voith.com

2022
AnnualReportVoith at a Glancein € millions

2020/212021/22

Orders received

5,016

5,164

Sales

4,260

4,881

EBIT adjusted1)

165

200

Return on sales in %

3.9

4.1

ROCE in %

9.6

10.5

Result before taxes from continuing operations

80

116

Net result

130

Cash flow from operating activities

144

93

Total cash flow

-89

-137

Investments

133

143

Research and development

192

213

in % of sales

4.5

4.4

Equity

1,015

1,436

Equity ratio in %

19.8

24.1

Balance sheet total

5,114

5,956

Employees

19,91821,491

2)

2)

3)1) For more information, see section “Notes on segment reporting” in the notes to the financial statements.
2) Previous-year figure adjusted.
3) Full-time equivalents; without apprentices; as at September 30.

Annual Report 2022Group
Foreword4
The Corporate Board of Management

8Report of the Supervisory Board

10

The Supervisory Board

15Group Management Report
I.

Background18

II. Economic report

32

III. Risks and opportunities

63

IV. Forecast report

77

Consolidated Financial Statements
Consolidated statement of income86

Consolidated statement of comprehensive income

87

Consolidated balance sheet88

Consolidated statement of changes in equity

90

Consolidated cash flow statement

92­Notes to the consolidated financial statements
for the 2021 /22 fiscal year

93

Notes to the consolidated statement of income122

Notes to the consolidated balance sheet

130

Notes to the consolidated cash flow statement 

153

Notes on segment reporting154
Segment information by business segment

156

Segment information by region 

158

Other notes

159

Responsibility statement

183

Voith Annual Report 2022
Group

3

Group

Page

Foreword

4

The Corporate Board of Management

8Report of the Supervisory Board

10

The Supervisory Board

15

4Voith Annual Report 2022Group
Foreword

Ladies and gentlemen,dear business partners of the Voith Group,With the present report, we are looking back on a 2021/22 fiscal year that did notbring about the economic normalization hoped for after the abatement of theCovid-19 pandemic; but rather, in the second half, it saw a dramatic worsening of
the crisis-ridden environment. The war in Ukraine changed the world, the full extent
of its direct and indirect consequences can only be vaguely discerned.
There has seldom been a time of such uncertainty as today. Concern about apotential shortage of energy in Europe is contributing to this situation, as are themassive rises in energy prices and the associated inflation. Persistent supply
bottlenecks and shortages of materials in many sectors and the increasingawareness that we will be facing a recession in some economies round off thechallenging overall picture.

Voith Annual Report 2022Group
Foreword“All in all, there is one thing
we can establish with certainty
today: the Voith Group is in arobust condition with regard
to its finances and operations.
Our business model has once
again proven to be resilient.”Dr. Toralf Haag

Under these circumstances, it was not a giventhat our overall assessment of the past fiscal
year would be positive and that – despite themany imponderables – we can look ahead withan underlying optimism. This achievement waspossible only due to the great effort on the partof all Voith colleagues, and I would like to express
my sincere gratitude, also in the name of theentire Board of Management, to all of them.

The Voith Group managed well over the 2021/22 fiscal year. Our figures have turned
out to be satisfactory, a development to which all three Group Divisions contributed.
In some cases, we even exceeded our own forecasts. For instance, the Voith Group
continued to grow its orders received in comparison to the very high previous year’slevel, contrary to the original expectations. Never before have our order books been
as well-filled as today. This provides us with a degree of security when looking to thecoming months.
Sales rose perceptibly over the past year. This effect came from the high levelof orders received in previous years; the phasing out of the Covid restrictions inmany countries allowed for better processing of the orders on hand. We increased
our earnings appreciably, even though we are not yet where we want to be. The
improvement in earnings is attributable firstly to measures to boost efficiency thatare increasingly taking effect. Secondly, we have taken successful countermeasures
to alleviate the burdens caused by the massive rises in energy, materials andtransport costs. At the same time, we continued to invest in further acquisitions aswell as in research and development.
All in all, there is one thing we can establish with certainty today: the Voith Group isin a robust condition with regard to its finances and operations. Our business model
has once again proven to be resilient. We are benefiting from our broad sectoraland geographical diversification as much as from our increasingly well-establishedmarket position in all three Group Divisions. In addition, there are the regional supply
chains that provide us with a degree of immunity against global disruptions.

56Voith Annual Report 2022Group
Foreword“Our strategy is gaining traction.
The distinct alignment to themegatrends of decarbonizationand digitalization, and particularly
our strategic focus on sustainable
technologies, is paying off.”
Dr. Toralf Haag

The fact that we have undergone profitable
growth in a very challenging environmentshows another aspect: our strategy is gaining traction. The distinct alignment to themegatrends of decarbonization and digitalization, and particularly our strategic focus onsustainable technologies, is paying off.

We are positioning ourselves in our markets as a trailblazer for an industry in the
post-carbon age – with increasing success and with growing credibility. One contributing factor is Voith itself having been net climate-neutral at all locations worldwide
since the beginning of 2022, as planned. It is, however, of central importance that
we underpin this positioning time and time again with innovative technologies andpioneering products for the industry of tomorrow. This is something we succeededin doing in many instances in our core business once again in the past year, and wewill continue following this path. One example that should be mentioned at this point
is our “Papermaking for life” sustainability program launched in 2022, with which we
intend to set new standards in climate and resource-saving paper production overthe coming years. We demonstrated the fact that even products with a long tradition
can be reinvented with the Voith Schneider Propeller, which in its electrified version
provides green propulsion for ships.
The continuation of our targeted M&A activities contributes to expanding our portfolio
of offerings in line with our strategy. For example, Voith has entered the promising
off-highway market by acquiring the majority shareholding in Argo-Hytos. In addition,
Voith acquired IGW Rail, a globally operating high-tech company that has specialized
in gear unit and coupling solutions for the rail vehicle industry, and is a perfect matchfor our existing range of products and services. Another important milestone was thetakeover of the shares in Voith Hydro Holding from the previous joint venture partner,
Siemens Energy. This now makes us the sole owner of our hydropower businessthat is so important for the energy transition.
Alongside enhancing the core business, Voith has identified hydrogen technology,
electrical drive systems, cargo rail and energy storage as particular future growthVoith Annual Report 2022Group
Forewordareas. We are making good progress in all these areas. Voith is currently ­developing,for example, a complete hydrogen tank system that will be easy to integrate into
commercial vehicles. With regard to energy storage systems, we are focusing on thedevelopment of a redox flow battery that enables stabilization of the performancepeaks of solar or wind farms.
Expanding the core business and simultaneously opening up new growth opportunities in the area of sustainable technologies: our strategic agenda will be ­dominatedby these two issues also in the current fiscal year. In addition, the focus will be on
further reinforcing our resilience in the operating business and on continuing to achieve
profitable growth even in an economic environment that is likely to be even moredemanding.
In concrete terms, for the 2022/23 fiscal year we expect the Group’s orders received
to be on a good level, only slightly down on the high previous-year figure. The highlevel of orders on hand will be reflected in a continued rise in sales. At the same time,
we intend to achieve a perceptible further improvement in our profitability. We areaware that, in light of increasing uncertainty caused by war and inflation, and an antici­
pated recession, this will not happen by itself but will require a lot of hard work by
everyone at Voith. But we are confident that we can achieve these goals. After all,over the past few years, we have put Voith into a good starting position to emerge
stronger from these crisis-ridden times.
Thank you for the trust you place in us and we would be pleased for you to continue
accompanying us on our way forward.
Sincerely yours,

Dr. Toralf Haag
President & CEO

7

8Voith Annual Report 2022
Group
The Corporate Board of Management

Dr. Toralf Haag
President and CEO
Stephanie Holdt
Finance and Controlling
Dr. Stefan Kampmann
Innovation & Technology
Andreas Endters
Voith Paper
Dr. Tobias Keitel
Voith Hydro
Cornelius Weitzmann
Voith Turbo(from top left to bottom right)

Voith Annual Report 2022
Group
The Corporate Board of Management

The Corporate Board of Management

910Voith Annual Report 2022
Group
Report of the Supervisory Board

Report of the Supervisory Boardfor the 2021/22 Fiscal Year

Ladies and gentlemen,
The economic and global political climate in the 2021/22 fiscal year was characterized by various crisesthat overlapped. The economic shock triggered by the war in Ukraine at the beginning of 2022 hit
into a global economy that had not completely recovered from the recession caused by the Covid-19
pandemic. The increase in prices for energy, raw materials and food fueled inflation that was already at
an increased level due to existing supply bottlenecks. Global supply chain disruptions and shortagesof raw and other materials as well as intermediate products intensified. New rounds of lockdowns inimportant ports and production centers in China also played their part. But most of all, the war in Ukraine
led to massive upheavals on the energy markets. An impending gas shortage over the upcoming two
winters is currently a cause for concern for the European economies and German industry in particular
as well as the exorbitant rises in energy and electricity prices.
Voith proved to be in a robust condition, both operatively and financially, in the 2021/22 fiscal year andsaw a satisfactory development measured against the extremely challenging general environment. The
Company grew in all three Group Divisions constituting the core business and succeeded in increasing
Group sales and earnings. Orders received further increased on the very high previous-year level, sothat we launched into the new fiscal year with orders on hand at a record level.
A contribution to the overall satisfactory development came just as much from the Company’s broad
sectoral and geographical positioning and the established market position in the three Group Divisions
as it did from the strategic focus area on sustainable technologies – a focus that points the way forthe enhancement of today’s core business as well as for investments in new business segments andmarkets. The growing realization that the climate crisis is one of the largest global challenges of thecoming decades, along with the current debate about energy security and the expansion of renewable

Voith Annual Report 2022
Group
Report of the Supervisory Board

energies, underscore once more: Voith is well-positioned with its contribution to industrial sustainability
and is able to exploit enormous growth opportunities in this field.
Oversight activities of the Supervisory Board
The Supervisory Board was informed regularly, promptly and comprehensively by the Board of Management of Voith Management GmbH, the personally liable general partner of Voith GmbH & Co. KGaA,
on all material issues and business transactions, including the current business position and financial
position of the Group and its Group Divisions, the business planning along with financial and personnel
planning as well as the corporate strategy. In this context, the sales and earnings situation of the Groupand its Divisions were also presented as were investments and possible risks to which the Company is
exposed. Finally, compliance issues were addressed in detail.
In the reporting year, the Supervisory Board came together for four regular meetings, all of which could
be held as in-person meetings once again after the long period of Covid-19-related restrictions. Between
meetings, there was a regular exchange of information between the Chairman of the Supervisory Boardand the Board of Management of the personally liable general partner, Voith Management GmbH. In eachcase, the Supervisory Board was informed about the most important points arising from this exchange
of information at its next meeting.
The Supervisory Board meetings were held on October 8, 2021, December 7, 2021, March 25, 2022,
and on June 3, 2022. All Supervisory Board members attended at least half of the Supervisory Board
meetings.
The focal point of the first meeting in the reporting year on October 8, 2021, was a debate on the
preliminary business figures for the 2020/21 fiscal year then just ended, on the planning for the 2021/22
and 2022/23 fiscal years, and on the Group’s financial, investment and personnel planning. Furthermore,
the Supervisory Board addressed the proportion of women attained in the two management levels below
the Corporate Board of Management and determined the new objective valid for the new determination
period (October 1, 2021, to September 30, 2026).
At the second meeting of the Supervisory Board held on December 7, 2021, the Supervisory Board
approved the financial statements and the management report of Voith GmbH & Co. KGaA for the
2020/21 fiscal year, as well as the consolidated financial statements and the Group management reportfollowing an in-depth consultation and in accordance with the resolution recommended beforehand by
its Audit Committee. Furthermore, the Supervisory Board proposed that the general meeting, whichis the body with the corresponding competence at a company organized as a partnership limited byshares (KGaA), approve the financial statements and adopted the necessary proposals to the general
meeting, including the ones relating to appropriation of the unappropriated retained earnings andelection of the independent auditor. The Company’s general meeting held the same day approved thefinancial statements as proposed and, in all other respects, passed resolutions in accordance with theaforementioned proposals.

11

12

Voith Annual Report 2022
Group
Report of the Supervisory Board

At its meeting of March 25, 2022, the Supervisory Board dealt with business development over the firstquarter of the 2021/22 fiscal year commencing on October 1, 2021, and deliberated on the outlook forthis fiscal year. Furthermore, reports were submitted to the Supervisory Board on the field of cybersecurity,
the measures initiated by the Company and its Group companies in this context were explained in detailand discussed at length. Continuing on from and supplementing the discussion of the corresponding
topic already held at the first meeting of the Supervisory Board in the reporting year, the programs topromote diversity at Voith were presented and discussed at the meeting on March 25, 2022.
At its fourth and last meeting in the reporting year on June 3, 2022, the Board of Management of thepersonally liable general partner presented a report to the Supervisory Board on the first half of the
fiscal year and on expectations for the full 2021/22 fiscal year. Both topics were discussed in detail.
Additionally, the Supervisory Board dealt with the Group’s positioning in Asia.
There was no indication of any conflicts of interest in the Supervisory Board.
Report on the work of the committees
The Company’s Supervisory Board has established an Audit Committee and a Nomination Committee.
There were no further Supervisory Board committees in the reporting year. The Audit Committee came
together for a total of three meetings, on October 7, 2021, on December 6, 2021, and on June 2, 2022,
each of which was held in person. After prior consultation by telephone, the Nomination Committee
passed a resolution using the circulation procedure on October 25, 2021, to propose to the general
meeting held for this purpose on December 6, 2021, to elect Ms. Isabel Diaz Rohl as a Supervisory
Board member representing the shareholders to succeed Dr. Hubert Lienhard.
The Audit Committee held each of its meetings in the presence of the responsible audit partner fromthe auditor, KPMG AG Wirtschaftsprüfungsgesellschaft, Munich. At its meetings on October 7, 2021,
and December 6, 2021, the Audit Committee addressed in particular the 2020/21 financial statements
for the Group and Voith GmbH & Co. KGaA, including the report by the independent auditor; over andabove this, the Audit Committee deliberated on the financial aspects of the 2021/22 planning and issues
relating to the effectiveness of the internal control system (ICS) and took receipt of the annual report by
the Internal Audit function and of a compliance report. Furthermore, the Audit Committee analyzed anddiscussed any mandatory changes to governance potentially arising from the German Financial Market
Integrity Strengthening Act (FISG) in the future as well as any further desirable adjustments going beyond
the same. At its meeting on June 2, 2022, the Audit Committee addressed in particular the Group’s
six-month financial statements as at March 31, 2022, and dealt with issues of risk management andcybersecurity. In addition, compliance matters including the settlement with the World Bank that was
concluded and came into effect in April 2022 were on the agenda at all meetings of the Audit Committee
in the reporting year.

Voith Annual Report 2022
Group
Report of the Supervisory Board

Change in the Board of Management of the personally liable general partner andon the Supervisory Board
Ms. Stephanie Holdt was appointed member of the Board of Management of the personally liable generalpartner, Voith Management GmbH, effective as of April 1, 2022. On May 1, 2022, she assumed the roleof CFO from Mr. Egon Krätschmer, who left the Board of Management of the personally liable generalpartner, Voith Management GmbH, as of April 30, 2022, after more than 40 years in the Company, toenter retirement.
The Supervisory Board would like to thank Mr. Krätschmer for his decades of successful work for theCompany and his great dedication to the ongoing development of the Voith Group. The Supervisory
Board wishes Mr. Krätschmer all the best for the future.
Dr. Hubert Lienhard resigned from his office as member of the Supervisory Board as of November
20, 2021. On December 6, 2021, the general meeting elected Ms. Isabel Diaz Rohr as successor to
Dr. Lienhard pursuant to § 9 (2) sentence 4 of the Company’s articles of incorporation and bylaws forthe remaining term of office of Dr. Lienhard.
Mr. Ralf Willeck, deputy chairman of the Supervisory Board, resigned from his office as member of
the Supervisory Board as of the close of July 31, 2022. Mr. Willeck was a Supervisory Board member
representing the employees and as a trade union representative for ten years. As the competent body,
Ulm local court appointed Mr. Tobias Bucher pursuant to Sec. 104 of the German Stock Corporation Act(AktG) on September 19, 2022. With his departure from the Supervisory Board, Mr. Willeck likewise left
the Supervisory Board’s Audit Committee at the close of July 31, 2022. The election of a new deputy chairof the Supervisory Board was held immediately after the end of the reporting year at the first in-person
meeting of the Supervisory Board following Mr. Willeck’s departure, taking place on October 7, 2022.
At that meeting, Mr. Alexander Schlotz, who had already been a member of the Supervisory Board asa representative of the employees, was elected deputy chairman of the Supervisory Board to succeed
Mr. Willeck. At the same meeting, the Supervisory Board also elected Alexander Schlotz as successor
to Mr. Willeck on the Audit Committee.
To the extent that the independent auditor was consulted in the reporting year as expert at the meetings of
the Supervisory Board or Audit Committee, the Board of Management (in the case of the Audit Committee,
the CEO and the CFO) of Voith Management GmbH as the personally liable general partner of Voith
GmbH & Co. KGaA took part in the meetings pursuant to Section 109 (1) Sentence 3 last clause AktG.
KPMG Wirtschaftsprüfungsgesellschaft, Munich, was appointed independent auditor of the financial
statements for the 2021/22 fiscal year at the general meeting on December 7, 2021. The Supervisory
Board accordingly engaged the independent auditor.
The general meeting of Voith GmbH & Co. KGaA held on December 7, 2021, exonerated the personallyliable general partner and the Supervisory Board for their activities in the 2020/21 fiscal year.

13

14

Voith Annual Report 2022
Group
Report of the Supervisory Board

2021/22 financial statements
The independent auditor, KPMG AG Wirtschaftsprüfungsgesellschaft, Munich, examined and granted its
unqualified audit opinion on the accounting records, the annual financial statements and the management
report of Voith GmbH & Co. KGaA and the consolidated financial statements and the group management
report as at September 30, 2022. The consolidated financial statements were prepared in accordancewith International Financial Reporting Standards (IFRS).
At its meeting on December 7, 2022, the Audit Committee examined in depth the annual financial
statements of Voith GmbH & Co. KGaA and the Group as well as the respective management reports.
The responsible audit partner from KPMG AG Wirtschaftsprüfungsgesellschaft, Munich, took part in themeeting of the Audit Committee held on December 7, 2022; at this meeting he reported on the material
results of the audit and provided additional information. The CEO and the CFO of Voith Management
GmbH as the personally liable general partner of Voith GmbH & Co. KGaA took part in the meeting of the
Audit Committee pursuant to Section 109 (1) Sentence 3 last clause AktG. At its meeting on December 8,2022 in which the responsible audit partner from KPMG AG Wirtschaftsprüfungsgesellschaft, Munich,also took part, the Supervisory Board performed an in-depth examination of the financial statements,
the consolidated financial statements and the management reports of its own that did not give rise to
any objections, the Supervisory Board agreed with the results of the audit on the part of the independent
auditor and approved the financial statements and the consolidated financial statements in accordancewith the recommendation of the Audit Committee. The Board of Management of Voith Management
GmbH as the personally liable general partner of Voith GmbH & Co. KGaA took part in the meeting of theSupervisory Board pursuant to Section 109 (1) Sentence 3 last clause AktG. The financial statements ofVoith GmbH & Co. KGaA were then approved by a resolution of the general meeting on December 8, 2022,with the approval of the personally liable general partner. Furthermore, at its meeting on December 8,2022, the Supervisory Board followed the proposal of the personally liable general partner made to thegeneral meeting relating to the appropriation of the unappropriated retained earnings.
Finally, the Supervisory Board would like to thank the Board of Management of Voith Management GmbHas the personally liable general partner of Voith GmbH & Co. KGaA, the respective managements of thesubsidiaries and the representatives of the workforce for their prudent approach and their successful
work in this challenging fiscal year. But our thanks go out most of all to Voith’s employees who – evenunder very difficult conditions for each individual person – continued to contribute to the Company’s
success with their dedication.

Heidenheim, December 2022
Chairman of the Supervisory Board

Prof. Dr.-Ing. Siegfried Russwurm

Voith Annual Report 2022Group
The Supervisory Board

The Supervisory Board
Prof. Dr.-Ing. Siegfried Russwurm

Johannes Hammacher

Thomas Martin*

Chairman of the Voith GmbH & Co. KGaA

Member of the Executive Board oflnnovation Manager Voith Paper,

Supervisory Board and

JMV Management und Verwaltungs SE

J.M. Voith SE & Co. KG

Constanze Hufenbecher

Isabel Diaz Rohr

Member of the Board of Management

Member of the Supervisory Boardof Infineon Technology AG

of Palfinger Group

Chairman of the Voith Management GmbH
Shareholders’ Committee
Ralf Willeck*
Deputy Chairman,(from December 6, 2022)

First Authorized Representative

Dr. Norbert Kloppenburgof the Metal Workers’ Union (IG Metall)

Former Member of the Executive Board

Gerd Schaible*(until July 31, 2022)

of Kreditanstalt für Wiederaufbau

Head of Office of the Corporate

Walter Beraus*

Klaus Lehleiter*

Secretary of the Metal Workers’ Union

University-qualified engineer,(IG Metall), Regional Organization

J.M. Voith SE & Co. KG

Works Council ofBaden-Württemberg

Voith GmbH & Co. KGaA
Martin Schily
Member of the Executive Board of

Dr. Hubert Lienhard

JMV Management und Verwaltungs SE

Tobias Bucher*

Former Chairman of the Management Board

First Authorized Representative ofof Voith Management GmbH

Alexander Schlotz*

the Metal Workers’ Union (IG Metall),(until November 20, 2021)

Chairman of the Corporate andHeidenheim

Joint Works Council(from September 19, 2022)* Elected by the employees.

15Voith Annual Report 2022
Group Management Report

17Group Management Report

Page

I.

Background

18

I.1.

Group structure and business activities 

18

I.2.

Management system

19

I.3.

Group strategy

20

I.4.

Research and development

23

I.5.

Sustainability

25

I.6.

Employees

27

II.

Economic report

II.1.

Overall assessment 

32

II.2.

Macroeconomic and industry-specific environment

33

II.3.

Business development of the Group

39

II.4.

Business development of the Group Divisions

45

II.5.

Economic position

57

III. Risks and opportunities

32

63

III.1.

Risk and opportunities management

63

III.2.

Accounting-related internal control system 

64

III.3.

Risks

66

III.4.

Opportunities

75

IV. Forecast report

77

IV.1.

Business environment 

77

IV.2.

Future development of the Voith Group

80

18

Voith Annual Report 2022
Group Management Report
I. BackgroundI.

BackgroundI.1. Group structure and business activities
Family-owned, global technology group
The Voith Group is a global technology company. With its broad portfolio of systems, products, services
and digital applications, Voith sets standards in the energy, paper, raw materials and transport &automotive markets. With locations in over 60 countries, Voith operates around the globe, maintaining
an extensive network of production, service and sales units on every continent on the planet.
Voith GmbH & Co. KGaA, based in Heidenheim an der Brenz, Germany, is the operative head organizationand parent company of the Group. The central functions are also performed here.
The Board of Management of Voith Management GmbH is responsible for the strategy and operative
management of the Voith Group. Voith Management GmbH, which like Voith GmbH & Co. KGaA is
100 % family-owned, is the personally liable general partner of, and manages the business of, Voith
GmbH & Co. KGaA. The Board of Management of Voith Management GmbH is appointed by the Voith
Management GmbH Shareholders’ Committee. Oversight of Voith GmbH & Co. KGaA is exercised by
the Supervisory Board.
The operating business is structured into three Group Divisions: Hydro, Paper and Turbo. These Group
Divisions are managed separately and their respective business results are presented transparently as
part of the segment reporting.
The Group Division Hydro is a leading full-line supplier and trusted partner for equipping hydropower
plants. Voith Hydro develops customized, long-term solutions and services for large and small hydropower plants all over the world. Its portfolio of products and services covers the entire life cycle andall major components for large and small hydropower plants, from generators, turbines, pumps andautomation systems, right through to spare parts, maintenance and training services, and digitalsolutions for intelligent generation of hydropower.
The Group Division Paper is a leading full-line supplier as well as a pioneer in the paper industry. Throughconstant innovations Voith Paper is continually optimizing the papermaking process and facilitating
resource-saving and efficient production.
The Group Division Turbo is a specialist in intelligent drive technology, systems and customized services.
With innovative and smart products, Voith Turbo offers the highest levels of efficiency and reliability.
Customers from highly diverse industries, such as oil & gas, energy, mining and mechanical engineering,ship technology, rail and commercial vehicles, rely on the advanced technologies and digital solutions
provided by Voith.

Voith Annual Report 2022
Group Management Report
I. Background

19

Organizational structure
Voith Group Divisions

Voith GmbH & Co. KGaA

­Hydro

Paper

Turbo

I.2. Management system
The key financial performance indicators for the Voith Group are the performance of orders received
and sales as well as EBIT (earnings before interest and taxes) and ROCE (return on capital employed).
The internal performance indicator EBIT is based on an operating earnings indicator derived from externalfinancial reporting, the operational result. This figure is determined on the basis of operating activities
and is calculated from sales less costs before financial result and income taxes. To calculate EBIT,
amortization and depreciation on hidden reserves disclosed within the scope of business combinations,
restructuring expenses and other extraordinary expenses are added. For reconciliation to EBIT, theoperational result is adjusted for these amounts in order to come to a better assessment of the operating
activities for internal control purposes.
The return on capital employed (ROCE) is calculated by bringing EBIT and the average capital employed
into relation. Capital employed designates the funds tied up within the business with a view to generating
sales. This essentially comprises property, plant and equipment and net working capital. Calculating
the ratio of a performance indicator from the statement of income (profit from operations) to a figure
based on the balance sheet (capital employed) is in compliance with generally accepted standards forholistic business management and with value-based management.
For more informationon the calculationof ROCE, see theNotes on segment
reporting sectionin the notes to thefinancial statements.

The definition of ROCE was amended in the reporting year. The previous-year figures were adjusted
accordingly. In the past, it was profit from operations rather than EBIT that was used to calculate ROCE,
with profit from operations being EBIT plus operating interest income. Operating interest income wasdefined as imputed interest effects on the portion of customer advances that is not used to financeinventories and receivables from customer-specific contracts.
The indicators and reports submitted to the Corporate Board of Management of Voith GmbH & Co.
KGaA as well as within the Group Divisions and the operating companies are based on these Group
performance indicators.

20

Voith Annual Report 2022
Group Management Report
I. BackgroundI.3. Group strategy
The basis: Our DNA, our values*
At Voith, business success is defined as a long-term goal. As a family-owned company, Voith understoodthe importance of the sustainability mindset and of value-driven business long before these concepts
became part of the economic debate. In the course of the Company’s 155-year history, this approachhas enabled Voith to overcome numerous obstacles, to manage effectively through turbulent times andto write industrial history.
Our DNA: Sustainable technologies for future generations.
We develop sustainable technologies to preserve the natural foundation of life for future generations. At
the same time we are safeguarding Voith’s long-term future. We will achieve this by generating profitable
growth to guarantee the stability and financial independence of our Company and, at the same time, bybalancing our business success with our responsibility towards society and the environment.
The way we see ourselves is expressed in our corporate values.
Ambitious:
We embrace challenges and set ambitious goals that enable us to continuously grow both as individuals
and as an organization.
Innovative:
We turn ambitious ideas into innovative technology. To do so, we listen attentively, have a close lookand think in new ways. This enables us to experience firsthand the way the world and our customers
are changing, develop solutions that create value added, and set new standards in our markets.
Reliable:
As Voithians, we constantly strive for the trust of our customers and partners by keeping our promises.
This allows us to build productive, long-term relationships.
Fair:
In every interaction, we show respect, sincerity, honesty and modesty. This is not a question of merecompliance with rules and regulations but constitutes our underlying philosophy.
Sustainable:
We are mindful of our responsibility to society and the environment in everything we do. With our technical innovations, we want to make a contribution to growth and prosperity worldwide. As a family-owned
company we strive for lasting financial independence.

* The content of this section consists of unaudited, voluntary content that was critically read by the independent auditor.

Voith Annual Report 2022
Group Management Report
I. Background21

Our strategy for profitable growth
Growth and profitability play a crucial role in safeguarding Voith’s future. The last three fiscal years weremarked by an exceedingly challenging economic environment and overlapping crises. The disruptions
these caused to global markets and supply chains put national economies around the world into a stateof emergency; businesses in many industries are undergoing a stress test that is probing the resilienceof their business models and organizations. Our established market position in all three Group Divisions,the broad sectoral and geographical diversification and regional supply chains are important factors
enabling us to come through these challenging times comparatively well. Over and above this, we arebenefiting from a sound balance sheet and from liquidity safeguarded over the long term by appropriate
funding lines. In this context, we made a conscious decision to continue investing even in times ofcrisis: in research and development, business acquisitions, training and the ongoing development of ourCompany. This enabled Voith to put itself in a good position to come out of these crisis-ridden times
not only stronger but to generate sustainable and profitable growth going forward.
The megatrends of decarbonization and digitalization offer immense growth opportunities for Voith. In
both the expansion of our core business and in the opening up of new business segments and markets,
our strategic focus is on sustainable technologies. We want to be a trailblazer for an industry in the
post-carbon age. What drives us forward in this – even more than the current debate about the faster
expansion of renewable energies and energy security – is the growing realization that overcoming theclimate crisis is one of the largest global challenges. Governments the world over have set specificobjectives for achieving carbon neutrality. In this respect, the global economy is facing a tremendous
task of transformation. Companies around the world must set the right course today by investing insustainable technologies – firstly, in order to secure important competitive advantages on the global
markets with innovative products and with highly efficient digitalized production and, secondly, to meet
regulatory requirements. Digitalization of all areas of life received a further boost from the Covid-19
pandemic. With digital solutions and sustainable technologies we are supporting our customers in theirown transformation. We are also continuing to work very hard on digitalizing our own business processes
and on making our business activities more sustainable. One important success: since January 1, 2022,
our operations have been net climate-neutral in all global locations.
Our objective is to be a pioneer and performance leader for our customers in our strategic business
units. We want to be the first point of call for companies in the market segments we serve and set
value-adding standards that benefit our customers. We also aspire to grow more strongly in the specified
business units compared to the relevant market average and, in each case, to be one of the three largest
providers by sales over the medium term.

22Voith Annual Report 2022
Group Management Report
I. BackgroundOn the way to this objective, we are focused on the following four strategic pillars:
1. Advancing our corporate culture:
Our corporate culture is based on our values. In order to cope with the upheavals in our industries andplay an active role in shaping the outcome, we must constantly advance our culture. We want to achievea stronger market and customer orientation and develop a distinct culture of innovation. To this end,
we must reduce hierarchies and bureaucracy and reinforce cooperation. The skills required for this aredescribed in our new competency model. This has a major influence on the selection and developmentof our employees and is the basis for all further HR tools. A key role in cultural change is played by our
executive managers, who bring an appropriate way of thinking and working to the Company throughtheir role model function and leadership behavior.
2. Leveraging the potential of our core business:
We are one of the largest and most renowned market participants worldwide in our core business.
Building on the technological leadership we have in many of the market segments we serve, we
intend to leverage the full potential of our current core business: this, firstly, involves an appreciable
expansion of the service and aftermarket business in all three Group Divisions. Secondly, the goal isto enhance the core business technologically. In this context, the focus is on environmentally friendly,
sustainable solutions that contribute to climate neutrality and resource efficiency, as well as digital,
often AI-driven, products and services that boost the efficiency and availability of systems. In this way,
we intend to become a trailblazer for the sustainable and digital transformation of our customers andmarkets. In strengthening our core business, we are building not only on our own expertise in the areasof technology, sales, marketing, organization and management but also on targeted acquisitions that
supplement our core business in a meaningful way.

Information on ourinnovation strategy,
particularly with reference to new businesssegments and markets, can be found insection I.4. Researchand development.

3. Exploring future growth markets:
Our strategy also includes a clear commitment to opening up new business segments and markets andinvesting with a focus on sustainable future technologies. Growth areas we are currently addressing
include hydrogen technology, electrical drive systems, cargo rail and energy storage. There are many
starting points for Voith in this context. With our experts, we are working on strategies and concepts,
some of which are cross-divisional projects, in order to develop marketable technologies from innovativeideas.
4. Setting up efficient structures and processes:
In order to position Voith as an independent, successful company in the long term and to secure thefinancial leeway for necessary investments in the future, we must continually increase our productivity
and efficiency. For this, we need an organization that is as lean, agile and efficient as possible, as
well as demand and customer-oriented structures and processes throughout the Company. With thisobjective in mind, several initiatives have been launched over recent years. In the previous year, forinstance, we successfully implemented an extensive project for streamlining administrative functions.

Voith Annual Report 2022
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I. Background23

We are constantly working to optimize our production network. One further important objective is thestandardization and harmonization of our IT system landscape. In particular, we are working to introduce
a Group-wide ERP (enterprise resource planning) system that integrates all operating processes on
one uniform platform. As part of this complex, multiyear project, all areas of our Company will be
gradually transitioned to the new system. For this purpose, the corresponding processes are being
analyzed and vital processes are being redefined. We have been greatly committed in the reporting
year to further pursuing the project. The new IT system landscape has been successfully deployed andis already in use in one Group Division and in another the basis has been created for implementation
to commence in the 2022/23 fiscal year. Over and above this, the topics of occupational safety andquality management remain a top priority. High standards in both areas are imperative for achieving
excellence in our business operations and generating excellent commercial results.

I.4. Research and development
Innovation as the basis of future business successResearch and development (R&D) has traditionally played a central role at Voith. Ever since the Company
was founded, our engineers have been writing history with their inventions in the field of technology. Thisis reflected in the strong patent base: Voith holds several thousand active patents worldwide and several
hundred more are registered each year. Technological expertise and ability to repeatedly transform thisknow-how into market-oriented innovations with added value for our customers form the foundation
for Voith’s strong positioning in the markets and regions we serve.
Information onthese two pillars of
our Group strategy
can be found insection I.3. Groupstrategy.

We consider decarbonization and digitalization of the economy to be an important challenge over the
next decade. Consequently, these two megatrends are reflected as central elements in our Groupstrategy and in our R&D strategy. They point the way for the ongoing technological development of ourcurrent core business as well as for R&D investments in new business segments and markets.
One important strategic objective for Voith is to also use existing expertise in the areas of hydropower,
paper production, mobility and industrial applications beyond the current product portfolio and, by doing
so, to open up new business segments and markets. We have currently defined four growth areas inthis context – hydrogen technology, electrical drive systems, cargo rail and energy storage – which weare refining in strategic workstreams. In each workstream our objective is to develop a business model,
a technological solution and access to customers in order to subsequently achieve economies of scalein the operating business. The workstreams report directly to the Corporate Board of Management.
As they operate in an extremely dynamic regulatory and technological environment, they are managedwith an agile approach.

24

Voith Annual Report 2022
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I. BackgroundIn one strategic workstream, we are working on the use of hydrogen in mobility applications to facilitate
the viable deployment of electrical drives in trucks and other heavy-load vehicles. As part of this, andwith contributions coming from all Group Divisions, Voith is developing a complete hydrogen tank systemthat can be easily integrated into vehicles. This is an area where Voith can apply its experience gained
over many years with the processing of carbon.
Great importance is also attached to the ongoing development of our electrical drives for a wide rangeof transportation options such as buses, trucks and ships, and also for industrial applications. With
our innovations in this field, we intend to play a role in the shift from fossil to more sustainable drive
solutions and to participate in this growing market.
Information on thedevelopment statusof our CargoFlex
automatic freight­coupling can befound in section II.4.3.
Voith Turbo.

Many countries are striving to shift freight transport off the roads and onto rails with the aim of decarbon­
izing the field of mobility. To this end, it is necessary to significantly increase the degree of automationof rail freight transport. With a view to exploiting the strategic growth area of cargo rail, we are currently
developing an automatic freight coupling that includes digital solutions geared at boosting efficiency inrail freight transport.   
In order to cover the rise in energy needs associated with the progressing electrification of our society
with renewable energies, our electricity grids need to be stabilized with flexible buffer storage systems.
Within the scope of the growth area of energy storage, we are currently focusing on the developmentof a redox flow battery that enables the performance peaks of, for example, solar or wind farms to bestabilized. Compared to other batteries, redox flow technology offers the benefit of slower battery aging
which, in turn, makes a longer service life possible. In addition, batteries produced using this technology
are recyclable and non-flammable.
Not only are all strategic growth areas linked to the megatrend of decarbonization, but they are also
closely intertwined with the new possibilities of digitalization. In our current core business, digitalization
already plays an important role as we develop digital solutions and services for the Industrial Internet ofThings (IIoT) that enable customers of our three Group Divisions to make sustained improvements to theefficiency and availability of their systems and applications. Our OnCumulus cloud platform in addition
to our software applications and AI-driven solutions form the basis for these services and solutions.
Alongside the digital transformation of our customers, we are also accelerating the digitalization of ourCompany. Through standardization of our internal digital infrastructure and our digital applications, weare optimizing our processes and facilitating a continuous stream of innovations. This is reflected ininternal efficiency gains and an increasingly data-based decision-making process.
As the Voith Group, we continue to invest consistently in the research and development of new
solutions – over € 1 billion in total over the past five years. Even in times of crisis, we made a conscious
decision to maintain our R&D commitment at a high level.

Voith Annual Report 2022
Group Management Report
I. Background25

The Voith Group’s R&D expenditure developed as follows over the reporting year:

Research and development Groupin € millions

192

2020/21213+11 %2021/22

Based on Group sales, the R&D ratio of the Voith Group was 4.4 % (previous year: 4.5 %). Of the total
R&D expenditure of € 213 million, € 5 million were capitalized (previous year: € 6 million). Simultaneously,
depreciation and amortization of € 9 million (previous year: € 8 million) was recognized on capitalized
development costs.
Our latest innovations in the reporting year are described in section II.4. Business development of theGroup Divisions.

I.5. Sustainability*
Industrial sustainability as a business model
Sustainability is one of our central corporate values and is embedded in our DNA. The commitment
to engaging in ecologically sound, socially responsible and fair business activities has its roots in the
traditions of Voith as a family-owned company. We have refined our understanding of sustainability overpast years: sustainability not only defines the way in which we act as a company. More than ever before,
we interpret it to mean how Voith can use technological innovation to help transform the industrial sector
in the direction of climate neutrality and conservation of resources while, at the same time, ensuring
economic prosperity and thus social stability. Our strategic focus on sustainable technologies points
the way for the ongoing development of our product portfolio in the existing core business and forinvestments in new business segments and markets. In brief: industrial sustainability is our businessmodel. This is enabling us to make a key contribution to a climate-neutral, decarbonized industrial
society and is, at the same time, safeguarding our growth.

* The content of this section consists of unaudited, voluntary content that was critically read by the independent auditor.

26

Voith Annual Report 2022
Group Management Report
I. BackgroundWe are systematically implementing our sustainability strategy and have defined five fields of action tothis end: sustainable business management, responsibility for our products, for our supply chain, for theenvironment and for our employees. We intend to make a demonstrable contribution to the sustainable
development of the Company, society and the environment and to set standards throughout the industry
with regard to sustainability issues. In our core business, we are addressing the global megatrend of
decarbonization with the refinement of hydropower as a regenerative energy source, resource-saving
paper production and alternative drive technologies. This means that we are using our technologicalexpertise to support our customers in attaining their sustainability and climate objectives. And we also
apply this expertise to ensure that our own business operations as a Company are sustainable. We
reached an important sustainability goal in the reporting year: since January 1, 2022, Voith has been
net climate-neutral in its operations at all global locations, which means the Company has once again
taken on a pioneering role.
Our claim to leadership in terms of sustainability has also been confirmed by an independent body:
Voith ranks as one of the three best companies in the world in the mechanical and plant engineering
industry in the corporate rating by the renowned rating agency ISS ESG. Our sustainability activities
were awarded a B-rating in 2022, as was already the case in the previous year. We have held “prime”
status since 2018. The rating is not only an important indicator of the effectiveness of our sustainability
measures but also has a positive impact on our financing costs as it is increasingly being used by banks
as a criterion in granting credit.
The Group Directive on Sustainability governs the organization, responsibilities and the principles of ouractions in this field. Since 2009, Voith has systematically recorded and analyzed environmental data,materials indicators and relevant personnel data. Since 2011, we have published an annual sustainability
report that provides information on such issues as environmental, employee and social matters as well ascompliance with human rights and the combating of corruption. Comprehensive figures, data, facts andexplanations relating to all the aforementioned areas of activity can be found in our sustainability report.
Section I.6. of this management report contains general information on how we fulfill our responsibility
towards our employees.

Voith Annual Report 2022
Group Management Report
I. Background27

I.6. Employees
Number and distribution of employees
The number of employees in the Voith Group developed as follows in the 2021/22 fiscal year and were
distributed across the various Group Divisions and regions as shown (all figures represent full-time
equivalents excluding apprentices, as at September 30 in each case):

Employees Group
Full-time equivalents as at September 30

19,9182020/21

21,491+8 %2021/22

Employees total 21,491
by Group Division

Hydro
16 %

by region

Paper
36 %

Germany
37 %Europeexcluding Germany
23 %

Other
1%
Corporate Functions& Services
12 %

Turbo
36 %

Americas
17 %

Asia
22 %

The headcount of Voith Group employees rose by 1,573 in the reporting year. Whereas just over
180 jobs at the Group Division Hydro and around 170 jobs at Corporate Functions & Services werecut, the number of employees in the two other Group Divisions of the core business rose, mainly on
account of acquisitions.
At Voith Hydro, the number of jobs decreased by 184 to 3,444 as at the end of the 2021/22 fiscal year
(previous year: 3,628). This is largely attributable to the fact that fewer casual labors were needed in
North America for the assembly and commissioning of hydropower projects. In addition there were
further capacity adjustments in South America and Asia.
The headcount at the Group Division Paper was up by 393 persons (September 30, 2022: 7,825 employees) on the previous year (7,432). This was partially due to the first-time consolidation of TSP

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Voith Annual Report 2022
Group Management Report
I. Background

OnCare Digital Assets Inc. (123 employees) in the Group Division Paper. This company was previously
allocated to Corporate Functions & Services. Furthermore, jobs were created to handle the increase in
the volume of business.
At Voith Turbo, the number of employees rose by 1,532 to 7,732 as at September 30, 2022 (previous
year: 6,200). This increase is largely attributable to the takeover of Argo-Hytos with around 1,450 fulltime equivalents.
In Corporate Functions & Services, i.e. in the Group’s holding company, there were 2,490 employees
as at the end of the reporting year (previous year: 2,658). The decrease of 168 jobs is mainly due to thereclassification of TSP OnCare Digital Assets as part of the Group Division Paper. Further jobs were cut
at Corporate Functions & Services as part of the streamlining of administrative structures.
As far as the regions are concerned, Voith still employs most people in Germany. The second largest
region is Europe excluding Germany, closely followed by Asia, with the Americas following behind.
In the 2021/22 fiscal year, global personnel expenses were as follows:· € 1,301 million (previous year: € 1,247 million) for wages and salaries· € 243 million (previous year: € 232 million) for social security· € 38 million (previous year: € 37 million) for post-employment benefits

Priorities of HR work*
Our employees are key to sustainable business success. They are the force behind our innovative drive
and, with their ideas, their skills and their personalities, they create competitive advantages for Voith.
For this reason, we consider the recruitment and retention of talented individuals and their ongoingdevelopment to be an important value driver for our Company.

Information on our
corporate culture andVoith values can befound in section I.3.
Group strategy.

Currently, one central objective of HR work at Voith involves providing effective support for the envisioned
refinement of our corporate culture – an important pillar of our corporate strategy. As we see leadershipto be a vital aspect in leveraging the corporate culture, we offer our executive managers a wide range ofdevelopment programs. We train them in line with their duties and their experience background in theapplication of our management tools and use various educational formats to convey the knowledge,
best practices, skills and abilities needed in modern management based on our Voith values.

Talent management and personnel development*
Our personnel development concepts are intended to help us, as an organization, to prepare for a
dynamic, complex and networked working world and to empower our employees to actively participate in* The content of this section consists of unaudited, voluntary content that was critically read by the independent auditor.

Voith Annual Report 2022
Group Management Report
I. Background29

shaping it. Based on our employees’ individual training needs, we support them with internal and external
training and personal development measures that foster professional, personal and methodological skills
and competencies, thus facilitating lifelong learning.
Executive managers play a key role in personnel development. Consequently, we work with a holistic
model for leadership. The structures, processes and systems derived from this are designed in sucha way that our executive managers and employees are in constant dialog with each other: regularly
recurring and ad hoc discussions help to optimize collaboration, boost performance and facilitate
learning. Additionally, with our talent management tools, we pursue the goal of recruiting personnel forour key positions from our own ranks over the long term. Thanks to internal talent pools and state-ofthe-art means of identifying talent, we are continually refining the ways of matching people with positions.

Employer attractiveness and personnel marketing*
At Voith, fair working conditions and competitive remuneration are standard practice. Voith sees itself
as a family-friendly company that supports diverse ways of life. This perception of ourselves has been
defined in our Group-wide guidelines for a flexible and family-oriented work culture. It is our declaredobjective to offer our employees a working environment that adjusts as flexibly as possible to their
particular circumstances. This also includes individual working-time models that employees can sign up
to in consultation with their line managers. These models range from a combination of “mobile working”
and on-site presence, or part-time work and job sharing through to flexible vacation arrangements andsabbaticals. Moreover, we provide support with offers of assistance relating to childcare and caring for
relatives. We regularly obtain external confirmation that we are living up to our aspiration to be a fair
employer: since 2014, Voith has received the “FairCompany” seal of quality awarded by Handelsblatt
newspaper and the Institute for Employment and Employability (IBE).
Given the global shortage of skilled labor, and now a general labor shortage, Voith is constantly working
to reinforce its employer brand and strives to make the application and onboarding processes as
pleasant and efficient as possible for new employees. When selecting applicants, the crucial factors
include, in addition to the required professional qualifications, ways of thinking and working that alignwith our corporate culture. To ensure both factors are met, we build on personal dialog and additionallydeploy objectivized, standardized procedures.

First-class professional training*
In the reporting year, we once again provided a large number of young people with career prospects andmaintained a high level of apprenticeships. At the close of the 2021/22 fiscal year, 720 apprentices andstudents were employed at Voith locations around the globe (previous year: 752, -4 %; basis: headcount).

* The content of this section consists of unaudited, voluntary content that was critically read by the independent auditor.

30

Voith Annual Report 2022
Group Management Report
I. BackgroundAs a matter of tradition, we attach great importance to first-class vocational training. We received
renewed confirmation of this in September 2022 from the survey on “Germany’s Best Training Companies”
conducted by Service Value, the Cologne-based analysis institute, in cooperation with “Die Welt” daily
newspaper. Voith was awarded a “very high level of attractiveness”, receiving an excellent result of 35th
place from just under 1,850 companies listed in the Industry segment. The basis for our success is thefocus on interdisciplinary learning and a holistic approach to imparting a combination of both socialand professional skills. At our major international locations, we employ training methods based on theGerman dual system but adapted to local requirements. Voith’s most important training facilities outsideof Germany are located in Kunshan, China, and in São Paulo, Brazil.
In the reporting year, the Hanns Voith special technical college was able to look back on over 50 yearsof success. Each year, some 30 young people with special educational needs start a school year of
preparatory vocational training to qualify them for the training and labor market. After the twelve monthsof vocational preparation, more than 80 % of leavers find a job or apprenticeship.

Diversity, inclusion and equal opportunity*
As an employer, Voith sees it as its duty to offer all its employees equal opportunities and to ensure thatthe workplace is free from discrimination. This stance has been reinforced in the form of a Declaration
on Diversity, Inclusion and Equal Opportunities (“D&I Declaration”) signed by the Corporate Board ofManagement.
Since the 2012/13 fiscal year, there has been a Group-wide diversity and inclusion (D&I) program in place
at Voith. “Diversity” stands for the variety of our workforce with regard to the dimensions of gender, age,nationality or ethnic origins, skin color, language, religion, training and professional experience as well as
all other individual differences such as family status, social background, beliefs, health status, physicalor mental abilities or gender or sexual individuality. We are convinced that these varied dimensions – inconjunction with different experiences, talents and strengths – promote diversity of thought. At Voith, weunderstand “inclusion” to be a culture of appreciation and mutual respect that facilitates the developmentof individual potential.
Alongside the awareness of executive managers and employees which is maintained consistently via
workshops and related campaigns, the D&I program also involves optimizing our processes with theobjective of countering unconscious patterns of thought. In addition, managers have been provided witha D&I toolkit that contains specific suggestions for how to work in and manage teams. As a signatory
to and endorser of the Diversity Charter, Voith regularly organizes regional and global D&I days with awide offering of workshops, discussion forums and keynote speeches.

* The content of this section consists of unaudited, voluntary content that was critically read by the independent auditor.

Voith Annual Report 2022
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I. Background31

As women are still underrepresented in technical professions and courses of studies, technology
companies generally employ significantly fewer women than men. The proportion of women in the overall
workforce was 18 % (previous year: 18 %, based on headcount). Our objective is not only to increase
the proportion of women overall but also the share of female executives in the Company. The measures
we are taking include personnel marketing activities with the aim of positioning Voith as an attractive
employer, particularly for women. Internal regional women’s networks also make a valuable contribution
with various initiatives such as mentoring programs, networking events and training sessions.

Occupational health and safety management*
Occupational health and safety are top priorities for us. By taking a responsible approach to the designof workplaces and processes, we aim to avoid accidents and work-related illnesses as far as is possible.
Since the implementation of our global occupational safety program, we have seen great improvements
at all our locations: the frequency rate, calculated pursuant to an international standard and documenting
the number of accidents per one million working hours, has been reduced appreciably from the baselineof 13.9, or 921 reportable accidents per year in the 2008/09 fiscal year. In the reporting year, the numberof accidents per one million working hours stood at 1.6 (previous year: 2.1), which means there was a
total of 61 (previous year: 79) accidents. In comparison: the average frequency rate for companies in
the German Wood and Metal Trades Association is 21.5. In the reporting year, the severity rate stood at
492 (previous year: 537) hours lost per one million working hours. Although we have achieved a great
deal in the past, it is important that we continue to place a strong and uncompromising focus on strict
occupational safety measures and constantly draw our employees’ attention to this topic.
In the field of occupational safety, we are building on our effective HSE (Health, Safety, Environment)
organization. The Group-wide IT system hse+ assists our HSE experts in their work. A corresponding
Group directive documents the framework and responsibilities for occupational health and safety;
mandatory minimum requirements and standards for the Voith Group are also prescribed in fundamental
processes and operating procedures. The success of our occupational safety program stems fromthe involvement of all employees acting in conjunction with the Corporate Board of Management andexecutive managers.
In the field of occupational health, we place particular emphasis on prevention. All in all, we pursue aregional approach appropriate to heterogeneous conditions. No matter where our employees work, theyshould be able to maintain their ability to work and retire in good health at the end of their working lives.
Over the first half of the reporting year in particular, the Covid-19 pandemic continued to be a challenge
in terms of occupational health and safety. The situation regarding the pandemic was analyzed on an
ongoing basis and action was taken at all times with suitable preventive and acute measures dependingon the given situation. We continue to monitor developments and are in a position at all times to adapt
protective measures to the prevailing conditions.

* The content of this section consists of unaudited, voluntary content that was critically read by the independent auditor.

32

Voith Annual Report 2022
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II. Economic reportII.

Economic report
II.1. Overall assessment
Growth in a challenging environment, profitability improved despite
massive rise in materials prices
The Voith Group looks back on a challenging 2021/22 fiscal year (October 1, 2021 to September 30,2022). The war in Ukraine triggered a political and economic shock at the beginning of 2022 that sharply
slowed the momentum of economic recovery following the pandemic-related recession of 2020. Global
supply chain disruptions and shortages of raw materials and intermediate products intensified. A newround of extensive lockdowns – imposed as part of the zero-Covid policy – at important ports andmanufacturing centers in China in the spring of 2022 further aggravated the situation. The increase in
prices for energy, raw materials and food fueled inflation that was already higher due to existing supply
shortages.
In this environment marked by multiple crises and great volatility, Voith operations and finances proved
to be robust. Also benefiting from an acquisition made in the Group Division Turbo in August 2022 andpositive currency effects, the Voith Group’s key financial performance indicators improved over the2021/22 fiscal year. The Voith Group’s orders received and sales grew in the 2021/22 fiscal year and, evenafter adjusting for these effects, exceeded our expectations. On the back of a very high previous-year
figure, orders received rose by 3 % to € 5.2 billion. Orders on hand reached an all-time high and stoodat € 7.0 billion at the end of the fiscal year on September 30, 2022. Sales rose by around € 600 million
or 15 % to € 4.9 billion in the reporting year.
Rises in the prices of raw materials, components, intermediate products and energy – which weremassive rises in some cases – and increases in transport costs led to an increase in the cost of materials
that outstripped the rate of sales growth. It was possible to place a limit on the rise in other cost items
by means of measures that increased efficiency and through a very disciplined approach to expenditure.
The earnings indicators in the reporting year reflect an improved profitability. EBIT grew by 21 % to€ 200 million. The return on sales improved to 4.1 % (previous year: 3.9 %) and ROCE to 10.5 % (previous
year, adjusted: 9.6 %). The higher EBIT translated into the Group net result, at € 30 million being up on
the previous-year level (€ 1 million).
All three Group Divisions – Hydro, Paper and Turbo – contributed to the pleasing development at
Group level with high, in some cases higher than expected, levels of orders received and sales, aswell as positive operating results. The largest contribution to the Group EBIT was made by Voith Paper

Voith Annual Report 2022
Group Management Report
II. Economic report33(€ 131 million, +15 %). Voith Turbo’s EBIT grew 19 % to € 48 million. At € 2 million, the EBIT in the Group
Division Hydro fell short of our expectations (previous year: € 8 million).
Despite the ongoing challenges of the market environment, we have once again made significant
investments for the future over the 2021/22 fiscal year. In this context, the strong orientation of theVoith Group towards industrial sustainability and the ongoing strategic and technological enhancementof the Voith product portfolio are given high priority. For instance, building on an R&D expenditurethat increased year-on-year, we not only developed individual product innovations but also performed
research into enabling technologies for the development of strategic growth areas; secondly, we are
opening up the off-highway sector as a new business segment for our drive systems through Argo-Hytos,
a company we acquired in the reporting year. Additionally, we have invested in our own organization:
primarily in the digitalization of our business processes, the optimization of our internal structures andthe refinement of our corporate culture.
The net assets and financial position of the Voith Group remain very sound. The equity ratio improved
to 24.1 % (previous year: 19.8 %), mainly due to a high level of other comprehensive income from therise in discount rates for pension provisions and from currency effects. The cash flow from operating
activities was clearly positive at € 93 million but was down on the previous-year figure (previous year:€ 144 million) in the light of larger inventories as well as a higher level of trade receivables. Total cash
flow was negative at € -137 million (previous year: € -89 million). Our investments in business acquisitions
were the main reason for the higher cash outflow.
The net liquidity, defined as the difference between liquid financial assets and interest-bearing financial
liabilities (not taking lease liabilities into consideration), remains at a good level even after the highlevel of acquisition activity and amounted to € -233 million at the end of the reporting year (previous
year: € -5 million). Without the acquisition activity, the net liquidity would have deteriorated slightly incomparison to the previous year. The stable liquidity position from our own bank balances and existing
loan agreements gives us sufficient leeway to further invest in our future and to advance important
strategic topics.

II.2. Macroeconomic and industry-specific environment
Global economic recovery hampered by war in Ukraine, high inflationand persisting supply chain problems
Towards the end of 2021, the global economy was on its way to recovery from the recession triggeredby the Covid-19 pandemic, but it was rocked once again in spring 2022 by the outbreak of the war
in Ukraine. The conflict and its repercussions are having massive negative economic implications for34

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II. Economic report

the region and the world. For instance, the existing supply chain issues are being further amplified,
which – particularly in Europe – has already led to impediments to industrial production. Furthermore,prices for energy, raw materials and food were on the rise. The USA, the EU and the UK put severe
limits on their oil imports from Russia, whereas Russia imposed massive reductions on its gas supplies
to Europe, which resulted in an energy crisis. Some economies in Europe, including Germany, arehighly dependent on Russian gas, not only for generating heat and electricity but also as a raw material
in manufacturing. This dependence involves the risk of a full-blown gas shortage that could hit bothbusinesses and private households alike.
The rise in the prices of energy, raw materials and foodstuffs is reinforcing the already raised level ofinflation caused by supply bottlenecks. In contrast to the original forecasts by central banks, inflation
is proving to be more persistent and has reached surprisingly high levels in 2022 – especially in the US
and Europe. In this context, a global inflation rate of 8.8 % is anticipated for 2022. Inflation reduced real
incomes and weighed on macroeconomic demand. Advanced economy central banks reacted with anassertive interest-rate turnaround, and in many emerging markets, too, interest rate hikes, aggressive
in some cases, were implemented, with such rises dampening economic development.
This was aggravated by a new round of extensive lockdowns as part of China’s zero-Covid policy that
also affected important manufacturing centers and considerably slowed the economic growth of theworld’s second largest national economy in 2022. Shanghai, for instance, has the largest container port
in the world and was in a strict lockdown for eight weeks over the second quarter of 2022. Developments
in China had global consequences as, firstly, the lockdowns exacerbated the supply-chain problems
and, secondly, the reduction in demand from China for goods and services was also dragging down
its international trading partners.
In the light of the various overlapping crises, global economic development in the reporting year wasappreciably weaker than was to be expected on the basis of the economic forecasts available at thetime of publication of our 2021 annual report. In its World Economic Outlook (WEO) from October 2022,
the International Monetary Fund (IMF), for instance, forecasts global economic growth of only 3.2 %for the full year 2022. In October 2021, the forecast rate of global growth for 2022 was still at 4.9 %.
Whereas the warring countries of Russia and Ukraine entered recession in 2022, the gross domestic
products in the regions and countries important for Voith were still on the rise over the reporting period. In
this context, the other European economies saw significantly weaker development than expected a year
ago on account of the war in Ukraine. For 2021 and 2022, the IWF anticipates the following growth rates:

Voith Annual Report 2022
Group Management Report
II. Economic report

35

Economic growth
Real change in GDP1) on the previous year

World output
Advanced economies
USA
Euro area2)
Germany
Emerging market anddeveloping economies
China
ASEAN-5
India
Brazil

2021

6.0 %

2022

3.2 %

2021

5.2 %

2022

2.4 %

2021

5.7 %

2022

1.6 %

2021

5.2 %

2022

3.1 %

2021

2.6 %

2022

1.5 %

2021

6.6 %

2022

3.7 %

2021

8.1 %

2022

3.2 %

2021

3.4 %

2022

5.3 %

2021

8.7 %

2022

6.8 %

2021

4.6 %

2022

2.8 %

Source: International Monetary Fund (IMF); World Economic Outlook, October 2022.
1)

2021: estimates; 2022: forecasts.

2)

Including Germany.

Of the advanced economies (IMF forecast for 2022: +2.4 %), Germany saw a less than average growthrate, especially as industrial production was impeded by the global supply bottlenecks for raw andother materials. In this context, the growth forecast for 2022 has undergone a dramatic downward
correction from 4.6 % in the IMF publication of October 2021 to the most recent 1.5 %. Whereas the
reduced growth rates in the euro zone are mainly due to the war in Ukraine, the focus in the USA is on
the consequences of the high inflation. Growth expectations for the US economy in 2022 were reduced
from the original 5.2 % (WEO Oct. 2021) to 1.6 %.
In China, growth for 2022 is likely to be appreciably lower than anticipated twelve months ago, mainly
due to the new round of lockdowns (WEO Oct. 2021: 5.6 %). Aside from the Covid year of 2020, thegrowth rate of 3.2 % forecast for 2022 is the lowest in four decades. India (2022: 6.8 %) underwent
more dynamic growth than China in the reporting period. Brazil’s gross domestic product is expected
to grow by 2.8 % over the course of 2022.

Mechanical and plant engineering with subdued production
After a situation in 2021 where the German mechanical and plant engineering sector succeeded inincreasing its level of orders received by 32 % in real terms on the back of strong foreign demand
but with production growing by only 6 % over the same period due to shortages of materials and36

Voith Annual Report 2022
Group Management Report
II. Economic reportskilled personnel, the sector began 2022 with an above-average level of orders on hand, according todata from VDMA, the relevant industry association. The investment climate has become increasingly
dampened over the course of 2022. As a consequence, the level of orders received in the German
mechanical and plant engineering sector deteriorated, falling to below the previous-year level over the
first eight months (January to August) of the calendar year 2022. In parallel with this, the supply-side
disruptions – predominantly supply bottlenecks – intensified, meaning that price-adjusted production
was slightly down on the previous year’s level in the first seven months of 2022, despite the high levelof orders on hand.

Turbulence on the five Voith markets
The overlapping crises in the reporting year also impacted the five target markets Voith serves. In
particular, Russia’s war in Ukraine has caused great turmoil on the markets for oil & gas, energy and raw
materials and they will undergo significant upheaval over the medium term. The energy crisis triggeredby the conflict is having a negative impact on industry as a whole. The lockdowns in China also had
a far-reaching impact, which placed a strain on key segments of the transport & automotive market,
among others. Bottom line, the Voith markets developed positively in the main, but were marked by agreat degree of volatility.
Energy: war in Ukraine is promoting the expansion of renewable energies
The energy market encompasses the conversion of various primary energy sources such as hydropower
and wind, and also coal and gas into electricity, as well as various forms of storage. This market isserved by the Group Divisions Hydro and Turbo (division Industry).
Although global electricity consumption continued to rise in all regions, growth slowed over the courseof the 2021/22 fiscal year, mainly due to the slowing of economic activity and the rise in electricity prices
as a consequence of the Ukraine war. Electricity needs will continue to rise over the medium term dueto the increasing electrification of all areas of life.
With regard to electricity generation, coal-fired power plants are currently experiencing an unforeseeable
revival – contrary to general efforts to reduce the use of fossil energy sources in order to reach climate
targets. Due to the sharp rise in gas prices and to ensure security of supply, coal was employed as a
cost-competitive alternative available at short notice. In 2021, the volume of electricity generated fromcoal increased worldwide by 9 %, thus meeting more than half of the additional demand for electricity.
The shift from gas to coal continued in 2022. Electricity generation from nuclear power, oil and gas
increased only slightly in 2021. Power generation from renewable energies increased over 2021 by 6 %on the previous year, thus covering around one-third of additional electricity demand. In 2021, renewableenergies represented 28 % and hydropower 16 % of electricity generation worldwide.
The medium- to long-term trend towards renewable energies continues; according to forecasts by theInternational Energy Agency (IEA) their share of global power generation will increase from 28 % in 2021
to more than 32 % by 2024. The share in fossil energy sources is expected to decline from 62 % to 58 %over the same period, with absolute figures stagnating. Nuclear electricity generation is forecast to see
slight growth in absolute terms but a constant share of 10 % of global power generation.

Voith Annual Report 2022
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37

Power sector investments rose perceptibly in the reporting year. The largest share of spending related torenewable energies, with photovoltaics predominant among the renewables. In the area of hydropower
the market volume may fluctuate sharply from year to year on account of the large volumes of investment
of individual hydropower projects. A large portion of total investments in hydropower stemmed frompumped storage projects in China. These, however, are being awarded primarily to local competitorson account of relevant regulations by the Chinese government. In the 2021/22 fiscal year, the volume ofcontracts awarded relevant to the Group Division Hydro increased slightly in comparison to the previous
year. Investment in the reporting year in the market for conventional power plant technology, which isrelevant for the Group Division Turbo, stood roughly at the level of the previous year.
Oil & gas: price leaps and great volatility
The oil & gas market comprises three segments: upstream involving the extraction of crude oil and naturalgas, midstream relating to transport of raw materials primarily via pipelines and tankers, and downstream
consisting of the refining of crude oil and natural gas into the various fuels and raw materials used by
the chemicals industry. The division Industry of the Group Division Turbo supplies all segments in thismarket with application-specific products and services.
The war in Ukraine set off a shock wave in the oil & gas market in the reporting year. Russia is one of
the world’s largest exporters of oil and gas, and a large portion of Russian exports previously went to
the European Union. In response to the war, long-standing energy partnerships and supply relationships
have been terminated and new ones are coming into being. The war in Ukraine has exacerbated thetightening supply of gas underway since mid-2021. While global demand for oil continued to rise, due
to oil being used as a substitute for gas, among other factors, there are increasing concerns that supply
will fail to match this development. The consequences of these disruptions were price surges and an
extremely volatile price development at an appreciably higher level across the board than in the previous
year and prior to the outbreak of the Covid-19 pandemic.
Oil and gas prices determine the earnings position of companies active in the oil & gas market and thus
also influence Voith Turbo’s business in this sector. In view of the very high market prices, investment
activity increased overall. Upstream investments increased perceptibly in the reporting year, but theyremained appreciably down on the level prior to the outbreak of the Covid-19 pandemic. In the midstream
segment, a large number of refineries continued to be closed in advanced economies whereas the plans
to expand capacities were pursued in the developing countries of the Middle East and Asia. There was a
net reduction in refinery capacities worldwide for the first time in 2021. All in all, investment in refineries isstill likely to have risen slightly in the reporting year. As Europe intends to substitute missing gas supplies
from Russia in the near term, primarily with liquid gas, demand for liquefied gas has risen on the world
market. Investments in LNG liquefaction projects, in particular in the USA, and in the expansion of LNG
terminals, primarily in Europe, increased appreciably.
Paper: slight rise in paper production, investment in paper machines remains at a high level
The paper market covers all areas of paper production: from stock preparation and paper production –including surface refinement by calendering and coating – through to reeling paper webs. The Group
Division Paper serves this market for all types of paper: board and packaging paper, specialty paper,
tissue and graphic paper. Its range of offers includes new lines, rebuilds of entire production facilities,

38

Voith Annual Report 2022
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II. Economic report

automation technology, digitalization solutions, partial rebuilds, services and spare parts, optimization
products, roll covers and fabrics, preparation of primary (pulp) and secondary fiber (wastepaper), andwater treatment facilities.
Global paper production rose slightly in the reporting year. For the full year 2022, industry analysts expect
a global production volume that exceeds the level of 2019, i.e. prior to the outbreak of the Covid-19
crisis. There was a rise in the production volume for all grades of paper apart from graphic papers.
The strongest growth was seen with board and packaging paper also as a consequence of booming
e-commerce. Production of tissues increased again after the pandemic-related contact restrictions weresuccessively lifted and demand for tissues for use outside the home rose once again. One exception to
the generally rising trend in production is the European market, which is suffering from the consequencesof the war in Ukraine, particularly from the energy crisis. In the reporting year, there have already been
temporary closures of production facilities on account of the extremely high gas prices and the increase
across the board in prices for energy and materials. All in all, European paper production is likely todecrease over the full year 2022. Even in China, where economic activity weakened overall, production
came to a standstill at paper factories in 2022. This resulted mainly from the excess capacities built up
over the past years with strong investment.
In line with the global increase in paper production, demand for wear parts revived in the reporting year,
and once the restrictions aimed at containing the pandemic had been scaled back in most regions, theservice business also recovered perceptibly. The market for new lines and rebuilds remained at a highlevel but, given the challenging and uncertain environment, investment contracted compared to theprevious year that had seen extraordinarily strong investment activity.
Raw materials: ongoing boom in demand and high prices stimulate investment activities
We define raw materials as ores and minerals extracted from the earth, such as copper, iron ore and coal
along with other geological materials, for instance sediments used as building materials. By contrast,
the raw materials oil and gas are considered separately as part of the oil & gas market. The segmentof the raw materials market of relevance for Voith is the mining sector, which is supplied by the Group
Division Turbo (division Industry).
The raw materials market continued to be marked by excess demand in the reporting year. The war in
Ukraine and its consequences triggered considerable market turbulence and volatile price increases.
The lockdowns in China shortened supplies further. In the light of Russia’s preeminent significance as
an exporter, the prices of power plant coal skyrocketed since the beginning of 2022 and remained at asimilarly high level until the end of the reporting period. The prices of most metals and minerals also rose
sharply. According to World Bank forecasts, the increase amounted to 16 % in 2022 in comparison to
the previous year. The price trajectory is being driven by high energy prices and the war in Ukraine. The
prices of copper and iron ore saw very volatile developments. They reached an all-time high in March2022 but then fell back to a high level in comparison to previous years by the end of Voith’s reportingyear. Other metals, predominantly nickel and aluminum, rose even more sharply.

Voith Annual Report 2022
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39

In the light of the booming demand and the high prices, there was a high level of investment activity inthe mining industry in the reporting year.
Transport & automotive: commercial vehicle segment in decline, recovery in rail and marine
The transport & automotive market includes diverse transport routes and the means of transport used onthem for moving people and goods. The Group Division Turbo (division Mobility) serves this varied market
as a specialist for intelligent drive technology, systems and customized services for the commercial
vehicle industry, rail sector and marine segment.
The truck market was in decline in the 2021/22 fiscal year. Global production of medium-size (6–15 metrictons) and heavy (> 15 metric tons) trucks fell appreciably in the reporting year. A major factor in thisdevelopment was the significant decline in demand for trucks on the large Chinese market following
the strict Covid-19 lockdowns in spring 2022. In Europe, the war in Ukraine and its implications
exacerbated the already existing supply chain problems which led to a slight decline in production. Of
the three major truck markets, North America was the only one to return growth. In the bus market,
demand rose perceptibly from a low level in 2022 once public transport passenger numbers started tonormalize. Contrary to the general growth trend, the Chinese bus market saw a negative developmenton account of the lockdowns.
Even though the rail market recovered slightly overall in the reporting year after the situation in passenger
rail traffic eased noticeably in the third year of the Covid-19 pandemic, there continued to be project
delays and postponements. The salient factors were shortages of, and high prices for, raw materials,
the global energy crisis and the war in Ukraine along with its consequences.
The market for marine applications was on a recovery trajectory in the reporting year, albeit from a low
level. Stimulus for growth was seen in particular with special-purpose vessels for servicing offshore
wind turbines.

II.3. Business development of the Group
II.3.1. Material events
Change on the Corporate Board of Management
In spring 2022, Stephanie Holdt was appointed Chief Financial Officer and member of the Voith Group’s
Corporate Board of Management. She is succeeding Egon Krätschmer who has retired. Stephanie Holdt
has more than 20 years’ experience in finance and accounting; most recently, she was the Chief Financial
Officer and Senior Vice President at a US manufacturer of construction materials based in Chicago.

40Voith Annual Report 2022
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II. Economic report

M&A activities
Effective as of August 2, 2022, we acquired 79.5 % of the shares in Argo-Hytos. Argo-Hytos develops
and produces components for hydraulic and system solutions with a focus on the off-highway sector(agricultural machinery, construction equipment and vehicles). Prior to the takeover, the family businesswith some 1,450 employees (full-time equivalents) generated annual sales of around € 200 million.
Based in Switzerland, the Argo-Hytos Group has operations worldwide with production companies inGermany, Czech Republic, Poland, India and China, as well as numerous own distribution and assemblycompanies. Argo-Hytos will be fully consolidated within the Voith Group and assigned to the Group
Division Turbo. The investment in Argo-Hytos marks our entry into the promising off-highway market.

More informationon these two
acquisitions can befound in section II.4.3.
Voith Turbo of thismanagement report.

Furthermore, we signed an agreement in June 2022 to purchase IGW Rail, which came into effectas of October 4, 2022 once all official approvals had been granted, i.e. in the 2022/23 fiscal year.
Headquartered in Czech Republic, the company specializes in gear unit and coupling solutions forthe rail vehicle industry. IGW Rail has four production facilities in Czech Republic, India, the USA andChina, and employs around 500 people. Through the acquisition, Voith becomes one of the world’s
largest independent manufacturers of rail vehicle gear units and transmissions. IGW Rail will be fully
consolidated within the Voith Group and likewise assigned to the Group Division Turbo as of the2022/23 fiscal year.
Effective as of March 1, 2022, Voith acquired the remaining 35 % shareholding in Voith Hydro Holding
GmbH & Co. KG from its previous joint venture partner Siemens Energy. Through the transaction,
Voith has become the sole shareholder in the Group Division Hydro that was previously managed as a
joint venture. With this step, Voith is continuing its strategy of strengthening the core business in thefield of sustainable technologies. Voith and Siemens Energy had founded Voith Siemens Hydro Power
Generation GmbH & Co. KG as a joint venture in 2000 with a view to pooling Voith’s turbine expertiseand Siemens’ generator know-how. Today, Voith has gained extensive knowledge and experience itself
as a full-line supplier, which means that the original structuring as a joint venture is no longer relevantto the operating activities. The acquisition was made by a company controlled by the ultimate parent
company, JMV SE & Co. KG, and thus not included in the present consolidated financial statements.
The purchase price was funded by a loan granted to the acquiring company by a company included in
the present consolidated financial statements. As the acquiree had already been consolidated in previous
years, this acquisition did not have any further impact on the present consolidated financial statements.

Voith Annual Report 2022
Group Management Report
II. Economic report41

II.3.2. Orders received
Further growth in orders received from an already high level
The trend in orders received by the Voith Group was considerably better than expected in the 2021/22
fiscal year and, at € 5,164 million, orders received were 3 % up on the very high previous-year figure(previous year: € 5,016 million). In view of the crisis-ridden economic environment marked by market
turbulence and uncertainties, we consider this result to be very satisfactory.
With high levels of orders received, in one case exceeding expectations, all three Group Divisions
contributed to the encouraging development at Group level. In addition, there were positive effects fromexchange rate fluctuations and acquisitions. Even adjusted for these non-operating effects, which were
just over € 200 million, the forecast was exceeded (2021 management report: “perceptible decline”).
At € 7,029 million as at September 30, 2022 (previous year: € 6,248 million), the Voith Group’s orders on
hand reached a further all-time high. The sharp rise will be only gradually reflected in sales growth on
account of the long project times inherent in the large-scale plant business and the disruptions to the
supply chains that still have to be reckoned with.

Orders received Group

Orders on hand Groupin € millionsin € millions

6,248
5,016

2020/21
Detailed informationon the developmentof orders received ineach Group Division
can be found in section II.4. Businessdevelopment of theGroup Divisions.

5,164

7,029
+12 %

+3 %

2021/222020/212021/22

All three Group Divisions operated successfully in a market environment that remained challenging. Voith
Hydro (€ 1,184 million) and Voith Turbo (€ 1,636 million) increased their orders received by 3 % and 8 %,respectively. In the Group Division Paper (€ 2,256 million), orders received fell slightly compared to thevery high previous-year figure (-1 %).

42Voith Annual Report 2022
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II. Economic report

In the reporting year, orders received were distributed as follows among the Group Divisions and regional
markets:

Orders received total € 5,164 million
by Group Division

by region

Hydro
23 %

Paper
44 %

Germany
13 %Europeexcluding Germany
30 %

Other
7%
Corporate Functions& Services
2%

Turbo
31 %

Americas
24 %

Asia
26 %

II.3.3. Sales
Group sales up by more than € 600 million
Group sales grew by € 621 million to € 4,881 million (previous year: € 4,260 million). The 15 % increase
exceeded our expectations.
The phasing out of pandemic-related travel limitations and limited access to construction sites in mostregions, with the exception of the new round of strict lockdowns in China, allowed us to better process
the high level of orders received in the previous years and to convert them into the corresponding
sales once again. The service business, where revenue is typically recognized quite quickly, also saw
a positive development.
There were also positive effects from exchange rate fluctuations and acquisitions that were, however,pushed into the background by the strong operating effect. Even adjusted for these non-operating
effects, totaling around € 200 million, the sales forecast was exceeded (2021 management report:“slight increase”).

Sales Groupin € millions

4,260

2020/21

4,881
+15 %

2021/22

Voith Annual Report 2022
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II. Economic report

Detailed informationon the developmentof sales in eachGroup Division canbe found in section II.4. Businessdevelopment of theGroup Divisions.

43

All three Group Divisions succeeded in increasing their sales. Voith Paper saw the strongest growth (24 %)and also made the largest contribution to the Group in absolute terms (€ 2,196 million). The Group Divisions
Hydro (€ 1,048 million) and Turbo (€ 1,557 million) grew by 11 % and 7 %, respectively.
In the reporting year, Group sales were distributed as follows among the Group Divisions and regional
markets:

Sales total € 4,881 million
by Group Division

by region

Hydro
21 %

Paper
45 %

Germany
14 %Europeexcluding Germany
28 %

Other
3%
Corporate Functions& Services
2%

Turbo
32 %

Americas
24 %

Asia
31 %

II.3.4. Operating result
EBIT develops in line with sales trend

For our definition
of EBIT, we referto section I.2.
Management
system.

Detailed informationon the developmentof EBIT in eachGroup Division
can be found insection II.4 Businessdevelopment of theGroup Divisions.

EBIT rose by 21 % to € 200 million and was in line with our expectations (forecast in 2021 management
report: “appreciable increase”). Supply chain difficulties and in some cases massive rises in materials
prices and transport costs required significant countermeasures.
A large contribution to the Group EBIT came from the Group Division Paper (€ 131 million), which
increased its operating result by 15 %. In the Group Division Turbo, EBIT rose by 19 % to € 48 million. At
Voith Hydro, the operating result contracted from € 8 million in the previous year to € 2 million.

EBIT Group

ROCE Group1)

in € millions

in %

200
165

+35
2020/212021/222020/212021/22

1)Previous-year figure adjusted.

9.6

10.5

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The return on sales stood at 4.1 % (previous year: 3.9 %). The ROCE improved from 9.6 % (adjusted) in
the previous year to 10.5 % in the reporting year, thus falling short of our expectations (forecast in 2021
management report: “appreciable increase”).
The improvement in the return on sales and ROCE means we are on the right path, but we had
anticipated greater progress already for the reporting year. The main reason for profitability not yet
improving as significantly as set out in our original planning was the increased costs of procurement
as a consequence of the supply chain problems and price increases triggered by the pandemic andexacerbated by the war in Ukraine. The development of EBIT furthermore reflects significant investmentsin the future. For instance, we made a conscious decision to increase our R&D expenditure in thereporting year back to the high level of the 2018/19 fiscal year despite the challenging environment
and in doing so not only drove forward individual product innovations but also the development offundamental technologies aimed at exploiting strategic growth areas. Furthermore, we invested in
our organization. For example, we were greatly committed to further pursuing the multiyear project tointroduce a standardized Group-wide ERP system.

Voith Annual Report 2022
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II. Economic report45

II.4. Business development of the Group Divisions
II.4.1. Hydro
Growth in sales and orders received, EBIT has fallen
The Group Division Hydro looks back on a challenging 2021/22 fiscal year in which the aftermath of
the Covid-19 pandemic continued to be felt. Operating successfully in a market environment that has
recovered slightly, Voith Hydro was able to increase orders received and sales. The operating result
fell short of expectations, however. EBIT declined on account of unexpectedly sharp increases inmaterials and transport costs and the processing of orders posted in weak market phases under highprice pressure.
Key financial performance indicators
The Group Division Hydro’s key financial performance indicators for the 2021/22 fiscal year are as follows:

Orders received Hydro

Sales Hydroin € millionsin € millions

1,146

1,184
+3 %

2020/21

945

1,048
+11 %

2020/212021/22

EBIT Hydro

ROCE Hydro1)in € millionsin %2021/223.7

2020/218-6

2020/212021/222

1.0

2021/22

1)Previous-year figure adjusted.

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Hydropower market showing slight signs of recovery
In the 2021/22 fiscal year, the market environment for the Group Division Hydro remained challenging,
despite the slight signs of recovery: catch-up effects in the awarding of hydropower projects that had
been postponed in previous years on account of the pandemic were evident in some regions, but the war
in Ukraine, the instability of the global supply chains and the general economic slowdown ran counterto any substantial market recovery. Even though the level of contracts awarded prevailing prior to the
Covid-19 crisis has not quite been reached in the light of strained government budgets and difficulties
with the funding of private projects, the global volume of contracts awarded relevant to Voith increasedon the previous year.
Orders received above expectations
At € 1,184 million, Voith Hydro’s level of orders received in the reporting year was 3 % up on thehigh previous-year figure that was marked by two major projects. Adjusted for currency effects,
the development was stable. We exceeded the forecast published in the 2021 management report(“slight decline”). As at September 30, 2022, orders on hand rose to € 3,538 million (previous year:€ 3,194 million).
The orders received in the reporting year were shaped by modernization projects. Among other factors,
a major project in the USA contributed to the good developments. Here we were awarded a ten-year
contract to modernize the turbines and generators at the Fort Randall dam. As part of the project
scope, Voith will manufacture eight new Francis turbine runners and overhaul the stators of the eight
generators. This hydropower plant located on the Missouri River in South Dakota is one of the largest
in the USA and has been generating electricity since 1954. In North America, we additionally received
various medium-size and smaller-scale orders which allowed us to maintain our strong position on thislarge hydropower market that is marked by modernization projects.
We also performed well on the fiercely competitive European market. For example, as part of therefurbishment of the Ffestiniog pumped storage power plant in Wales that has been underway since2017, we won a further extensive contract following successful completion of the first phase of the
project. For Statkraft, the largest European generator of renewable energy, we have taken on themodernization work for Hammarforsen hydropower plant in Sweden.
In Africa, substantial contracts began to be awarded again following the sharp decline in awards in theprevious year caused by the Covid-19 pandemic. Voith was able to secure an extensive modernization
order and a follow-up contract within the scope of an important new-build project. In the Australian stateof Tasmania, we received an order to modernize a hydropower complex with a total of three power plants.
Service activities increased after the Covid-19-related travel limitations were gradually phased out inmost regions.
Slight rise in sales
In the reporting year, Voith Hydro’s sales grew by 11 %, or 6 % after adjusting for currency effects. The
sales trend was within our expectations (forecast in 2021 management report: “slight increase”).

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47

The Group Division’s sales continued to be impacted by the effects of the Covid-19 pandemic, albeit not
so strongly as in the previous year. For instance, construction site closures in China, the state-imposed
lockdown of our production facility in Shanghai and delays in the supply chain led to postponements
in project and revenue recognition. A negative impact also came from growth being subdued since thebeginning of the pandemic in the small-hydropower segment and in the service business, which typicallyinvolves revenue from orders being recognized quite quickly.
Looking at the regional distribution of sales, more than one-third of sales was attributable to theAmericas, followed by Asia. A good quarter of sales was generated in Europe (including Germany).
Fall in operating result
Earnings in the Group Division Hydro fell short of our expectations, essentially due to the processing oforders that were posted in weak market phases under high price pressure and as a consequence of therises in materials and transport costs turning out to be higher than anticipated. With additional impacts
as a result of negative currency effects and impairment of receivables in Central America, Voith Hydro’s
EBIT fell to € 2 million (previous year: € 8 million). This meant that the return on sales dropped to 0.2 %(previous year: 0.8 %) and ROCE to 1.0 % (previous year, adjusted: 3.7 %). Our forecasts published in
the 2021 management report predicted a “significant increase” for both EBIT and ROCE.
Events of strategic importance for Voith Hydro
As a result of the majority stake in Green Highland, a Scottish hydropower service provider, acquired
towards the end of 2021, Voith Hydro is expanding its business in the field of maintenance, operationand development of hydropower facilities. Green Highland specializes in small hydropower projects
with a total output of up to 20 MW and supports plant owners by performing not only monitoring andmaintenance activities but also the technical, commercial and administrative management of the plants.
Innovations
In the reporting year, Voith set new technical standards in pumped storage technology: the world’s
first two power units with a capacity of 350 MW at a rated speed of 600 revolutions per minute weresuccessfully commissioned at the Changlongshan pumped storage plant in China in 2022. These arereversible power units with a rated head of 710 meters. Raising the speed from 500 r/min – as has
been usual to date with units of this kind – to 600 r/min enables higher efficiency on the one hand, buton the other it also increases the energy density and thus the mechanical load on the units. Designingand manufacturing machines with such parameters is highly complex.
With Voith’s involvement, further progress was made in the reporting year under the XFLEX HYDRO
project funded by the EU’s Horizon 2020 research and innovation program. The objective of the projectis to safeguard power grid stability with flexible hydropower technologies and thus contribute to a secureand resilient post-carbon power supply. Within the scope of the project, the 19 consortium partners,
which include hydropower operators and equipment manufacturers, research centers and consultancies,
contribute their expertise under the leadership of the Swiss Federal Institute of Technology of Lausanne(EPFL). What makes this project exceptional is the ability not only to explore innovative technologies inlaboratory tests and computer simulations but also to test them at full-scale. In the reporting year, Voith

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worked together with energy supplier EDP to refine various technologies and to test them in Portugal’s
Frades II pumped storage power plant. Upon project completion in February 2023, firstly a road map
for the introduction of the innovative technologies at European power plants will be presented, andsecondly, impact assessments will be drafted outlining the challenges for governments and business.
In cooperation with digital specialist Ray Sono, which is also part of the Voith Group, Voith Hydro
launched Hydro Pocket, a digital service product for station management in the small hydropower
segment. Hydro Pocket, a cloud-based solution for small and medium-sized hydropower plants,
offers operators greater efficiency, flexibility and security. Thanks to the transparent view of assets andassistance in the form of intelligent analysis methods, maintenance and repair planning can be optimized
and faults or unplanned downtime can be reduced.

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II.4.2. Paper
Appreciable sales growth, high profitability, record level oforders on hand
In the light of ongoing strong investment activity in the paper machine market, the Group Division Paper’s
orders received in the reporting year were nearly at the high level seen in the previous year. Orders on
hand rose to an all-time high of € 1,878 million. Sales grew by 24 % and were above target. Despite thechallenging business environment involving conditions such as a massive increase in materials prices andtransport costs, Voith Paper succeeded in further increasing EBIT – starting from an already high level.
Key financial performance indicators
The Group Division Paper’s key financial performance indicators for the reporting year are as follows:

Orders received Paper

Sales Paperin € millionsin € millions

2,276
-1 %

2020/21

2,256

2,196
1,776

2020/212021/22

EBIT Paper

ROCE Paper1)

in € millions

in %

114

+24 %

131

2020/21+172021/222020/212021/22

24.9

26.2

2021/22

1)Previous-year figure adjusted.

Orders received remain at a very high level
In the 2021/22 fiscal year, the Group Division Paper generated orders received of € 2,256 million (-1 %),just under the previous year’s record figure. As at the end of the fiscal year on September 30, 2022,
orders on hand increased to € 1,878 million (September 30, 2021: € 1,741 million), thus reaching an
all-time high.

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Voith Paper operated successfully in a market environment that remained positive. The business with
consumables, spare parts and services expanded, driven by high demand for paper and board, inparticular. In addition, paper manufacturers increased their inventories as a precautionary measure. In
the project business (new lines and rebuilds), the volume of orders was down on the previous year that
had seen extraordinarily strong investment activity but, in comparison with preceding years, remained
at a high level. Several major orders also contributed to this. Furthermore, orders received in thereporting year contain positive currency effects. Adjustment for currency effects results in a decline of
5 % in comparison to the previous year. The development is in line with our business planning (forecast
in 2021 management report: “perceptible decline”).
Orders received in the project business were dominated by new lines and rebuilds for the productionof board and packaging paper. For example, we received an extensive order from Norske Skog, oneof Europe’s leading producers of printing papers, to rebuild a newsprint machine for the production ofrecycled containerboard. Likewise in the area of packaging paper, we were commissioned by a numberof customers from Asia to build a total of four new lines. For these, the most recent solutions from ourPapermaking 4.0 portfolio are being used. Investments were also made in the segment of specialty
papers and non-wovens. In the growing US paper market, for instance, we were awarded a contract
for the manufacture of a new line for the production of glass fibers. No major investments were madein the area of graphic paper machines.
Sales up 24 %Sales increased appreciably to € 2,196 million. At 24 %, the growth rate exceeded our expectations(forecast in the 2021 management report: “perceptible increase”). The good sales trend reflects thehigh level of orders on hand at the end of the previous fiscal year as well as the high volume of orders
received in the reporting year. Both the project business and the business with consumables, spareparts and services contributed to the greatly encouraging development. Sales benefited from positive
currency effects but these were negligible in the light of the appreciable growth of the operating business.
The strongest sales region in the reporting year was Asia, followed by Europe (including Germany) andNorth America.
Rise in operating result
The Group Division Paper was able to increase its EBIT by 15 % to € 131 million in the reporting year. The“perceptible increase” forecast in the 2021 management report was achieved. The return on sales fell
to 6.0 % (previous year: 6.4 %), essentially due to pandemic-related project delays as well as increasedmaterials and transport costs. Starting from a very good level in the previous year (adjusted: 24.9 %),the ROCE improved slightly once again, albeit not quite as strongly as originally expected (forecast in
2021 management report: “perceptible increase”). It stood at 26.2 % in the reporting year.
Material events
After the takeover of the company BTG in the 2019/20 fiscal year, we merged and integrated the two
product portfolios of Voith Paper and BTG as they complemented each other to a great extent. In

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the summer of 2022, for example, we were able to present to the professional community the Papermaking 4.0 digitalization and automation portfolio and demonstrate our expertise as full-line supplierfor pulp and paper production. Papermaking 4.0 aims at enabling paper manufacturers worldwide touse digitalization and automation to achieve significant productivity and cost advantages. The two
established data platforms, Voith OnCumulus and BTG dataPARC were merged to form an integrated,hybrid system solution by the name of dataPARC cloud. dataPARC cloud combines the respective
strengths of Voith’s cloud solution OnCumulus and BTG’s on-premise installation. On this basis, thePapermaking 4.0 portfolio offers a wide range of solutions from the areas of Availability, Efficiency andOperations.
In the service field, we are pooling our expertise with that of BTG and Toscotec, subsidiaries we acquiredin the 2019/20 fiscal year, and are restructuring our offering. In spring 2022, for instance, we presented ajoint, modular service portfolio for one of the most important components of tissue machines, the Yankee
cylinder. As part of the new ProServices by Voith, BTG and Toscotec, we provide tissue manufacturers
with dedicated R&D, Application and Operations teams and a central point of contact. With the help ofeight different measurement and diagnostic tools that can be combined with each other, these ensurethat the Yankees are always in perfect condition, which is of key importance for ensuring smooth andefficient tissue production.
Innovations
As an important component in the Voith Group’s sustainability strategy, the Group Division Paper
introduced the “Papermaking for Life” sustainability program in spring 2022. As part of this innovation
offensive, over the coming years we will invest some € 100 million per year in the research anddevelopment of new solutions for the most sustainable and efficient paper production. This is intended
to achieve, by 2030, 100 % CO2-neutral paper production, 90 % fresh water savings and an increasein the paper recycling rate to 90 %. In line with the goals of the Paris Agreement, paper manufacturers
worldwide are facing the challenge of producing more sustainably. As a global technology company,
Voith is taking on a leading role in supporting customers in this path.
In the reporting year, too, the Group Division Paper launched numerous innovations on the market suchas the modular InduraClean heavyweight cleaning system. The system provides improved cleaning
performance as part of the stock preparation process and belongs to the BlueLine portfolio. InduraClean
contains an improved cleaner bank, which can be combined with various cleaners to attain the best
possible cleaning result. Depending on requirements, the focus of the modular technology can be placedon increased production volume, energy reduction or improved separation efficiency.
We also introduced the new quality measurement and control system OnQuality 4.0 in the reportingyear. Building on the existing Voith OnQuality.Scanners and OnQuality.Sensors already installed in morethan 750 plants, OnQuality 4.0 constitutes the next level of digitalization of the paper mill and enables
significant savings in resources, scrap and costs. The new system consists of all the important elements
required for perfect quality measurement and control: virtual sensors use artificial intelligence to predictin real time quality parameters such as tensile strength that can otherwise only be measured in the52

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II. Economic reportlaboratory; the cloud platform stores all relevant data and enables users to perform in-depth analyses;with just a few clicks, personalized dashboards and reports can be intuitively created and viewed on
mobile devices such as smartphones or tablets.
Further innovations in the field of consumables, products and services included, for example, theQualiFlex QView press sleeve for board and packaging paper machines. The latest addition to the
Qualiflex family makes cracks inside the press sleeve visible at an early stage, allowing predictive
maintenance to be implemented. The EdgeSaver edge trim concept is a new product augmenting ourportfolio for stabilizing the web edge in the headbox area. The EdgeSaver can be mounted to paper
machines from all manufacturers and not only saves virgin fiber but also reduces energy consumption
in paper production while at the same time improving the paper quality.
One of our most recent developments won an international industrial design award in the reporting year:
the InfibraFiner was awarded silver in the Focus Open 2022 International Design Award. The InfibraFiner
represents the latest generation of Voith refiners and is part of Voith’s successful BlueLine product family.
The committee was impressed by the design, innovative strength and future viability of the solution, as
well as its direct customer added value. The InfibraFiner arose from our Papermaking Vision design study
presented in the previous year. This holistic concept takes into account all aspects of paper production
and aims to simplify maintenance and operation of the equipment, reduce interfaces by means of ahigher degree of networking, and further increase efficiency, safety and sustainability. Correspondingly,
the focus of the InfibraFiner’s configuration was on optimized user interfaces and a “clean design”.
We also communicated our successes and the leading role in the digitalization of the paper industry withthe “Paper is on” campaign. The “Paper is on” campaign enables Voith to highlight the focus topics ofthe digital product portfolio Papermaking 4.0: full-line supplier, efficiency, sustainability, cloud solutions,
automation and innovation. Testimonials from long-standing customers were a central component of thiscampaign as they emphasized the successful implementation of the digital solutions and the resulting
efficiency gains and resource savings.

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II.4.3. Turbo
Growth in orders received, sales and EBITThe Group Division Turbo saw a robust development over the reporting year and was able to increase
the level of orders received and sales. This development was driven by the recovery of business in thedivision Industry, but the division Mobility also operated successfully in an environment that remained
challenging. The operating result was also up on the previous-year level but fell behind expectations.
With the takeover of the company Argo-Hytos in August 2022, Voith is entering the promising off-highway
market (agricultural machinery, construction machinery and vehicles).
Key financial performance indicators
The Group Division Turbo’s key financial performance indicators developed as follows in the 2021/22
fiscal year:

Orders received Turbo

Sales Turboin € millionsin € millions

1,512

1,636

1,457

+8 %

2020/212020/212021/22

EBIT Turbo

ROCE Turbo1)

in € millions

in %

41

2020/21

1,557
+7 %

48
+7

2021/222020/214.9

2021/225.0

2021/22

1)Previous-year figure adjusted.

Orders received up 8 %The Group Division Turbo boosted its orders received by 8 % to € 1,636 million. Although the Covid-19related lockdowns in China, the war in Ukraine and the global supply chain disruptions had a negative

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impact on our business, investment activities nevertheless remained high in some of the market
segments and regions served by Voith Turbo. Both divisions operated successfully in this challenging
environment and contributed to the positive development of orders received.
Voith Turbo also benefited from positive currency effects and the majority shareholding in Argo-Hytos
acquired in August 2022 as the orders received by this company over two months were consolidated
in our 2021/22 financial statements. After adjusting for these effects – around € 60 million in total – theorders received by the Group Division rose by 4 % and were thus at the upper end of our expectations(forecast in the 2021 management report: “slight increase”). At € 1,583 million, orders on hand at theend of the 2021/22 fiscal year appreciably exceeded the previous-year level (September 30, 2021:€ 1,285 million).

Detailed informationon the developmentof the markets rele­vant for Voith Turbofor energy, rawmaterials, transport& automotive can befound in section II.2.
Macroeconomic andindustry-specificenvironment.

The division Mobility was able to slightly increase its volume of orders received. In the commercial vehicle
segment, the business with DIWA transmissions for buses saw growth at a low level, whereas unit salesof retarders for trucks weakened in comparison to the previous year. Alongside supply-side restrictions,such as shortages of materials and supply difficulties, the main factor in the development of the truck
market was a significant decline in demand for trucks on the large Chinese market as a consequenceof the strict Covid-19 lockdowns in that country. The business in the rail segment recovered slightly,
even though there continued to be delays in the awarding of projects in the reporting year. In the marine
segment, Voith experienced encouraging demand for the electric Voith Schneider Propeller (eVSP).
The division Industry’s volume of orders received increased perceptibly in the 2021/22 fiscal year. The
sales markets served by the division Industry – raw materials and energy – remained at a high level inthe reporting year. Even though the war in Ukraine and the lockdowns in China exacerbated supply
chain problems, materials shortages and price volatility, investment activities continued to rise in somecustomer industries relevant to the division Industry in the 2021/22 fiscal year. The business with themining and steel industry and the unit sales of components and solutions in the area of wind power of
ELIN Motoren, the subsidiary acquired two years ago, enjoyed a particularly good development.
Strong industrial business brings about sales growth
The Group Division Turbo’s sales rose by 7 % to € 1,557 million. The division Industry’s appreciable growth
was the main contribution to this increase. Despite the massive impediments caused by the lockdowns
in China, the division Mobility’s development was more or less stable. As the travel limitations were
gradually phased out in most other regions, the service business, where revenue is typically recognizedquite quickly, returned to a positive development in the reporting year.
After adjusting for effects amounting to € 70 million – the consolidation effect in connection with ArgoHytos and positive currency effects – the Group Division’s sales rose by 2 % and were thus at the upper
end of our expectations (forecast in the 2021 annual report: “stable development”).
The strongest sales region in the reporting year was Europe (including Germany) where we achieved
a pleasing rise in sales. Although sales in China were in decline due to the lockdowns, Asia remained
the second most important region. In North and South America, sales noticeably gained in momentum.
Operating result below expectations
The EBIT of the Group Division Turbo increased by 19 % to € 48 million (previous year: € 41 million).

Voith Annual Report 2022
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55

Over the two months of its consolidation within the Group, the newly acquired company Argo-Hytos
made a positive contribution to the operating result of the Group Division Turbo. Adjusted for M&A
and currency effects, Voith Turbo’s EBIT remained roughly at the previous-year level; the appreciable
increase forecast in the 2021 management report was not achieved. The background to this is themore than expected increase in materials and transport costs and changed sales mix. The return onsales increased slightly to 3.1 % (previous year: 2.8 %). ROCE was only slightly up on the previous-year
figure due to an increase in the capital employed; the forecast appreciable increase was not achieved.
Material events
With the takeover of the majority shareholding in Argo-Hytos, Voith is entering the promising off-highway
market. Based in Switzerland, this company develops and produces hydraulic components and systemsolutions with a focus on agricultural machinery, construction equipment and vehicles. The company will
be continued as an independent brand with the addition of “a Voith Company”. The majority shareholdingin Argo-Hytos was acquired effective as of August 2, 2022, and has been fully consolidated in the Group
Division Turbo as of this date. For Voith Turbo, the acquisition forms the basis for Off-Highway, the new
third division (in addition to Mobility and Industry).

Information on theacquisitions canalso be found insection II.3.1. of thismanagement report.

Furthermore, we signed an agreement in the reporting year to purchase IGW Rail that came into effectas of October 4, 2022 once all official approvals had been granted. IGW Rail is a globally operating
high-tech company that has specialized in customized gear unit and coupling solutions for the rail vehicleindustry. With its product range, IGW covers all types of rail vehicle, from heavy locomotives to light rail,and from trams and subways to high-speed trains. As Voith also supplies a wide range of components
for these rail vehicle markets, the acquisition perfectly complements Voith’s existing activities. As of the2022/23 fiscal year, IGW Rail will be fully consolidated in the Group Division Turbo.
Innovations
R&D work in the Group Division Turbo over the reporting year continued to concentrate on the electrification of power trains and on the digitalization of our product portfolio.
One core innovation in the division Mobility in recent years is the Voith Electrical Drive System (VEDS),
an electrical drive concept introduced in 2019. In the reporting year, we presented VEDS HD+, our firstelectrical drive for heavy-duty commercial vehicles. The new VEDS HD+ complements the VEDS portfoliothat previously consisted of an HD (heavy duty) variant for double-decker and articulated buses as wellas trucks over 26 metric tons and an MD (medium duty) variant for solo buses and trucks weighing up
to 19 metric tons. The outstanding efficiency of the VEDS was confirmed in the reporting year by the
independent UTAC institute. According to assessments by this renowned test center, the StreetDeck
Electroliner of our customer Wrightbus is currently the most efficient e-double-decker in the world. The
VEDS plays a significant role in this success. With Paul Nutzfahrzeuge and Ford Otokar, we succeededin winning the first customers for the VEDS in the truck segment in the reporting year.
After many years of being nothing more than a niche drive concept, the hydrogen-based version ofe-mobility has been increasingly attracting the attention of politicians and industry because for many
commercial vehicle applications in the off-road and heavy-duty sectors, hydrogen has clear advantages
over other energy sources in terms of technology and operating costs. At the IAA Transportation, theworld’s leading trade show for heavy commercial vehicles, held in the reporting year, we presented forthe first time a modular overall system for heavy-duty commercial vehicles with hydrogen drives: the new

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Plug & Drive H2 storage system reflects Voith’s expertise as a system provider. In line with this holistic
approach, customers receive everything from a single source, from the tank nozzle to the fuel cell inlet,
including a patented installation system to accommodate the H2 tanks. The Plug & Drive H2 storage
system is primarily designed for heavy-duty commercial vehicles, construction vehicles and similar
applications, where the use of battery-electric concepts does not make sense from an economical or
technical perspective.
We also gained our first customers for our DIWA NXT automatic transmission launched in the previous
year. Bus manufacturer Iveco, for example, is building on the DIWA NXT automatic transmission inits newest generation of hybrid buses, available either as natural gas or XTL renewable gas versions.
Compared to the previous generation, the new generation delivers a significant reduction in energy
costs and CO2 emissions, while optimizing total cost of ownership.
For rail, too, Voith is driving forward important innovations, and offers sustainable, efficient solutions
both for passenger transport and cargo rail traffic. One of our lighthouse projects is the CargoFlex, adigital automatic freight coupler that we introduced in 2019 and have been continually refining since then.
We achieved further market successes with the electric Voith Schneider Propeller (eVSP), our mostimportant innovation in recent years for the marine segment. In the meantime, the first wind farm maintenance vessels equipped with eVSPs have been commissioned and are operating successfully. Orders
were received for further vessels with eVSPs in the reporting year. The fully electric and emissions-free
propulsion system can be deployed in various applications, for example in supply and service vessels
for offshore wind turbines, in ferries, yachts or special purpose vessels.
The division Industry also brought numerous innovations to market in the 2021/22 fiscal year. Amongothers, the TurboBelt TPXL coupling family was extended to include further coupling variants. The
fill-controlled TurboBelt TPLX turbo coupling is suitable for a wide range of applications, for example inunderground and open-cast mining, for linking production to a port facility and in belt conveyor systems.
The coupling variants presented in the reporting year were developed for various performance classesof conveyor systems.
More than one million Voith hydrodynamic turbo couplings are in use worldwide. In numerous branchesof heavy industry such as mining, petrochemicals, steel or thermal power plants, they ensure smooth
starting up of plants and machinery, and at the same time protect them from potential damage evenunder extreme conditions. With the new TurboGuide Mobile, launched in October 2021, Voith has offeredits customers an app providing an efficient, intuitive but comprehensive interface for the managementof constant-fill fluid couplings. App users can conveniently view all relevant data on the filling quantityof the coupling on their smartphone or tablet. Moreover, the app provides troubleshooting functions aswell as access to operating manuals, tutorials and the Voith Turbo Webshop.
Hydrogen as an energy carrier of the future is playing an increasingly important role. There is also
considerable potential for industrial applications. We have systematically analyzed the possibilities ofexisting products with regard to suitability for hydrogen applications and furthermore identified growthareas outside our existing product portfolio. Various forward-looking projects in the area of hydrogen
infrastructure were subsequently launched by the division Industry before the end of the reporting year.

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II.5. Economic position
II.5.1. Earnings position
Appreciable increase in operational result and Group net result
The Voith Group’s statement of income for the reporting year is marked by perceptible growth in total
output and changes to the cost structure. Whereas the ratio of cost of materials to total output increased
due to increases in materials prices – which were massive in some cases – as a consequence of theintensified supply-chain problems and general inflation, it was possible to put a limit on the rise in theother cost items by means of measures that increased efficiency and through a very disciplined approach
to expenditure. All in all, we succeeded in increasing the operational result significantly. The Group net
result was likewise up on the previous year’s level.

Operational result GroupNet result Groupin € millionsin € millions

136
89

+47

30

+29
1
2020/212021/222020/212021/22

Total output in the Voith Group stood at € 4,963 million (previous year: € 4,340 million). The total output(+14 %) thus developed virtually in parallel with sales (€ 4,881 million, +15 %).
Cost of materials rose by 22 % to € 2,404 million (previous year: € 1,978 million). The ratio of cost of
materials to total output increased to 48.4 % (previous year: 45.6 %). The increase in this ratio wasessentially due to higher prices for raw materials, intermediate products and components as well as arise in transport costs.
All other cost items rose at a slower rate than total output. Personnel expenses stood at € 1,582 million(previous year: € 1,516 million; +4 %). In light of an appreciable increase in total output, the ratio of
personnel expenses to total output consequently fell to 31.9 % (previous year: 34.9 %).
Depreciation and amortization amounted to € 180 million (previous year: € 170 million, +6 %). The ratio
of depreciation and amortization to total output decreased slightly to 3.6 % (previous year: 3.9 %).
The net balance of other operating expenses and income as well as impairment losses on tradereceivables and contract assets, net, increased to € -661 million (previous year: € -587 million, +13 %).
In addition to increased logistics costs, this development was mainly caused by an increase in additions

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II. Economic reportto provisions of € 45 million to € 245 million (previous year: € 200 million, +23 %), mainly order-related
provisions as well as lower income from the utilization of order-related provisions of € 95 million (previous
year: € 129 million, -27 %).
Detailed informationon the developmentof EBIT can be foundin section II.3.4.
Operating result.

The operational result rose by € 47 million to € 136 million (previous year: € 89 million, +52 %). EBIT, theimportant financial indicator for the Group, is obtained by eliminating non-recurring items and performing
other adjustments. In the reporting year, EBIT was increased by € 35 million to € 200 million (previous
year: € 165 million, +21 %).
At € -4 million, the share of profit/loss from companies accounted for using the equity method was up
on the previous-year figure (previous year: € -6 million).
The balance of interest expenses and interest income stood at € -37 million (previous year: € -22 million).
The deterioration in the interest result is essentially attributable to an interest expense from themeasurement of financial liabilities on account of termination rights of non-controlling interests of€ 11 million (previous year: € 4 million interest income). The other financial result rose to € 21 million(previous year: € 19 million, +11 %).
The result before taxes increased by € 36 million to € 116 million (previous year: € 80 million, +45 %).
Income taxes totaled € 87 million (previous year: € 74 million). The tax rate decreased to 75 % (previous
year: 92 %). The drop is primarily attributable to extraordinarily high impairments of deferred tax assets
in the previous year.
At € 30 million, the Group net result was appreciably up on the previous year (€ 1 million). A negative
net result of € -5 million from discontinued operations had weighed on the previous-year figure. These
activities were abandoned in the reporting year so that no further net result from discontinued operations
was incurred.

II.5.2. Net assets position
Asset situation stable
In comparison to September 30, 2021, total assets increased by € 842 million to € 5,956 million (previous
year: € 5,114 million, +16 %). The rise is essentially due to an increase in inventories and trade receivables
as well as intangible assets and other financial assets.
In total, non-current assets increased by € 422 million to € 2,693 million (previous year: € 2,271 million,+19 %). The rise in intangible assets is mainly attributable to an increase in goodwill of € 114 million to€ 868 million (+15 %). The main reason for this increase is the acquisition of the majority shareholdingVoith Annual Report 2022
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in Argo-Hytos in the reporting year. In addition, other financial assets increased by € 129 million to€ 185 million (+232 %). One primary factor in this change is the granting of a loan to an entity controlled
by JMV SE & Co. KG, the ultimate parent company, for funding the acquisition of the remaining 35 %shareholding in Voith Hydro Holding GmbH & Co. KG from the previous joint venture partner, Siemens
Energy.
Current assets grew by € 420 million to € 3,263 million (previous year: € 2,843 million, +15 %). Inventories
rose by € 197 million to € 879 million (+29 %) whereas trade receivables increased by € 138 million to€ 882 million (+19 %) in line with the greater volume of business. In addition, contract assets increasedby € 141 million to € 715 million (+25 %) on account of the growth in sales. In contrast, cash and cash
equivalents dropped by € 99 million to € 412 million (-19 %). Further details on the development of cash
and cash equivalents can be found in the following section on the financial position.

II.5.3. Financial position
Financial position remains soundNon-current liabilities decreased slightly by € 25 million to € 1,682 million (previous year: € 1,707 million;-1 %). Whereas pension provisions saw a drop of € 254 million to € 545 million (-32 %), bank loans
increased by € 161 million to € 629 million (+34 %). The rise in bank loans is due, among other factors,
to the financing of the business combinations performed in the reporting year. The decrease in pension
provisions is primarily attributable to significantly higher discount rates in comparison to the previous
year.
Current liabilities rose by € 446 million to € 2,838 million (+19 %), mainly on account of the increase in trade
payables of € 159 million to € 729 million (+28 %) and in contract liabilities of € 69 million to € 1,008 million(+7 %). In addition to this, there was an increase in bank loans of € 115 million to € 194 million (+146 %).
The main reason for the growth in the current liabilities is the increase in net working capital and thefinancing of the investments and business combinations.
The net balance of deferred tax assets and liabilities decreased by € 39 million. The reduction is mainly
due to the increase in deferred tax liabilities of the German Group companies.
Equity increased to € 1,436 million (previous year: € 1,015 million, +42 %). The sharp increase in equity
mainly stemmed from other comprehensive income of € 423 million. Other comprehensive income
contains a positive effect due to actuarial gains arising in particular from the increase in the discountrate for pension provisions. The opposite effect came from the increase in the pension trend. In addition,other comprehensive income benefited from currency translation effects of € 157 million. The equity ratio
improved to 24.1 % (previous year: 19.8 %).

60Voith Annual Report 2022
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Cash flow from operating activities remains clearly positive
The main components of the cash flow statement in the reporting year break down as follows:
Development of cash flowin € millions

2021/222020/21

Cash flow from operating activities

93

144

Cash flow from investing activities

- 401

- 85

Cash flow from financing activities

171

- 148

Total cash flow

- 137

- 89

The cash flow from operating activities was clearly positive in the 2021/22 fiscal year at € 93 million. This
figure was € 51 million down on the previous year (€ 144 million). Payments to increase inventories aswell as a higher level of trade receivables and contract assets were the main factors in this decline. In
contrast, the increase in trade payables and additionally the rise in net income had the opposite effect.
The cash flow from investing activities amounted to € -401 million in the reporting period (previous
year: € -85 million). The sharp increase in cash outflows is mainly attributable to our M&A activity inthe reporting year. Payments of € 192 million were made for the acquisition of consolidated companies
in the 2021/22 fiscal year, whereas payments of only € 17 million were incurred in this respect in
the previous year. The business combinations in the reporting year comprise the acquisition of the
majority shareholding in Argo-Hytos and the remaining shares in Suzlon Generators Limited. In addition,
payments for investments increased from € 43 million to € 139 million. The main reason for this rise was
the granting of a loan to a company that is controlled by the ultimate parent company, JMV SE & Co.
KG, and that is not included in the present consolidated financial statements, in order to finance theacquisition of the remaining 35 % shareholding in Voith Hydro Holding GmbH & Co. KG. On balance,
the purchase and sale of securities gave rise to payments of € 3 million (previous year: net proceeds of€ 75 million). The securities were mainly term deposits with individual maturities of more than 90 days.
Net receipts and payments for property, plant and equipment, and intangible assets amounted to€ -94 million (previous year: € -106 million).
In the 2021/22 fiscal year, we invested a total of € 143 million (previous year, adjusted: € 133 million)
in property, plant and equipment, and intangible assets. The rights of use under leases amounting to€ 27 million (previous year: € 21 million) were taken into account here pursuant to IFRS 16. Since thereporting year, remeasurements of rights of use under lease agreements have been disclosed pursuant
to IFRS 16 as part of investments, therefore the previous-year figure was restated accordingly.

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61

Investments Group1)
in € millions

133

143
+7 %

2020/211)2021/22

Previous-year figure adjusted.

As a percentage of the Group’s sales, our investment ratio came to 2.9 % in the reporting year (previous
year, adjusted: 3.1 %).
The investments broke down as follows across the various Group Divisions:

Investments total € 143 million
by Group Division­Hydro
17 %

Paper
38 %

Corporate Functions& Services
15 %

Turbo
30 %

Moderate increase in financial liabilities
There are two tranches totaling € 59 million outstanding from the note loan issued in 2015. In this context,
one tranche of € 38 million is repayable in November 2022 and another final tranche of € 21 million in
November 2025. The note loan issued in 2020 amounting to € 400 million has maturity dates in 2025,
2027 and 2030.
Follow-on financing for the syndicated euro loan dating from 2018 was successfully obtained at the
beginning of October 2022. The syndicate was expanded from eleven to twelve participating banks,
the volume was increased from € 550 million to € 600 million. The credit line has not been drawn on andis available as a strategic liquidity reserve until 2027, plus two renewal options until 2029. It contains
an option to increase the volume of the facility up to a maximum of € 800 million subject to the banks’consent.

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The revolving syndicated loan in China, which was refinanced in 2019, will be available until June 2024;
it is for an amount of € 202 million. This facility is currently not being utilized.
In July 2020, bilateral confirmed cash lines totaling € 375 million had been entered into with four partnerbanks with terms of two to three years. These were successfully extended in the past fiscal year andaugmented with two further cash lines with two new banks to the current total of € 525 million. At thereporting date, € 50 million of these credit lines had been utilized.
In July and August 2022, confirmed loans of € 100 million each were utilized at two banks from new
credit facilities. These loans are due in 2024 and 2027.
In addition, Voith uses free bilateral bank credit lines for low-interest financing of fluctuations in working
capital. These long-term and diversified instruments facilitate sustainable growth. The availability of astable liquidity position from its own bank balances and existing loan agreements is given top priority
by Voith – especially in the light of the imponderables arising from the situation of multiple crises.
Payments for dividends amounted to € -32 million (previous year: € -31 million).
The cash flow from financing activities increased by € 318 million to € 171 million (previous year:€ -147 million).
Total cash flow stood at € -137 million (previous year: € -89 million).
Net liquidity remains at a good level
The net liquidity of the Voith Group, defined as the difference between liquid financial assets andinterest-bearing financial liabilities (not taking lease liabilities into consideration), remains at a goodlevel even after the high level of acquisition activity. At the end of the reporting year, it amounted to€ -233 million (previous year: € -5 million). Without the acquisition activity, the net liquidity would havedeteriorated slightly in comparison to the previous year. The net liquidity indicator is not defined underInternational Financial Reporting Standards (IFRS) accounting policies, which means that its definitionand calculation may differ from the practice in other companies.
Fundamentals and objectives of financial management
The key objective of liquidity and financial management is to make sure at all times that the Voith Groupis able to continue as a going concern and to ensure the financial independence of the family-owned
business.
Cash management is the task of the Group’s treasury function as well as the related regional financecenters. The Group maintains cash pooling systems in Europe, China, India and North America, which
it uses to concentrate its cash and cash equivalents as far as possible and to lower interest expenses
caused by external debt financing. Borrowings are generally taken out by Voith GmbH & Co. KGaA andprovided to the Group companies when needed.

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III.

63

Risks and opportunities
III.1. Risk and opportunities management
Geared towards increasing the value of the Company
Entrepreneurial activity involves making decisions under conditions of uncertainty. Risk is therefore an
integral part of entrepreneurial activity. To safeguard against risks that could jeopardize the Group or its
companies as a going concern, Voith operates a consistent and binding Group-wide risk management
system.
All the elements of risk management have been brought together in a risk management system. This is
not only geared to compliance with legal requirements, it should also contribute to increasing the valueof the Group and its companies by reducing potential risks and their probability of occurrence. At thesame time, the system is intended to produce a state of equilibrium between correctly assessed risks
and the exploitation of opportunities.
Voith distinguishes between five risk types:
1. Strategic risks
2. Financial risks
3. Operating risks (process risks, infrastructure risks, production risks)
4. Performance risks (contractual risks and technical risks)
5. Compliance risks
Risk management at Voith is organized on a decentralized basis but is monitored and coordinatedcentrally. Responsibilities are clearly defined for the differentiated risk profiles at all levels of the Group.
The risk management process itself breaks down into four stages:· Risk identification: Voith constantly monitors macroeconomic developments, developments in specific industries and internal business processes that could affect the situation of the Group. A risk
catalog helps identify individual risks. For this purpose, risks are collated in all functional areas anddocumented in a Group-wide internal database.
· Risk analysis and assessment: The risks identified in this way are assessed in terms of extent ofdamage and their probability of occurrence. Wherever possible, the potential impact is quantified asa cost factor. In order to assess the potential risk, the worst-case scenario and an expected-casescenario are analyzed for each identified performance risk, and their respective impact on the financial
situation of the Group is examined. Multiplying this figure by the probability of occurrence provides
the aggregate risk.

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III. Risks and opportunities· Risk management: Analysis and assessment of the identified risks gives Voith’s management thedata it needs to decide whether the risks should be avoided, reduced by suitable actions, transferredby signing appropriate agreements, or whether they have to be carried by means of optimized processes and controls.
· Risk monitoring and reporting: Voith has a multitiered set of controlling and reporting tools that help the
Corporate Board of Management analyze risks and make well-founded decisions. Those performancerisks that involve either a maximum risk potential ≥ € 5 million or a maximum risk potential of ≥ € 2 million and a probability of occurrence of ≥ 50 % are reported to the Corporate Board of M
­ anagement on
a quarterly basis. The reporting additionally includes the measures taken in this context to mitigate therisk such as existing insurance policies, recognized provisions or recorded depreciation. Furthermore,
the general risk situation, also with regard to other risk types, is regularly placed on the agenda of theadvisory committees of all business units. Risks to the Group’s ability to continue as a going concern
are reported to the next highest organizational level through to the Corporate Board of Management
even between scheduled meetings. Risks to the Group’s ability to continue as a going concern are
defined as aggregate risk potential (gross, before consideration of measures to mitigate risk) in relation to the respective business unit that exceeds either 50 % of equity or 10 % of sales.
In addition to the systematic management of risks, it is also essential that we support our businessperformance by actively managing opportunities. The identification of opportunities and their strategic
and financial assessment play an important role in the strategy discussions the Corporate Board ofManagement holds regularly with those responsible for the operating units. The results of these meetings
are incorporated into the Voith Group’s strategic decisions as well as into the medium-term planningand the annual operative planning process.

III.2. Accounting-related internal control system
Proper and reliable financial reporting
The key elements of the internal control and risk management system for the Group’s financial reporting
process are described in the following. The aim of the accounting-related internal control and risk
management system is to guarantee that accounts are prepared correctly and reliably and to ensurethat consolidated and single-entity financial statements comply with the applicable regulations.
The following structures and processes have been implemented in the Group:
The Corporate Board of Management bears overall responsibility for the internal control and risk
management system with regard to the Group’s financial reporting process. All levels of the Group are
integrated through a strictly defined management and reporting organization.
Uniform recognition and measurement based on the regulations applicable for the Voith GmbH &Co. KGaA consolidated financial statements is ensured by Group accounting guidelines. Amended

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accounting rules are constantly adapted and communicated by Voith GmbH & Co. KGaA. The qualityof the guidelines is ensured by an ongoing exchange between the departments responsible.
Accounting is organized on a decentralized basis but is monitored and coordinated centrally. Accounting
entries are recorded in the separate financial statements of the subsidiaries of Voith GmbH & Co.
KGaA. There are internal controls in place in the Voith risk control matrix for those line items that, froma Group perspective, are significant and exposed to an elevated risk of misstatement; these controls
were developed at corporate headquarters and must be applied by the subsidiaries when preparing
their end-of-year financial reporting. The controls address the significant accounting-related risks forthe specified line items of the financial reporting and contain corresponding instructions on controlling
activities, responsibilities and documentation duties. Among other elements, the controlling activities
comprise analytical procedures as well as the practice of having significant and complex business
transactions processed and controlled by different people. Complex accounting issues (e.g. financial
instruments) are referred to corporate departments or external experts (e.g. relating to pensions). The
activities and controls for these issues are also considered in the risk control matrix.
The consolidated financial statements are prepared by adding information to the single-entity financial
statements of the subsidiaries to create standardized reporting packages which are included in the
consolidation system. Once the data has been fed into the consolidation system, it is subject to an
automated plausibility check. If this returns an error message, this is immediately corrected by theindividuals in charge of the subsidiaries concerned. The subsidiaries are supported by contact persons
at headquarters for all accounting-related issues. After the data is finally approved, the respective
management, or in isolated cases the representatives they appoint, issues a letter of representation
confirming the completeness and accuracy of the reporting package in accordance with the relevant
requirements and confirming that the internal controls have been conducted and documented.
Group-wide reconciliation of balances takes place worldwide via an intranet-based platform. The various
deadlines for the different parts of the reporting package are stipulated in the consolidation systemand centrally monitored in the course of the preparation process. Almost all consolidation activities areundertaken centrally at Voith GmbH & Co. KGaA. The entire consolidation process is supported by both
systems-based and manual controls.
The proper functioning of the controls defined in the accounting-related internal control system is
evaluated on a regular basis. If any weaknesses are identified, the system is adjusted accordingly bycentral accounting.
The quality of financial reporting is also ensured by reconciling planning calculations with the externalreporting at all levels of the Company. System access controls based on authorization concepts aswell as programmed plausibility checks in those IT systems used for the financial reporting ensure thatprocesses are complete and accurate.
The internal audit department performs regular reviews of the proper functioning, correctness, reliability
and efficiency of all internal control and risk management systems in the Voith Group independently of
the individual processes. Suitable measures are promptly taken to remedy any gaps or weaknesses
that may be identified.

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Compliance with individual rules of the accounting-related internal control system is tested by theexternal auditors on a sample basis in the course of their audit of the consolidated and separate
financial statements. Any deficiencies or flaws that appear are recorded in a management letter alongwith suggested improvements.

III.3. Risks
In the sections that follow, we describe risks that could have a substantially negative effect on our net
assets, financial position and earnings position and lead to failure to meet forecasts or targets. The
order of the risks within the five risk categories presented below reflects how we currently estimate theimportance of these risks for the Voith Group. Unless stated otherwise, the following risks relate to all
Group Divisions.

III.3.1. Strategic risks
In the “strategic risks” risk categories, we examine not only risks arising from Group strategy andcoordination as well as technology, human resources and IT risks but also external risks from themacroeconomic, market and competitive situation as well as the political environment.
Risks from the macroeconomic, market and political environment
Our economic environment is determined by global demand for capital goods. This demand is in turninfluenced by the global macroeconomic environment. If economic development were to fall perceptibly
short of expectations, it is highly probable that this would have negative effects on Voith’s businessposition, net assets, financial position and earnings position.
We based our planning for the 2022/23 fiscal year on the assumption that global economic growth
will decline further on account of the energy crisis triggered by the war in Ukraine, the ongoing impactof the Covid-19 pandemic and the high level of inflation. Some countries, most of all Germany, willprobably enter recession in 2023. In this context, the environment will remain marked by high volatility
and considerable uncertainties. Various risks call into question whether the forecast economic growth
can actually be achieved.
One significant risk to the macroeconomic environment and Voith’s earnings position is the war in
Ukraine and its consequences. This risk has an influence on energy supplies and prices, the availability
and prices of raw materials and intermediate products, the functioning of supply chains and the levelof transport costs. A further escalation of the conflict would probably have a negative impact on global
trade and might cause a new round of price shocks. After a situation where Russia has already cut gasdeliveries to European countries significantly and the shortfall in volume cannot yet be made up fromother sources, a complete suspension of supplies in combination with an especially hard winter couldVoith Annual Report 2022
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give rise to real supply bottlenecks and distribution would have to come under government control. As
gas is not only converted into electricity but also serves as a raw material for a number of branches ofindustry, this would cause damage especially to highly industrialized economies such as Germany. For
the paper industry, a gas shortage constitutes a serious threat as many processes in the productionof paper and pulp are gas-based – a specific risk affecting the Group Division Paper. With its focus onenergy efficient, resource-saving technologies, Voith meets the sector’s requirements and considers
itself to be well positioned in the competitive environment.
A further risk stems from the further course of the Covid-19 pandemic. While the pandemic currently
seems to be under control in light of the virus strains with milder symptoms having now become
predominant, a new round of lockdowns is possible, especially in China due to the zero-Covid strategy
in place in that country. The consequences would not only be further impediments to the supply chainsthat have been hard hit since 2020 and, associated with this, shortages and higher prices for goods,
and transport cost increases. Travel and contact limitations could also complicate construction site
activities, commissioning and service activities as well as production at our manufacturing locations, or
those of our suppliers, which might lead to delays in revenue recognition.
Persistent inflation is cutting into real incomes and weighing on consumer demand. It constitutes achallenge that requires central banks around the world to act sensitively: excessive countermeasures
could push many economies into a protracted recession; insufficient tightening of monetary policy would
lead to inflation becoming entrenched, which would require even stronger interest rate hikes with thecorresponding discouragement of investment.
Further potential reasons for global economic growth falling below expectations include financial market risks, additional geopolitical flash points, such as those between Iran and Saudi Arabia or between
China and Taiwan, and a general continuation of geopolitical fragmentation.
Various market and competitive risks could have a negative impact on Voith’s earnings position should
they occur.
A high degree of uncertainty is generally detrimental to the investment climate. Decisions on the awardingof plant engineering contracts could be postponed.
If important sales markets for Voith were to collapse because of the economy cooling off appreciably
more sharply than expected, this would have negative effects on Voith’s earnings position. This relates
primarily to markets and segments that react especially sensitively to economic developments, suchas the truck market and mining. Falling demand would make it more difficult to achieve the targets fororders received and sales.
For some time now, the Group Division Paper has been observing a rise in competitive and pricepressure, especially in China. This pressure might increase more sharply than assumed in the planning,
through M&A activities by competitors, for instance. In the other Group Divisions, the competitive andprice pressure might similarly rise due to cyclical weakness in demand. This would, in all probability,
have negative implications for our earnings margin.

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Risks from Group strategy and coordination
Despite the exceedingly challenging economic environment and the overlapping crises seen over the
past three fiscal years, we have continued to consistently pursue our group strategy described in
section I.3. This strategy involves massive forward-looking investments into the ongoing developmentof our Company, into research and development, business acquisitions and training. In the past threefiscal years alone, we have invested around three-quarters of a billion euros in company acquisitions andmore than half a billion euros in our own development of innovations. The megatrends of decarbonizationand digitalization point the way not only for the expansion of our product portfolio in the existing corebusiness but also for opening up new business segments and markets. We believe that this alignment
provides us with decisive competitive advantages and open up growth potential. As is always the casewith such major transformation processes, there is the general risk of the strategic changes not being
implemented within the planned time period or not leading to the desired outcome. We are aware ofthis risk as well as of the associated opportunities. The alignment of our business model to industrial
sustainability and the ongoing strategic and technological development of the Voith range of products
enjoy the utmost attention from the Corporate Board of Management, which is reflected among otherthings in the “Innovation & Technology” portfolio that is organized at this level.

Further information
can be foundin section I.6.
Employees.

Information on ourinnovation strategy
can be found in section I.4. Researchand development.

Human resources risks
One of the central challenges for Voith is the ability to recruit a sufficient number of qualified employees
and retain them within the Company. The corporate targets will be jeopardized if qualitative and quantitative bottlenecks in the availability of staff occur. In this respect, we compete with other international
players. With regard to personnel marketing, we are building on the strong Voith brand and are constantly
taking new directions in the field of recruitment. Competitive compensation schemes, a family-friendly
HR policy and flexible working models along with international career development prospects enable us
to offer an attractive work environment. Through a wide range of training and development programs aswell as a culture of lifelong learning, we make it possible for the people employed at Voith to continually
improve their qualifications in order to meet the demands of a constantly changing working world.
Innovation-related risks
Innovation-related risks are a key risk area for a technology group like Voith. The future profitability of theCompany hinges on its ability to develop marketable products and services and to use state-of-the-art
production technologies and service processes. Our earnings position could be negatively impacted byinvestments in technology that do not work out as planned or fail to find the level of market acceptance
expected or that are overtaken by new disruptive technologies. Voith invests large sums of money infurther improving and refining existing technologies, and in researching and developing new products,
systems and services. The strengthening of our market orientation and our innovative drive is a declaredobjective in the advancement of our corporate culture. Our aim is to identify disruptive technologies
at an early stage, get involved in them from the very beginning and take an active role in shaping thefuture of our markets.
IT risks
In the area of IT risks, we monitor risks arising from the IT infrastructure and information security risks.
The latter relate not only to Voith’s own business operations but also to products and solutions developed
for customers.

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Our successful business activities are underpinned by state-of-the-art and secure information technology.
For this reason, we have our own central IT function within the Group that safeguards reliable information
processing on an ongoing basis. The IT specialists in this function manage the entire IT infrastructure
for the Group and the specific application systems used by each Group Division. We employ a hybrid IT
infrastructure: one part of our systems, applications and data is hosted in in-house computer centers,
another part is kept in a cloud.
Our information security management is based on the international standard ISO/IEC 27001, and thus
meets the most stringent standards. Our central computer center operations in Heidenheim are certified
under this standard; this standard applies to all computer centers on an internal basis on which a Group
directive also builds.
Our primary objective regarding the management of IT risks is to ensure the availability of our IT
infrastructure and IT applications used. Outages of basic systems owing to technical faults, attacks orforce majeure would result in business processes being massively disrupted or coming to a complete
standstill. In order to prevent such business interruptions, we have built redundant capacity into the coresystems of our IT landscape at two computer centers. At the application level, we address not only therisk of outages but also the risk of defective software and the risk of attacks by third parties, such as
those involving ransomware. Applications are consistently implemented with the “security by design” and“privacy by design” approach, which means that security and data protection requirements are alreadytaken into consideration at the development phase in order to prevent later security vulnerabilities anddata protection issues. In addition, there are dedicated vulnerability tests and simulated hacks.
In order to maintain the confidentiality of our data, these must be categorized by each and every
employee according to the confidentiality levels defined in a Group directive. Depending on the respective
level of confidentiality, we have auxiliary IT tools such as encryption technology, which we use to securely
store and transfer data. This also ensures that our intellectual property is protected to the fullest extent
possible. In addition to these technical measures, we train and inform our employees about how tosecurely handle confidential data by means of e-learning programs and awareness campaigns.
The measures necessary to contain the Covid-19 pandemic have been placing increased demands on
our information technology since the 2020/21 fiscal year. As early as at the beginning of the Covid-19
pandemic, we succeeded in aligning the global IT infrastructure to a large share of mobile working.
A fast, stable IT infrastructure, in addition to data and system security, safeguards ongoing business
operations and unhindered communications even in times of limited personal contacts.
The cybersecurity of our products and solutions for customers is of utmost importance. The machinery,plants, systems and components in our product portfolio contain digital components that are exposed tocyber threats through increasing interconnectivity. Governments, our customers and business partners
all around the world are facing the task of managing the digital transformation and are demanding
cybersecurity concepts for software-based components and solutions over the entire product life cycle.
If Voith were not in a position to meet the regulatory, statutory and customer requirements relating to thecybersecurity of its products, there would be a risk, in addition to liability risks, of not being consideredin calls for tender.

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Over the 2021/22 fiscal year, we significantly expanded our cybersecurity management system for thedevelopment of digital products and solutions. Notably, certification according to the internationallyrecognized standard IEC 62443-4-1 was attained for the processes involved in the secure development of digital products. One important component of this standard is a risk-based approach. Accordingly, a threat analysis and a risk assessment are performed for each product which are used to determine product-related security requirements that are then fulfilled by appropriate measures. With theIEC 62443-4-1 standard, we meet the highest quality and security standards and consider ourselves
to be in a good position. Going forward, it is imperative to address the most recent developments andto adapt the product development processes to the resulting requirements.
With a view to completing the networking of our IT infrastructure, we are currently working towards
introducing a Group-wide ERP (enterprise resource planning) system to integrate all business processes
on a uniform platform. This is a complex multiyear project that involves risk during the implementation
phase. Apart from this, there are currently no specific IT risks.

III.3.2. Financial risks
Voith’s diversified financing structure is designed to safeguard long-term stability. By virtue of the ability
to access borrowed capital from unused lines of credit, Voith is currently not exposed to any concrete
liquidity risks and has sufficient liquidity reserves at its disposal to be able to meet all payment obligations
at all times. In the past fiscal year, Voith had increased its confirmed credit lines once again in light of theimponderables regarding the prevailing environment of multiple crises, thus maintaining the high levelof precaution against increased liquidity requirements seen in the previous year. Most of these facilities
are still available for utilization. Voith also obtained early follow-on financing for its syndicated euro loan
at the beginning of October 2022, increasing the volume slightly.
As a company with global operations, Voith remains exposed to the risk of fluctuating exchange rates,
which could have a negative impact on the business position, net assets, financial position and earnings
position. To contain risks arising from cash flows in different currencies (mainly the US dollar but also
currencies such as the Chinese renminbi (yuan), Brazilian real or Indian rupee), there are consistentcurrency management procedures in place throughout the Group. All Group companies are required
to hedge foreign currency items whenever these occur. Revaluation of the euro against various othercurrencies could have negative effects on sales and net result due to currency translation of thefinancial statements prepared in foreign currency. This could further have an impact on our competitive
position as competitors could benefit from cost advantages in weaker currencies. Moreover, interest
rate risks are hedged using suitable instruments in order to maintain interest and financing security
in the long term.

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To hedge existing transactions such as future cash flows in different currencies or floating-rate financing,
Voith uses a variety of derivative financial instruments, in particular forward exchange contracts tomanage currency risks and interest rate swaps to manage interest rate risks. The instruments used andthe hedging strategies are formally designated and documented at the inception of the hedge in linewith the Company’s risk management objective. The risks are constantly monitored and, if necessary,the hedging instruments are adjusted.
To guard against political and economic risks associated with goods and services provided by the Group
Divisions, the Group buys commensurate insurance from government export credit insurance agencies,
from the private-sector insurance market and from banks. The Group also maintains adequate cash
reserves to cover all other operating risks.
Counterparty risks with financial partners are monitored constantly. For more information, please referto the notes to the consolidated financial statements. The related reporting as well as reporting on
financial instruments (Sec. 315 (2) No. 1 German Commercial Code (HGB)) is provided there in thesection “Other notes”.
Adequate provisions have been recognized and contingent liabilities have been disclosed in the notes
to cover the potential financial burden of tax risks. Neither Voith GmbH & Co. KGaA nor any of its Group
companies are involved in any current or foreseeable taxation proceedings that could have a material
effect on their economic situation.
There are no indications of particular liquidity or financial risks.

III.3.3. Operating risks
In the “operating risks” risk category, we monitor process, infrastructure and production risks.
Procurement risks
The most important operating risks currently stem from the area of procurement. Collaboration with
suppliers in the global procurement markets generally involves risks with regard to potential supply
dis­ruptions, unforeseen cost increases and non-compliance with environmental and social standards.
To secure our supplies, we have embedded effective measures in the relevant purchasing processes –supplier selection, order processing and delivery date tracking. In addition, we have a multiple source
policy in place in order to circumvent the risks of supply outages and supplier insolvency at a global
level. Once again in the 2021/22 fiscal year, we additionally used master agreements and long-term
price agreements in contracts with significant procurement volumes to prevent any unplanned cost
increases. We have integrated compliance with current national environmental and social standards in
our General Terms and Conditions of Purchase.

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Our attention is currently focused on the massive price increases for energy, raw materials andcomponents in combination with their limited availability. A new round of pandemic-related lockdowns
or a further escalation of the war in Ukraine could exacerbate the existing problems with global supply
chains and have a three-fold negative impact on Voith’s earnings position: if materials that are requiredfor our production or directly on our construction sites are temporarily unobtainable, our deliveries orcommissioning work would have to be postponed, which could delay revenue recognition or lead toconsiderable contractual penalties; if we were not able to pass on the rising materials and transport
costs completely to our customers as part of our order origination process, this would weaken our
profitability; and if, in the case of contracts already concluded, the costs were to rise more strongly
than assumed in the price calculation, the calculated margin of individual orders would not be attained.
The latter risk relates most notably to the large plant business with long project times, particularly in
the Group Division Hydro.
We respond to the challenges described with further diversification and localization of the supply chains
and intensified risk management and date tracking with regard to our suppliers. We, therefore, consider
ourselves to be in a good starting position to identify any further possible disruptions in the supply chainsat an early stage and counter them with flexible alternative solutions.
Increases in the price of energy do not constitute a significant risk for Voith. Firstly, the share of the costsof energy and electricity in the total cost of materials at Voith, as a mechanical and plant engineering
company, is comparatively small. Secondly, we have secured our electricity and gas needs, specificallyin Germany, by means of forward contracts for the 2022/23 fiscal year. In Germany energy prices are
particularly high in an international comparison and the gas supply situation is critical.
However, we are able to counter worldwide inflationary trends only to a limited extent with procurement
strategies. When concluding new contracts, we consequently ensure that our price calculation is as
forward-looking as possible and the contractual arrangement addresses the risk of price increases. In
the case of contracts that have already been concluded, we perform new calculations and, in somecases, we enter into renegotiations with our customers.
Environmental and health risks
The business activities of an industrial company generally give rise to risks for people and the environment. Such risks occurring could also result in damages being filed and a loss of reputation. Industrial
safety as well as compliance with environmental legislation and corporate policies is a top priority for
us. All production processes are subject to the Group directives on health, safety and environmental
protection and on quality and risk management. Integrated management systems monitor compliancewith these directives and ensure that both production and products consistently meet the same highquality and environmental standards. Environmental risks can thus be identified at an early stage andappropriate countermeasures initiated. Insurance policies have been taken out or adequate provisions
have been recognized for any residual risks. In this respect, we consider environmental and health risks
arising from Voith’s business activities to be well under control with regard to probability of occurrence
and amount of potential damage in particular.

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III.3.4. Risks to performanceLong-term contracts, especially for major projects, form a key component of our plant engineeringbusiness at the Group Divisions Hydro and Paper. Such contracts are associated with a host of significant
risks and we attach great importance to managing these. These firstly include contractual penalties
and claims for damages through to withholding of payments and contract terminations arising from
unexpected technical problems or unforeseeable developments at the project locations or failure tomeet specified deadlines. Secondly, cost overruns or reduction of productivity within the scope of fixedprice contracts may lead to a fall in earnings margins. Project management and controlling, as it has
been implemented, continuously reviews whether the projects are indeed performing in line with theplans. Any deviations are addressed at an early stage and any risk allowances necessary are recognized.
Liability and property insurance in line with standard industry practice is taken out to cover potential
losses and/or liability risks. Appropriate provisions are recognized for special risks arising from existing
contracts if these risks can be reliably quantified.
As part of our regular internal reporting on performance risks, we monitor the maximum risk potential
associated with specific risk positions as well as the risk potential deemed to be realistic after carefulassessment. The maximum risk potential is considered in the light of whether they constitute risks
jeopardizing the Group’s ability to continue as a going concern. There were no risks to the Group’s
ability to continue as a going concern at the reporting date. The realistic risk potential is considered forprofit planning purposes and in order to assess the need to recognize provisions in the balance sheet.
As at the reporting date, provisions and allowances totaling € 316 million (previous year: € 323 million)
were recognized in the balance sheet for significant performance risks (maximum risk: € 462 million;
previous year: € 452 million).

III.3.5. Compliance risks
At Voith, we base all our actions on trust and integrity. We require each and every employee to comply
with the applicable laws and our own internal guidelines (compliance). This applies to all levels ofhierarchy throughout the Group. Voith’s Code of Conduct contains rules that govern conduct towards
third parties such as business partners, competitors, political parties and authorities as well as between
employees within the Company. Non-compliant behavior, or even illegal acts committed by employees – for example cartel infringements, corruption, economic crime, money laundering or manipulationof financial reporting – can be damaging to our reputation and can lead to sanctions, penalties andultimately to a fall in earnings. Even compliance infringements on the part of business partners can also
have negative consequences. For this reason, we place great value on a well-functioning compliancemanagement. Compliance with these principles is monitored by the Group’s Compliance Committee,
whose chair reports directly to the Corporate Board of Management, and by the compliance officers in
the Group Divisions and in each Group company. All employees are required to report any infringement of
the Voith Code of Conduct. Our whistleblower system is also accessible to people outside the Company.
In addition, we perform random internal compliance reviews in areas where potential corruption risks

74

Voith Annual Report 2022
Group Management Report
III. Risks and opportunities

have been identified within the scope of the risk management process. Infringements are consistently
met with sanctions. To avoid compliance infringements on the part of third parties, corresponding
regulations are enshrined in our general terms and conditions and are also a constituent part of othercontractual arrangements. We perform a compliance due diligence check on important suppliers before
our cooperation starts.
In the 2021/22 fiscal year, Voith Hydro entered into a settlement agreement with the World Bank onbringing to a conclusion proceedings against two companies in the Group Division that have beenrunning since 2018 and were already addressed in the consolidated financial statements in past years.
These proceedings centered on infringements by individual managerial employees of Voith Hydro
Shanghai Ltd. and Voith Hydro GmbH & Co. KG of World Bank regulations and compliance rules inplace throughout the Voith Group in connection with two projects financed by the World Bank in Asia
and Africa over the period between 2012 and 2016. Voith is giving highest priority to investigatingthese incidents. For this reason, the Company is cooperating fully with the World Bank and is actively
assisting with investigations on-site. Alongside the temporary debarment of two Voith Hydro subsidiaries
from projects financed by the World Bank, the settlement agreement also included Voith making asettlement payment to the countries concerned. Immediately after the incidents became known, Voith
took the necessary personnel-related measures and furthermore began working in collaboration with aninternationally renowned compliance expert to tighten the already very strict compliance rules throughout
the entire Company.  

III.3.6. Overall risk
To the best of our knowledge, there are no risks which, either individually or collectively, could jeopardize
the ability of the Voith Group to continue as a going concern. Of all the risks facing the Voith Group,
external risks could have the strongest negative impact on business development. Compared with theprevious year, the overall risk potential has risen slightly. We are convinced that, in light of our strong
diversification, the established market position in all three Group Divisions, our financial strength, andthe instruments used to control risks, our Group is able to bear the risks associated with our businessactivities.

Voith Annual Report 2022
Group Management Report
III. Risks and opportunities

75

III.4. Opportunities
In the following, we describe significant opportunities that could have a positive impact on our businessposition, net assets, financial position and earnings position, and lead to forecasts or targets being
exceeded. The order of the opportunities presented below reflects how we currently estimate the importance of these opportunities for the Voith Group. Unless stated otherwise, the following opportunities
relate to all the Group Divisions.
Growing our service businessWe are generally working towards expanding the service business and increasing its share of sales.
In the light of the overlapping crises, investment in new equipment and machines was postponedin several industries. With respect to the extended service life of existing equipment, customers are
increasingly tending to make more intensive use of our range of services, such as maintenance,
performance-enhancing components and spare parts. This offers opportunities in all Group Divisions
for our service activities, which might grow more strongly than currently anticipated.
Expansion of our portfolio with product innovations
We are constantly working on developing new technologies, products and solutions as well as improving
existing ones. We again launched numerous new products in the market for all Group Divisions in thereporting year. In the best-case scenario, this will not only allow us to secure our market position but
also to generate sales and to gain market share that has not yet been integrated in our business plan,
especially if innovations are recognized as value adding by our customers much faster than currently
assumed. We see opportunities particularly in products aimed at climate neutrality and resource
efficiency, such as products for sustainable paper production or for sustainable passenger and goods
transport, such as electrical drives. The Covid-19 pandemic further accelerated the digitalization ofmany industries. This offers growth potential for Voith with new digital solutions relating to the Industrial
Internet of Things.
Opportunities associated with the global economy
If the economic environment in important sales regions proves to be better over the short to medium
term than currently assumed, it is likely to have a positive impact on Voith’s business position, net
assets, financial position and earnings position. The extent and the duration of the economic slowdown
depend to a large degree on factors that are hard to predict: primarily, on the development of thegeopolitical conflict over Ukraine and the further course of the Covid-19 pandemic and, specifically, thecountermeasure strategies applied. The decisive factor will be how quickly the diverse market imbalancesand supply chain disruptions are resolved and the currently high rates of inflation can be brought down
to a healthier level. Global economic developments which exceed current expectations would benefit
all Group Divisions, albeit with different degrees of delay.
Growth through acquisitions
Alongside organic growth, we also strive for growth through business acquisitions and equity investments. Potential acquisition targets are profitable businesses with viable technology and above-average

76Voith Annual Report 2022
Group Management Report
III. Risks and opportunities

potential for growth, that complement our business in the existing markets or expand it with newactivities. We use structured M&A processes to continually screen potential target companies for theirsuitability. Even in the short term, acquisitions offer opportunities for additional earnings not provided
for in the business plan; in the midterm they can help improve our position in existing markets or open
up promising new industries for Voith. In addition, acquisitions may offer potential synergies.
New sales markets for existing products and services
As well as expanding our portfolio of offerings, we also evaluate market opportunities for our existingproducts and services in all of our Group Divisions in those regions where they have been underrepresented
to date or have no presence at all. Africa, for instance, offers great potential, especially for the Group
Divisions Hydro and Turbo. However, as the continent is struggling severely with the consequencesof the Covid-19 pandemic and the markets there are proving to be generally volatile and difficult topredict, we have made conservative assumptions in this respect for our business planning. We alsoseek to transfer our already successful products to new fields of application or sales areas. Anotherapproach that offers new growth opportunities especially for the Group Division Turbo consists of more
intense marketing of complete systems. This means that various components, some of which can also
be purchased from subcontractors, are combined in one system with an optimized setup. The resulting
additional sales potential has not yet been integrated in our business plan.
Increasing investments in the oil & gas market due to a sustained higher oil priceIndustry analysts currently assume that the oil price will remain at a relatively high level over the shortterm, which provides scope for investment, but it will fall below 80 US dollars per barrel of Brent crude
oil over the medium term. Should the oil price remain permanently at a high level, oil companies might
increase their investments and expenditure on service activities more sharply than expected. This would
improve Group Division Turbo’s order situation.
Expectations on volume awarded in the hydropower market exceeded
On account of the scale of many hydropower projects, the annual volume awarded on the market
is exposed to volatile fluctuations. In the event that some of the major projects currently on hold areawarded in the 2022/23 fiscal year, this would lead to an unexpected upward spike and improve theGroup Division Hydro’s order situation.

Voith Annual Report 2022
Group Management Report
IV. Forecast report

IV.

77

Forecast report
IV.1. Business environment
Global economic downturn expected
At the beginning of the 2022/23 fiscal year, the global economy remains in a downturn and is confronted
by major challenges and uncertainties. There is a series of factors overshadowing the outlook. These
include, but are not limited to, the war in Ukraine and its consequences, the extraordinarily high inflation
rates worldwide and the associated restrictive monetary policy on the part of most central banks, theCovid-19 pandemic that has not yet been overcome, and ongoing disruptions to supply chains. All sales
regions relevant to Voith are affected by at least some of these growth-inhibiting factors.
Global economic growth is expected to remain slow over the coming two years. In its latest release from
October 2022, the IMF forecasts global economic growth of 3.2 % in 2022 to be followed by a slowingof the growth rate to 2.7 % the following year. For 2024, economic growth is projected to be only at thelevel of 2022 (IMF forecast: +3.2 %).
An overview of the growth rates expected by the IMF in 2023 and 2024 for regions and countries mostimportant to Voith is presented below:
Economic growth
Real change in GDP1) on the previous year

World output
Advanced economies
USA
Euro area2)
Germany
Emerging market anddeveloping economies
China
ASEAN-5
India
Brazil

2023

2.7 %

2024

3.2 %

2023

1.1 %

2024

1.6 %

2023

1.0 %

2024

1.2 %

2023

0.5 %

2024

1.8 %

2023

-0.3 %

2024

1.5 %

2023

3.7 %

2024

4.3 %

2023

4.4 %

2024

4.5 %

2023

4.9 %

2024

4.9 %

2023

6.1 %

2024

6.8 %

2023

1.0 %

2024

1.9 %

Source: International Monetary Fund (IMF); World Economic Outlook, October 2022.
1)

Forecasts.

2)

Including Germany.

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Voith Annual Report 2022
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IV. Forecast report

Germany, our most important market, is expected to enter recession over the full year 2023, particularly as industrial production is severely hit by the critical energy supply and the rise in the pricesof raw materials, intermediate products and components. A technical recession, meaning that thegross domestic product will contract in at least two consecutive quarters, will be seen in many othereconomies in Voith’s 2022/23 fiscal year. With regard to the euro zone as a whole and for the USA,the forecast for 2023 is stagnation with very low growth rates of 0.5 % (euro zone) and 1.0 % (USA).
Even if the trend in most emerging markets will probably turn out to be slightly more dynamic than inadvanced economies, the diverse crises are also leaving their mark on the former. In China, for example,
the forecast growth rate remains at a low level in comparison to the years prior to the outbreak of theCovid-19 pandemic on account of the strict zero-Covid policy and an impending real estate crisis. The
growth rates for India are expected to be in excess of 6 %. Brazil’s gross domestic product is forecast
to grow by only 1.0 % (2023) and 1.9 % (2024). At the same time, the Brazilian economy is alreadyweakened by many years of economic and political crisis.

The material risks
to global economic
development can befound in section III.3.
Risks.

All in all, the economic environment remains volatile. The already very subdued forecasts are, according
to the IMF’s own statements, subject to great uncertainty with the balance of risks currently tilted to thedownside. These risks most notably include Russia completely stopping its gas supplies to Europe, adeterioration in the Covid-19 pandemic and protracted high inflation rates caused by further shocks
from energy or food prices or insufficient monetary policy measures.

Divergent developments in the Voith markets
In light of the economic downturn, the mechanical and plant engineering segment is likely to be facedwith increasing reluctance to invest over Voith’s 2022/23 fiscal year, but it does have a high volume oforders on hand. Over the short term, supply-side burdens such as supply chain problems, shortagesof materials and labor as well as rising energy and raw materials costs are the greatest challenges.
A decline in production in real terms is expected for the German mechanical and plant engineering
industry in 2023.
Of the five Voith markets, it will primarily be, in our estimation, important segments of the transport &automotive market and the paper machine market that will feel the brunt of the economic slowdown.
The raw materials, oil & gas and energy markets should benefit from the current high prices on thesemarkets, but they will probably continue to be marked by a great degree of volatility.
The medium- to long-term growth trajectory of the energy market is characterized by rising needs
worldwide, which necessitate increasing investments in the creation of additional power generation
capacities. At the same time, there is a transition to low-emissions energies underway, particularly inWestern industrial countries and China. Alongside climate change and the objective of decarbonization,

Voith Annual Report 2022
Group Management Report
IV. Forecast report79

the driving factors include Europe’s efforts to become independent of Russia. For hydropower, being asustainable form of energy generation, the energy transition also provides potential. Over the medium
term, hydropower will play a significant role in the energy mix and continue to grow. As part of the great
expansion of wind and solar energy, the demand for pumped storage power plants for safeguarding gridstability and supply reliability is also growing. Over the short term, the volume of contracts awarded in thehydropower market may be exposed to volatile fluctuations from year to year that are difficult to predict.
In the field of conventional energies, growth is expected most of all with nuclear electricity generation.
The oil & gas market will most probably continue to be characterized by high volatility over the 2022/23
fiscal year. According to forecasts by industry experts, the prices of oil and gas will decline a little again
in comparison to the reporting year but will remain at a high level on account of the market turbulence.
The high profits of oil and gas producers in 2022 provide more scope for investments over the shortterm. On the other hand, global efforts to reduce fossil energies with a view to limiting CO2 emissions
is dampening the sector’s willingness to invest.
On account of an expected slight increase in global paper production, we are anticipating a risingdemand for consumables and spare parts and a further recovery in the service business on the paper
market, subject to the assumption that contact restrictions will not be imposed again in most regions.
Investment in new lines is currently restrained by the present economic and geopolitical crises. The
focus of investment activities is increasingly being placed on rebuilds, specifically to convert graphic
machines to plants for manufacturing board and packaging papers.
With regard to the raw materials market, we assume that prices will calm down again somewhat, butwill remain at a high level. In this light, investment activity in the mining industry is expected to remainhigh. In our assessment, the focal point of investment will be on efficiency-boosting and sustainable
technologies that will be, however, subject to high price pressure. Over the medium to long term,worldwide efforts to achieve climate neutrality are likely to cause a sharp rise in the demand for raw
materials such as aluminum, copper and nickel.
The picture for the transport & automotive market is varied. In light of the economic slowdown and thesignificant rise in fuel costs, our outlook for the commercial vehicle segment is subdued. Industry experts
expect the truck market and the bus market to expand slightly over 2023 in comparison to the previous
year, but not to return to the level prior to the outbreak of the Covid-19 pandemic until 2025. An economic
downswing would, however, have a short-term negative impact on unit sales figures in the commercial
vehicle segment. The global rail market will in all probability continue to expand over the coming years,
benefiting from the global climate protection efforts and the trend towards urbanization. Additional
opportunities stem from digitalization of rail traffic and harmonization of European railroad systems. In
the marine segment, we anticipate an ongoing recovery in demand: growth potential is offered by themaritime energy transition, subsidized by governments in some cases, that will lead to modernizationof fleets and new build programs – with a focus on low-consumption vessel propulsion systems.

80Voith Annual Report 2022
Group Management Report
IV. Forecast report

IV.2. Future development of the Voith Group
Increase in profitability
Over the last three years, which were marked by crises, Voith has demonstrated the resilience of its
business model and its organization. We made a conscious decision to continue investing even in timesof crisis: in research and development, business acquisitions, training and in the ongoing strategicand organizational development of our Company. By doing so, Voith has put itself into a good starting
position to generate sustainable and profitable growth in the future.
Our strategic focus on sustainable technologies will continue to point the way not only for theenhancement of our current core business but also for investments in new business segments andmarkets over the coming years. This involves a great deal of commitment to research and development
and targeted business acquisitions going forward.
Our Group forecasts for the four key financial performance indicators in the 2022/23 fiscal year are as
follows:

Voith Group

2021/22in € millions

2022/23
Forecast

Orders received

5,164

Slight decline

Sales

4,881

Slight increase

EBIT

200

Perceptible increase

ROCE

10.5 %

Perceptible improvement

We assume that the level of orders received by the Voith Group will remain at a good level in the 2022/23
fiscal year but will lag slightly behind the high value seen in the reporting year. Our forecast is based on
the assumption that all three Group Divisions will continue to face a challenging market environment
and that the paper market in particular will start to normalize after two years with extraordinarily strong
investment activity. The high level of orders on hand at the end of the reporting year will be reflectedgradually in increasing sales over the coming years. In the 2022/23 fiscal year, we anticipate slight growthin Group sales, essentially due to a good development at Voith Turbo. On account of the long projecttimes in the large-scale plant business, there will be a time lag before the high level of orders on handcurrently prevailing in the Group Divisions Hydro and Paper will be reflected in sales and earnings. In all
Group Divisions, we expect growth stimulus to come from the service business. We intend to further
improve our profitability. Over the last few years, we have worked very hard on optimizing our structuresand processes. The efficiency gains brought about by this are now becoming increasingly apparent.
These will be countered by increases, considerable in some cases, in the costs of materials, personnel
and energy. For the 2022/23 fiscal year, our business planning provides for a perceptible increase in
EBIT. All three Group Divisions are expected to contribute to this improvement in earnings. In line withthe development of the operating result, our planning also sees ROCE improving.

Voith Annual Report 2022
Group Management Report
IV. Forecast report81

The key performance indicators of the Voith Group and the Group Division Turbo are benefiting frompositive consolidation effects in connection with the acquisitions of Argo-Hytos in August 2022 and IGW
Rail in October 2022: in the 2022/23 fiscal year the financial figures for IGW Rail will be consolidated inour consolidated financial statements for the first time and those of Argo-Hytos for the first time for a
twelve-month period. All forecasts are stated before taking account of currency effects and the effectof any new M&A activities.
It should be noted that all forecasts involve a significant degree of uncertainty. Revenue recognition
might well continue to be impeded by delivery delays, materials shortages or travel limitations as aconsequence of potential further lockdowns in countries with a zero-Covid strategy, such as China, andalso in connection with the war in Ukraine – disruptions that might impact our customers’ operationsin addition to our own. In the event that the cost of materials, personnel and energy were to rise
more sharply than currently anticipated, this would place an additional burden on results. Economic
development in regions important to Voith falling noticeably short of expectations, due for example to
new exogenous shocks, would call in question our ability to reach our target level of orders received. A
recession in the countries important for Voith could have a considerable impact on sales, earnings andorders received. Our forecasts are based on the assumption that there will be no further escalation of
the stress factors and no additional serious political or economic turbulence.
Our forecasts for the Group Division Hydro are as follows:
2021/22in € millions

2022/23
Forecast

Orders received

1,184

Stable development

Sales

1,048

Stable development

EBIT

2

Perceptible increase

ROCE

1.0 %

Perceptible improvement

Group Division Hydro

Investment in the hydropower market is likely to remain dominated by Chinese pumped storage projects,
the majority of which are being implemented by Chinese competitors. However, we do expect ongoingstrong demand for pumped storage power facilities also outside of China, due to their role as enablersof grid stabilization. Furthermore, we have identified potential mainly in modernization projects and in theservice business. Within the scope of our business planning for the 2022/23 fiscal year, we assume thatthe volume of contracts awarded in the hydropower market relevant to Voith will remain roughly at thelevel of the reporting year. For Voith Hydro, we anticipate that orders received will reach approximately
the good level seen in the reporting year. In the event that the contract for a major order that is expected
for the next two years is finalized in the 2022/23 fiscal year already, the level of orders received would
rise very appreciably in comparison to the reporting year. The recent slight increase in the level of orders
received will be reflected only gradually in sales growth on account of the long project times inherent
in the hydropower sector. In the 2022/23 fiscal year, we anticipate a stable development. For EBIT and
ROCE, our business planning provides for a perceptible improvement starting from the very low levels
seen in the reporting year. Both key performance indicators are, however, expected to be below theGroup’s average in the 2022/23 fiscal year.

82

Voith Annual Report 2022
Group Management Report
IV. Forecast report

For the Group Division Paper we forecast the following developments:
2021/22in € millions

2022/23
Forecast

Orders received

2,256

Slight decline

Sales

2,196

Slight decline

Group Division Paper

EBIT

131

Slight increase

ROCE

26.2 %

Slight improvement

After paper manufacturers made extraordinarily high investments once again in the reporting year,
specifically with regard to the production of board and packaging paper, we expect the paper machine
market to normalize in the 2022/23 fiscal year: investments in new plants are likely to decline in light of
the large number of crises and uncertainties, whereas demand for rebuilds should remain high. In linewith the probable further increase in paper production and on account of the lifting of Covid-related
travel limitations, we see a slight increase in demand for consumables and services. The orders received
in the Group Division Paper are likely to remain at a very good level in the 2022/23 fiscal year, but willprobably decrease slightly on the extremely high figure seen in the reporting year. With regard to Voith
Paper’s sales, our business planning provides for a slight decline on the high reporting-year level. We
intend to achieve another slight increase in EBIT and, in doing so, bring about a slight improvement in
ROCE starting from the current high level.
Our forecasts for the Group Division Turbo are as follows:
2021/22in € millions

2022/23
Forecast

Orders received

1,636

Perceptible increase

Sales

1,557

Perceptible increase

EBIT

48

Perceptible increase

ROCE

5.0 %

Perceptible improvement

Group Division Turbo

We assume that the markets relevant for the Group Division Turbo will continue to stabilize in the2022/23 fiscal year, especially in China. Voith Turbo will see a positive consolidation effect, as IGW
Rail, that was acquired in October 2022, will be included in the Voith Group for the first time, andArgo-Hytos, that was acquired in August 2022, will be included for a full twelve-month period for the
first time. All in all, we forecast a perceptible increase in orders received in comparison to the previous
year. In light of the high volume of orders on hand at the end of the reporting year, we also anticipate
a perceptible increase in sales. All three divisions, Mobility, Industry and Off-Highway, are expected tocontribute to this growth. In an environment that remains very volatile, the successful implementationof our programs to boost efficiency in addition to the growth in volume will have a positive impact on
the earnings side. The opposite will come from increases in the costs of materials, personnel andVoith Annual Report 2022
Group Management Report
IV. Forecast report

83

energy. From today’s perspective, we forecast a perceptible improvement in EBIT and ROCE. Even
without taking account of the acquisitions of Argo-Hytos and IGW Rail, our business planning assumes
that EBIT and ROCE will increase perceptibly; orders received and sales would probably see a stabledevelopment without the consolidation effect.
The above forecast report shows the Voith Corporate Board of Management’s perspective on the future
course of business and reflects the state of knowledge at the time of reporting. The actual development
may deviate – positively or negatively – from these forecasts. Concerning the opportunities and risks
already known for the forecast development of business operations, we refer to section III. Risks andopportunities of this management report.
As a company, we see ourselves equipped in the best possible way for coming challenges. Thanks
to its broad sectoral and geographical positioning, the established market position in all three Group
Divisions as well as a sound balance sheet, Voith is extremely resilient. Voith has a product portfolio thatis fit for the future, an efficient organization and an outstanding, dedicated workforce. Our Company isin a good strategic position, and the reliable long-term access to capital provides us with the necessary
entrepreneurial scope needed to make important investments for the future and to implement thedecisions we deem suitable to enable us to continue along our path of sustainable profitable growth.

Heidenheim an der Brenz, November 29, 2022
The Board of Management of Voith Management GmbH
Dr. Toralf Haag
Stephanie Holdt
Dr. Stefan Kampmann
Andreas Endters
Dr. Tobias Keitel
Cornelius Weitzmann

Voith Annual Report 2022
Consolidated Financial Statements

Consolidated Financial
Statements

85

Page

Consolidated statement of income

86

Consolidated statement of comprehensive income

87

Consolidated balance sheet

88

Consolidated statement of changes in equity

90

Consolidated cash flow statement92­ otes to the consolidated financial statementsNfor the 2021 /22 fiscal year

93

Notes to the consolidated statement of income

122

Notes to the consolidated balance sheet

130

Notes to the consolidated cash flow statement

153

Notes on segment reporting154

Segment information by business segment

156

Segment information by region

158

Other notes

159

Responsibility statement

183

86

Voith Annual Report 2022
Consolidated Financial Statements
Consolidated statement of income

Consolidated statement of income
for the period from October 1, 2021 to Septem­ber 30, 2022
in € thousandsNote2021 /22

2020 /21

Sales

(1)

4,881,346

4,260,350

Changes in inventories and other own work capitalized(2)

81,58079,516

4,962,926

4,339,866

Total output
Other operating income(3)482,820

332,108*

Cost of materials(4)- 2,404,314- 1,977,789

Personnel expenses(5)- 1,581,749- 1,516,003

Depreciation and amortization- 179,968- 169,863

Impairment losses on trade receivables and contract assets, net- 15,403

10,508*- 1,128,793- 929,664*

Operational result

135,519

89,163

Share of profit/loss from companies accounted for using the equity method- 3,622- 6,470

Interest income

12,2999,675- 49,006- 31,331

21,164

19,057116,354

80,094- 86,704- 73,577

29,6506,517

0- 5,230

29,650

1,287

Other operating expenses(6)Interest expenses
Other financial result(7)

Result before taxes from continuing operations
Income taxes(8)

Net result from continuing operations
Net result from discontinued operations
Net result· N et result attributable to shareholders of the parent company

19,190- 9,059· N et result attributable to holders of non-controlling interests

10,46010,346* As of the 2021/22 fiscal year, the line item “Impairment losses on trade receivables and contract assets, net” will be reported separately.
Previous-year figures were adjusted accordingly.

Voith Annual Report 2022
Consolidated Financial Statements
Consolidated statement of comprehensive income

87

Consolidated statement ofcomprehensive income
for the period from October 1, 2021 to Septem­ber 30, 2022
in € thousands

2021 /22

2020 /21

Net result

29,6501,287

262,736

25,068- 977- 111,891

Components of other comprehensive income that will not be recycled through profit or loss inlater accounting periods:
Remeasurement of defined benefit plans
Taxes on components of other comprehensive income that will not be recycled through profit or loss inlater accounting periods
Components of other comprehensive income that will be recycled through profit or loss inlater accounting periods:
Gains/losses on financial assets and marketable securities- 3,075

423

Gains/losses on cash flow hedges

14,822- 570

Gains/losses on currency translation

144,248

39,503

Gains/losses on net investment in foreign operations

12,345

4,828

Taxes on components of other comprehensive income that will be recycled through profit or loss inlater accounting periods- 7,216- 453

Other comprehensive income

422,883- 43,092

Total comprehensive income

452,533- 41,805· Total comprehensive income attributable to shareholders of the parent company

440,876- 52,677· Total comprehensive income attributable to holders of non-controlling interests

11,657

10,872452,533- 41,805

Further information can be found in section 19.

88Voith Annual Report 2022
Consolidated Financial Statements
Consolidated balance sheet

Consolidated balance sheet
as at Sep­tember 30, 2022

Assetsin € thousandsNote2022-09-30

2021-09-30

A.

Non-current assets

I.

Intangible assets(9)

1,159,589

975,224II.

Property, plant and equipment(10)

1,081,034

1,019,772

III.

Investments accounted for using the equity method(11)

43,58348,758IV.

Securities

10,985

12,779V.

Other financial assets(16)

184,581

55,622VI.

Other financial receivables(15)

73,22447,913VII.

Other assets(15)

41,633

18,544

VIII.

Deferred tax assets(8)

Total non-current assets

98,167

92,4102,692,796

2,271,022

681,444

B.

Current assets

I.

Inventories(12)878,631

II.

Trade receivables(13)

882,037

744,140

III.

Contract assets(14)715,432

573,952

IV.

Securities(16)

58,59551,337

V.

Current income tax assets

51,00633,996VI.

Other financial receivables(15)

102,322

95,127

VII.

Other assets(15)

153,538

138,854

VIII.

Cash and cash equivalents(17)411,892

511,165

3,253,453

2,830,015

9,704

12,503

Total current assets

3,263,157

2,842,518

Total assets

5,955,953

5,113,540

IX.

Assets held for sale(18)

Voith Annual Report 2022
Consolidated Financial Statements
Consolidated balance sheet

89

Equity and liabilitiesin € thousandsNote2022-09-30

2021-09-30

A.

EquityI.

Issued capital

120,000

120,000

II.

Revenue reserves

1,178,451

925,988

III.

Other reserves- 13,782- 181,385

IV.

Profit participation rights

6,600

6,600

1,291,269

871,203

Equity attributable to shareholders of the parent company
V.

Profit participation rights

96,80096,800VI.

Other interests

48,011

46,774

144,811

143,574(19)

1,436,080

1,014,777

Equity attributable to non-controlling interests
Total equity
B.

Non-current liabilities

I.

Provisions for pensions and similar obligations(20)545,223

799,529

II.

Other provisions(21)

116,499

139,651

III.

Income tax liabilities

313

99

IV.

Bank loans and other interest-bearing liabilities(22)839,009

632,548

V.

Other financial liabilities(24)

38,42136,194VI.

Other liabilities(24)

44,31545,417

VII.

Deferred tax liabilities(8)

Total non-current liabilities

98,50153,517

1,682,281

1,706,955

C.

Current liabilities

I.

Provisions for pensions and similar obligations(20)

32,86733,180II.

Other provisions(21)

325,425

287,411

III.

Income tax liabilities

52,011

37,185

IV.

Bank loans and other interest-bearing liabilities(22)

262,119

155,061V.

Trade payables(23)

729,446

569,575

VI.

Contract liabilities(14)

1,008,444

938,859

VII.

Other financial liabilities(24)

280,385

233,490

VIII.

Other liabilities(24)

146,895

137,047

Total current liabilities

2,837,592

2,391,808

Total equity and liabilities

5,955,953

5,113,540

90

Voith Annual Report 2022
Consolidated Financial Statements
Consolidated statement of changes in equity

Consolidated statement of changes in equity
Equity attributable to shareholdersof the parent companyin € thousands

Issuedcapital

Revenue
reserves

Financial assets
and marketablesecurities

Cash flow
hedgesCurrencytranslation

2021-10-01

120,000

925,988- 47,593- 290- 101,429

254,083- 2,770

14,800143,228

273,273- 2,770

14,800143,228- 50,363

14,51041,799Net result

19,190

Other comprehensive income
Total comprehensive income

0

Allocation of profit participation rights- 5,590

Share of net result attributable to profit
participation rights
Dividends- 20,000

Non-controlling interests – put options

3,823

Other adjustments
2022-09-30

957
120,000

1,178,451

Equity attributable to shareholdersof the parent companyin € thousands

Issuedcapital

Revenue
reserves

Financial assets
and marketablesecurities

Cash flow
hedgesCurrencytranslation

2020-10-01

120,000

1,040,815- 47,601

103- 140,510

Net result- 9,059

Other comprehensive income- 86,850

8- 393

39,081- 95,909

8- 393

39,081- 47,593- 290- 101,429

Total comprehensive income

0

Allocation of profit participation rights- 5,590

Share of net result attributable to profit
participation rights
Dividends- 20,000

Non-controlling interests – put options

6,148

Other adjustments
2021-09-30

Further information can be found in section 19.

524
120,000

925,988

Voith Annual Report 2022
Consolidated Financial Statements
Consolidated statement of changes in equity

91

Equity attributable
to non-controlling interests
Net investment
in foreign
operations

Profitparticipationrights- 32,073

6,600

12,345
12,345

Otherinterests

Total

Total
equity871,203

96,80046,774

143,574

1,014,777

19,19010,46010,46029,650421,686

1,197

1,197

422,883

11,657

11,657452,533

5,227

0

0

440,876

0363- 5,227

5,227

- 363

- 5,227- 363- 19,728

Total

Profitparticipationrights6,600- 5,227- 5,590- 20,000- 5,904- 5,904- 25,904

3,823- 4,524- 4,524

- 701

957

8

8

965

48,011

144,811

1,436,080

1,291,269

96,800Equity attributable
to non-controlling interests
Net investment
in foreign
operations

Profitparticipationrights- 36,609

6,600

4,536
4,536

Other
interests

Total

Total
equity942,798

96,80043,871

140,671

1,083,469- 9,059

10,346

10,346

1,287- 43,618526

526- 43,092

10,872

10,872- 41,805

5,227

0

0

- 52,677

0363- 5,227

5,227

- 363

- 5,227- 363- 32,073

Total

Profitparticipationrights6,600- 5,227- 5,590- 20,000- 4,571- 4,571- 24,571

6,148- 3,501- 3,501

2,647

524

103

103

627

46,774

143,574

1,014,777871,203

96,800

92

Voith Annual Report 2022
Consolidated Financial Statements
Consolidated cash flow statement

Consolidated cash flow statementin € thousands

2021 /22

2020 /21

Result before taxes from continuing and discontinued operations

116,354

74,864

Depreciation and amortization

174,451

152,948

Interest expenses/income

36,70721,656

Other non-cash items- 2,612

16,876

Gains/losses from the disposal of property, plant and equipment and intangible assets- 9,067- 482

Gains/losses from investments- 5,049- 55

Changes in provisions and accruals- 10,212- 7,587

Change in net working capital- 134,500- 47,201

Interest paid

- 19,308- 17,484

Interest received

7,963

6,088

Dividends received

6,190

1,387

Taxes paid

- 68,357- 57,416

Cash flow from operating activities

92,560143,594- 116,244- 112,139

22,276

6,148

Investments in financial assets- 138,771- 42,556

Acquisitions of consolidated subsidiaries minus cash and cash equivalents- 192,095

00- 17,289

Investments in property, plant and equipment and intangible assets
Proceeds from the disposal of property, plant and equipment and intangible assets

Payments in connection with the acquisition of consolidated companies in the previous year
Proceeds from the disposal of financial assets

26,891

5,491

Proceeds from the disposal of securities

208,847

283,494

Payments for the acquisition of securities- 212,133- 208,049

Cash flow from investing activities- 401,229- 84,900

Dividends paid

- 32,248- 30,582

Acquisition of non-controlling interests- 15,334- 21,202

New bank loans and overdrafts

328,791

42,313

Repayment of bank loans and overdrafts- 69,491- 108,849

Changes in other interest-bearing financial receivables and liabilities- 40,372- 28,954

Cash flow from financing activities

171,346- 147,274

Total cash flow

- 137,323- 88,580

38,05017,979Cash and cash equivalents at the beginning of the period

511,165

581,766

Cash and cash equivalents at the end of the period

411,892

511,165

Exchange rate movements and valuation changes

Further information can be found in the section “Notes to the consolidated cash flow statement”.

Voith Annual Report 2022
Consolidated Financial Statements­N otes to the consolidated financial statements for the 2021/22 fiscal year93

­ otes to the consolidatedN
financial statements for the2021/22 fiscal year
General information
Voith GmbH & Co. KGaA (Voith), which has its headquarters at St. Pöltener Str. 43, Heidenheim an
der Brenz, is registered at the commercial register in Ulm, Germany (HRB 735450) and is the parent
company of the Voith Group. The Board of Management of Voith Management GmbH (commercial
register number HRB 735126) is responsible for the strategy and operative management of theVoith Group. Voith Management GmbH is the personally liable shareholder (general partner) of, andresponsible for, the management of the business of Voith GmbH & Co. KGaA.
Voith GmbH & Co. KGaA prepares its own consolidated financial statements as at September 30,
2022, in accordance with IFRS as endorsed by the EU, and a Group management report. JMV SE &Co. KG, as the ultimate parent company, prepares consolidated financial statements as at September
30, 2022, in accordance with IFRS as endorsed by the EU, and a Group management report for thelargest consolidated group of companies. Both sets of consolidated financial statements are publishedin the Bundesanzeiger (German Federal Gazette). The Board of Management of Voith Management
GmbH authorized the consolidated financial statements for presentation to the Supervisory Board on
November 29, 2022.
The preparation of the consolidated financial statements for the 2021/22 fiscal year in accordance withIFRS as endorsed by the EU, and in accordance with the interpretations of the International Financial
Reporting Interpretations Committee (IFRIC), was undertaken on a voluntary basis because Voith does
not participate in capital markets as defined by EU Regulation (EC) No. 1606/2002. In preparing these
consolidated financial statements, Voith has applied all pronouncements which are mandatory for listedcompanies issued by the International Accounting Standards Board (IASB) as well as the additional
requirements of German commercial law pursuant to Sec. 315e HGB (German Commercial Code).
The consolidated financial statements have been prepared in euros. Except where explicitly statedotherwise, all amounts are stated in thou­sands of euros (€ thou­sand). Minor rounding differences
may occur.
The Voith Group is divided into three segments: Hydro, Paper and Turbo. Details of the businessactivities pursued by the Group’s segments are provided in the explanatory notes on segment reporting.

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Voith Annual Report 2022
Consolidated Financial Statements­N otes to the consolidated financial statements for the 2021/22 fiscal year

Consolidated group
In addition to those entities acting as holding companies, the consolidated financial statements also
include all the Group’s manufacturing, service and sales companies both in Germany and in othercountries as at September 30 of each fiscal year. The financial statements of the subsidiaries areprepared for the same period as their parents’ financial statements, using consistent accounting
policies.
Subsidiary companies are consolidated in full from the date on which the Group obtains control. They
are no longer included in the consolidation as soon as the parent company ceases to have control. For
five companies (previous year: five), control over companies included in the consolidation is obtained
due to the fact that the Group has a majority of voting rights in the relevant decision-making bodies.
The following companies are included in the consolidated financial statements:
2022-09-30

2021-09-30

Voith GmbH & Co. KGaA and its fully consolidated subsidiaries:· Germany

25

24· Other countries

133

116

158

140

· Germany44· Other countries

5

6

9

10

Associates and joint ventures:

The following significant companies are included in the consolidated
financial statements:
VZ
Voith GmbH & Co. KGaA, Heidenheim an der Brenz, Germany
VZB
J.M. Voith SE & Co. KG, Heidenheim an der Brenz, Germany
VZUS-VO Voith US Inc., Appleton (WI), USA
VHH
VHY
VHP
VHPO
VHM
VHS
VHFK
VHN

Voith Hydro GmbH & Co. KG, Heidenheim an der Brenz, Germany
Voith Hydro Inc., York (PA), USA
Voith Hydro Ltda, São Paulo (SP), Brazil
Voith Hydro GmbH & Co. KG, St. Pölten, Austria
Voith Hydro Inc., Brossard (QC), Canada
Voith Hydro Shanghai Ltd., Shanghai, China
Voith Fuji Hydro K.K., Kawasaki-shi, Kanagawa, Japan
Voith Hydro Private Limited, New Delhi, India

Voith Annual Report 2022
Consolidated Financial Statements­N otes to the consolidated financial statements for the 2021/22 fiscal year

VPP
VPIT
VPC
VPFI
VPTA
VPTI
VPBE

Voith Paper Máquinas e Equipamentos Ltda., São Paulo (SP), Brazil
Voith IHI Paper Technology Co., Ltd., Tokyo, Japan
Voith Paper (China) Co., Ltd., Kunshan, Jiangsu, China
Voith Paper Fabrics Ipoh Sdn. Bhd., Chemor, Perak Darul Ridzuan, Malaysia
Voith Paper S.A., Ibarra (Guipúzcoa), Spain
Toscotec S.p.A., Marlia (LU), Italy
BTG Eclépens S.A., Eclépens, Switzerland

VTKT
VTCN
VTPA
VTGB
VTAU
VTIV
VTEM
VTYD

Shanghai Voith Schaku KTK Coupler Technology Co., Ltd., Shanghai, China
Voith Turbo Power Transmission (Shanghai) Co., Ltd., Shanghai, China
Voith Turbo Ltda., São Paulo (SP), Brazil
Voith Turbo Limited, Croydon, United Kingdom
Voith Turbo Pty. Ltd., Smithfield (N.S.W.), Australia
Voith Turbo S.r.l., Reggio Emilia, Italy
ELIN Motoren GmbH, Preding/Weiz, Austria
ARGO-HYTOS GmbH, Kraichtal-Menzingen, Germany

95

An exhaustive list of the companies and other investments included in the consolidated financial
statements can be found in the consolidated financial statements. The consolidated financial statementsof Voith GmbH & Co. KGaA are filed with the Bundesanzeiger pursuant to Sec. 264b No. 4 HGB and
Sec. 264 (3) No. 5 HGB.
Non-controlling interests are held in the following significant subsidiary companies:
Voith Hydro Holding GmbH & Co. KG, Heidenheim an der Brenz, Germany

Non-controlling shareholdings, in %2022-09-30

2021-09-30

35

35

The voting share capital held by Voith Hydro GmbH & Co. KG is equal to the percentage of sharecapital held.

96

Voith Annual Report 2022
Consolidated Financial Statements­N otes to the consolidated financial statements for the 2021/22 fiscal year

The following table shows the financial data of significant subsidiary companies with non-controllingshareholders (the figures are those of the Voith Hydro Holding GmbH & Co. KG segment):
Voith Hydro Holding GmbH & Co. KG, Heidenheim an der Brenz, Germanyin € thousands

2022-09-30

2021-09-30

Sales

1,052,240

946,828

Net result- 36,159- 19,456

Net result attributable to non-controlling interests- 14,860- 11,290

Other comprehensive income

72,593

19,553

Total comprehensive income

36,43497

Total comprehensive income attributable to non-controlling interests

11,199- 3,473

1,091,895

872,490

Current assets
Non-current assets

273,435

243,128

Current liabilities

1,107,038

864,637

Non-current liabilities

126,839

149,661

Net assets

131,453

101,320

Net assets attributable to the non-controlling interests

33,431

22,232

Cash flow from operating activities

48,952- 62,650

Cash flow from investing activities- 3,689- 12,449

Cash flow from financing activities- 48,392

60,862

Total cash flow

- 3,129- 14,237

Net foreign exchange difference

2,541

1,035

Net increase/decrease in cash and cash equivalents- 588- 13,202

Voith Annual Report 2022
Consolidated Financial Statements­N otes to the consolidated financial statements for the 2021/22 fiscal year

97

Business combinations in the 2021/22 fiscal year
ARGO-HYTOSOn August 2, 2022, Voith acquired 79.5 % of the shares in ARGO-HYTOS Group AG and its 19 subsidiaries (Argo-Hytos). Voith gained control through the acquisition of the majority of shares and voting
rights. Based in Baar, Switzerland, this company develops and produces components for hydraulics
and system solutions with a focus on the off-highway sector (agricultural machinery, construction
equipment and vehicles).
As a components and system supplier, Argo-Hytos serves customers in the field of mobile working
machinery and of general mechanical engineering. The family business with more than 1,600 employees
has more than 70 years’ experience in fluid and motion control and filtration technology in mobile andindustrial hydraulics. Argo-Hytos has become an innovation leader particularly in the area of mobile
hydraulics. It owns a number of patents and, in many cases, has set new standards in its industry. Withproduction companies in Germany, Czech Republic, Poland, India and China, as well as numerous own
international distribution and assembly companies, the Argo-Hytos Group has operations worldwide.
Under the terms of the business combination, Voith agreed to acquire the remaining 20.5 % of theshares at a later date, where the non-controlling shareholder has fixed exercise periods within which
he is able to sell his shares to Voith (put option). Over and above this, Voith has the right to acquire
the non-controlling interest within fixed exercise periods (call option). The accounting treatment of theput option gives rise to an obligation of € 46.2 million that is reported in non-current financial liabilities.
The amount of this obligation was determined using discounted earnings indicators on the basis of
the contractually agreed terms, an assumption as to the expected exercise date, and an interest rateof 8.9 %.
The company and its 19 subsidiaries have been fully consolidated since August 1, 2022, and areallocated to the Group Division Turbo.
The business combination is presented using the anticipated acquisition method in combination withthe full goodwill method.
The difference between the purchase price and the acquired net assets revalued to their respective fairvalues amounting to € 84.2 million has been reported as goodwill, and represents the future economic
benefit of acquired assets that cannot be identified individually and reported separately. The goodwill
is not tax-deductible.
Since August 1, 2022, Argo-Hytos has contributed an additional € 36.5 million to the Group’s sales. The
share in net result for the same period amounted to € 1.5 million (this figure includes depreciation andamortization of the assets identified within the scope of the purchase price allocation of € 1.9 million).

98

Voith Annual Report 2022
Consolidated Financial Statements­N otes to the consolidated financial statements for the 2021/22 fiscal year

If Argo-Hytos had been included in the Group for the whole fiscal year, it would have generated additional sales of € 186.1 million and a net result of € 10.8 million.

in € thousands

Acquisition datefair value

Intangible assets

72,682

Property, plant and equipment

55,985Inventories

55,140Receivables and other assets

47,189Cash and cash equivalents

22,012

Pension obligations- 5,283

Other liabilities and accruals- 46,373

Liabilities to banks- 17,185

Option – financial liability- 46,222

Deferred tax liabilities- 13,436

Net fair value of equity

124,509

Goodwill- 84,232

Purchase price of the interests acquired

208,741

Cash and cash equivalents- 22,012

Cash outflows

186,729

The purchase price of the interests acquired was paid by means of the outflow of cash and cash
equivalents (€ 204.2 million) and the taking out of a loan (€ 4.5 million).
There are no significant differences between the gross value and the fair value of the receivables.
Suzlon Generators Ltd.
At the beginning of April 2022, Voith acquired the remaining 75 % of the shares in the Indian company
Suzlon Generators Ltd. Before the share purchase, the company was operated jointly with the Indian
partner Suzlon Energy and accounted for as an associate.
Suzlon Generators specializes in the manufacture of generators for onshore wind turbines. With theacquisition, Voith is expanding its expertise in the wind generator business.
The remeasurement of the 25 % shareholding in Suzlon Generators previously accounted for using
the equity method gave rise to a gain of € 1.6 million that was recognized in the Group’s statementof income in the item “Share of profit/loss from companies accounted for using the equity method”.
The remeasured 25 % shareholding and the purchase price for the 75 % shareholding acquired in the2021/22 fiscal year are listed in the table shown below.

Voith Annual Report 2022
Consolidated Financial Statements­N otes to the consolidated financial statements for the 2021/22 fiscal year

99

The company has been fully consolidated since April 1, 2022, and is allocated to our Group Division
Turbo. Until March 31, 2022, the 25 % shareholding was accounted for using the equity method.
The difference between the purchase price and the acquired net assets revalued to their respective fairvalues amounting to € 4.1 million has been reported as goodwill, and represents the future economic
benefit of acquired assets that cannot be identified individually and reported separately.
Since April 1, 2022, Suzlon Generators Ltd. contributed an additional € 5.8 million to the Group’s sales.
The share in net result for the same period was € -0.2 million.
If the company had been included in the Group for the whole fiscal year, they would have generated
additional sales of € 13.3 million and a net result of € -1.8 million.

in € thousands

Acquisition datefair value

Property, plant and equipment

4,321

Receivables

1,469

Other assets

1,870

Cash and cash equivalents

670

Other liabilities and accruals- 3,705

Deferred tax liabilities- 651

Net fair value

3,974

Goodwill

4,074

Fair value of the 100 % shareholding held by Voith

8,048

thereof: fair value of the 25 % shareholding already held

2,012

Purchase price of the 75 % shareholding newly acquired

6,036

Cash and cash equivalents- 670

Cash outflows

5,366

Business combinations in the 2022/23 fiscal year
At the beginning of October 2022, Voith acquired 100 % of the shares and voting rights of IGW Railand thus gained control of the company. Based in Brno, Czech Republic, this is a high-tech company
with worldwide operations at four production locations and around 500 employees; it has specializedin customized gear unit and coupling solutions for the rail vehicle industry.
With IGW Rail’s product and service portfolio, Voith is further expanding its range of offerings and isstrengthening its position as global provider of rail vehicle components.

100

Voith Annual Report 2022
Consolidated Financial Statements­N otes to the consolidated financial statements for the 2021/22 fiscal year

The acquired units will be fully consolidated from October 1, 2022, and are allocated to the Group
Division Turbo.
The purchase price was € 48 million and was paid in cash.
A breakdown of the difference, resulting from the acquisition, between the purchase price andthe acquired net assets of € 14 million prior to remeasurement was not yet available at the time of
preparation of the present consolidated financial statements and will be performed in the 2022/23 fiscal
year. It is currently not possible to make the other disclosures pursuant to IFRS 3.B64 as the allocation
process is still ongoing.
Discontinued operations in the 2021/22 fiscal year
The decision was made in the 2020/21 fiscal year to abandon the business operations of merQbiz LLC.
They were closed down before the end of that fiscal year.
Otherwise, there were no further discontinued operations in the 2021/22 fiscal year.
In the 2020/21 fiscal year, the following items were disclosed in the statement of income in the net result
from discontinued operations relating to merQbiz LLC:
2021 /22

2020 /21

Income0446

Expenses0- 5,676

Operational result before taxes

0- 5,230

Income taxes00

Net result0- 5,230in € thousands

There were no impairment losses as a consequence of the application of the provisions of IFRS 5.15
in the previous year.
Cash flow from discontinued operations:2021 /22

2020 /21

Cash flow from operating activities0- 3,865

Cash flow from investing activities

0791

in € thousands

Voith Annual Report 2022
Consolidated Financial Statements­N otes to the consolidated financial statements for the 2021/22 fiscal year

101

Basis of consolidation
Acquisition accounting is performed using the acquisition method in accordance with IFRS 3.
Accordingly, the consideration transferred to the seller plus any non-controlling interests and thefair value of the previously held equity interests in the acquiree are offset against the fair value of theacquired assets and liabilities as at the acquisition date. Any excess of cost over carrying amount isrecognized as goodwill. Any excess of carrying amount over cost is recognized in profit or loss.
Any contingent consideration is recognized at acquisition date fair value. Subsequent changes tothe fair value of the contingent consideration, which represents an asset or liability, are recognizedeither in profit or loss or in other comprehensive income in accordance with IFRS 9. If the contingent
consideration is classified as equity, it is not remeasured and its subsequent settlement is accounted
for within equity.
In the case of business combinations achieved in stages that give rise to control over an entity, or in
the case of disposals of shares which result in a loss of control, the previously held or remaining equity
interests are remeasured at fair value through profit or loss.
A change in the parent’s ownership interest in a subsidiary that does not result in a loss of control is
accounted for as an equity transaction. Accordingly, business combinations achieved in stages where
the Group already has control or disposals of shares without a loss of control have been recognizeddirectly in equity without affecting the result for the period from the 2009/10 fiscal year onwards.
Companies in which Voith GmbH & Co. KGaA has the power to directly or indirectly exercise asignificant influence on financial and operating policy decisions (associates) are accounted for using
the equity method, as are joint ventures over which common control is exercised together with othercompanies. Changes in the share of the associate/joint venture’s equity that are not recognized in profit
or loss are likewise recognized directly in equity in the consolidated financial statements. The sameaccounting policies are used to determine Voith’s share in equity of all companies accounted for using
the equity method.
Receivables and liabilities between the consolidated companies are eliminated on consolidation.
Intercompany profits in inventories and non-current assets are eliminated in the consolidated statementof income. Intercompany sales and other intercompany income are netted against the corresponding
expense. Deferred tax is recognized for consolidation transactions.

102

Voith Annual Report 2022
Consolidated Financial Statements­N otes to the consolidated financial statements for the 2021/22 fiscal year

Foreign currency translation
The consolidated financial statements are presented in euros, which is Voith GmbH & Co. KGaA’s
functional currency. Financial statements prepared by subsidiaries that use a different functional
currency are translated as follows:
The equity of foreign companies included in the consolidated financial statements is translated athistorical rates. All other items on the balance sheet are generally translated to the presentation
currency at the rates applicable as at the reporting date. Goodwill arising from business combinations
before transition to IFRS reporting is an exception to this rule. This goodwill continues to be translated
at historical exchange rates.
In the statement of income, income and expenses are translated at average exchange rates. Retained
earnings and losses are translated using the relevant historical exchange rate.
Differences arising from currency translation are netted with other reserves.
Foreign currency transactions in local financial statements are translated at the historical exchange
rates. At fiscal year-end the resulting monetary items are measured at the closing rate, and any
exchange rate gains or losses are recorded as foreign exchange gains or losses under other operating
income/expenses.
Exchange rate gains or losses resulting from long-term loans and liability balances, both between
Group companies and on external balances, as well as valuation effects arising from their associatedhedging instruments, are reported within financial results in the statement of income.
Currency translation differences arising from loans denominated in foreign currencies (where these areused to hedge a net investment in foreign operations) are recognized in other comprehensive income
until the underlying net investment is disposed of. These currency translation differences give rise todeferred tax items that are also recognized under other comprehensive income.

Accounting policies
Consistent accounting policies are used to prepare the separate financial statements for the companies
included in the consolidated financial statements. Significant accounting policies are described below.
Sales
In accordance with IFRS 15, revenue is recognized upon transfer of control of the goods or services tothe customer. The amount of revenue is determined on the basis of the transaction price taking accountVoith Annual Report 2022
Consolidated Financial Statements­N otes to the consolidated financial statements for the 2021/22 fiscal year103

of variable consideration. The latter is only included in determining the transaction prices if it is highly
probable that there will be no subsequent sales reversals. The “most likely amount” method is generally
chosen for estimating such variable consideration. The performance obligations identified are realized
both over time and at a point in time.
Specifically in the case of construction contracts for customer-specific plant and equipment at Voith
Paper and Voith Hydro, revenue is recognized over time if the transaction meets the criteria of IFRS
15.35. Such contracts are consequently recognized in accordance with the percentage-of-completion(PoC) method. The percentage of completion per contract to be recognized is calculated as the ratioof the actual costs incurred to the anticipated total costs of the project (“cost-to-cost method”). If theoutcome of a construction contract cannot be estimated reliably, it is not possible to calculate contract
revenue and costs based on the percentage of completion. In such cases, revenue is recognizedat the amount of costs incurred for the construction contract to date, with the contract costs being
recognized immediately and in full in the period in which they are incurred. Expected losses on suchcontracts are based on recognizable risks. In the case of contracts that are presented using the PoC
method, there is essentially only one performance obligation. In addition, revenue is recognized overtime in the case of service contracts and customer-specific products from the Group Divisions Turboand Paper. In the latter case, the criterion of no alternative use will, in some instances, only be met at
a later point in time, therefore recognition over time is not performed until this criterion is met.
For all other products, revenue is recognized at the point in time at which the customer obtains
control. This is generally the case when merchandise has been delivered or services performed andthe risk of ownership has been transferred to the customer. If, in the case of consignment warehouseagreements, control has already been transferred upon warehousing at the customer’s premises,
revenue is recognized at this point in time.
Voith uses the practical expedients pursuant to IFRS 15.129 and does not adjust transaction prices
for significant financing components, as the period between transfer of the goods or provision of theservice and payment by the customer is less than one year. Furthermore, the costs of obtaining acontract are not capitalized and amortized over the life of the contract as the amortization period would
be less than one year. In the case of contracts with a term of less than one year, the transaction prices
for obligations not yet fulfilled are not disclosed in accordance with the practical expedients of IFRS 15.
Other income and expenses
Interest expenses and income are recorded as they arise (using the effective interest method, i.e. theeffective interest rate at which the estimated future cash flows from the asset are discounted to thefinancial asset’s net book value over the expected term to maturity of the financial instrument).
Dividend income is recognized when the Group’s right to receive the payment is established.

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Operating expenses are recognized as expenditure at the time when a service is used and other salesrelated expenses are recognized as incurred. Taxes on income are calculated in accordance with tax
law in the countries in which the Group operates.
For all measurement categories recognized in accordance with IFRS 9, net gains or losses as definedin IFRS 7 result from the measurement or disposal of financial instruments. At Voith, such income andexpense items mainly consist of foreign exchange gains and losses, impairments, and gains/losses
from the sale of financial instruments. Neither current interest income and expenses nor dividend
income are included.
Intangible assets
Intangible assets acquired for monetary consideration are recognized at acquisition cost and amortizedon a straight-line basis over their estimated useful lives. Amortization is recognized on a straight-line
basis over the following useful lives:
Useful life
Customer relationships

5 to 17 years

Technology

5 to 19 years

Development costs

1 to 5 years

Internally generated intangible assets are capitalized as development costs based on their production
costs, provided that manufacture of these assets meets the recognition criteria stated in IAS 38 and,in particular, that the generation of future economic benefits is probable. The production costs include
all costs which are directly attributable to the development process and a proportionate share ofoverheads. These assets are amortized using the straight-line method from the date of completion,i.e. the start of production, over a defined period which is usually between three and five years. If therequirements for capitalization are not satisfied, expenses are recognized in profit or loss in the fiscal
year in which they were incurred.
Impairment losses are recorded in accordance with IAS 36 if the carrying amount of the asset exceeds
its recoverable amount. The recoverable amount is the higher of an asset’s value in use, the present
value of expected future cash flows from the use of the asset, and the fair value less costs to sell.
Should the reasons for impairment losses recognized in previous periods no longer apply, these
impairment losses are reversed.
The reversal posted through profit or loss is limited so that the carrying amount of the asset does notexceed its recoverable amount, nor exceed the carrying amount that would have been determined, netof amortization, had no impairment loss been recognized for the asset in previous years.
Impairment losses are generally shown in the statement of income under depreciation and amortization.
Reversals of impairment losses are reported under other operating income. Borrowing costs that are
directly attributable to intangible assets are capitalized as part of the cost of those assets.

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Goodwill is tested for impairment at least annually. For impairment testing, goodwill is assigned toessentially three groups of cash-generating units. In line with the management’s internal reporting
practices, these are identified on the basis of the Group’s operating activities. Voith has therefore
defined the segments Hydro, Paper and Turbo as relevant groups of cash-generating units. Goodwill
recognized on acquisition of some ventures that to date have been treated as own cash-generating
units will be tested for impairment on a stand-alone basis at the level of the respective unit. The units
Ray Sono AG, Pilotfish Networks AB and FlowLink Systems Private Ltd. come into this category.
The Voith Group generally determines whether goodwill is impaired by reference to the fair value lesscosts to sell. This is based on the discounted cash flow projections taken from the latest businessplanning prepared by management. The planning assumptions are adjusted to reflect the current
information available. Key assumptions on which calculations of fair value are based include assumptions
about the trend in orders received and sales, growth rates, extrapolated cash flow forecasts beyond
the planning horizon, and discount rates. Due account is taken of reasonable assumptions regarding
macroeconomic trends and historical developments. Based on the value in use measurement of theseassets there was no indication of a need to record an impairment loss on goodwill.
For the purposes of the impairment tests the following assumptions were made concerning the cash-­generating units:
Voith Hydro:
Following a higher than expected level of orders received in the reporting year, a stable development isanticipated for the 2022/23 fiscal year. The backlog of orders on hand will be gradually reduced overthe course of the 2022/23 fiscal year, which will result in a stable sales development.
Voith Paper:
After a sharp increase in the reporting year, a slight decline in orders received is expected for the2022/23 fiscal year. The Group Division Paper anticipates a slight decline in sales for the 2022/23 fiscal
year.
Voith Turbo:
Following a rise in orders received in the reporting year, a perceptible increase in orders received is
expected for the 2022/23 fiscal year. In light of the high level of orders on hand, Voith Turbo expects aperceptible increase in sales for the 2022/23 fiscal year. The increases are to a great extent a result of
the acquisition of Argo-Hytos and IGW Rail.
Ray Sono AG:
Perceptible growth in orders received and sales is anticipated over the planning years.
FlowLink Systems Private Ltd.:
Stable orders received are expected for the 2022/23 fiscal year and moderate growth in sales for theplanning years.

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Pilotfish Networks AB:
The planning years are expected to see a rising level in orders received and sales.
The cash flow forecast is based on the detailed finance budget for the coming two years and aqualified top-down projection for years three to five. Cash flows for periods after the fifth fiscal year are
extrapolated at a constant growth rate of approximately 1 % (Ray Sono AG: 2 %). These growth rates
do not exceed the average long-term growth rates of the business segment in which the corresponding
cash-generating unit operates.
The discount rates are arrived at by determining the weighted average cost of capital, which is basedon the financing costs of comparable competitors for each of the cash-generating units. The discountrates used reflect the specific equity risk associated with the respective cash-generating units. The
present values of future net cash inflows are determined using after-tax interest rates of 5.3 % for Voith
Hydro (previous year: 5.3 %), 6.3 % for Voith Paper (previous year: 6.3 %), 6.6 % for Voith Turbo (previous
year: 6.4 %), and 6.3 % (previous year: 6.2 %) for Ray Sono AG, FlowLink Systems Private Ltd. and
Pilotfish Networks AB. The rates extrapolated from the after-tax rates for which IAS 36 disclosures are
required are 6.9 % for Voith Hydro (previous year: 7.1 %), 8.6 % for Voith Paper (previous year: 8.5 %),9.2 % for Voith Turbo (previous year: 9.0 %), 8.3 % for Ray Sono AG (previous year: 8.0 %), 8.6 % for
Flow Link Systems Private Limited (previous year: 8.3 %), and 7.6 % for Pilotfish Networks AB (previous
year: 7.4 %).
The potential changes in the discount rate of +1 percentage point and in the anticipated future cash
flow of - 5 % assumed by the management for the segments Voith Paper and Voith Hydro as well as
FlowLink Systems Private Ltd., Pilotfish Networks AB do not give rise to any impairment. For the segment Voith Turbo, an increase in the discount rate of more than 1.01 percentage points or alternatively
a decrease in future cash flows of more than 16.7 percentage points would result in a need to record
an impairment loss. For Ray Sono AG, an increase in the discount rate of more than 0.94 percentage
points or alternatively a decrease in future cash flows of more than 18.7 percentage points would resultin a need to record an impairment loss.
The brands acquired in the 2019/20 fiscal year as part of the acquisition of BTG and Toscotec areclassified as intangible assets with an indefinite useful life. The brands are tested for impairment in asimilar procedure and as at the same measurement date (March 31) as with the impairment test of the
goodwill.
On the basis of an analysis of all relevant factors for determining the useful life of the BTG and Capstonebrands (legal, contractual and economic as well as the competitive situation), it is not possible toidentify a limit on the period in which cash flows from the BTG and Capstone brands can be expected.
The carrying amount of the brand BTG as at the reporting date is € 44.6 million (€ 38.8 million as at theacquisition date) and the brand Capstone is € 3.3 million (€ 2.9 million as at the acquisition date). Thechanges since the acquisition date are exclusively attributable to exchange rate differences.

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For the purpose of impairment testing, the BTG and Capstone brands were allocated to the “BTG”
and “Capstone” cash-generating units. As part of impairment testing, the recoverable amount wasdetermined by establishing the value in use on the basis of the present value of future cash flows
based on a 5-year financial planning. This planning is used to derive cash flows for the following years
with different growth rates being applied. A growth factor of 1 % is applied for the terminal value. To
determine the present values of future net cash inflows, an after-tax interest rate of 6.3 % was used for
BTG and Capstone (previous year: 6.3 %). The discount factor (before taxes) for the future cash flows
is 8.5 % (previous year: 8.5 %) for BTG and 8.0 % (previous year: 8.0 %) for Capstone, respectively, forthe 2021/22 fiscal year.
On the basis of an analysis of all relevant factors for determining the useful life of the Toscotec brand(legal, contractual and economic as well as the competitive situation), it is not possible to identify a limiton the period in which cash flows from the Toscotec brand can be expected. As at the reporting date,the carrying amount came to € 24.7 million, unchanged from the acquisition date.
For the purpose of impairment testing, the Toscotec brand was allocated to the “Toscotec” cashgenerating unit. As part of impairment testing, the recoverable amount was determined by establishingthe value in use on the basis of the present value of future cash flows based on a 5-year financial
planning. This planning is used to derive cash flows for the following years with different growth rates
being applied. A growth factor of 1 % is applied for the terminal value. To determine the present valuesof future net cash inflows, an after-tax interest rate of 6.3 % was used for Toscotec. The discount factor(before taxes) for the future cash flows is 8.6 % (previous year: 8.1 %) for the 2021/22 fiscal year.
Within the scope of the acquisition of Argo-Hytos, the brand identified as part of the purchase priceallocation was classified as an intangible asset with an indefinite useful life.
On the basis of an analysis of all relevant factors for determining the useful life of the Argo-Hytos brand(legal, contractual and economic as well as the competitive situation), it is not possible to identify alimit on the period in which cash flows from the Argo-Hytos brand can be expected. As at the reporting
date, the carrying amount came to € 34.8 million (€ 34.1 million at the acquisition date). The changes
since the acquisition date are exclusively attributable to exchange rate differences.
For the purpose of impairment testing, the Argo-Hytos brand was allocated to the “Argo-Hytos” cashgenerating unit. As part of impairment testing, the recoverable amount was determined by establishingthe value in use on the basis of the present value of future cash flows based on a 5-year financial
planning. This planning is used to derive cash flows for the following years with different growth rates
being applied. A growth factor of 1 % is applied for the terminal value. To determine the present valuesof future net cash inflows, an after-tax interest rate of 6.6 % was used for Argo-Hytos. The discountfactor (before taxes) for the future cash flows is 8.9 % for the 2021/22 fiscal year.
The impairment testing performed did not lead to any need to recognize impairment losses on thebrands.

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The potential changes in the discount rate of +1 percentage point and in the anticipated future cash
flows of - 5 percentage points assumed by management for all brands capitalized does not result in aneed to record an impairment loss.
Property, plant and equipment
Property, plant and equipment are stated at cost less depreciation and after deduction of any impairment losses. The production cost of internally produced property, plant and equipment includes all
directly attributable production costs and an appropriate share of production overheads. Depreciationis recognized on a straight-line basis over the following useful lives:
Useful life
Buildings

40 to 50 years

Plant and machinery

4 to 15 years

Other equipment, furniture and fixtures

4 to 12 years

The carrying amount of property, plant and equipment capitalized is tested for impairment if unusual
events or market developments give rise to indications of impairment. To this end, the carrying amountof an asset or cash-generating unit is compared with its recoverable amount, which is defined as thehigher of fair value less costs to sell and value in use. Impairment losses are reversed if the fair value ofa previously impaired asset subsequently increases again.
The reversal posted through profit or loss is limited so that the carrying amount of the asset does notexceed its recoverable amount, nor the carrying amount that would have been determined, net of
depreciation, had no impairment loss been recognized for the asset in previous years.
Impairment losses are generally shown in the statement of income under depreciation and amortization.
Reversals of impairment losses are reported under other operating income. Repair and maintenancecosts are recognized as expenses at the time when they are incurred. Any major renewals or
improvements are capitalized. Borrowing costs that are directly attributable to property, plant andequipment are capitalized as part of the cost of those assets.
LeasesIFRS 16 defines a lease as a contract (or part of a contract) that conveys the right to use an identifiable
asset (the underlying asset) for an agreed period of time in exchange for consideration. In this context,
a contract is an agreement between two or more parties (lessor and lessee) that creates enforceable
rights and obligations. In accordance with IFRS 16, the Voith Group, acting as lessee, generallyVoith Annual Report 2022
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recognizes all leases in the form of a right of use and a corresponding liability. The lease liability isrecognized at the present value of future lease payments taking into account extension, terminationand purchase options that are reasonably certain to be exercised. The right of use is calculated with theamount of the lease liability plus all lease payments made upon or prior to provision of the leased asset
and initial direct costs and estimated costs for the disassembly, disposal or restoration of the leased
asset, less all incentive payments received from the lessor. The right of use is amortized on a straightline basis and the lease liability is accreted applying the effective interest method taking account of
the incremental borrowing rate of the lessee and the lease payments. To determine its incremental
borrowing rate, the Voith Group obtains interest rates from various external sources of finances andmakes certain adjustments to take into account the terms of the lease and the type of asset. Lease
payments are split into a principal component and interest payments. In the cash flow statement, theinterest component is disclosed in the cash flow from operating activities, whereas the repayments oflease liabilities are shown as part of the cash flow from financing activities.
The Voith Group makes use of the simplifications contained in IFRS 16 for short-term and low-value
leases (up to USD 5 thou­sand). Payments under such leases are recognized as expenses directly inthe statement of income. The provisions of IFRS 16 on the accounting treatment of leases are notapplied to leases for intangible assets. Similarly, leases within the Group are not accounted for inaccordance with IFRS 16 so that for the segment reporting pursuant to IFRS 8 the lease payments
under these lease arrangements will continue to be recorded in profit or loss over the term of the leaseusing the straight-line method. At every reporting date, the carrying amounts of rights of use underlease arrangements are assessed for any indication of impairment. If there are any such indications, animpairment test will be performed.
Financial instruments
A financial instrument is any contract that simultaneously gives rise to a financial asset of one party to thecontract and a financial liability or equity instrument of the other party to the contract. Financial assets
and liabilities are recorded for the first time on the trading date and recognized in the consolidatedbalance sheet when Voith is a contract party to a financial instrument.
For the classification of financial instruments, the Group distinguishes between the following
measurement categories: measured at amortized cost (AC), measured at fair value through othercomprehensive income (FVOCI) and measured at fair value through profit or loss (FVTPL).
Financial assets (debt instruments) – measured at amortized cost (“AC”)
The Group recognizes debt instruments at the date they are originated. Such assets are initiallyrecognized either at fair value plus directly attributable transaction costs or, in the case of tradereceivables, at the transaction price. Subsequent to initial recognition, they are measured at amortizedcost (AC) to the extent that the objective of the business model is to hold the financial assets in orderto realize the contractual cash flows. In this respect, the cash flow condition (“SPPI criterion”) is met

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when the contractual terms of the financial asset give rise to cash flows at determined points in timethat constitute solely payments of principal and interest (SPPI).
Financial assets (equity instruments) – measured at fair value through other comprehensive
income (“FVOCI”)
Generally speaking, equity instruments are to be measured at fair value through profit or loss upon initialrecognition. During first-time recognition, it is possible to exercise an irrevocable option of classifying
equity instruments as measured at fair value through other comprehensive income. Equity instruments
may be classified as measured at fair value through other comprehensive income only if they areneither held for trading nor constitute contingent consideration as part of a business combination(OCI option). Voith exercised the OCI option for equity instruments held as a strategic investment
in order to supplement the Group’s business operations. These are measured at fair value throughother comprehensive income. Furthermore, the Group holds financial assets to cover future pension
obligations. These pension funds are not held for trading. Consequently, Voith also exercised the OCI
option for these instruments, with the underlying financial assets being measured at fair value throughother comprehensive income (FVOCI). There is no intention to generate short-term gains on disposalof any material amount from such instruments. For this reason, fluctuations in the measurementof investments and the financial assets used for securing pensions should not have any effect on
the statement of income. Changes in the market value arising from subsequent measurement andaccumulated gains/losses in the event of derecognition at a later date are posted directly in equity andare never reclassified with an effect on profit or loss.
Financial assets (equity instruments) – measured at fair value through profit or loss (“FVTPL”)
Voith decided not to exercise the OCI option for financial assets that are not held as a strategic
investment. These equity instruments are held with a view to generating income from the financial
instruments. For this reason, gains and losses from the disposal of shares and fluctuations in themeasurement of the investments are to be recorded in the statement of income.
Financial liabilities – measured at amortized cost (“AC”)
Non-derivative financial liabilities are measured on initial recognition at fair value less attributabletransaction costs. Subsequent to initial recognition, the Group classifies them as other financial liabilities
measured at amortized cost.
Derivative financial instruments – measured at fair value through profit or loss (“FVTPL”)
All derivative financial instruments are recognized at fair value on the trading date. The derivative
financial instruments are classified as held for trading and thus assigned to the measurement category“FVTPL” (measured at fair value through profit or loss) unless they are designated as being a hedging
instrument and are effective as such.

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Fair value
The fair value of investments for which an organized market exists is determined by the quoted market
price at the reporting date. Where no active market exists, valuation techniques are used to determine
the fair value. The techniques used by Voith for this purpose aim to reflect objective criteria as accurately
as possible and to simulate an active market. This is done, for example, by analyzing discounted cash
flows, referring to arm’s length transactions between knowledgeable, willing and independent partners,
and drawing on comparisons with the current fair value of other financial instruments which are identicalin all significant aspects.
Derivative financial instruments and hedging
Voith uses a variety of financial derivatives – such as forward exchange contracts and interest rate
swaps – to hedge underlying transactions. Essentially, the Group applies fair value hedge accounting offirm commitments to hedge operating business transactions. The Group continues to use the provisionsof IAS 39 for the recognition of hedges.
At the inception of a hedge relationship, the Group formally designates and documents both theunderlying transaction and the hedging instrument as well as the risk management objective andstrategy for entering into the hedge. This documentation includes identification of the hedging
instrument, the hedged item or transaction, the nature of the risk being hedged, and how the Groupwill assess the hedging instrument’s effectiveness in offsetting the exposure to changes in the hedged
item’s fair value that is attributable to the hedged risk. Such hedging relationships are considered to behighly effective in offsetting the risks of fair value changes. Currency hedges are used in line with thecontracts in question (term, volume). Their effectiveness is assessed on an ongoing basis to determine
whether they have been highly effective throughout the financial reporting periods for which the hedge
was designated.
Hedges that meet the strict criteria for hedge accounting are accounted for as described below:
Fair value hedges
Fair value hedges are hedges of the Group’s exposure to changes in the fair value of a recognized asset
or liability or an unrecognized firm commitment that is attributable to a particular risk and could affectprofit or loss for the period. In the case of fair value hedges, the carrying amount of a hedged item isadjusted by the profit or loss that is attributable to the hedged exposure, and the difference is reported
in profit or loss. The derivative financial instrument is remeasured at its fair value and any gains or losses
arising as a result are recognized in profit or loss.
For fair value hedges relating to hedged items carried at amortized cost, the adjustment to the carrying
amount is amortized through profit or loss over the remaining term to maturity.

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When an unrecognized firm commitment is designated as a hedged item, the subsequent accumulatedchange in the fair value of the firm commitment that is attributable to the hedged risk is recognized as
an asset or liability and the corresponding gain or loss is recognized in the profit or loss for the period.
Changes in fair value of the hedging instrument are also recognized in the profit or loss for the period.
The Group discontinues fair value hedge accounting if the hedging instrument expires, is sold, terminatedor exercised, or if the hedge no longer meets the criteria for hedge accounting. Every adjustment tothe carrying amount of a hedged financial instrument is released to income using the effective interest
method. The reversal may begin as soon as an adjustment exists and shall begin no later than when
the hedged item ceases to be adjusted for hedging gains and losses.
Cash flow hedges
Hedging transactions are classified as cash flow hedges when the transactions hedge the risk ofchanges in cash flows which can be attributed to a risk affecting a recognized asset, a recognizedliability or a planned transaction, and could affect profit or loss for the period. The effective portion of
the gain or loss on a hedging instrument is recognized directly in equity, whereas the ineffective portionis recorded in the statement of income.
The amounts recorded in equity are reclassified to the statement of income in the period in which thehedged transaction affects the profit or loss for the period, e.g. in which the hedged financial income
or expense is recorded or in which a planned sale or purchase is made. If the underlying hedgedtransaction is the acquisition of a non-financial asset or a non-financial liability, the amounts recordedin equity are included in the initial carrying amount of the non-financial asset or a non-financial liability.
If the planned transaction is no longer expected to occur, the amounts recorded previously in equity
are transferred to the profit or loss for the period. When the hedging instrument expires, is sold,terminated, or is exercised without a hedging instrument being replaced or rolled over into anotherhedging instrument or when the Group ceases to designate a hedging instrument as such, the amounts
previously recorded remain as a separate item in equity until the planned transaction occurs. If theplanned transaction is no longer expected to occur, the amount is recognized in profit or loss.
Embedded derivatives
Pursuant to IFRS 9, embedded derivatives where the underlying is a financial asset covered by thestandard are never accounted for separately. Instead, the hybrid financial instrument as a whole isassessed with regard to classification.
In the event of there being embedded derivatives for which separate recognition is required, suchderivatives are classified as held for trading and thus assigned to the measurement category “FVTPL”(measured at fair value through profit or loss). Embedded financial derivatives with positive fair values

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are stated under other financial receivables; those with negative fair values are stated under bank loans
and other interest-bearing liabilities or other financial liabilities.
Inventories
Raw materials and supplies, merchandise, work in progress and finished goods are all stated underinventories at the lower of cost and net realizable value. In addition to direct costs, cost includes anappropriate portion of necessary materials and production overheads as well as production-related
depreciation that can be directly allocated to the production process. The average cost, or cost basedon the first-in, first-out (FIFO) method, is capitalized in the balance sheet. Appropriate allowance
is made for inventory risks associated with slow-moving stocks, reduced salability, etc. When thecircumstances that previously caused inventories to be written down below cost no longer exist, thewrite-down is reversed.
Contract assets and contract liabilities
Contract assets constitute an entity’s right to consideration in exchange for goods already transferredor services already performed. In the Voith Group, contract assets essentially consist of long-term
projects at Voith Hydro and Voith Paper, which are recognized over time in accordance with IFRS
15.35. Contract assets are disclosed at the percentage of completion to be recognized less any
customer payments already received.
The customer payments are contractually agreed and are generally dependent on project progress
and/or predetermined milestones.
If customer payments exceed the performance already completed, the resulting balance is disclosed
under contract liabilities. Furthermore, contract liabilities include advances received from customers
for products where revenue is recognized at a specific point in time.
Receivables and other assets
Receivables and other assets (with the exception of derivatives) are assigned to the measured atamortized cost (“AC”) measurement category and are initially recognized either at fair value plus
directly attributable transaction costs or, in the case of trade receivables, at the transaction price.
Subsequent to initial recognition they are measured at amortized cost. They are regularly tested for
impairment on an individual basis. Where objective evidence of a potential loss exists (for example, if the
debtor is experiencing significant financial difficulty, if it is highly probable that insolvency proceedings
will be opened against the debtor, if the debtor defaults on or is in arrears with interest or principal
payments, if significant adverse changes in the technological, economic or legal environment of thecontracting partner occur, if there is a significant or prolonged decline in the fair value of a financial
instrument below its cost, or if legal proceedings are opened), individual allowances are recorded using
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calculated using a forward-looking credit risk management system based on CDS spreads. In doing
so, the receivables are segmented according to common default risk features. A decline in the volumeof receivables brings about a corresponding decrease in such provisions and vice versa. Impaired
receivables are derecognized when they are assessed as uncollectible. Interest-free or low-interest
receivables due in more than one year are discounted.
Cash and cash equivalents
Cash and cash equivalents include cash in hand and checks, cash at banks and cash equivalents. Cashat banks includes both daily deposits and time deposits with fixed maturities of up to three months.
Discontinued operations and non-current assets held for saleNon-current assets and disposal groups held for sale are classified as non-current assets held for saleor as liabilities directly associated with assets classified as held for sale, respectively, if their carrying
amount is to be recovered through sale rather than through continuing use. This condition is regarded
as met when the sale is highly probable and the asset or disposal group is available for immediate salein its present condition. In this case, management has decided to sell the asset and it is expected thatthe sale will take place within 12 months from the date of classification. Non-current assets held forsale are measured at the lower of their carrying amount and their fair value less costs to sell. Assets
held for sale are not subject to depreciation and amortization.
Discontinued operations are recognized as soon as any component of an entity with businessactivities and cash inflows and outflows that can be clearly distinguished from the rest of the entity
for operational and accounting purposes is classified as held for sale or has already been disposedof, and such division either (1) represents a separate major line of business or a geographical area of
operations, and (2) is part of a single coordinated plan to dispose of a separate major line of businessor geographical area of operations, or (3) is a subsidiary exclusively acquired with a view to resale.
The net result of discontinued operations is reported separately from income and expenses fromcontinuing operations in the consolidated statement of income. Figures shown for previous years
are presented on a comparable basis. Cash inflows and outflows from discontinued and continuing
operations are not presented separately in the consolidated cash flow statement, and figures shownfor previous years in the cash flow statement are not restated. Figures disclosed in the notes to theconsolidated financial statements for items in the consolidated statement of income relate to continuing
operations. Information on discontinued activities is provided in the section “Disposals and discontinued
operations”. Sales and expenses generated within the Group have been eliminated in order to present
the financial effect of the discontinued operations with the exception of sales and expenses which are
expected to continue after the sale of the discontinued operations.
Deferred and current taxes
In accordance with IAS 12, deferred tax assets and liabilities are recognized for temporary differences(temporary concept). Deferred tax assets are also recognized for tax losses carried forward, interest

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carryforwards and tax credits insofar as it is reasonable to expect that they will be realized in the near
future. Taxes that relate to items recognized under other comprehensive income are also themselves
recognized in equity. Deferred taxes are calculated based on the tax rates enacted or substantively
enacted by the reporting date that apply or are expected to apply in the countries concerned at the timeof realization. Deferred tax assets on tax losses carried forward, interest carryforwards and tax creditsthat are not likely to be realized or that are not covered by deferred tax liabilities are either written downor not recognized at all. Deferred tax assets and deferred tax liabilities are presented on a net basis if
the Group has a legal right to offset current tax assets against current tax liabilities and they relate toincome taxes levied by the same taxation authority. No deferred taxes are recognized in connection
with the first-time recognition of goodwill or in the case of initial recording of an asset or a liability fortransactions that do not constitute business combinations and do not have any effect on the reported
or taxable earnings.
Current taxes are calculated and reported in accordance with the tax laws and regulations valid foreach company.
Profit participation rights
Profit participation rights amounting to € 103,400 thou­sand are reported as a separate component of
the Group’s equity, in accordance with IAS 32. Interest is not reported as interest expenses, but istreated in a similar manner to a dividend obligation.
Provisions for pensions and similar obligations
Provisions for pension obligations are measured based on actuarial valuation methods using theprescribed projected unit credit method for defined benefit plans as required by IAS 19. This method
considers not only the pensions and future claims known at the end of the reporting year but also
future anticipated increases in salaries and pensions. Defined benefit obligations are measured basedon the proportion of future benefits accrued at the reporting date. Measurement includes assumptions
about the future development of certain parameters that could affect the actual future benefit amount.
The expenses for these benefit plans are divided into service cost and interest expenses on the net
debt from the obligations and plan assets. Both expense items are recognized in the statement ofincome. Revaluations of the net debt recognized are disclosed under other comprehensive income netof deferred taxes.
Other provisions
Provisions are recognized for all discernible risks and uncertain obligations at the amount that is likely
to be realized. These provisions are not netted against recourse claims. Provisions are recognized when
the Group has a present obligation to a third party as a result of a past event and it is probable that an
outflow of resources will be required whose amount can be estimated reliably. Provisions for warranty
claims are based on historical claim trends and estimated future trends. Specific provisions are set up
for known claims. Provisions for outstanding expenses, onerous contracts and other business-related

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Voith Annual Report 2022
Consolidated Financial Statements­N otes to the consolidated financial statements for the 2021/22 fiscal year

obligations are measured based on services still to be rendered, usually at the amount of the costs
to sell.
Provisions which do not lead to an outflow of resources in the following year are carried at thediscounted settlement amount at the reporting date. The discount rate used is derived from market
interest rates. The settlement amount also includes the estimated cost increases. If an amount set
aside as a provision is expected to be refunded (through an insurance claim, for example), the refund
amount is stated separately as an asset only if it is virtually certain. Income from refunds is not netted
against expenses.
Liabilities
Current liabilities are stated at the amount needed to settle the obligation. Financial liabilities aremeasured at their amortized cost. Amortized cost corresponds to the cost of the financial liabilities
adjusted for repayments, issue costs and the amortization of any debt discounts or debt premiums.
Where liabilities are accounted for as hedged transactions, they are measured taking into account themarket value of the hedged risk. Gains and losses are recognized in profit or loss.
Liabilities arising from leases are recognized at the present value of the minimum lease payments atthe start of the lease and subsequently stated under financial liabilities at their amortized cost. Lease
payments are split into an interest component and a principal component. The interest component ofeach payment is recognized as an expense in the statement of income.
Classification of non-controlling interests of third-party shareholders in limited partnerships
based on termination rights of non-controlling shareholders and put options
In accordance with IAS 32, financial instruments that entitle the holder to repayment of the capitalmade available to the partnership must be classified as liabilities. In companies that operate as limited
partnerships, partners have the right under German law to demand repayment of the capital they havemade available to the partnership. This right cannot be excluded by the partnership agreement. This
provision also extends to other comparable repayment rights of holders of non-controlling interests
with a settlement agreement. Put options create sale rights for the holder of the put pursuant to IAS 32.
a) Put options
Where the right to terminate on the part of non-controlling interests exists in the form of a put option,
the corresponding non-controlling interests are not derecognized but are treated as a component ofequity during the reporting year. Based on this, a share of net result for the year is allocated to holders
of non-controlling interests. At each reporting date, it is assumed that the put option will be exercised
and the corresponding non-controlling interests are reclassified from equity to financial liabilities. Thisfinancial liability is recognized in the amount of the estimated compensation obligation and measured
at fair value. The difference between this liability and the share of equity attributable to non-controllinginterests is treated as a transaction between owners and has been recognized from the 2009/10
fiscal year onwards as a change in equity without any effect on the statement of income. Up until andVoith Annual Report 2022
Consolidated Financial Statements­N otes to the consolidated financial statements for the 2021/22 fiscal year

117

including the 2008/09 fiscal year, such transactions were regarded as a business combination achievedin stages and the difference stated as goodwill. The Group elected to retain these amounts under thetransitional arrangements provided for under IAS 27 (2008).
Two material options were exercised in the current fiscal year. By doing so, Voith acquired 100 % of theshares in the companies. A total of € 15,092 thou­sand was paid for exercising the put options.
Amounts reclassified from equity to financial liabilities totaled € 77,494 thou­sand in the 2021/22 fiscal
year (previous year: € 38,507 thou­sand).
b) Limited partnerships
Liabilities from interests held in limited partnerships as well as non-controlling interests with comparable
termination rights are measured at amortized cost. The measurement-related changes in the liability arerecognized in the interest result in the consolidated statement of income.
If the non-controlling interests in limited partnerships are terminated or if the respective comparable
termination rights or put options are exercised, the financial liabilities recognized prior to termination or
exercise of the put options are reclassified as other financial liabilities.
Financial guarantee contracts
Financial guarantee contracts issued by the Group are those contracts that require a payment to bemade to reimburse the holder for a loss it incurs because the specified debtor fails to make a payment
when due in accordance with the terms of a debt instrument. These financial guarantee contracts aretreated as insurance contracts as defined by IFRS 4, i.e. the financial guarantee contracts are disclosed
as contingent liabilities until utilization becomes probable. When this is the case, the corresponding
obligation is recognized.
Exercise of judgment and estimates by management
The presentation of net assets, financial position and earnings position in the consolidated financial
statements requires the exercise of judgment by management. Management has exercised judgmentin the following instances:· Income taxes: management must make assessments on whether deferred tax assets are impaired
and on risks from uncertain tax items· Determining the requirement for, and measuring the amount of, impairment of intangible assets andproperty, plant and equipment· Determining the requirement for allowances against doubtful receivables· Sales recognized in accordance with the percentage-of-completion method: determining thepercentage of completion· Measurement of provisions and assessment of the likelihood of their utilization

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Voith Annual Report 2022
Consolidated Financial Statements­N otes to the consolidated financial statements for the 2021/22 fiscal year

Some accounting policies require critical estimates that involve complex and subjective assessments
and the use of assumptions, some of which are inherently uncertain and subject to change. Thesecritical accounting estimates can vary from period to period and significantly impact a company’s
financial position and/or earnings. The management explicitly points out that future events will often
deviate from planning assumptions, and that it is normal for estimates to have to be adjusted.
Significant estimates and assumptions have to be made in the following areas of accounting:
Revenue recognition over time in the case of long-term projects
Specifically in the case of long-term projects involving customer-specific plant and equipment, revenue
is recognized over time using the PoC method if the criteria of IFRS 15.35 are met.
Accurate estimates of the percentage of completion are of vital importance under this method.
Depending on the method used to measure the percentage of completion, the most significant
estimates concern the total contract cost, the remaining costs to complete the contract, the total
contract revenue and contract risks.
The management of operating subsidiaries review all estimates that are needed for revenue recognition
over time using the PoC method on an ongoing basis and make adjustments as and when necessary.
Such examinations are part of management’s normal accounting activities at operating level. We refer
to notes 1 and 14 for details of the carrying amounts.
Trade and other receivables
Determining allowances for doubtful receivables requires significant judgment on the part of management
as well as an analysis of the individual debtors that covers their creditworthiness, current and future
economic trends and an examination of historic default scenarios. We refer to note 13 for details of thecarrying amounts.
Impairment of goodwill
Determining the recoverable amount of a Group Division to which goodwill was allocated involves
estimates by management. The value in use is measured based on planning for the first five years,
which is based on taking management’s expectations and adjusting them for economic trends andhistoric developments. Estimates of growth, the weighted average cost of capital and tax rates are
likewise based on reliable information that reflects the risks associated with operating business in eachgiven industry or division. We refer to note 9 and to the segment reporting for details of the carrying
amounts.
Development costs
Development costs are capitalized if the recognition criteria described in IAS 38 are met. Initial
capitalization is based on management’s estimate that the technical and economic feasibility isVoith Annual Report 2022
Consolidated Financial Statements­N otes to the consolidated financial statements for the 2021/22 fiscal year

119

demonstrated; the forecast of the expected future economic benefit to be gained from assets isessential to the decision whether or not costs are to be capitalized. We refer to note 9 for details of
the carrying amounts.
Pension obligations
Estimates of pension obligations depend significantly on key assumptions including discount factors,
expected salary increases, mortality rates and healthcare trends. The assumptions used to calculate thediscount factor reflect the interest rates that can be realized on high-quality fixed-income instrumentswith appropriate maturities. We refer to note 20 for details of the carrying amounts.
Other provisions
Recognizing provisions for anticipated losses on contracts, warranty-related costs and litigation involves
the use of significant estimates. Voith recognizes provisions for anticipated losses in all cases where
current estimates of the total contract costs exceed expected contract revenues. Onerous contracts are
identified by estimating the total costs of the contract, which requires significant judgment. Estimates
are also necessary for assessing obligations from warranties and litigation. Provisions for restructuring
are based on detailed plans for expected activities which are reviewed and approved by the Board ofManagement. We refer to note 21 for details of the carrying amounts.
Taxes
The Voith Group has business operations in many countries and is subject to many different tax laws.
Both current and deferred taxes on income must be calculated for each individual taxable entity. To
calculate deferred tax assets on tax losses carried forward and temporary differences, for example,
assumptions must be made about the possibility of realizing sufficient taxable income in the future andthe interpretation of complex tax laws and regulations. We refer to note 8 for details of the carrying
amounts.
In the event that it is unlikely that amounts reported in the tax returns can be realized (uncertain tax
items), tax liabilities are recognized. The amount is determined from the best possible estimate of
the expected tax payment (anticipated value or most probable value of the uncertain tax item). Tax
receivables from uncertain tax items are recognized when it is probable that they will materialize. Only incases where there is a tax loss carried forward or an unused tax credit is no tax liability or tax receivable
recognized for these uncertain tax items, and instead the deferred tax assets are adjusted for the as
yet unused tax losses carried forward and tax credits.
Determining fair values
Within the scope of business combinations, purchase price allocations are subject to not insignificant
estimates. The specification of planning values and discount rates should be specifically mentioned inthis context. The specification of useful lives is, however, also subject to not inconsiderable assumptions.

120

Voith Annual Report 2022
Consolidated Financial Statements­N otes to the consolidated financial statements for the 2021/22 fiscal year

Adoption of amended and new standards and interpretations
Changes in accounting and measurement policies due to first-time adoption of revised andnew IFRS and IFRIC
The following new and revised IAS and IFRS standards were applied for the first time in the 2021/22
fiscal year:
Standard/interpretation

Amendment/new standard or interpretation

Amendments to IFRS 4
Insurance Contracts

Extension of the period (in line with the amendment to IFRS 17) for
the temporary exemption of certain insurance companies from theapplication of IFRS 9.

Amendments to IFRS 9, IAS 39, IFRS 7,
IFRS 4 and IFRS 16:
Interest Rate Benchmark Reform – Phase 2

Phase 2 addresses in particular details on classification andmeasurement of financial instruments and additional aspects of hedge
accounting. Other requirements and standards with measurement andprovisions requirements were modified.

All IAS and IFRS standards applied for the first time had no significant effect on the net assets, financial
position and earnings position of the Group.

Voith Annual Report 2022
Consolidated Financial Statements­N otes to the consolidated financial statements for the 2021/22 fiscal year

121

The adoption of the following revised and newly issued IFRS and IFRIC was not yet mandatory in the2021/22 fiscal year, and/or they had not yet been endorsed by the European Commission for adoption
in the European Union.
Standard/interpretation

Amendment/new standard or interpretation

Mandatory effective date

Amendments to IFRS 3
Business Combinations

The amendment updated an obsolete reference to the conceptual
framework without modifying the provisions in the standard in any
significant manner.

Periods beginning on or afterJanuary 1, 2022

Amendments to IFRS 16
Leases

The amendment relates to the accounting treatment of lease liabilities
from sale-and-leaseback transactions.

Periods beginning on or afterJanuary 1, 2024

IFRS 17 Insurance Contracts,
including amendments to IFRS 17

IFRS 17 establishes principles for the identification, recognition,measurement, presentation and disclosure in the notes of insurance
contracts.
The amendments to IFRS 17 primarily included a deferral of theeffective date.

Periods beginning on or afterJanuary 1, 2023

Amendments to IFRS 17
Insurance Contracts

First-time application of IFRS 17 and IFRS 9 – Comparative information:
The minor (“narrow scope”) amendment to IFRS 17 introduced the option
to apply a “classification overlay approach” if certain criteria are met.
This can increase the informative value of the comparative information
on financial instruments in the year prior to the first-time application of
IFRS 17.

Periods beginning on or afterJanuary 1, 2023

Amendments to IAS 1
Presentation of Financial Statements

Improvement in consistency regarding the classification of liabilities as
current or non-current. Specifically, the intention is to provide rules on
the classification of liabilities with an uncertain settlement date.

Periods beginning on or afterJanuary 1, 2024

Amendments to IAS 1 Presentationof Financial Statements, PracticeStatement 2 andAmendments to IAS 8 Accounting
Policies, Changes in Accounting
Estimates and Errors

Clarification that in future information only has to be provided on“material” and no longer on “significant” accounting policies.
Furthermore, the term “accounting estimate” used in IAS 8 has been
redefined.

Periods beginning on or afterJanuary 1, 2023

Amendments to IAS 12
Income Taxes

The amendments relate to an exemption from the initial recognition
exemption in closely specified cases. These lead to a situation wheredeferred taxes, for instance on leases recognized at the lessee andon decommissioning obligations, must be recognized.

Periods beginning on or afterJanuary 1, 2023

Amendments to IAS 16
Property, Plant and Equipment

The amendment governs the handling of any proceeds stemming fromthe sale of items that are produced while bringing that asset to thelocation and condition necessary for it to be capable of operating in
the manner intended.

Periods beginning on or afterJanuary 1, 2022

Amendments to IAS 37
Provisions, Contingent Liabilities
and Contingent Assets

The amendment governs which costs an entity must take into
account for the fulfilling of a contract when it is assessing whether
a contract is onerous.

Periods beginning on or afterJanuary 1, 2022

Improvements to IFRS (2018–2020)

Amendments to standards IFRS 1, IFRS 9, IFRS 16 and IAS 41.

Periods beginning on or afterJanuary 1, 2022

None of the revised and newly issued IFRS and IFRIC that are subject to mandatory adoptions as of
the 2022/23 fiscal year will have any significant effect on the net assets, financial position and earnings
position of the Voith Group. The impact of revised or newly issued standards and interpretations thatwill be subject to mandatory adoption by the Voith Group at a later date is currently being investigated.
At present, the Voith Group does not plan to adopt the new or amended standards and interpretations
early.

122

Voith Annual Report 2022
Consolidated Financial Statements
Notes to the consolidated statement of income

Notes to the consolidated statementof income

01.

Sales
2021 /22in € thousands

Over
time

2020/21

At a point
in time

Total

Over
time

At a point
in time

Total

Voith Hydro

1,047,848

0

1,047,848

944,846

0944,846

Voith Paper

1,373,749

822,5032,196,252

1,073,872

701,788

1,775,660

2,421,597

822,5033,244,100

2,018,718

701,788

2,720,506

Sales of € 1,556,507 thou­sand (previous year € 1,457,274 thou­sand) at Voith Turbo and the other sales of€ 80,739 thou­sand (previous year: € 82,570 thou­sand) were mainly recognized at a specific point in time.
Sales of € 1,397,603 thou­sand (previous year: € 1,834,060 thou­sand) are expected in future periods
from currently not, or only partially, completed performance obligations.

02.

Changes in inventories and other own work capitalizedin € thousands

2021 /22

2020 /21

Changes in inventories of finished goods and work in progress

70,446

71,377

Other own work capitalized

11,134

8,139

81,58079,516

Voith Annual Report 2022
Consolidated Financial Statements
Notes to the consolidated statement of income

03.

04.

05.

123

Other operating incomein € thousands

2021 /22

2020 /21*

Income from the use of order-related provisions

94,658

128,858

Income from the reversal of provisions and accruals

74,111

52,703Foreign exchange gains

199,752

64,816

Gains on the disposal of intangible assets and property, plant and equipment

12,472

3,102

Rental and lease income

2,083

2,407

Income from insurance indemnification payments

17,937

23,574

Other income

81,80756,648482,820

332,108

2021 /22

2020 /21

Cost of raw materials and supplies andof purchased merchandise

1,943,511

1,600,050

Cost of purchased services

460,803377,7392,404,314

1,977,789

2021 /22

2020 /21

1,300,560

1,247,368

281,189

268,635

1,581,749

1,516,003

Cost of materialsin € thousands

Personnel expenses
in € thousands

Wages and salaries
Social security, pension and other benefit costs

The costs of post-employment benefits total € 37,779 thou­sand (previous year: € 36,942 thou­sand).

* See statement of income.

124

Voith Annual Report 2022
Consolidated Financial Statements
Notes to the consolidated statement of income

Number of employees
Annual average

Direct production employees
Administration staff/indirect production

Apprentices and interns

As at the reporting date

2021 /22

2020 /21

2022-09-30

2021-09-30

10,326

10,353

10,943

10,272

9,813

9,839

10,548

9,646

20,13920,192

21,491

19,918

720

752

720

752

20,85920,944

22,211

20,670

Number of employees by region
Annual average

06.

As at the reporting date

2021 /22

2020 /21

2022-09-30

2021-09-30

Germany

7,498

7,494

7,863

7,360

Europe excluding Germany

4,299

4,187

5,002

4,139

Americas

3,532

3,689

3,643

3,622

Asia

4,648

4,661

4,823

4,635

Other

162

161

160

162

20,13920,192

21,491

19,9182021 /22

2020 /21*

Other operating expenses
in € thousands

Increase in provisions and accruals

245,343

200,189

Other selling expenses

286,289

226,979

Other administrative expenses

266,173

237,743

Foreign exchange losses

192,226

70,455

Rental and lease expenses

23,961

24,022Losses on the disposal of intangible assets and property, plant and equipment

3,404

3,585

111,397

166,691

1,128,793

929,664

Other expenses* See statement of income.

Voith Annual Report 2022
Consolidated Financial Statements
Notes to the consolidated statement of income

07.

125

Other financial resultin € thousands

2021 /22

2020 /21

Gains/losses from investments

5,049

55

Reversal of impairment/impairment of other investments and loans

5,517

19,304

Income from securities and loans

507

347

Currency gains on long-term financing positions

29,5903,170

Currency losses on long-term financing positions- 18,750- 4,046

- 749

227

21,164

19,057

Measurement of derivatives used to hedge financial transactions

Gains/losses from investments and reversal of impairment/impairment of other investments and loans
relate to financial instruments in the “at fair value through profit or loss” (FVTPL) measurement category.
The currency gains and losses on long-term financing positions result from currency gains and losses onlong-term intragroup and external loans and liability balances. The measurement effects of derivatives
used to hedge financial transactions relate to the hedging instruments associated with these long-term
financing positions.

08.

Income taxesin € thousands

2021 /22

2020 /21

Current taxes- 63,472- 59,168

5,249- 2,720- 23,232- 14,409- 86,704- 73,577

thereof taxes from previous periods
Deferred taxes

Current taxes include domestic income taxes and comparable foreign income taxes that are calculated
in accordance with the local tax laws valid for each subsidiary.
Deferred taxes are recognized for temporary differences between carrying amounts for tax reporting andcarrying amounts recognized under IFRS at the individual Group companies as well as for consolidation
measures. Deferred tax assets are also recognized for tax losses carried forward that can be reasonably
expected to be realized in the near future. The average income tax rate for German companies is29.125 % (previous year: 29.840 %).

126

Voith Annual Report 2022
Consolidated Financial Statements
Notes to the consolidated statement of income

Deferred taxes are calculated at the tax rates prevailing in the respective countries. The deferred tax
expense from temporary differences amounted to € 26,516 thou­sand (previous year: tax expense of€ 22,981 thou­sand).
The deferred tax income from tax losses carried forward amounted to € 3,284 thou­sand in the 2021/22
fiscal year. This primarily includes the impairment of deferred tax assets of € 2,833 thou­sand whichwere recognized in the 2020/21 fiscal year, a decrease in deferred tax assets on tax losses carriedforward of € 1,534 thou­sand as a result of adjustments of tax losses carried forward from the previous
year, income of € 2,195 thou­sand from the initial recognition of deferred tax assets on tax losses carriedforward, expenses of € 3,803 thou­sand from the utilization of tax losses recognized in the previous
year and income of € 9,497 thou­sand from the initial recognition of previously unrecognized tax losses.
The deferred tax income from tax losses carried forward amounted to € 8,572 thou­sand in the 2020/21
fiscal year. This primarily includes an increase in deferred tax assets on tax losses carried forward of€ 226 thou­sand as a result of adjustments of tax losses carried forward from the previous year, incomeof € 3,828 thou­sand from the initial recognition of deferred tax assets on tax losses carried forward,
expenses of € 2,541 thou­sand from the utilization of tax losses recognized in the previous year andincome of € 6,941 thou­sand from the initial recognition of previously unrecognized tax losses.
In addition, the current income tax charge was reduced by the use of deferred tax assets on tax lossesof € 3,651 thou­sand unrecognized in the previous year (previous year: € 4,812 thou­sand).
As at September 30, 2022, no deferred tax assets were recognized on German trade tax lossesof € 935,378 thou­s and (previous year: € 968,295 thou­s and), German corporate income taxes of€ 548,371 thou­sand (previous year: € 448,896 thou­sand) and interest carryforwards under German
tax law of € 36,950 thou­sand (previous year: € 17,715 thou­sand) as it is not likely that these tax losses
carried forward can be utilized in the near future.
In addition, no deferred tax assets were recorded on tax losses carried forward for foreign federal tax
of € 255,897 thou­sand (previous year: € 176,017 thou­sand) or foreign state taxes of € 57,916 thou­sand(previous year: € 78,698 thou­sand) due to the fact that the utilization of the losses is not probable in
the near future.
No deferred tax assets were recognized on temporary differences of € 204,028 thou­sand (previous year:€ 427,642 thou­sand) as utilization of the losses is not probable in the near future. The decrease arises
from the reduction in the temporary differences mainly in the provisions for pensions.
In Germany, tax losses carried forward can be carried forward indefinitely. Outside Germany, tax losses
can usually be carried forward for a limited period of no more than five to ten years.

Voith Annual Report 2022
Consolidated Financial Statements
Notes to the consolidated statement of income

2021-10-01

in € thousands

127

2022-09-30

Net

Recognized in
Recognizedconsolidated
in otherstatement of comprehensive
incomeincomeBusiness
combinations

Currency

Net

Deferredtax assets

Deferredtax liabilities

Intangible assets- 79,508

3,978

0- 15,778

1,579- 89,729

9,223- 98,952

Property, plant andequipment- 45,189

982

0- 3,159- 1,527- 48,893

5,470- 54,363

Financial assets andsecurities- 1,984

3,392- 2,91002- 1,50025- 1,525

Inventories andreceivables- 63,096- 29,446

0

1,883

3,417

- 87,242

59,070- 146,312

Other assets- 18,596- 10,535- 4,254- 27- 1,248- 34,660

7,536- 42,196

Pension provisions

17,551- 10,053

- 977

656

512

7,689

9,171

- 1,482

Financial liabilities

35,125- 2,577

- 52

1,792

- 56

34,232

41,690- 7,458

Other provisions andliabilities

137,914

14,901

0

546

4,296

157,657

187,742- 30,085

Tax effect on
distributable earningsof Group companies- 5,491

2,842

0

0

0

- 2,6490- 2,649

Tax losses carriedforward62,167

3,284

0

0

- 690

64,76164,76100- 286,521

286,521- 334

98,167- 98,501

Netting

038,893- 23,232- 8,193- 14,087

6,285

128

Voith Annual Report 2022
Consolidated Financial Statements
Notes to the consolidated statement of income

2020-10-01

2021-09-30

Net

Recognized inconsolidated
statement ofincomeRecognizedin othercomprehensive
incomeCurrency

Net

Deferredtax assets

Deferredtax liabilities

Intangible assets- 80,400

846

0

46

- 79,508

7,949- 87,457

Property, plant andequipment- 29,298- 15,6110- 280- 45,189

3,257- 48,446

Financial assets andsecuritiesin € thousands

- 953

- 431

- 599

-1

- 1,984266- 2,250

Inventories andreceivables- 34,882- 28,756

0542- 63,096

36,360- 99,456

Other assets- 9,735- 8,38921- 493- 18,596

7,979- 26,575

Pension provisions

137,095- 7,702- 111,891

49

17,551

18,894- 1,343

Financial liabilities

2,925

32,1850

1535,12540,895- 5,770

Other provisions andliabilities

130,202

4,888

125

2,699

137,914160,823- 22,909

Tax effect on
distributable earningsof Group companies- 5,480

- 11

0

0

- 5,491

Tax losses carriedforward53,076

8,572

0

519

62,167

62,16700- 246,180

246,180

38,89392,410- 53,517

Netting0
162,550- 14,409- 112,344

3,096- 5,491

Voith Annual Report 2022
Consolidated Financial Statements
Notes to the consolidated statement of income

129

Reconciliation of expected and effective tax expense:
The income of Voith GmbH & Co. KGaA and its subsidiaries in Germany is subject to corporate income
tax and trade tax as well as the solidarity surcharge. Profits earned outside Germany are taxed at theprevailing rates in the countries concerned. The expected tax expense was calculated based on a tax
rate of 29.125 % (previous year: 29.840 %) that takes into account the legal structure of the Voith Group
relevant for tax purposes.
in € thousands

2021 /22

2020 /21

Result before income taxes

116,354

80,094

Expected tax expense (+)/tax income (-)

33,88823,900Deviations from expected tax rates- 8,840- 11,271

Effect of changes in tax rates- 1,093- 141

Tax-free income- 10,430- 11,643

Non-deductible expenses

20,952

20,432

Taxes relating to other periods- 8,861

3,853

Change in impairments of deferred tax assets

61,996

49,100

Other tax effects

- 908

- 653

Income taxes

86,70473,57774.5

91.9

Effective tax rate (in %)The non-deductible expenses contain withholding taxes of € 8,936 thou­s and (previous year:€ 11,886 thou­sand).
No deferred tax liabilities were recorded on temporary differences in connection with investments in
subsidiaries of € 93,733 thou­sand (previous year adjusted on account of amended calculation logic:€ 22,312 thou­sand), as the criteria specified in IAS 12.39 were met.
When distributions by foreign subsidiaries are made in Germany, 5 % of the distribution is subject
to German taxation. In addition, withholding taxes and dividend-related taxes abroad may also be
incurred. Further income tax implications must also be observed in the case of distributions fromsubsidiaries abroad to another foreign company.

130

Voith Annual Report 2022
Consolidated Financial Statements
Notes to the consolidated balance sheet

Notes to the consolidated balance sheet

09.

Intangible assets
Development of intangible assets from 2021-10-01 to 2022-09-30
Franchises,industrial rights
and similar rights
and assets as wellas licenses in suchrights and assets

Goodwill

Development
costs

Prepayments

Total

Cost
2021-10-01

395,459

808,081

169,58201,373,122

Business combinations

71,24388,3061,254

185

160,988

Currency translation differences

10,32425,276- 83

035,517

Additions

12,634

653

5,441

5

18,733

Disposals- 7,143

0

- 715

0

- 7,858

3

0

- 13

0

- 10

Transfers

1,262

0

- 576

0

686

Cost
2022-09-30

483,782

922,316

174,890190

1,581,178

Accumulated amortizationand impairment 2021-10-01- 211,358- 54,179- 132,361

0- 397,898

Currency translation differences- 2,778

0125

0- 2,653

Amortization- 18,753

0- 8,684

0- 27,437

0

0

- 979

0

- 979

7,116

0

264

0

7,380

-2

0

0

0

-2

Accumulated amortizationand impairment 2022-09-30- 225,775- 54,179- 141,635

0- 421,589

Carrying amounts 2022-09-30

258,007868,137

33,255190

1,159,589

in € thousands

Other adjustments

Impairment losses
Disposals
Other adjustments

The franchises, industrial rights and similar rights and assets as well as licenses in such rights andassets contain brands with an indefinite useful life of € 107.5 million (previous year: € 67.0 million), thereof
addition from business combinations in 2021/22 of € 34.1 million.

Voith Annual Report 2022
Consolidated Financial Statements
Notes to the consolidated balance sheet

131

Development of intangible assets from 2020-10-01 to 2021-09-30
Franchises,industrial rights
and similar rights
and assets as wellas licenses in suchrights and assets

Goodwill

Development
costs

Prepayments

Total

386,425805,630

163,43133

1,355,519

0

0

0

0

0

1,595

2,451

123

0

4,169

Additions

10,189

0

6,030

8

16,227

Disposals- 3,05900

0- 3,059

0

0

-2

0

-2

309

0

0

- 41

268

Cost
2021-09-30

395,459

808,081

169,58201,373,122

Accumulated amortizationand impairment 2020-10-01- 190,255- 54,179- 124,280

0- 368,714

- 695

0

- 53

0

- 748

in € thousands

Cost
2020-10-01
Business combinations
Currency translation differences

Other adjustments
Transfers

Currency translation differences- 23,2570- 8,0280- 31,285

Impairment losses

Amortization

- 138

0

0

0

- 138

Disposals

2,986

0

0

0

2,986

1

0

0

0

1

Accumulated amortizationand impairment 2021-09-30- 211,358- 54,179- 132,361

0- 397,898

Carrying amounts 2021-09-30

184,101

753,90237,221

0975,224

Other adjustments

The franchises, industrial rights and similar rights and assets as well as licenses in such rights andassets contain brands with an indefinite useful life of € 67.0 million.

132

Voith Annual Report 2022
Consolidated Financial Statements
Notes to the consolidated balance sheet

10.

Property, plant and equipment
Development of property, plant and equipment from 2021-10-01 to 2022-09-30
Land and buildings, including
buildings on
third-party land

Plant andmachinery

862,955

1,509,075

534,108

Business combinations

29,1637,130

11,466

Currency translation differences

44,311

95,915

11,870Additions

6,073

29,79722,391

0

0

0

127

in € thousands

Cost
2021-10-01

Capitalized interest

Other equipment,
Prepayments
furniture and and assets underfixturesconstruction

Rightsof useTotal

49,377

155,963

3,111,478

2,795

9,752

60,306

3,501

3,225

158,822

39,25020,186

117,697

0

127

0

0

0

0

6,343

6,343

Disposals- 8,069- 84,182- 26,439- 1,328- 12,188- 132,206

Transfers

7,514

19,383

6,102- 31,087- 2,598- 686- 14,265- 94- 2,24600- 16,605

- 55

- 45

- 61

308

97

244

Cost
2022-09-30

927,627

1,576,979

557,191

62,943

180,780

3,305,520

Accumulated depreciationand impairment 2021-10-01- 416,430- 1,183,846- 434,674- 240- 56,516- 2,091,706

Currency translation differences- 20,785- 74,629- 9,6670- 1,874- 106,955

Depreciation- 18,830- 57,665- 31,6820- 31,329- 139,506

Remeasurements

Reclassification to assets held for sale
Other adjustments

Impairment losses- 7,597- 4,462

- 90

0

0

- 12,149

Disposals

1,193

79,072

24,962

0

11,676116,903

Transfers

- 677

- 843

655

0

865

0

Reclassification to assets held for sale

6,028

89

1,915

0

0

8,032

Reversal of impairment losses

0

3

11

0

103

117

Other adjustments

24

169

585

0

0

778

Accumulated depreciationand impairment 2022-09-30- 457,074- 1,242,112- 447,985- 240- 77,075- 2,224,486

Carrying amounts 2022-09-30

470,553334,867

109,206

62,703

103,705

1,081,034

Voith Annual Report 2022
Consolidated Financial Statements
Notes to the consolidated balance sheet

133

Development of property, plant and equipment from 2020-10-01 to 2021-09-30
Land and buildings, including
buildings on
third-party land

Plant andmachinery

830,210

1,463,158

525,16900Currency translation differences

15,182

Additionsin € thousands

Cost
2020-10-01
Business combinations

Other equipment,
Prepayments
furniture and and assets underfixturesconstruction

Rightsof useTotal

43,408

147,566

3,009,511

0

0

0

0

28,186

4,488

557

1,182

49,595

5,053

26,642

22,63135,595

14,826

104,747

Capitalized interest

0

0

0

116

0

116

Remeasurements

0

0

0

0

7,936

7,936

Disposals- 2,011- 28,020- 23,993- 2,427- 5,831- 62,282

Transfers

14,533

19,123

5,840- 27,798- 11,966- 268

Reclassification to assets held for sale

0

0

0

0

0

0

- 12

- 14

- 27

- 74

2,250

2,123

Cost
2021-09-30

862,955

1,509,075

534,108

49,377

155,963

3,111,478

Accumulated depreciationand impairment 2020-10-01- 393,294- 1,135,875- 422,506- 240- 29,531- 1,981,446

Currency translation differences- 5,094- 19,971- 3,495

0- 709- 29,269

Depreciation

Other adjustments- 18,708- 54,561- 31,9860- 31,928- 137,183

Impairment losses

- 100

- 390

- 294

0

- 473

- 1,257

Disposals

1,279

26,98023,5380

5,606

57,403

Transfers

- 513

- 29

23

519

0

Reclassification to assets held for sale

0

0

0

0

0

0

Reversal of impairment losses

0

0

0

0

0

0

Other adjustments

0

0

46

0

0

46

Accumulated depreciationand impairment 2021-09-30- 416,430- 1,183,846- 434,674- 240- 56,516- 2,091,706

Carrying amounts 2021-09-30

446,525

325,229

99,434

49,13799,447

1,019,772

134

Voith Annual Report 2022
Consolidated Financial Statements
Notes to the consolidated balance sheet

The Voith Group exercised the call option for the leased property in Mergelstetten effective as at March
31, 2021. In the statement of changes in fixed assets, this transaction is disclosed in the transfers
between right of use and land and buildings, including buildings on third-party land.
The impairment losses are included in the consolidated statement of income item “Depreciation andamortization”. Impairment losses include impairments on land and buildings of € 5,824 thou­sand andon technical plant and machinery of € 4,198 thou­sand, which had to be recognized on account of theimpairment of a production plant in the Group Division Hydro as a consequence of the deterioration in
the prospects for the future of this cash-generating unit.
An interest rate of 1.6 % was used to calculate capitalized interest (previous year: 1.3 %).
The prepayments and assets under construction include buildings of € 2,621 thou­sand (previous year:€ 5,604 thou­sand), plant and machinery of € 54,046 thou­sand (previous year: € 41,245 thou­sand) andnon-production-related equipment of € 6,036 thou­sand (previous year: € 2,286 thou­sand).
As at September 30, 2022, the carrying amounts of the rights of use under leases contained landand buildings of € 68,682 thou­s and (previous year: € 71,209 thou­s and), plant and machinery of€ 7,625 thou­sand (previous year: € 485 thou­sand), leased vehicles of € 16,304 thou­sand (previous year:€ 15,296 thou­sand) and other of € 11,094 thou­sand (previous year: € 12,457 thou­sand).
The depreciation on the rights of use under leases break down as follows: € 18,794 thou­sand (previous
year: € 18,705 thou­sand) on land and buildings, € 374 thou­sand (previous year: € 394 thou­sand) on
plant and machinery, € 9,824 thou­sand (previous year: € 10,648 thou­sand) on leased vehicles and€ 2,337 thou­sand (previous year: € 2,181 thou­sand) on other.

11.

Investments accounted for using the equity method
Associates
The following table summarizes the financial information for associates; all amounts relate to the Group’s
proportionate share of the respective associates:in € thousands

2022-09-30

2021-09-30

38,60044,180- 5,480- 5,984

Other comprehensive income

527

684

Total comprehensive income- 4,953- 5,300

Carrying amount of the investments in associates
Share of:Net result of continuing operations

Voith Annual Report 2022
Consolidated Financial Statements
Notes to the consolidated balance sheet

135

The net result of continuing operations includes income from associates of € 680 thou­sand (previous
year: € 1,425 thou­sand) and expenses of € 6,160 thou­sand (previous year: € 7,409 thou­sand). In the2021/22 fiscal year, a loss of € 1,872 thou­sand was not disclosed in the statement of income for the
first time.
Joint ventures
The Group has interests in joint ventures which are not individually material. The following table summarizes
the financial information for these joint ventures; all amounts relate to the Group’s proportionate shareof the respective joint ventures:in € thousands

2022-09-30

2021-09-30

4,983

4,578

Net result of continuing operations

268

- 843

Other comprehensive income

137

-8

Total comprehensive income

405

- 851

Carrying amount of the interests in joint ventures
Share of:For one joint venture, a loss of € 1,402 thou­sand was not disclosed in the statement of income.
In some cases, the companies accounted for using the equity method have reporting periods which do
not end on September 30, as the reporting dates are aligned to those of the controlling shareholder.
Accordingly, some companies prepare interim financial statements as at September 30. For othercompanies the effects of the different reporting periods are not significant for the Voith Group’s earnings
position and net assets.

12.

Inventoriesin € thousands

2022-09-30

2021-09-30

Raw materials and supplies

338,991

264,660

Work in progress

234,546

184,780

Finished goods and merchandise

203,034

136,871

Prepayments

102,060

95,133

878,631

681,444

136

Voith Annual Report 2022
Consolidated Financial Statements
Notes to the consolidated balance sheet

Write-downs of inventories recognized as expenses amounted to € 3,712 thou­sand (previous year:€ 9,432 thou­s and). Obligatory reversals of write-downs totaling € 6,139 thou­s and (previous year:€ 9,451 thou­sand) were made. These amounts are recognized in the cost of materials.

13.

Trade receivables
Trade receivables consist of the following items:in € thousands

2022-09-30

2021-09-30

Trade receivables

924,270

777,931

Bad debt allowances- 42,233- 33,791

882,037

744,140

Trade receivables are classified as current assets. As at September 30, 2022, the volume of receivables
that is not expected to be realized within one year is € 11,183 thou­sand (previous year: € 8,053 thou­sand).
Movements in the allowance account for the impairment of trade receivables were as follows:in € thousands

2022-09-30

2021-09-30

Impairment at the
beginning of the fiscal year

- 33,791- 45,577

Additions- 18,311- 10,266

Utilization

6,720

10,295

Reversal

5,691

10,415

Changes in consolidated group/exchange differences- 2,857- 1,334

Expected credit losses

315

2,676

Impairment at theend of the fiscal year

- 42,233- 33,791

The total reversal of € 5,691 thou­sand (previous year: € 10,415 thou­sand) is comprised exclusivelyof reversals of specific bad debt allowances, as was the case in the previous year. Additions of€ 18,311 thou­s and (previous year: € 10,266 thou­s and) consist of additions to specific bad debt
allowances of € 16,694 thou­sand (previous year: € 10,160 thou­sand) and of expected credit losses of€ 1,617 thou­sand (previous year: € 106 thou­sand).

Voith Annual Report 2022
Consolidated Financial Statements
Notes to the consolidated balance sheet

14.

137

Contract assets and contract liabilities
Notes on material changes in contract assets and contract liabilities:in € thousands

2022-09-30

2021-09-30

Contract assets at the beginning of the fiscal year

573,952

539,446

Exchange rate differences

32,73012,944

Change as a result of project progress, taking account of customer
payments received

487,818

389,433

Reclassification from contract assets to trade receivables- 427,317- 408,058

Impairments- 2,541

540

Other changes

50,79039,647

Contract assets at the end of the fiscal year

715,432

573,952

Contract liabilities at the beginning of the fiscal year

938,859

845,256

Exchange rate differences

42,49919,674

Business combinations

540

0

Sales included in contract liabilities at the beginning of the period- 395,045- 198,426

Increase as a result of customer payments received less figure recognized
as sales over the period

368,798

346,767

Other changes
Contract liabilities at the end of the fiscal year

52,793- 74,412

1,008,444

938,859

138

Voith Annual Report 2022
Consolidated Financial Statements
Notes to the consolidated balance sheet

15.

Other financial receivables and other assets
Other financial receivablesin € thousands

Current

Non-current

2022-09-30

Current

Non-current

2021-09-30

Derivatives used to hedge
operational transactions

31,02919,201

50,23021,126

12,35733,483

Derivatives used to hedge
financial transactions

112

14,60914,721

101

0

101

Financial receivables

20,275372

20,647

20,657

1,405

22,062Sundry financial assets*

50,90639,042

89,94853,24334,151

87,394102,32273,224

175,546

95,127

47,913143,040in € thousands

Current

Non-current

2022-09-30

Current

Non-current

2021-09-30

Prepaid expenses

34,0398,249

42,28830,5297,174

37,703

Other taxes (without income
taxes)

119,499

33,384

152,883

108,325

11,370

119,695

153,538

41,633

195,171

138,854

18,544

157,398

Other assets

16.

Other financial assets and securities
The increase in other financial assets mainly results from a new loan to a related company of€ 121 million.
Further information on the other financial assets and securities can be found in the section “Additional
information on financial instruments”.

* Includes assets totaling € 24,933 thou­sand (previous year: € 19,943 thou­sand) which are not financial instruments and which
are accordingly excluded from the disclosures made in the section “Additional information on financial instruments”.

Voith Annual Report 2022
Consolidated Financial Statements
Notes to the consolidated balance sheet

17.

139

Cash and cash equivalentsin € thousands

2022-09-30

Cash on hand
Cash equivalents
Cash at bank2021-09-30

106

127

4,865

2,271

406,921508,767

411,892

511,165

Cash at banks earns interest at floating rates based on daily bank deposit rates.
Short-term deposits are made for varying periods of between one day and three months, depending on
the cash requirements of the Group. These deposits earn interest at the respective short-term deposit
rates.
On account of foreign exchange controls in one country, the Group currently has no access to cash
and cash equivalents of € 7,563 thou­sand.

18.

Assets held for sale and liabilities directly associated with assets
classified as held for sale
All the assets held for sale of € 9,704 thou­sand (previous year: € 12,503 thou­sand) comprise property,
plant and equipment (previous year: € 3 thou­sand). In the previous year, the balance sheet item mainlycontained investments of € 12,500 thou­sand.

140

Voith Annual Report 2022
Consolidated Financial Statements
Notes to the consolidated balance sheet

19.

EquityIssued capital
The share capital of Voith GmbH & Co. KGaA of € 120,000 thou­sand comprises 108,000 thou­sandordinary shares with a nominal value of € 1.00 each and 12,000 thou­sand preference shares with anominal value of € 1.00 each.
Revenue reserves and other reserves
The revenue reserves and other reserves consist of retained earnings generated by Voith GmbH &Co. KGaA and its consolidated subsidiaries as well as the effects of the remeasurement of defined
benefit plans, the currency translation of foreign subsidiaries, the valuation of net investments in foreign
operations, gains/losses on financial assets and marketable securities recognized directly in equity
without effect on profit or loss and cash flow hedges pursuant to IAS 39.
The statement of comprehensive income shows the measurement effects of the individual components
of other comprehensive income. Other comprehensive income consists of:in € thousands

2021 /22

Remeasurement of defined benefit plans

262,736

25,068· Gains/losses in the current period

262,736

25,068

Gains/losses on the valuation of financial assets and marketable securities- 3,075423· Gains/losses in the current period- 3,075423

00Gains/losses on cash flow hedges

14,822- 570· Gains/losses in the current period

14,415

- 500

407

- 70

Gains/losses on currency translation

144,248

39,503· Gains/losses in the current period

144,248

39,50300

Gains/losses from the currency translation of net investments
in foreign operations

12,345

4,828· Gains/losses in the current period

12,345

4,828

0

0

- 8,193- 112,344

422,883- 43,092· Transfers to profit and loss

· Transfers to profit and loss

· Transfers to profit and loss

· Transfers to profit and loss
Tax on components of other comprehensive income
Other comprehensive income

2020 /21

Voith Annual Report 2022
Consolidated Financial Statements
Notes to the consolidated balance sheet

141

Deferred taxes on the components of other comprehensive income are as follows:
2021 /22

2020 /21

Beforetaxes

Deferred
taxes

After
taxes

Beforetaxes

Deferred
taxes

After
taxes

262,736- 977

261,759

25,068- 111,891*- 86,823

Gains/losses on the valuation offinancial assets and marketablesecurities- 3,075291- 2,784

423

- 307

116

Gains/losses on cash flow
hedges

14,822- 4,306

10,516

- 570

146

- 424

Gains/losses on currencytranslation

144,2480

144,248

39,503039,503

Gains/losses from the currencytranslation of net investments
in foreign operations

12,345- 3,201

9,144

4,828

- 292

4,536

Other comprehensive income

431,076- 8,193422,883

69,252- 112,344- 43,092

in € thousands

Remeasurement of defined
benefit plans

Profit participation rights
Profit participation rights with a nominal volume of € 103,400 thou­sand (previous year: € 103,400 thou­sand) qualify as Group equity under the IAS 32 criteria. The rights are lower-ranking bearer profit
participation rights with variable compensation, no fixed maturity date and no right of termination on
the part of the creditors. Profit participation rights of € 96,800 thou­sand were issued by a subsidiary ofVoith GmbH & Co. KGaA. Profit participation rights of € 6,600 thou­sand were issued by Voith GmbH &Co. KGaA. Subject to the approval of the appropriate governing body, profits totaling € 5,590 thou­sand(previous year: € 5,590 thou­sand) are scheduled to be distributed on the sum total of these rights forthe 2022/23 fiscal year.
Non-controlling interests
The majority of non-controlling interests are held by the co-owners of the subsidiaries Shanghai CRRC
Voith Transmission Technology Co., Ltd., China, Rif Roll Cover Srl, Italy, Voith Fuji Hydro K.K., Japan,
Voith IHI Paper Technology Co., Ltd., Japan, Voith Hydro Shanghai Ltd., China and Voith Paper Fabrics
India Ltd., India. Of the profit participation rights totaling € 103,400 thou­sand, € 96,800 thou­sand is
attributable to non-controlling interests.
Appropriation of retained earnings at Voith GmbH & Co. KGaA
The Board of Management proposes to pay a dividend of € 0.17 per share (€ 20,000 thou­sand in total) outof the unappropriated retained earnings of Voith GmbH & Co. KGaA and to carry forward the remaining
amount. Of the total dividends proposed, € 2,000 thou­sand is attributable to preference shares. Dividend
payments in the fiscal year amounted to € 20,000 thou­sand (previous year: € 20,000 thou­sand). The
distribution per share in the fiscal year amounted to € 0.17 per share (previous year: € 0.17 per share).

* The previous year includes impairments of deferred tax assets on temporary differences in pension provisions recorded
directly in equity.

142

Voith Annual Report 2022
Consolidated Financial Statements
Notes to the consolidated balance sheet

Additional disclosures on capital management
Voith is a family-owned company. As such, it is obliged to maintain a robust and sustainable financial
profile that enables the Group to meet its earnings and growth targets.
Voith manages its capital with the aim of maximizing the return on capital. The Group’s managed capitalconsists of equity and interest-bearing financial liabilities.

in € thousands

2022-09-30

2021-09-30

Equity1,436,080

1,014,777

Interest-bearing financial liabilities

1,101,128

787,6092,537,208

1,802,386

Equity increased by 41.5 % compared to the previous year. Both the positive effects from themeasurement of pension obligations and the currency translation of the foreign subsidiaries were themain contribution to this development. Interest-bearing financial liabilities increased by 39.8 %. The
composition of interest-bearing financial liabilities is described in note 22.
The articles of incorporation and bylaws of Voith GmbH & Co. KGaA do not prescribe any specificcapital requirements.

20.

Provisions for pensions and similar obligations
Provisions for pensions are recognized for benefit obligations in the form of retirement, invalidity andsurviving dependents’ benefits payable under pension plans. The benefits provided by the Group vary
according to local legal, tax and economic conditions in the respective countries and are usually basedon the length of employee service and the level of remuneration.
The Group’s post-employment benefits include both defined benefit plans and defined contributionplans. In the case of defined contribution plans, the Company pays contributions to state or private
pension schemes based on either legal or contractual requirements or on a voluntary basis. Once thecontributions have been paid, there are no further obligations for the Company. Current contributions
are recognized as pension expenses in the period concerned and are € 104,809 thou­sand for the Voith
Group as a whole (previous year: € 105,307 thou­sand).
The majority of the pension plans are defined benefit plans that take the form of provisions-based or
externally funded schemes.

Voith Annual Report 2022
Consolidated Financial Statements
Notes to the consolidated balance sheet

143

The pension provisions for defined benefit plans are determined in accordance with IAS 19 using theinternationally recognized projected unit credit method. For this purpose, the future obligations aremeasured on the basis of the pro rata employee benefit obligations earned at the end of the fiscal year.
Pension provisions are measured taking into account development assumptions for those factors which
affect the benefit amount. All defined benefit plans require actuarial valuations. These are preparedannually by qualified actuaries.
The amount of the individual benefit payments is generally measured based on the wage or salary level
and/or position in the corporate hierarchy, as well as the length of service. The features and relatedrisks of the defined benefit plans available to employees vary according to local legal, tax and economic
conditions in the respective countries. The features of the material defined benefit plans at Voith aredescribed below.
a) Pension plans in Germany and Austria
The pension plans in Germany generally include retirement, invalidity and surviving dependents’
benefits. Traditionally, the pension commitments are measured on the beneficiary’s final salary. In
recent years, these benefits have been increasingly replaced by capital savings models. Under capitalsavings models, the amount of the benefit is measured as the sum of the (annual) savings modules. The
individual modules are measured from the defined salary-based contribution using a variable conversion
factor for age and interest rates for a defined retirement age.
Numerous Group companies have introduced capital savings models to satisfy their obligation to pay
an employer contribution.
In accordance with the German Company Pensions Act, current benefit payments are regularly reviewed
with regard to the increase in the consumer price index.
In contrast to the older final-salary-based pension commitments, which involve a relatively high risk ofextra funding requirements arising from salary trends, from external input parameters (e.g. the income
threshold for the statutory pension insurance scheme) and from the adjustment of current pensions,the current capital savings models ultimately only involve the risk of a change in the interest rates usedin the calculation.
Pension provisions are recognized for all pension commitments. Funding is therefore only obtained in
exceptional cases. The plan assets of German companies take the form of insurance policies. They do
not include any financial instruments issued by companies of the Voith Group.
For mortality and invalidity, the RT 2018G mortality tables by Heubeck are used. Employee turnoverprobabilities were calculated specifically for the Group.
In Austria, the obligations result primarily from a severance benefit scheme (“Abfertigungen”). Benefits
become due upon termination of the employment relationship (provided the employee is not culpable

144

Voith Annual Report 2022
Consolidated Financial Statements
Notes to the consolidated balance sheet

for the termination), i.e. also upon retirement. Austrian severance benefits all qualify as capital savings.
A few years ago, the nature of these benefits changed for new hires to post-employment benefits on
account of new statutory requirements. These qualify as defined contribution plans and are organized
via legally independent employee welfare funds. The employer’s obligation is limited to payment of thecontribution. In addition, obligations exist for retirement, invalidity and surviving dependents’ benefits
on the basis of individual commitments and a pension plan, which closed to new hires a long time ago,at the St. Pölten location.
b) Pension plans in the United States and Canada
The companies of the Voith Group in the USA previously had four defined-benefit pension plans thatwere terminated over the fiscal year. Plan participants who had not yet retired were offered flat-rate
payments instead of monthly benefit payments in line with tax regulations. On May 4, 2022, the Voith
Group entered into a binding agreement with Legal and General America on the purchase of theoutstanding liabilities for the remaining participants including those who are already in the payout
phase. Both were treated as buyouts that, seen together, led to a loss of around € 1 million and arereflected in the statement of income. An arrangement was achieved where the value of the buyout of€ 94,551 thou­sand was lower than the value of the assets held in the plan, meaning that no further
contributions were necessary. Although some adjustments to the final price are still expected, it isassumed that there will be a surplus of assets. These excess assets are accounted for as securities
and are based on management’s assessment of the excess assets, which will be available for otherpurposes.
The plans were already closed to new entrants in previous years; instead, new entrants were admitted
to defined contribution pension plans. All of the pension plans have been frozen. No new participants
have been accepted and no further provisions will be recognized for future benefit payments or futureservice cost (apart from a small group of participants in a plan for whom only cost of living increases
are still considered in the calculation of the final average benefit payment). The pensions were primarily
based on the final average salary or the length of service (i.e. the product of a fixed dollar amount andthe number of years of service) and were paid monthly for life.
Finally, there is a plan for post-employment medical benefits for a group of plan participants who
met the age and length of service criteria when the plan was closed to new participants. This plan isunfunded. These defined benefit plans give rise to actuarial risks for the Voith Group in the USA, arisingfrom such factors as the investment risk, interest rate risk, longevity risk and the risk of a rise in thecosts of medical care.
The Voith Group maintains two active defined benefit plans in Canada. Both plans are closed to newentrants, who participate in various defined contribution plans instead. The benefits paid under both ofthese plans take the form of lifelong monthly pensions.

Voith Annual Report 2022
Consolidated Financial Statements
Notes to the consolidated balance sheet

145

The plan assets of the defined benefit plans are invested by an Outsourced Investment Management
team who manage the plan assets as trustee. The Group companies paying the contributions haveassigned the responsibility for overseeing the investment of plan assets to an investment committee.
According to Canadian law at both federal and provincial level, the Company and its representatives
have a fiduciary duty as the managers of the plan assets to act solely in the best interests of thebeneficiaries.
The legal and regulatory framework used to calculate the minimum funding requirement for pension
plans is based on the relevant laws applicable in the Province of Ontario and at federal level in Canada,
including the Ontario Pension Benefits Act and the Ontario Income Tax Act as well as the associatedlaws and regulations as amended. Based on these laws, either an annual or a three-yearly assessmentof the minimum funding requirement is made by the plan’s actuary.
The following amounts were recorded in the consolidated financial statements for post-employment
defined benefit pension plans:
Defined benefit
obligationin € thousands

2022-09-30

Fair value ofplan assets

2021-09-30

2022-09-30

Net carrying amount fromdefined benefit plans

2021-09-30

2022-09-30

2021-09-30

Germany and Austria

574,486

814,807- 25,223- 25,003

549,263

789,804

USA and Canada

34,401

171,964- 21,055- 158,335

13,346

13,629Other

69,78881,338- 54,307- 52,062

15,481

29,276

678,675

1,068,109- 100,585- 235,400

578,090

832,709

146

Voith Annual Report 2022
Consolidated Financial Statements
Notes to the consolidated balance sheet

Movements in the net liability from defined benefit plans:

2022-09-30

2021-09-30

Present valueof defined
benefitobligations

Fair value ofplan assets

Balance, October 1

1,068,109

Current service cost

19,286in € thousands

Total

Present valueof defined
benefitobligations

Fair value ofplan assets

Total- 235,400

832,709

1,097,888- 239,251858,637-

19,286

16,612-

16,612

Past service cost from plan curtailments (income)- 4,3790- 4,379

- 900

0

- 900

Interest expenses (+ ) / interest income (-)

14,258- 3,731

10,527

14,256- 4,253

10,003Losses (+ ) / gains (-) from changes
in demographic assumptions

353

-

353

- 4,361-- 4,361

Losses (+ ) / gains (-) from changes
in financial assumptions- 287,368-- 287,368- 27,265-- 27,265

7,412

-

7,412

5,018

-

5,018

Remeasurement of plan assets(without amounts included in interest result)-

24,53824,538

-

3,778

3,778

Employer contributions to the fund-

- 3,507- 3,507-- 3,788- 3,788

Employee contributions to the fund-

- 1,575- 1,575-- 1,318- 1,318- 179,148

146,622- 32,526- 44,797

13,603- 31,194

Remeasurements:

Losses (+ ) / gains (-) fromexperience adjustments

Benefits paid
Change to the Group’s structure

5,283

0

5,283

- 184

131

- 53

Other

- 2,999

4,654

1,655

2,742

- 506

2,236

Currency translation differences on foreign plans

36,495- 32,186

4,309

4,520

- 3,796724

Addition to termination benefits inaccordance with IAS 19.159 et seq.

1,373

-

1,373

4,580

-

4,580

678,675- 100,585

578,090

1,068,109- 235,400

832,709

Balance, Septem­b er 30

Voith Annual Report 2022
Consolidated Financial Statements
Notes to the consolidated balance sheet

147

Movements in the net liability from defined benefit plans:Germany and Austria
2022-09-30

2021-09-30

Present valueof defined
benefitobligations

Fair value ofplan assets

Balance, October 1

814,807

Current service cost

15,875in € thousands

Past service cost from plan curtailments (income)

Total

Present valueof defined
benefitobligations

Fair value ofplan assets

Total- 25,003

789,804

836,250- 24,693

811,557-

15,875

12,943-

12,943

- 693

0

- 693

- 39

0

- 39

10,580- 333

10,247

9,590

- 288

9,302

Losses (+ ) / gains (-) from changes
in demographic assumptions

0

-

0

0

-

0

Losses (+ ) / gains (-) from changes
in financial assumptions- 236,245-- 236,245- 20,773-- 20,773

4,748

-

4,748

3,945

-

3,945

Remeasurement of plan assets(without amounts included in interest result)

-

- 638

- 638

-

- 634

- 634

Employer contributions to the fund

-

0

0

-

0

0

Employee contributions to the fund

-

0

0

-

0

0

- 33,177

1,373- 31,804- 31,748

1,344- 30,404

Interest expenses (+ ) / interest income (-)
Remeasurements:

Losses (+ ) / gains (-) fromexperience adjustments

Benefits paid
Change to the Group’s structure

2,412

0

2,412

- 184

0

- 184

Other

- 5,108- 622- 5,730

243

- 732

- 489

0

0

0

0

0

0

1,287

0

1,287

4,580

0

4,580

574,486- 25,223

549,263

814,807- 25,003

789,804

Currency translation differences on foreign plans
Addition to termination benefits inaccordance with IAS 19.159 et seq.
Balance, Septem­b er 30

148Voith Annual Report 2022
Consolidated Financial Statements
Notes to the consolidated balance sheet

USA and Canada
2022-09-30

in € thousands

Balance, October 1

2021-09-30

Present valueof defined
benefitobligations

Fair value ofplan assets

171,964- 158,335

Total

Present valueof defined
benefitobligations

Fair value ofplan assets

Total

13,629181,506- 165,036

16,470Current service cost

329

-

329

492

-

492

Past service cost from plan curtailments

- 903

0

- 903

0

0

0

Interest expenses (+ ) / interest income (-)

3,262- 2,845

417

3,949

- 3,575

374

28

-

28

- 1,592-- 1,592- 29,262-- 29,262- 5,106-- 5,106

1,506

-

1,506

1,281

-

1,281

Remeasurement of plan assets(without amounts included in interest result)-

21,273

21,273

-

3,443

3,443

Employer contributions to the fund-

- 1,316- 1,316-- 1,972- 1,972

Employee contributions to the fund

-

- 11

- 11

-

29

29

- 143,040

143,0400- 11,420

11,420

0

537

5,177

5,714

- 734

235

- 499

Currency translation differences on foreign plans

29,980- 28,038

1,942

3,588

- 2,879709

Balance, Septem­b er 30

34,401- 21,055

13,346

171,964- 158,335

13,629Remeasurements:
Losses (+ ) / gains (-) fromchanges in demographic assumptions
Losses (+ ) / gains (-) fromchanges in financial assumptions
Losses (+ ) / gains (-) fromexperience adjustments

Benefits paid
Other

Costs for defined benefit plans break down as follows:in € thousands

Current service cost

2022-09-30

2021-09-30

19,286

16,612

Past service cost

- 4,379- 900

Interest expenses from pension obligations and plan assets

10,527

10,003Current service cost and past service cost are stated under personnel expenses. Interest expenses
on the obligation and interest income on plan assets are stated in the interest result. Past service cost
includes the effects of the increase in the actuarial interest rate for the capital savings plans.

Voith Annual Report 2022
Consolidated Financial Statements
Notes to the consolidated balance sheet

149

The plan assets consist of the following components:
Quoted prices
in an active marketin € thousands

No quoted prices
in an active market

Total

2022-09-30

2021-09-30

2022-09-30

2021-09-30

2022-09-30

2021-09-30

Equity instruments

5,012

5,776

0

0

5,012

5,776

Debt instruments

4,756

149,449

0

0

4,756

149,449

Real estate

1,028

1,025

0

0

1,028

1,025

Cash andcash equivalents
Other*

401

2,829

0

0

401

2,829

16,117

5,783

73,271

70,53889,38876,321

27,314

164,862

73,271

70,538100,585

235,400

The calculation of pension provisions was based on the following assumptions:
Germany and Austria
in %

USA

2022-09-30

2021-09-30

2022-09-30

2021-09-30

Discount rate

4.07

1.35

5.07

2.44

Pension increases

2.00

1.60

0

0

The inputs used in the calculation of the defined benefit obligation (DBO) include assumed discountrates, wage and salary trends, as well as mortality rates. These vary depending on the state of theeconomy and other factors in the respective country.
Changes to the relevant actuarial assumptions would have had the following impact on the defined
benefit obligation:
2022-09-30

2021-09-30

in € thousandsin %in € thousandsin %up 0.50 % points- 39,703- 5.9- 75,177- 7.0

down 0.50 % points

44,1306.5

85,1538.0

Pension increases

up 0.25 % points

11,283

1.7

17,746

1.7

down 0.25 % points- 10,844- 1.6- 16,944- 1.6

Life expectancy+ 1 year

18,182

2.7

35,331

3.3

Discount rate

The sensitivity analyses presented here show the effect of changes to one assumption with no change
in the other assumptions, i.e. possible correlations between the individual assumptions are notconsidered.

* Primarily employer’s pension liability insurance.

150

Voith Annual Report 2022
Consolidated Financial Statements
Notes to the consolidated balance sheet

Increases or decreases in the discount rate, the wage and salary trends and the mortality rates do
not have the same impact in absolute terms on the defined benefit obligation (DBO), primarily on
account of discounting the obligation to net present value. If a number of assumptions are changed
simultaneously, the total impact does not necessarily equate to the sum of the effects attributable to theindividual assumptions changed. In addition, the sensitivity of the DBO to a change in an assumption
is only a reflection of the specific magnitude of the change. If an assumption changes by a different
magnitude to that assumed here, the impact on the DBO will not necessarily be linear.
Future cash flows
Contributions of € 3,861 thou­sand are expected to be paid into the plans in the next reporting period.
The weighted average term of the DBO is 13 years.

21.

Other provisions
The provisions consist of the following:At
2021-09-30

Changein scopeof consolidation

Utilization

Additions

Reversals

81,772174- 11,151

9,034- 10,031

Warranty provisions

187,327

1,088- 57,778

101,580

Other order-related provisions

110,82456- 21,888

49,730

Other provisions

47,139337- 12,844

17,008427,062

1,655- 103,661

177,352in € thousands

Personnel-related provisions

Transfers

Discounting
effectCurrencytransla­t ion
differ­e ncesAt
2022-09-30

0

121

586

70,505- 24,120- 1,812- 1,552

7,675

212,408- 31,853- 1,215

- 68

5,459

111,045- 4,429

- 774

- 642

2,171

47,966- 70,433- 3,801- 2,141

15,891

441,9242022-09-30

2021-09-30

in € thousands< 1 year> 1 year< 1 year> 1 year

Personnel-related provisions

23,986

46,51920,625

61,147Warranty provisions

169,832

42,576

136,844

50,483

Other order-related provisions

108,214

2,831

107,787

3,037

Other provisions

23,393

24,57322,15524,984

325,425

116,499

287,411

139,651

Other provisions include restructuring provisions and provisions for personnel adjustments totaling€ 20.2 million (previous year: € 24.2 million).
No refund claims associated with other provisions were capitalized (previous year: € 16.9 million).

Voith Annual Report 2022
Consolidated Financial Statements
Notes to the consolidated balance sheet

151

Personnel-related provisions mainly comprise the phased retirement scheme (“Altersteilzeit”) and longservice bonuses. In the case of provisions for phased retirement, the amount and maturity of the future
payments to be made to the beneficiaries are uncertain. Warranty provisions are recorded based on
past experience or on the basis of individual assessments and represent the legal and contractual
warranty obligations as well as goodwill commitments to customers. The provisions generally represent
amounts that will be payable within the next two fiscal years. Other contract-related provisions include
obligations for services still to be rendered on customer orders or parts of orders that have been billed,
obligations for service and maintenance contracts, and commission provisions. In these cases, theamount and timing of future expenses are dependent on completion of the orders concerned.

22.

Bank loans and other interest-bearing liabilities
Financial liabilities include the following:in € thousands

Current

Non-current

2022-09-30

Current

Non-current

2021-09-30

Bank loans

193,968

628,552

822,520

78,768467,956

546,724

Financial liabilities from leases

30,07071,640101,710

25,527

72,662

98,189

0

0

0

1

0

1

332

0

332

291

0

291

37,749138,817

176,566

50,47491,930142,404

262,119

839,009

1,101,128

155,061

632,548787,609

Notes payable
Derivatives used to hedge
financial transactions
Other interest-bearing liabilities

Other interest-bearing liabilities contain obligations from the classification of non-controlling interests inlimited partnerships based on termination rights of holders of non-controlling interests and put options.
The Voith Group’s current and non-current bank loans are denominated in the following currencies:in € thousands

2022-09-30

2021-09-30

813,856

518,497

3,019

338

Swedish krona

024,233

Canadian dollar

0

2,808

Other currencies

5,645

848

822,520546,724Euro
US dollar

152

Voith Annual Report 2022
Consolidated Financial Statements
Notes to the consolidated balance sheet

23.
24.

Trade payables
Trade payables of € 266 thou­sand (previous year: € 484 thou­sand) are due after more than one year.

Other financial liabilities and other liabilities
Other financial liabilitiesin € thousands

Current

Non-current

2022-09-30

Current

Non-current

2021-09-30

Derivatives used to hedge
operational transactions

38,705

15,57454,27921,178

11,84533,023

Personnel-related liabilities

101,363

2,981

104,344

100,490499

100,989

Sundry financial liabilities

140,317

19,866160,183

111,822

23,850135,672

280,385

38,421

318,806

233,490

36,194

269,684

Personnel-related liabilities at fiscal year-end included outstanding annual bonus payments andoutstanding payments for wages, salaries and social security contributions.
Other liabilitiesin € thousands

Current

Non-current

2022-09-30

Current

Tax liabilities

61,784

Prepaid expenses

5,722

Other liabilities

11,63573,4194,637

10,35979,38928,043

146,895

44,315

Tax liabilities principally relate to sales taxes (VAT).

Non-current

2021-09-30

58,511

9,788

68,299

3,211

3,806

7,017

107,432

75,32531,823

107,148

191,210137,047

45,417

182,464

Voith Annual Report 2022
Consolidated Financial Statements
Notes to the consolidated cash flow statement

153

Notes to the consolidated
cash flow statement
Non-cash changes
Changes arisingfrom the acquisition/disposalof companies

Changes due
to currency
effects

Changes infair valuesin € thousands

2021-10-01

Cashchanges

Bank loans

546,724

259,300

17,185- 846

Financial liabilities from leases

98,189- 32,421

7,989

1,507

1

-1

0

0

Notes payable
Derivatives used to hedge
financial transactions
Other interest-bearing liabilities

Other financial receivables

Other
effects

2022-09-30

0157

822,520026,446

101,710

0

0

0

291

0

0

55

- 14

0

332

142,404- 9,873

46,306351- 3,515893

176,566

787,609

217,005

71,4801,067- 3,529

27,496

1,101,128- 26,397

1,923

0

382

- 14,621-4- 38,717

761,212

218,928

71,4801,449- 18,150

27,492

1,062,411

Othereffects

2021-09-30

Non-cash changes
Changes due
to currency
effects

Changes infair valuesin € thousands

2020-10-01

Cashchanges

Bank loans

612,263- 66,536

775

0

222

546,724

Financial liabilities from leases

115,499- 28,911

684

0

10,917

98,189

403

- 387

- 15

0

0

1

Notes payable
Derivatives used to hedge financial transactions
Other interest-bearing liabilities

Other financial receivables

73

0

9

209

0

291

179,809- 3,245124- 27,649- 6,635

142,404

908,047- 99,079

1,577- 27,440

4,504

787,609- 30,169

3,589

181

55

- 53

- 26,397

877,878- 95,490

1,758- 27,385

4,451

761,212

154

Voith Annual Report 2022
Consolidated Financial Statements
Notes on segment reporting

Notes on segment reporting
Information on the segment data
The business is managed according to the different products and business segments and corresponds
to the structure of internal reporting to the Board of Management of Voith Management GmbH.
EBIT adjusted for non-recurring items (extrapolation of result from increasing the carrying values upon
first-time consolidation (PPA depreciation) and restructuring expenses and other exceptional items)
forms the central performance indicator for the operating result. Reconciliation of EBIT adjusted for
non-recurring items to result before taxes from the Group’s continuing operations contains effects whichare, as a rule, shown as other operating income and expenses, and depreciation and amortization in
the consolidated statement of income on account of their operating nature. In the course of calculating
EBIT, these items are adjusted as non-recurring effects in order to facilitate a better assessment ofsegments’ business operations.
The former Group Division Digital Ventures was already assigned to the Group holding company as across-divisional function in the previous year and has no longer been managed as a separate Group
Division since then. In the segment reporting, the figures were integrated into the reconciliation column.
In all other respects, the demarcation between the segments and the method used to calculate thesegment information remains unchanged in comparison to September 30, 2021.
Segment information is generally based on the same presentation and measurement methods as theconsolidated financial statements. Intercompany sales are effected at market prices, and intersegment
transactions and business are all reported in accordance with the accounting policies used for the
consolidated financial statements.
In the Voith Group, the key indicator for assessing and managing an individual segment is return on
capital employed (ROCE). ROCE is calculated by bringing EBIT and the average capital employed
into relation with each other. The definition of ROCE was amended in the reporting year. For better
comparability, the previous-year figures were restated on the basis of the new definition. In the past,
it was profit from operations rather than EBIT that was compared with capital employed to calculate
ROCE. Profit from operations is calculated by adding operating interest income to EBIT. We define
operating interest income as imputed interest effects on the portion of customer advances that is not
used to finance inventories and receivables from customer-specific contracts.
Capital employed designates the funds tied up within the business with a view to generating sales.
This essentially comprises property, plant and equipment and net working capital. Calculating the ratioof a performance indicator from the statement of income (profit from operations) to a figure based on
the balance sheet (capital employed) is in compliance with generally accepted standards for holistic
business management and with value-based management.

Voith Annual Report 2022
Consolidated Financial Statements
Notes on segment reporting155

The capital employed on the reporting date is an average value derived from the values as at the end of
the fiscal year, as at the reporting date for the previous six-monthly financial statements and as at theend of the previous year. In contrast to the requirements of IAS 21, the assets and liabilities of foreignsubsidiaries are translated at the average exchange rate for the reporting year. Owing to the use of
averages, capital employed cannot be reconciled to the figures in the consolidated balance sheet on
any given reporting date.
Consolidation entries were taken into account in full in calculating capital employed.
Capital expenditures relate to intangible assets (excluding goodwill) and property, plant and equipment.
In the fiscal year, the remeasurements from IFRS 16 are also disclosed as investments. The previousyear figures were adjusted accordingly. Additions due to business combinations are not included.
Sales are broken down regionally, based on the customer’s registered office. Non-current assets,consisting of property, plant and equipment including rights of use, goodwill and other intangible
assets, are allocated based on the location of the asset.

Information on the activities of the segments presented
As a full-line supplier for equipping hydropower plants, the Group Division Hydro is one of the world’s
leading industrial partners for hydropower plant operators. This applies both to the field of electricity
generation and to the pumped storage of energy. Voith Hydro’s portfolio of products and services
covers the entire life cycle and supplies all major components for large and small hydropower plants:from generators, turbines, pumps, automation systems and digital solutions for smart hydropower rightthrough to aftermarket business in spare parts and maintenance services, as well as training services.
As a leading partner and pioneer in the paper industry, the Group Division Paper provides technologies,
products and services for the entire paper manufacturing process, all from a single source. A constantstream of innovations allows the technology group to optimize the paper manufacturing process on
an ongoing basis. Voith Paper focuses on developing resource-saving products which reduce theconsumption of energy, water and fibers. Furthermore, the Group Division Paper offers a broad service
portfolio for all sections of the paper manufacturing process. The Papermaking 4.0 concept also allows
papermakers to link up their equipment in the best possible way and improve their competitivenessthrough effective and secure use of the data generated.
The Group Division Turbo is a supplier of components and systems for intelligent drive technology anda provider of customized services. With innovative and smart products, Voith Turbo offers the highest
levels of efficiency and reliability. Customers from highly diverse industries, such as oil & gas, energy,
mining and mechanical engineering, ship technology, rail and commercial vehicles, rely on the advanced
technologies and digital solutions provided by Voith Turbo.

156

Voith Annual Report 2022
Consolidated Financial Statements
Segment information by business segment

Segment information bybusiness segment­H ydroin € millions­Paper­­Turbo2021 /22

2020 /21

2021 /22

2020 /21

2021 /22

2020 /21

1,048

945

2,196

1,776

1,557

1,457

4

2

20

20

7

8

1,052

947

2,216

1,796

1,564

1,465

EBIT

2

8

131

114

48

41

Depreciation andamortization of property,
plant and equipment andintangible assets 2)

23

22

59

57

50

51

Capital spending 3)

24

19

54

42

43

47

Segment goodwill

18

18

516

483

271

184

Sales with third parties
Sales withother segments
Segment sales, total

Average capital
employed 4)

205

208

500

458

975

828

ROCE4)

1.0 %

3.7 %

26.2 %

24.9 %

5.0 %

4.9 %

Employees 5)

3,444

3,628

7,825

7,432

7,732

6,200

Sub-total of Hydro, Paper and Turbo.
Depreciation and amortization does not include depreciation and amortization recorded in the non-recurring result as it is not included in EBIT.
3)
Without additions due to business combinations and financial assets. Previous year restated, see “Information on the segment data”.
4)
Previous year restated: new logic behind calculation of the average capital employed, see “Information on the segment data”.
5)
Statistical headcount on reporting date.
1)2)

Voith Annual Report 2022
Consolidated Financial Statements
Segment information by business segment

Total core business1)

Reconciliation

157

Total

2021 /22

2020 /21

2021 /22

2020 /21

2021 /22

2020 /21

4,801

4,178

80

82

4,881

4,260

31

30

- 31

- 30

0

0

4,832

4,208

49

52

4,881

4,260

181

163

19

2

200

165

132

130

23

23

155

153

121

108

22

25

143

133

805

685

63

69

868

754

230

221

1,680

1,494

10.8 %

10.9 %

19,001

17,260

2,490

2,658

1,910

1,715

10.5 %

9.6 %

21,491

19,918Reconciliation of EBIT to the Group’s result before taxes from continuing operations:in € millions

2021 /22

2020 /21

EBIT

200

165

Non-recurring result

- 66

- 77

- 12

- 17

thereof restructuring expenses

- 15

- 43

thereof expenses relating to other periods from legal disputes

- 18

- 17

thereof impairment losses on property, plant and equipment*

- 10

0

thereof other exceptional items

thereof PPA depreciation and amortization

- 11

0

Other adjustments

2

1

Share of profit/loss from companies accounted for using the equity method-4-6Interest income/expense

- 37

- 22

Other financial result

21

19

Result before taxes from continuing operations

116

80

* Further information on this in section 10. Property, plant and equipment.

158

Voith Annual Report 2022
Consolidated Financial Statements
Segment information by region

Segment information by region
External sales (registered office of customer)­H ydro­Paper­­Turbo

ReconciliationTotal

in € millions

2021 /22

2020 /21

2021 /22

2020 /21

2021 /22

2020 /21

2021 /22

2020 /21

2021 /22

2020 /21

Germany

39

33

186

138

408

370

46

42

679

583

Foreigncountries

1,009

912

2,010

1,638

1,149

1,087

34

40

4,202

3,677

thereof Europe

227

253

570

582

554

506

7

8

1,358

1,349

thereof
Americas

379

329

584

486

182

128

22

22

1,167

965

thereof Asia

329

275

835

551

340

391

5

10

1,509

1,227

· of which China

121

124

615

363

194

266

1

5

931

758

thereof others

74

55

21

19

73

62

0

0

168

136

1,048

945

2,196

1,776

1,557

1,457

80

82

4,881

4,260

Non-current assets
in € millions

2022-09-30

2021-09-30

Germany

784

711

1,457

1,284

thereof Europe

767

667

· of which Switzerland

298

235

thereof Americas

301

278

·o
 f which USA

249

226

Foreign countries

thereof Asia

383

332

·o
 f which China

290

263

thereof others

6

7

2,241

1,995

Voith Annual Report 2022
Consolidated Financial Statements
Other notes

159

Other notes
Contingent liabilities, contingent assets andother financial obligations
Appropriate provisions have been recognized in the relevant Group companies to cover potential
financial obligations arising from taxation, legal and arbitration proceedings.
Over and above this there are risks from tax-related legal disputes and ongoing taxation proceedingsin Brazil. There are risks of € 21.9 million relating to income taxes. Likewise, tax risks in connection with
VAT, among other things, were identified; no estimate of the financial effect is disclosed for reasons ofpracticability, as it is impossible to make any reliable estimate. The current assessment of the situationis that the proceedings will be brought to a successful conclusion and, therefore, there will be nooutflow of economic resources.
Owing to the ongoing tax field audit of German companies, further changes may be made to tax items.
Over and above this, there are risks from legal disputes amounting to € 30.8 million (previous year:€ 21.5 million).
Other financial obligations include purchase commitments for capital expenditures of € 32.4 million(previous year: € 16.6 million).

160

Voith Annual Report 2022
Consolidated Financial Statements
Other notes

Contingent liabilities
The contingent liabilities listed below are stated at face value. No provisions were recognized for thesecontingencies, as the probability of occurrence is regarded as low:in € thousands

Guarantee obligations
Provision of collateral for third-party liabilities

2022-09-30

2021-09-30

2,442

958

500

800

2,942

1,758

Most of the guarantee obligations expire in 2025.

Leases
The rental and lease agreements in the Voith Group mainly relate to buildings, passenger vehicles andmachinery. The agreements mainly have terms of one to 15 years. Some companies have the optionof extending their rental agreements.
Liabilities of € 31,617 thou­s and in connection with lease agreements were repaid (previous year:€ 28,183 thou­sand). Including the interest payments, cash outflows totaled € 32,421 thou­sand (previous
year: € 28,911 thou­sand).
The interest expenses from the compounding of lease liabilities are disclosed in the financial result andamounted to € 881 thou­sand in the 2021/22 fiscal year (previous year: € 897 thou­sand).
Lease expenses include expenses for short-term leases of € 10,650 thou­s and (previous year:€ 9,573 thou­sand) and expenses for leases of low-value assets of € 3,543 thou­sand (previous year:€ 3,229 thou­sand) that are disclosed in other operating expenses.
Future cash outflows of an immaterial amount were not included in the lease liabilities as it is notreasonably certain that the lease agreements will be extended or not terminated.
Income from the sublease of rights of use as well as gains and losses from sale-and-leaseback
transactions are immaterial in the Voith Group.

Voith Annual Report 2022
Consolidated Financial Statements
Other notes

161

Additional information on financial instruments
Carrying amounts, amounts recognized in the balance sheet and fair values by measurement category.
Amount recognized in the balance sheet inaccordance with IFRS 9
Carrying
amount2022-09-30

Amortized
cost

Cash and cash equivalents

AC411,892

411,892

411,892

Trade receivables

AC882,037

882,037

882,037

Contract assets

n. a.

715,432in € thousands

Fair value
through
equityFair value
through
profit or loss

Not assigned
to an IFRS 9
measurement
category

IFRS 9measurement
category

Fair value
2022-09-30

Assets:Other financial assets and securities

715,432

715,432

254,161· F inancial investments

AC53,20353,20353,203· Loans

AC

124,391

124,391

124,391

FVOCI/n. a.

10,966· Investments (financial investments)

FVTPL

49,224· S ecurities

FVOCI

16,377· Investments (strategic)

Derivative financial instruments

137

10,82949,224

137
49,224

16,377

16,37764,951· Forward exchange contracts

FVTPL

27,914· Forward exchange contracts(fair value hedges)

n. a.

22,43022,43022,430· Interest rate swaps (cash flow hedges)

n. a.

14,607

14,607

14,607

Other receivables

27,91427,91485,662· F inancial receivables

AC

20,647

20,647

20,647·S
 undry financial assets

AC65,01565,01565,015

AC729,446

729,446

729,446

Bank loans/notes

AC822,520

822,520

Financial liabilities from leases

n. a.

101,710

Liabilities:
Trade payables

Derivative financial instruments

783,021
101,71054,611· Forward exchange contracts

FVTPL

28,214· Forward exchange contracts(fair value hedges)

n. a.

26,165

26,165

26,165· Forward exchange contracts(cash flow hedges)

n. a.

232

232

232

Other interest-bearing liabilities· Other interest-bearing liabilities· L iabilities arising from the acquisition of
investment shareholdings
Sundry financial liabilities

28,21428,214

176,566
AC

98,267

FVTPL

78,299AC

264,527

The presentation was changed in comparison to the previous year.

98,267

184,836
67,362

264,527

10,93778,299264,527

162

Voith Annual Report 2022
Consolidated Financial Statements
Other notes

Amount recognized in the balance sheet inaccordance with IFRS 9

in € thousands

IFRS 9measurement
category

Carrying
amount2021-09-30

Amortized
cost

Fair value
through
equityFair value
through
profit or loss

Not assigned
to an IFRS 9
measurement
category

Fair value
2021-09-30

Assets:Cash and cash equivalents

AC511,165

511,165

511,165

Trade receivables

AC

744,140

744,140

744,140

Contract assets

n. a.

573,952

Other financial assets and securities

573,952

573,952

132,238· F inancial investments

AC49,49449,49449,494· Loans

AC

2,781

2,781

2,781

· Investments (strategic)

n. a.

5,821

· Investments (financial investments)

FVTPL

59,520· S ecurities

FVOCI

Derivative financial instruments

5,821
59,52014,62259,52014,622

14,62233,584· Forward exchange contracts

FVTPL

8,722

· Forward exchange contracts(fair value hedges)

n. a.

24,862Other receivables

8,722

8,722
24,862

24,86289,513· F inancial receivables

AC

22,062

22,062

22,062·S undry financial assets

AC67,451

67,451

67,451

AC569,575

569,575

569,575

Bank loans/notes

AC546,725

546,725

Financial liabilities from leases

n. a.

98,189Liabilities:
Trade payables

Derivative financial instruments

553,486
98,18933,314· Forward exchange contracts

FVTPL

8,867

· Forward exchange contracts(fair value hedges)

n. a.

24,00024,00024,000· Forward exchange contracts(cash flow hedges)

n. a.

447

447

447

Other interest-bearing liabilities· O ther interest-bearing liabilities· L iabilities arising from the acquisition of
investment shareholdings
Sundry financial liabilities

8,867

8,867

142,404
AC

91,645

FVTPL

50,759AC

236,661

The presentation was changed in comparison to the previous year.

91,645

189,41332,401

236,661

18,35850,759236,661

Voith Annual Report 2022
Consolidated Financial Statements
Other notes

163

Fair value hierarchy for the financial assets and liabilities recognized at fair value listed in the table above:in € thousands

2022-09-30

Level 1

Level 2

Level 3

16,377

16,37700Derivative financial instruments

64,951064,9510Investments

49,3610049,361

Derivative financial instruments

54,611054,6110Liabilities arising from the acquisitionof investment shareholdings

78,2990

078,2992021-09-30

Level 1

Level 2

Level 3

Securities

14,622

14,62200Derivative financial instruments

33,584033,5840Investments

59,5200059,520Derivative financial instruments

33,314033,3140Liabilities arising from the acquisitionof investment shareholdings

50,7590050,759AssetsSecurities

Equity and liabilitiesin € thousands

AssetsEquity and liabilities

The three-level fair value hierarchy divides the input factors used in the measurement techniques tomeasure the fair value into three levels, as follows:
Level 1:
Input factors quoted in active markets accessible to the Company for identical assets or liabilities on
the measurement date.
Level 2:Other inputs than those at level 1 for which observable market data which relates directly or indirectly
to the financial assets or liabilities is available.
Level 3:
Input factors for which there is no observable market data.
Within the Group, transfers between fair value hierarchy levels are performed at the end of the reporting
period. No transfers were made between the levels of the fair value hierarchy in the 2021/22 and2020/21 fiscal years.

164

Voith Annual Report 2022
Consolidated Financial Statements
Other notes

The fair values of derivative financial instruments allocated to level 2 of the fair value hierarchy aretaken from the daily observable exchange rates, associated forward rates and the term structure ofinterest rates. In addition, fair value measurement includes both the counterparty credit risk and theGroup’s own credit risk. Input factors that take account of counterparty credit risk can be obtained fromobservable credit default swaps (CDS) from the banks participating in the respective transaction. At theVoith Group, the market CDS rates were used to calculate the Group’s own credit risk.
€ 49 million (previous year: € 60 million) of the investments allocated to level 3 of the fair value hierarchy
relate to those held by the Group as investments with a view to generating income. These investments
are therefore measured at fair value through profit or loss (FVTPL). The fair values of the investments
were determined by firstly calculating the fair value for each investment resulting in each case fromthe total of the shares held and cash and cash equivalents available as at the measurement date. The
equity value of the respective investment is determined on the basis of a market-oriented measurement
approach, the multiplier method, and is calculated in each case from the total value of the Company
less the net financial position. In the present case, multipliers derived from representative externaltransactions are used, taking account of current developments up to the measurement date. These
multipliers are multiplied by the average of operating results (EBITDA) achieved in the past in relation
to the total enterprise value. In a second step, the fair values of the investments attributable to theVoith Group are calculated in accordance with the existing ownership structure. One investment in thismeasurement category with a market value of € 12.5 million was sold in the current fiscal year.
Furthermore, investments that the Group would like to hold over the long term for strategic purposes,
and for which it exercised the OCI option, are allocated to level 3 of the fair value hierarchy. Both in thecurrent year and in the previous year, market values of an immaterial amount were determined for theseinvestments. No dividends were recognized in profit or loss from the equity investments designated as
FVOCI in the 2021/22 fiscal year.
A rise (fall) in the projected figures or falling (rising) interest rates would give rise to an increase (decrease)in the fair value of the investment.
The fair values of liabilities arising from business combinations that are allocated to level 3 relate
to put options held by non-controlling shareholders as well as contractually agreed purchase priceinstallments for the future acquisition of shares. The fair values were determined on the basis of thecurrent planning prepared by management using the discounted cash flow method. The planningassumptions are adjusted to reflect the current information available. A risk-adjusted discount rate
(WACC) was used for discounting. Agreements concluded under company law generally contain afixed formula for calculating the purchase price in the event of the put options being exercised. In thisrespect, the purchase prices result from the gross business values of the investments determinedusing the multiplier method in accordance with a contractually agreed definition, minus the net debt,
multiplied by the non-controllers’ shareholdings. If the put options can be exercised only at a later date,
the purchase prices are discounted to the reporting date using an interest rate (WACC) appropriate forthe term involved.

Voith Annual Report 2022
Consolidated Financial Statements
Other notes

165

If the business value of the underlying companies were to increase (decrease), this would lead to anincrease (decrease) in the liabilities from the acquisition of investment shareholdings. In contrast, rising(falling) interest rates would lead to a fall (rise) in the liabilities arising from the acquisition of investment
shareholdings.
The changes in the fair values of assets and liabilities classified as level 3 in the fair value hierarchy
were as follows:in € thousands

2022-09-30

2021-09-30

Balance, October 1

8,761- 42,670

Acquisition of investments

10,101

6,559

Exercise of put options

15,092

20,625

Disposal of investments FVTPL- 26,478

0

Put options from business combinations- 46,222

0Change in valuation policy

137

0

6,081

19,339Fair value changes in liabilities from the acquisition of investment shareholdings
recorded in the financial result

329

- 506

Fair value changes in liabilities from the acquisition of investment shareholdings
not affecting net income

3,261

5,414

- 28,938

8,761

Fair value changes of the investments recorded in the financial result

Balance, Septem­b er 30

The fair values of financial assets and financial liabilities measured at cost or amortized cost, which need
to be determined to meet disclosure requirements, are calculated as follows:
Cash and cash equivalents, trade receivables and other financial receivables are subject to floatinginterest and fall due within one year. For this reason, their carrying amounts approximate their market
values on the reporting date.
Because trade payables and other financial liabilities generally have short residual terms, their carrying
amounts approximate the market values.
The market value of the note loan of € 419 million (previous year: € 465 million) is calculated in the same
way as the market values of unlisted bonds, bank loans and other financial liabilities as the present
value of the payments associated with the liabilities, based on the effective yield curve and Voith GmbH& Co. KGaA’s credit spread curve determined for different currencies (fair value hierarchy level 2).
The market value of other financial liabilities totaling € 120 million (previous year: € 120 million)
was determined based on internal planning data. These are measured using the discounted cash
flow projections taken from the latest business planning prepared by management. The planningassumptions are adjusted to reflect the current information available (fair value hierarchy level 3).

166

Voith Annual Report 2022
Consolidated Financial Statements
Other notes

Net gains and losses recognized in profit or loss for each measurement category of financial instruments:in € thousands

2021/222020/21

Financial assets measured at amortized cost (AC)65,777

13,292Financial assets measured at fair value throughother comprehensive income (FVOCI)

529

344

Financial assets and liabilities measured atfair value through profit or loss (FVTPL)

14,83917,779Financial liabilities measured at amortized cost (AC)- 43,599- 5,255

For details of net gains and losses from financial assets recognized in other comprehensive income werefer to note 19.
Net gains and losses recognized on financial assets measured at amortized cost (AC) mainly relate totrade receivables.
Interest income of € 10,653 thou­sand (previous year: € 6,202 thou­sand) and interest expenses of€ 16,166 thou­sand (previous year: € 12,106 thou­sand) for financial assets or financial liabilities relate tothose assets or liabilities measured at amortized cost. No interest was recorded for financial assets
measured at fair value through other comprehensive income or for financial assets measured at fairvalue through profit or loss.
Offsetting of financial instruments
The following table shows the volume that can potentially be offset under master netting agreements.
The agreements do not meet the criteria required for net presentation in the balance sheet due to thefact that the Group does not have a present legal right to offset the amounts recognized, as the rightto offset is conditional on the occurrence of future events.

in € thousands

Gross presentation
balance sheet
2022-09-30

Volume that canpotentially beoffset under masternetting agreements

Potential
net amount

64,951

31,27733,67454,611

31,277

23,334

AssetsDerivative financial instruments
Equity and liabilities

Derivative financial instruments

Voith Annual Report 2022
Consolidated Financial Statements
Other notesin € thousands

167

Gross presentation
balance sheet
2021-09-30

Volume that canpotentially beoffset under masternetting agreements

Potential
net amount33,584

17,353

16,23133,314

17,353

15,961

AssetsDerivative financial instruments
Equity and liabilities

Derivative financial instruments

Collateral
As at the reporting date, the financial assets include non-current securities totaling € 7,118 thou­sand(previous year: € 7,869 thou­sand) that are used to cover future pension obligations. Furthermore,€ 114 thou­sand of the sundry financial assets (previous year: € 210 thou­sand) has been provided ascollateral for liabilities and contingent liabilities. They may be drawn on if the underlying obligations are
not fulfilled or if the contingent liabilities are realized.
Assets of € 159 thou­sand (previous year: € 732 thou­sand) have been provided as collateral for financial
liabilities.

Risk management
Principles of financial risk management
The Voith Group is a global business and is exposed to risks arising from changes in interest rates andexchange rates in the course of its ordinary business activities which affect its liabilities, assets andtransactions. These risks could affect its net assets, financial position and earnings position. The aimof financial risk management is to manage and limit these risks.
The principles of the Group’s financial policy are laid down by the Voith GmbH & Co. KGaA Board ofManagement and monitored by the Supervisory Board. Corporate Finance, a corporate department ofVoith GmbH & Co. KGaA, implements the financial policy and regularly reports to the Chief Financial
Officer on the financial position of the Group and its current risk exposures. Certain financial transactions
require special approval by the Corporate Board of Management. Long-term refinancing is obtained byVoith GmbH & Co. KGaA.
Derivative financial instruments are used to limit the currency and interest rate risks arising both fromoperating business and from the resultant financing requirements. These instruments are used inaccordance with clearly defined, consistent, Group-wide guidelines. Compliance with these guidelines
is verified on an ongoing basis. Hedge transactions and cash investments are placed only with financial
institutions that have first-class credit ratings.

168

Voith Annual Report 2022
Consolidated Financial Statements
Other notes

Credit risk
The Voith Group does business only with recognized, creditworthy third parties. Customers who wish
to do credit-based business with the Group are subject to creditworthiness verification.
Cash and cash equivalents and other financial assets:
For the purposes of internal risk management, other financial assets consist essentially of cash andshort-term securities. Counterparty default risks associated with term deposits are limited by selecting
solvent banking partners and by spreading cash across multiple counterparties. For banks, a ratingsbased limit (derived from credit default swaps/rating) is monitored constantly. If a defined threshold isexceeded with the CDS rates, the limits are reduced and funds have to be allocated. In addition, theVoith Group invests in securities and monitors the associated risks of these centrally. The low credit
risk exemption is applied. The Voith Group allocates cash investments primarily to business partners
with investment grade ratings. In addition, all counterparties are continually monitored using a risk
management system based on CDS rates.
With respect to credit risk arising from the Group’s other financial assets, the Group’s exposure to credit
risk arises from default of the counterparty, with a maximum exposure equal to the carrying amountof these instruments. For details of financial guarantees, please refer to the discussion of contingent
liabilities. This kind of loss can occur if individual business partners fail to meet their contractual
obligations. As a rule, no collateral exists for such an eventuality.
For determining the expected credit losses (ECL) for other financial instruments, Voith uses an evaluation
model in which determination of the ECL is based on probabilities of default observable in the capital
market and that are applied in each case to the individual counterparties and the associated exposures.
Market-orientated probabilities of default for the relevant counterparties are derived on the basis of
the corresponding credit default swap (CDS) rates that reflect the future expected credit losses. In the
consolidated financial statements, the ECL for other financial instruments is of secondary importance,
which means that no further quantification is necessary.
A significant rise in credit risk is assumed if the financial assets are more than 30 days overdue. An
event of default is assumed if the financial assets are more than 90 days overdue. Objective evidenceof impairment exists, for example, in a situation where the debtor is in significant financial difficulties orthere has been a breach of contract such as an overdue payment.
Trade receivables:
Credit risk arising from the delivery of goods and services stems from manufacturing risks andreceivable risks. Management of these risks is governed by rules that are binding throughout theVoith Group. The maximum default risk is limited to the carrying amount of trade receivables, which is€ 882,037 thou­sand (previous year: € 744,140 thou­sand). The maximum default risk for contract assets
is € 715,432 thou­sand (previous year: € 573,952 thou­sand). Based on the collateral held, the maximum

Voith Annual Report 2022
Consolidated Financial Statements
Other notes

169

default risk for trade receivables is reduced by € 105,331 thou­sand (previous year: € 109,051 thou­sand)and that for contract assets by € 75,755 thou­sand (previous year: € 36,161 thou­sand).
All orders above a defined contract value are subject to general risk assessment requirements. Without
special permission from the relevant decision-making bodies, Group companies do not accept
unsecured orders from customers whose credit rating is below a defined threshold and who cannot
furnish an adequate guarantor.
Political manufacturing and receivables risks with a Euler Hermes Country Risk Level of 3 or higher
must, as a rule, be hedged, unless approval is issued by the decision-making bodies in individual cases.
Further risk assessment is also activated for orders upward of defined contract values. Necessary credit
insurance is obtained via export credit agencies (ECAs), in the private insurance market or by meansof bank products.
The impairment model in IFRS 9 involves a risk allowance for expected credit losses (ECL). This meansthat the accounting method is close to the forward-looking credit risk management and necessitatesa model for measuring expected credit losses on trade receivables and also for contract assets thattakes account of macroeconomic factors (“forward-looking information”). IFRS 9 does not contain any
regulations on the specific design of the model.
IFRS 9 does not permit mere extrapolation of credit losses observed in the past, which means that acertain likelihood of default exists even for customers who have always had a first-class rating.
Voith uses a simplified evaluation model in which determination of the ECL is based on probabilities ofdefault observable in the capital market and that are applied in each case to the portfolio of receivables
and the contract assets (exposure) for each individual region and Group Division. In this context,
allocation of total exposure to the relevant regions is derived from the regional distribution of sales in thepast fiscal year. Market-orientated probabilities of default for the relevant regions and Group Divisions
are derived on the basis of the corresponding credit default swap (CDS) rates that reflect the future
expected credit losses. Any impaired and hedged receivables still contained in the exposure are taken
into account as necessary.
In principle, expected credit losses should be determined at the level of individual instruments, but,for the purpose of simplification, clustering is deemed permissible and is customary in practice. With
regard to clustering, it should be noted that the clusters must be comprised of financial instrumentswith homogeneous characteristics. In this respect, the assumption is made that each of the outstanding
receivables have similar risk features and are thus subject to similar default probabilities. Voith performs
clustering according to the Group Divisions Hydro, Paper, Turbo and Others, and according togeographical regions.

170

Voith Annual Report 2022
Consolidated Financial Statements
Other notes

The following structure of external default risk rating classes is derived from the ECL model:in € thousands

External
ratingBreakdown ofreceivables

Gross carrying
amount*Impairment
loss

Net carrying
amountLoss rate

AAA to BBB-

91 %1,553,327- 12,538

1,540,789

0.81 %

BB+ to BB-

7%61,003- 739

60,2641.21 %

B+ to B-1%

117,110- 4,750

112,360

4.06 %AAA to BBB-

91 %1,290,370- 6,228

1,284,142

0.48 %

BB+ to BB-

7%

100,810- 802

100,008

0.80 %

B+ to B-1%

20,162- 5,779

14,38328.66 %

2022- 09- 30
Low riskMedium risk
High risk2021- 09- 30
Low riskMedium risk
High risk

The impairment model applied is based on an event of default of the receivable after a maturity of 365
days.
Prior to application of the model at Group level, the Voith companies examined the portfolio ofreceivables with regard to objective evidence of impairment, such as delayed payment on the part ofthe debtor for no apparent reason, significant levels of debt or breach of contract. The gross carrying
amount of the impaired receivables from customers is ultimately derecognized when the debtor has
become insolvent and insolvency proceedings have been opened.
The Voith Group is not exposed to any material concentration of risks. Corporate policy is to avoid
concentration of credit risk in a single financial institution. Instead, the Group invests with a variety ofcreditworthy financial institutions. The Group’s customer structure is not materially concentrated in any
particular geographic region. The Group tests doubtful accounts for impairment considering certain
customers, historical trends, branches of industry and various other information.
Liquidity risk
To ensure that it can always meet its financial obligations, the Voith Group has negotiated sufficient cashlines and syndicated credit facilities with its banking partners.
In February 2020, Voith took out a note loan of € 400 million with terms of five, seven and ten years.
Fixed rate interest (€ 169 million) or floating rate interest on the basis of the 6M Euribor (€ 231 million) is
payable on the tranches. The variable interest was fixed in the 2021/22 fiscal year by means of interest
rate swaps. Long-term loans totaling € 200 million were taken out in the 2021/22 fiscal year. Of thistotal, floating interest based on the Euribor is payable on € 100 million and fixed interest on the other€ 100 million.

* Gross carrying amount less specific bad debt allowances and without taking account of deduction of provisions on the assets side.

Voith Annual Report 2022
Consolidated Financial Statements
Other notes

171

Follow-on financing for the syndicated euro loan dating from 2018 was successfully obtained at the
beginning of October 2022. The syndicate was expanded from 11 to 12 participating banks, the volume
was increased from € 550 million to € 600 million. The credit line has not been drawn on and is available
as a strategic liquidity reserve until 2027, plus two renewal options until 2029. It contains an option
to increase the volume of the facility up to a maximum of € 800 million subject to the banks’ consent.
The revolving syndicated loan in China, which was refinanced in 2019, will be available until June 2024;
it is for an amount of € 202 million. This facility is currently not being utilized.
The credit facilities are subject to the customary market conditions and contractual terms and conditions
based on Voith’s rating. As in previous years, all contractual terms and conditions were complied within full in the 2021/22 fiscal year. The ratings given by the rating agencies Moody’s and S&P remainunchanged at Ba1 stable and BB+ stable.
The liquidity of Group companies is ensured by means of cash pools, intercompany loans and theallocation of external bank credit lines to individual operating units. Corporate Finance producesmonthly finance status reports for the entire Group. Balances of central bank and cash pool accounts
and bank guarantees are available on a daily basis.
The table below lists the undiscounted, contractually agreed cash outflows for financial instruments:in € thousands

2022-09-30

Cash flows< 1 year

Cash flows
1–5 years

Cash flows> 5 years

Trade payables

729,446

729,445282

0Bank loans/notes

822,520

203,734

601,073

48,862Financial liabilities from leases

101,71030,66862,1999,865

Other interest-bearing liabilities

176,566

39,02664,70673,951Other financial liabilities

264,527

243,986

20,7602,087

Derivative financial instruments

54,611· Outflows

789,226

175,841578· Inflows- 748,185- 154,494- 501

1,287,900

770,367

134,842

2,149,380

172

Voith Annual Report 2022
Consolidated Financial Statements
Other notesin € thousands

2021-09-30

Cash flows< 1 year

Cash flows
1–5 years

Cash flows> 5 years

Trade payables

569,575

569,0905280Bank loans/notes

546,725

83,384

274,610

213,484

Financial liabilities from leases

98,18928,304

61,194

12,868Other interest-bearing liabilities

142,404

50,474

31,39760,420

Other financial liabilities

236,661

212,31223,630720

Derivative financial instruments

33,314· Outflows

475,546

195,0970· Inflows- 454,303- 183,025

0964,807403,431

287,492

1,626,868

Solvency is ensured and liquidity managed using cash equivalents and short-term securities which canbe transformed into cash at any time.
Derivatives include cash outflows for derivative financial instruments with negative market values forwhich gross cash settlement has been agreed. The cash outflows for these financial derivatives arematched by corresponding cash inflows which are shown separately in the table above under inflows
and outflows (gross). On the other hand, where a net cash settlement is effected, cash outflows arepresented on a net basis.
There are no expectations that cash flows presented in the maturity analysis could be incurredsignificantly earlier, or that there will be significant changes to the cash flow amounts.
Financial market risk
Foreign exchange risk:
Its global production and trading activities expose the Voith Group to risks arising from fluctuations
in exchange rates. Foreign exchange risks exist in particular wherever receivables, liabilities, cash
and cash equivalents, and orders received (fixed obligations/forecast transactions) are or will bedenominated in a currency other than the functional currency of the Group company concerned.
Most currency hedging is undertaken by Corporate Finance and its Regional Finance Center. Transaction
risks arising from the international delivery of goods and services are mainly limited by forward exchange
contracts. In general, all foreign currency transactions at the Voith Group are hedged. Major balance
sheet items and orders are hedged individually within the framework of hedge accounting (full fair value
method). Based on this, the foreign currency risk essentially corresponds to the nominal value of theforward exchange contracts.
In the project business, both the hedge relationship and the risk management objectives and strategies
must be documented in respect of the underlying hedged item or transactions before external hedges
are entered into.

Voith Annual Report 2022
Consolidated Financial Statements
Other notes

173

Hedges must be highly effective to be in compliance with the Voith Group’s risk management strategy.
Where hedges are demonstrated to be effective, the transactions qualify for hedge accounting. The
Group uses the dollar offset and critical term match method to assess whether the derivative designatedin each hedge will probably be effective and has been effective. As a result, fluctuations in the exchange
rate do not affect profit or loss, nor do they influence project costing.
Main causes for these hedges being ineffective can be firstly the impact of the credit risk of thecounterparties and the Group on the fair value of the forward exchange contracts that are not reflectedin the change in the fair value of the hedged cash flows and that are attributable to the change in theexchange rates, and secondly changes in the timing of the hedged transaction.
In the Voith Group, derivative financial instruments are traded externally by Corporate Finance on behalfof Group companies. Group companies in countries subject to foreign exchange restrictions hedge theircurrency risks locally. A Group-wide treasury management software tool is used for central scheduling,
monitoring and documentation of all foreign currency hedges entered into by Corporate Finance orGroup companies.
Changes in the US dollar exchange rate are significant for the Voith Group. The net USD exposureamounted to € 191 million as at September 30, 2022 (previous year: € 254 million). Based on thebalance sheet items described above, the effects on the net result and consolidated equity are as
follows: if the US dollar falls by 5 %, the result before taxes increases by € 652 thou­sand (previous
year: increase of € 4,473 thou­sand) and other comprehensive income increases by € 3,464 thou­sand(previous year: decrease of € 197 thou­sand). If, on the other hand, the US dollar rises by 5 %, the result
before taxes decreases by € 652 thou­sand (previous year: decrease of € 4,473 thou­sand) and othercomprehensive income decreases by € 3,464 thou­sand (previous year: increase of € 197 thou­sand).
The exposure not taken into consideration in the sensitivity analysis amounts to € 296 million for CNY(previous year: € 146 million) and to € 112 million for SEK (previous year: € 55 million).
Interest rate risk:
The Voith Group’s exposure to interest rate risks arising from external refinancing is analyzed andmanaged centrally by Corporate Finance. Medium- to long-term assets and liabilities with fixed interest
rates are the main source of interest rate risks at the Group, as changes in market rates of interest
can cause the value of a financial instrument to fluctuate. The risk to the market value of fixed-interest
receivables and liabilities and the interest rate risk with floating-rate receivables and liabilities is hedged
on a case-by-case basis, for example by means of interest rate swaps and, where appropriate, hedge
accounting is applied.
The Voith Group’s risk management strategy requires highly effective hedges. When demonstrated
to be effective, the hedge transactions qualify for hedge accounting status. The critical term match
method and the hypothetical derivative method are used to prove the effectiveness of the hedge. As aresult, interest rate fluctuations do not affect the interest result.
The relevant asset items are essentially cash at banks that is invested in the money market and/or isused to fund the existing cash pools. The Group companies that participate in the cash pool operate adaily zero-balancing policy and therefore have no exposure to external interest rate risks.

174

Voith Annual Report 2022
Consolidated Financial Statements
Other notes

On the cost side, interest rate risks arise from a note loan and a variety of bank loans.
The carrying amounts of the Group’s significant financial instruments that are exposed to interest raterisks are grouped by their contractually agreed maturities in the following table:
2022-09-30
in € thousands

Less than
1 year

1–2 years

2–3 years

3–4 years

4–5 years

More than
5 years

Total

Floating interest rate
Cash and cash equivalents

411,892

0

0

0

0

0

411,892

Bank loans

155,236

101,109

711

711

711

887

259,365

Bank loans

38,732

737

200,480

21,711

260,967

40,528563,1552021-09-30
in € thousands

Less than
1 year

1–2 years

2–3 years

3–4 years

4–5 years

More than
5 years

Total

Fixed interest rate

Floating interest rate
Cash and cash equivalents

511,165

0

0

0

0

0

511,165

Bank loans

77,405

1,110

1,109

98,189711

135,342

313,866

1,363

38,711

737

102,896

21,701

67,450232,858

Fixed interest rate
Bank loans

The variable part of the note loan is now presented in the fixed interest liabilities as it has been hedgedusing interest rate swaps. In the event of an increase (decrease) in the interest rate of 100 basis points,
the market value of the interest rate swaps, and correspondingly the other comprehensive income,would increase (decrease) by € 6.3 million. In the previous year, additional interest costs of € 1.1 million
p.a. would have been incurred for the variable part of the note loan if the 6M Euribor had risen incomparison to the end of the previous fiscal year. If, in contrast, the 6M Euribor had fallen at the next
two interest dates by 100 basis points, the interest costs would have remained unchanged.
The interest result from the other material floating-rate financial instruments would have been € 1.5 million higher (lower) (previous year: € 4.3 million higher (lower)) if the market rate of interest had been 100
basis points higher (lower) as at September 30, 2022. As in the previous year, this effect originatesfrom CNY denominated floating-rate financial instruments of € 1.4 million (previous year: € 2.5 million).

Voith Annual Report 2022
Consolidated Financial Statements
Other notes

175

Risks relating to securities and stock prices:
The Voith Group holds securities in the “at fair value through other comprehensive income” (FVOCI)
measurement category of € 16 million (previous year: € 15 million). A 10 % change in the underlying stock
prices would cause equity to change by 10 % of the carrying amount of the stocks concerned.
It should be noted that all existing stock price risks are analyzed continuously and suitable counteraction
is taken accordingly.
Commodity price risk:
The Voith Group is exposed to risks arising from changes in commodity prices, as these also affect mostof the semi-finished goods that it needs. Voith’s Corporate Purchasing regularly reviews the nature,
volume and scheduling of the Group’s materials requirements. On request by Corporate Purchasing
and in consultation and agreement with Group companies, suitable forward commodity contracts canbe arranged by Corporate Finance to limit any latent commodity price risks. The Group had commodity
contracts of an immaterial amount in the fiscal year.
Hedge relationships:
The following items are used to hedge foreign exchange and interest rate risks:2022-09-30

Nominal values*in € thousands< 1 year> 1 year< 1 year> 1 year< 1 year> 1 year

Forward exchange contracts(fair value hedges)

457,869

143,191

13,404

9,026

19,752

6,413

Forward exchange contracts(cash flow hedges)

1,237

0

0

0

232

0

0

231,500

0

14,60700821,786

211,912

17,737

10,177

19,0539,161

1,280,892

586,603

31,14133,81039,037

15,574

Interest rate swaps(cash flow hedges)
Other derivatives

Positive market values

Negative market values

2021-09-30

Nominal values*in € thousands< 1 year> 1 year< 1 year> 1 year< 1 year> 1 year

Forward exchange contracts(fair value hedges)

595,944249,947

16,775

8,087

15,326

8,674

Forward exchange contracts(cash flow hedges)

11,050

991

0

0

447

0

330,954

156,053

4,452

4,270

5,696

3,171

937,948406,991

21,227

12,357

21,46911,845

Other derivatives

Positive market values

Negative market values* Nominal values refer to the volume of the hedged transaction in local currency, translated at the closing rate.

176

Voith Annual Report 2022
Consolidated Financial Statements
Other notes

Positive market values are disclosed at the reporting date as other financial assets and negative market
values as financial liabilities (in the case of financial transactions) or as other financial liabilities (in thecase of operational transactions).
The market values of the forward exchange contracts were determined as present values of the cash
flows taking account of the respective contractually agreed forward rates and the forward rate on thereporting date. The average rates of the forward exchange contracts entered into for material currency
pairs are as follows as at September 30, 2022:
Average hedged rates< 1 year> 1 year

EUR / USD

1.13371.2027

EUR / CNY

7.75208.8000USD / BRL

5.40605.9417

USD / CNY

6.86846.8443

USD / INR

80.2180

81.6643

The average interest rate for the interest rate hedges is 1.003 %.
Fair value hedges:
The Group uses fair value hedges primarily to hedge foreign exchange risks.
In the 2021/22 fiscal year, a loss of € 4,597 thou­sand was recorded on derivative financial instruments
classified as fair value hedges (previous year: a gain of € 21,260 thou­sand). Since the hedges have been
mainly classified as highly effective, measurement of the hedged transactions at the reporting date
produced an offsetting gain/loss in the same amount.
The following table presents the measurement effects of the underlying hedged transactions (“firm commitments”) and the change in the value of the underlying transactions that are used as a basis for determining whether the hedge is ineffective. The change in the value of the hedging instruments that wereused as a basis for determining whether the hedge is ineffective corresponds to the change in value ofthe underlying hedged transactions.
Balance sheet itemin € thousands

Sundry financial
assetsFinancial liabilities/
sundry financial
liabilities

Change in the valueof the underlying
hedged transactions
that were used as abasis for determining
whether the hedge
is ineffective

15,251

15,812- 3,735

10,137

16,097- 863

2022- 09- 30
Firm commitments
2021- 09- 30
Firm commitments

Voith Annual Report 2022
Consolidated Financial Statements
Other notes

177

In the 2021/22 fiscal year, positive effects on profit or loss of € 3.4 million arose from ineffective hedges(previous year: € 1 million) that are contained in other expenses.
Changes in the value of derivative financial instruments that do not meet the requirements for hedge
accounting under IAS 39 are recognized as income or expenses in profit or loss at the reporting date.
Cash flow hedges:
As at September 30, 2022, there were cash flow hedges in place that are subject to either currency orinterest rate risks.
Hedge relationships designed to hedge cash flows from forecast sales transactions were classified ashighly effective. Accordingly, an unrealized gain of € 14,415 thou­sand (previous year: loss of € 500 thou­sand) was recognized within consolidated equity in other reserves as at September 30, 2022.
The following table presents the measurement effects of the underlying hedged transactions (“forecast
transactions”) and the change in the value of the underlying transactions that are used as a basis fordetermining whether the hedge is ineffective. The change in the value of the hedging instruments thatwere used as a basis for determining whether the hedge is ineffective corresponds to the change invalue of the underlying hedged transactions.

in € thousands

Change in thefair values of
the underlying
transactions

Hedge reserve

Change in the valueof the underlying
hedged transactions
that were used as abasis for determining
whether the hedge
is ineffective

192

- 231

192

- 14,607

14,607- 14,607

- 626

- 500

- 626

2022- 09- 30
Foreign exchange risk
Forecast transactions
Interest rate risk
Floating interest rate instruments
2021- 09- 30
Forecast transactions

There were no effects on profit or loss from ineffective hedges in the 2021/22 and 2020/21 fiscal years.
In the 2021/22 fiscal year, there was a reclassification from other reserves of € 407 thou­sand (previous
year: € -70 thou­sand) to other operating expenses in the statement of income on account of thetermination of hedges. No effects were reclassified in the statement of income relating to the interest
rate swaps.

178

Voith Annual Report 2022
Consolidated Financial Statements
Other notes

Research and development costs
In the 2021/22 fiscal year, research and development costs totaled € 212,544 thou­sand (previous year:€ 192,028 thou­sand).
Of this amount, development costs of € 5,441 thou­s and (previous year: € 6,030 thou­s and) were
capitalized in the balance sheet. The remaining costs represent activities for non-customer-specificnew developments and improvements of € 155,702 thou­sand (previous year: € 139,055 thou­sand)and development activities of € 51,401 thou­sand (previous year: € 46,943 thou­sand) capitalized forcustomer-specific contracts.
Transactions with related parties and individuals
In the course of its ordinary business activities, Voith GmbH & Co. KGaA maintains relationships bothwith the subsidiaries listed in these consolidated financial statements and with other related companies
and individuals (family members who are shareholders, and members of the Supervisory Board and of
the Board of Management).
In the 2007/08 fiscal year, one subsidiary of Voith GmbH (as it was known at the time) was sold tofamily shareholders in a transaction under common control. That company, JMV GmbH & Co. KG,
Heidenheim an der Brenz, Germany, was merged into JMV SE & Co. KG, Heidenheim an der Brenz,
Germany, in the 2019/20 fiscal year. Since then, it has been the ultimate parent company of the Voith
Group.
All business transactions with related parties are conducted at arm’s length conditions.
Members of the Board of Management of Voith Management GmbH, members of the Supervisory Boardof Voith GmbH & Co. KGaA and family member shareholders also serve on the supervisory boardsof other companies with which Voith maintains relationships in the course of its ordinary businessactivities. Any transactions involving these companies are conducted at arm’s length conditions.
A total of € 680 thou­sand (previous year: € 600 thou­sand) was paid at customary market rates tomembers of the Supervisory Board and former members of the Board of Management for consulting
and other services. Consulting services for a total of € 460 thou­sand were provided by other relatedparties (previous year: € 462 thou­sand), of which € 115 thou­sand (previous year: € 122 thou­sand) had
yet to be paid as at September 30, 2022.

Voith Annual Report 2022
Consolidated Financial Statements
Other notes

179

The majority of goods and service transactions with related parties (entities and individuals) are shownin the table below:
in € thousands

2021 /22

2020 /21

9,165

8,636

Services purchased from associates

261

307

Services rendered to associates

292

4,931

Receivables from associates

437

58

Liabilities to family shareholders

Liabilities to associates

1,073

848

Services purchased from other investments

2,732

3,140

Services rendered to other investments

12,020

10,323

Receivables from other investments, including advances paid

12,891

10,454

- 354

- 354

Liabilities to other investments and to Voith Management GmbH

29,01827,912Loans to JMV Hydro Beteiligungen GmbH

Impairment of receivables from other investments

120,6000Services purchased from joint ventures2

2

Services rendered to joint ventures

98

Receivables from joint ventures

170

255

Liabilities to joint ventures

971

846

Services purchased from the ultimate parent company

12,99910,925Services rendered to the ultimate parent company

1,393

1,406

676

498

11,20810,303

Receivables from the ultimate parent company
Liabilities to the ultimate parent company

Liabilities to family shareholders include current floating-rate clearing accounts and pension obligations.
For more information on the profit participation rights of € 103,400 thou­s and (previous year:€ 103,400 thou­sand) granted to family shareholders, please refer to note 19.
In the 2021/22 fiscal year, guarantees of € 2,424 thou­sand (previous year: € 940 thou­sand) were issued
in favor of other investments.
Capital increases totaling € 1,003 thou­sand (previous year: € 0) were made in favor of associates.
There were no capital increases in favor of joint ventures in the 2021/22 fiscal year (previous year:€ 853 thou­sand).

180

Voith Annual Report 2022
Consolidated Financial Statements
Other notes

Compensation of governing bodies
The compensation for members of the Board of Management of Voith Management GmbH, including
pension expenses, totaled € 9,416 thou­s and in the fiscal year (previous year: € 9,831 thou­s and).
Due to the fact that these expenses are recharged by Voith Management GmbH to Voith GmbH &Co. KGaA, they are presented in the Voith Group’s consolidated statement of income wholly within
personnel expenses. This amount includes short-term benefits totaling € 8,515 thou­sand (previous year:€ 9,004 thou­sand) and post-employment benefits of € 901 thou­sand (previous year: € 827 thou­sand).
The compensation for members of the Board of Management under commercial law totaled € 7,741 thou­sand (previous year: € 8,186 thou­sand).
As a consequence of bringing together the Corporate Board of Management at Voith Management
GmbH, the pension commitments to this group of individuals existing prior to their appointment to theVoith Corporate Board of Management was transferred to Voith Management GmbH at the respective
fulfillment amount under commercial law. No transfers were performed in the 2021/2022 fiscal year
(previous year: approximately € 280 thou­sand).
The present value as at September 30, 2022, of the defined benefit obligations to the Corporate Boardof Management at Voith Management GmbH amounted to € 6,258 thou­sand (including entitlementsfrom deferred compensation; previous year: € 9,990 thou­sand).
The present value of defined benefit obligations toward past members of the Board of Management
totals € 67,588 thou­sand (previous year: € 90,690 thou­sand). Of these amounts, € 2,311 thou­sand(previous year: € 2,730 thou­sand) relates to obligations on the part of the former parent of the Group,
J.M. Voith SE & Co. KG, toward past members of the Corporate Board of Management.
Plan assets for former members of the Board of Management total € 38,977 thou­sand (previous year:€ 38,602 thou­sand).
These amounts are included in note 20.
The compensation for past members of the Board of Management totaled € 4,624 thou­sand (previous
year: € 4,967 thou­sand). Of this amount, € 411 thou­sand (previous year: € 399 thou­sand) relate tocompensation for the members of the Board of Management of the former parent of the Group, J.M.
Voith SE & Co. KG.
The members of the Supervisory Board of Voith GmbH & Co. KGaA received (short-term) compensationof € 378 thou­sand (previous year: € 376 thou­sand).

Voith Annual Report 2022
Consolidated Financial Statements
Other notes

181

Auditor’s fees and services
The following fees (including reimbursement of expenses) were paid to the independent auditor for theservices rendered in the 2021/22 fiscal year:in € thousands

2021 /22

2020 /21

Annual audit

3,102

2,784

Other assurance or valuation services

41

0

Tax advisory services

778

999

Other services

49

6

3,970

3,789

Subsequent events
Mr. Uwe Wehnhardt, Chairman of the Management Board of Voith Hydro and member of the Corporate
Board of Management, resigned from both positions as of October 31, 2022.
Dr. Tobias Keitel was appointed Chairman of the Management Board of Voith Hydro and member of the
Corporate Board of Management with effect from November 1, 2022.
Voith acquired 100 % of the shares in IGW Rail in October 2022. Further information on this can befound in the section entitled “Business combinations in the 2022/23 fiscal year”.
No additional significant developments have occurred since the close of the 2021/22 fiscal year.

182

Voith Annual Report 2022
Consolidated Financial Statements
Other notes

Corporate Board of Management
The following were appointed members of the Board of Management of Voith Management GmbH in
the 2021/22 fiscal year or shortly afterwards:
Dr. Toralf Haag
Stephanie Holdt (from April 1, 2022)
Egon Krätschmer (until April 30, 2022)
Dr. Stefan Kampmann
Andreas Endters
Uwe Wehnhardt (until October 31, 2022)
Dr. Tobias Keitel (from November 1, 2022)
Cornelius Weitzmann
Heidenheim an der Brenz, November 29, 2022
The Board of Management of Voith Management GmbH
Dr. Toralf Haag
Stephanie Holdt
Dr. Stefan Kampmann
Andreas Endters
Dr. Tobias Keitel
Cornelius Weitzmann
The German language consolidated financial statements of Voith GmbH & Co. KGaA as at September
30, 2022, as authorized for issue and the unqualified audit opinion issued thereon by KPMG
Wirtschaftsprüfungsgesellschaft, Munich, will be filed in German at the Bundesanzeiger (Federal
German Gazette). They can be viewed at www.bundesanzeiger.de.

Voith Annual Report 2022
Consolidated Financial Statements
Responsibility statement

183

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 net assets, financial position and earnings positionof the Group, and the Group management report includes a fair review of the development andperformance 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.

Heidenheim an der Brenz, November 29, 2022
The Board of Management of Voith Management GmbH
Dr. Toralf Haag
Stephanie Holdt
Dr. Stefan Kampmann
Andreas Endters
Dr. Tobias Keitel
Cornelius Weitzmann

Contact
Voith Group
Phone: +49 7321 37 0
Fax: +49 7321 37 7000
E-mail: info@voith.com
Group Communications
Phone: +49 7321 37 2877
Fax: +49 7321 37 7107
E-mail: info@voith.com
Investor Relations
Phone: +49 7321 37 2332
Fax: +49 7321 37 7010
E-mail: info@voith.com

Imprint
Publisher
Voith Group
Voith GmbH & Co. KGaA
St. Pöltener Str. 43
89522 Heidenheim, Germany
Phone: +49 7321 37 0
Fax: +49 7321 37 7000
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Seipp Kommunikationsberatung,Cologne, Germany
Typography
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Neunburg vorm Wald, Germany
Photo Credits
Thomas Dashuber,
Munich, Germany

This annual report is also available in German.
Both versions, as well as other information, canbe downloaded at www.voith.com.
© Voith GmbH & Co. KGaA, 2022-12