Annual Report 2015

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Balance sheet

as of per 31 December 2015

CHF million Notes 2015 % 2014 %
Cash and cash equivalents   549   374  
Marketable securities   10   6  
Trade accounts receivable (3) 640   643  
Inventories (4) 640   666  
Income taxes receivable (5) 13   9  
Other accounts receivable (6) 49   62  
Prepayments to creditors   14   26  
Accrued income   19   15  
Current assets   1 934 63 1 801 60
Property, plant, and equipment for own use (7) 988   1 009  
Investment properties (7) 39   44  
Intangible assets (8) 26   27  
Deferred tax assets (11) 83   88  
Other financial assets (10) 13   20  
Non-current assets   1 149 37 1 188 40
Assets   3 083 100 2 989 100
Trade accounts payable   420   419  
Bonds (13) 200      
Other financial liabilities (13) 158   154  
Loans from pension fund institutions (13, 14) 27   27  
Other liabilities (15) 80   69  
Prepayments from customers   55   52  
Current tax liabilities   45   42  
Provisions (12) 38   37  
Accrued liabilities and deferred income (16) 198   181  
Current liabilities   1 221 39 981 33
Bonds (13) 299   497  
Other financial liabilities (13) 113   56  
Pension benefit obligations (14) 120   131  
Other liabilities (15) 46   51  
Provisions (12) 109   123  
Deferred tax liabilities (11) 45   46  
Non-current liabilities   732 24 904 30
Liabilities   1 953 63 1 885 63
Share capital (17) 4   4  
Capital reserves   24   33  
Treasury shares (19) –6   –9  
Retained earnings   1 059   1 029  
Equity attributable to shareholders of Georg Fischer Ltd   1 081 35 1 057 35
Non-controlling interests   49 2 47 2
Equity (17) 1 130 37 1 104 37
Liabilities and equity   3 083 100 2 989 100

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Income statement

for the year ended 31 December 2015

CHF million Notes 2015 % 2014 %
Sales   3 640 100 3 795 100
Other operating income (23) 50   45  
Income   3 690 101 3 840 101
Cost of materials and products   –1 740   –1 841  
Changes in inventory of unfinished and finished goods   25      
Operating expenses (24) –628   –665  
Gross value added   1 347 37 1 334 35
Personnel expenses (25) –925   –935  
Depreciation on tangible fixed assets (7) –122   –122  
Amortization on intangible assets (8) –4   –3  
Operating result (EBIT)   296 8 274 7
Interest income (26) 2   3  
Interest expense (26) –34   –39  
Other financial result (26) –16   –6  
Ordinary result   248 7 232 6
Non-operating result (27) 3   14  
Extraordinary result (28)        
Profit before taxes   251 7 246 6
Income taxes (29) –53   –51  
Net profit   198 5 195 5
– Thereof attributable to shareholders of Georg Fischer Ltd   188   184  
– Thereof attributable to non-controlling interests   10   11  
Basic earnings per share in CHF (18) 46   45  
Diluted earnings per share in CHF (18) 46   45  

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Statement of changes in equity

for the year ended 31 December 2015

CHF million Notes Share capital Capital reserves Treasury shares Goodwill offset Cumulative translation adjustments Cash flow hedging Other retained earnings Retained earnings Equity attributable to share- holders of Georg Fischer Ltd Non-controlling interests Equity
Balance as of 31 December 2013   41 60 –9 –319 –3 –17 1 182 843 935 43 978
Net profit               184 184 184 11 195
Translation adjustments recognized in the reporting period           14     14 14 1 15
Changes of cash flow hedges (9, 15)           –12   –12 –12   –12
Goodwill offset via equity (2, 8)                      
Addition to non-controlling interests (2)                   –1 –1
Purchase of treasury shares (19)     –21           –21   –21
Disposal of treasury shares (19)   2 16           18   18
Share-based compensation                        
– Transfers for 2013 (19, 30)     5       –5 –5      
– Granted for 2014 (19, 30)             5 5 5   5
Reduction in par value   –37               –37   –37
Dividends (17)   –29             –29 –7 –36
Balance as of 31 December 2014   4 33 –9 –319 11 –29 1 366 1 029 1 057 47 1 104
Net profit               188 188 188 10 198
Translation adjustments recognized in the reporting period           –71     –71 –71 –1 –72
Changes of cash flow hedges (9, 15)           1   1 1   1
Goodwill offset via equity (2, 8)       –29       –29 –29   –29
Purchase of treasury shares (19)     –13           –13   –13
Disposal of treasury shares (19)   1 11           12   12
Share-based compensation                        
– Transfers for 2014 (19, 30)     5       –5 –5      
– Granted for 2015 (19, 30)             6 6 6   6
Dividends (17)   –10         –60 –60 –70 –7 –77
Balance as of 31 December 2015   4 24 –6 –348 –60 –28 1 495 1 059 1 081 49 1 130

Statement of changes in equity as PDF

Cash flow statement

for the year ended 31 December 2015

CHF million Notes 2015 2014
Net profit   198 195
Income taxes (29) 53 51
Financial result (26) 48 42
Depreciation and amortization (7, 8) 126 125
Other non-cash income and expenses   3 5
Increase in provisions, net (12, 28) 30 22
Use of provisions (12) –34 –28
Loss/profit from disposal of tangible fixed assets   –22 –12
Changes in      
– Inventories   –2 20
– Trade accounts receivable   –45 –36
– Other receivables and accrued income   3 1
– Trade accounts payable   26 –26
– Other liabilities and accrued liabilities and deferred income   21 –26
Interest paid   –32 –40
Income taxes paid   –45 –45
Cash flow from operating activities   328 248
Additions to      
– Property, plant, and equipment (7) –167 –152
– Intangible assets (8) –4 –5
– Other financial assets     –4
Disposals of      
– Property, plant, and equipment (7) 30 19
– Intangible assets (8)   1
– Other financial assets   2 2
Purchase/disposal of marketable securities   –1 –1
Cash flow from acquisitions (2) –1 –22
Cash flow from divestitures (2) –1 2
Interest received   2 2
Cash flow from investing activities   –140 –158
Free cash flow   188 90
Purchase of treasury shares   –13 –21
Disposal of treasury shares   12 18
Par value reduction paid     –37
Dividend payments to shareholders of Georg Fischer Ltd   –70 –29
Dividend payments to non-controlling interests   –7 –7
Repayment of bonds (13)   –300
Issuance of long-term financial liabilities (13) 68 12
Repayment of long-term financial liabilities (13) –4 –9
Changes in short-term financial liabilities   14 5
Cash flow from financing activities   0 –368
Translation adjustment on cash and cash equivalents   –13 11
Net cash flow   175 –267
Cash and cash equivalents at beginning of year   374 641
Cash and cash equivalents at year-end1   549 374

1 Cash, postal and bank accounts: CHF 507 million (previous year: CHF 367 million), fixed-term deposits: CHF 42 million (previous year: CHF 7 million).

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Notes to the consolidated financial statements

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Corporate accounting principles

Accounting policies

General //

The consolidated financial statements of Georg Fischer Ltd have been prepared in accordance with all of the current guidelines of Swiss GAAP FER (Swiss Generally Accepted Accounting Principles Accounting and Reporting Recommendations) and, furthermore, with the provisions of the Listing Rules of SIX Swiss Exchange and with Swiss company law. The consolidated financial statements are based on the financial statements of the GF Corporate Companies for the year ended 31 December, prepared in accordance with uniform corporate accounting principles.

Furthermore, the consolidated financial statements have been prepared in accordance with the purchase cost method with the exception of marketable securities, participations under 20%, and derivative financial in­struments, which are measured at fair value. The preparation of the consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of revenues, expenses, assets, liabilities, and contingent liabilities at the balance sheet date. If in the future such estimates and assumptions, which are based on management’s best judgment at the balance sheet date, deviate from the actual circumstances, the original estimates and assumptions will be modified as appropriate in the year in which the circumstances change.

Definition of non-Swiss GAAP FER measures //

The subtotal “Gross value added” includes all operating incomeless cost of materials and products, changes in inventory, and operating expenses.

As the subtotal “Gross value added” is an important key figure for GF, it is reported separately in the income statement.

The EBITDA corresponds to the operating result (EBIT) before depreciation on tangible fixed assets and amortization on intangible assets. For GF, the EBITDA is an important operational key figure, which, on the one hand, displays a harmonization to the cash flow from operating activities, and, on the other hand, is used as a reference for multiples.

“Free cash flow” consists of cash flow from operating activities together with cash flow from investing activities and it is reported separately in the cash flow statement.

“Free cash flow” is not only an important performance indicator for GF but is also a generally accepted and widely used performance figure in the financial sector.

Scope and principles of consolidation //

The scope of consolidation includes Georg Fischer Ltd and all Swiss and foreign Corporate Companies which the parent company, directly or indirectly, controls either by holding more than 50% of the voting rights or by otherwise having the power to govern their operating and financial policies. These entities are fully consolidated; assets, liabilities, income, and expenses are incorporated in the consolidated accounts. Intercompany balances and transactions (accounts receivable, accounts payable, income, and expenses) are eliminated upon consolidation. Non-controlling interests are presented separately in the equity and in the net income of consolidated companies, but as a component of consolidated equity and consoli­dated net income, respectively. Gains arising from intercompany transactions are eliminated in full. Capital consolidation is based on the acquisition method, whereby the acquisition cost of a Corporate Company is eliminated at the time of acquisition against the fair value of net assets acquired, determined according to uniform corporate accounting principles.

Companies acquired are consolidated from the date on which control is obtained, while companies sold are excluded from the scope of consolidation as of the date on which control is relinquished, with any gain or loss recognized in income.

Joint ventures in which the GF Corporation exercises joint control together with a joint venture partner are treated according to the method of proportionate consolidation.

Companies in which the GF Corporation has a non-controlling interest of at least 20% but less than 50%, or over which it otherwise has significant influence, are included in the consolidated financial statements using the equity method of accounting and presented as investments in associates. Investments conferring less than 20% of the voting rights are stated at fair value and presented under other ­financial assets.

Sales and revenue recognition //

Billings for goods and services are recognized as sales when they are delivered or when the principal risks and benefits incidental to ownership are transferred.

An assessment as to whether the principal risks and opportunities were transferred for a particular delivery is made separately for each sales transaction on the basis of the contractual agreement underlying the transaction. The transfer of legal ownership alone does not necessarily result in the transfer of the principal risks and opportunities. This is the case, for instance, if

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

Services rendered are booked as sales depending on the degree of their completion if the result of the service can be reliably assessed.

Sales are stated before value-added tax, sales tax, and after the deduction of discounts and credits. Appropriate warranty provisions are recognized for anticipated claims.

Foreign currencies //

Corporate Companies prepare their financial statements in their functional currency. Monetary assets and liabilities held in foreign currencies are translated at the spot rate on the balance sheet date. Foreign exchange gains and losses resulting from transactions and from the translation of balance sheet items denominated in foreign currencies are reported in the income statement. Derivative financial instruments used to hedge such balance sheet items are stated at fair value. In hedging contractually agreed future cash flows (hedge accounting), the effective portion of changes in the derivative financial instruments’ fair value is recognized in equity with no effect on the income statement. Any ineffective portion is recognized immediately in the income statement. As soon as an asset or liability results from the hedged underlying transaction, the gains and losses previously recognized in equity are derecognized and transferred to the income statement along with the valuation effect from the hedged underlying transaction.

The consolidated financial statements are prepared and presented in Swiss francs. For consolidation purposes, the financial statements of the foreign entities are translated into Swiss francs as follows: balance sheets at year-end rates, income and cash flow statements at average rates for the year under review. Any translation differences resulting from the different translation of the balance sheets and income statements or from the translation of corporate loans with equity character denominated in foreign currencies are recognized in equity, by taking the deferred tax effect into consideration. Upon the divestment of a foreign subsidiary, the related cumulative exchange differences are transferred to the income statement.

Maturities //

Assets that are either realized or consumed in the course of the Corporation’s normal operating cycle within one year or held for trading are included in current assets. All other assets are included in non-current assets.

All liabilities that the Corporation intends to settle in the course of its normal operating cycle or that fall due within one year of the balance sheet date are included in current liabilities. All other liabilities are included in non-current liabilities.

Segment information //

In accordance with the management structure and the reporting to the Executive Committee and the Board of Directors, the reportable segments are the three operating divisions of GF Piping Systems, GF Automotive, and GF Machining Solutions. GF Piping Systems develops, manufactures, and distributes piping systems for industry, utility, and building technology. GF Automotive produces castings for the automotive industry. GF Machining Solutions develops, manufactures, and distributes electric discharge machines, milling machines, laser machines, and automation solutions. GF Machining Solutions also provides services for these products. Business units within these segments have been aggregated as a single reportable segment because they manufacture similar products with comparable production processes and supply them to similar customer groups using similar distribution methods. Segment accounting is prepared up to the level of operating result (EBIT) as this is the key figure used for management purposes. All operating assets and liabilities that are directly attributable or can be allocated on a reasonable basis to the segments are reported in the corresponding divisions. No distinction is made between the accounting policies of the segment reporting and those of the consolidated financial statements.

Cash and cash equivalents //

Cash and cash equivalents are stated at nominal value. They include cash on hand, postal and bank accounts, and fixed-term deposits with an original maturity of up to 90 days.

Marketable securities //

Marketable securities include investments held for trading and derivative financial instruments. Acquisitions and disposals are recognized on the trade date, rather than the settlement date. Held-for-trading investments are stated at market value, with unrealized gains and losses being recognized in the income statement and disclosed in the financial result.

Derivative financial instruments //

Derivative financial instruments are reported under marketable securities or other current liabilities. Foreign currency and interest rate risks are hedged by the Corporation using forward exchange contracts, currency options, and swaps. Foreign currency risks related to highly probable future cash flows from sales in foreign currencies are hedged, using cash flow hedges in particular.

Accounts receivable //

Short-term accounts receivable are stated at nominal value. Value adjustments for doubtful debts are established based on maturity structure and identifiable solvency risks. Besides individual value adjustments with respect to specific known risks, other value adjustments are recognized based on statistical surveys of default risk.

Inventories //

Goods held for trading are generally stated at average cost and internally manufactured products at manufacturing cost, including direct labor and materials used, as well as a commensurate share of the related overhead costs. Cash discount deductions are treated as reductions in the purchase cost. If the net realizable value is lower than the above, a corresponding valuation adjustment is made. Inventories with an insufficient turnover rate are partly or fully value-adjusted.

Property, plant, and equipment //

Items of property, plant, and equipment are stated at cost or manufacturing cost less depreciation and impairment. Borrowing costs for the financing of assets under construction are part of the costs of the asset if they are material. Assets acquired under finance lease contracts are capitalized at the lower of the present value of the minimum lease payments and fair value. The related outstanding finance lease obligations are presented under liabilities. Assets are depreciated on a straight-line basis over their estimated useful lives or lease terms: investment properties and buildings 30 to 40 years, building components 8 to 20 years, machinery and production equipment 6 to 20 years, and other equipment (vehicles, IT systems, etc.) 1 to 5 years. Assets under construction are usually not depreciated. Assets held under the terms of a finance lease are described in the section “Leases”. Where components of larger assets have different useful lives, these components are depreciated separately. Useful lives and residual values are reviewed annually on the balance sheet date and any adjustments are recognized in the income statement. Any gains or losses on the disposal of items of property, plant, and equipment are recognized in the income statement.

Intangible assets //

Acquired licenses, patents, and similar rights are capitalized and, with the exception of land use rights, are amortized on a straight-line basis over their estimated useful lives of 3 to 15 years. Land use rights are amortized over the duration of the usage rights granted. For this item, useful lives can be up to 50 years. Software is amortized on a straight-line basis over the estimated useful lives of 1 to 5 years.

In the event of business combination, goodwill at the date of acquisition is calculated as follows: the fair value of the net assets, plus transaction costs incurred in connection with the business combination, plus the value of the minority interests in the acquired company, less the value of the acquired net assets carried on the balance sheet.

The positive or negative goodwill resulting from acquisitions is offset in equity against retained earnings at the date of acquisition. Upon the disposal of a portion of the company, the goodwill previously offset in equity is transferred to the income statement. If parts of the purchase price are dependent on future results, they are estimated as accurately as possible at the acquisition date and recognized in the balance sheet. In the event of disparities when the definitive purchase price is settled, the goodwill offset in equity is adjusted accordingly.

The consequences of the theoretical capitalization and amortization of goodwill are explained in note 8.

Other financial assets //

Other financial assets mainly comprise loans to third parties, non-controlling interests of less than 20% held over the longer term, and pension assets. Loans are stated at amortized cost less valuation adjustments; the related interest income is recognized using the effective interest method. Non-controlling interests are stated at their estimated fair value.

Liabilities //

Trade accounts payable as well as other liabilities are stated at nominal value.

Employee benefit plans //

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

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

Provisions //

Provisions are recognized for any present obligation incurred as a result of a past event if it is probable that an outflow of resources will be required to settle the obligation and the amount can be estimated reliably.

Taxes //

Taxes are accrued for all tax obligations, irrespective of their due date. Current income taxes are calculated on the taxable profit. Deferred taxes are calculated by applying the balance sheet liability method for any temporary difference between the carrying amount according to Swiss GAAP FER and the tax basis of assets and liabilities. Tax loss carryforwards are recognized only to the extent that it is probable that future taxable profits or deferred tax liabilities will be available against which they can be offset. The calculation of deferred taxes is based on the country-specific tax rates. Tax assets and liabilities are offset if they concern the same taxable entity and tax authority and if there exists an offset entitlement for current taxes. No deferred tax is provided for temporary differences on investments in subsidiaries where the timing of the reversal of the temporary difference is controlled by the Corporation and it is probable that the temporary difference will not reverse in the foreseeable future.

Leases //

The present value of finance leases is recognized in the non-current assets and in the other financial liabilities on the balance sheet when most of the contractual risks and rewards have been transferred to the consolidated entity. Lease installments are divided into an interest and a repayment component based on the annuity method. Assets held under such finance leases are depreciated over the shorter of their estimated useful life and the lease term. Operating lease installments are reported in the income statement under operating expenses.

Financial liabilities //

Financial liabilities comprise bank loans, mortgages, and bonds. They are recognized at their amortized cost. Borrowing costs are recognized in the income statement using the effective interest method. Borrowing costs that can be allocated directly to the construction, build-up, or purchase of a qualifying asset are capitalized as part of the acquisition or manufactuirng costs of the asset.

Research and development //

All research costs are recognized in the income statement in the period in which they were incurred. Development costs are recognized as an asset only to the extent that the following specific recognition criteria are all met:

  • costs are clearly defined, clearly attributable to the product or process, and can be separately identified and measured reliably
  • the technical feasibility can be demonstrated
  • the company intends to produce and market the product or to use the process
  • a market exists
  • the required internal resources are available
  • the amount recognized is covered by future cash flows

Impairment //

The recoverable amount of non-current assets (especially property, plant, and equipment, intangible assets, financial assets as well as the goodwill reported in the sample accounting in note 8) is reviewed at least once a year. If there is any indication of an impairment, an impairment test is performed immediately. If the carrying amount exceeds the recoverable amount, an impairment loss is recognized in the income statement. As the goodwill is already offset with equity at the date of the acquisition, an impairment of the goodwill does not affect the income statement but leads to a disclosure in the notes only.

Contingent liabilities //

Contingent liabilities are assessed on the basis of likelihood and the amount of the potential future liabilities and are disclosed in the notes.

Assets held for sale //

Assets and disposal groups are classified as “held for sale” if the asset’s carrying amount is to be recovered principally by a sales transaction rather than through continued use.

For this purpose, such assets or disposal groups are recognized as a separate item in current assets. The assets are reclassified only if and when management has decided on their disposal and has begun to look for buyers. Moreover, the asset or disposal group must be available for immediate sale in its current condition, and it must be highly likely that the disposal will take place within a year.

Assets or disposal groups that are classified as “held for sale” are stated at the lower of carrying amount or fair value less costs to sell, and any impairments from the initial classification as “held for sale” are recognized in the income statement. Moreover, from the date of their reclassification, assets and disposal groups “held for sale” are no longer amortized on a straight-line basis. Current and deferred taxes paid on divestiture gains are to be reported as income tax expense.

Debt from the sale of assets held for sale is to be reported separately from other debt in the balance sheet and may not be offset against assets. The debt is stated at amortized cost.

Discontinued operations //

Discontinued operations are reported as soon as a part of the company with business activities and cash inflows and outflows, which can be clearly delimited from the rest of the company operationally, is classified as held for sale or has already been disposed of, and this part of the company

  • either represents a separate major line of business or geographical area of operations, and
  • is part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations, and
  • represents an independent technology

The sales and the operating result (EBIT) from discontinued operations are disclosed separately in the notes. The disclosure includes the prior-year figures (as if the operation had been disposed of at the beginning of the reference year).

Information in connection with the discontinued operations is set out separately in notes 2 and 28.

Treasury shares, share-based compensation, and earnings per share //

Treasury shares are stated at cost as a separate negative position in equity. Gains or losses arising from the disposal of treasury shares are respectively credited to or deducted from the corresponding capital reserves.

Share-based compensation to members of the Executive Committee and senior management is stated at fair value at the grant date and recognized in personnel expense in the period in which the service is performed.

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

Management assumptions and estimates

Significant accounting policies //

The preparation of financial statements requires management to make estimates and assumptions that could materially affect the consolidated financial statements of GF, particularly with regard to the items described below, if the actual results differ from management’s estimates and assumptions.

Impairment of non-current assets //

The values of non-current assets and intangible assets are reviewed whenever there are indications that their carrying amount may no longer be recoverable, due to changed circumstances or events. If such a situation arises, the recoverable amount is determined on the basis of expected future inflows. It corresponds to the higher of the discounted value of expected future net cash flows and the expected net selling price. If the recoverable amount is lower than the carrying amount, a corresponding impairment loss is recognized in the income statement. The main assumptions on which these measurements are based include growth rates, margins, and discount rates. The cash inflows actually generated can differ considerably from discounted projections.

Provisions for warranties and onerous contracts //

In the course of their ordinary operating activities, Corporate Companies can become involved in litigation. Provisions for pending legal proceedings are measured on the basis of the information available and a realistic estimate of the expected outflow of resources. The outcome of these proceedings may result in claims against the Corporation that cannot be met or cannot be met in full through provisions or insurance cover.

If there are any contractual obligations for which the unavoidable costs of meeting the obligations exceed the expected economic benefits (e.g. onerous delivery contracts), provisions are made for the agreed amounts over the entire period or over a prudently estimated period. These provisions are based on management assumptions. The carrying amounts of these provisions derive from the explanations given in note 12.

Income taxes //

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

Risk management

Enterprise risk management as a fully integrated risk management process was systematically applied in 2015 at all levels of the Corporation. The three divisions, the Corporate Staff and all significant Corporate Companies prepared a risk map in May and November of the key risks with regard to strategy, markets, operations, management and resources, financials as well as sustainability. The likelihood of the risk occurring was classified into four categories. Where possible and appropriate, the identified risks were subject to a quantifiable assessment, taking into consideration any measures that had already been implemented. Alternatively, a qualitative assessment of the risk exposure was applied.

The Risk Council, consisting of representatives of the divisions and the Corporate Staff and headed by the Chief Risk Officer, held two meetings. The topics of these meetings were the optimization of the semi-annual risk reporting with more focus on the implementation of measures; business continuity management; coordination of all activities in the area of enterprise risk management; and the analysis of the risk maps.

In accordance with the semi-annual risk reporting process, the Executive Committee and the management of the divisions discussed the risk maps twice during the year under review. They defined at the appropriate level the key risks of the Corporation, the divisions and the Corporate Companies, and determined adequate measures to mitigate those risks. The Board of Directors tabled the topic of enterprise risk management in December 2015 to analyze the corporate and divisional risk maps as well as define the key risks and the risk mitigation measures.

The multi-stage procedure, including workshops at division management, Executive Committee and Board of Directors level, has proven to be very effective, as has having Internal Auditing assess the risk maps prepared by the Corporate Companies.

The key risks were identified as a slowdown of economic growth in China, the cyclicality of certain business units of the divisions, the quality and competitiveness of the products, and foreign currency developments.

Measures to reduce these and other risks were defined and are being implemented in line with the strategic targets of the Corporation and the three divisions.

Financial risk management

The Board of Directors bears ultimate responsibility for financial risk management. The Board of Directors has tasked the Audit Committee with monitoring the development and implementation of the risk management principles. The Audit Committee reports regularly to the Board of Directors on this matter.

The risk management principles are geared to identifying and analyzing the risks to which the Corporation is exposed and
to establishing the appropriate control mechanisms. The principles of risk management and the processes applied are regularly reviewed, taking due regard of changes in the market and in the Corporation’s activities. The ultimate goal is to develop controls, based on the existing training and management guidelines and processes, that ensure a disciplined and conscious approach to risks. The Audit Committee is supported by the Head of Finance & Controlling in this task.

Owing to its business activities, GF is exposed to various financial risks such as credit risk, market risk (including currency risk, interest rate risk, and price risk), and liquidity risk. The following sections provide an overview of the extent of the individual risks as well as the goals, principles, and processes employed for measuring, monitoring, and hedging the financial risks.

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Affiliated companies

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Report of the Statutory Auditor

As statutory auditor, we have audited the consolidated financial statements of Georg Fischer Ltd, which comprise the consolidated balance sheet, consolidated income statement, consolidated statement of changes in equity, consolidated cash flow statement and notes (pages 58 to 100), for the year ended 31 December 2015.

Board of Directors’ responsibility //

The Board of Directors is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with Swiss GAAP FER and the requirements of Swiss law. This responsibility includes designing, implementing and maintaining an internal control system relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. The Board of Directors is further responsible for selecting and applying appropriate accounting policies and making accounting estimates that are reasonable in the circumstances.

Auditor’s responsibility //

Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with Swiss law and Swiss Auditing Standards. Those standards require that we plan and perform the audit to obtain reasonable assurance whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers the internal control system relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control system. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of accounting estimates made, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion //

 In our opinion, the consolidated financial statements for the year ended 31 December 2015 give a true and fair view of the financial position, the results of operations and the cash flows in accordance with Swiss GAAP FER and comply with Swiss law.

Report on other legal requirements //

We confirm that we meet the legal requirements on licensing according to the Auditor Oversight Act (AOA) and independence (article 728 CO and article 11 AOA) and that there are no circumstances incompatible with our independence.

In accordance with article 728a paragraph 1 item 3 CO and Swiss Auditing Standard 890, we confirm that an internal control system exists which has been designed for the preparation of consolidated financial statements according to the instructions of the Board of Directors.

We recommend that the consolidated financial statements submitted to you be approved.

Zurich, 19 February 2016

PricewaterhouseCoopers Ltd

Stefan Räbsamen
Audit expert
Auditor in charge

Roman Uehli
Audit expert