 10.7 million shares in RSE AG (put option) to WCM AG was terminated in December 2005. Klöckner-Werke AG did not exercise this put option and therefore was entitled to an equalisation claim against WCM AG in the amount of the difference between the purchase price that Klöckner-Werke AG would have generated in exercising the put option and the agreed value of the RSE shares of € 8.30 per share. The settlement amount totalled € 175 million and was credited to the cash management account. Under the agreement of December 30, 2005 relating to the repayment of intragroup liabilities by WCM AG, Klöckner-Werke AG acquired a further 28.4 million shares (70.7% of the share capital) in RSE AG at a total price of € 236 million at first. This corresponds to a price of € 8.30 per share. The purchase price payment was settled by offsetting Klöckner-Werke AG's existing claims against WCM AG in the total amount of € 288 million. Following the examination of the value of the RSE share based on the contractually for all RSE shares agreed adjustment clause, the price was reduced to € 8.15 per share and an equalisation claim of € 6 million was established. Including the equalisation amount, the remaining claim of Klöckner-Werke AG against WCM AG as at the balance sheet date of December 31, 2005 totalled € 58 million. RSE previously acquired 14,652,000 shares (31.98% of the share capital) in Klöckner-Werke AG at a price of € 263.7 million under the share purchase and transfer agreement of December 29, 2005 relating to financial restructuring and the reduction of claims from WCM AG. HSH Nordbank AG waived its available lien rights on the shares sold on the condition precedent that KlöcknerWerke AG requests recall of the shares sold and subsequently withdraws these by implementing a resolution to this effect at the Annual General Meeting. The agreed price for shares of Klöckner-Werke AG was € 18.00 per share. According to the expert valuation submitted by RSM Haarmann Hemmelrath as at March 24, 2006, the value of Klöckner shares as at December 31, 2005 was € 17.97. By way of the amendment dated March 24, 2006 on the share purchase and transfer agreement dated December 29, 2005, it was found that WCM KG must reimburse to RSE AG an amount of € 0.03 per share, a total of € 440 thousand.
52
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS KLÖCKNER-WERKE AG
The two agreements of December 29 and 30, 2005 were subject to the following conditions subsequent: a) The Annual General Meeting of Klöckner-Werke AG does not pass an effective resolution on the withdrawal of the shares to be withdrawn in the required majority by September 30, 2006, b) The effective resolution on the withdrawal of the shares to be withdrawn passed in the required majority by the Annual General Meeting of Klöckner-Werke AG is declared void res judicata, or c) HSH Nordbank AG in accordance with the terms of the lien rights of the shares to be withdrawn is entitled to realise these and actually effects realisation. By way of the share transfer agreement dated May 9, 2006, RSE AG transferred the 14,652,000 Klöckner shares in accordance with Section 71d sentence 5 AktG to Klöckner-Werke AG. On July 5, 2006, the Annual General Meeting of Klöckner-Werke AG passed an effective resolution on the withdrawal of the shares to be withdrawn with the required majority. However, the resolution could not be implemented as it was contested by several plaintiffs. On January 17, 2007, a procedure agreement on the liquidation of shares in Klöckner-Werke AG was concluded between HSH Nordbank AG and the insolvency administrator of WCM AG and of WCM KG, the lawyer Mr. Michael C. Frege (insolvency administrator). An agreement of consent to the liquidation agreement on Klöckner-Werke AG shares was also concluded between KlöcknerWerke AG and the insolvency administrator on January 17, 2007. This was based on the fact that by concluding the procedure agreement between HSH Nordbank AG and the insolvency administrator, HSH Nordbank AG actually exercises its liquidation rights to the shares to be withdrawn and the restructuring thereby became irrelevant. As a result, the shares transferred under the condition subsequent revert to WCM AG or WCM KG and the receivables of Klöckner-Werke AG from WCM AG initially repaid by offsetting are revived. By implementing the restructuring, Klöckner-Werke AG would have been able to realise a large share of its receivables from WCM AG. The exercising of the lien by HSH Nordbank AG in the financial year 2007 resulted in the frustration of the settlements. The receivables of the Klöckner Group from WCM AG are secured against assets pledged by WCM AG. The collateral was sufficient until the occurrence of the insolvency of WCM AG. However, the liquidation of collateral by the insolvency administrator of WCM AG may result in the Company being unable to realise its receivables.
SCOPE OF CONSOLIDATION The consolidated financial statements include all the significant subsidiaries in which Klöckner-Werke AG, as the ultimate and controlling parent company, directly or indirectly exercises control as defined by IAS 27.13. As at December 31, 2007, in addition to Klöckner-Werke AG, a total of 9 German subsidiaries (previous year: 17) and 31 foreign subsidiaries (previous year: 31) were included in the consolidated financial statements within the scope of full consolidation.
53
In the Filling and Packaging Technology segment, KHS Argentina S.A., Buenos Aires (Argentina), which previously had not been consolidated due to its subordinate importance, was consolidated for the first time effective January 1, 2007. In financial year 2006 due to the short period of time between the acquisition of the shares in Guangdong Light Industrial Machinery Plant 2 Ltd. (GLM2), Shantou (China) and the preparation of the consolidated financial statements, the fair values of the acquired assets and liabilities are determined only on a provisional basis. In the last quarter of the financial year 2007, the purchase price allocation was finally concluded within the time period of 12 months after the time of acquisition stated in IFRIC 3.62. The following table provides an overview of the subsequent changes made to the purchase price allocation:
Carrying amounts
Intangible assets Property, plant and equipment
Original valuation at
Adjustment of purchase
at first-time consolidation
first-time consolidation
price allocation
after adjustments
TCNY
€ thousand
TCNY
€ thousand
TCNY
€ thousand
0
0
0
0
0
0
64,392
6,435
0
0
64,392
6,435
Investment property
0
0
0
0
0
0
Other noncurrent assets
0
0
0
0
0
0
Inventories
119,769
11,969
1,301
130
121,070
12,099
Trade receivables
105,119
10,505
-6,764
-676
98,355
9,829
Cash and cash equivalents
18,692
1,868
-2,562
-256
16,131
1,612
Other current assets
26,117
2,610
-17,772
-1,776
8,346
834
Purchased assets
334,090
33,387
-25,797
-2,578
308,293
30,809
Noncurrent liabilities
104,599
10,453
171,073
17,096
275,672
27,549
Current liabilities
123,722
12,364
-89,729
-8,967
33,992
3,397
Assumption of liabilities
228,321
22,817
81,344
8,129
309,664
30,946
Purchased net worth
105,770
10,570
-107,141
-10,707
-1,371
-137
Purchase price
0
22,005
0
4
0
22,009
Goodwill
0
14,606
0
7,499
0
22,105
Cash share of purchase price
0
22,006
0
3
0
22,009
Cash acquired
0
1,868
0
-256
0
1,612
Cash used in company acquisition
0
20,138
0
259
0
20,397
As a result of the change in purchase price allocation, goodwill in the consolidated balance sheet resulting from offsetting the purchase price for acquiring the 70% interest in GLM2 in October 2006 and the pro rata revalued equity increased by € 7.5 million. In the Other Industrial Holdings segment the shares in REMAK Maschinenbau GmbH, Reinheim, were sold to a company of the Hähn Group, Rheinböllen by way of agreement dated May 7, 2007. The shares were transferred effective May 31, 2007. Together with REMAK Maschinenbau GmbH, its subsidiary REMAK of North America Inc., Itasca (USA), is also no longer included in the scope of consolidation.
54
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS KLÖCKNER-WERKE AG
Domus Verwaltungsgesellschaft mbH, Duisburg and Klöckner Durilit GmbH, Osnabrück, were merged to form Klöckner Mercator Maschinenbau GmbH, Duisburg, as of January 1, 2007. The business assets of Domus Beteiligungsgesellschaft mbH & Co. KG, Duisburg, were acquired as part of the rollup of Klöckner-Werke AG as of November 30, 2007. Due to its subordinate importance, GVG Grundbesitz- und Verwaltungsgesellschaft mbH, Duisburg, was not included in the consolidated financial statements. In the Holdings segment, by way of an agreement dated March 26, 2007, Klöckner Mercator Maschinenbau GmbH, Duisburg, sold 94% of its shares in Phoenix Holding GmbH, Berlin, which had been acquired in financial year 2006 with the intention of resale. In turn, Phoenix Holding GmbH holds all shares in Phoenix Office Garden GmbH, Berlin, and 94% of limited partner's shares in Phoenix Immobilienverwaltungsgesellschaft mbH & Co. KG, Berlin. The three companies that operate the "Phoenix-Schwalbach" property company were recognised under "assets and liabilities held for sale" as at December 31, 2006. In the financial year 2007, the changes in the scope of consolidation impacted only insignificantly on the net assets, financial position and results of operation at the Klöckner Group. 7 (previous year: 6) subsidiaries, 1 (previous year: 1) associated company and one joint venture were not included in consolidation as they, individually and in their entirety, are not material to the net assets, financial position and results of operations of the Klöckner Group as their business activities are either suspended or only minor. In accordance with IAS 39, shares in subsidiaries, associates or joint ventures are not consolidated or valued at equity, but recognised at cost if these are of subordinate importance from a group perspective. A full list of shareholdings has been published in the electronic Federal Gazette (elektronischer Bundesanzeiger) and the commercial register has been notified. A condensed statement of the significant consolidated companies including disclosures on shareholders' equity and results for the year in accordance with IFRS is contained in the "Further information" section of the Annual Report.
DISCONTINUED OPERATIONS Phoenix Holding GmbH, Phoenix Office Garden GmbH and Phoenix Immobilienverwaltungsgesellschaft mbH & Co. KG were acquired in the financial year 2006 with the intention of resale. By way of the disposal of 94% of shares in Phoenix Holding GmbH, these three companies were no longer included in the scope of consolidation from the first quarter of 2007 onwards. RSE Projektmanagement AG, RSE Service GmbH and Twin Squares S. A. were acquired at the end of 2005 with the exclusive intention of resale. The liquidation of Twin Squares S. A. was resolved at the end of March 2006. The assets and liabilities of the company were transferred to RSE AG, which was included in the scope of consolidation of Klöckner-Werke AG at the time. RSE Projektmanagement AG and RSE Service GmbH were sold to WCM GmbH by way of purchase and transfer agreement dated May 22, 2006. Under IFRS 5.32c, companies acquired with intention to sell are treated as discontinued operations for the purposes of accounting. The assets of those companies were therefore reported separately in the balance sheet as at December 31, 2006 as "assets held for sale". Similarly, liabilities in connection with the assets held for sale were reported as a separate item on the liabilities side of the balance sheet. The result of discontinued operations is also reported separately in the consolidated income statement.
55
The result of discontinued operations is as follows:
2007
2006
Sales
0
1,891
Changes in inventories and other own work capitalised
0
61
Other operating income
44
898
Cost of materials
-9
-2,057
Staff costs
0
-454
Depreciation and amortisation expense
0
-8
-35
-432
Net interest income
0
107
Earnings before taxes (EBT)
0
6
Income taxes
0
-6
Net result of discontinued business operations
0
0
€ thousand
Other operating expenses
CONSOLIDATION PRINCIPLES The single entity financial statements of the companies included in the Klöckner consolidated financial statements are prepared in accordance with IFRS applying uniform accounting policies. Acquired subsidiaries are reported using the purchase method in accordance with IFRS 3. Fully consolidated companies are consolidated by offsetting the cost of the assets and liabilities acquired against the fair values of these assets and liabilities at the time of acquisition. The cost of the acquisition corresponds to the fair value of the assets surrendered, the equity finance instruments issued and the liabilities arising or assumed at the time of the transaction. The recognisable assets, liabilities and contingent liabilities of the subsidiaries are valued at their full fair value, regardless of the size of any minority interests. Intangible assets are reported separately from goodwill if these are separable from the enterprise or result from a contractual or other right. Goodwill is no longer amortised, but is instead subject to an impairment test performed annually, or more frequently if there is evidence to suggest an impairment. The annual impairment test is normally performed in the fourth quarter of the financial year. Negative differences arising on the first-time consolidation are recognised in the income statement when they arise. The residual carrying amounts of the recognised goodwill are taken into account when calculating the profit or loss on deconsolidation. Intra-group sales, expenses and income and all receivables, liabilities and provisions between the consolidated companies are offset against each other. Where noncurrent assets and inventories contain assets resulting from intra-group supplies, corresponding intercompany profits are eliminated.
56
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS KLÖCKNER-WERKE AG
Minority interests in consolidated shareholders' equity and the consolidated net result for the year are shown separately from the parent company's share in these items. Minority interests in partnerships, which must be reported as debt capital under IAS 32, are recognised under other long-term liabilities. The investment in RSE Grundbesitz und Beteiligungs-Aktiengesellschaft (RSE AG), Frankfurt/Main, is carried at equity as KlöcknerWerke AG still holds more than 20% of voting rights after the occurrence of one of the conditions subsequent of the restructuring agreements concluded at the end of 2005 and can therefore materially influence its financial and business policy.
CURRENCY TRANSLATION The consolidated financial statements have been prepared in the reporting currency euro. In accordance with IAS 21, the concept of the functional currency is applied for translating the financial statements of companies prepared in foreign currencies. The functional currency of the consolidated companies is the relevant national currency or a third-party currency, as these companies manage their business activities on an independent financial, commercial and organisational basis. Assets, liabilities and contingent liabilities are translated at the average rate as at the balance sheet date, shareholders' equity is translated using historic rates. Items in the income statement are translated using the average rate for the period. The resulting differences are reported in equity. If companies leave the consolidated group, existing exchange rate differences are reversed in income. Transactions in the individual balance sheets of consolidated companies prepared in the local currency are reported in the foreign currency using the rate at the time of initial recognition. Monetary items (cash and cash equivalents, receivables and liabilities) in foreign currency are measured at the closing rate at the balance sheet date in accordance with IAS 21. Exchange differences arising on the translation of monetary items are reported in the income statement under other operating income or other operating expenses.
57
The following significant exchange rates were used in currency translation for the Klöckner Group:
Closing rate
Average rate
31.12.2007
31.12.2006
2007
2006
USD
0.679302
0.759301
0.729672
0.796217
Brazil
BRL
0.382702
0.355391
0.374637
0.36554
UK
GBP
1.363605
1.489203
1.461269
1.466567
Australia
AUD
0.596766
0.599125
0.61168
0.600059
INR
0.017217
0.017147
0.017665
0.018382
MXN
0.062155
0.069832
0.066722
0.073009
ZAR
0.099703
0.108549
0.103524
0.117342
USA
India Mexico South Africa
INTANGIBLE ASSETS Intangible assets comprise goodwill, capitalised development costs, patents, software, licenses and similar rights. Intangible assets acquired are recognised at cost at the time of acquisition. With the exception of goodwill, all intangible assets have a limited useful life. Intangible assets are written off on a straight-line basis over their period of use. The useful lives are between 2 and 15 years. If there are indications of impairment, the intangible assets subject to impairment are tested for impairment and, if necessary, written down to the recoverable amount in accordance with IAS 36. If the original reason for a previously recognised impairment ceases to apply, the assets are written up to amortised cost. In accordance with IFRS 3 and IAS 38, goodwill is no longer amortised. Instead, IAS 36 requires that goodwill be subject to an impairment test performed annually, or more frequently if there is evidence to suggest an impairment exists, and if necessary written down to its recoverable amount (impairment-only approach). Development costs are capitalised if a newly developed product or process can be clearly defined, is technically feasible and is intended for either own use or marketing. Capitalisation also requires that the development expenses will be offset by future cash flows with sufficient certainty. The development process must be distinguished from the research phase. Development is the application of research findings and takes place before the start of commercial production or use. In the event that the requirements for recognition are not present, the expenses are recognised in the income statement in the year in which they arise. Costs include all costs that can be directly attributed to the development process as well as appropriate parts of the developmentrelated overheads. Finance costs are not capitalised. Development costs are amortised from the beginning of production over the forecast useful life of the developed system model on a straight-line basis, which generally amounts to five years.
58
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS KLÖCKNER-WERKE AG
PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment are measured at cost less straight-line depreciation. Low-value economic assets are written off in full in the year of acquisition and shown as disposals in the statement of changes in assets. Depreciation is charged on a straight-line basis pro rata temporis in accordance with the assets' useful lives. The following useful lives are applied:
Property, plant and equipment
Useful life in years
Buildings
10 to 50
Leased Buildings
10 to 25
Technical equipment and machinery
2 to 25
Other equipment, operating and office equipment
3 to 25
To the extent impairment is indicated, the corresponding assets are subject to an impairment test and if necessary written down to the recoverable amount in accordance with IAS 36. If the original reason for a previously recognised impairment ceases to apply, the assets are written up to amortised cost. Fixed assets do not generally consist of individual components that are significant in relation to the total cost ("component approach"). Thus, there is no separate reporting and depreciation. Subsequent costs are only recognised as a component of the cost of the asset if it is probable that the group will receive future economic benefit from it and the costs of the asset can be reliably determined. All other repairs and maintenance are recognised in the income statement in the financial year in which they occur. The residual carrying amounts, the useful lives and the depreciation method are examined at least as of the end of each financial year. If the expectations deviate from earlier estimates, then changes are made in line with IAS 8 as changes in estimates.
IMPAIRMENT TESTS Impairment tests are performed at least once per year for goodwill; or only if there are specific indications of impairment for specific other intangible assets with limited useful lives and property, plant and equipment. Impairment is recognised in the income statement if the recoverable amount of an asset is less than its carrying amount. The recoverable amount is the higher of the net realisable value and the value in use. The recoverable amount is calculated on an individual basis for each asset. If this is not possible, the calculation is performed on the basis of cash generating units. The net realisable value corresponds to the recoverable amount from the sale of an asset at normal conditions less costs of disposal. The value in use is calculated on the basis of the estimated cash flows from the use and disposal of an asset using the discounted cash flow process. The cash flows are derived from the medium-term corporate planning taking into account current developments. Cash flows are discounted to the balance sheet date using risk equivalent capitalisation interest rates. If the reason for impairment recognised in the previous year no longer applies, with the exception of goodwill, assets are written up to their amortised carrying amount.
59
LEASES Leases at the Klöckner Group relate to developed land and plant, technical equipment and machinery and operating and office equipment. Leased noncurrent assets for which the group company in question is the commercial owner (finance lease) are recognised in the balance sheet at the lower of the present value of the leasing instalments or fair value in accordance with IAS 17 and written off over their useful lives or contract duration, if this is shorter. The corresponding payment obligations from the leasing instalments are recognised in the balance sheet as liabilities. The lease payments are allocated to interest expenses and reduction of lease obligations in such a way as to generate a constant periodic rate of return on the lessor's net investment outstanding in respect of the finance leases. If the lessor remains the commercial owner of the property (operating lease), the lease instalments are recognised as an expense in the financial year.
INVESTMENT PROPERTY Investment property includes all property held to generate rental income or capital appreciation that is not used in production or for administrative purposes. In accordance with IAS 40 they are carried at amortised cost (cost model). Depreciable investment property is depreciated on a straight-line basis over a useful life of up to 50 years. Measurement is at cost taking depreciation into consideration. Transaction costs are included in first-time measurement. Fair values are estimated using recognised accounting policies or, provided current market prices of comparable property are available, derived from these. The majority of properties are valued at regular intervals by independent experts.
FINANCIAL ASSETS Financial assets comprise shares in affiliated non-consolidated companies and investments as well as loans and other securities. All of these securities are classified as “available for sale”. The latter are valued at market value, changes in market values are recognised in equity. Where permanent impairment is indicated, an impairment test is performed. Any resulting impairment is recognised in the income statement. In line with IAS 32, shares in partnerships are treated as debt instruments. Permanent impairment and reversals are recognised in income. If there are no market values and a reliable estimate of market values is not possible, measurement is at cost less any impairment. For this reason, shares in affiliated, non-consolidated companies and other equity holdings are reported separately and at cost. If “available for sale” securities are sold or impaired, the cumulative adjustments of the fair values previously recognised in equity are recorded as gains or losses on financial assets in the income statement. Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not listed on an active market. They arise when the Group makes money, goods or services directly available to a creditor without the intention of trading this receivable. These are classified as current assets, provided they have a time to maturity of less than twelve months after the reporting date. If the time to maturity exceeds twelve months, these are classified as noncurrent liabilities.
60
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS KLÖCKNER-WERKE AG
All purchases and disposals of financial assets are recorded at their value at the settlement date, i.e. the day when the Group is obliged to purchase or sell the asset. They are derecognised if the rights to payments from the investment lapse or are transferred and the Group also transfers substantially all risks and rewards incident to ownership.
DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGES The Klöckner Group uses derivative financial instruments to hedge currency and interest rate change risks from operational transactions, and in financing. The Group uses forward currency contracts and interest rate swaps to hedge against these risks. Derivative finance transactions are only concluded with banks with first-class credit ratings. The use of such transactions is regulated in a guideline and is subject to stringent monitoring, in particular by means of a strict demarcation between the trading, processing and control functions. Derivative financial instruments are measured at market value in accordance with IAS 39. Market value is calculated on the basis of information provided by the relevant banks which is calculated in line with recognised methods. Derivative financial instruments with a positive fair value are reported in other current assets, while derivative financial investments with a negative fair value are recorded in other current liabilities. Fair value hedges are designed to provide cover for changes in the value of an asset or a liability. As the corresponding change in value of the underlying transaction is recognised in the income statement, the opposite change in value of the derivative is also recognised as an expense or as income. A cash flow hedge exists if the derivative guarantees the balancing of the risks of the future cash flows of an existing underlying transaction or almost certain future transactions. The effectiveness of the cash flow depends on how closely a specific underlying transaction is hedged with a corresponding derivative. To the extent that gains or losses on the measurement of a derivative correspond with the underlying transaction, i.e. are hedge-effective, these are reported in equity. As soon as the underlying transaction matures, gains or losses on the derivative are reported in the income statement in the same way as on the underlying transaction. In contrast, gains or losses on the non hedge-effective portion of a derivative are always reported in the income statement. Hedge accounting was not used in the Klöckner Group in the financial year 2007.
DEFERRED TAX In accordance with IAS 12, deferred tax assets and liabilities are recognised on all temporary differences between the tax base and amounts recognised under IFRS as well as on consolidation measures recognised in the income statement using the balance sheetoriented liability method. Deferred tax assets also include claims for tax relief resulting from the expected utilisation of existing loss carryforwards in subsequent years, the realisation of which can be guaranteed with sufficient certainty. Deferred taxes are calculated on the basis of the tax rates in force or expected in accordance with the legal situation in the individual countries at the time of realisation or as expected.
61
INVENTORIES Inventories are recognised at the lower of cost and net disposal proceeds. In accordance with IAS 2, in addition to directly attributable direct costs, costs of inventories contain overheads attributable to the production process on the basis of normal operation capacity including appropriate depreciation of manufacturing equipment. If required, the net realisable value is used if this is lower. The net selling price is the proceeds that can be generated in a normal transaction less the variable costs to sell. The cost of such inventories, which are not ordinarily interchangeable, as well as the costs of goods or services produced and segregated for specific projects, should be assigned by specifically identifying their individual costs. The weighted average cost method or the first-in, first-out method is used for inventories of a similar nature and of similar use to the enterprise.
CUSTOMER-SPECIFIC CONTRACT MANUFACTURING In accordance with IAS 11, contract sales and results for each contract are calculated using the percentage-of-completion method. The stage of completion is determined by reference to the relationship between the contract costs and the estimated total costs at the relevant reporting date. The corresponding contract costs are recognised as an expense when they are incurred. If the result of a manufacturing contract cannot be reliably determined, revenue should be only recognised in the amount of contract costs incurred. Advance payments are deducted from the future receivables due from contract manufacturing reported in trade and other receivables in the balance sheet. If the advance payments received for individual manufacturing orders exceed the future receivables due from contract manufacturing, the excess amount is reported in liabilities. If the total contract costs are expected to exceed the total contract revenues, the expected loss is immediately reported as an expense or a liability.
RECEIVABLES AND OTHER ASSETS Except for derivative finance instruments, receivables and other assets are recognised at amortised cost. Recognisable risks are taken into account using appropriate valuation allowances. To the extent that the reasons for valuation allowances recognised in earlier periods no longer apply, valuation allowances are reversed. Receivables with no or low interest with a maturity of more than a year are discounted. Trade and other receivables are reported as current assets in the balance sheet. If the individual business cycles of the Group companies are such that part amounts will not be realised in the next twelve months, these amounts are indicated in the notes to the consolidated financial statements.
PENSION PROVISIONS There are both defined contribution and defined benefit plans for the employees of Klöckner Group companies. Pension obligations differ on account of the respective legal, tax and economic circumstances of the country in question and are dependent on the affiliation and remuneration level of the employee. Benefit commitments are financed by the assets of external funds and provisions.
62
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS KLÖCKNER-WERKE AG
The pension provisions relate to defined benefit pension schemes and contain both obligations from current pensions and benefits from future pensions. In accordance with IAS 19, these are calculated using the projected unit credit method based on actuarial valuations carried out in the fourth quarter of each financial year. Pension provisions are allocated exclusively to noncurrent provisions. Plan assets as defined by IAS 19 are deducted from the pension obligations. Actuarial gains and losses are recognised as part of the pension provision in the year they arise and included in the presentation of all gains and losses included in the consolidated financial statements as at year-end in accordance with IAS 19.93B. Past service costs are reported under staff costs, the interest portion of the increase in the provision as net interest income.
OTHER PROVISIONS In accordance with IAS 37, provisions are recognised if a legal or constructive obligation exists, utilisation is probable (more likely than not) and the net cash outflow can be reliably estimated. Provisions are recognised at the probable value of utilisation. To the extent that the effect is significant, noncurrent provisions are discounted.
LIABILITIES Liabilities are recognised at the initial carrying amount. Any difference between the amount paid and the amount repayable on maturity is amortised using the effective interest method.
CONTINGENT LIABILITIES Contingent liabilities represent possible liabilities to third parties resulting from past events whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Group. Contingent liabilities can also arise as a result of a present obligation resulting from past events that is however not recognised due to the fact that an outflow of resources is not probable or the amount of the obligation cannot be estimated with sufficient certainty.
GOVERNMENT GRANTS Government grants essentially relate to investment and income subsidies for whose realisation the subsidy providers require certain conditions to be met. Grants extended for the procurement or manufacture of assets are deducted from the carrying amount of these assets in the balance sheet. Grants relating to income are reported under other operating income. Income subsidies granted over several years are recognised as deferred income and reported under other liabilities.
INCOME RECOGNITION Income is recognised when the supplies and services owed have been performed and the associated risks have been transferred to the customers. Rebates, bonuses and discounts are deducted from income. Sales on customer-specific contract manufacturing are recognised in accordance with the percentage-of-completion method. Please refer to the notes on customer-specific contract manufacturing. The breakdown of sales by business sector and region is presented in the segment reporting.
63
BORROWING COSTS Costs of borrowing are recognised as expenses in the period in which they are incurred in accordance with the benchmark method of IAS 23. Costs of borrowing that can be directly allocated to the acquisition or manufacture of a qualifying asset are also not capitalised and are not recognised as part of the cost.
UNCERTAINTY AND THE USE OF ESTIMATES The preparation of consolidated financial statements requires assumptions and estimates that affect the recognition, measurement and reporting of assets, liabilities, contingent liabilities, income and expenses. The assumptions and estimates relate in particular to the calculation of the stage of completion in contract manufacturing, the recognition of deferred tax on loss carryforward, the recognition and measurement of pension provisions as well as the assessment of the impairment of lease assets and financial assets. The assumptions and estimates are founded on premises that are based on the knowledge currently available in each case. In particular circumstances at the time of the preparation of the consolidated financial statements and the expected realistic future development of the global and industry-specific environment of the Group companies were taken into account in the assessment of future business developments. Although these assumptions and estimates are made on the basis of the knowledge available at the time, actual events may differ from these assumptions and estimates. If the original basis of estimate changes, the effects of such changes are generally recognised in the income statement. Changes in estimates of amounts shown in previous reporting periods have no material effect on these consolidated financial statements.
64
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS KLÖCKNER-WERKE AG
NOTES TO THE CONSOLIDATED BALANCE SHEET NONCURRENT ASSETS 1
Intangible assets COSTS Industrial property
€ thousand January 1, 2006
rights and similar rights
Development
Advance
Goodwill
costs
payments
Total
15,414
32,010
3,763
1,040
52,227
Additions
2,326
16,477
6,474
1,482
26,759
Disposals
-346
0
0
-610
-956
Transfers
479
0
382
-262
599
59
0
0
0
59
-70
-9
-6
-8
-93
17,862
48,478
10,613
1,642
78,595
0
7,499
0
0
7,499
December 31, 2006 adjusted
17,862
55,977
10,613
1,642
86,094
January 1, 2007
Changes to scope of consolidation Exchange differences December 31, 2006 Adjustment IFRS 3
17,862
55,977
10,613
1,642
86,094
Additions
4,361
344
2,683
1,634
9,022
Disposals
-560
0
-340
0
-900
Transfers
1,748
0
-301
-1,472
-25
-482
0
0
0
-482
Changes to scope of consolidation Exchange differences
79
14
-8
-7
78
December 31, 2007
23,008
56,335
12,647
1,797
93,787
65
DEPRECIATION AND AMORTISATION EXPENSE Industrial property rights
Development
Advance
costs
payments
Total
-4,268
0
-13
-13,994
0
-179
-3
-2,391
347
0
0
0
347
-586
0
0
0
-586
Changes to scope of consolidation
-4
0
0
0
-4
Exchange differences
63
0
0
3
66
-12,104
-4,268
-179
-13
-16,564
0
0
0
0
0
December 31, 2006 adjusted
-12,104
-4,268
-179
-13
-16,564
January 1, 2007
€ thousand
and similar rights
Goodwill
January 1, 2006
-9,713
Additions
-2,209
Disposals Transfers
December 31, 2006 Adjustment IFRS 3
-12,104
-4,268
-179
-13
-16,564
Additions
-2,386
-9
-996
-5
-3,396
Disposals
518
0
0
0
518
Transfers
-24
0
25
0
1
Changes to scope of consolidation
398
0
0
0
398
Exchange differences
-8
0
3
0
-5
December 31, 2007
-13,605
-4,277
-1,147
-18
-19,047
NET CARRYING AMOUNTS Industrial
€ thousand December 31, 2006 Adjustment IFRS 3
property rights and similar rights
Development
Advance
Goodwill
costs
payments
Total
5,758
44,210
10,434
1,629
62,031
0
7,499
0
0
7,499
December 31, 2006 adjusted
5,758
51,709
10,434
1,629
69,530
December 31, 2007
9,403
52,058
11,500
1,779
74,740
66
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS KLÖCKNER-WERKE AG
The carrying amount of goodwill amounts to € 50,692 thousand (previous year: € 50,343 thousand) for the Filling and Packaging Technology segment and € 1,366 thousand (previous year: € 1,366 thousand) for the Other Industrial Holdings segment. Goodwill is subject to an annual impairment test and valued at original cost less cumulative impairment losses. For the purposes of the impairment test, goodwill is allocated to cash generating units. For management purposes, goodwill is monitored at segment level in line with the primary reporting format. Impairment is tested using the value in use on the basis of estimated cash flows derived from corporate planning. Planning is based on a planning horizon of three years. Average growth of 1% (previous year: 1%) in cash flows is assumed for the following period. The assumed euro to US dollar exchange rate is 1.33 (previous year: 1.28). As in the previous year, cash flows are discounted using a uniform, weighted cost of capital of 10% before taxes. The forecast sales growth in the Filling and Packaging segment in the three-year planning period is 3.4% p. a. (previous year: 7% p. a.). Sales growth of approximately 3% p. a. is forecast for the Other Industrial Holdings segment. No impairment losses were recognised as a result of the implementation of the impairment test. Should negative deviations in individual planning assumptions arise, these do not necessarily result in the recognition of impairment losses. Research and development expenses were treated as follows:
€ thousand Research costs and non-capitalised development costs Capitalised development costs Total
2007
2006
22,216
27,040
2,683
6,474
24,899
33,514
67
2
Property, plant and equipment COSTS Advance payments,
€ thousand January 1, 2006
Other
assets under
equipment,
construction and
Land, land rights and buildings, including
Technical
buildings in third-party land
equipment
operating and
construction
and machinery
office equipment
preparation costs
Total
112,405
62,863
79,371
2,359
256,998
Additions
855
5,582
7,882
4,647
18,966
Disposals
-113
-2,830
-3,062
-102
-6,107
Transfers
3,195
5,183
3,422
-2,428
9,372
Changes to scope of consolidation
5,517
4,925
468
159
11,069
Exchange differences
-1,707
-1,443
-1,391
-14
-4,555
December 31, 2006
120,152
74,281
86,689
4,621
285,743
January 1, 2007
120,152
74,281
86,689
4,621
285,743
Additions
3,740
3,806
6,853
6,980
21,380
Disposals
-381
-1,328
-4,189
-18
-5,916
Transfers
5,609
1,518
1,006
-8,108
25
-195
-384
-1,497
0
-2,076
Changes to scope of consolidation Exchange differences
-1,374
-873
-865
-83
-3,195
December 31, 2007
127,550
77,020
87,998
3,393
295,961
68
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS KLÖCKNER-WERKE AG
DEPRECIATION AND AMORTISATION EXPENSE Advance payments, Other
assets under
Technical
equipment,
equipment
operating and
construction and construction
and machinery office equipment
preparation costs
Total
Land, land rights and buildings, including buildings in
€ thousand January 1, 2006
third-party land
-44,783
-44,850
-65,785
1
-155,418
Additions
-3,987
-3,995
-5,474
0
-13,456
Disposals
55
2,245
2,770
-1
5,070
Transfers
-2,856
-3,307
-3,164
0
-9,327
Changes to scope of consolidation
0
-2,979
-196
0
-3,175
Exchange differences
658
1,082
1,147
0
2,887
December 31, 2006
-50,913
-51,804
-70,702
0
-173,419
January 1, 2007
-50,913
-51,804
-70,701
0
-173,419
Additions
-3,353
-5,100
-6,451
0
-14,904
Disposals
154
904
3,505
0
4,563
Transfers
0
216
-216
0
0
194
382
1,421
0
1,997
Changes to scope of consolidation Exchange differences
533
597
762
0
1,891
December 31, 2007
-53,385
-54,805
-71,682
0
-179,872
NET CARRYING AMOUNTS Advance payments, Land, land rights and buildings, including buildings in
€ thousand
third-party land
Technical
Other
assets under
equipment,
construction and construction
equipment operating and and machinery office equipment
preparation costs
Total
December 31, 2006
69,239
22,476
15,988
4,621
112,324
December 31, 2007
74,165
22,215
16,316
3,393
116,089
69
Property, plant and equipment include the following amounts from finance leases:
€ thousand Land and property Previous year Technical equipment and machinery Previous year
Cumulative
Net carrying
Historical cost
depreciation
amounts
3,568
-518
3,050
3,568
-389
3,179
4,129
-1,673
2,456
3,440
-876
2,564
511
-132
379
511
-21
490
Operating and office equipment Previous year
Property, plant and equipment with a total value of € 3.7 million (previous year: € 17.1 million) are subject to restrictions in title in the form of liens and assignments of security and object clauses issued by subsidy providers.
3
Investment property COSTS € thousand January 1, 2006
46,198
Additions
64
Disposals
0
Transfers Changes to scope of consolidation
0 -13,147
Exchange differences
-147
December 31, 2006
32,968
January 1, 2007
32,968
Additions
228
Disposals
-1,570
Transfers
0
Changes to scope of consolidation
0
Exchange differences
-133
December 31, 2007
31,493
70
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS KLÖCKNER-WERKE AG
DEPRECIATION AND AMORTISATION EXPENSE € thousand January 1, 2006
-14,771
Additions
-718
Disposals
0
Transfers
0
Changes to scope of consolidation
1,670
Exchange differences
31
December 31, 2006
-13,788
January 1, 2007
-13,788
Additions
-102
Disposals
741
Transfers
0
Changes to scope of consolidation
0
Exchange differences
29
December 31, 2007
-13,120
NET CARRYING AMOUNTS € thousand December 31, 2006
19,180
December 31, 2007
18,373
Investment property breaks down as follows:
€ thousand Klöckner-Werke AG
Carrying amount
Carrying amount
31.12.2007
31.12.2006
16,069
16,932
KHS USA Inc.
1,106
982
Klöckner Mercator Maschinenbau GmbH
1,198
1,266
18,373
19,180
Total
71
Investment property relates to developed and undeveloped land. At the balance sheet date, the fair values of these assets totalled around € 21 million (previous year: € 22 million). Rental income of € 0.3 million (previous year: € 1.5 million) accrued in the reporting year. Direct operating expenses for investment property primarily related to properties that generated rental income in the reporting year. These totalled € 0.04 million (previous year: € 0.5 million). As in the previous year, no investment property was transferred to secure a property charge for credit lines. At the balance sheet date, there were no significant obligations relating to the implementation of repairs, maintenance, improvements etc.
4
Investment in associates This item refers to RSE AG in which Klöckner-Werke AG held a 24.6% interest at the balance sheet date. As of December 31, 2007, the shareholders' equity of RSE AG was € 21.5 million with total assets of € 31.1 million. In financial year 2007, the company generated sales of only € 129 thousand.
5
Noncurrent financial assets COSTS Shares in and loans to affiliated
€ thousand
Investment securities
companies
Equity holdings
(market value)
Other loans
Total
17,095
4,626
4,073
2,403
28,197
Additions
1,288
0
0
8,406
9,694
Disposals
0
0
-3,956
-826
-4,782
-74
0
0
0
-74
-17,232
-1,978
0
0
-19,210
January 1, 2006
Transfers Changes to scope of consolidation Exchange differences
0
0
0
-32
-32
December 31, 2006
1,077
2,648
117
9,951
13,793
January 1, 2007
13,793
1,077
2,648
117
9,951
Additions
541
0
0
11
552
Disposals
-158
0
-117
-9,171
-9,446
0
0
0
0
0
88
0
0
0
88
Transfers Changes to scope of consolidation Exchange differences
0
0
0
-28
-28
December 31, 2007
1,549
2,648
0
763
4,959
72
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS KLÖCKNER-WERKE AG
DEPRECIATION AND AMORTISATION EXPENSE Shares in and loans to affiliated
€ thousand
Investment securities
companies
Equity holdings
January 1, 2006
-935
0
Additions
-244
0
Disposals
0
0
0 244
Transfers Changes to scope of consolidation
(market value)
Other loans
Total
0
0
-935
-5
-193
-442
0
0
0
0
0
0
0
0
0
0
244
Exchange differences
0
0
0
0
0
December 31, 2006
-935
0
-5
-193
-1,133
January 1, 2007
-1,133
-935
0
-5
-193
Additions
0
0
0
0
0
Disposals
158
0
5
0
163
Transfers
0
0
0
0
0
Changes to scope of consolidation
0
0
0
0
0
Exchange differences
0
0
0
0
0
December 31, 2007
-777
0
0
-193
-970
companies
Equity holdings
Investment securities (market value)
Other loans
Total
December 31, 2006
143
2,648
112
9,758
12,660
December 31, 2007
772
2,648
0
570
3,989
NET CARRYING AMOUNTS Shares in and loans to affiliated
€ thousand
The other long-term loans are due within a period of up to five years. None of these loans are subject to restraints on disposal (previous year: € 8.4 million).
6
Other assets Other current assets primarily relate to tax relief claims from other taxes.
73
CURRENT ASSETS 7
Inventories
€ thousand
31.12.2007
31.12.2006
Raw materials, consumables and supplies
91,221
79,232
Work in progress
28,629
34,491
Finished products and goods
24,748
30,588
9,626
5,722
154,224
150,033
Advance payments paid for inventories Total
Inventories of € 8.5 million (previous year: € 40.2 million) are subject to restrictions of title in the form of assignments of collateral. Write-downs of inventories as a result of impairment in the financial year 2007 amounted to € 5.5 million (previous year: € 5.1 million). This impairment is recognised under cost of materials and as a change in inventories in the income statement. After being written down to net selling price, the corresponding inventories have a residual carrying amount value of € 36.0 million (previous year: € 67.8 million). Reversals of impairment losses on inventories in the amount of € 2.1 million (previous year: € 0.1 million) were made during the year.
8
Trade and other receivables
thereof with
€ thousand
thereof with
a remaining
a remaining
maturity of more
maturity of more
31.12.2007
than one year
31.12.2006
than one year
Trade receivables
142,763
3,852
147,990
8,347
Receivables from contract manufacture
161,125
0
97,420
0
1,020
0
189
0
522
0
515
0
305,430
3,852
246,114
8,347
Receivables from affiliated companies Receivables from other investees and investors Total
As a result of the adjustment in line with IFRS 3, the previous-year figures were reduced by € 658 thousand from € 246,772 thousand to € 246,114 thousand. The consequence was that trade and receivables rose by € 7,074 thousand from € 140,916 thousand to € 147,990 thousand, while receivables from contract manufacturing declined by € 7,732 thousand from € 105,152 thousand to € 97,420 thousand. In the financial year 2007, impairment of € 5.4 million (previous year: € 8.4 million) was recognised on trade and other receivables in respect of expected defaults. Customer retentions contained in trade and other receivables are of subordinate importance.
74
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS KLÖCKNER-WERKE AG
An amount of € 3.7 million (previous year: € 24.9 million) in trade receivables and receivables from contract manufacturing is pledged as a guarantee for financial liabilities. Receivables from contract manufacturing relate to customer-specific manufacture orders with positive balances, where the manufacturing costs incurred including shares of profits exceed the advance payments received.
€ thousand Cost of manufacture including result of manufacture contract Advance payments received Receivables from contract manufacture
31.12.2007
31.12.2006
657,200
450,895
-496,075
-353,475
161,125
97,420
As a result of the adjustment in line with IFRS 3, receivables from contract manufacturing declined from € 105,152 thousand to € 97,420 thousand.
9
Current financial assets
€ thousand Receivables from affiliated companies
31.12.2007
31.12.2006
12
92
Other securities and current loans
3,243
1,248
Total
3,255
1,340
10 Other assets Other current assets include prepaid expenses of € 2.6 million (previous year: € 1.3 million). Receivables from other taxes amount to € 15.0 million (previous year: € 10.7 million). The fair value of derivative finance instruments totals € 0.9 million. No other short-term assets (previous year: € 0.4 million) are subject to restrictions.
11 Cash and cash equivalents The development of cash and cash equivalents in accordance with IAS 7 is shown in the cash flow statement. Cash and cash equivalents of € 3.9 million (previous year: € 24.5 million) relate to bank balances with restrictions on disposal. € 3.9 million (previous year: € 23.1 million) are pledged as collateral for guarantees.
12 Assets held for sale Notes on assets held for sale and related liabilities can be found in the "Scope of consolidation" section.
75
SHAREHOLDERS' EQUITY 13 Shareholders' equity
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY Reserves Accumulated other shareholders' equity Earnings reserves/ Gains/losses
€ thousand January 1, 2006
Fair value
Consolidated
Subscribed
Capital
unappropri-
capital
reserves
ated surplus
translation
of securities
to shareholders
interests
equity
401,036
on currency measurement
Capital available
Minority shareholders`
159,552
78,795
147,045
1,993
3,379
390,764
10,272
Changes in consolidated group
0
0
0
0
0
0
-5,886
-5,886
Dividends paid
0
0
-15,582
0
0
-15,582
-11
-15,593
Consolidated net income for the year
0
0
-346,820
0
0
-346,820
-332
-347,152
Transfer from capital reserves
0
-65,595
65,595
0
0
0
0
0
75,018
0
188,718
0
0
263,736
0
263,736
Actuarial gains and losses from pension obligations
0
0
-3,094
0
0
-3,094
0
-3,094
Other changes in shareholders' equity
0
0
954
-7,252
-3,269
-9,567
-20
-9,587
Adjustment IFRS 3
0
0
0
170
0
170
-3,091
-2,921
December 31, 2006
234,570
13,200
36,816
-5,089
110
279,607
932
280,539
January 1, 2007
Set off of own shares
234,570
13,200
36,816
-5,089
110
279,607
932
280,539
Changes in consolidated group
0
0
377
0
0
377
0
377
Dividends paid
0
0
0
0
0
0
0
0
for the year
0
0
21,339
-117
0
21,222
646
21,868
Transfer from capital reserves
0
0
0
0
0
0
0
0
Set off of own shares
0
0
0
0
0
0
0
0
Actuarial gains and losses from pension obligations
0
0
6,410
0
0
6,410
0
6,410
Consolidated net income
Other changes in shareholders' equity December 31, 2007
0
0
0
-4,477
-110
-4,587
-57
-4,644
234,570
13,200
64,942
-9,683
0
303,029
1,521
304,550
Subscribed capital At the balance sheet date, the subscribed capital (share capital) of Klöckner-Werke AG amounts to € 234,570,035.20 and is divided into 45,814,460 bearer shares. The nominal amount per share is € 5.12. The share capital is fully paid in.
76
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS KLÖCKNER-WERKE AG
Authorised capital The Annual General Meeting of June 16, 2005 authorised the Management Board, with the approval of the Supervisory Board, to increase the share capital by June 15, 2010 by a total of up to € 50,000,000 through the issue of new bearer shares against cash contributions on one or several occasions (Authorised Capital I). Shareholders are to be granted subscription rights. However, the Management Board is authorised, with the approval of the Supervisory Board, to exclude fractional amounts from the shareholders' subscription rights. The Management Board is further authorised, with the approval of the Supervisory Board, to exclude the subscription rights of shareholders for an amount of up to 10 % of the available share capital at the coming into force of this authorisation and at the first resolution on the utilisation of Authorised Capital I, if the issue price of the new shares is not significantly below the listed price of the already listed shares of the same category and features at the time of the final establishment of the issue price, which should be established as close as possible to the placing of the shares. Shares that are issued or sold during the term of this authority are to be included in the calculation of the maximum amount of 10% of the share capital until the time of their exercising with the exclusion of subscription rights in accordance with Section 186 (3) of the German Stock Corporation Act or its corresponding application. The Management Board is also authorised to establish further details of the capital increase and its implementation with the authorisation of the Supervisory Board. The same Annual General Meeting also authorised the Management Board, with the approval of the Supervisory Board, to increase the share capital by June 15, 2010 by a total of up to € 50,000,000 through the issue of new bearer shares on one or several occasions against cash or non-cash contributions (Authorised Capital II). Shareholders are to be granted subscription rights. However, the Management Board is authorised, with the approval of the Supervisory Board, to exclude fractional amounts from the shareholders' subscription rights. The Management Board is further authorised, with the approval of the Supervisory Board, to exclude the subscription right in capital increases against non-cash contributions for the purpose of the acquisition of companies, parts of companies or investments in companies. The Management Board is also authorised to establish further details of the capital increase and its implementation with the authorisation of the Supervisory Board. The Annual General Meeting of July 5, 2006 authorised the Management Board to acquire up to 10% of the current share capital of treasury shares by January 4, 2008. Consideration for the acquisition of these shares may not exceed or fall short of the standard price on the Frankfurt Stock Exchange by more than 10%. At the same time, the Management Board was authorised, with the approval of the Supervisory Board, and without a further resolution of the Annual General Meeting, to withdraw the treasury shares, offer them to staff for acquirement or dispose them in a way other than via the stock exchange or offer them to shareholders at a price not materially less than the quoted price (mean of the closing prices on the Frankfurt Stock Exchange for the last five days prior to disposal). Action for annulment and rescission against resolutions of the Annual General Meetings on June 16, 2005 and July 5, 2006 was rejected in the first instance by the Duisburg district court. The appeal procedures are ongoing at the Düsseldorf higher regional court. Actions for annulment and rescission against resolutions of the Annual General Meeting on June 14, 2007 have been referred to the Duisburg district court
Capital reserves Capital reserves contain the amounts in excess of the nominal value generated on the issue of shares by Klöckner-Werke AG in previous years.
77
Earnings reserves/unappropriated surplus Earnings reserves contain the amounts recognised by Klöckner-Werke AG in previous financial years and transfers from net profit for the year as well as withdrawals to offset net losses for the year. Actuarial gains and losses from pension obligations recognised in equity are also recorded here.
Treasury shares By way of the share transfer agreement dated May 9, 2006, RSE AG transferred 14,652,000 Klöckner shares in accordance with Section 71d sentence 5 AktG to Klöckner-Werke AG. On July 5, 2006, the Annual General Meeting of Klöckner-Werke AG passed an effective resolution on the withdrawal of the shares to be withdrawn with the required majority. However, the resolution could not be implemented as it was contested by several plaintiffs. On January 17, 2007, a procedure agreement on the liquidation of shares in Klöckner-Werke AG was concluded between HSH Nordbank AG and the insolvency administrator of WCM AG and of WCM KG, the lawyer Mr. Michael C. Frege (insolvency administrator). An agreement of consent to the liquidation agreement on Klöckner-Werke AG shares was also concluded between KlöcknerWerke AG and the insolvency administrator on January 17, 2007. This was based on the fact that by concluding the procedure agreement between HSH Nordbank AG and the insolvency administrator, HSH Nordbank AG actually exercises its liquidation rights to the shares to be withdrawn and the restructuring thereby became irrelevant. HSH Nordbank AG had terminated its business relationship with WCM AG on October 17, 2006 and demanded the repayment of the full amount of the receivable by October 25, 2006. 14,211,000 shares in Klöckner-Werke AG, which were held by KlöcknerWerke AG at that time following their transfer by RSE AG, served as collateral for HSH Nordbank AG. However, these shares were not the subject of the public auction of Klöckner shares to recover debts scheduled by HSH Nordbank AG for November 27, 2006 and then later cancelled. For accounting purposes, at December 31, 2006, it was assumed that Klöckner-Werke AG was no longer the economic owner of the 14,652,000 shares. As a result, as at December 31, 2006 the subscribed capital and earnings reserves reported in the IFRS consolidated financial statements rose accordingly.
Accumulated other shareholders' equity Total other shareholders' equity is a part of reserves. Changes in fair value from the fair value measurement of securities (availablefor-sale securities) and from derivative financial instruments (cash flow hedges) recognised in equity and exchange differences arising on the translation of financial statements prepared in foreign currencies are recorded here.
Capital management The primary objective of capital management within the Group is to ensure that the company can retain its capacity to service debt and the Group’s financial substance. The financial security is largely controlled by the equity ratio figure. The components of this ratio are equity as per the consolidated balance sheet and consolidated total assets. In the financial year 2007, the equity ratio increased to 38.5 % (December 31, 2006: 36.1%).
78
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS KLÖCKNER-WERKE AG
Reserves for the fair value measurement of securities developed as follows:
Fair value measure€ thousand
ment of securities
As of January 1, 2006
3,379
Adjustment to fair values
110
Reclassifications recognised in profit and loss statement
-3,379
As of December 31, 2006 / January 1, 2007
110
Adjustment to fair values
0
Reclassifications recognised in profit and loss statement
-110
As of December 31, 2007
0
Changes in the fair value of derivative financial instruments are reported after taking into account deferred tax.
NONCURRENT LIABILITIES 14 Provisions Noncurrent provisions are made up as follows:
€ thousand Provisions for pensions and similar obligations Other provisions Total
31.12.2007
31.12.2006
148,355
162,714
18,856
18,776
167,211
181,490
Provisions for pensions and similar obligations The calculation of pension obligations is based on the following actuarial assumptions:
in %
31.12.2007
31.12.2006
Discounting rate
5.50
4.50
Salary trend
2.75
2.00
Rate of pension progression
2.00
1.50
Individual promises
1.75
---
Remaining every three years
5.25
---
Expected return on plan assets
4.10
4.50
The calculations for the 2006 and 2007 financial years are based on Prof. Klaus Heubeck's mortality tables for 2005 G respectively.
79
The provisions recognised in the balance sheet derive from the present value of the defined benefit commitments as follows:
€ thousand Present value of provision-financed pension commitments Present value of funded pension commitments Present value of total pension commitments Fair value of plan assets Pension provisions
31.12.2007
31.12.2006
148,210
162,010
1,758
2,171
149,968
164,181
-1,613
-1,467
148,355
162,714
As in the previous year, the financing of defined benefit pension commitments on the balance sheet date is equal to the provision for pensions. The present value of all defined benefit pension commitments developed as follows:
€ thousand Present value of defined benefit obligations as at January 1 Changes to scope of consolidation Service cost Interest expense
2007
2006
164,181
160,821
-847
0
1,250
894
7,105
6,593
Gains/losses recognised in equity
-11,479
5,342
Actual pension payments
-10,242
-11,380
0
1,911
149,968
164,181
Transfers within equity Present value of defined benefit obligations as at December 31
In the reporting year, plan assets comprise only insurance assets shown as other assets. In the previous year, in addition to insurance assets, plan assets also included assets invested in a provident fund.
€ thousand
2007
2006
Plan assets at the beginning of the year
1,467
2,367
0
-991
Changes to scope of consolidation Expected return on plan assets
147
62
Gains/losses recognised in equity
61
-201
Actual payments from plan assets
-62
0
Premium additions by employer
0
230
Premium additions by employee
0
0
1,613
1,467
Plan assets at the end of the year
The actual return on plan assets for financial year 2007 was € 61.3 thousand (previous year: € 62.1 thousand). In the coming reporting period, an amount of € 69.0 thousand is expected to be paid into plan assets (previous year: € 85.4 thousand).
80
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS KLÖCKNER-WERKE AG
The insurance policies of plan assets work with an average interest rate of 4.1%. Together with the return generated in previous years and the associated future expected returns, average long-term expected returns are also 4.1%. The expense reported in the income statement for defined benefit obligations in the financial year is made up as follows:
€ thousand
2007
2006
Expense for pension claims earned in the reporting year
1,250
894
Interest expense
7,105
6,593
Expected return on plan assets Total
-61
-62
8,294
7,425
Gains and losses recognised in equity developed as follows:
€ thousand Gains/losses recognised in equity as at January 1 Changes to scope of consolidation Actuarial losses on pension obligations from changes in actuarial measurement assumptions Actuarial losses on pension obligations from experience adjustments Actuarial losses on plan assets from changes in actuarial measurement assumptions Actuarial losses on plan assets from experience adjustments Gains/losses recognised in equity as at December 31
2007
2006
15,977
10,434
52
0
-15,135
3,499
3,578
1,843
-124
72
63
129
4,411
15,977
Other provisions Other (noncurrent) provisions developed as follows:
OTHER (NONCURRENT) PROVISIONS Currency adjustment, As at
change in scope of
1.1.2006
consolidation, other
Provisions for guarantees and contract risks
5,489
Personnel-related provisions
5,002
Other provisions
€ thousand
Total
As at Utilisation
Addition
Reversal
31.12.2006
110
-71
2,121
-1,755
5,894
-64
-1,776
4,164
0
7,326
2,628
-379
-312
4,214
-595
5,556
13,119
-333
-2,159
10,499
-2,350
18,776
81
OTHER (NONCURRENT) PROVISIONS Currency adjustment, € thousand
As at
change in scope of
1.1.2007
consolidation, other
As at Utilisation
Addition
Reversal
31.12.2007
Provisions for guarantees and contract risks
5,894
0
-69
1,990
-1,584
6,231
Personnel-related provisions
7,326
-2,708
-2,725
3,814
-122
5,585
Other provisions
5,556
-387
-132
2,397
-394
7,040
18,776
-3,095
-2,926
8,201
-2,100
18,856
Total
The outflow of economic benefits from other long-term provisions is expected to last over a period of a maximum of 5 years. As in the previous year, additions to other noncurrent provision do not contain any amounts relating to interest on provisions. Personnel-related provisions include € 4.7 million for part-time retirement (previous year: € 6.4 million).
15 Financial liabilities
€ thousand Liabilities due to banks
31.12.2007
31.12.2006
25,952
25,646
Liabilities due to other lenders
7,813
8,401
Liabilities from finance leases
4,299
4,571
38,064
38,618
Total
As a result of the adjustment in line with IFRS 3, the previous-year figure was partially changed as a result of the reclassification from current to noncurrent by € 16,641 thousand from € 21,977 thousand to € 38,618 thousand.
16 Other liabilities As was the case in the previous year, other liabilities do not include any income subsidies.
82
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS KLÖCKNER-WERKE AG
CURRENT LIABILITIES 17 Provisions
CURRENT PROVISIONS Currency adjustment, € thousand
As at
As at
change in scope of
1.1.2006
consolidation, other
Utilisation
Addition
Reversal
adjusted
13,714
-212
-6,533
3,882
-4,070
7,902
31.12.2006
Provisions for guarantees and contract risks Personnel-related provisions
5,044
-47
-2,495
1,609
-538
3,573
Other provisions
26,480
402
-9,019
19,091
-11,577
25,377
Total
45,238
143
-18,047
24,582
-16,185
36,852
CURRENT PROVISIONS Currency adjustment, € thousand
As at
change in scope of
1.1.2007
consolidation, other
Utilisation
Addition
Reversal
31.12.2007
As at
14,661
Provisions for guarantees and contract risks
7,902
2,818
-3,112
10,196
-3,143
Personnel-related provisions
3,573
1,317
-1,932
2,660
-909
4,709
Other provisions
25,377
-5,379
-5,872
16,322
-9,860
20,588
Total
36,852
-1,244
-10,916
29,178
-13,912
39,958
As a result of the adjustment in line with IFRS 3, provisions for warranties increased by € 1,121 thousand from € 6,781 thousand to € 7,902 thousand. Provisions for partial retirement obligations total € 1.1 million (previous year: € 2.0 million). There were no provisions for anniversary bonus obligations. Other current provisions primarily contain provisions for general administrative costs, costs of preparing the financial statements, costs of the Annual General Meeting, litigation costs and other consulting and administrative costs.
83
18 Financial liabilities
€ thousand
31.12.2007
31.12.2006
Liabilities due to banks
4,651
10,815
Liabilities from finance leases
1,265
1,599
Liabilities from bills of exchange
1,806
0
Liabilities due to affiliated companies
25,087
7,752
Total
32,809
20,166
As a result of the adjustment in line with IFRS 3, the previous-year figure was partially changed as a result of the reclassification from current to noncurrent by € 10,948 thousand from € 31,114 thousand to € 20,166 thousand. Current and noncurrent liabilities from finance leases amount to € 5.6 million (previous year: € 6.2 million). Obligations from finance leases are recognised at their present value in the balance sheet. The nominal values of the minimum lease payments are reconciled in the following table:
2007
2006
Nominal
Discount
Present
Nominal
Discount
Present
€ thousand
value
amount
value
value
amount
value
Remaining maturity of up to one year
1,265
0
1,265
1,599
0
1,599
Remaining maturity of 1 to 5 years
3,087
4,457
1,097
3,360
3,926
839
Remaining maturity of more than five years
1,346
134
1,212
1,453
242
1,211
Total
6,537
973
5,564
7,509
1,339
6,170
84
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS KLÖCKNER-WERKE AG
19 Trade payables
€ thousand
31.12.2007
31.12.2006
Trade payables
62,856
79,684
Liabilities from contract manufacturing
72,670
63,709
11
140
135,537
143,533
Liabilities due to affiliated companies Total
As a result of the adjustment in line with IFRS 3, the previous-year value moved down by € 5,574 thousand from € 149,107 thousand to € 143,533 thousand. Liabilities from contract manufacturing relate to customer-specific manufacture contracts with negative balances, for which the advance payments received exceed the manufacturing costs incurred including shares of profit and loss.
€ thousand Cost of manufacture including result of manufacture contract Advance payments received Liabilities from contract manufacturing
31.12.2007
31.12.2006
-4,882
-613
-67,788
-63,096
72,670
63,709
31.12.2007
31.12.2006
20 Other liabilities
€ thousand Advance payments received on inventories Liabilities personnel department
4,319
3,602
14,170
11,925
Other liabilities
24,313
24,742
Total
42,802
40,269
As a result of the adjustment in line with IFRS 3, other liabilities increased by € 3,540 thousand from € 21,202 thousand to € 24,742 thousand. As was the case in the previous year, other liabilities do not include any subsidies as at December 31, 2007. The fair value of derivative finance instruments totals € 2.4 million.
85
NOTES ON THE CONSOLIDATED INCOME STATEMENT 21 Sales Sales primarily relate to the sale of goods and customer-specific contract manufacturing. The breakdown of sales by business sector and region is presented in the segment reporting. Sales from trade receivables include € 719.7 million (previous year: € 499.8 million) relating to receivables from contract manufacturing.
22 Changes in inventories and other own work capitalised
€ thousand
2007
2006
Changes in inventories
3,622
-2,351
Own work capitalised
2,980
8,134
Total
6,602
5,783
23 Other operating income
2007
2006
Reversal and utilisation of reserves
€ thousand
12,360
22,799
Profit on disposal of financial assets
12,025
6,489
Reversal of depreciation and amortisation
6,849
4,755
Exchange gains
8,639
4,597
Gains on the disposal of intangible assets and property, plant and equipment
313
635
Other
14,039
10,580
Total
54,225
49,855
Income from government grants received during the financial year 2007 totalled € 0.0 million (previous year: € 0.1 million).
24 Cost of materials
€ thousand Cost of raw materials, consumables and supplies, and of goods purchased Expenses relating to other receivables Total
2007
2006
543,721
409,664
90,969
69,762
634,690
479,426
86
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS KLÖCKNER-WERKE AG
25 Staff costs
€ thousand Wages and salaries Social security and pension costs (thereof pensions) Total
2007
2006
230,024
214,957
42,473
38,612
(135)
(2,828)
272,497
253,569
In financial year 2007, pension costs for all non-legally stipulated defined contribution plans were € 135 thousand (previous year: € 2,828 thousand). Employer contributions to statutory pensions were € 16,036 thousand (previous year: € 14,458 thousand).
26 Average number of employees during the year
€ thousand
2007
2006
Wage earners
2,275
2,094
Salary earners
3,177
3,046
Apprentices and trainees Total
245
223
5,697
5,363
The redundancy expenses in the reporting year were € 1.137 thousand (previous year: € 571 thousand). Costs for social security plans amount to € 908 thousand (previous year: € 356 thousand).
27 Other operating expenses
€ thousand
2007
2006
Selling expenses
95,469
70,254
Office supplies, literature, IT and communications expenses
14,451
10,181
7,354
8,761
13,262
8,476
Exchange rate losses
8,279
5,357
Legal and consulting expenses
4,204
4,658
Write downs on receivables Premises and maintenance expenses
Other
57,787
49,978
Total
200,805
157,665
87
28 Income from associates at equity The result of the investment in RSE AG results from a reversal of € 5.0 million minus the proportionate net loss of the year at RSE AG of € 2.8 million.
29 Income from other equity holdings
€ thousand Income from investment companies
2007
2006
343
604
Income from securities and loans
0
8
Impairments on financial assets and other securities
0
-249
343
363
2007
2006
Total
30 Depreciation and amortisation expense
€ thousand On intangible assets On property, plant and equipment On investment property Total
3,396
2,394
14,904
13,455
102
718
18,402
16,567
31 Non-recurring effects of the insolvency of WCM AG In 2006, total non-recurring effects of the insolvency of WCM AG of € 363.9 million were reported. This was due to write-downs of receivables of the Klöckner Group from WCM AG of € 283.5 million and the transitional consolidation for the remaining shares in RSE AG of € 80.4 million.
32 Interest income and expenses Interest income results primarily from financial assets and time deposits. The interest expense on pension obligations totalled € 7.1 million (previous year: € 6.6 million).
88
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS KLÖCKNER-WERKE AG
33 Income taxes and deferred taxes
€ thousand
2007
2006
Current tax
-6,241
-1,963
Deferred tax
-15,761
915
Total
-22,002
-1,048
2007
2006
Changes in deferred tax assets in the balance sheet
-2,715
2,316
Changes in deferred tax liabilities in the balance sheet
18,533
-590
Deferred taxes recognised in equity
-5,487
1,992
-15,761
915
The effect of deferred tax on earnings was as follows:
€ thousand
Deferred taxes in the income statement
Deferred tax for German companies was calculated using an average income tax rate of 30.0% (previous year: 39.9%). The tax rates applied for foreign companies were between 16% and 43% (previous year: between 20% and 39%). The change in tax rates in individual countries had no effects in deferred taxes (previous year: € 1 million). No write-downs or reversals of write-downs on deferred taxes were required in the reporting year. As of the balance sheet date, the Klöckner Group had corporation tax loss carryforwards of € 1,231 million in Germany (previous year: € 1,212 million) and trade tax loss carryforwards of € 1,068 million (previous year: € 1,041 million). Other loss carryforwards of € 31.1 million (previous year: € 31.0 million) related to foreign companies. The majority of the tax loss carryforwards can be carried forward indefinitely. Deferred taxes on loss carryforwards are only capitalised when future settlement is likely. Therefore, no deferred tax assets were recognised on corporation tax loss carryforwards of € 1,151 million (previous year: € 1,148 million) and trade tax loss carryforwards of € 988 million (previous year: € 977 million). No deferred tax assets were recognised on loss carryforwards abroad of € 31.1 million (previous year: € 31.0 million). Tax loss carryforwards in Germany could not be utilised in the financial year due to the generation of tax losses. Based on current company planning, it is assumed that tax loss carryforwards will be offset against forecast profits in the next five years. The change in recognising deferred tax assets on loss carryforwards resulted in a reduction in the tax expense of € 2.1 million (previous year: reduction by € 6.9 million). Deferred tax assets and liabilities are attributable to the following balance sheet items:
89
2007 € thousand Intangible assets Property, plant and equipment Investment property Financial assets
2006
Assets
Liabilities
Assets
Liabilities
977
5,086
1,215
5,275
80
1,013
56
1,573
0
0
0
422
0
636
-1,560
110
Other assets
2,158
42,873
5,380
44,324
Inventories
20,416
711
123,566
759
Provisions
8,765
142
8,226
-12,309
Financial liabilities
1,036
32
2
-4,726
Other liabilities
3,910
1,354
-98,024
0
24,166
0
26,283
0
Tax loss carryforwards Other Offsetting of deferred tax assets and liabilities Total
0
0
1,193
0
-33,044
-33,044
-35,158
-35,158
28,464
18,803
31,179
270
Tax receivables and liabilities are offset if there is a legally enforceable right to offset the current tax receivables against the current tax liabilities, and if the deferred tax relate to taxes levied by the same tax authority. Profits not intended for distribution in subsidiaries in countries in which withholding tax is retained amounted to € 44.0 million (previous year: € 28.9 million). Based on the tax rates in force at the balance sheet date, an amount of € 1.7 million (previous year: € 1.4 million) would be retained as withholding tax by the relevant authorities were a distribution to be made. The following table reconciles the theoretical tax expense based on the application of normal tax rates in the individual companies to the actual tax expense reported in the income statement.
€ thousand Consolidated earnings before taxes (EBT) Theoretical tax rate in % Expected tax expense/earnings Effect of the utilisation of loss carryforwards Effect of non-capitalisation of deferred tax on loss Difference in tax rates on foreign income Effect of change in tax rate Others Tax expense per income statement Tax rate in %
2007
2006
43,871
-345,872
39.9
39.9
-17,504
138,003
4,219
0
-7,755
-139,051
1,517
0
-1,565
0
-915
0
-22,003
-1,048
50.15
---
90
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS KLÖCKNER-WERKE AG
34 Earnings per share In accordance with IAS 33, basic and diluted earnings per share are calculated by dividing Klöckner-Werke AG shareholders' share in the net income or loss for the period by the weighted average number of shares outstanding.
2007 Share of the shareholders of Klöckner-Werke AG in the profit or loss (€ thousand) Number of shares outstanding Earnings per share (€)
2006
21,222
-346,820
45,814,460
33,807,960
0.46
-10.26
NOTES TO THE CASH FLOW STATEMENT 35 Cash flow statement The funds included in the cash flow statement in accordance with IAS 7 contain cash and bank balances with a maturity of no more than three months and correspond to the items reported under cash and cash equivalents in the balance sheet. Bank balances of € 3.9 million (previous year: € 24.5 million) have restrictions on disposal. The effects of exchange rate-related changes in cash totalled € -0.8 million (previous year: € -1.2 million). To the extent they arise, currency adjustments are reported in the items to which they are attributable.
91
NOTES ON THE SEGMENT REPORTING 36 Segment reporting In accordance with IAS 14 ("Segment Reporting"), business sectors are recognised as the primary reporting format and geographical regions as the secondary reporting format in the segment reporting. This allocation reflects the internal management and reporting structure and takes into account the various risk and earnings structures of the business areas. Only continuing operations are included in the segment reporting. These are structured as follows:
CONSOLIDATED SEGMENT REPORTING Filling and € thousand 1.1.-31.12.2007
Sales to third parties Previous year Sales with other segments Previous year Total sales Previous year EBITDA Previous year Segment result (EBIT before non-recurring effects)
Packaging
Other indus-
Technology
trial Holdings
995,544
119,931
670
-670
1,115,474
751,675
118,616
2,250
0
872,541 0
Holdings Reconciliation
Total
0
0
0
0
95
0
0
-95
0
995,544
119,931
670
-670
1,115,474
751,770
118,616
2,250
-95
872,541
54,940
9,630
6,267
0
70,837
32,475
1,001
-757
0
37,881 52,435
39,629
6,966
5,840
0
Previous year
19,494
3,386
-1,566
0
21,314
Segment assets
593,614
74,710
69,310
54,181
791,815
Previous year
524,940
103,051
62,582
81,261
771,834
205,358
23,318
12,618
245,971
487,265
207,918
30,329
23,479
226,648
488,374
27,390
3,000
12
0
30,402
46,604
4,926
445
0
51,975
-15,311
-2,664
-427
0
-18,402
-12,981
-2,776
-810
0
-16,567
-7,014
-259
-81
0
-7,354
-5,949
-2,093
-364,820
0
-372,862
0
0
4,652
0
4,652
0
0
0
0
0
4,929
745
23
0
5,697
4,584
752
27
0
5,363
Segment liabilities Previous year Investments in property, plant and equipment and intangible assets Previous year Depreciation and amortisation expense Previous year Impairment losses Previous year Reversals of write-downs/impairment losses Previous year Average number of employees during the year Previous year
92
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS KLÖCKNER-WERKE AG
CONSOLIDATED SEGMENT REPORTING Other
Breakdown by region: € thousand 1.1.-31.12.2007
Sales to third parties
Other
European Germany
countries
America
Asia
countries
Total
184,397
432,361
237,427
185,678
75,611
1,115,474
Previous year
157,613
339,986
175,668
117,623
81,651
872,541
Segment assets
635,306
5,895
52,405
75,508
22,701
791,815
Previous year
630,730
7,929
64,339
56,853
11,983
771,834
18,087
397
822
9,224
1,872
30,402
23,425
797
3,090
24,458
205
51,975
3,355
177
897
1,223
45
5,697
3,257
170
782
1,073
81
5,363
Investments in property, plant and equipment and intangible assets Previous year Average number of employees during the year Previous year
Filling and Packaging Technology The companies of the KHS Group are combined in this segment. The companies' activities comprise the business areas filling technology, pasteurisation technology, filter technology, labelling technology, transport technology, packaging and palleting technology, cleaning and filling technology for kegs and service activities.
Other Industrial Holdings The main companies in this segment are Klöckner DESMA Elastomertechnik (KDE), Klöckner DESMA Schuhmaschinen (KDS) and Klöckner Hänsel Processing (KHP). The individual companies produce: Rubber injection moulding machinery (KDE), shoe machinery (KDS) and special-purpose machinery for the confectionary industry (KHP).
Holdings The holding companies include Klöckner-Werke AG and Klöckner Mercator Maschinenbau GmbH. The administrative expenses incurred by and the net interest income attributable to these companies are reported in the Holdings segment, together with various individual expense and income items that cannot be allocated to the business segments.
Reconciliation Amounts representing cross-segmental transactions are shown in the "reconciliation" column. These are eliminated on consolidation. Items that cannot be allocated to individual segments are also included in this column. The segment data was determined using the same accounting policies applied in the consolidated financial statements. Business relationships between the companies of the Klöckner Group are conducted using the same prices as agreed with third parties. Secondary segment reporting by geographical region is based on revenue generated at customer locations or at the registered office of the consolidated companies. The Group is split into the regions Germany, other European countries, America, Asia and other countries in line with the various risk and earnings structures.
93
OTHER DISCLOSURES The Klöckner Group had the following contingent liabilities at the balance sheet date:
37 Contingent liabilities
thereof affiliated € thousand Liabilities on bills
thereof affiliated
31.12.2007
companies
31.12.2006
companies
1,287
0
1,714
0
Guarantees
14,543
0
9,835
0
Indemnity agreements
84,781
3,645
71,898
0
164
0
0
0
Other contingent liabilities
Other Group financial liabilities are made up as follows:
38 Other financial liabilities
thereof affiliated € thousand Orders for Investments in intangible assets
31.12.2007
companies
thereof affiliated 31.12.2006
companies
432
0
340
0
Orders for investments in property, plant and equipment
6,051
0
3,814
0
Other financial liabilities
2,170
0
3,866
0
Qualifying operating leases predominantly relate to technical equipment and machinery as well as operating and office equipment. Future minimum lease payments mature as follows:
€ thousand
31.12.2007
31.12.2006
Remaining maturity of less then 1 year
4,986
2,843
Remaining maturity of between 1 and 5 years
3,423
2,214
0
7
8,409
5,064
Nominal value
Remaining maturity of more than 5 years Total
In the financial year 2007, the minimum lease payments on operating leases totalled € 1.9 million (previous year: € 2.7 million). As in the previous year, no income was generated from subleases. Contingent rent payments totalling € 0.2 million (previous year: € 0.3 million) were made for leases.
94
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS KLÖCKNER-WERKE AG
39 Financial instruments and financial risk management Financial instruments In line with IAS 39, all financial assets and liabilities are divided into several measurement categories. Classification is dependent on the purpose for which the financial assets and liabilities were acquired. Accounting for the financial instruments is based on the classification. The following categories are used in the Klöckner Group:
Loans and Receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not listed on an active market. They arise when the Group makes money, goods or services directly available to a creditor. Acquired receivables are also classified here.
Financial assets available for sale Financial assets available for sales are non-derivative financial assets which are not attributable to any of the other categories shown.
Measurement in income of financial assets at fair value In the Klöckner Group only financial assets intially classified as being assets held for trading are measured at fair value. Derivatives are considered as being held for trading providing they do not have a documented hedging relationship to underlying transactions. The option to designate financial instruments as at fair value through fair value on first-time recognition is not exercised within the Klöckner Group.
Liabilities measured at amortised cost On first-time recognition, financial liabilities are carried at fair value less transaction costs. In subsequent periods, they are recognised at amortised cost. Any difference between the amount paid and the repayment amount is then distributed over the duration of the loan using the effective interest method.
Measurement in income of financial liabilities at fair value As the Klöckner Group does not designate financial instruments as at fair value through profit or loss on first-time recognition, this category only includes the derivatives with a negative market value which are not included in hedge accounting.
95
At the balance sheet date, the financial instruments in the Klöckner Group are made up as follows:
Reconciliation of balance sheet items to IAS 39 measurement categories ASSETS Financial assets
€ thousand
Loans and
Financial assets
evaluated at
receivables
available for sale
present value
Total
Fair value
Noncurrent assets Financial assets
565
3,419
0
3,984
3,984
Previous year
1,358
11,302
0
12,660
12,660
Other assets
0
0
0
0
0
13
0
0
13
13
305,430
0
0
305,430
305,430
246,114
0
246,114
246,114
Financial assets
12
3,243
0
3,255
3,255
Previous year
92
1,248
0
1,340
1,340
5,075
9
0
5,084
5,084
3,549
0
152
3,701
3,701
0
35,381
0
35,381
35,381
0
65,568
0
65,568
65,568
311,082
42,052
0
353,134
353,134
251,126
78,118
152
329,396
329,396
Previous year Current assets Trade and other receivables Previous year
Other assets Previous year Cash and cash equivalents Previous year Total Total previous year
96
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS KLÖCKNER-WERKE AG
Reconciliation of balance sheet items to IAS 39 measurement categories LIABILITIES Financial liabilities
Valuation rate
evaluated
according
at fair value
to IAS 17
Total
Fair value
33,764
0
4,300
38,064
38,153
25,522
0
4,572
30,094
30,620
Other liabilities
13
0
0
13
13
Previous year
2,997
0
0
2,997
2,997
Financial liabilities evaluated at costs
Financial liabilities Previous year
€ thousand Noncurrent liabilities
Current liabilities Provisions
132
0
0
132
132
Previous year
1,392
0
0
1,392
1,392
Financial liabilities
31,544
0
1,265
32,809
33,681
Previous year
18,567
0
1,599
20,166
20,652
Trade payables
135,537
0
0
135,537
135,537
Previous year
143,533
0
0
143,533
143,533
Other liabilities
12,138
0
0
12,138
12,138
Previous year
3,097
24
0
3,121
3,121
0
0
0
0
0
Liabilities in connection with assets held for sale Previous year Total Total previous year
16,396
0
0
16,396
16,396
213,128
0
5,565
218,693
219,654
211,504
24
6,171
217,699
218,711
Cash and cash equivalents, trade and other receivables generally have short periods to maturity. For this reason their carrying amounts at the reporting dates closely approximate the fair value. The fair value of other long-term receivables with a time to maturity of over one year is the present value of the cash flows related to assets. Here current interest rate parameters are used which reflect the market and partner related changes in conditions and expectations. Trade and other payables generally have short remaining times to maturity. For this reason the carrying values are close to the fair values. The fair values of liabilities to banks, bounded loans and other financial liabilities are calculated as the present values of the payments related to the liability on the basis of the relevant current yield curve and the credit spread curve of the Klöckner Group differentiated by currency. The fair value of traded derivative financial instruments is the market value. This figure can be positive or negative. If there are no market values, the fair value must be calculated on the basis of recognised mathematical models. For derivative financial instruments the fair value is the amount that the Klöckner Group must either receive or pay when ending the financial instruments to the reporting date. This is calculated using the exchange rates, interest rates and credit standing of the contract partners relevant on the reporting date.
97
In financial year 2007, there were no reclassifications of financial instruments, i.e. recognition at cost instead of fair value or recognition at fair value instead of cost. Financial instruments are derecognised if the rights to payments from the investment lapse or were transferred and the Group also transfers substantially all risks and rewards incident to ownership. In the financial year at KDE and KDS forfaiting was made at a level of € 4,765 thousand (previous year: € 6,724 thousand) where not all opportunities and risks were disposed. The net results from financing instruments largely contain interest income and expenses, dividend income and changes in value.
NET RESULT IN EVALUATION CATEGORIES € thousand Loans and receivables Financial assets available for sale (thereof included in shareholders’ equity) (thereof assumed into the income statement) Financial assets evaluated at present value Financial liabilities evaluated at costs Liabilities evaluated at fair value income statement related Total
2007
2006
-7,331
2,779
-548
6,226
(0)
(0)
(-548)
(6,226)
0
20
-1,244
-15,790
0
69
-9,123
-6,696
Total interest income and expense of the financial instruments not carried at fair value through profit or loss are as follows:
€ thousand
2007
2006
Interest income
1,076
8,298
Interest expense
-2,183
-4,848
Total net interest income
-1,107
3,450
As in the previous year, no Interest income was generated on impaired financial assets. As in the previous year there was no income from fees for expenses of € 953 thousand (previous year: € 653 thousand) which was recognised directly as an expense for financial instruments not carried at fair value through profit or loss.
98
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS KLÖCKNER-WERKE AG
Financial risk management The Klöckner Group is subject to various financial risks as part of its business activities. In particular changes in interest and exchange rates can have a significant impact on the Group's net assets, financial position and results of operations. The Group's uniform risk management system focuses on the unpredictable aspects of developments in the financial markets and aims to minimise potential negative effects on the Group's financial position. The Group uses derivative financial instruments to hedge against specific risks. Klöckner-Werke AG's central finance department is responsible for controlling risk management in accordance with guidelines issued by the Management Board. The finance department identifies, evaluates and hedges financial risks in close collaboration with the Group's operating units. The Management Board determines the principles to be applied for the uniform risk management system and guidelines issued for specific areas, e.g. dealing with foreign currency risk, interest rate risk and credit risk, as well as the use of derivative and non-derivative financial instruments.
Foreign currency risk The Group operates globally and is consequently exposed to a foreign currency risk in the form of exchange rates against various foreign currencies, principally the US dollar. Foreign currency risks arise in respect of expected future cash flows, recognised assets and liabilities and net foreign investments. A foreign currency risk arises when future business transactions or recognised assets and liabilities are recorded in a currency other than the functional currency of the enterprise. The Group companies used forward exchange contracts to hedge such risks arising from expected transactions and recognised assets and liabilities. The following derivative positions existed at the balance sheet date:
€ thousand Nominal volume Positive market values Negative market values
31.12.2007
31.12.2006
34,935
43,456
924
517
-6
-5
The nominal volume represents the total of all call and put amounts relating to derivative financial transactions. Market values are determined by measuring open positions at market prices without taking into account opposing changes in value in the underlying transactions. These thus correspond to the expenses or income that would result from a (theoretical) settlement at the balance sheet day. As at December 31, 2007, € 30,748 thousand (88.0%) of forward currency contracts relate to USD, € 3,590 thousand (10.3%) to GBP, € 0 thousand (0.0 %) to euro and € 597 thousand (1.7%) to AUD. In 2006, € 38,135 thousand (87.8%) related to USD, € 1,957 thousand (4.5%) to GBP, € 2,888 thousand (6.6%) to euro and € 476 thousand (1.1%) to AUD.
99
Hedge accounting was not used in financial year 2007. To the balance sheet date of December 31, 2006, the hedging transactions have the following maturities:
€ thousand Forward exchange dealing
Remaining
Remaining
Remaining
maturity
maturity
maturity
Remaining maturity
of up to one
of more than
Total
of up to one
of more than
Total
year
one year
31.12.2007
year
one year
31.12.2006
33,220
1,715
34,935
42,688
768
43,456
In presenting the exchange rate risks, the impact of hypothetical changes to relevant variables of the exchange rate risk is determined in relation to the result and equity on the reporting date. Here the assumption is made that the foreign exchange items as of the reporting date are representative for the whole financial year. The calculation of the exchange rate sensitivities is based on the following assumptions: sensitivities are determined for EUR/USD, EUR/GBP, EUR/BRL and EUR/INR. The calculation of sensitivities for the USD showed that if the EUR appreciated or depreciated by 10% against the USD as of December 31, 2007, then consolidated net income in the Klöckner Group would be € 2,496 thousand higher or € 1,415 thousand lower (previous year: € 3,538 thousand lower or € 3,639 thousand higher). For GBP the calculation showed consolidated net income would have been € 404 thousand higher or € 124 thousand lower (previous year: € 129 thousand lower or € 73 thousand higher), for BRL € 1,127 thousand lower or € 1,127 thousand higher (previous year: € 723 thousand higher or € 723 thousand lower) and for INR € 599 higher or lower (previous year: € 113 thousand higher or lower).
Credit and default risk The default risk on financial assets is recognised by means of appropriate valuation adjustments taking into account existing collateral. Trading guidelines ensure that sales are only made to potential customers if the customer in question has demonstrated an appropriate payment history and has passed a specific creditworthiness check. No particular concentration of credit and default risks exist for the Klöckner Group either in respect of customers or individual countries. The maximum default risk for each class of financial instruments is largely reported by the total of the carrying amounts and market values of the financial assets per class, minus all immediately available cash and bank balances. As in the previous year, there was no collateral to reduce possible default risks from trade receivables. The analysis of the age of the assets which were overdue to the reporting date showed the following:
100
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS KLÖCKNER-WERKE AG
AGE PATTERN ANALYSIS
Past due, not impaired since
31.12.2007 Impaired at the balance sheet
€ thousand Loans and receivables Previous year
< 30 days
31 to 60 days
61 to 90 days
91 to 180 days
> 180 days
date
46,568
15,254
13,843
13,276
18,895
2,706
31,675
11,694
3,772
11,748
19,996
2,064
4
0
0
0
0
0
92
0
0
0
0
0
46,572
15,254
13,843
13,276
18,895
2,706
31,767
11,694
3,772
11,748
19,996
2,064
Financial assets available for sale Previous year Total Total previous year
As in the previous year, in the Klöckner Group there was no collateral or other credit improvements in relation to the financial assets impaired to the reporting date in the financial year 2007. Impairment of financial assets is taken as soon as there are objective indications of a reduction in value, such as considerable financial difficulties of the debtor or a breach of contract. The impairment is recognised in the income statement under other operating expenses. If an asset cannot be recovered, then it is booked out against the impairment account The following table provides an overview of how the impairment item developed:
Opening inventory
€ thousand
as of January 1
Addition
Transfers
Disposals
Thereof
Thereof
Currency
As at
utilisations
releases
effects
December 31
2007
11,800
5,435
-582
-7,379
-973
-6,406
-1,129
8,145
2006
10,994
5,450
0
-4,644
-385
-4,259
0
11,800
In the reporting year, in the Klöckner Group impairment of € 7,354 thousand (previous year: € 8,495 thousand) was recognised for assets in the “Loans and receivables” category. Write-ups and reversals of € 6,849 thousand (previous year: € 4,755 thousand) were recognised. The valuation rates following IAS 17 concern liabilities from finance leases, which are evaluated with the general principles of this standard. As in the previous year, no terms of payment were prolonged for trade receivables with the intention of preventing receivables from becoming overdue. No other financial areas were overdue or impaired. It is assumed that these assets can be recovered at all times.
Guarantees for third-party obligations are stated in the notes on contingent liabilities.
101
Liquidity risk Careful liquidity management includes holding sufficient cash and tradable securities, the possibility of financing on the basis of an adequate level of committed credit facilities and the existence of unutilised credit lines. The maturity structure of all financial liabilities is as follows:
between
more
up to 1 year
1 and 5 years
than 5 years
Trade payables
135,537
0
0
Previous year
143,533
0
0
4,651
26,335
190
€ thousand
Liabilities due to banks Previous year
10,815
20,475
11,247
Other liabilities
12,138
13
0
Previous year
3,097
2,997
0
0
0
2,348
0
0
0
Liabilities from derivatives Previous year
In the financial year 2007, to secure contractually determined liabilities financial assets (e.g. cash collateral, trade receivables) of € 19.8 million (previous year: € 115.5 million) were deposited. As in the previous year, rights to sell on the collateral were not granted in the financial year.
102
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS KLÖCKNER-WERKE AG
Interest rate change risk The interest rate structure of the significant assets and liabilities of the Klöckner Group are as follows:
€ thousand Noncurrent financial assets Trade receivables Current financial assets Other current assets Cash and cash equivalents Pension provisions Noncurrent financial liabilities Current provisions Current financial liabilities
Fixed
Variable
interest
interest
No interest
Total
Fixed
Variable
31.12.2007
interest
interest
Total No interest
31.12.2006
0
510
3,479
3,989
1,084
8,693
2,883
12,660
35,980
37
269,413
305,430
60,620
0
185,494
246,114
0
3,250
5
3,255
543
48
749
1,340
88
0
41,849
41,937
0
0
28,738
28,738
4,143
26,346
4,892
35,381
788
61,411
3,369
65,568
148,355
0
0
148,355
162,714
0
0
162,714
29,505
8,002
557
38,064
29,916
8,702
0
38,618
0
0
39,958
39,958
0
0
36,852
36,852
4,578
28,220
11
32,809
1,651
18,363
152
20,166
Trade payables
8
0
135,529
135,537
0
96
143,437
143,533
Other current liabilities
0
0
42,803
42,803
83
0
40,186
40,269
Current financial assets bear interest at 4.0% to 5.5%. Cash and cash equivalents are invested at interest rates of between 0.25% and 11.5%. Most financial liabilities bear variable interest in a range of 0.25% to 8.05%. Interest rate swaps are used to reduce interest rate risks. The following positions existed at the balance sheet date:
€ thousand Nominal volume Positive market values Negative market values
31.12.2007
31.12.2006
9,460
22,681
0
267
-103
-54
The remaining terms of interest rate swaps are up to seven years. The impact of hypothetical changes of market interest rates on interest payments and expenses and other earnings components, as well as on equity, are shown below. To determine interest rate sensitivity a 100 point change in interest rates was assumed. If the market interest rate on December 31, 2007 had been 100 basis points higher or lower, then the result would have been € 129 thousand higher (previous year: € 809 thousand) or € 136 lower (previous year: € 820 thousand). The hypothetical earnings impact of € 129 thousand / minus € 136 thousand results from the potential effects as a result of interest rate derivatives of € 190 thousand / minus € 197 thousand and original, financial liabilities with variable interest rates of minus € 61 thousand / € 61 thousand. Thus equity would have been € 129 thousand/minus € 136 thousand higher or lower.
103
The sensitivity analyses are representative for the exchange rate and interest rate risks. There were no changes in methodology compared to previous reporting periods.
40 Related parties IAS 24 requires the disclosure of related parties that Klöckner-Werke AG controls or that control Klöckner-Werke AG. Business transactions concluded between Klöckner-Werke AG and its subsidiaries, which constitute related parties, were eliminated on consolidation and are therefore not explained in this disclosure note. On March 8, 2007, Salzgitter AG Stahl und Technologie, Salzgitter (SZ AG), announced that it had concluded a contract with the WCM Group to buy around 78% of the shares of Klöckner-Werke AG. After signing the final sale agreements on April 17, 2007, Salzgitter AG reported on July 5, 2007 that the requirements for it to acquire Klöckner shares from WCM were in place. Since this time, Klöckner-Werke AG has been a dependent company of SZ AG. Previously, Klöckner-Werke AG was controlled by WCM AG i. Ins. and WCM KG i. Ins. To July 5, 2007, the following significant events occurred between WCM AG on the one hand and Klöckner-Werke AG on the other: • In the light of the insolvency proceeding of WCM AG and WCM KG opened on November 21, 2006, the transactions in the
context of restructuring the WCM Group have a material impact on the Klöckner Group. The individual transactions have therefore been compiled in a separate section of the note to the consolidated financial statements. • On December 14, 2001, a cash management agreement was concluded between WCM AG and Klöckner-Werke AG. According
to this, in the interests of the principle of central Group financing, the finance requirements of Klöckner-Werke AG would be covered by WCM AG. In return, Klöckner-Werke AG was obliged to transfer free, temporarily non-essential cash to a central financial clearing account managed by WCM AG for Klöckner-Werke AG. The cash management balance was already frozen from September 30, 2003 in such a way that no financial outflows from Klöckner-Werke AG to the WCM parent company were possible and the balance could only be increased by interest. By way of a letter dated January 12, 2007, the cash management agreement was terminated by Klöckner-Werke AG. As a result of the occurrence of the conditions subsequent of the restructuring agreements on January 17, 2007, total net receivables rose by € 231.7 million to € 283.5 million, which were reported as receivables from the insolvent WCM AG. In connection with the disposal of Klöckner and RSE shares by the WCM AG i. Ins. insolvency administrator to SZ AG, in a letter dated June 13, 2007, Klöckner-Werke AG waived its lien rights on the shares of RSE and KW. As direct counterperformance for waiving its lien rights, Klöckner-Werke AG received an amount of € 1.0 million. Waiving the lien rights was a condition of the insolvency administrator for liquidating the Klöckner and RSE shares. Klöckner-Werke AG will participate in the liquidation of these shares on the basis of its insolvency quota. After July 5, 2007, the following events occurred between Salzgitter AG and its subsidiaries and the Klöckner Group companies:
104
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS KLÖCKNER-WERKE AG
• On the basis of a share purchase and transfer agreement dated December 21, 2007, Klöckner-Werke AG sold 832,541 RSE shares
to Salzgitter Mannesmann GmbH (SMG). The sales price was € 6.25 per share, the price determined in the RSE AG squeeze-out proceedings as an appropriate settlement for the transfer of the shares of the minority shareholders. The agreed sales price of € 6.25 is well above the earnings value of RSE AG of € 0.99 per share. • On September 14, 2004, a cash management agreement was concluded between Salzgitter Mannesmann GmbH (SMG) and KHS
AG. Here SMG grants KHS AG a credit line of € 40.0 million which was initially limited to December 31, 2007 and later extended to December 31, 2008. On December 31, 2007, € 24.7 million of the credit line was utilised. The interest rate used is the base interest rate plus 75 basis points per year. These transactions are presented together with all other transactions in the report in accordance with Section 312 of the German Stock Corporation Act and have been audited by the auditor. The audit did not give rise to any reservations. IAS 24 further requires the disclosure of parties, including close family members, who can exert a significant influence on the enterprise, i.e. can affect, though not control, the enterprise's financial and operating policies. In the 2007 financial year, this relates to the members of the Supervisory Board and Management Board and their close family members. Members of the Supervisory and Management Boards and their mandates are listed in the "Further information" section. The companies of the Klöckner-Werke Group have not concluded any reportable transactions with members of the Supervisory or Management Boards or with companies on whose management or supervisory committees these persons are represented. On October 2, 2006, Klöckner-Werke AG acquired 995,948 shares in RSE AG from a related company as part of the then planned assumption of all shares in RSE AG. The agreed purchase price as at the time of acquisition was equal to the value of the RSE shares already held by Klöckner-Werke AG. Following the occurrence of one of the conditions subsequent of the restructuring agreements concluded in the WCM Group at the end of 2005, a majority of RSE shares held by Klöckner-Werke AG reverted to WCM AG, with the result that Klöckner-Werke was no longer able to acquire all shares in RSE. In light of this background, the parties to the agreement revoked the share purchase agreement of October 2, 2006 by mutual consent on May 14, 2007. In the financial year 2007, Klöckner-Werke AG employees performed management services for RSE AG. On the basis of the existing services agreement, revenues of € 191 thousand were achieved. In financial year 2007, RSE AG was granted loans totalling € 2.7 million. Interest income of € 95 thousand was generated from these loans. No reportable transactions were concluded with non-consolidated companies.
41 Remuneration paid to members of the Management Boards and Supervisory Boards The remuneration system for members of the Management Board consists of fixed and variable components. The fixed allowance is paid as non-performance-related basic remuneration as a monthly salary. In addition, the members of the Management Board receive payments in kind, which essentially comprise the value recognised by tax guidelines for the usage of a company car. Performance-related remuneration is the variable component. It is geared towards the attainment of performance-dependent and personal targets. Furthermore, the members of the Management Board received pension commitments in the form of individually agreed fixed amounts.
105
In 2007, the Management Board received remuneration of € 2,420 thousand (previous year: € 1.464 thousand) for the performance of duties for the parent company and the subsidiaries.
REMUNERATION OF THE MANAGEMENT BOARD Service cost
Supervisory
Fixed
Variable
Non-cash
from pension
Board
€ thousand
component
component
remuneration
commitments
remuneration
Total
Roland Flach
716
300
19
0
10
1,045
Valentin Reisgen
464
320
13
131
0
928
Maternus Gemmel
192
254
1
0
0
447
1,372
874
33
131
10
2,420
Total
Mr. Maternus Gemmel's contract of employment is with KHS AG. The disclosures relate to the remuneration paid by KHS AG for the whole of the financial year 2007. There were no payments resulting from the termination of employment relationships of members of the Management Board in financial year 2007. The Management Board members of Klöckner-Werke AG have pension commitments that, in the event of retirement, will result in a claim of € 197 thousand p.a. for Mr. Roland Flach, € 120 thousand p. a. for Mr. Valentin Reisgen and € 51 thousand p. a. for Mr. Maternus Gemmel. There is a change of control agreement for the Management Board members Roland Flach and Valentin Reisgen for the event of a change in the majority shareholder, whereby they can leave the Company if they so desire under certain conditions, receiving remuneration for the remaining term of their contracts. Payments totalling € 1,614 thousand (previous year: € 1,660 thousand) were made to former members of the Management Board and their dependents. Provisions for this amount to € 17,654 thousand (previous year: € 19,218 thousand). In 2007, the Supervisory Board received remuneration of € 385 thousand (previous year: € 393 thousand) for the performance of duties for the parent company and the subsidiaries, € 50 thousand of which relates to the General and Audit Committee and € 23 thousand to attendance fees. In accordance with Section 14 of the Articles of Association, members of the Supervisory Board each receive fixed remuneration consisting of € 20,000, € 30,000 for the Vice Chairman of the Supervisory Board and € 40,000 for the Chairman of the Supervisory Board, as well as attendance fees. The remuneration paid to members of the Supervisory Board does not contain a variable element. The members of the Supervisory Board who serve on one of the committees set up for the first time in the reporting year, each receive fixed annual remuneration of € 5,000 in addition to the above-mentioned remuneration. In the case of the Chairman of the Committee, the fixed annual remuneration is twice the above amount. The remuneration reported below also includes that for activities supervisory bodies of subsidiaries.
106
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS KLÖCKNER-WERKE AG
REMUNERATION OF THE SUPERVISORY BOARD Fixed €
component
Dr. Heinz Jörg Fuhrmann, (since July 18, 2007), Chairman (since August 2, 2007)
Attendance Committees
fees
Total
0
0
750
750
Rainer Laufs, Chairman (until July 5, 2007)
45,113
15,000
1,500
61,613
Joachim Kletzin, Vice Chairman
37,670
5,000
2,000
44,670
Erich Bach
25,113
5,000
2,250
32,363
Karl Ehlerding
25,113
10,000
2,250
37,363
Dr. jur. Dirk Geitner (until June 30, 2007)
20,000
0
750
20,750
0
0
750
750
Dr. Jochen Melchior (until June 30, 2007)
25,113
0
750
25,863
Peter H. Miebach (until June 30, 2007)
20,000
0
500
20,500
Hans-Jürgen Obenauer
20,000
0
1,500
21,500
Dr. Ulrich Schaarschmidt (since July 18, 2007)
0
0
750
750
Peter-Jürgen Schreiber (since July 18, 2007)
0
0
750
750
Artur Schreiber
25,113
0
1,500
26,613
Karl-Ernst Schweikert (until July 5, 2007)
23,495
5,000
1,250
29,745
0
0
1,250
1,250
25,113
10,000
2,750
37,863
Heinz Groschke (since July 18, 2007)
Karl Spanke (since July 18, 2007 Helmut Weber Heiko Wolters Total
20,000
0
1,500
21,500
311,843
50,000
22,750
384,593
As in previous years, no advances, loans, guarantees or warranties were extended to members of the Management Board or Supervisory Board. No members of the Supervisory Board performed any paid consultancy services. The Company has taken out a D&O insurance policy for members of the Management and Supervisory Board without a deductible.
42 German Corporate Governance Code The Management Board and the Supervisory Board of Klöckner-Werke AG issued a declaration on the Corporate Governance Code in accordance with Article 161 of the German Stock Corporation Act in December, 2007 and made this accessible to shareholders at all times on the Internet site of Klöckner-Werke AG at .
43 Auditors' fees PricewaterhouseCoopers Aktiengesellschaft, Wirtschaftsprüfungsgesellschaft (PwC), Frankfurt/Main, incurred fees of € 595 thousand as the auditor of the consolidated financial statements as at December 31, 2007. BDO Deutsche Warentreuhand Aktiengesellschaft, Wirtschaftsprüfungsgesellschaft (BDO), Düsseldorf, incurred further fees totalling € 429 thousand as the auditor of the consolidated financial statements as at December 31, 2005 in financial year 2006.
107
PwC
PwC
BDO
2007
2006
2006
465
324
224
Other certification and valuation services
0
0
0
Tax consultancy services
0
0
0
Other services performed for Klöckner-Werke AG or its subsidiaries
130
3
205
Total
595
327
429
€ thousand Audit
44 Events after the balance sheet date There were no events after the balance sheet date which could materially impact the net assets, financial position and results of operation at the Klöckner Group.
45 Waiving of disclosure in accordance with Section 264 no. 3 of the HGB The following entirely consolidated domestic subsidiaries have fulfilled the required terms and conditions in accordance with Section 264 no. 3 of the HGB to be freed of disclosure of their annual financial statements: • Klöckner Mercator Maschinenbau GmbH, Duisburg • Klöckner DESMA Elastomertechnik GmbH, Fridingen • Klöckner DESMA Schuhmaschinen GmbH, Achim • Klöckner Hänsel GmbH, Hanover.
46 Responsibility statement To the best of our knowledge, and in accordance with the applicable reporting principles, the consolidated financial statements give a true and fair view of the assets, liabilities, financial position and profit or loss of the Group, and the management report of the Group includes a fair review of the development and performance of the business and the position of the Group, together with a description of the principal opportunities and risks associated with the expected development of the Group. Duisburg, February 25, 2008 Klöckner-Werke AG The Management Board
Roland Flach (Chairman)
Valentin Reisgen
108
AUDITOR’S REPORT KLÖCKNER-WERKE AG
AUDITOR’S REPORT We have audited the consolidated financial statements prepared by the Klöckner-Werke AG, Duisburg, comprising the balance sheet, the income statement, statement of recognised income and expense, cash flow statement and the notes to the consolidated financial statements, together with the group management report for the business year from January 1 to December 31, 2007. The preparation of the consolidated financial statements and the group management report in accordance with the IFRSs, as adopted by the EU, and the additional requirements of German commercial law pursuant to § (Article) 315a Abs. (paragraph) 1 HGB ("Handelsgesetzbuch": German Commercial Code) are the responsibility of the parent Company's Board of Managing Directors. Our responsibility is to express an opinion on the consolidated financial statements and on the group management report based on our audit. We conducted our audit of the consolidated financial statements in accordance with § 317 HGB and German generally accepted standards for the audit of financial statements promulgated by the Institut der Wirtschaftsprüfer (Institute of Public Auditors in Germany) (IDW). Those standards require that we plan and perform the audit such that misstatements materially affecting the presentation of the net assets, financial position and results of operations in the consolidated financial statements in accordance with the applicable financial reporting framework and in the group management report are detected with reasonable assurance. Knowledge of the business activities and the economic and legal environment of the Group and expectations as to possible misstatements are taken into account in the determination of audit procedures. The effectiveness of the accounting-related internal control system and the evidence supporting the disclosures in the consolidated financial statements and the group management report are examined primarily on a test basis within the framework of the audit. The audit includes assessing the annual financial statements of those entities included in consolidation, the determination of the entities to be included in consolidation, the accounting and consolidation principles used and significant estimates made by the Company´s Board of Managing Directors, as well as evaluating the overall presentation of the consolidated financial statements and the group management report. We believe that our audit provides a reasonable basis for our opinion. Our audit has not led to any reservations. In our opinion based on the findings of our audit the consolidated financial statements comply with the IFRSs as adopted by the EU , and the additional requirements of German commercial law pursuant to § 315a Abs. 1 HGB and give a true and fair view of the net assets, financial position and results of operations of the Group in accordance with these requirements. The group management report is consistent with the consolidated financial statements and and as a whole provides a suitable view of the Group's position and suitably presents the opportunities and risks of future development. Frankfurt am Main, February 25, 2008 PricewaterhouseCoopers Aktiengesellschaft Wirtschaftsprüfungsgesellschaft
(Dr. Reinhard Müller)
(Klaus Jäcker)
Wirtschaftsprüfer (German Public Auditor)
Wirtschaftsprüfer (German Public Auditor)
109
FURTHER INFORMATION
SIGNIFICANT CONSOLIDATED GROUP COMPANIES OF KLÖCKNER-WERKE AG Extract from the list of shareholdings in accordance with Section 285 no. 11 and Section 313 (2) of the HGB as at December 31, 2007 with information on shareholders' equity and net income in line with IFRS provisions. A full list of shareholdings has been published in the electronic Federal Gazette (elektronischer Bundesanzeiger) and the commercial register has been notified in accordance with Section 287 HGB.
Shareholding Name and registered office of company
Currency
%
via. no.
Shareholders' equity
Net income
(1,000 units)
(1,000 units)
Holding segment 1
Klöckner-Werke AG, Duisburg (parent company)
Filling and Packaging Technology segment 2
KHS AG, Dortmund
EUR
100.0
1
267,567
30,498
1) 2)
3
KHS China GLM2 Co. Ltd., Shantou (China)
CNY
70.0
2
21,020
15,122
2)
4
KHS Mexico S. A. de C. V., Zinacantepec (Mexico)
MXN
100.0
7
99,785
9,752
5
KHS Industria de Maquinas Ltda., Sao Paulo (Brazil)
BRL
100.0
2
25,582
4,884
6
KHS Machinery Pvt. Ldt. Ahmedabad (India)
INR
89.0
2
311,093
104,681
KHS USA Inc., Waukesha (USA)
USD
100.0
2
50,968
1,776
2)
7
Other Industrial Holdings 8
Klöckner Mercator Maschinenbau GmbH, Duisburg
EUR
100.0
1
101,069
-305
1) 2)
9
Klöckner DESMA Elastomertechnik GmbH, Fridingen
EUR
85.0
8
7,372
2,400
1) 2)
10
Klöckner DESMA Machinery Pvt. Ltd., Ahmedabad (India)
INR
100.0
9
144,963
30,403
2)
11
Klöckner DESMA Schuhmaschinen GmbH, Achim
EUR
100.0
8
5,611
46
1) 2)
12
Klöckner Hänsel Processing GmbH, Hanover
EUR
100.0
8
4,411
219
2)
1) The company is integrated in Klöckner-Werke AG in accordance with Section 319 ff of the German Stock Corporation Act. A profit transfer agreement exists with Klöckner-Werke AG. The net result for the year is reported before the profit transfer. 2) The company was fully consolidated in the consolidated financial statements of Klöckner-Werke AG.
110
FURTHER INFORMATION KLÖCKNER-WERKE AG
SUPERVISORY BOARD AND MANAGEMENT BOARD AND THEIR MANDATES SUPERVISORY BOARD
Dr. Heinz Jörg Fuhrmann, Salzgitter, Chairman
Karl Ehlerding, Hamburg
since July 18, 2007 Chairman since August 2, 2007 Member of the Executive Board of Salzgitter AG Membership of Supervisory Boards: Europipe GmbH KHS AG* Klöckner-Werke AG* Mannesmannröhren-Werke GmbH Öffentliche Lebensversicherung Braunschweig Öffentliche Sachversicherung Braunschweig Salzgitter Flachstahl GmbH Salzgitter Mannesmann Handel GmbH, Vice Chairman Salzgitter Stahl GmbH Comparable mandates: Ets. Robert et Cie S. A. S., Comité de Surveillance HANSAPORT Hafenbetriebsgesellschaft mbH Thyssen Krupp GfT Bautechnik GmbH, Advisory Council
General Manager of KG Erste “Hohe Brücke 1” Verwaltungs-GmbH & Co. Membership of Supervisory Boards: Deutsche Real Estate AG KHS AG* Klöckner-Werke AG* MATERNUS-Kliniken AG WCM Beteiligungs- und Grundbesitz-AG i. Ins. Comparable mandate: Deutsche Bank AG Nord, Advisory Board
Rainer Laufs, Kronberg im Taunus, Chairman until July 5, 2007 Independent consultant Membership of Supervisory Bords:
LANXESS AG LANXESS GmbH MCE AG, Linz PETROTEC AG, Vice Chairman WCM Beteiligungs- und Grundbesitz-AG i. Ins., Chairman
Joachim Kletzin, Berlin, Vice Chairman** Director of IG Metall training establishment Membership of Supervisory Boards: KHS AG, Vice Chairman* Klöckner-Werke AG* Comparable mandates: BiB Bildungs- und Beschäftigungsgesellschaft mbH Leipzig, Chairman of the Advisory Board
Erich Bach, Frankfurt am Main** Head of the Staff IR/DS Board at IG Metall Membership of Supervisory Boards: KHS AG* Klöckner-Werke AG*
Dr. jur. Dirk Geitner, Bergisch Gladbach until June 30, 2007 Lawyer
Heinz Groschke, Büchen since July 18, 2007 Member of the Executive Board of Salzgitter AG Membership of Supervisory Boards: Ilsenburger Grobblech GmbH KHS AG* Klöckner-Werke AG* Comparable mandates: A.P. Steel (UK) Ltd, United Kingdom, Chairman Project Metals Ltd., United Kingdom, Chairman Salzgitter Mannesmann International (HK) Ltd. (Hongkong), Board of Administration Salzgitter Mannesmann International, (Asia) Pte. Ltd. (Singapore), Board of Administration Salzgitter Mannesmann (Scandinavia) AB (Sweden), Board of Administration Salzgitter Mannesmann (Italia) s. r. l. (Italy), Board of Administration Salzgitter Mannesmann (España) S. A. (Spain), Board of Administration Salzgitter Mannesmann International (USA) Inc. (USA), Chairman Salzgitter Mannesmann International (Canada) Inc. (Canada), Chairman Salzgitter Mannesmann International (Mèxico) S. A. de C. V. (Mexico), Chairman Salzgitter Mannesmann Trade (Beijing) Co. Ltd. (China), Chairman Salzgitter Mannesmann (UK) Ltd. (United Kingdom), Chairman
111
Dr. Jochen Melchior, Essen until June 30, 2007 Independent consultant Membership of Supervisory Boards: AXA Service AG National-Bank AG Comparable mandates: Mattson Technology, Inc., Chairman University Clinic Essen
Artur Schreiber, Dortmund** Head of the logistic unit at KHS AG Membership of Supervisory Boards: KHS AG* Klöckner-Werke AG* Karl-Ernst Schweikert, Männedorf, Switzerland until July 5, 2007 Management Board of WCM Beteiligungs- und Grundbesitz-AG i. Ins.
Peter H. Miebach, Hamburg until June 30, 2007 Member of the Management Board Steria Mummert Consulting AG
Hans-Jürgen Obenauer, Worms** Chairman of the Works Council of KHS AG, Worms site Membership of Supervisory Boards: Klöckner-Werke AG*
Karl Spanke, Essen since July 18, 2007 Head of Audit at Salzgitter AG Membership of Supervisory Boards: KHS AG* Klöckner-Werke AG* RSE Grundbesitz und Beteiligungs-AG Salzgitter Flachstahl GmbH
Dr. Ulrich Schaarschmidt, Braunschweig since July 18, 2007
Manager (Finance and Controlling) at Peiner Träger GmbH Membership of Supervisory Boards: Klöckner-Werke AG *
Helmut Weber, Fröndenberg** Chairman of the Group Works Council of Klöckner-Werke AG Membership of Supervisory Boards: KHS AG* Klöckner-Werke AG*
Peter-Jürgen Schneider, Hanover since July 18, 2007 Member of the Executive Board of Salzgitter AG Membership of Supervisory Boards: Ilsenburger Grobblech GmbH KHS AG* Klöckner-Werke AG* Mannesmannröhren-Werke GmbH MHP Mannesmann Präzisrohr GmbH Peiner Träger GmbH Salzgitter Flachstahl GmbH Salzgitter Stahl GmbH SZST Salzgitter Service und Technik GmbH, Chairman Verkehrsbetriebe Peine-Salzgitter GmbH, Chairman Comparable mandates: HANSAPORT Hafenbetriebsgesellschaft mbH, Chairman Projekt Region Braunschweig GmbH
Heiko Wolters, Kolbingen** Vice Chairman of the Works Council of Klöckner DESMA Elastomertechnik GmbH Membership of Supervisory Boards: Klöckner-Werke AG*
112
FURTHER INFORMATION KLÖCKNER-WERKE AG
GENERAL COMMITTEE
AUDIT COMMITTEE
Dr. Heinz Jörg Fuhrmann, Salzgitter, Chairman since August 2, 2007 Rainer Laufs, Kronberg im Taunus, Chairman until July 5, 2007 Joachim Kletzin, Berlin** Peter-Jürgen Schneider, Hannover, since August 2, 2007 Karl-Ernst Schweikert, Männedorf, Switzerland, until July 5 2007 Helmut Weber, Fröndenberg**
Karl Ehlerding, Hamburg, Chairman Rainer Laufs, Kronberg im Taunus, until July 5, 2007 Erich Bach, Frankfurt am Main** Karl Spanke, Essen, since August 2, 2007 Helmut Weber, Fröndenberg**
MANAGEMENT BOARD
Roland Flach, Kronberg im Taunus, Chairman Membership of Supervisory Boards: ALLBODEN Allgemeine Grundstücks-AG BHE Beteiligungs-AG, Chairman KHS AG, Chairman* RSE Grundbesitz und Beteiligungs-AG, Chairman RSE Projektmanagement AG, Chairman Comparable mandates: KHS USA, Inc. (USA), Chairman*
Valentin Reisgen, Neuss Membership of Supervisory Boards: ALLBODEN Allgemeine Grundstücks-AG, Chairman BHE Beteiligungs-AG, Vice Chairman RSE Grundbesitz und Beteiligungs-AG, Vice Chairman Comparable mandates: Impuls AG (Bulgaria)* KHS Asia Pte. Ltd. (Singapore)* KHS China GLM2 Co. Ltd. (China), Chairman* KHS Industria de Máquinas Ltda. (Brazil)* KHS Machinery Pvt. Ltd. (India)* KHS Mèxico S. A. de C.V. (Mexico)* KHS Pacific Pty. Ltd. (Australia), Chairman * KHS Manufacturing (S. A.) (Pty.) Ltd. (South Africa)* KHS USA, Inc. (USA)*
•
Group mandates ** Employee representatives
Maternus Gemmel, Bad Kreuznach until December 31, 2007 Membership of Supervisory Boards: KHS Asia Pte. Ltd. (Singapore)* KHS China GLM2 Co. Ltd. (China)* KHS Machinery Pvt. Ltd. (India)* KHS Industria de Máquinas Ltda. (Brazil)* KHS Japan Corporation (Japan)* KHS Machines Nigeria Limited (Nigeria)* KHS Pacific Pty. Ltd. (Australia)* KHS RUS OOO (Russian Federation)* KHS Manufacturing (S. A.) (Pty.) Ltd. (South Africa)* KHS UK Ltd. (United Kingdom)* KHS Machine & Equipment (Qinhuangdao) Co., Ltd. (China)* KHS S.A.R.L. (France)* Klöckner Holstein Seitz S. A. (Spain)*
113
NOTES TO THE ANNUAL FINANCIAL STATEMENTS OF KLÖCKNER-WERKE AG Klöckner-Werke AG is the parent company of the Klöckner Group. Klöckner-Werke AG's situation is primarily influenced by activities performed within the Group. The financial statements Klöckner-Werke AG, having received an unqualified audit opinion from PricewaterhouseCoopers Aktiengesellschaft, Wirtschaftsprüfungsgesellschaft, Frankfurt/Main, have been published in the electronic Federal Gazette (elektronischer Bundesanzeiger) and filed with the commercial register. It can be requested from Klöckner-Werke AG at any time and is also available on the Internet. The annual financial statements of Klöckner-Werke AG were prepared in accordance with the accounting regulations of the German Commercial Code and the German Stock Corporation Act. These are presented in summary form below.
INCOME STATEMENT OF KLÖCKNER-WERKE AG € thousand Other operating income Personnel costs
2007
2006
17,058
8,291
8,711
7,711
Depreciation a) on fixed intangible and tangible assets b) on current assets in excess of normal depreciation
178
238
0
283,557
Other operating expenses
4,672
4,290
Income from shareholding
-19,189
-12,281
0
86,631
Amortisation on securities held as current assets Net interest income
-3,744
-147
Result of ordinary business activity
-19,436
-386,564
Net loss for the year
-19,436
-386,564
Retained earnings brought forward
0
4,919
Transfers from capital reserves
0
65,594
Transfers from other earnings reserves
0
316,051
-19,436
0
Net result
114
FURTHER INFORMATION KLÖCKNER-WERKE AG
BALANCE SHEET OF KLÖCKNER-WERKE AG ASSETS € thousand
31.12.2007
31.12.2006
Fixed assets Intangible assets Tangible assets Financial assets
20
33
16,313
17,438
349,051
346,580
365,384
364,051
13,972
9,385
0
581
Current assets Receivables and other assets Securities Liquid funds Prepaid expenses
200
803
14,172
10,769
396
371
379,952
375,191
115
BALANCE SHEET OF KLÖCKNER-WERKE AG LIABILITIES € thousand
31.12.2007
31.12.2006
234,570
234,570
13,200
13,200
0
0
Shareholders' equity Subscribed capital Capital reserves Other earnings reserves Net result
-19,436
0
228,334
247,770
38,587
38,496
Provisions Pension provisions Other provisions
6,922
6,237
45,509
44,733
104,089
81,172
Liabilities Liabilities due to affiliated companies Other liabilities
2,020
1,516
106,109
82,688
379,952
375,191
Klöckner-Werke AG's net asset position is characterised by the management and administration of equity holdings and Group activities for the Group companies. The parent company holds shares in the various management companies.
116
FURTHER INFORMATION KLÖCKNER-WERKE AG
KEY WORD INDEX A Annual financial statements of Klöckner-Werke AG – excerpt (HGB) Annual General Meeting Auditor’s report
I 113 37 121
B Balance sheet Business divisions
44 12
26 22 48 55 19 56 17
D Declaration of compliance Dividend
35 20
E Earnings per share Economic environment Employees Environment
19 18 17 15
23 21 19 44 30 6 35
G General trading conditions Group companies
18 109
H Holdings
L Locations
3
Management Board Management report Mandates of the Supervisory Board and Management Board Market capitalisation
113 12 124 35
N Net asset position Notes
22 49
O Order situation Other Industrial Holdings Outlook
20 24 31
P Products
12
R
F Filling and Packaging Technology Financial position Financial situation Financial statements Forecast report Foreword of the Management Board Free float
46 47 35 16
M
C Capital and ownership structure Cash flow Cash flow statement Consolidation principles Corporate governance report Currency translation Customers
Income statement Income and expense Investor Relations Investments
25
Related parties Remuneration of the Management Board and Supervisory Board Research and development Results of operations Risk management
27 104 12 19 28
S Scope of consolidation Segment reporting Shareholders' equity/suscribed capital Shares Strategic overview Supervisory Board Supervisory Board report Supplementary report
52 91 75 34 12 110 38 25
117
DATES & CONTACT FINANCIAL CALENDAR 2008 Interim Report Q1
May 9, 2008
Annual General Meeting
June 26, 2008
Mid-year Financial Statements
August 8,2008
Interim Report Q3
November 7, 2008
CONTACT Klöckner-Werke AG
Investor Relations
Subsidiaries
Opernplatz 2
Tel. 069 90026-510
www.khs.com
60313 Frankfurt am Main
Fax 069 90026-555
www.desma.biz
Tel.
[email protected]
www.desma.de
www.kloecknerwerke.de
www.kloeckner-haensel.de
Herausgeber
Photos
Print
Klöckner-Werke AG,
© Pichugin Dmitry
Druckerei Hassmüller
Frankfurt am Main
© Tamara Kulikova
GmbH & Co. KG,
© Richard List/CORBIS
Frankfurt am Main
Conception and production
© Lee Prince
Konzeption + Design GbR, Köln
© VANNUCCI ROBERTO
069 90026-0
WKN: 678 000 ISIN: DE 000 6780 000
IMPRESSUM
Michael Konrad GmbH,
Oliver Tjaden
Frankfurt am Main
Frank Reinhold
This report contains forward-looking statements and forecasts based on assumptions and estimates by the management of Klöckner-Werke AG. While we assume that the expectations of these forward-looking statements are realistic, we cannot guarantee that they will be realised. Assumptions may contain risks and uncertainties. These can lead to actual events that differ from the forecast results. Factors that can cause such deviations include changes in exchange control or the economic and business environment, fluctuations in exchange rates, insufficient acceptance of new products or services and changes in corporate strategy.
www.kloecknerwerke.de
GESCHÄFTSBERICHT 2007
KONZERN-KENNZAHLEN 2007 2007
2006
Auftragseingang
Mio. €
1.076,1
1.016,2
Außenumsatz
Mio. €
1.115,5
872,5
Inland
Mio. €
184,4
157,6
Ausland
Mio. €
931,1
714,9
Mitarbeiter im Jahresdurchschnitt Inland
3.355
3.257
Ausland
2.342
2.106
T€
197
164
Mio. €
52,4
21,3
Gesamtleistung je Mitarbeiter Operatives Ergebnis (EBIT) vor Sondereinflüssen Umsatzrendite EBITDA Umsatzrendite
%
4,7
2,4
Mio. €
70,8
37,9
%
6,4
4,3
Ergebnis vor Steuern (EBT)
Mio. €
43,9
-345,9
Jahresüberschuss
Mio. €
21,9
-347,2
0,0
0,0
Investitionen Sachanlagen
Mio. €
21,4
25,2
Immaterielle Vermögenswerte
Mio. €
9,0
26,8
Abschreibungen
Mio. €
18,4
16,6
Cashflow aus laufender Geschäftstätigkeit
Mio. €
-37,2
37,7
Bilanzsumme
Mio. €
791,8
776,8
Eigenkapital
Mio. €
304,6
280,5
%
38,5
36,1
Kurs zum Ende des Geschäftsjahres
€
15,28
11,10
Höchstkurs im Geschäftsjahr
€
16,90
12,31
Tiefstkurs im Geschäftsjahr
€
10,69
9,95
€
0,46
-10,26
Eigenkapitalquote Klöckner-Aktie
Ergebnis je Aktie
