Interim Report 2015

Voith in figures

2014-10-01 to
2015-03-31

2013-10-01 to
2014-03-31

2,370

2,779

2,663

2,604

Return on sales in %

137
5.1

125
4.8

Result before taxes

-88

53

Net result

-131

30

Cash flow from operating activities

-143

76

Total cash flow

-511

-20

Investments

52

68

in € millions

Orders received
Sales
Profit from operations

1)

829

1,031

Equity ratio in %

14.5

18.9

Balance sheet total 2)

5,717

5,453

38,90739,302Equity2)

Employees 2) , 3)
1)
2)
3)

See “Notes on segment reporting” in the notes to the Group interim financial statements.
Reference date March 31, 2015, compared to September 30, 2014.
Without apprentices.

Contents

Foreword

01
02

Group interim management report
01 Business development and earnings position of the Group8

02 Business development and earnings position of the Group Divisions

14

03 Net assets and financial position

23

04 Employees

27

05 Subsequent events

29

06 Risks and opportunities

30

07 Forecast report

32

Group interim financial statements
Consolidated statement of income

38

Consolidated statement of comprehensive income

39

Consolidated balance sheet

40

Consolidated statement of changes in equity

42

Consolidated cash flow statement

44

Basis of the interim consolidated financial statements and accounting policies

45

Notes on segment reporting

49

Segment information by business segment

50

Notes to the statement of income and the balance sheet

52		

Other notes

59

Responsibility statement66

4Voith Interim Report 2015

Foreword

Ladies and gentlemen,
In a market and competitive setting which remains challenging, the overall development of the Voith Group stabilized noticeably in the first six months of the current
2014/15 fiscal year. Adjusted for changes in the scope of consolidation, Group salesrose by a good 5% in the reporting period. Owing to a persistent lack of economic
momentum and a continuing weak investment climate and delays in awards of somemajor projects in many markets, the number of orders received remained subdued.
Nonetheless, a satisfactory number of orders were received following the tangible
turnaround in the previous year.
Our Group-wide “Voith 150+” success program is beginning to bear fruit. Voith’s
operative earnings improved more than proportionately to sales. The profit fromoperations rose by 12% over the adjusted result for the previous year. As anticipatedand previously announced, the net result was negative. This was due to the planned
special burdens arising from the restructuring of Voith Paper and the streamlining ofGroup-wide administrative structures as part of the Voith 150+ program. The measures making up our success program are in part designed to make structures andprocesses more efficient, to optimize the existing product portfolio and to exploit
growth potential in highly promising markets.
All four Group Divisions showed themselves in robust health in the first half of theyear and, from our current perspective, are again expected to post profit from operations in 2014/15 as a whole. We continue to anticipate that the sales generated byVoith Hydro in 2014/15 will remain at much the same level as last year. We expect

Voith Interim Report 2015

Voith Industrial Services to report continuing moderate organic sales growth andVoith Paper to stabilize sales revenues at a level that is on a par with the previous
year. At the present juncture, the target for Voith Turbo must be to achieve reasonably stable sales development over the year as a whole.
In view of the stable development during the first half year, we reaffirm our Group’s
annual forecast and anticipate sales and orders received remaining at much thesame level as in the previous year. Alongside the improvements in the first half year,
we also expect to see a slight increase in our profit from operations for 2014/15
as a whole and anticipate the restructuring measures having a further positive andvisible impact. Despite positive operative earnings performance, the net result for
2014/15 as a whole will, as previously announced, again be negative owing to thespecial burden represented by high restructuring expenses.
Our company will continue to focus on promoting and implementing “Voith 150+”
as planned throughout the rest of the year. One important aspect of the successprogram was met in the reporting period: the acquisition of 25.1% of the sharesand voting rights in KUKA AG, one of the leading suppliers of robots and automatic
production lines and solutions worldwide. We regard this acquisition as a strategic
investment. The technologies produced by KUKA are key components for the digitalindustry of the future, and for the megatrend “Industrie 4.0”. In the coming years, ourobjective will be to add specifically automation and industrial software competence
to the Voith Group’s existing divisions and to amend our portfolio accordingly. On
the basis of this step, we have decided that Voith will focus on its technology andengineering strengths, and have initiated a value maintenance management sales
process for the Voith Industrial Services Group Division.
We are making good progress with our current program. This program will put Voith
back on track for sustained profitable growth. There is still some way to go. However, we are determined to stay on course and to implement our plans and to put
our measures into action step by step.

Best regards

Dr. Hubert Lienhard
President and CEO

5

Group interim management reportfor the period from October 2014 to March 2015

01

01	Business development andearnings position of the Group02	Business development andearnings position of the Group Divisions
03 Net assets and financial position
04 Employees
05 Subsequent events
06 Risks and opportunities
07 Forecast report

8
14
23
27
29
30
32

8

Group interim management report

01

Business development andearnings position of the Group

Voith Interim Report 2015

The measures taken in recent years to increase
profitability are beginning to take effect: Moderate
growth in sales enabled us to achieve a substantial
increase in the Voith Group’s profit from operationsin the first half year of 2014/15. Despite the positive
operative performance, net result – as announced andplanned – was burdened by provisions for restructuring
expenses and was negative. Owing to market
developments fewer orders were received during thereporting period, nonetheless we consider ourselveson course to meet our estimates for the year as a whole(“constant development”).

01.1. Overall assessment

Improved profitability
In the first half of the 2014/15 year we generated a slight increase in sales whileachieving an above-average improvement in operational earnings indicators. We
attribute this pleasing development to the ongoing restructuring of the Voith
Paper division, the portfolio optimization, and the efficiency improvements introduced under the Group’s Voith 150+ success program, which are showing first
noticeable results. As a result we were able to improve our return on sales and
ROCE. Owing to the timing of project awards in the Voith Hydro division, orders
received in the reporting period were, as anticipated, below the previous year’slevel. As we expect a higher level of orders received for Voith in the second halfof the fiscal year as a result of the various projects to be awarded on the hydropower market, we consider ourselves on course to achieve the goals set out inthe annual report for (“constant”) sales and orders. The Group’s net result was
negative for the period, as announced in February, despite the positive developments at operating level, and will be negative for the year as a whole. This is due
to provisions made for the costs of restructuring at Voith Paper and for redundancy costs in connection with the Group-wide optimization of administrative
structures and processes as part of the Voith 150+ program. The personnel measures planned through to the end of the 2015/16 fiscal year are reflected in theinterim financial statements for the first half of the 2014/15 fiscal year.

9Voith Interim Report 2015

Group interim management report

01.2. Economic

Weakened trends for emerging markets

environment
In the first half of the Voith fiscal year 2014/15 global economic trends did notlive up to the expectations of economic analysts issued at the end of 2014, thedate that our last annual report was published.
On average, global growth in 2015 was at the same low level as in the previous
year. For example, the International Monetary Fund (IMF) has reduced its global
economic growth forecast for 2015 to +3.5 % (estimate at October 2014: +3.8 %),and reduced the forecast for 2016 to +3.8 % (estimate at October 2014: +4.0 %).
The reduced level of growth is attributed to slower growth in emerging markets.
According to IMF forecasts, emerging market growth will only amount to 4.3 % in2015. The growth trend in China has slowed more than expected, which particularly affects export-based economies such as Germany’s, and manufacturers ofcapital goods in particular. Although China’s expected rate of growth of 6.8 % issignificantly above the global average, this trend weakens its role as a driver ofthe global economy and as a demand driver for European manufacturers of capi­
tal goods. India is considered to have become stronger since the presentationof our 2014 annual report, and according to IMF it is expected to generate faster
growth rates than China, although at lower absolute amounts. The significant fall

Changed economic climate: Economic growth in 2015
Real year-on-year change in GDP, 2015
Forecast 2015
acc. IMF

World output
Advanced
economies
United States
Euro area3)

AR 20141)3.8  %

Interim 20152)

3.5  %AR 20141)2.3  %

Interim 20152)

2.4  %AR 20141)3.1  %

Interim 20152)

3.1  %AR 20141)1.3  %

Interim 20152)

1.5  %AR 20141)1.5  %

Interim 20152)

1.6  %AR 20141)
Emerging market anddeveloping economies Interim 20152)

4.3  %

Germany

China
ASEAN-5
India
BrazilRussia5.0  %AR 20141)7.1  %

Interim 20152)

6.8  %AR 20141)5.4  %

Interim 20152)

5.2  %AR 20141)

6.4  %

Interim 20152)

7.5  %AR 20141)1.4  %

Interim 20152)-1.0  %AR 20141)0.5  %

Interim 20152)-3.8  %

Source: International Monetary Fund (IMF), World Economic Outlook (WEO), April 2015, October 2014
AR = Anual Report; Interim = Interim Report
1)
Anual Report 2014 (IMF, WEO October 2014).
2)
Interim Report 2015 (IMF, WEO April 2015).
3)
Including Germany.

10Group interim management report

Voith Interim Report 2015

in oil prices and the continuing Ukraine conflict – with the associated economic
sanctions applied by the West – have created a recession in Russia as well as
a drastic reduction in expected economic progress. The sanctions and the poor
economic conditions in Russia have an above average effect on the German
mechanical engineering sector. In the short term, it is expected that growth inBrazil will be lower than the pessimistic expectations made for it, and according
to forecasts issued by the IMF it may even record a fall in Gross Domestic Product in 2015, reinforced by the lower oil price and severe droughts.
On the other hand, conditions in industrial countries have improved slightly inthe reporting period from their low level in the previous year. Oil-importing countries are benefiting from lower oil prices which, owing to the continuing supply
glut, have approximately halved since mid-2014. Growth in industrial countries
is expected to be 2.4 %, above the previous year’s level (+1.8 %). Economies inthe euro zone have benefited from the improvement in export competitivenesson markets worldwide associated with the fall in the euro.
In three target markets served by Voith – energy, paper, and raw materials – theinvestment climate has remained subdued. The oil & gas market has been weaker
than we expected at the time we published our 2014 annual report due to thefall in oil prices. Major segments of the transport & automotive market have been
relatively positive. Graf Wirtwachs

01.3. Sales

Group sales up slightly
The Voith Group generated sales of € 2,663 million in the first half of the 2014/15
fiscal year, representing 2 % growth compared to the same period in the previous
year (€ 2,604 million). After adjusting for changes in the scope of the consolidation(primarily the sale of the DIW Group at September 30, 2014), the growth in sales
is 5 %. Of this, approximately 2 percentage points are due to positive changes inexchange rates, as a consequence of the lower euro. This affected all four of theSales Group

Sales total € 2,663 millionin € millions

by Group Division

Voith ­­Hydro
25  %

Voith Paper
29  %

Voith ­Industrial­Services
21  %

2,663

2,604

2013/14Full fiscal year

Voith ­Turbo25  %

2014/15First half-year

First half-year 2014/15

Voith Interim Report 201511

Group interim management report

Group Divisions, if not to the same degree. Overall, sales developments were inline with our expectations.
The four Group Divisions report diverging trends. Voith Paper and Voith Industrial
Services grew by 15 % and 9 % respectively (after adjusting for changes in thescope of the consolidation). Voith Hydro and Voith Turbo reported slight falls insales (-2 % in each case).
Detailed information on the development of sales at the separate Group
Divisions can be found in section 02,“Business development and earnings
position of the Group Divisions”.

01.4. Orders received

Voith Paper was the largest contributor to Group sales with 29 % (previous year:
27 %), followed by Voith Hydro and Voith Turbo with 25 % each (previous year:
25 % and 26 % respectively), while Voith Industrial Services’ share was 21 % (previous year: 22 %). Umsatz 2x M

Orders received in the first half year below
the previous year level

Detailed information on the developmentof orders received at the separate Group
Divisions can be found in section 03,“Business development and earnings
position of the Group Divisions”.

Overall, the Voith Group secured new orders totaling € 2,370 million in the firsthalf of the 2014/15 fiscal year (previous year: € 2,779 million, -15 %). The fall is
13 % compared to the same period of the previous year, once adjustments forchanges in the scope of the consolidation are taken into account. The fall compared to the same period in the previous year is primarily attributable to theVoith Hydro Group Division, where significantly fewer orders were received thanin the extraordinarily strong equivalent period in the previous year owing to thetiming of large projects awarded in the reporting period. However, this is not a
medium-term trend, but is primarily a result of the cyclical nature of the way inwhich major hydropower projects are awarded. We expect a stronger second
half year for Voith Hydro, and we see the Voith Group as a whole on course tomeet our overall estimates for the 2014/15 fiscal year (“constant” development).
Voith Paper and Voith Turbo recorded orders received at approximately the samelevel as in the same period in the previous year. The value of orders received also
included the positive effects of changes in exchange rates. AuftrEig 3x M

Orders received Group

Orders received total € 2,370 million

Orders on hand Groupin € millions

by Group Divisionin € millions

Voith ­Turbo
31  %
2,779

2,370

2013/14Full fiscal year

2014/15First half-year

Voith ­­Hydro
16  %

5,379

5,273

2013/142014/15

Voith ­Industrial­Services23  %
Voith Paper
30  %

First half-year 2014/15

Full fiscal year

First half-year12

01.5. ResultsGroup interim management report

Voith Interim Report 2015

Improvements in operational earnings indicators,
charges against net result
Although we made significant improvements in operational earnings indicators
and were able to improve return on sales in the first half of the 2014/15 fiscal year,
the net result is negative, as advised back in February 2015, totaling €-131 million(previous year: € 30 million). The net post-tax loss is a result of major expenses
incurred in connection with efficiency improvement measures instigated in thereporting period (these are described below under results from non-recurring
items).

For information on the developmentof sales, we refer to section 01.3.

The Group’s total output increased by 2 %, consistent with the increase insales. The increase totaled € 56 million, giving rise to a new total of € 2,695 million (previous year: € 2,639 million). Trends in the total output of the Group Div­
isions were uneven, as was the case with sales (Voith Industrial Services after
adjusting for changes in the scope of the consolidation +4 %, Voith Hydro -1 %,Voith Paper +13 %, and Voith Turbo +3 %).M
Material expenses increased to €1,084 million (previous year: €1,021 million,+6 %). The ratio of the cost of material to total output increased to 40.2 % (previous year: 38.7 %). The increase in the material cost ratio was primarily a result of
the increased level of sales at the material intensive business with new machinesat Voith Paper. In addition, the disposal of the DIW Group at September 30, 2014
(with a low material ratio) and the associated low proportion of total Group sales
attributable to Voith Industrial Services also contributed significantly to the increasein the materials ratio.
Personnel expenses fell by € 33 million to €1,039 million (previous year: €1,072 million, -3 %). The changes reflect the lower staff numbers, in particular as a resultof the restructuring measures implemented at Voith Paper in previous years. The
first notable effects of these measures resulted in increased profitability and contributed significantly to reducing the ratio of personnel expenses to total output
to 38.6 % (previous year: 40.6 %).
Depreciation and amortization totaled € 80 million, changing only marginally (previous year: € 82 million). The amounts were also practically constant as a proportionof total output at 3.0 % (previous year: 3.1 %).

Operational result before non-recurring items
Group in € millions
118

105

in € millions

30
-131

2013/14Full fiscal year

Net result Group

2014/15First half-year

2013/14Full fiscal year

2014/15First half-yearVoith Interim Report 2015

Group interim management report

13

The balance of other operating expenses and income increased to € 374 million(previous year: € 358 million). The ratio to total output increased slightly to 13.9 %(previous year: 13.6 %).

For detailed information on thedevelopment of the profit fromoperations and the ROCE for eachGroup Division, see section 03.

We were able to improve the operational result before non-recurring items by 12 %to €118 million (previous year: €105 million). The profit from operations used forinternal management purposes amounted to €137 million (previous year: €125 million, +9.6 %). As with sales and orders received, this includes positive effects
resulting from changes in exchange rates. The return on sales improved to 5.1 %(previous year: 4.8 %). The ROCE (return on capital employed) increased to 11.0 %(previous year: 9.9 %). M

Further details of both ofthese measures are provided in
section 04, “Employees”.

The result from non-recurring items in the period totaled €-165 million (previous
year: €-20 million) and was primarily the outcome of the following restructuring measures: In February 2015 Voith Paper presented a package of measuresdesigned to concentrate its European activities in a small number of locations
and to reduce the size of the workforce further. Current plans envisage cuts of
900 jobs worldwide. We had previously announced in the 2014 annual report thatfurther capacity adjustments would be necessary in this division in order to be
successful in the long term given the structural changes in the market. In addition, under the Voith 150+ program we will improve the efficiency of the Group’s
administrative function by implementing a thorough restructuring program, involving the cutting of 720 jobs across the Group. Of these jobs, 150 affect the Voith
Paper division and are included in the reduction of the Voith Paper workforce
by 900 as mentioned above. Based on current planning, both measures will becompleted by the end of the 2015/16 fiscal year. Further expenses included in
the non-recurring result resulted from the sale of subsidiaries. M
Individual contributions to non-recurring items were made by Voith Industrial Services (€-22 million, previous year: €-7 million), Voith Hydro (€-15 million, previous
year: €-5 million), Voith Paper (€-109 million, previous year: €-3 million), Voith Turbo(€-14 million, previous year: €-4 million), and by activities with holding functions(€-5 million, previous year: €-1 million).
The interest result, the net sum of interest expenses and interest income, totaled€-34 million, which was almost unchanged compared to the same period in theprevious year (€-35 million).
The other financial result amounted to €-8 million (previous year: € 0) and primarily represents impairment charges against securities and charged to the income
statement.
Income taxes totaled €-44 million (previous year: €-23 million), including income
taxes relating to other periods of €-18 million (previous year: €1 million). There were
no tax effects relating to significant amounts of expenses included in non-recurring items in the period.
GrafErgeb 2x

14

02

Group interim management report

Voith Interim Report 2015

Business development
and earnings position of
the Group Divisions
All four Group Divisions posted clearly positive operating
earnings figures, despite uneven performance in termsof sales and orders received. The intensive restructuringof the service portfolio, efficiency improvement measures
in Voith Industrial Services and the restructuring of Voith
Paper are showing the first tangible signs of success:both Group Divisions have increased their profit fromoperations. Voith Hydro reported a fall in profit fromoperations during the reporting period but anticipates
for the 2014/15 fiscal year as a whole a constantdevelopment as projected. For market reasons, Voith
Turbo was unable to match the figures for the same
period in the previous year.

02.1. Voith Hydro

Market activity low
For Voith Hydro the first half of the 2014/15 fiscal year was characterized by amarket in which, as anticipated, very few major projects were awarded. However,Voith Hydro is on course for the full year 2014/15.

Sales slightly below the high level of the previous year
Voith Hydro generated sales of € 656 million in the first half of the 2014/15 fiscal
year, only slightly below the very high level in the previous year, as expected (previous year: € 668 million, -2 %). This is due to the low level of orders received in thefiscal years 2012/13 and 2011/12, which are reflected in sales with a time delay.
We retain our forecast of stable sales for the year as a whole.

Fall in orders received due to market conditions
The hydropower market in the reporting period is significantly lower than in theprevious year. In any case we expected that the volume of projects awarded in
the market in the current year would be lower due to the high volumes of large

Voith Interim Report 201515

Group interim management reportprojects awarded in the 2013/14 fiscal year, and accordingly we forecast a fall inorders received for Voith Hydro. Only a small proportion of the expected market
volume has been awarded to date. This is due to the timing of awards for planned
major projects, but also partially due to the negative influence of deteriorated
economic or political conditions affecting the project award process, for ex­­ample
in Brazil and Russia.
Voith Hydro participated reasonably in the orders received and won new orders
to a value of € 376 million in the reporting period (previous year: € 747 million,-50 %). As we expect a number of large projects to be awarded over the courseof the remaining part of the year, we expect that Voith Hydro’s orders received
in the second half of the fiscal year will be higher. Accordingly, the percentage
fall in orders received for the full year will be lower than it has been in the current
reporting period. Orders on hand remained at a high level at March 31, 2015,
amounting to € 2,962 million (September 30, 2014: € 3,091 million).
Our orders received in the reporting period were dominated by modernization
projects attributable to the large hydro segment. For example, we are engaged tomodernize the Polpitiya hydropower plant for the Ceylon Electricity Board (CEB),
Sri Lanka’s largest energy provider. As part of this order we will replace two 37.5
MW generator-turbine units with two 40 MW units and overhaul the spiral casesand draft tubes, and will also be responsible for the erection and commissioning of the plant. This modernisation will significantly increase the performance ofthe power plant, which was originally commissioned in 1969. The hydropower
market in Southeast Asia, like that in China and Central Asia, is generally gaining in importance.
Sales Voith ­­Hydroin € millions

668

656

2013/14Full fiscal year

2014/15

The hydropower market in Western Europe is slow given the weak economic
climate in Western eurozone countries and the unabated growth of wind andsolar plants in Germany. However, we were able to win a number of orders in
the reporting period in the small hydro segment (power plants with a generating capacity of up to 30 MW per unit) in Italy. These orders, with a total value of€16 million, are for the modernization of three power plants which have been connected to the grid since the early twentieth century. The modernization will enable
them to provide electricity from renewable energy sources for many decades tocome, demonstrating the long-term profitability of hydropower plants.

First half-year

Orders received Voith ­­Hydro

Orders on hand Voith ­­Hydro

Profit from operations Voith ­­Hydroin € millionsin € millionsin € millions

3,091

2,962

747

51

43

376

2013/14Full fiscal year

2014/15First half-year

2013/14Full fiscal year

2014/15First half-year

2013/14Full fiscal year

2014/15First half-year16Group interim management report

Voith Interim Report 2015

Voith Hydro also won orders in the challenging European pumped storage segment. The Société Electrique de L’Our S.A. placed an order with us to modernize four motor-generators at the Vianden pumped storage plant in Luxembourg,
which is marketed by the utility RWE Génération. The power plant, which islocated directly on the German-Luxembourg border, feeds its electricity directly
into the German grid and can be used for flexible electricity storage purposes
and to stabilize and regulate the network as part of the energy turnaround.
In Russia, due to the weakness of the ruble, domestic providers are being given
preference when hydropower projects are awarded. Despite the difficult conditions we have been able to win one project.
The USA and Canada as established hydropower markets continue to show
potential for modernization. While renewable energies are being driven back in
the USA by gas power plants due to the boom in shale gas, new hydroplants areplanned in Canada as a result of progressive energy policies.
Political instability and the weak economic climate in Brazil are acting as a brakeon infrastructure projects and are having a negative effect on hydropower tenders.

Profit from operations down
Voith Hydro generated a profit from operations of € 43 million in the first half of the
fiscal year 2014/15 (previous year: € 51 million, -15 %), in line with our expectations. We retain our forecast that profit from operations for the year as a whole willremain stable. Return on sales was 6.6 % (previous year: 7.6 %). The lower returnon sales in the reporting period was due to the timing of individual projects, andincludes effects which will approximately balance themselves out over the year
as a whole. The ROCE was 17.5 % (previous year: 22.7 %).

Voith Interim Report 201502.2. Voith Industrial
Services

17Group interim management report

Portfolio optimization and efficiency improvement
measures take effect
The intensive restructuring of the service portfolio and the efficiency improvement
measures are showing the first signs of success. Adjusted for changes in thescope of consolidation, Voith Industrial Services was able to increase sales andprofit from operations in the first half of the 2014/15 fiscal year.
Voith Industrial Services has three active divisions following the disposalof the Industries division (DIW Group) at September 30, 2014: Automotive,­Energy-Petro-Chemicals, and Engineering Services.

Organic sales growth
Voith Industrial Services generated sales of € 555 million (previous year: € 574 million, -3 %). Adjusted for changes in the scope of consolidation (the disposal of
the DIW Group at September 30, 2014, the acquisition of Helix Systems at July
31, 2014), Voith Industrial Services sales increased by 9 %, primarily driven by the
Automotive division. Owing to the short throughput times of service contracts,
Voith Industrial Services does not record the volume of orders on hand, whichmeans that orders received are identical to sales.

Growth at all three divisions
In the Automotive division, Voith Industrial Services’ largest division by sales, we
succeeded in increasing sales once again following four years of strong volume
growth. In Europe we benefited from our focus on premium manufacturers whose
exports to the Americas and Asia remain at a high level. The increase at the
Automotive division benefited from the continued good business performancein China. We have successfully integrated the US company Helix Systems Inc.
which we acquired in the previous year, providing an excellent basis to buildon the technical portfolio. In other respects the performance in North America
was stable. Production levels in the Automotive sector in Brazil are falling due toSales Voith ­Industrial ­Services

Profit from operations Voith ­Industrial ­Servicesin € millionsin € millions

574

555

2013/14Full fiscal year

2014/15First half-year

992013/14Full fiscal year

2014/15First half-year18Group interim management report

Voith Interim Report 2015

recession. Despite this, it was still possible to generate orders from new customers and diversify the customer portfolio further. Voith Industrial Services reacted
quickly to the changed market conditions and amended structures accordingly.
Business with Western manufacturers in Mexico performed well. There were earlysigns of an upswing for the Automotive sector in India.
Sales in the Energy-Petro-Chemicals division in the first half of the 2014/15 fiscal
year were above the level of the same period in the previous year. The market
environment for maintenance services in the downstream segment for the Western European oil and gas industry, the core business of this division, is currently
challenging due to the low oil prices. This increasingly difficult environment isexacerbated in Germany by the energy turnaround. All thermal power station
operators are drastically reducing their service and maintenance input owing to
the significantly shorter operational lives. A large turnaround project in Norway
and a chemical industry capacity enlargement project in Germany contribute to
the positive trends given these market conditions. At the same time, activities in
the location business are being driven forward.
In the Engineering Services division, which offers contract engineering for theaerospace, automobile, commercial and rail vehicle industries, sales increasedin the period under review following a decline in the previous year. Business withrail vehicle manufacturers developed positively, primarily driven by the market
in Asia. Voith Industrial Services was awarded two major projects in China andTaiwan in the reporting period. Demand for engineering sources for the aerospacesector, represented by the P3 Voith Aerospace joint venture, is low. This is dueto the lack of new developments made by the leading aerospace manufacturers.

Profit from operations showing first benefitsof the efficiency program
In the first half of the 2014/15 fiscal year Voith Industrial Services generated a
profit from operations of € 9 million, at the same level as in the previous year
(previous year: € 9 million). After adjusting for changes in the scope of the consolidation we improved the Voith Industrial Services profit from operations by
61 %. The improvement in results was driven by the efficiency programs in Energy-Petro-Chemicals and Engineering Services, and the improvement in the order
position for contract engineering services for manufacturers in the rail vehicle
and automobile industries. The return on sales in the reporting period was 1.6 %(previous year: 1.5 %; adjusted: 1.1 %). The ROCE was 7.3 % (previous year: 7.3 %;adjusted: 5.1 %). We expect a slight improvement in the second half of the fiscal
year, during which the benefits of the efficiency improvement measures will beeven more apparent.

Voith Interim Report 201519

Group interim management report

02.3. Voith Paper

Restructuring measures
show first noticeable effects
Voith Paper sees itself confronted with continued difficult market conditions. However, it has been able to emerge from the trough, due to the restructuring measurestaken in previous years. In the first half of the 2014/15 fiscal year, sales were up,orders received have been stabilized, and we recorded a significant improvementin profit from operations, which was positive.

Sales grown by 15 %In the first half of the 2014/15 fiscal year we generated sales of € 776 million (previous year: € 673 million). The 15 % increase is primarily attributable to projectbusiness (new machines and major rebuilds). In the previous year these wereslightly improved due to a few specific investments, enabling us to record a slightincrease in orders received for the first time in three years. Sales in our businesswith products, consumables, and services also increased slightly. Asia remained
our largest region in terms of sales. The pleasing growth rate recorded in thereporting period cannot be continued into the second half of the fiscal year as
it results from a few individual projects. We retain our forecast that sales for theyear as a whole will remain stable.

Orders received almost at the same level
as the previous year
Sales Voith ­Paperin € millions

776

673

2013/14Full fiscal year

2014/15

We were able to stabilize orders received at a low level in the reporting period. In
the first half of the 2014/15 fiscal year new orders received totaled € 699 million,
which, in continued difficult market conditions, was almost at the level of theprevious year (previous year: € 709 million, -1 %). Orders on hand decreased to€1,001 million as at March 31, 2015 (September 30, 2014: €1,078 million).
While we were able to generate a slight increase in orders for the products, consumables, and services business, the project business was lower than in theFirst half-year

Orders received Voith ­Paper

Orders on hand Voith ­Paper

Profit from operations Voith ­Paperin € millionsin € millionsin € millions

17
1,078

709

1,001

699

-5
2013/14Full fiscal year

2014/15First half-year

2013/14Full fiscal year

2014/15First half-year

2013/14Full fiscal year

2014/15First half-year20Group interim management report

Voith Interim Report 2015previous year and fell behind our expectations. Paper manufacturers remained
cautious about making investments in new machines. In Brazil the stagnation
continued due to the unfavorable political and economic climate. In Europe, too,
we received fewer orders than in the same period in the previous year. A lightmarket recovery is noticeable in North America. A large proportion of our orders
received in the reporting period was again generated in Asia.
Orders for new machines were obtained in the reporting period for the manufacture of board and packaging paper, whereby primarily medium-sized machines
were in demand. We likewise received an order for a new tissue machine fromSouth America. We also received a number of large rebuild orders in the board
and packaging paper sector.
The production of graphic paper is declining worldwide, while the board andpackaging paper and tissue sectors are recording growth in some regions. Also,
even though the production of paper worldwide is increasing again, this low levelof growth is for the most part being absorbed by the use of existing production
capacity. Accordingly there is a low level of interest among paper manufacturers
for investments in new plant.

Significant improvement of profit from operations
In the first half of the 2014/15 fiscal year we generated a profit from operations of€17 million (previous year: €-5 million). This pleasing result is due to the increased
level of sales and also to the restructuring efforts made in recent years which
resulted in noticeable reductions of personnel and other operating costs. Returnon sales was 2.2 % (previous year: -0.8 %). The ROCE improved to 3.9 % (previous year: -1.2 %).

Voith Interim Report 2015

Group interim management report

02.4. Voith Turbo

Challenging first half year

21

In a market which is in part a difficult one, Voith Turbo was not quite able to maintain sales and orders received at the same levels as the same period of the previous year. The profit from operations also declined in the reporting period.

Sales slightly below the same period
in the previous year
Voith Turbo’s sales in the reporting period totaled € 669 million (€ 682 million, -2 %).
Within this total, growth was recorded in the Commercial Vehicles and Rail divisions, while sales in the Power, Oil & Gas and Mining & Metals divisions werelower than in the previous year. We expect the second half of the fiscal year tobe somewhat stronger and we maintain our sales forecast for Voith Turbo for theyear as a whole (“constant trend”).

Orders received almost at the same level
as the previous year
In the first half of the 2014/15 fiscal year Voith Turbo received new orders totaling€ 733 million (previous year: € 742 million, -1 %), almost matching the figures for thesame period in the previous year. A positive trend was seen in orders received
in the Commercial Vehicles division, which were even slightly ahead of the previous year’s high level. Orders received by the Power, Oil & Gas and Rail divisions
were stable. In the Mining & Metals division orders received declined in a market
which continues to be weak. Orders on hand at March 31, 2015 amounted to€1,310 million, slightly above the level at the end of the previous fiscal year (September 30, 2014: €1,210 million).

Sales Voith ­Turboin € millions

669

682

2013/14Full fiscal year

2014/15

The Commercial Vehicles division has developed well in what is generally a positive environment. In particular we are continuing to have export success with the
DIWA automatic transmissions for buses, and we were able to record a series of
attractive orders here, for example in Azerbaijan, Russia, and Hong Kong. The

First half-year

Orders received Voith ­Turbo

Orders on hand Voith ­Turbo

Profit from operations Voith ­Turboin € millionsin € millionsin € millions

1,310

1,210

57

733

742

2013/14Full fiscal year

2014/15First half-year

2013/14Full fiscal year

2014/15First half-year44

2013/14Full fiscal year

2014/15First half-year22Group interim management report

Voith Interim Report 2015service business also contributed to the good level of orders received in thisdivision. The Russia/Ukraine crisis and the pessimistic economic climate had anegative effect on our business in Eastern Europe.
The Mining & Metals division recorded lower orders received in a persistently very
weak market environment. Price falls continued in an overheated raw materials
market, and this has now affected copper as well as coal and iron ore. This led tocost pressure and a lower level of investment activity among mine operators andmining companies, with projects postponed or canceled completely, particularly
in important markets such as China and Australia. Demand from the machine
tool market was also weak.
In the Power, Oil & Gas division orders received were stable, driven by export
demand from North America. While the demand for power plant technology
remained weak in the core markets – in China due to the deterioration in growthprospects and in India due to political decisions that remain unresolved – thebusiness for combined power plants in North America developed well. Our pipeline business in the USA developed well as a consequence of the expansion of
the infrastructure for the transport of shale gas. On the other hand, the upstream
sector suffered under the low oil price, particularly in the offshore sector. This
led to more difficult price negotiations with equipment suppliers and to project
delays, and had a negative effect on our business with oil and gas equipment
and for offshore special ships. The market for petrochemical plant and associated equipment remained weak.
In the Rail division our orders received were, as expected, slightly lower thanin the same period of the previous year, although still at a high level. The global
market for rail vehicles continued to be positive, with the exception of the Russian
market. At the same time, competition among train manufacturers became evenfiercer, thus generating pressure on prices accordingly. We won new orders for
metro and special rail vehicles in particular, for example in the United Kingdom,
Poland, and China. Demand in Germany remained cautious. The service business for replacement parts and maintenance developed well.

Profit from operations down
Voith Turbo generated a profit from operations of € 44 million in the first half of the
fiscal year 2014/15 (previous year: € 57 million), below our own expectations. The
24 % decline is due to the fall in sales, in particular in the service business of thePower, Oil & Gas division, and to the recording of additional provisions against
risks. The efficiency programs launched have had a positive effect on results, butwere not wholly able to compensate for the effect on results of the lower sales
and the additional charges. As a result the return on sales fell to 6.5 % (previous
year: 8.3 %). The ROCE was 11.8 % (previous year: 14.7 %).

Voith Interim Report 2015

03
03.1. Balance sheet

Group interim management report

23

Net assets and financial position
The Voith Group continues to display a robust structureof assets and equity and liabilities. Owing to the negative
net result and valuation adjustments to pension
provisions, the equity ratio has fallen to 14.5 %. Cashflow was negative owing to the strategic acquisition of
25.1 % in KUKA AG.

Negative net result and valuation-driven
increases in pension provisions reduced
equity ratio
The balance sheet total increased by € 264 million to € 5,717 million (previous year:€ 5,453 million, +5 %), driven in particular by increased levels of bank borrowings
and the effect of changes in exchange rates due to the weakness of the euro.
Non-current assets increased by a total of € 583 million to € 2,986 million (previous year: € 2,403 million, +24 %). A significant proportion of this change resulted
from the acquisition of a 25.1 % shareholding in KUKA Aktiengesellschaft, Augsburg, which largely explains the increase in the amount recorded in the balance sheet for investments accounted for using the equity method (€+527 million). The € 40 million fall in intangible assets is primarily due to the reclassificationof assets to assets held for sale (€-38 million). The € 41 million increase in property,
plant, and equipment is primarily due to changes in currency exchange rates(€+57 million).
Current assets fell to € 2,731 million (previous year: € 3,050 million, -11 %). Trade
receivables and inventories increased by a total of € 69 million in the first half
year; this increase is largely recorded in the Voith Turbo division. The decreasein cash and cash equivalents (€-495 million) was due to the acquisition of the
KUKA shareholding.
Non-current liabilities increased significantly by € 283 million to € 2,278 million (previous year: €1,995 million, +14 %). The increase in pension provisions(€+116 million) as a consequence of yet another reduction of the discounting
rate contributed to this. In addition, other provisions increased (€+100 million), forthe most part due to the recording of new restructuring provisions. Furthermore,24Group interim management report

Voith Interim Report 2015

long-term bond liabilities, bank liabilities, and other interest-bearing liabilities
increased (€+47 million) as a result of long-term borrowings taken out under asyndicated loan in China, as well as valuation adjustments made to bond liabilities.
Current liabilities increased by €184 million, rising from € 2,427 million to€ 2,611 million (+8 %). The short-term bank liabilities contributed significantly tothis (€+231 million) with short-term loans taken out for working capital purposes,
including in China where we are disadvantaged by our customers’ long target
payment dates. Current other provisions (€+8 million) include, amongst otheritems, a reduction in the level of contract-specific provisions (€-18 million) andan increase in restructuring provisions (€+33 million). The reduction in current
other liabilities (€-124 million) is primarily due to lower down-payments receivedon account of orders from customers (€-139 million).
As at the previous reporting date, the items “Assets held for sale” and “Liabilities
directly associated with assets classified as held for sale” contain the assets andliabilities of one of Voith Hydro’s subsidiaries which is due to be sold, as well as
the assets and liabilities of P3 Voith Aerospace Holding GmbH, a wholly consolidated subsidiary, and a Voith Paper investment accounted for using the equity
method, which are also held for sale.
The net balance of deferred tax assets and liabilities increased by € 38 million, driven by the increase in the pension provisions resulting from valuation
adjustments.
Equity fell to € 829 million (previous year: €1,031 million, -20 %). This fall was primarily the result of the negative net result, valuation changes to pension provisions, and dividend payments made. The net effect of changes in currency
exchange rates had a positive effect on equity. The equity ratio fell as a result to
14.5 % (previous year: 18.9 %).

03.2. Liquidity

Overall cash flow negative due to the acquisitionof the KUKA shareholding
The cash flow from operating activities amounted to €-143 million (previous year:€ 76 million) in the first half of the 2014/15 fiscal year, primarily as a result of the significant increase in current assets in the period (increase of €+222 million, previous

Development of cash flow

First half-year
2014/15First half-year
2013/14

Cash flow from operating activities

-143

76

Cash flow from investing activities

- 557

- 39

Cash flow from financing activities

189

-57

Total cash flow

- 511

-20

in € millions

Voith Interim Report 2015

Group interim management report25

year: fall of €19 million), in turn due to the lower level of down-payments receivedon account of orders from customers.
The cash flow from investing activities of €-557 million (previous year: €-39 million) is mainly the result of payments for financial assets of €-529 million (previous
year: €-3 million), mostly in connection with the acquisition of the shareholding in
KUKA Aktiengesellschaft.
The cash flow from financing activities amounting to €189 million (previous year:€-57 million) primarily results from additional bank loans as previously described.
The overall cash flow was €-511 million (previous year: €-20 million).
Net debt, measured as the difference between interest-bearing financial liabil­ities and liquid financial assets, amounted to € 733 million (September 30, 2014:€-40 million). This is mainly due to the lower level of cash and cash equivalents
following the acquisition of the KUKA Aktiengesellschaft shareholding, and to
additional bank liabilities for working capital purposes.

03.3. Investments andFurther investments in productivity

R&D expenses

We used the high level of investment in recent years to modernize and greatly
expand the infrastructure of the Voith Group, thereby creating a sound basis toreach our mid-term targets. This enabled us to make further reductions in thelevel of new investments in the reporting period, as planned. In the first half ofthe 2014/15 fiscal year we invested € 52 million (previous year: € 68 million, -24 %)in the Voith Group. The most significant additions to property, plant, and equipment were made in the Voith Turbo and Voith Industrial Services divisions. The
investment ratio, as a percentage of Group sales, amounted to 1.9 % (previous
year: 2.6 %). Regionally, investments were focused on Germany and China. As aresult of the high level of investments in previous years, depreciation amounted
to € 80 million (previous year: € 82 million, -2 %).
Research and development expenses in the reporting period totaled €103 million (previous year: €112 million, -8 %). The ratio of research and development tosales was therefore 3.9 % (previous year: 4.3 %). GrafInvest 3x

26Group interim management report

03.4. Financial investments

Strategic shareholding in KUKA AG

and participatinginterests

Voith Interim Report 2015

We have made a significant step forward with the Voith 150+ success programin the reporting period. Voith GmbH acquired a 25.1 % shareholding and voting
rights in KUKA AG, Augsburg in the first half of 2014. The KUKA Group is oneof the leading suppliers of robots and automatic production lines and solutions
worldwide. For Voith, this is one of the largest M&A investments made in recent
years. KUKA AG had Group sales of € 2,096 million and an EBIT of €142 million
in 2014. The investment is accounted for using the equity method in the Voith
GmbH consolidated financial statements.
We regard the shareholding in KUKA AG as a strategic investment. Digitization
and automation will change industrial production processes fundamentally in the
coming years. Robots are a key component for the digital industry of the future,and for the megatrend “Industrie 4.0”. In the coming years, it is our objective to
make targeted additions to the automation and industrial software competence ofVoith’s existing activities which are primarily at home in the mechanical engineering sector, and to amend our portfolio accordingly. The acquisition of the KUKA
shareholding is a first and important step in this direction.

Sales process for Voith Industrial Services initiatedOn the basis of this step, the management of Voith GmbH decided in February
to focus the Group on its technology and engineering strengths, and initiated avalue maintenance management sales process for the Voith Industrial Services
division. The business model of Voith Industrial Services is based on providing an
intensive personal service; this is performed generally at the customer’s premises
and requires specific knowledge of the customer’s processes. Accordingly thisdoes not fit with the future focus of the business.

Voith Interim Report 201504

27

Group interim management report

Employees
The number of employees working for the Voith Groupfell by around 400 to around 38,900 in the reporting
period, primarily owing to the restructuring of Voith Paper.
Most employees continue to work in Voith Industrial
Services, which is the most personnel-intensive division.
Cuts of a further 1,470 jobs are planned by the end of
the 2014/15 fiscal year.

Headcount down again
As at March 31, 2015, we employed 38,907 full-time equivalents (excluding
apprentices) in the Voith Group. Overall, this is 395 or 1 % fewer jobs than at theend of the last fiscal year (September 30, 2014: 39,302).
This decrease in jobs is largely due to the restructuring of Voith Paper. A total of
399 jobs at Voith Paper were cut in the first six-month period of 2014/15. Thesejob cuts affected all regions, but hit the new machine business hardest of all.
The number of employees at Voith Industrial Services increased in the first half yearof 2014/15 by 31 overall. This was due to substantial job creation in the Automotive division, particularly in the growth markets of China and India, which is in linewith the good business development of the division. In contrast, jobs were cut inthe Energy-Petro-Chemicals and Engineering Services divisions. The employees
working in the sold Industries division were no longer included in the comparative
figures for September 30, 2014.

Employees Group

Employees total 38,907
by Group Division

39,30238,907Voith ­Turbo
16  %

Voith ­­Hydro
13  %

Voith Paper21  %

2013/14Full fiscal year

2014/15First half-year

Other
3  %

First half-year 2014/15

Voith ­Industrial­Services
47  %

28

Group interim management report

Voith Interim Report 2015

The headcount in the Group Divisions Voith Hydro (+10 jobs) and Voith Turbo(-11 jobs) was much the same as in the previous year. In Voith Turbo, this all but
constant overall development was the outcome of job cuts driven by restructuring measures in the Commercial Vehicles and Mining & Metals divisions on the
one hand, and recruitment of new employees to meet orders in the Rail divisionon the other.

Voith Industrial Services remains theGroup Division with the most employees
There were only minor changes in the relative number of employees in each Group
Division during the period under review. Voith Industrial Services accounts for
47 % of the total headcount (previous year: 47 %), once again making it the largest Group Division in terms of total staff numbers. 18,390 people were working
there at the end of the period under review (previous year: 18,360). Voith Paper
employed 8,020 staff (previous year: 8,419) as at March 31, 2015, or 21 % of theGroup’s headcount which was unchanged on the previous year. With 6,264 staff
members (previous year: 6,275), Voith Turbo again made up 16 % of the Group’s
headcount. With 5,229 people, Voith Hydro employed 13 % of the Group’s total
workforce (previous year: 5,219 employees).

Further job cuts at Voith Paper unavoidable
In order to adjust the cost structure of Voith Paper to the permanent contraction inmarket volume and, against the background of increasingly fierce competition andhigh pressure on prices, to ensure it can continue to operate successfully in the
future, Voith Paper submitted a package of measures in February 2015 involving
the concentration of its European activities at just a few locations as well as further
job cuts. Current plans envisage cuts of 900 jobs worldwide. Current planningenvisages these measures being implemented by the end of the 2015/16 fiscal year.

Concentration of worldwide administrative
functions with the target of reducing staff by 700
As announced in February, in the next few months we will continue to systematically implement the measures under our Group-wide Voith 150+ success program. We aim to streamline our administrative processes by taking steps that
include establishing four Shared Service Centers in which scalable, standardizable administrative functions will be consolidated across Group Divisions. This
planned administrative restructuring will enable around 720 jobs in the Group to
be cut. 150 of these jobs are in Voith Paper and are already included in the figuresreferred to above (900 jobs to go at Voith Paper). Under current planning thesemeasures will be implemented by September 30, 2016. GrafMitar 2xl

Voith Interim Report 201505

Group interim management report

29

Subsequent events
With effect from April 30, 2015 Voith Industrial Services sold its share­holding interest in P3 Voith Aerospace GmbH & Co. KG to the other shareholder, P3 Ingenieur­
gesellschaft mbH. P3 Voith Aerospace is one of Germany’s largest engineering
services providers in the aerospace industry. The company was previously fully
consolidated in the Group’s financial statements of Voith GmbH.
No additional significant developments have occurred since the close of the firsthalf of the 2014/15 fiscal year (March 31, 2015).

30

06

Group interim management report

Voith Interim Report 2015

Risks and opportunities
Our assessment of the risk and opportunities situation
has only altered slightly since publication of the annual
report. There continue to be no risks to the Voith Group’s
ability to continue as a going concern. The mostsignificant risks which could cause the results to deviate
negatively from those forecast/targeted continue to be
external. The risks are matched by opportunities that
could have a positive influence on business development.

Risk management aligned toward increasing thevalue of the Company
Entrepreneurial activity includes making decisions under conditions of uncertainty. To safeguard against risks that could jeopardize the Group and/or its companies as a going concern, Voith operates a consistent and binding Group-widerisk management system. It should contribute to increasing the value of the Groupand its companies by reducing potential risks and the probability of their occurring. At the same time, the system is intended to produce a state of equilibrium
between correctly assessed risks and the exploitation of opportunities.
To the best of our knowledge at the time this report went to press, there are no
risks to the Voith Group’s ability to continue as a going concern. For our assessment of the risk situation we refer in all cases to our 2014 annual report in which
we describe risks which could have a significantly negative effect on our net assets,financial position and results of operations and which could cause the results todeviate negatively from those forecast/targeted.
The probability that two particular market risks will arise has increased since
publication of our annual report; we are closely observing these risks which we
consider to be significant. First, the low price of crude oil could reduce oil companies’ demand for investment and services which would lead to a deterioration in
the financial position of our Voith Turbo and Voith Industrial Services Group Divisions. This would be all the more probable if the price of oil were to fall even further
or to remain at its currently low level for a long period of time. Second, owing topersistently low prices of raw materials, mine operators and mining companies
might decide to hold back on their investment activities – a risk which affects ourVoith Turbo Group Division.

Voith Interim Report 2015

Group interim management report

31

The location risk represented by the spread of the Ebola epidemic in Africa, as
described in the 2014 annual report, and its potentially negative impact on Voith
Hydro, has dwindled in importance. We now regard the probability of occurrenceof this risk as remote.
In terms of financial and liquidity risks it is important to note that the investment
grade rating given by the Moody’s agency was downgraded from “Baa2” to “Baa3(negative outlook)” in December. Further downgrading could raise financing costs
and have a negative effect on the net assets, financial position and results ofoperations.
As well as risks we also perceive a number of opportunities which could havepositive effects on our net assets, financial position and results of operations,and cause the results to deviate positively from those forecast/targeted. We also
refer in all cases to the annual report as regards the assessment of our opportunity situation. We consider all the significant opportunities described in thatreport as continuing to apply. The continuing low euro exchange rate represents
a new opportunity, which could have a positive impact on our net assets, financial position and results of operations. If the euro persists at its currently weakexchange rate this could have a positive effect on our forecast results. A lower
euro exchange rate would, in particular, make our products more competitive on
the global market and positively influence our results.

32

07

07.1. Business environment

Group interim management report

Voith Interim Report 2015

Forecast report
Based on developments during the reporting period
we confirm the Group’s annual forecast. Against the
backdrop of the economy recovering slightly but with
the investment climate remaining gloomy, we expect
both the sales and orders received to remain constantthroughout the 2014/15 fiscal year. At the same time, we
aim to improve our profitability and increase the profit
from operations. As announced previously, the Group’s
net result will be negative owing to provisions made forrestructuring expenses.

Global economic recovery remains fragile
The available economic indicators suggest that the second half of Voith’s 2014/15
fiscal year will see a continuation of moderate global economic recovery. Nonetheless, due to the high level of uncertainty, the environment remains difficult forcapital goods. Consumer goods and industrial services will probably continue tobenefit from the generally positive trend.
After worldwide economic growth of 3.4 % in 2014 the International Monetary Fund(IMF) is forecasting rates of global growth of between 3.5 % and 3.8 % for 2015
and 2016 respectively. Important exceptions to this positive trend are Brazil andRussia where, in both countries, the economy is expected to contract in 2015 and,according to the IMF, will only return to positive rates of growth in 2016 (Brazil) or
2017 (Russia). The slowdown in the rate of growth of the Chinese economy will also
almost certainly make itself felt in export-oriented economies like Germany’s. The
IMF forecasts rates of growth for the emerging markets as a whole of between
4.3 % in 2015 and 4.7 % in 2016.
The IMF also projects the economic growth of the advanced economies improvingfrom 1.8 % in 2014 to 2.4 % in both 2015 and 2016. This is based on the assumption that oil importing countries continue to benefit from the low oil prices resulting
from a market glut. The low energy prices in the USA due to production of its own
shale gas and oil are responsible for the re-industrialization of the country andare expected to generate GDP growth exceeding the average for the advanced
economies. However, the strong dollar has to some extent taken the momentum
out of the highly positive recent prospects for growth in the USA.

Voith Interim Report 201533

Group interim management report

Overall economic recovery remains fragile and subject to considerable risks. In
the short term these risks include, above all, a potential escalation of one ormore geopolitical conflicts, such as the Russia/Ukraine conflict or the extremely
unstable situation in the Near and Middle East. There is also the threat posed by
an exit from the euro zone by Greece, which would have a highly unpredictable
impact on the currency union. In China there is a risk that high levels of cor­por­ate debt or the possible overheating of the real estate market could provoke turbulence on financial markets with negative effects for the real economy. In themedium term, high levels of sovereign debt in many countries and the failure to
implement reforms in the euro zone could act as a burden on further economic
development. Low energy prices and euro exchange rates will only compensate
for the weaknesses in the euro zone in the short term. We see few chances forbetter-than-anticipated development.
We still see little stimulus for growth and an ongoing gloomy climate for capital
investments in our target energy and raw materials markets. Willingness to commit
to investments in the oil & gas market may be expected to fall further in light of thecontinuing low oil prices forecast by market analysts. The market appears to havebottomed out with regard to investing activities in the paper market. We continue
to be optimistic about the key segments of the transport & automotive market.
The forecast for our business is based on the assumption of there being no major
economic or political turbulences.GrafWirtWachs

Economic growth
Real change in GDP on the previous year1)

World output
Advanced
economies
United States
Euro area2)
Germany
Emerging market anddeveloping economies
China
ASEAN-5
India
BrazilRussia2015

3.5  %

2016

3.8  %

2015

2.4  %

2016

2.4  %

2015

3.1  %

2016

3.1  %

2015

1.5  %

2016

1.6  %

2015

1.6  %

2016

1.7  %

2015

4.3  %

2016

4.7  %

2015

6.8  %

2016

6.3  %

2015

5.2  %

2016

5.3  %

2015

7.5  %

2016

7.5  %

2015-1.0  %

2016

1.0  %

2015-3.8  %

2016

-1.1  %

Source: International Monetary Fund, World Economic Outlook, Apr. 2015
1)
Forecasts.
2)
Including Germany.

34Group interim management report

07.2. Future development

Group’s annual forecast confirmed

Voith Interim Report 2015of the Company

On the basis of developments during the period under review and provided thatthe delayed projects are in fact awarded to Voith Hydro in the second half of theyear, we can confirm the outlook for the 2014/15 fiscal year which we publishedwith the annual report in December 2014. For the whole of 2014/15 we forecast
that Group sales will remain at the same level as the previous year adjusted forchanges in the scope of consolidation. Our sales projections are based on thehigh level of orders on hand and a stable development of new business throughout the year as a whole. On the basis of the operative earnings performance inthe first half year of 2014/15 we are confident that the profit from operations andconsequently also the ROCE of the Voith Group will grow modestly over the year
as a whole, as the measures introduced under Voith 150+ show further positiveeffects. Despite positive operative earnings performance the net result for 2014/15
as a whole – burdened by the provisions for restructuring expenses described in
section 01.5. – will be negative.
Forecasts are always subject to considerable uncertainty. A host of macro-economic and industry-specific factors can influence, positively or negatively, thedevelopment of individual Group Divisions or the entire Group. For informationon the significant risks and opportunities which could lead to a negative/positive
forecast deviation, we refer to section 06 “Risks and opportunities” of this management report.

All four Group Divisions return a profit
In terms of their sales and orders received, the developments in all four Group
Divisions will differ depending on their respective markets. Nonetheless, all Group
Divisions, including Voith Paper, will post a clear profit from operations. This confirms our assessment that our portfolio adjustments, restructuring efforts andmeasures to improve efficiency are taking effect and our Voith 150+ program isprogressing well.
We continue to anticipate that the sales and profit from operations generated
by Voith Hydro in 2014/15 will remain at much the same level as in the previous
year. According to our current planning ROCE will continue to be high withoutquite matching last year’s figures, due to higher net working capital. Owing to
the uneven distribution of the volume of project awards over the year as a whole,as described above, we expect more orders to be received in the second half ofthe year and a lower percentage decline over the whole year than in the first halfyear. If that market expectation is met, despite the major market-driven reductionin the reporting period, we remain on track for the year as a whole and confirm

Voith Interim Report 2015

Group interim management report35

the orders received projected in the 2014 annual report (“noticeable decline”).
Overall, the current decline in orders is not a mid-term trend but is due solely tothe irregular award of major hydropower projects.
At Voith Industrial Services we continue to expect moderate organic sales growthin the 2014/15 fiscal year, adjusted for the Industries division sold as at September 30, 2015 and the P3 Voith Aerospace joint venture sold as at April 30,
2015. We anticipate that the positive effects from the portfolio adjustment andthe initiated efficiency enhancement measures will have a stronger impact on
the profitability of Voith Industrial Services in the second half of the year. For thisreason, we continue to assume that the profit from operations adjusted for thedescribed changes in the consolidated group will outpace sales in 2014/15 as awhole. ROCE will improve modestly year on year.

Refer to section 04 “Employees”
for the planned package of measures.

We reaffirm our projection for Voith Paper for the current fiscal year. We assume
that revenues throughout 2014/15 will stabilize at a level that is on a par withthe previous year. The cost savings achieved from previous restructuring measures are expected to have further positive effects in the second half of the year
and we anticipate a noticeable increase in profit from operations in the 2014/15
fiscal year and corresponding improvements in the return on sales and ROCE
compared with the previous year. We still have reason to believe that the paper
machine market will stabilize at the level it has now reached and that we will
be able to increase the number of orders received slightly over the year as awhole. Nonetheless, competition and price pressure remains intense. Bearing
in mind the permanently lower market volume, further restructuring measures
will be necessary in Voith Paper in order to achieve sustained improvements inresults. The package of measures introduced by us during the reporting period
will begin contributing to an improvement in profit from operations – dependingof how quickly the measures are implemented – from the 2015/16 fiscal year
onwards at the earliest. M
Voith Turbo expects somewhat higher sales in the second half of the year compared to the figures for the reporting period. As a result, at the present juncture thetarget of reasonably stable sales development would appear to be achievable overthe entire year. We also continue to expect orders received to remain constant as
forecast in the annual report. With regard to profit from operations, it will probably
not be possible to compensate in full during the second half year for the downward trend which became apparent during the first half of the fiscal year, despite
the initiated efficiency program. If the general situation on the oil and raw materials
markets does not improve, we expect profit from operations to decrease slightly
and, from our current perspective, do not anticipate achieving the projected profit(“increase slightly”) published in the annual report. As announced in the annual
report, ROCE is projected to remain at much the same level as in the previous year.

Group interim financial statements
for the period from October 2014 to March 201502

Consolidated statement of income
Consolidated statement of comprehensive income
Consolidated balance sheet
Consolidated statement of changes in equity
Consolidated cash flow statement
Basis of the interim consolidated
financial statements and accounting policies
Notes on segment reporting
Segment information by business segment
Notes to the statement of income andthe balance sheet
Other notes
Responsibility statement

38
39
40
42
44
45
49
50
52		
59
66

38

Group interim financial statements

Voith Interim Report 2015

Consolidated statementof incomefor the period from October 1, 2014 to March 31, 2015in € thousands

Sales
Changes in inventories and other own work capitalized
Total output
Other operating income

2014-10-01 to
2015-03-31

2013-10-01 to
2014-03-31

2,662,682

2,603,952

32,48335,413

2,695,165

2,639,365

215,957

149,863

Cost of material-1,084,032-1,021,461

Personnel expenses-1,038,940-1,072,253

Depreciation and amortization-80,254-82,291

Other operating expenses-590,365-508,053

Operational result before non-recurring itims

117,531

105,170

Non-recurring result-164,887-20,184

Operational result-47,356

84,986

Income from companies accounted for using the equity method

1,296

3,226

Interest income

6,348

6,188

Interest expenses-39,684-41,495

Other financial result-8,448

159

Result before taxes-87,844

53,064

Income taxes-43,578-23,401

Net result-131,422

29,663

Net result attributable to shareholders of the parent company-138,238

19,265

Net result attributable to holders of non-controlling interests

6,816

10,398

Voith Interim Report 2015

39

Group interim financial statements

Consolidated statementof comprehensive income
for the period from October 1, 2014 to March 31, 2015in € thousands

Net result

2014-10-01 to
2015-03-31

2013-10-01 to
2014-03-31-131,422

29,663-118,352

3,899

26,164-1,508

214-23,994

Components of other comprehensive income that will not be recycled
through profit or loss in later accounting periods:
Remeasurement of defined benefit plans
Taxes on components of other comprehensive income that will not be recycled
through profit or loss in later accounting periods
Components of other comprehensive income that will be recycled
through profit or loss in later accounting periods:
Gains/losses on available-for-sale financial assets
Gains/losses on cash flow hedges

0

-312

Gains/losses on currency translation

53,095-18,839

Gains/losses from the currency translation of net investments in foreign operations-2,138-1,315

Taxes on components of other comprehensive income that will be recycled
through profit or loss in later accounting periods-25

7

Other comprehensive income-41,042-42,062

Total comprehensive income-172,464-12,399·T otal comprehensive income attributable to shareholders of the parent company-185,860-19,006·T otal comprehensive income attributable to holders of non-controlling interests

13,396

6,607-172,464-12,399

40

Group interim financial statements

Voith Interim Report 2015

Consolidated balance sheet
as at March 31, 2015in € thousands

2015-03-31

2014-09-30

A.

Non-current assets

I.

Intangible assets

673,305

712,854

II.

Property, plant and equipment

1,231,374

1,189,950

III.

Investments accounted for using the equity method

567,979

41,320IV.

Securities

127,600

134,176

V.

Other financial assets

39,66432,501VI.

Other financial receivables

106,03175,160VII.

Other assets

28,30332,868

VIII. Deferred tax assets

212,014

183,878

Total non-current assets

2,986,270

2,402,707

B.

Current assets

I.

Inventories

II.

Trade receivables

III.
IV.

747,003

734,421

1,192,217

1,136,574

Securities

31,95249,552Current income tax assets

57,03974,527

V.

Other financial receivables

154,087

111,978

VI.

Other assets

130,477

112,616

VII.

Cash and cash equivalents

306,432

800,823

2,619,207

3,020,491

111,858

30,012

Total current assets

2,731,065

3,050,503

Total assets

5,717,335

5,453,210

VIII. Assets held for sale

Voith Interim Report 201541

Group interim financial statementsin € thousands

2015-03-31

2014-09-30

A.

EquityI.

Issued capital

120,000

120,000

II.

Revenue reserves

489,956

737,573

III.

Other reserves

48,015

6,930

IV.

Profit participation rights

6,600

6,600

Equity attributable to shareholders of the parent company

664,571871,103

V.

Profit participation rights

96,80096,800VI.

Other interests

67,15063,400Equity attributable to holders of non-controlling interests

163,950

160,200

Total equity

828,521

1,031,303

B.

Non-current liabilities

I.

Provisions for pensions and similar obligations

867,778

752,425

II.

Other provisions

295,048

194,931

III.

Income tax liabilities

1,431

965

IV.

Bonds, bank loans and other interest-bearing liabilities

945,890899,282

V.

Other financial liabilities

49,586

18,348VI.

Other liabilities

51,49052,690VII.

Deferred tax liabilities

66,85076,730Total non-current liabilities

2,278,073

1,995,371

C.

Current liabilities

I.

Provisions for pensions and similar obligations

28,176

27,683II.

Other provisions

303,471294,656

III.

Income tax liabilities

78,28890,847

IV.

Bonds, bank loans and other interest-bearing liabilities

318,887

96,547

V.

Trade payables

571,049

525,025

VI.

Other financial liabilities

305,241

297,758

VII.

Other liabilities

963,713

1,087,753

2,568,825

2,420,269

41,916

6,267

Total current liabilities

2,610,741

2,426,536

Total equity and liabilities

5,717,335

5,453,210

VIII. Liabilities directly associated with the assets classified as held for sale

42

Group interim financial statements

Voith Interim Report 2015

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

2014-10-01

Issued capital

Revenue
reserves

Available-for-salefinancial assets

Cash flow
hedgesCurrencytranslation

120,000

737,573

4,491-1,063

10,808

Net result-138,238

Other comprehensive income-88,707149-226,945149

043,2604,640-1,06354,068

Total comprehensive income

0

Allocation of reserves toprofit participation rights

43,260-5,590Share of income attributable toprofit participation rights
Dividends-15,000

Adjustments to the group of consolidated
companies affecting non-controlling interests
Non-controlling interests – put options-1,187

Other adjustments
2015-03-31

1,105
120,000

489,956

Equity attributable to shareholdersof the parent companyin € thousands

2013-10-01

Issued capital

Revenue
reserves

Available-for-salefinancial assets

Cash flow
hedgesCurrencytranslation

120,000

832,485

38,122-1,040-1,787

Net result

19,265

Other comprehensive income

2,879-24,124-312-15,859

22,144-24,124-312-15,859

13,998-1,352-17,646

Total comprehensive income

0

Allocation of reserves toprofit participation rights-5,501

Acquisition of non-controlling interests

771

Share of income attributable toprofit participation rights
Dividends-15,000

Contributions from holders of
non-controlling interests-1,564Non-controlling interests – put options-738

Other adjustments-483

2014-03-31

120,000

832,114

Voith Interim Report 201543

Group interim financial statements

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

Profitparticipationrights-7,3066,600-2,324-2,324

Total

ProfitparticipationrightsOtherinterests

Total

Total
equity871,103

96,80063,400160,200

1,031,303-138,238

6,816

6,816

-131,422-47,622

6,580

6,580

-41,042

13,396

13,396-172,464

5,227

0

0

-185,860

0363-5,227

5,227

-363

-5,227-363-5,227-5,590-15,000-3,222-3,222-18,2220-1,080-1,080-1,080-1,187-3,183-3,183-4,3701,105-9,6306,600

664,571

96,800-2,161-2,161-1,056

67,150163,950

828,521Equity attributable to holders
of non-controlling interests
Net investment
in foreign
operations

Profitparticipationrights-6,858

6,600

-855
-855

Total

ProfitparticipationrightsOtherinterests

Total

Total
equity987,52296,80058,147

154,947

1,142,469

19,265

10,398

10,39829,663-38,271-3,791-3,791-42,062

6,607

6,607

-12,399

5,138

0-3,024-3,024-2,253-5,138-5,5010-19,006

0363-5,138

5,138

771
-363

-7,713

6,600

-363

-5,138-15,000-2,954-2,954-17,954-1,564

1,809

1,809

245

-738

528

528

-210

-483

-349

-349

-832

60,764

157,564

1,103,565

946,001

96,80044Group interim financial statements

Voith Interim Report 2015

Consolidated cash flow statement
2014-10-01 to
2015-03-31

2013-10-01 to
2014-03-31

Result before taxes-87,844

53,064

Depreciation and amortization

113,100

84,172

Interest expenses/income

33,33635,307

Other non-cash items

22,502

5,231

1,102

4,011

169

0

in € thousands

Gains/losses from the disposal of property, plant, equipment and intangible assets
Gains/losses from the disposal of consolidated companies
Gains/losses from investments
Changes in other provisions and accruals
Change in net working capital

-146

-40

57,505-89,284-222,437

18,729Interest paid

-7,340-10,979

Interest received

3,549

6,339

Dividends received

1,353

1,174

-57,727-31,894-142,878

75,830-51,814-67,578

Tax paid
Cash flow from operating activities
Investments in property, plant, equipment and intangible assets
Proceeds from the disposal of property, plant, equipment and intangible assets
Investments in financial assets
Subsequent purchase payments for earlier acquisitions
Receipts and payments in connection with the disposal of consolidated subsidiaries
Proceeds from the disposal of financial assets

6,123

2,616

-529,581-3,207169

0-3,868

4,663

535

957

Changes in investments in securities

21,642

24,137

Cash flow from investing activities-556,794-38,412Dividends paid

-23,003-22,5170-6,825Acquisition of non-controlling interests
Disposal of non-controlling interests

0245

256,50953,375

Repayment of bonds, bank loans and overdrafts-28,119-69,901

Changes in other interest-bearing financial receivables and liabilities-16,851-11,422

Cash flow from financing activities

188,536-57,045

Total cash flow

-511,136-19,627

19,126-16,699

New bonds, bank loans and overdrafts

Exchange rate movements and valuation changes
Reclassification to assets held for sale-2,3810Cash and cash equivalents at the beginning of the period

800,823

900,967

Cash and cash equivalents at the end of the period

306,432

864,641

Voith Interim Report 2015

Group interim financial statements

45

Basis of the interim consolidated
financial statements andaccounting policies
Voith GmbH (Voith) is a company founded in Germany with international activ­
ities. The Company’s registered offices are located in Heidenheim an der Brenz at
St. Pöltener Strasse 43. The Company is entered in the commercial register (under
the number HRB 725621) at the Registration Court in Ulm, Germany. The interim
consolidated financial statements prepared by Voith are published in the Bundes­
anzeiger [German Federal Gazette] in German. As a domestic issuer of debt secur­
ities pursuant to Sec. 2 (1) Sentence 1 German Securities Trading Act (WpHG),
Voith prepares this half-year financial report in accordance with the provisions ofSec. 37w WpHG and the requirements of IAS 34 “Interim Financial Reporting”.
The interim consolidated financial statements for the first half of the 2014/15 fiscal
year were prepared in accordance with the International Financial Reporting Standards (IFRS) for interim financial reporting as endorsed by the European Union. In
comparison to the full annual report as at September 30, 2014, the interim consolidated financial statements are condensed in scope.
The unaudited interim consolidated financial statements do not include all of theinformation and disclosures required for consolidated financial statements andmust therefore be read in conjunction with the consolidated financial statements
for the year ending September 30, 2014. The interim financial statements are presented in euros and the figures have been rounded using standard commercial
principles.
Within the framework of preparing the interim consolidated financial statements
pursuant to IFRS, it is necessary to make certain estimates, judgments, andassumptions that could have an impact on the amount and presentation of assets
and liabilities recognized in the reporting, as well as on the disclosures on contingent assets and contingent liabilities on the reporting date and on the income andexpenses reported for the period. Actual amounts may differ from the estimates.
Changes in estimates, judgments, and assumptions could have a material impact
on the interim financial reporting.
The accounting and valuation policies applied by the Group in these interim
consolidated financial statements generally correspond to the accounting andvaluation policies applied in the IFRS consolidated financial statements for theprevious fiscal year. Income taxes are recorded on the basis of an estimate of
the weighted average annual tax rate expected for the full year, taking accountof the tax impact of any circumstances that can only be allocated to the respective period under review.

46

Group interim financial statements

Voith Interim Report 2015

The following new and revised IAS and IFRS standards were applied for the firsttime in the first half of the 2014/15 fiscal year:

Standard/interpretation

Amendment/new standard or interpretation

IFRS 10 Consolidated
Financial Statements

IFRS 10 creates a uniform definition for control and thus
a uniform basis for the existence of a parent-subsidiary
relationship and the related demarcation of the consolidated
Group. The new standard replaces IAS 27 (2008)“Consolidated and Separate Financial Statements” andSIC 12 “Consolidation – Special Purpose Entities”.

IFRS 11 Joint Arrangements

IFRS 11 governs the accounting treatment of situations
where a company exercises joint control over a joint venture
or a joint operation. The new standard replaces IAS 31“Interests in Joint Ventures” and SIC 13 “Jointly Controlled
Entities – Non-Monetary Contributions by Venturers” as therelevant rules for accounting for joint ventures to date.

IFRS 12 Disclosure ofInterests in Other Entities

The objective of IFRS 12 is to prescribe disclosures on
information that provides users of financial statementswith a basis for assessing the nature of interests in otherentities (e.g. subsidiaries, associates) and the related risks
and effects of these interests on the Group’s net assets,financial position, and results of operations.

Amendments to IAS 32
Financial Instruments:
Presentation

Amendments to provisions on offsetting financial assets
and liabilities.

Amendment to IAS 36
Impairment of Assets

Amendment of disclosure requirements in respect of thecarrying amounts of non-financial assets as a consequenceof the new IFRS 13.

Amendment to IAS 39
Financial Instruments:
Recognition and Measurement

Novation of derivatives and continuation of hedge
accounting.

IFRIC 21 Levies

Accounting treatment of levies raised by public authorities.

None of the IAS and IFRS standards applied for the first time had a significant effect on the net assets, financial position, and results of operations of
the Group.

Voith Interim Report 201547

Group interim financial statements

Basis of consolidation
The following companies are included in the consolidated financial statements:in € thousands

2015-03-31

2014-09-30

Voith GmbH and its fully consolidated subsidiaries:
Germany

55

56

Other countries

134

139

Total number of fully consolidated companies

189

195

Germany

7

6

Other countries

13

13

Total companies accounted for using the equity method

20

19

Companies accounted for using the equity method:

There were no new companies fully consolidated for the first time in this reporting period.
Intercompany mergers between Group companies in Germany and other countries reduced the number of fully consolidated companies.
The investment in KUKA Aktiengesellschaft, located in Augsburg, Germany, which
was acquired in early December has been included for the first time. The investment is accounted for using the equity method. Voith holds 25.1 % of the sharecapital, and as a result has significant influence.

	Business combinations

There were no business combinations in the first half of the current or previous
fiscal years.

	Acquisition of further
interests in companies
over which the Groupalready has control

There were no acquisitions of further interests in companies over which the Groupalready has control in the first half of the 2014/15 fiscal year. In the first half of the
2013/14 fiscal year Voith Hydro acquired the remaining 20 % of the interests inVoith Hydro Ocean Current Technologies GmbH & Co. KG, Germany. In addition,
Voith Paper acquired the remaining 50 % of the interests in Voith EcoSolutions
GmbH & Co. KG, Germany. The purchase price for the two transactions totaled€ 6,825 thousand.

48

Group interim financial statements

	Disposals of shareholdings

As part of the planned process of streamlining its portfolio, the Voith Turbo segment disposed of its shareholding in a subsidiary in the first half of the 2014/15
fiscal year. Under this transaction the Group disposed of non-current assets totaling €1,075 thousand, current assets of € 3,819 thousand, non-current liabilities of€ 2,450 thousand, and non-current liabilities of € 2,444 thousand. The purchaseprice was € 955 thousand. A loss of €169 thousand resulted from the sale. The
loss is reported within operating results.

Voith Interim Report 2015

There were no disposals of shareholdings in the first half of the 2013/14 fiscal year.

Voith Interim Report 2015

Group interim financial statements

49

Notes on segment reporting
The structure of the segments and the methods used to calculate the segment
information have remained unchanged since September 30, 2014.
When calculating the profit from operations, the following profit/loss components
were taken into consideration. These components remain unchanged comparedto the last consolidated financial statements:

Operating interest income
Operating interest income is defined as interest received by the Company on thelong-term financing of receivables from customers, or as the imputed interest
effect attributable to that portion of customer advances that is not used to financeinventories and PoC receivables.

Other adjustments
Other adjustments contain effects which, based on their operating character, arenormally shown as other operating income and expenses in the consolidated
statement of income. In determining the profit from operations, these adjustments
are eliminated as non-recurring effects so as to facilitate a better assessment of
the operating activities by segment.
The capital employed as at the March 31, 2015 reporting date is an average value
derived from the values as at the end of the period under review and as at theend of the previous period. The capital employed on the reporting date of September 30, 2014 is an average value derived from the values as at the reporting date of September 30, 2014, the reporting date for the previous half-yearlyfinancial statements, and as at the end of the previous period under review as at
September 30, 2013.

50

Group interim financial statements

Voith Interim Report 2015

Segment information bybusiness segment
Voith ­­H ydroin € millions

External sales

Voith ­­Paper

2014/15

2013/142014/15

2013/142014/15

2013/14

656

668

555

574

776

673

2

2

5

13

12

9

658

670

560

587

788

682

Sales with other segments
Total segment sales

Voith ­­Industrial ­­S ervices

Profit from operations

43

51

9

9

17

-5

Average capital employed

493

463

250

242

861

891

5,229

5,219

18,39018,360

8,020

8,419

Employees 2)
1)
2)

Subtotal for Voith Hydro, Voith Industrial Services, Voith Paper and Voith Turbo.
Statistical number of persons employed at the balance sheet date compared to September 30, 2014.

The two defined earnings components, “Operating interest income” and “Other
adjustments”, are not shown directly in the consolidated statement of income.
Accordingly they are presented separately below in the reconciliation of the profit
from operations by segment to result before taxes.

Reconciliation of total profit from operations
to the Group’s result before taxes:in € millions

2014/15

2013/14

Profit from operations

137

125

Operating interest income

-17

-20

Other adjustments-30

Non-recurring result

-165

-20

1

3

Income from companies accounted for using the equity method
Interest result

-33

-35

Other financial result-80Result before taxes

-88

53

Voith Interim Report 2015

51

Group interim financial statements

Voith ­Turbo

Total core business1)

Reconciliation

2014/15

2013/142014/15

2013/14

669

682

2,656

2,597

3

3

22

27

672

685

2,678

2,624

-15

Total
2013/142014/15

2013/14

7

7

2,663

2,604

-22

-27

0

0

-20

2,663

2,604

2014/15

44

57

113

112

24

13

137

125

737

752

2,341

2,348

148

154

2,489

2,502

6,264

6,275

37,90338,273

1,004

1,029

38,90739,302

52

Group interim financial statements

Voith Interim Report 2015

Notes to the statement of income
and the balance sheet
The following notes are restricted to those matters that provide useful additional
information for understanding the amounts reported in the statement of income
and the balance sheet.

	Selected notes to thestatement of income

Other operating incomein € thousands

2014/15

Income from the utilization of contract-specific provisions

51,66949,981

Income from the reversal of provisions and accruals

24,14929,660Foreign exchange gains

101,202

27,079Recovered bad debts

2,633

2,746

887

564

2,934

2,375

Gains on the disposal of intangible assets andproperty, plant and equipment
Rental and lease income

2013/14

Income from insurance indemnification payments

4,423

3,812

Other income

28,06033,646215,957

149,863in € thousands

2014/15

2013/14

Increase in provisions and accruals

90,54078,294

Other selling expenses

166,459

170,952

Other administrative expenses

136,231

119,071

Foreign exchange losses

71,62333,231

Rent for buildings and machinery

38,44838,871

Bad debt allowances

13,261

4,199

694

821

73,10962,614590,365

508,053

Other operating expenses

Losses on the disposal of intangible assets andproperty, plant and equipment
Other expenses

Voith Interim Report 2015

Group interim financial statements

53

Non-recurring result
The result from non-recurring items in the reporting period totaled €-165 million
and primarily reflects the following measures:
In response to increased competitive and price pressures and in order to adjust
the cost structure to the permanent lower market volumes, Voith Paper presented
a package of measures in February 2015 involving the concentration of its European activities at just a few locations as well as further job cuts. Current plans
envisage cuts of 900 jobs worldwide. Based on current planning the measures
should be implemented by the end of the 2015/16 fiscal year.
In addition, among other things, as part of our Group-wide success program
Voith 150+ scalable administrative activities worldwide will be combined into fourshared service centers, in which standardized administrative functions will be
combined across divisions. This planned administrative restructuring will enablearound 720 jobs in the Group to be cut. 150 of these jobs are in Voith Paper andare already included in the figures referred to above (900 jobs to go at Voith Paper).
Based on current planning, these measures will also be completed by the end of
the 2015/16 fiscal year.
Further expenses were also incurred in connection with the planned sale of shareholdings and due to adjustments to the purchase prices of sales of shareholdings
already completed.
Individual contributions to non-recurring items were made by Voith Industrial Services (€-22 million), Voith Hydro (€-15 million), Voith Paper (€-109 million), Voith
Turbo (€-14 million), and by activities with holding functions (€-5 million).
The non-recurring result in the same period of the 2013/14 fiscal year amounted to€-20 million, which included expenditure of €-3 million at Voith Paper, and activities with holding functions of €-1 million in connection with subsequent costs ofrestructuring plans initiated in previous years. Non-recurring results further included
structural and market-driven capacity adjustments at Voith Hydro (€-5 million) andVoith Industrial Services (€-7 million) as well as losses on disposal of a businessactivity incurred by Voith Turbo (€-4 million).

54

Group interim financial statements

Voith Interim Report 2015

The results of non-recurring items include the following:in € thousands

2014/15

2013/14

Personnel expenses-136,428-13,578

Depreciation and amortization of non-current assets-7,378-1,872Other expenses-2,295-3,317

Impairment charges and other expenses in connection
with company disposals-20,047-4,462

Income from the reversal of provisions and other income

1,261

3,045

-164,887-20,184

2014/15

2013/14146

40-8,768-9

Other financial resultin € thousands

Gains/losses from investments
Impairment of securities and other investments
Other financial result

174

128

-8,448

159

Income taxes
Income taxes totaled €-44 million (previous year: €-23 million) including income
taxes relating to other periods of €-18 million (previous year: €1 million). There were
no tax effects relating to significant amounts of expenses included in non-recurring items in the period.

Voith Interim Report 2015

Group interim financial statements

	Selected notes to thebalance sheet

Intangible assets

55

In the first half of the 2014/15 fiscal year an amount of € 4 million (previous year:€ 7 million) was invested in intangible assets. Amortization amounted to €13 million (previous year: €14 million) and impairment losses to € 5 million (previous year:none). € 38 million (previous year: none) was reclassified to assets held for sale asa result of the planned sale of P3 Voith Aerospace Holding GmbH.

Property, plant and equipment
Investments in property, plant and equipment amounted to € 47 million in the firstsix months of the 2014/15 fiscal year (previous year: € 61 million). Depreciation
amounted to € 67 million (previous year: € 68 million) and impairment losses to€ 2 million (previous year: € 2 million). An amount of € 2 million (previous year: none)
was reclassified to assets held for sale as a result of the planned sale of P3 Voith
Aerospace Holding GmbH.

Investments accounted for using the equity method
Investments accounted for using the equity method include the investment in
KUKA Aktiengesellschaft, Augsburg, Germany for the first time. The investment
was acquired in early December 2014.
KUKA Aktiengesellschaft and its subsidiaries are among the leading suppliers ofrobots and automated production equipment and solutions worldwide.
Summary figures for KUKA Aktiengesellschaftin € millions

2015-03-31

Stock market value (share)
Equity method – result

1)

Dividend paid to the Group
1)

642.8
-2.7
0

Including amortization of share of assets revalued to fair value under the preliminary purchase price allocation.

The significant financial information is provided in summary form in the tablebelow. The data is obtained from the quarterly financial statements published by
KUKA Aktiengesellschaft as of March 31, 2015.

56

Group interim financial statements

Voith Interim Report 2015

Summary income statement datain € millions

2015-03-31

Sales

719.8

Result of continuing operations after tax

15.3

Result of discontinued operations after tax-

Other comprehensive income

48.6

Total comprehensive income

63.9

Summary balance sheet data and reconciliation tocarrying value under the equity methodin € millions

2015-03-31

Non-current assets

854.8

Current assets

1,305.1

Non-current liabilities-359.1

Current liabilities-1,202.3

Equity (including non-controlling interests)

598.5

in € millions

2015-03-31

Share of equity attributable to the Group(excluding non-controlling interests)

147.0

Goodwill arising under the equity method,
including share of fair value adjustments

382.4

Carrying amount under the equity method

529.4

Inventories
Inventories consist of the following items:in € thousands

2014/15

2013/14

Raw materials and supplies

246,445219,218

Work in progress

261,441

252,403

Finished goods and merchandise

155,802

156,504

Prepayments

83,315106,296

747,003

734,421

Voith Interim Report 2015

Group interim financial statements

57

Assets and liabilities held for sale
The tidal power products section of the Ocean Energies division of the Voith Hydro
segment was reported here in the previous year, as the sale of this business isplanned; accordingly we refer to the presentation in the last annual report for
more details. The carrying values presented there have not changed significantly.
In addition, an investment which has to date been accounted for under the equity
method by Voith Paper has now been reclassified as held for sale, as it is planned
to dispose of this investment within the next year. The carrying value of this investment is €10 million.
Also, as at March 31, 2015 Voith plans the sale of P3 Voith Aerospace Holding
GmbH, which is attributed to the Voith Industrial Services segment. Due to theplanned sale, reclassifications have been made to assets held for sale of goodwill(€ 31 million), intangible assets (€ 7 million), other non-current assets (€ 3 million),
inventories (€12 million), trade receivables (€ 21 million), and other current assets(€17 million). On the liabilities side, non-current liabilities of € 2 million and current
liabilities of € 33 million have been reclassified to liabilities directly associated withassets classified as held for sale.
Impairments totaling €17 million have been recorded within non-recurring items
in connection with the planned disposals.

EquityA dividend of € 0.13 per share was distributed from the unappropriated retained
earnings of Voith GmbH. This equates to €15,000 thousand (previous year:€15,000 thousand). Distributions totaling € 5,590 thousand were made to holders of profit participation capital (previous year as at March 31, 2014: € 5,501 thousand). Dividends totaling € 3,222 thousand were distributed to other holders of
non-controlling interests (previous year as at March 31, 2014: € 2,954 thousand).

58

Group interim financial statements

Voith Interim Report 2015

Provisions for pensions and similar obligations
The increase in provisions for pensions and similar obligations is primarily the resultof changes in actuarial assumptions. The Voith Group’s calculation of pension provisions is based on the following assumptions:
Germany and Austria
in   %

USA

2015-03-31

2014-09-30

2015-03-31

2014-09-30

Discount rate

1.43  %

2.50  %

3.60  %

3.90  %

Pension increases

1.70  %

2.00  %

0  %

0  %

Bonds, bank loans and other interest-bearing financial liabilities
Financial liabilities include the following items:in € thousands

Bonds

Current

Non-current

2015-03-31

Current

Non-current

2014-09-30

0739,398

739,3980715,894

715,894

272,828

120,387

393,215

42,029101,333

143,362

Financial liabilities from leases

379

1,237

1,616

424

1,417

1,841

Notes payable

339

0

339

3,745

0

3,745

45,341

84,868130,20950,34980,638130,987

318,887

945,890

1,264,777

96,547899,282

995,829

Bank loans

Other financial liabilities

Voith Interim Report 2015

59

Group interim financial statements

Other notes
Contingent liabilities, contingent assets,
and other financial obligations
There are risks in connection with the recognition of transfer prices in foreign
jurisdictions amounting to € 5 million (previous year: € 5 million) and amounting to€14 million in connection with legal disputes (previous year: €19 million). A successful outcome is currently expected in both cases.
Neither Voith GmbH nor any of its Group companies are involved in any current orforeseeable taxation, legal, or arbitration proceedings that could materially influence their economic situation.
Owing to the ongoing tax field audit of the German companies, further changes
may be made to tax items.
Guarantee obligations amount to € 31,219 thousand (previous year: €17,740
thousand).
Moreover, other financial obligations are as follows:in € thousands

2015-03-31

2014-09-30

Purchase commitments for capital expenditures

16,31416,008

Obligations arising from non-cancelable operating leases

126,624

137,945

Other

1,207

1,305

144,145

155,258

60

Group interim financial statements

Voith Interim Report 2015

	Additional information on
financial instruments
Amount recognized in the balance sheet inaccordance with IAS 39

IAS 39measure­Carrying
ment
amountcategory 2015-03-31

in € thousands

Amortized
cost

Cost

Fair value
through
equityFair value
through
profit orloss

Amount­recognizedin thebalancesheet inFair value
accordancewith IAS 17 2015-03-31

Assets:Cash and cash equivalents

LaR

Trade receivables

LaR

866,758866,758866,758

Receivables from construction contracts

LaR

325,459

325,459

325,459

32,52532,525

Other financial assets and securities

306,432

306,432

306,432

199,216· Financial assets, loans and receivables

LaR

32,525· Available-for-sale financial assets

LaR

159,321· F inancial assets at fair value
through profit or loss

FAfvtplDerivative financial instruments

33,405125,916

7,370

125,9161)
7,370

7,370

5,810

5,810

5,810

17,717

17,717

17,717

23,527· Derivatives not used for hedging

FAHfT· Derivatives used for hedging

n.a.

Other receivables

201,547· Financial receivables

LaR

53,30453,30453,304· Sundry financial assets

LaR

148,243

148,243

148,243

Liabilities:
Trade payables

FLAC

513,483

513,483

513,483

Bonds/bank loans/notes

FLAC

1,132,952

1,132,952

1,203,542

n.a.

1,616

Financial liabilities from leases
Derivative financial instruments

1,616

87,303· Derivatives not used for hedging

FLHfT· Derivatives used for hedging

6,435

6,435

n.a.

80,868Other financial liabilities

FLAC

130,209113,258

80,868Sundry financial liabilities

FLAC

267,523

267,523

LaR

1,732,721

1,732,721

16,951

6,435
80,868281,354
267,523

IAS 39 measurement categories:
Loans and receivables (LaR)
Available for sale (AfS)

AfS

159,321

Financial assets held for trading (FAHfT)

FAHfT

5,810

5,810

Financial assets at fair value
through profit or loss (FAfvtpl)

FAfvtpl

7,370

7,370

Financial liabilities measured atamortized cost (FLAC)

FLAC

2,044,167

Financial liabilities held for trading(FAHfT)

FLHfT

6,435

1)

33,4052,027,216

125,916

16,951
6,435

Available-for-sale financial assets (AfS) include investments whose fair value could not be determined reliably.

Voith Interim Report 2015

61

Group interim financial statements

Amount recognized in the balance sheet inaccordance with IAS 39

IAS 39measure­Carrying
amountment
category 2014-09-30

in € thousands

Amortized
cost

Cost

Fair value
through
equityFair value
through
profit orloss

Amount­recognizedin thebalancesheet inaccordance Fair value
with IAS 17 2014-09-30

Assets:Cash and cash equivalents

LaR

Trade receivables

LaR

812,520

812,520

812,520

Receivables from construction contracts

LaR

324,054

324,054

324,054

43,67543,675

Other financial assets and securities

800,823

800,823

800,823

216,229· Financial assets, loans and receivables

LaR

43,675· Available-for-sale financial assets

AfS

160,489· Financial assets held for trading

FAHfT

5,878

5,878

5,878

· F inancial assets at fair value
through profit or loss

FAfvtpl

6,187

6,187

6,187

Derivative financial instruments

26,024

134,465

134,4651)

19,229· Derivatives not used for hedging· Derivatives used for hedging

FAHfT

2,961

2,961

2,961

n.a.

16,26816,26816,268Other receivables

129,603· Financial receivables

LaR

41,902

41,902

41,902· Sundry financial assets

LaR

87,70187,70187,701

Trade payables

FLAC

512,317

512,317

512,317

Bonds/bank loans/notes

FLAC

863,001

863,001

n.a.

1,841

Liabilities:

Financial liabilities from leases
Derivative financial instruments

948,435
1,841

20,100· Derivatives not used for hedging

FLHfT

2,872

2,872

2,872

n.a.

17,22817,22817,228Other financial liabilities

FLAC

130,987

115,171

Sundry financial liabilities

FLAC

296,005

296,005

Loans and receivables (LaR)

LaR

2,110,675

2,110,675

Available for sale (AfS)

AfS

160,489

Financial assets held for trading (FAHfT)

FAHfT

8,839

8,839

Financial assets at fair value
through profit and loss (FAfvtpl)

FAfvtpl

6,187

6,187

Financial liabilities measured atamortized cost (FLAC)

FLAC

1,802,310

Financial liabilities held for trading(FAHfT)

FLHfT

2,872

· Derivatives used for hedging

15,816

283,764
296,005

IAS 39 measurement categories:

1)

26,024

1,786,494

134,465

15,8162,872

Available-for-sale financial assets (AfS) include investments whose fair value could not be determined reliably.

62Group interim financial statements

Voith Interim Report 2015

The fair value hierarchy of the financial assets and liabilities in the above table thatare valued at fair value for accounting purposes was as follows:in € thousands

2015-03-31

Level 1

Level 2

Level 3

Other financial assets and securities

133,286

Derivative financial instruments

23,527133,28600023,5270

Derivative financial instruments
Liabilities arising from the acquisitionof investment shareholdings

87,303087,3030

16,9510

0

16,951

2014-09-30

Level 1

Level 2

Level 3

Other financial assets and securities

146,530

146,53000Derivative financial instruments

19,2290

19,2290

Derivative financial instruments

20,100020,1000Liabilities arising from the acquisitionof investment shareholdings

15,8160015,816

AssetsLiabilitiesin € thousands

AssetsLiabilities

The three-level fair value hierarchy divides the input factors used in the measurement techniques to measure the fair value into three levels:
Level 1:
Input factors quoted in active markets accessible for the Company for identicalassets or liabilities for the Company on the measurement date.
Level 2:Other inputs than those of level 1 that are observable for the financial asset or
liability, either directly or indirectly.
Level 3:
Input factors for which there are no observable market data.

Voith Interim Report 2015

Group interim financial statements

63

No reclassifications were made between the fair value hierarchies in the first halfof the 2014/15 fiscal year.
The fair values of derivative financial instruments allocated to level 2 of the fairvalue hierarchy are taken from the daily observable market prices and interest
curves. In addition fair value measurement includes the risk of both counterparty
default and default on the part of the holder. Input factors that take account ofcounterparty credit risk can be obtained from observable credit default swaps(CDS) from the institutes participating in the respective transaction. At Voith themarket CDS rate was used to calculate the Group’s own credit risk.
The fair values of liabilities from business combinations allocated to level 3 ofthe fair value hierarchy are based on internal planning data. These are measured
using the discounted cash flow projections taken from the latest business planning prepared by management. The planning assumptions are adjusted to reflect
the current information available.
The fair values of financial assets and financial liabilities measured at cost or
amortized cost, which need to be measured to meet disclosure requirements,
are calculated as follows:
Cash and cash equivalents, trade receivables and other financial receivables are
subject to floating interest and fall due within one year. For this reason, their carrying amounts approximate their fair values on the reporting date.
Because trade payables and other financial liabilities generally have short residual
terms, the carrying amounts approximate the fair values.
The market values of unlisted bonds, bank loans and other financial liabilities arecalculated as the present value of the payments associated with the liabilities,
based on the applicable term structure of interest rates and Voith GmbH’s credit
spread curve determined for different currencies.

64

Group interim financial statements	Related parties

As in previous periods, transactions with related parties are conducted on arm’s
length conditions. The following table shows the most significant transactions fordeliveries and services with related entities and individuals:in € thousands

Voith Interim Report 2015

2015-03-31

2014-09-30

Liabilities to family shareholders

13,332

17,743

Receivables from associates, incl. advances paid

2,972

3,152

Liabilities to associates

1,623

1,755

Receivables from other investments, incl. advances paid

11,597

16,448-286-102

Liabilities to other investments, including advances received

24,752

27,989Receivables from joint ventures

5,453

4,382

599

768

Impairment of receivables from other investments

Liabilities to joint ventures
Receivables from the ultimate parent company
Liabilities to the ultimate parent companyin € thousands

Services purchased from associates
Services rendered to associates

176

165

5,116

4,852

2014/15

2013/14

1,334

4,638

321

49

Services purchased from other investments

3,240

1,097

Services rendered to other investments

7,093

9,103

Services purchased from joint ventures

1,871

2,306

Services rendered to joint ventures
Services purchased from the ultimate parent company
Services rendered to the ultimate parent company

283

59

5,269

5,170

354

348

Guarantees were issued in favor of one associate, one joint venture, and otherinvestments amounting to €11,836 thousand (previous year: €11,836 thousand),€1,812 thousand (previous year: €1,545 thousand), and € 875 thousand (previous
year: €1,364 thousand) respectively.

Voith Interim Report 2015

Group interim financial statements

65

Obligations from outstanding orders payable to the ultimate parent amount to€ 2,443 thousand (previous year: € 4,344 thousand) and those to associates
amount to € 3,430 thousand (previous year: € 4,681 thousand).
Capital increases of €169 thousand were carried out in favor of joint ventures(previous year: €1,255 thousand).
KUKA Aktiengesellschaft, Augsburg, as an associated company, has been
included as a related party for the first time. Reportable transactions and balances were insignificant in the reporting period.

	Significant events
subsequent to
the reporting dateWith effect from April 30, 2015 Voith Industrial Services sold its shareholding
interest in P3 Voith Aerospace Holding GmbH to another shareholder, P3 Ingenieurgesellschaft mbH. P3 Voith Aerospace is one of Germany’s largest engineering services providers in the aerospace industry. The company was previously fully
consolidated in the Group’s financial statements of Voith GmbH.
No further significant developments have occurred since the end of the first halfof the 2014/15 fiscal year.

Heidenheim, May 12, 2015
Voith GmbH
The Board of Management
Dr. Hubert Lienhard
Dr. Hermann Jung
Bertram Staudenmaier
Dr. Roland Münch
Carsten J. Reinhardt

66Group interim financial statements

Voith Interim Report 2015

Responsibility
statement
To the best of our knowledge, and in accordance with the applicable reporting principles for the interim financial reporting, the interim consolidated financial statements
give a true and fair view of the assets, liabilities, financial position and profit or lossof the Group in accordance with German accepted accounting principles, and theinterim Group management report includes a fair view of the development and performance of the business and the position of the Group, together with a descriptionof the material opportunities and risks associated with the expected developmentof the Group for the remaining months of the financial year.

Heidenheim, May 12, 2015
Voith GmbH
The Board of Management
Dr. Hubert Lienhard
Dr. Hermann Jung
Bertram Staudenmaier
Dr. Roland Münch
Carsten J. ReinhardtImprint
Publisher:
Voith GmbH
St. Pöltener Str. 43
89522 Heidenheim
Germany
Phone: +49 7321 37-0
Fax: +49 7321 37-7000
E-mail: info@voith.com
www.voith.com

Respecta Silk 60, used for this Voith
Interim Report 2015, is a recycled
paper manufactured in accordancewith the international FSC® standard. The cellulose is partly manufactured from certified, i.e. responsibly
managed, forests. Careful forestry
practice ensures, among other things,
that biological diversity and ecological processes are not disturbed whenwood products are removed from theforest. The paper was manufactured
with Voith equipment.
Printed in Germany© Voith GmbH, 2015-05

This interim report is also available inGerman. Both versions and other information are available on the Internet for
download.
www.voith.com

Voith GmbH
St. Pöltener Straße 43
89522 Heidenheim, Germany
Phone +49 7321 37-0
Fax +49 7321 37-7000
www.voith.com