Annual Report 2011

Annual Report 2011
Contributions

The Voith Group in Figures2009 /10

Orders received

6 358

5 300

Sales

5 594

5 198

Operational result before
non-recurring result

416

353

Return on sales in %

7.4

6.8

Income before tax

322

234

Net income

200

121

Cash flow from operating activities

244

390

Total cash flow

-261

199

Investments

211

234

Research and development

259

266

in % of sales

4.6

5.1

Equity

1 287

1 107

Equity ratio in %

22.1

18.8

Balance sheet total

5 815

5 902

Employees*

40 69139 754* Without apprentices.

Imprint

Voith GmbH
Phone: +49 7321 37-0
Fax: +49 7321 37-7000
E-mail: info@voith.com

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

Corporate Communications
Phone: +49 7321 37-3879
Fax: +49 7321 37-7107
E-mail: info@voith.com

2010 /11in € millions

Contact

Investor Relations
Phone: +49 7321 37-2332
Fax: +49 7321 37-7010
E-maill: info@voith.com
Voith Hydro
Phone: +49 7321 37-6848
Fax: +49 7321 37-7828
E-mail: info.voithhydro@voith.com
Voith ­Industrial Services
Phone: +49 711 7841-174
Fax: +49 711 7841-179
E-mail: info.­industrialservices@voith.com
Voith Paper
Phone: +49 7321 37-2888
Fax: +49 7321 37-7008
E-mail: info.voithpaper@voith.com
Voith Turbo
Phone: +49 7321 37-2832
Fax: +49 7321 37-7110
E-mail: info.voithturbo@voith.com

Magazine Section:
Burda Creative Group GmbH,
Munich, Germany
Editing/Text (Financial Section):
Seipp Kommunikationsberatung,Cologne, Germany
Typography (Financial Section),
Production:
G2 Werbeidee GmbH,
Munich, Germany
Photo Credits:
A1PIX/Jürgen Gregor: p. 32
Brian Bielmann: pp. 46, 47
Achim Bieniek: p. 70
Corbis/Angelo Cavalli: pp. 56, 57
Corbis/Redlink: pp. 22, 23
Volker Dautzenberg: p. 66
F1 Online: pp. 24, 25
Jeffrey G. Katz: p. 33
Dirk Krüll: pp. 54, 55
Dawin Meckel: pp. 2, 6, 8, 9, 19, 27, 29,
30, 39, 40/41, 42, 45, 48/49, 58, 61,
62/63, 64/65, 68
Rüdiger Nehmzow: pp. 20, 21
Benno Sänger: p. 34
ullstein bild/CARO/Kruppa: p. 43
Voith: pp. 10, 30, 37, 39, 50, 52, 69
laif/Marcos Zimmermann: p. 37

Environmentally Friendly
Production
Printing:
Wahl-Druck GmbH,
Aalen, Germany

This annual report is also available
in German. Both versions, as well aspress releases and other information,
can also be downloaded from theInternet at www.voith.com

Printed in Germany, ©Voith GmbH, 2011-12

The Group

July 2011

August 2011

September 2011

In Mutriku, Spain, the world’s first wave-operated power plant starts commercial operations.
Here, Voith supplied the plant with 16 Wells turbines, with a combined output of 300 kilowatt.

Voith completes preparations for the first onemegawatt tidal current turbine at the European
Marine Energy Center on Scotland’s Orkney
Islands. To anchor this 200 ton-turbine, a
24 meter piling will be drilled into the rocky
seabed and serve as a foundation for the tidal
turbine during its two-year testing phase. To
install the foundation, a special-purpose ship
designed for marine construction projects isused: The “North Sea Giant” which is driven
by five Voith Schneider Propellers, each having
5 160 HP.

Voith announces an order for the modernization of the Saratovskaya Hydropower Plant insouthwest Russia. This power plant’s Kaplan
turbines, with a runner diameter of 10.3 meters, are the largest of their class in the world.

Voith receives a three-year extension of its
contract with VW in Chemnitz for maintenanceand tool management in this motor production
facility.
The automotive supplier, Grob, extends its
contract with Voith for an additional two years
for assembly and commissioning services.
The German paper and cardboard producer,
Varel, restarts operation of its PM 4 paper machine following an extensive modernization.
Here both its production capacity and ecological operating characteristics were improved.
At Nine Dragons in Dongguan, China, thePM 28 starts producing copying and printing
paper.
The Chinese paper manufacturer, Shandong
Sun Paper Industry, starts production operations with its new PM 24 paper machine in
Yanzhou, China.
Voith introduces the world’s first secondarywater retarder to the public. This new retarder
operates by using a motor’s cooling fluid.

222 | Voith Annual Report 2011

Voith wins a maintenance contract from Continental for its facilities in Limbach and Stollberg. This contract has a life span of two years,
with an optional extension of an additional two
years.

Voith assumes responsibility as general contractor for the electromechanical equipment in
the Teles Pires Hydropower Plant, on the riverof the same name, in western Brazil. This order
includes the delivery of five 404 MVA generators, as well as automation of the power plant’s
electrical and mechanical equipment.

Contributions

Management Report

The Voith Group

Consolidated Financial Statements

Contributions

02

Foreword

18

01 provide

08

The Corporate Board of Management

44

02 move

10

Report of the Supervisory Board

60

03 inspire

14

The Supervisory Board

Voith receives two orders in India: It will supply
all of the electromechanical equipment for the
Sainj Run-of-the-River hydropower station in
Himachal Pradesh, as well as the Rongnichu
Run-of-the-River power station.

At Nine Dragons in Dongguan, China, thePM 32 cardboard machine successfully goes
into operation. It is designed to operate at
speeds of 900 m/min. and will produce coatedfolding boxboard.

DIW Austria wins an international contract from
BP: By 2012, a total of 160 BP shops in Austria and Switzerland will be equipped with LED
lighting systems.

The Moorim Paper Group, South Korea, accepts final delivery of the PM 1—only fivemonths after the paper machine’s commissioning.

Voith supplies DIWA automatic transmissions
to the White Russian automotive manufacturer AMAZ for 185 metropolitan buses in the
Ukrainian capital of Kiev.

Management Report

Consolidated Financial Statements

76

I. Business and economic environment

134

Consolidated statement of income

83II.	Business development and earnings position

135

Consolidated statement of comprehensive income

136

Consolidated balance sheet

138

Statement of changes in equity

140

Consolidated cash flow statement

141

Notes to the consolidated financial statementsof the Group92

III.	Business development and earnings positionof the Group Divisions

111

IV. Net assets and financial position of the Group115

V. Research and development

117

VI. Non-financial performance indicators

120

VII. Subsequent events

121

VIII. Risks and opportunities

128

IX. Forecast reportfor the 2010/11 fiscal year
163

Notes to the consolidated statement of income

168

Notes to the consolidated balance sheet

189

Notes to the consolidated cash flow statement

190

Notes on segment reporting

192

Segment information by business segment

194

Segment information by region

195

Other notes

211

Responsibility statement212

The Voith Group and its shareholdings

219

Important events

223

Imprint

Dear ladies and gentlemen,
Dear business partners and friends of our company,

I am pleased to be able to tell you about another very good fiscal year in the 144year history of the Voith family business. In 2010/11, we received orders worth€6.4 billion, thereby clearly exceeding the previous best set in the boom year of
2007/08. Sales rose to €5.6 billion, which is also a record. On an especially
positive note, our operational result before non-recurring result grew overproportionally to sales, increasing by 18%. And we witnessed an even larger
increase in net income, which rose by 64%. In total, the company earned€322 million before tax and €200 million after tax.
I would like to sincerely thank all those who helped make this possible, primarily
our employees and also our partners, who once again chose to do business with
Voith in this fiscal year.
The profit from operations of all four Group Divisions enjoyed double-digit growth,
ensuring that Voith is in excellent shape. The Group enjoys strong foundations andits activities enable us to take advantage of the prospects in our different markets.
The positive figures are clear confirmation that our four-pillar strategy to ensure
long-term, sustainable growth is the right one:
A balanced, diversified product portfolio that is oriented
towards future markets and global megatrends;• A broad, international setup with deep roots in theregions where we operate;• A technical capacity to innovate. Our engineers
continually strive to develop better products to
help solve the challenges of our times;• Voith’s independence, stability and long-term orientation as
a 100% family-owned company.
•

02 | Voith Annual Report 2011

The Group
Foreword

Contributions

Management Report

Consolidated Financial Statements

This proven and successful strategy has been consistently followed over the pastfiscal year. We further enhanced our product portfolio, which is our first strategicpillar. Focusing on the core markets of energy, oil & gas, paper, raw materials andtransport & automotive compensates for financial market risks and allows us tocontinually develop at the Group level. By broadening the company’s product andservice spectrum in existing markets as well as opening up new activities, we
further expanded these positive aspects in fiscal 2010/11.
Thanks to its product portfolio, Voith is active in pivotal areas in the value-added
chain. This is exemplified by our hydroelectric activities. In 2011, the meltdown of
the Fukushima reactor shocked the world. In Germany, “energy revolution” became a common expression, and around the globe, we can expect many countries to increasingly align their national power supply towards renewable energy
solutions. With its many possibilities, hydroelectric power will play a key role in thisrestructuring process. It just so happens that pumped storage technology is the
backbone of this change in energy policy, given that pumped storage facilities are
essential for reliably using the fluctuating quantities of wind- and solar-based
power in the grids. Large hydroelectric plants that enable industrial-scale electricity generation in a dependable, predictable, cost-effective and climate-friendly
manner play a major role in the growth and social prosperity of emerging nations
such as China, Brazil, and India.
In addition to these tried and tested technologies, we are also conducting research in other areas of renewable energy. We see ourselves as spearheading
development when it comes to utilizing the power of water to generate electricity.
We believe in the concept of allowing humans to use the energy that exists in theoceans. In July 2011, the world’s first wave power plant was placed into operationin Spain. The Voith facility in Mutriku, northern Spain, provides electricity for 250
households. It’s a small but promising start. Elsewhere, we installed and launcheda prototype of our tidal current power plant on the seabed off the coast of South
Korea. In the summer of 2011, we successfully completed the groundwork for
another Voith tidal current turbine off the coast of Scotland’s Orkney Islands. Trialruns will begin in 2012. These tests are milestones on the path to large-scale

Voith Annual Report 2011 | 03

“We don’t just focus on the short term, insteadplanning with a long-term view and sustainability
in mind, extending over several generations.”
tidal current power stations that should provide enough output to supply tens of
thousands of households with electricity generated by the sea.
In the last fiscal year, we further reinforced the second pillar of our growth strategy by completing a variety of assignments and projects. Our objective is clear:
We want to be as deeply rooted in our international markets as we already are in
Germany. The only way the company can fully deploy its strengths over the coming years is by becoming a local business in our markets, by integrating and being
accepted as members of the local society, and by being perceived, for example,
as a Chinese, Indian or Brazilian company of German origin. To make this happen,
Voith must provide customized solutions suited to local particularities and specific requirements being developed in the respective countries and regions. We
can accomplish this by utilizing local management teams that have a thoroughunderstanding of the culture, market conditions and requirements – and simultaneously embody our Voith values around the world.
A step we have already taken on this path is the Corporate Service Center inShanghai, which was opened in July. It will become an important interface between Germany and China, which is one of Voith’s most important growth markets.
Indeed, the entire company benefits from the ever-stronger roots that are growing
in developing markets – roots that are a prerequisite for Voith’s long-term growth.
The third pillar that allows sustainable, profitable growth is our innovation strength.
Voith currently holds more than 11,000 patents, with another 400 being added
every year. As a family-owned company, we have the endurance and farsightedness needed to turn these patents into market-ready products.
This capability was displayed with the recent opening of our development centerfor the industrial production of carbon fiber-based composite materials in
Garching, near Munich, in September 2011. Here, Voith will apply all of its experience to develop and enhance industrial processes used in the manufacture ofcarbon fiber-reinforced plastic components. If it becomes possible to industrially04 | Voith Annual Report 2011

The Group
Foreword

Contributions

Management Report

Consolidated Financial Statements

process this material to the same degree as metal, for example, then lightweight
construction will become a field with attractive potential in various sectors, suchas the automotive and aviation industries. Despite our confidence in our expertise,
however, this is very much a medium-term perspective.
Our efforts in the area of carbon fiber materials are representative of our philosophy: Voith strives for success through diversification and innovation. We don’t justfocus on the short term, instead planning with a long-term view and sustainability
in mind, often extending over several generations.
Thanks to this conviction, Voith is able to reinvent itself within the scope of its
existing activities. We are especially proud that in the past year, we have achieved
a leading position in the high-growth tissue market thanks to our innovative, resource-saving ATMOS technology. The technological basis for this innovation impetus was developed by Voith in Brazil, by the way.
At Voith, we make responsible growth part of our initiatives and projects aroundthe world. Accordingly, we see ourselves as a company that does more than“merely” deliver products and solutions. Voith technologies are used in key points
along value-added chains that would be unable to function without our plants,
systems, components and maintenance services. We make valuable contributions
to basic services required by people and industries, to proper living conditions aswell as to sustainable, economic and social development.
Sustainability and responsibility are the principles that set clear guidelines for dayto-day business at Voith. As an employer, too, we want to live up to these standards. This is conveyed, for example, in our extraordinarily successful Group-wide
program for improving occupational safety. Being a responsible employer alsomeans that we don’t cut corners when it comes to social standards. Voith’s values
and standards apply universally, wherever the company operates in the world.
And that applies to the reliability of our products in the same way it does to ourbusiness approach and the way we treat our employees.

Voith Annual Report 2011 | 05

Together with our strategy, this self-conception forms the strong foundation uponwhich the Voith Group stands. At the same time, they also serve as a compass forthe future development of our company. We know where we came from, we know
who we are and we know where we want to go.
In the short term, the environment in which Voith operates seems like it is becoming more unstable. The economic forecasts are significantly more cautious thanthey were a year ago. The debt problem in Europe and the United States is unsettling countries around the world and causing volatility on the stock markets. In
regard to Voith, however, we see no cause for undue alarm. We assume that,given the backdrop of a slowing world economy over the next few years and beyond, we will still be able to increase both sales and our profit from operations.
However, even in case of a substantial economic downturn, we believe that thecompany is well equipped to overcome it. Voith continued to grow and become
stronger in the crisis years of 2008 and 2009. Today, we can respond quickly tochanges thanks to an efficient early-warning system. And we demonstrated during
the last crisis that we are able to do business and take action in a consistent andresponsible manner. Without tending toward complacency, this gives us the selfconfidence to say today, “Voith is prepared.”Over the medium to long term, we see very good prospects for Voith. We areserving the global megatrends that will have a considerable impact over the coming decades, namely mobility, urbanization, resource preservation and renewableenergies. Voith is already well positioned in developing markets and will continue to strengthen its presence there – thereby truly evolving into a globally
active company. Accordingly, we will continue to rely on establishing deep local
roots. In addition, Voith sees significant potential in the company’s existing portfolio in both developing markets and highly developed regions, particularly inEurope and North America.

06 | Voith Annual Report 2011

The Group
Foreword

Contributions

Management Report

Consolidated Financial Statements“As a family-owned company, Voith has
the freedom to focus fully on implementing
its medium- to long-term strategy.”
As a family-owned company, Voith has the freedom to focus fully on implementing
its medium- to long-term strategy and we will fully utilize this advantage. Over the
next several years, Voith will become even bigger and more international, yet it will
always remain true to itself – for our customers, business partners, employees
and owners, who all give us their unconditional support as we proceed on our
ambitious course.

Best regards,

Hubert Lienhard

Voith Annual Report 2011 | 07

1

1 Hubert Lienhard, President and CEO
2 Hermann Jung, Finance and Controlling
3 Hans-Peter Sollinger, Voith Paper
4 Bertram Staudenmaier, Voith Paper
5 Martin Hennerici, Voith Industrial Services
6 Peter Edelmann, Voith Turbo
7 Roland Münch, Voith Hydro

208 | Voith Annual Report 2011

3

4

The GroupThe Corporate Boardof Management

Contributions

5

Management Report

Consolidated Financial Statements

67“Over the next several years, Voith will become
even bigger and more international, yet it will always
remain true to itself.”
The Corporate Board of Management

Voith Annual Report 2011 | 09

Report of the Supervisory Board
Dear reader,In the 2010/11 fiscal year, Voith returned to its traditional legal form of a GmbH
(German limited liability company) as a large family-owned company. As aresult, the rights and responsibilities of the Supervisory Board are once again
governed by the German Codetermination Act (MitbestG). Exercising its rights
and responsibilities, the Supervisory Board met at four meetings to address
the strategic challenges and the specific operative issues of the Voith Group inparticular. The Supervisory Board shared the Board of Management’s growing
confidence that Voith has overcome the recent global economic crisis, mastering
the crisis with its impetus and flexibility. The meetings took place on October 4,
2010, December 7, 2010 as well as on March 4 and May 24, 2011. All the
meetings of the Supervisory Board were characterized by frank and intensive
exchanges of views with the Board of Management.
Discussions were based on detailed written and oral reports by members ofmanagement on the current situation, corporate planning (including financial
and investment planning), the development of the economic situation of theGroup and the anticipated effects on the four Group Divisions, developmentsin the Company’s earnings and financial position, and actions to be taken in thecontext of risk management and quality management. The plans to step up the
global orientation of the Group and its divisions, in particular in China and India,
both in terms of product development and adjustment as well as the focus of
the services offered, including considerations on cooperation and acquisitions,were discussed in detail. The ensuing financial and capital expenditure planningfor the current and subsequent year was approved unanimously at the meetingin October.

10 | Voith Annual Report 2011

The Group
Report of theSupervisory Board

Contributions

Management Report

Consolidated Financial Statements

The success of a company’s business is not reflected solely in good businessfigures but is also geared toward sustainability for the protection of people
and their environment as well as the good of future generations. This is why
Voith endeavors to adopt an economically, ecologically and socially compatible
approach to business that embraces sustainability as a fixed principle in allprocesses and procedures across the entire value added chain. The Supervisory
Board supports this initiative by management to drive sustainable business inall areas of the Voith Group. Among other things, the measures taken benefit
industrial safety and the health and safety of Voith employees, with a dramatic
drop in the number of industrial accidents already. The Supervisory Board was
delighted to see the first visible sign of this sustainability strategy in the form of
the 2010 sustainability report published for the first time in June of this year.
The Chairman of the Supervisory Board was kept constantly informed aboutsignificant developments and key decisions by management. He consulted
regularly with the President and Chief Executive Officer on matters of material
importance.
The Personnel Committee met twice in the fiscal year under review, on October 4,2010 and on December 7, 2010. There was no need to convene the Mediation
Committee formed pursuant to Sec. 27 (3) German Codetermination Act (MitbestG).
The composition of the Audit Committee changed in the year under review, with
Mr. Gerd Schaible replacing Mr. Florian Haupt as a new committee member.
The Audit Committee met twice, on December 6, 2010 and May 24, 2011. The
first meeting, which was held in the presence of the auditors who examined
the annual financial statements, conducted an in-depth examination of thefinancial statements of both the consolidated Group and Voith AG for fiscal
2009/10, and of the report submitted by the auditors, Ernst & Young GmbH
Wirtschaftsprüfungsgesellschaft, Stuttgart. The committee and the auditors
also discussed issues regarding the further improvement of the year-end close
process. The Audit Committee was also informed at length by management
about the shareholding structures and tax group structures in Germany as well

Voith Annual Report 2011 | 11

as by the head of the Compliance Committee on the compliance management
system in place since the fall of 2008.
An external audit came to the conclusion that all elements required for the
implementation and effectiveness of the compliance management system areestablished globally in the Voith Group. Beyond this, the head of the Internal
Audit unit discussed the Group audit report prepared for the fiscal year underreview at length with the committee and explained improvements which had
been made during the course of the year.
At its second meeting the Audit Committee considered the unaudited half-yearlyfinancial statements of the Group as at March 31, 2011 as well as the status of
the risk management system, the firewall concept in the Group to maintainfinancial independence and to avoid risks that could jeopardize the Group’s
existence as well as Law 8666/93 in Brazil. Further improvement measures werealso discussed in this context.
The shareholder meeting on January 22, 2011, exonerated management and theSupervisory Board for their work in the 2009/10 fiscal year and reappointed
Ernst & Young GmbH Wirtschaftsprüfungsgesellschaft, Stuttgart, as auditor forthe 2010/11 fiscal year. The Supervisory Board subsequently approved the corresponding engagement to appoint the auditors.
The auditor examined and granted its unqualified audit opinion on the accounting
records, the annual financial statements and management report of Voith GmbHand the consolidated financial statements and management report for the Voith
Group as at September 30, 2011. The consolidated financial statements werepre­pared in accordance with International Financial Reporting Standards (IFRS).
Ernst & Young GmbH paid special attention to “Application of the German Accounting Law Modernization Act (BilMoG)”, and “Employee old-age pension benefits” and “Revenue recognition” in accordance with the mandate laid down by
the Supervisory Board.

12 | Voith Annual Report 2011

The Group
Report of theSupervisory Board

Contributions

Management Report

Consolidated Financial Statements

At its meeting on December 7, 2011, the Audit Committee examined the annual
financial statements prepared for Voith GmbH and the Group and recommended
that the Supervisory Board approve said financial statements, which it did at its
meeting on December 8, 2011. Both meetings were attended by the relevant
member of the auditor’s Management Board and the person who led the audit.
They explained the significant audit findings and were available to provide
additional information. The Supervisory Board also approved the management
report of Voith GmbH and the Group and concurred in the proposal submitted
by management regarding the appropriation of net income.
At the meeting of the Supervisory Board in October 2010, a decision was taken
to reappoint Mr. Peter Edelmann effective June 1, 2011. Mr. Martin Hennerici wasthen reappointed at the meeting in March 2011 effective February 1, 2012. The
reappointments were made for five years in each case.
Finally, the Supervisory Board would like to thank the members of managementof Voith GmbH and the management of the subsidiaries, the employees of theGroup and the representatives of the workforce for their dedicated commitment
and their successful endeavors in the fiscal year under review.

Heidenheim, December 8, 2011
Chairman of the Supervisory Board

Dr. Manfred Bischoff

Voith Annual Report 2011 | 13

The Supervisory Board
Dr. Manfred Bischoff
Chairman,
Chairman of the Supervisory Board Daimler AG,
Stuttgart/Germany

Ulrich Eckelmann1)
General Secretary
European Metalworkers’ Federation,
Brussels/Belgium

Gerd Schaible1)
Deputy Chairman,
Chairman of the corporate works council of Voith GmbH,
Heidenheim/Germany

Sonja Gorsch
Teacher,Erftstadt/Germany

Rudolf Bädorf1)
Vice President Manufacturing & Logistics
and Site Representative of
Voith Paper GmbH & Co. KG,
Heidenheim/Germany

Walter Beraus1)
Secretary of the Metalworkers’ Union,
Regional Organization Baden-Württemberg,
Stuttgart/Germany

Thomas Brezina1)
Member of the works council of the common entityof companies of Voith Paper Heidenheim,
Heidenheim/Germany

14 | Voith Annual Report 2011

Prof. Dr. Bernd Gottschalk
Member of the Board of Managementof Mercedes-Benz AG (retired)

Dr. Alan Hippe
Member of the Executive Board
F. Hoffmann-La Roche AG,
Basel/Switzerland

Bernd Kauba1)
Chairman of the works council
DIW Mechanical Engineering GmbH & Co. KG,
Radebeul/Germany

The GroupThe Supervisory Board

Contributions

Management Report

Consolidated Financial Statements

Dr. phil. Nicola Leibinger-Kammüller
President of the Board of Managementof Trumpf GmbH + Co. KG,
Ditzingen/Germany

Ute Schurr1)
Chairwoman of the works council of the common
entity of companies of Voith Turbo Heidenheim,
Heidenheim/Germany

Reinhard Leigraf1)
Process technology engineer for special papers,
Voith Paper GmbH & Co. KG,
Ravensburg/Germany

Klemens Schweppenhäuser
Member of the Board of Management of
Familiengesellschaft J.M. Voith GbR,
Mannheim/Germany

Ophelia Nick
Veterinarian,Wülfrath/Germany

Andreas Strobel1)
1st Representative of the Metalworkers’ Union,
Heidenheim branch,
Heidenheim/Germany

Dr. F. Oliver Porsche
President and CEO of Familie
Porsche AG Beteiligungsgesellschaft,
Salzburg/Austria

Gerold Schaubmayr1)
Chairman of the works councilof Voith Turbo GmbH & Co. KG,
Crailsheim/Germany

Dr.-Ing. E. h. Jürgen Weber
Chairman of the Supervisory Boardof Deutsche Lufthansa AG,
Cologne/Germany

Dr.-Ing. E. h. Heinrich Weiss
Chairman of the Board of Managementof SMS GmbH,
Düsseldorf/Germany

1)

Elected by the employees.

Voith Annual Report 2011 | 15

p. 54
p. 32

p. 50
p. 66
p. 24
p. 56
p. 40

p. 34

The Group

Contributions

Management Report

Consolidated Financial Statements

Contributions

01 provide
24

China: Record growth in the People’s Republic

32

USA: Oceans and rivers – Energy storage with enormous potential

34

Brazil: Hard facts behind soft paper

40

India: From energy guzzlers to stress analysis

02 move
50

Sustainable paper production – Focusing on the bigger picture54

Low-emission hybrid buses – Braking brings progress

56

Monorails – Humming quietly above streets and traffic jams

03 inspire
66

Here for generations – Families at Voith

Voith Annual Report 2011 | 17

The Group

Contributions
provideManagement Report

01

provideVoith contributes to growth and well-being in key areas ofmodern society. With its diverse portfolio of technical systems,
equipment and services, the company is in tune with the megatrends of our time. Growing global mobility and urbanization,
together with an increasing use of renewable energies and thedrive to conserve resources all raise questions for which Voith
provides answers. The Group maintains development andproduction facilities in growth regions across the world inorder to supply a variety of local markets.

18 | Voith Annual Report 2011

Consolidated Financial Statements

Aspiring India
India

Achieving sustainable growth, generating energy from renewable sources andmanaging mankind’s ever-growing mobility are some of the major challenges of
our time. Emerging markets such as India, China or Brazil are rapidly developing
into modern economic giants. They need reliable infrastructure and industries
that can produce in an environmentally friendly way. Voith technology is providing
its contribution to their development. The company is active where its customers
need local solutions, for example in the Indian cities of Hyderabad, Vadodara,
Bangalore, Chennai, Pune and around New Delhi. //20 | Voith Annual Report 2011

The Group

Contributions
provideManagement Report

Consolidated Financial Statements

The energy revolution needs pumped storage plants

Kaprun,AustriaWind, solar, biomass and water are the pillars of the energy mix of the future.
Pumped storage plants contribute significantly to the success of green energy:
solar power plants and wind turbines can only be expanded on a large scale with
their help. They act as massive energy storage tanks, balancing out the irregularyield from solar and wind energy. If too much electricity is present, an electric motor triggers a pump turbine that sends the water into the higher reservoir. If thedemand for electricity increases, water is released from the upper reservoir througha pressure pipe, rushing onto the pump turbines that drive the generator. Voith canlook back on over 100 years of experience with pumped storage technology. The
green energy trend pursued by many countries encourages the expansion of proven, cost-effective technology in Europe. Voith is currently working on new pumped
storage plants in several countries across Europe as well as in South Africa. The
Limberg II pumped storage plant in Austria (pictured here) went into operation in
October 2011. To carefully preserve the natural surroundings, the pressure tunnel,
surge tank, pressure shaft as well as machines and transformers are all located ina chamber inside the mountain. //Voith Annual Report 2011 | 21

22 | Voith Annual Report 2011

The Group

Contributions
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Invisible, but indispensable

Xinjiang,
China

Deep in western China, in the Xinjiang Uygur Autonomous Region, lies thenation’s most important natural gas reserve – a huge resource for an energyhungry country. Valuable raw materials are concealed under the Earth’s surface, such as here in the Tarim Basin, or deep under the sea floor: ores, oiland gas, all treasures of the Earth that play a fundamental role in the functionof modern industrial societies. Through 4,200 km of pipelines, natural gas istransported from drilling rigs across 17 provinces along the Yangtze River tothe vibrant economic centers on the east coast. For decades, Voith technology has proven its excellence in the mining and processing of raw materials
all over the world. Couplings, transmissions, transformers and propeller
shafts often operate behind the scenes. Where conveyor systems, steel mills
and refineries connect, these elements make an indispensible contribution
to smooth, reliable operations in large industrial facilities. //Voith Annual Report 2011 | 23

Record growth in the
People’s Republic
In its latest five-year plan, the Chinese government isfocusing on sustainable growth, renewable energies andan expansion of the transportation infrastructure – allof which adds up to an excellent opportunity for Voith.
In Shanghai, Liaoyang and Kunshan, the company isdeveloping and making products for the domestic
market. And it plans to recruit hundreds of qualified
employees and managers in China.

Maintaining tradition in modern life:
Women perform the traditional movementsof their morning exercise routine on
the Bund riverside promenade in Shanghai.

24 | Voith Annual Report 2011

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Liaoyang,
Kunshan,
Shanghai,ChinaM

ini-projects don’t get you very
far in a huge country. If you
took the Empire State Building out of New York City and placed iton one of China’s largest building sites,
it would disappear completely. On theborder between Sichuan and Yunnan,
in a 400-m-deep ravine on the Jinsha
River, a tributary of the Yangtze, theXiluodu hydropower plant is being built.
In the summer, Voith supplied the first
turbine runner for this massive project.
Overall, the company will install three
770 MW Francis units for Xiluodu fromits plant in Shanghai. When the hydropower plant begins operations in 2013,
it will produce up to 13.9 GWh of electricity annually, which will make it oneof the most powerful plants of its typein the world.
No other country is building more major power plants than the world’s fastest-growing economic powerhouse.

In 2035, according to forecasts by theInternational Energy Agency, the People’s Republic will require three times
as much power as today. Coal is still
fueling China’s ascent to global economic power, but this black gold is amajor contributor to the rise in climatechanging greenhouse gases worldwide. The Chinese government isaware of its responsibility, which is why
its current five-year plan sets ambitious
goals: The country wants to cut its
greenhouse gas emissions by up to
45% by 2020. To this end, the government is putting its money on sustainable growth and renewable energies.
For an innovative technology firm like
Voith, this is a major opportunity. “Theplan offers Western companies with
relevant products and intellectual capital a platform on which to engage with
China in business,” says business consultant Dr. Edward Tse, Senior Partner
at Booz & Company in Shanghai.
China currently generates 22% of its
electricity via hydropower. The government plans to expand this from
220 GW today to 380 GW in 2020. Between 2011 and 2016 alone, €550 billion will go into renewable energies.
Martin Andrä, CEO Voith Hydro
Shanghai, therefore expects, “thatsome projects will be accelerated.”
Andrä can already celebrate two major orders today. Voith will supply thegenerators for two 300 MW units for
the Yan Tan power plant on the
Hongshui River and three Francis turbines, with an output of 408 MW

26 | Voith Annual Report 2011

each, for the Yang Qu hydropower
plant on the Yellow River. These two
projects will create 1,824 MW of newhydropower capacity. Guoqing Chen,
Vice President Voith Hydro Shanghai,
is proud to note that his employer has
thus far been involved in all of the major hydropower projects in the country.
“And the most important thing is,”Chen adds, “that all customers havebeen extremely satisfied with the highquality and reliability.”
Chen is one of 10 native Chinese on
the 12-person management committee of Voith Hydro in Shanghai. Nearly
all customer contact goes throughthem. “For that reason, Voith is perceived here as a Chinese company,”
explains Chen, “particularly as 95% of
our components are purchased or
produced locally.” This production is
being expanded further: “We are currently enlarging all of our productionbuildings,” reports Andrä. And theShanghai site wants to do even more
to develop products specifically for the
Chinese market, as some have to meetvery specific requirements. The plantnear the port metropolis is increasingly
becoming the main hub for both Asiaand other continents. “We want toraise Voith’s market share in countries
such as Vietnam, Laos and Thailand,for example,” adds Andrä.
Voith is pursuing similarly ambitious
plans in Kunshan. In the Chinese paper
production center near Shanghai, thecompany is intensively expanding its

Voith workers in Shanghai manufacture gigantic turbine runners. The plantis currently being expanded and willsoon serve other Asian countries suchas Vietnam, Laos and Thailand (top).
The Xiluodu dam construction siteruns day and night. What will be oneof the most powerful hydropower
plants in the world is scheduled to
begin operations in 2013 (bottom).

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22
percent

of China’s electricity, or 220 GW, is currently generated from hydropower. This output
is set to increase to 380 GW by 2020.

28 | Voith Annual Report 2011

Paper City. Office buildings and production halls are currently being expanded – with an exemplary ecologicalconcept. Here, Voith produces complete paper machines, fiber processing
plants (especially those used for therecycling of waste paper), automation
systems as well as roller covers andfabrics for paper machines. More andmore components and spare parts,
which today are still being imported
from Germany or Brazil, will be produced in Kunshan in order to be able
to supply the fast-growing markets in
China more quickly and efficiently.
“Many products can be produced hereat just as high quality, while transport
times and costs are also lower,” says
Senior Vice President of Voith Paper
Fabric & Roll Systems Asia, Robert
Kietaibl. In addition, Voith has been

producing manufacturing rolls for paper machines in the city of Liaoyang, inthe northeast part of the country, formany years.
Voith doesn’t just sell paper machines,
though, the company also offers its
customers support and service for theentire life cycle of its products. “Westand by our customers for their everyday production,” says Kietaibl about
the concept. Voith employees in threeservice centers ensure that worn partsfor fabrics and roll covers are replacedon schedule – a major benefit for the
manufacturers. “This helps them tosave energy, water and fibers,” explains
Kietaibl. These costs are constantly on
the rise, while the pressure on paper
prices is also growing. Meanwhile, thegovernment is pressing for production

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providemethods that conserve resources.
Voith’s service centers and production
sites in China work very closely together
to help the paper mills to achieve manufacturing processes that are both efficient as well as resource-conserving.
Conservation of resources is also on
the agenda for Voith Turbo. The aim ofChina’s latest five-year plan to expand
both the country’s alternative energies
and its transport infrastructure is giving
the Group Division some momentum.
The current Executive Vice President inShanghai, Martin Wawra, was, until lastyear, Head of Voith Turbo Scharfenberg
in Salzgitter, Germany. As a mechanicalengineer, he is intimately familiar withthe minute details of railcar couplings.
He is proud to report that Voith has justdeveloped new B-Metro-Scharfenberg

Management Reportcouplers which are tailored specificallyto the Chinese market. Jason Hu, Vice
President Rail in China, adds: “We areproducing the new short couplers in
our plant with local materials. When it
comes to quality, we’re not taking any
shortcuts.” The cities of Kunming andSuzhou plan to install the couplers intheir metros soon.

Consolidated Financial Statements

China is already the world’s biggest
paper producer and consumer,
and the demand for the raw material
for newspapers, books, hygiene
paper and cardboard continues to rise.

The new production concept is also
being applied to the Retarder VR 115
CT retarder. This nonwearing brake
could prevent many accidents in China
and help save lives. Small haulage companies in particular have to struggle withprice pressures in the industry, meaning
they frequently overload their vehicles.
“Most of them tend to carry a lot of water with them on each trip so that they
can adequately cool their brake discs

Voith Annual Report 2011 | 29

30 | Voith-Geschäftsbericht 2010/2011

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our components locally.”
Guoqing Chen, Vice President Voith Hydro Shanghai

The world’s biggest paper machine,
the Hainan PM2 is 430 m long.
Operating in a plant located on theisland of Hainan in the South China
Sea, it produces high-quality, multicoated fine paper. Its components
include CarboTec rollers made byVoith (above left).
In Shanghai, Voith is manufacturing
couplers specially developed for
Chinese metros as well as manyother components for railcars andbuses (left).

when coming down mountains,” says
Wawra. It is a dangerous practice common among small companies.
In order to be able to develop moreproducts in and for this large country,
Wawra is urgently seeking native engineers. “The Voith brand must become
even better known in China in order toattract more of the best workers,” hesays. The new Voith Corporate Service
Center in Shanghai should aid this.
Some 20 employees are already working here. At its opening in July 2011,
CEO Dr. Hubert Lienhard said: “TheCorporate Service Center will become
one of the most important links between China and Germany.” Voith aims
to be just as much at home in China asin Germany – something the Corporate
Service Center employees play an important role in. One of them is Lily
Wang. The human resources manager
has built a team of four young HR professionals in record time. “It wasn’teasy,” says Wang. “Human resources
experts are highly sought after inShanghai. But we have interesting opportunities to offer and German tech-

nology companies have a very good
reputation here.”
The young HR team led by Lily Wang
will support the Voith units in China in
the recruiting and qualification of technical and management personnel. A
central training center is also planned
and will begin operations in 2013. Here,engineering students and technicalschool graduates will complete a oneyear training program geared specifically to the requirements at Voith.
Another area of focus for Wang andher team is to set up a leadership program for management training. Workers can acquire key qualifications incommunications, personnel leadership,
strategic thinking and Voith’s values.
The program will convey a shared understanding of the Voith performancestandards and, at the same time, support the HR work of the Group Divisions. “It is our aim to make Voith oneof the best-known and most desirable
employers in China,” Wang says. Voith
plans to recruit at least 2,000 new employees in the next few years alone – a
Herculean task. //Voith Annual Report 2011 | 31

Oceans and rivers – Energy storage
with enormous potential
Voith Hydro Inc. CEO Kevin Frank discusses the huge potentialof hydropower in the United States as well as the prospectof Alaska becoming a model region for utilizing ocean energy.

Kevin Frank has led
Voith Hydro Inc., in theAmerican town of York,
Pennsylvania, sinceNovember 2010. Prior
to that he was SeniorVice President of Voith Fabric and Roll
Systems, Voith Paper North America.

In the United States, there are approximately 84,000 dams, but only 3% areused for generating electricity. What opportunities does this potential for generating energy offer?
There are hundreds of dams that could produce electricity but do not currently havethe capacity to do so. Additionally, we can get more power out of existing power
plants. The turbines in these dams have been in existence for decades – if we modernized these facilities with the most up-to-date technology, there would be significant energy gains. By powering non-powered dams, retrofitting existing plants andputting the right policies in place, experts estimate that we could generate an
additional 60,000 MW of power in the United States. That is the equivalent of 40
nuclear power plants, or 60 coal power plants.
Is it easier to modernize existing facilities rather than install new turbines on
non-powered dams?
Yes, because all new facilities have to go through a complicated approval processthat can take five to 10 years. We don’t go through the same process for basic
modernizations.

USA

Does this approval process for new facilities put hydropower at a competitive
disadvantage?
Unfortunately, yes. The permits for wind and solar plants are issued much faster,sometimes within months. The time itself is less of a concern than the uncertainty

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Consolidated Financial Statementsof the process. If we had some degree of certainty about how long a permit would
take, it would bring hydropower closer in line with other sources of energy.
Is there legislation in Congress that will speed up the licensing of small hydro?
There is legislation pending in both the House of Representatives and the Senate
aimed at expanding the use of small hydro across the United States. This focuses
on streamlining and shortening the licensing process as well as providing funding for
research and development. These bills enjoy support from members of both parties.
In my opinion, the licensing process shouldn’t take longer than two years, something
we have been championing for a long time. In some parts of Alaska, for example,
electricity can cost more than eight times the national average. As a result, there are
currently hundreds of sites for potential small hydro development, especially in remote and underserved areas.
Small power plants in remote areas – that sounds like a very traditional application of hydropower. What about emerging hydro technologies?
Voith Hydro has many high-tech innovations, such as marine power plants. This has
great potential in Maine on the east coast and Oregon on the west coast. We also
see potential in Alaska, where there are areas with huge tides, which would be
ideal for tidal technology. Alaska has nearly 34,000 miles of coastline, with many
communities relying on diesel for their power generation. Additionally, Alaska has
set a goal of obtaining 50% of its energy from renewable sources by 2025. All ofthese factors combined make it an ideal region for emerging ocean technology.
The west coast is known for its Pacific salmon migration. Are there opportunities for Voith to use its fish-friendly turbines in the Pacific Northwest?
There are tremendous opportunities for fish-friendly technology. Voith has developed two turbine concepts that provide for improved fish passage. The Alden turbine’s three long blades rotate slowly enough so that marine life can pass safely
through, with survival rates of up to 98% even in relatively small turbines. We also
have our Voith Minimum Gap Runner technology, which has been very successful
in allowing safe fish passage in larger turbines, including several sites in the PacificNorthwest. Fish-friendly technology is an area where government policies could be
helpful; if they make fish safety a priority, Voith Hydro has the technology to meettheir needs. //The US state of Oregon has around580 km of largely uninhabited, wavebattered coastline – perfect for providing ocean energy (far left).
Voith is equipping the Willow Island,
Cannelton and Smithland power
plants on the Ohio River with eightturbines with a total capacity of
208 MW (left).

Voith Annual Report 2011 | 33

34 | Voith-Geschäftsbericht 2011

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Hard facts behind soft paper
Voith offers the latest technology for the cost-efficientand resource-saving production of premium
hygiene paper – a success story with Brazilian roots.

São Paulo,
BrazilU

nremarkable it may be, but, tissue is the paper that cleans, dries and absorbs. We use it in toilet paper, facial tissue and paper towels. And more
and more of us are using it, especially in dynamic developing nations,where a better standard of living is raising hygiene consciousness.
Voith offers the latest technology for the cost-efficient production of conventional and premium tissue. As a production equipment manufacturer, the company has profited from the rising demand in recent years. Since 2008, Voith has
sold 20 new tissue machines and modernized seven existing plants by installing
formers and shoe presses. “We are already fully booked into next spring,” says
Rogério Berardi, Sales and Marketing Manager for America and Oceania.

The demands on premium paper
towels are high: Not only must
they be soft, but also extremely
absorbent and tear-resistant.

The roots of this success originate in the rolling hills in the northwest of theindustrial metropolis of São Paulo, in southern Brazil, where the 300,000m² Voith
complex is located. In total, Voith employs 6,000 workers in all Group Divisions
in Brazil. The Group has been in the Jaraguá district of São Paulo since 1964,
which was the first major subsidiary outside Europe. Brazil’s mighty rivers offer
excellent opportunities for producing hydro electricity, while the country’s hot,humid climate is ideal for the fast-growing eucalyptus tree, a real boon to theVoith Annual Report 2011 | 35

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paper industry. For Voith, São Paulo has developed into the most important location in the tissue sector. This is where the competence center, including researchand development, is located, where the pilot machine is housed and where theglobal responsibility lies for Voith’s tissue business.

Eucalyptus plantations supply the
raw material for paper production.
The tree, common in subtropicalcountries, grows extremely fastand is excellent for harvesting pulp
(above right).

An engineer and marketing specialist, Berardi has worked for Voith in São Paulofor 13 years and knows the markets well. For around a third of the year thefamily man is on the road throughout the world. “Tissue is a complex material,”
he says, “and every market has its own unique character.” Even within a national
market there can be major differences. For example, Brazilians in the industrial
metropolis of São Paulo each consume 9 kg of hygiene paper a year, while theannual per capita consumption in the poorer northeast part of the country is onlyaround 500 g – a figure comparable to inland China.

The more recycled paper that canbe used, the less wood is requiredfor production. Voith has succeeded
in developing a new process for producing premium tissue with recycledmaterial (right).

The biggest consumers of hygiene paper are North Americans, at 20-24 kg a
person, depending on the region. They wash their windows, clean their floors andpolish their cars with the material. For such uses, the paper must have specificcharacteristics. For one thing, it needs to be extremely absorbent. Paper towels
made from premium tissue can absorb up to 15 times their own weight, double
the amount of conventional tissue.
“North American consumers buy the most tissue, but they also place the highest
demands on it,” explains Berardi. They prefer dual-ply, highly structured material,
while Europeans want as many plies as possible. “We have to study the habits ofthe end consumers in all markets in order to develop products that meet theirneeds.” Hygiene paper the way they like it in North America is made using the

36 | Voith Annual Report 2011

Voith-Geschäftsbericht 2011 | 37

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provideManagement Report

Consolidated Financial Statements“In terms of sales, we are alreadynumber two in the world.”
Rogério Berardi, Sales and Marketing Manager for America and Oceania

complex TAD process (Through-Air Drying). A light stream of air flows directly
through the fabric during the drying process – an energy-intensive and expensive
procedure that dates back to the 1960s. “Our goal,” says Berardi, “was todevelop a solution with which we could produce high-quality premium tissue forless.” And they succeeded.

40
percent
The ATMOS process, an innovativetechnology for tissue production,saves electricity. And it can use 100%
recycled fibres. This sustainable
process was developed by Brazilian
and German Voith engineers.

38 | Voith Annual Report 2011

Voith engineers in São Paulo, and thousands of kilometers away in Ravensburg,
Germany, developed a new technology which requires considerably fewer
resources than the TAD principle: ATMOS (Advanced Tissue Molding System). In
this process, the paper web is dewatered with a vacuum suction roll and via hot
air and steam. The latter two raise the temperature, thus accelerating the dewatering process.
Newly developed felts and an additional fabric provide extra support for the
dewatering of the web. The fabric, which is fixed close to the the paper web, iscorrugated, allowing the sheet to maintain its three-dimensional structure. Whenthe process is finished, an extremely soft, absorbent premium tissue rolls off at
the end of the line.
The great strength of this new process is its sustainability. It requires 25% lessfibers than conventional tissue machines, while ATMOS lines also need just 60%of the energy consumed by comparable TAD machines. Another plus is the factthat an ATMOS machine can take 100% recycled fibers and make premium tissue
from them; something of a revolution, as TAD systems can only process a maximum of 20% recycled fibers. Despite the benefits, the road to success was notan easy one. The first ATMOS unit was installed in late 2006 at CMPC in Chile,the second-largest tissue producer in South America. However, it wasanother three years before Voith sold a second machine. “We were facing a double challenge,” explains Berardi. “We had to introduce a completely new technology and survive the economic crisis of 2008.” The real breakthrough came inRogério Berardi is pleased with
Voith’s success on the tissue market. The engineer has worked for
Voith in São Paulo for 13 years(below).
The Voith VTM 4 tissue machine at
CMPC Tissue. The plant in Altamira,
Mexico, came into operation in
the summer of 2010 (below right).

2011, when Voith sold three ATMOS machines; one in Europe and two in North
America, where the company also carried out an ATMOS retrofit.
At the same time, business picked up with conventional machines in various
sizes. Voith sold six in South America alone, and 11 tissue lines in other parts of
the world: three in Europe, five in China, two in Indonesia and one in Bahrain.
Turnover quadrupled within three years. “In terms of sales, we are alreadynumber two in the world,” says Rogério Berardi proudly. “We are certainly reaping the fruits of our earlier labors.” //Voith-Geschäftsbericht 2011 | 39

The city of Pune, with over five million
residents, is one of India’s top automobile
centers. General Motors, Tata Motors,
Volkswagen, Daimler and Fiat have factories here and qualified Voith employees
service painting equipment for various
manufacturers.

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From energy guzzlers
to stress analysis
In just three years in India, Voith Industrial Services
has already managed to gain a foothold in a variety ofindustries. Its employees are busy making automobile
production processes more efficient or simulating thestress limits of airplane components.

Pune,
Chennai,Bangalore,
India

A

ll of a sudden the lights go out. Entire city districts plunge into darkness– a common nuisance in India. In the seventh-largest nation on earth,energy is notoriously scarce and horrendously expensive. “Electricity
costs almost as much in India as in Germany,” says Dr. Manoj Gupte, who helped
establish Voith Industrial Services India in Pune, in the state of Maharashtra, andmanaged it until September 2011. An old commercial hub in the western part ofthe country, Pune is one of the four centers of the Indian automobile industry.
Volkswagen, Daimler, Tata Motors, General Motors and Fiat all manufacture cars
there. The other top centers are greater New Delhi, Chennai (a port city on thesoutheast coast) and Bangalore, about 300 km inland from Chennai. Here, in thegreen hills of the state of Karnataka, temperatures are relatively mild. Sweden’s
Volvo builds buses for public transportation systems in Bangalore – known as
India’s Silicon Valley. To cut costs, the Swedes hired Voith to conduct an energy
audit. For weeks, Voith employees searched high and low for potential savings.
“We combed through the entire operation. Of course, the biggest energy guzzlers were in production,” explains Gupte. Among the Voith team’s findings werenumerous gigantic ventilators used in the painting process. “They were working
quite inefficiently, so we recommended some improvements to help Volvo saveenergy in this area,” adds Sudhir Gurtoo, Gupte’s successor.

Voith Annual Report 2011 | 41

“The auto industry is outsourcing
an increasing number of tasks
to innovative and highly qualified
service providers.”
Sudhir Gurtoo, Voith Industrial Services India

The actual focus of Voith Industrial Services India’s work is servicing the painting
equipment of a number of car manufacturers, such as Fiat and Toyota, or local
companies like Bajaj Auto. “If a single painting robot breaks down, it can bringproduction to a complete standstill,” explains Gupte. It’s Voith’s job to make surethat doesn’t happen. Such a high level of service is relatively new in India, but the
future looks promising. “The auto industry is becoming more and more open tothis principle and outsourcing an increasing number of tasks to innovative andhighly qualified service providers,” Gurtoo says.
And the numbers confirm it. India is one of the fastest growing automobile markets in the world, posting double-digit growth rates in the last few months. According to the Society of Indian Automobile Manufacturers (SIAM), sales of motor
vehicles are expected to rise from 36 billion to 115 billion US dollars by 2016.
While there are no official figures on the actual number of vehicles on the road, it
is estimated that less than 1% of the population owns a car. These optimistic
forecasts are encouraging companies to expand their production capacities on
the subcontinent – and not just to meet potential domestic growth. More andmore of them are exporting cars around the world from production sites in India.

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Nissan Motor India began shipping the Micra, manufactured near Chennai, toEurope over a year ago, while the Nissan Pixo, which can be seen cruising thestreets of countries like Germany, is made by Maruti Suzuki in New Delhi.
Voith is continuously expanding its activities in India. In early 2010, the company
opened another location in Bangalore, Voith Engineering Services India. From
here, around 50 specialists serve customers in a variety of industries around theworld. “The location is simply perfect. A lot of science and technology institutes
and companies are based here,” explains Managing Director Dr. Suresh Nagesh.
The list includes international aviation companies like Airbus and Boeing. Nagesh
is particularly proud of the strategic partnership with Airbus Engineering Center
India (AECI). “Voith is one of just two firms selected to support the flight physics
team at AECI,” he notes. Voith engineers developed stress analyses for Airbus’
landing flaps and designed a digital mock-up of the A400M transport aircraft thatlets Airbus employees use a computer to check the effects of a particular weight
distribution. The French city of Toulouse, Europe’s airplane manufacturing capital, is also home to another Voith Engineering Services team, which works closely together with the engineers in Bangalore. Currently, they are cooperating on a
project to further develop Airbus’ behemoth, the A380.
The Bangalore team also designs digital models for other industry segments. They
can predict the behavior of industrial gearboxes under high heat, for instance, andthey also designed the entire body of a double-decker railcar on a computer, testing potential variations of its internal mechanism directly on the screen. Their Voith
colleagues in Germany, France and the United Kingdom are already benefitingfrom this experience with sophisticated technical simulations and computer models. “In the future, we also hope to support the development teams in other Group
Divisions,” says Nagesh. “We benefit from the diversity of skills found within alarge company and offer a high standard of design and development.” The sky isquite literally the limit: soon Voith will begin designing complete aircraft wings. //Voith’s service teams ensure that production never comes to a halt (far left).
Voith engineers in Bangalore andToulouse are cooperating on a projectto enhance Airbus’ huge A380 (left).

Voith Annual Report 2011 | 43

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move

02

Management Report

move

Progress cannot be achieved without innovativeand efficient products; long-term success cannot bereached without investments in the future. At Voith,
research and development are a top priority. Across
many areas of its industry, the company is setting
standards worldwide.

44 | Voith Annual Report 2011

Consolidated Financial Statements

The right tug for tight situations

Heidenheim,
Germany

Longer, taller, wider – while the shipbuilding industry seems
to know no limits, nature certainly does. In channels andstraits throughout the world, things can get a little tight forthe captains of the latest supertankers or luxury liners. It isfor situations like these that Voith collaborated with Canadian ship designer Robert Allan Ltd. to develop a uniquetugboat concept called RAVE. Unlike other simimlar tugs,
its two Voith Schneider Propellers are aligned longitudinally,
with one in the bow and one in the stern, rather than just in
the bow. Voith engineers examined the performance of the
new concept in a test tank using simulated currents. The
results showed how the tug can be maneuvered throughchannels, harbors and locks with the utmost precision,
meaning it can confidently lead the new giants of the sea
through even the narrowest of passages. //46 | Voith Annual Report 2011

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Cool energy for warm houses

Mutriku,Spain

The powerful forces of the sea contain a largely untapped
potential for generating clean energy, whether through wave
or tidal power plants. Voith is investing heavily in this new
field of research. The company recently installed a prototype tidal current machine on the seabed off the coast ofSouth Korea, at the future site of the world’s largest tidal
energy park. Voith also provided the equipment for the 16
Wells turbine units for the first commercial wave power
plant, in the Basque town of Mutriku on Spain’s northern
Atlantic coast. The plant has been generating enough power
for 250 households since the summer of 2011. //Voith Annual Report 2011 | 47

Green light for buses
The fast-growing metropolises of theworld need modern, reliable, high-capacity public transportation networks.
Today, more and more large cities are
relying on bus rapid transit systems(BRTs). High-performance buses, likethose in Xiamen, China, drive in separate lanes with their own traffic lightsystem, resulting in higher average
speeds that help passengers reach
their destinations quickly. Voith engineers developed the DIWA.5 transmission especially for city buses likethese. It offers an ideal combination ofride comfort, reliability and efficiency.
BRT system operators around theworld rely on DIWA transmissions andthe top-level service provided byVoith. More than 6,000 DIWA transmissions are in use in BRT systems
worldwide. South American metropolitan areas like Curitiba, São Paulo,
Santiago de Chile and Bogotá trust
Voith technology, as do Chinese cities
like Hangzhou, Dalian, Jinan, Changzhou, Zhengzhou and Xiamen. //48 | Voith Annual Report 2011

Xiamen,China

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Focusing on the bigger picture
Paper manufacturing requires great quantities of water, fiber and energy – allincreasingly rare and costly resources. Voith engineers are developing newprocesses that drastically reduce resource consumption.

Duiven,The Netherlands
Perlen,SwitzerlandPaper gives people wings – in the truest sense of the word. Back in the 18th
century, two French paper manufacturers, the Montgolfier brothers, took to
the skies for the first time with a paper-covered balloon framework. But,
more importantly, paper has given flight to human imagination. Without this bearer of written thought, our culture as we know it would not exist. Paper enabled theprinting of books and newspapers – triggering a genuine information revolution.
Nowadays, almost 400 million tons of paper and cardboard are produced eachyear – a quarter of which on Voith paper machines. The trend is rising, as is theconsumption of resources in general, primarily due to economic growth in developing nations. Paper consists mostly of wood fibers, or cellulose, and its manufacture consumes enormous amounts of water and energy. Of course, energy isexpensive and water and wood fiber are scarce commodities in many places
around the world. For that reason, Voith has set itself the goal of sustainably
minimizing the consumption of these resources.
Significant progress has already been made. For example, Voith engineers havedeveloped the Integrated Ecomill (IEM) concept. “We want to embed sustainability in the processes and, at the same time, design paper plants in a way that setsthem apart from traditional factories, both economically as well as environmentally,” explains systems expert Markus Oechsle from Voith. “We achieve that by
not only tightly integrating every process in the factory, but also integrating theplant into its individual environment and customizing it to meet client requirements.” In Tunisia, for example, operators have acces to substantial amounts ofnatural gas, but water is scarce. “We use the gas to generate electricity for seawater desalination,” Oechsle says. “Customizations like these are designed tofind the most cost-effective solutions for the region and the customer.”

An indispensable building blockin sustainable paper manufacturing
as well as a valuable resource:
recycled paper.

The example of Switzerland’s Perlen Papier AG facility demonstrates how freshwater consumption can be significantly reduced by consistent water management. Voith’s new PM 7 paper machine, which was the first one installed using

Voith Annual Report 2011 | 51

the IEM concept, has been running there since June 2011 alongside an older
PM 4 machine. Both systems use fibers recovered from recycled paper to produce newsprint. The entire plant has a comprehensive water management system that includes all areas, from recycled paper pulping through both machines
to the wastewater treatment system. “A certain amount of water is required foreach process step. We pay close attention to ensure that no water is lost andthat only the necessary amount is used,” reports Ewald Budweiser, head ofVoith’s Mill Concept department.
Sensors record the water levels and a computer controls any additions. The resulting process water is polluted in varying degrees. It is purified with special“kidney” filters and then fed back into the process. “This enables us to determine
the quality of water we need for specific process steps. In theory, we could evenpurify the process water back into drinking water, regardless of how polluted it
may be,” states Budweiser.

Both economically and environmentallysound: The pilot plant in Duiven, theNetherlands, processes around 200,000
tons of paper sludge from several different paper factories every year. Valuable
minerals and electricity are recovered
using the CTC process.

The water treatment plant at Perlen was successfully upgraded and now biologically treated, highly purified water flows into the Reuss River, a waterway richwith fish that originates in the St. Gotthard Massif mountains. For each process
step, the water must be at a specific temperature. “In order to achieve optimum
quality on the paper machine – rapid drainage and high durability – we maintainthe paper temperature at Perlen between 45 and 50°C,” explains Oechsle. But
the water cannot be that warm when it enters the treatment system or it will
malfunction. To prevent that, a reverse current heat exchanger cools the water
beforehand and heats the freshwater being pumped back into the system. This
saves energy and water: In total, these measures have reduced water consumption by an average of 33% over the previous setup. The demands placed on thewater management requirements vary from one location to another. Some plants
are located in dry regions, where little water is available, such as Tunisia, whileplants located in population centers are not allowed to release any wastewaterand must maintain a closed system cycle.
Energy savings at Perlen are also exemplary. Compared to the retired PM 5 model,
the new PM 7 consumes 5% less electricity and produces 10% less thermal energy
per ton of paper manufactured. To achieve this, Voith engineers primarily optimized
the dryer section. This is the longest production section on the machine as well as
the biggest energy consumer, where paper races through a series of steam-heateddryer cylinders at 115 km/h.
Another component of the IEM strategy is CTC technology (Controlled Thermal
Conversion). It converts paper sludge, or the sludge created when pulping recycled paper, into salable mineral materials as well as thermal energy. The sludge

The Group

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Management Report

Consolidated Financial Statements“In theory, we could evenpurify the process waterback into drinking water.”
Ewald Budweiser, Head of Mill Concept, Voith Paperis generally incinerated – an inefficient method because of its low energy content.
Furthermore, a quarter of the sludge remains behind as ash after the incineration
process, requiring costly disposal.
The CTC technology was developed by experts at the MinPlus-CDEM Group in the
Netherlands, which Voith acquired in January 2011. The Dutch company worked on
the technology at a large pilot plant in Duiven – which had been pulping sludge fromseveral paper factories since 2007 – to make it functional on an industrial scale. “Themost crucial factor for developing the technology was the growing problem ofsludge disposal,” recalls Dr. Joep Biermanns, the primary developer of CTC. “It was
clear to us that a long-term solution could only be based on creating new value; we
recognized that the sludge’s value lay in the minerals it contains.”

25
million tonsof paper sludge is created when usedpaper is recycled. Half of the sludge ismade up of minerals and Voith has successfully developed a new process forrecovering these valuable components
for industrial reuse.

These minerals – kaolin and calcium carbonate – are added to the wood pulp toachieve specific paper properties. CTC helps them find a second life during therecycling process. For this, the paper sludge first needs to be dried mechanically as it is composed of half water and half solid material (which contains
around 50% minerals). Then it undergoes a precisely controlled thermal treatment at a temperature of 700 to 800°C. The kaolin transforms into metakaolin
and a portion of the carbonate is removed from the calcium carbonate, similar tothe process of lime or cement burning. CTC also creates steam that can be usedin the paper plant to dry paper or drive an electrical turbine. The minerals are
successfully used for industrial purposes.
A large market awaits this new technology: Over 25 million tons of paper sludge
are produced every year as a waste byproduct of the recycled paper pulping
process. Interested parties are already emerging in Europe and North America.
But this is about much more than the production of paper machines and Markus
Oechsle is already thinking ahead: “We have already mastered the complete
production process, so in the future we need to address the entire plant. The first
IEM project in Perlen is running successfully; we can now say that our
strategy can be implemented, we can compete with it.” //Voith Annual Report 2011 | 53

Braking brings progress
In Germany’s Ruhr region, 11 city buses equipped with Voith hybrid drive systems
have been in operation since the summer of 2011. They help regional transportation
to save fuel, while also playing an active role in climate protection.

Bochum,GermanyW

hen Michael Mutzenbach steps on the brake pedal, one of the things
he is doing, besides decelerating, is helping the environment. For thelast 12 months, the 53-year-old has been driving buses for the Bochum-Gelsenkirchener Strassenbahnen AG (BOGESTRA) transportation company, which are equipped with an advanced parallel hybrid drive system from
Voith. “We use up to 15% less fuel on our routes,” he explains.
The principle is actually quite simple. Whenever the driver slows the bus bybraking, the energy that is released is stored in devices known as “supercaps”
located on the vehicle’s roof. These high-performance capacitors are charged by
the braking energy and, in contrast to storage batteries, they are not subject towear and tear. When the bus accelerates again, it uses this energy to reach aspeed of around 15 km/h, before the diesel engine automatically kicks in to totake over.
In the summer of 2011, BOGESTRA placed the 11 buses complete with Voith
drive systems into service. After successfully completing initial test runs on
selected routes, the vehicles, from Polish manufacturer Solaris, are now operating on many routes. The transportation company is more than satisfied with its
experiences to date. “We’ve not had a single malfunction so far,” reports Jörg
Filter, who is head of the infrastructure and vehicles division at BOGESTRA.

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In fact, thanks to the supercaps, the diesel engine is protected somewhat, while
the capacitors themselves are entirely maintenance-free. To top it off, particulate
emmission is reduced by up to 90% compared to conventional diesel vehicles,
carbon dioxide emissions are cut by 30% and the discharge of nitrogen oxides
is lowered by almost 40%.
The decision was quickly made, when, in 2009, Voith proposed entering into acollaboration on hybrid technology with one of the biggest transportationcompanies in the Ruhr. “We really profited from our long-term relationship with
BOGESTRA,” says Helmut Zimmermann, project manager at Voith. Filter adds,“It was clear to us that if we wanted to test hybrid technology on a large scale, itwould be best to do it with Voith.”
The project was carried out as part of a program of public development schemes.
The state of North Rhine-Westphalia subsidized eight of the vehicles and Germany’s Federal Ministry of Transportation provided funding for the other three.
Jörg Filter is convinced that without such development funding, hybrid drives forcommercial vehicles would not currently be possible, and he is aware that it may
take a few more years until the systems really catch on. “Nevertheless, hybrid
drives are a transitory technology for which it’s critical to collect as much information as early as possible. In that way, we will be able to safeguard Voith’sleadership in innovation,” he says.
Of course, image plays a significant role, too. Almost every day, driver Michael
Mutzenbach is asked by passengers about his bus with the eye-catching green
design. A display behind the driver’s seat provides passengers with a “live” displayof the braking and accelerating energy flowing through the bus at any given time.
They also notice that the ride comfort is different – the hybrid buses run smoother and more silently. The fact that he’s sitting at the wheel of a high-tech machine
also increases Mutzenbach’s driving pleasure. Or, as he puts it simply, “I just likedriving these things.” //The green buses represent environmental
awareness. The new technology significantly
decreases particulate emissions and reducescarbon dioxide and nitrogen oxide pollution
by at least one third (far left).
Passengers enjoy the new ride comfort
and feel good about taking such a technologically advanced bus. The hybrid driveis also a sound investment in a positive
future for the next generation (left).

Voith Annual Report 2011 | 55

Humming quietly above streets
and traffic jams
Monorails are a mode of transport full of promise for the future.
Not only do they move people quickly and safely around metropolitan
areas, they also protect the environment.

56 | Voith Annual Report 2011

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India,
Saudi Arabia,
BrazilF

lying over the Brazilian metropolis of São Paulo, you truly get asense of the word ‘megacity.’
The plane soars over a seemingly never-ending sea of houses punctuatedby countless skyscrapers.
Home to over 10 million people, the city
stretches around 60 km north to southand 80 km east to west. Seven million
registered vehicles make their way
through permanently congested streets.
In 2014, the FIFA World Cup will bringeven more people to São Paulo, which
is one of the host cities for the event.
Relief, it is hoped, will come in the formof a planned 24-km-long monorail linewith 17 stops connecting the districts ofVila Prudente and Cidade Tiradentes.

Even oil-rich Arab states are investing insustainable, high-performance transportation. Monorails already move passengers smoothly around Dubai (left) andthey will also be used in the new King
Abdullah Economic City in Saudi Arabia.

Additional routes and new vehicles are needed to meet thegrowing need for mobility
worldwide. This is especiallytrue for major metropolitan areas in emerging markets like
India, China or Brazil, wheremonorail systems are excellently
suited to this purpose.

The monorail will transport 500,000
passengers a day, including soccer fansfrom around the world.
The city’s government is banking on a
proven and beneficial transportation
system in which monorail trains will
run on their own line on stilts highabove streets and buildings. These
raised lines save space and are particularly safe, eliminating the risk of accidents with other transportation.
Monorails cannot derail, either, while
the cars’ rubber wheels mean they run
particularly quietly.
These advantages benefit not justtransportation planners but millions ofpeople as well. “Every day, monorailsystems around the world transport
hundreds of thousands of passengers
safely and efficiently,” says Kim Pedersen, President of The Monorail Society. “If more were built, then a lot of
people would leave their cars at
home.” His vision may come true: New

58 | Voith Annual Report 2011

monorail lines are being planned inmany countries. Voith is very muchpart of this development of the futureof transportation. The new Expresso
Tiradentes monorail line in São Paulo,
for example, will feature 54 trains
based on the Bombardier Innovia
monorail trains. These use Voith technology in the form of automatic andclose coupling, while Voith will also
provide 380 cooling systems to protect all the important traction components from overheating.
In King Abdullah Economic City, an urban megaproject in Saudi Arabia,
monorails will ensure mobility. The
new city with the regal name (and a
projected population of two million by2020) is being built on the country’s
Red Sea coast. The first high-rises in
its six districts are already in place,with a seaport and an expanded industrial zone also under development.
The monorail will begin gliding throughthis new urban landscape at up to

The Group

Contributions
move

Management Report

Consolidated Financial Statements“Every day, monorail systems
around the world transport
hundreds of thousands ofpassengers safely and efficiently.”
Kim Pedersen, President of The Monorail Society

60 km/h in 2014. The city’s six districts are being built by a consortium
made up of Bombardier Transportation and Saudi Oger Limited. Voith willin turn provide automatic coupling,close coupling and cooling systems aswell as energy absorption elementswith climbing guards.

provide vehicle head modules for a
new type of monorail being developedby an Indian-Malay consortium. The
company will ship 30 of these modules to India for the first 15 trains,while the retractable automatic coupling will be supplemented by an additional 45 close couplers.

A much larger monorail system is currently being developed in Mumbai inorder to help ease the endless chaotic
traffic of India’s largest city. Its planners aim to make any destination in
the city reachable within one hour,which will require a 15-line network
spanning more than 100 km. The first
20-km section will link south Mumbai
with the eastern suburbs. Trains will
run on a six- to nine-minute schedule,
serving 18 stops and transporting up
to 600 passengers per journey. Whencomplete, the system will move over
2.2 million people a day through thesubcontinent’s most important port
city. Voith’s role in this project is to

By providing these products, Voith will
help further the 190-year history of themonorail, which began in 1821 when
British engineer Henry Robinson
Palmer received the patent for thetechnology. The first monorail line,
built for transporting bricks, went into
operation in 1825. Its cars were suspended from a single rail and pulled
along by horse. A new suspended car
system for transporting goods wasdeveloped in 1870 by entrepreneur
Eugen Langen, from Cologne. It was
the driving force behind the suspended monorail system built in Wuppertal
between 1897 and 1903, which is stillin operation today. //2.2
millionpeople will be transported every day by the
new monorail system in Mumbai, India.
The 100-km-long rail network will link
the suburbs with all inner-city destinations
and the four-car trains will run on a tightsix- to nine-minute schedule.

Voith Annual Report 2011 | 59

The Group

Contributions
inspire03

Management ReportinspireFor generations, Voith has inspired the world with its innovations,precision and reliability. And for over 100 years, Voith technology
has played a major role in the development of emerging nations
and the prosperity of modern societies. Around the globe, thecompany is committed to providing excellent working conditions
for its employees and sponsoring local projects where its
branches and production facilities are located.

60 | Voith Annual Report 2011

Consolidated Financial Statements

At home with Voith
São Paulo,
BrazilTrust, reliability and openness: These values create abond between Voith and thousands of its employees
worldwide. At many production locations, the company employs several family members, such as Jair
Pinheiro in São Paulo, seen here taking a break withhis son André. Voith encourages long-term relationships with its workers because people who apply all of
their knowledge and experience in serving a company
over the years are a source for sustained economic
success. As the saying goes at Voith: wherever Voithians feel at home, that’s where Voith is at home, too. //62 | Voith Annual Report 2011

The Group

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Consolidated Financial Statements

Moving ahead in China

Longtan,
China

Anyone who wants to get aroundquickly and easily in most Asian cities
usually climbs into one of the countless
motorized rickshaws. Also known as
tuk-tuks, they are an extremely popularand highly maneuverable means oftransport in streets that are often congested. While on assignment at thelarge-scale construction site of the newLongtan hydropower plant, Yu Wenchao, a sales engineer in Shanghai,
opted for the three-wheeled taxi. Like
most of the Voith employees in China,
he is a Chinese citizen – a trend showing that, in this country, Voith is truly
evolving into a Chinese company. //Voith Annual Report 2011 | 63

Excellent prospects for young talent
Understanding complex production processes, ensuring
quality, protecting the environment and preserving resources
are just a few of the major exciting challenges in today’s
working world. Here, Brazilian high school students listen
intently to a Voith employee in São Paulo during their tour ofa plant. Wearing protective eyewear is mandatory because,
at Voith, safety in the workplace is a top priority. The Formare Project (“formare” means “training” in Portuguese) is
Voith’s way of building a bridge between the academic
realm and the company. Teens from families who cannot
afford to finance vocational training for their children havean opportunity to complete a training program and later
obtain a skilled-labor job. //64 | Voith Annual Report 2011

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Voith Annual Report 2011 | 65

The Group

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Here for generations –Families at Voith
Voith is a company with a long tradition. The same can be said of several
families who have worked here for generations. They appreciate a job that is
enjoyable as well as offering security and great opportunities.

Heidenheim,
GermanyUntil a few decades ago, family discussions about the children’s choice ofprofession were fairly rare in Heidenheim: “You’re going to Voith,” was theoft-heard statement from many parents. The Kenntner family is no exception, and today, the third generation of Kenntners is working for the company. It
all started with Hermann Kenntner, who was a gardener for company owner Dr.
Hanns Voith in the late 1930s. After returning from the Second World War badly
injured, Kenntner found another position at Voith – as an office messenger. By
the time he retired in the 1980s, he had moved up to tool purchaser and amassed
42 years of service.
Kenntner had also persuaded his sons Rolf and Karl-Heinz of the value of training
at Voith. After receiving his degree in engineering, Karl-Heinz worked in stock
preparation and later in the paper machine engineering department. Rolf began
his apprenticeship in 1960 and by the time he retired in 2008, he had traveled
across most of the world. Having started out as an illustrator, he became anadvertising expert and was later responsible for Voith Paper’s exhibition appearances throughout the world. “He still loves to talk about those days,” says Rolf’sdaughter Silke.
At 27, she is the youngest Kenntner working at Voith. Originally, Silke wanted to bea social worker, but she soon found she could make a living helping others at
Voith. Today, she assists families who are preparing for long-term assignments
abroad. That she was able to reach this responsible position has a lot to do withthe support of her former boss and her continuing education, she says.

The Kenntner family’s hometown ofHeidenheim, Germany, is closely tied to
the family company Voith. For KarlHeinz (left) and Rolf (center), there wasnever a question of working anywhere
else. Rolf’s children Frank (right) andSilke (left) work here, too, while Frank’s
daughter Leonie (right) recently completed an internship at Voith.

“Performance is recognized at Voith,” says Silke’s older brother Frank, a trained
industrial mechanic. He has carried out maintenance operations throughout
Europe, the United States and as far away as Brazil and Chile, where he repaired
the function rolls of paper machines and also trained the local workers. He recalls
these experiences fondly: “The Voith colleagues always made me feel at home,even when I was far away.” For the last three years, he has headed the “SpareParts and Repairs Order Coordination” group for Voith Paper in Heidenheim,
Krefeld and Düren. This year, his 15-year-old daughter Leonie got the chance tocheck things out for herself in an internship at the company. Perhaps one day
soon there will be a fourth generation of Kenntners at Voith. //Voith Annual Report 2011 | 67São Paulo,
BrazilT

hey were both very proud, says Ivone Pardini as her husband nods inagreement. She is describing the moment that her son was hired for a
trainee position at Voith Paper, straight out of technical school at the ageof 17. The young man, like his father, is named Ricardo Pardini, and so everyone
knows him as Ricardo Filho – Ricardo Jr. The elder Ricardo has already served
38 years with the company. Now aged 25, technical draftsman Ricardo Filho is
the third generation of Pardinis to work at Voith in the hills northwest of São Paulo.
It all started with his grandfather Mauro in 1969. After a few months at the plant,
the trained boiler maker was selected for a three-month course at Voith headquarters in Heidenheim. He brought back with him a little language knowledge,
a lot of technical know-how and a major passion for his company, where hespent the remaining 19 years of his working life, much of it running the locksmith’s shop. “Voith was a great stroke of luck for our family,” explains Ricardo
Pardini. “My father and I always had stable jobs – a great privilege in our country.”

Ricardo Filho discusses a job on
the computer with his father
Ricardo Pardini. Ricardo Sr. wasable to continually improve his
qualifications at Voith in São Paulo.
Now, his son is on his way to becoming the first in his family tocomplete his engineering degree,
alongside his work at Voith.

Ricardo Pardini has been with Voith since 18 July 1973. At 14, he filed technicaldrawings in the design archive. Now and then, his boss let him draw something,too. A small sheet metal part was the first sketch by today’s project coordinatorin the engineering department. The happiness that Ricardo felt on his way towork each day was due not only to the trust placed in him by his boss, but also
to a young woman in the accounting department. Her name was Ivone and shesoon became Ricardo’s wife. Their son, Ricardo Filho, wants to be the first Pardini engineer at Voith. So, four days a week, after eight hours of design work on
the new ATMOS tissue machine, he drives to the engineering science building.
“My degree will take me a little longer this way, but the daily work experience
helps me a lot in my classes,” says Ricardo Filho happily. //The Group

Contributions
inspireManagement ReportAfter 43 years of work in York, in the eastern United States, Larry Krout canlook back on a long, full career. When he started out at 21 in production
on the East Berlin Road, he had just finished serving in the military. At thetime, his employer was called Allis-Chalmers. When he retired at the end of October, he left as a long-serving Voithian.
Larry Krout and 11 of his relatives – his father, uncle, brothers, cousins and nephews – have all worked at the turbine plant’s production facilities. Founded as S.
Morgan Smith, the plant became Allis-Chalmers, before Voith Hydro took over in1986 and made it the company’s North American headquarters. The Krouts havewitnessed all of these name changes and the developments associated with them.

Consolidated Financial Statements

Larry Krout (left) with two of his relatives,
Jeff Flaharty (center) and Keith Krout(right), who also work for Voith in York,
Pennsylvania. For decades, turbines forhydropower plants shaped Larry Krout’s
life. Now that he is retired, he still likes tobe near water – when he is fishing.

York,
USA

The 64-year-old Larry still remembers the old-fashioned machines on which hecompleted his training in 1968. In 1974, when he was promoted to foreman of themachinery department, automation had just arrived on the scene. In 1988, hechanged to the department where the gigantic turbine runners are first assembled, then dismantled, and finally loaded for transport. Larry Krout was there
when the largest turbines in history were assembled. These have been turningsince 1998 at the Yacyretá am Paraná dam and hydropower plant in South America. In 1995, he even spent seven weeks performing installation work in China.
As interesting as that was, he was always happy to come back home. The Krouts
are not the wandering type – they love their home in the rural heart of Pennsylvania. “At Voith, we always had steady work. That was crucial for me and myrelatives,” says Krout in praise of his employer. And something else is also important to the long-term Voithian: After 43 years at the plant, he is, of course, looking
forward to a quieter life, sleeping in and going fishing, but he will miss his colleagues: “I always had the good fortune of working with first-class people.” //Voith Annual Report 2011 | 69

The Group

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inspireSt. Pölten,
Austria

Management Report

Consolidated Financial StatementsI

t is a wide family tree with many branches. Comprising 18 people, this particular one was drawn up by Rudolf Mischak. Under his name is the number 42.
That is how many years he has “belonged to Voith,” as they say in St. Pölten,
one of the oldest cities in Austria. The other 17 relatives – fathers, uncles, cousins, in-laws – were or are still employed at Voith.
Voith has a long tradition in St. Pölten. The company has been manufacturing inthis small baroque city by the Westbahn (Western railway) – one of the country’s
central railway lines – since 1903. From here, the crown lands of the AustroHungarian monarchy were opened up at the beginning of the 20th century. This
was also where business with Europe behind the “Iron Curtain” was coordinatedafter the Second World War. Rudolf Mischak remembers traveling into Czechoslovakia on the Postbus from 1975-1980: “That was the fastest connection in
those days.” Cars had to wait for hours at the border on the way to the mechanical engineering exhibition in Brünn. The 57-year-old traveled to the East several
times while working for the advertising department.
Mischak was 15 years old and fresh from school when he applied for one of themost sought-after training positions at the largest company in St. Pölten. His training at the model joinery shop began in 1969. When a position opened up in theadvertising department in 1975, he presented his drawing portfolio and was soon
designing the local employee newsletter. This remains part of Mischak’s job
today and he still works in the local marketing department in St. Pölten. He alsoorganizes company events, such as the open house, last held in September thisyear. These events are like a small family reunion for Mischak, who has four relatives currently working among the thousand Voith employees.

In front of the Voith plant in St.
Pölten, Austria: Rudolf Mischak,Andreas Demelmaier, Daniela
Maleschek, Michael Nassion andFerdinand Demelmaier (left to right).
All are related to one anotherand all work for Voith, the largest
company in their town.

When Rudolf Mischak started out in the joiner’s shop, his great uncle Engelbert,
who began the family tradition in 1938, still worked there, along with his father
Rudolf and three uncles. All of them worked in the foundry producing cast parts
for turbines and paper machinery. Rudolf Mischak Sr. held the position of works
council president on the company’s board of directors for many years. For 45
years of his life, the elder Mischak “belonged to Voith” and his brothers served
44 and 39 years respectively at the plant. “The company is part of our family history”, says Rudolf Mischak today and adds, with a mischievous grin: “The firstword babies say in our family say is not ‘mama,’ it is ‘Voith.’” //Voith Annual Report 2011 | 71

72 | Voith Annual Report 2011

Financial Report 2011

Voith GmbH
Corporate Central Functions

Voith Hydro

Voith ­Industrial ­Services

Voith ­Paper

Voith ­Turbo

Sales: €1 228 million

Sales: €1 006 million

Sales: €1 827 million

Sales: €1 520 million

Orders received: €1 762 million

Orders received: €1 006 million

Orders received: €2 005 million

Orders received: €1 572 million

Employees: 5 345

Employees: 18 464

Employees: 9 937

Employees: 5 965

74 | Voith Annual Report 2011

The Group

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Management Report

76

I. Business and economic environment

83

II. Business development and earnings position of the Group92

III. Business development and earnings position of the Group Divisions

111

IV. Net assets and financial position of the Group115

V. Research and development

117

VI. Non-financial performance indicators

120

VII. Subsequent events

121

VIII. Risks and opportunities

128

IX. Forecast report

Voith Annual Report 2011 | 75

I. Business and economic environment
I.1. Group structure and business activities
Voith is a global technology group. With its broad portfolio ofsystems, products and industrial ser­vices, Voith serves fiveessential markets: energy, oil & gas, paper, raw materials
and transport & automotive. Voith operates in over 50 countries around the globe, maintaining an extensive network of
production, service and sales units on every continent on
the planet.
Voith GmbH, the Group’s holding company, is headquartered in Heidenheim at the river Brenz/Germany. Voith
GmbH is 100% family owned. It is an operative management
holding whose Board of Management is directly responsible for strategy in the Voith Group and thus for controlling
the Company. The advisory and supervisory bodies are theShareholder Committee and the Supervisory Board. The latter is also in charge of monitoring management.

The operating business is bundled in four Group Divisions:
Voith Hydro, Voith ­Industrial ­S ervices, Voith ­P aper andVoith T­ urbo. In each Group Division, a legally independent
head organization oversees the activities of the Division’s
subsidiaries.
Corporate control is anchored in a value-based management
philosophy that uses the return on capital employed (ROCE)
as the key measure of the Company’s earnings power. Thisratio is calculated from the operational result before nonrecurring result and the capital employed. In addition to thevalue-based ROCE ratio, operating net cash flow was implemented as a second central indicator in the past fiscal year.
This figure serves to assess the Group’s ability to record
sufficient cash flows. All figures and reports submitted to theGroup’s Board of Management are based on these management ratios.

Organizational structure of the Voith Group
Voith GmbH

Voith Hydro

76 | Voith Annual Report 2011

Voith ­­Industrial­Services

Voith ­Paper

Voith ­Turbo

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Contributions

Management Report

Consolidated Financial Statements

I.2. Values, guidelines, compliance
Voith—Engineered Reliability

Compliance—our values are binding

All of our actions are based on trust. This maxim is supported and supplemented by our values of professionalism,
respect for the individual, colleagueship, openness, reliability and integrity. We summarize our canon of values in our
slogan “Voith—Engineered Reliability”. This encompasses
our claim of providing reliable and high-quality technology
on a sustainable basis and, at the same time, of always
acting fairly, openly and with integrity in dealings with our
employees, partners and customers. These values and theguidelines derived from them allow us to ensure that Voith
acts according to the same business principles and adopts
the same philosophy and umbrella brand all over the world.
By living these values in practice, we marry the culture of afamily-owned business with that of a global group.

The Voith Code of Conduct was introduced in 2009 fromthe legacy of previous Group guidelines and our culture of
integrity that was formulated as a principle of business conduct back in 1927. The Code of Conduct regulates how wedeal with customers and business partners as well as how
we interact with each other within the Company. Its aim is to
put reliability, integrity and transparency at the heart of ourcommunications and all of our contractual relationships. It isbased on compliance with the law and with all internal company regulations. The Voith Code of Conduct provides clear
guidance and has binding effect for all of our employees asa standard that applies globally. Punitive action will be takenin the case of any breaches of the Code of Conduct.

Voith’s values are the element that connects the owner family with management, employees, customers and partners.
Voith sees itself as a true interest group based on the ideasof performance and mutual respect. We interact closelywith the Voith family, which owns the Company. In regard
to our employees, we focus on long-term employment relationships and place a strong emphasis on offering themchallenging tasks and prospects for their personal development. We have long-term partnerships with our business
partners, customers and suppliers that often span several
generations. Remaining true to our values, we also seek out
open dialog with important stakeholders and target groups:
financial ser­vices providers and investors, universities andresearch institutes, NGOs and interested members of thegeneral public.

The main principles addressed by the Voith Code of Conduct
are as follows:
Compliance with the rules of fair competition
No agreements that contravene competition law• No corruption or bribery: no offering and granting or demanding and accepting unacceptable benefits• Transparency of donations and sponsorship• Maintaining own and respecting third-party company andpatent secrets• No undue preferential treatment of suppliers and service
providers••

The wording of this Code of Conduct is available on theInternet at: http://voith.com/compliance.htm.

Voith Annual Report 2011 | 77

I.3. Group strategy
The Compliance program including related training measures is coordinated and developed by the Compliance Committee, which reports directly to the CEO. The committee
comprises the Head of the Corporate Office (Chairperson),the Head of Corporate Legal Affairs, the Head of Corporate
HR Management and the Head of Corporate Internal Audit.
The compliance officers in the individual Group Divisions are
responsible for implementing the Code of Conduct in theirrespective areas of responsibility and are also important contact persons for all issues relating to compliance. However,ultimately it is the responsibility of each individual employee
to act in accordance with our corporate values. In order toraise awareness of this, we ask our executives to act asrole models and also provide executives and employeeswith training and information on topics such as corruption,competition issues and export controls. The employees andexecutives can also get support in their day-to-day work bycontacting the Compliance Committee or the Help Desk on
Voith’s intranet. At the beginning of the 2011/12 fiscal year,
all Voith employees will also have access to an e-learning
program that they can use to keep up to date on complianceissues at regular intervals.

Stability and independence as a family-owned company
As one of Europe’s major family enterprises, Voith GmbHbenefits from the stability and long-term view taken by its
shareholders. The financial independence that this offers
provides the economic foundations from which Voith canoperate. The self-professed objective of the Group’s Boardof Management, Supervisory Board and shareholders is topass Voith on to the next generation as a leading technology
firm with enhanced lasting strength. This also explains why
the Group’s strategy is geared to preserving business agility by ensuring that the Company continues to be focusedon sustainable profitable growth. The overriding goal thatguides our actions is to develop and offer solutions for customers that make a contribution to society and to protecting
the environment and that provide our employees with attractive and secure jobs all over the world.
Sustainable profitable growth
Our successful development is based on our excellently
trained employees, our diversified product portfolio, ourinternational gearing and our consistent investment in research and development as well as our stable ownership
structure.
A balanced product portfolio
Out of its original core business, mechanical and plant engineering, in recent years Voith has systematically expanded
its product and service portfolio to gain a firm foothold in its
core markets of energy, oil & gas, paper, raw materials andtransport & automotive. In this respect it has proved possible to spread sales fairly evenly between the Group Divisions. Although the share of sales contributed by each line

78 | Voith Annual Report 2011

The Group

Contributions

Management Reportof business varies from year to year depending on generalindustry performance, all four Group Divisions now accountfor a substantial share of Group sales.
Our broad strategic positioning as a diversified mixed-industry group acts as a buffer against the majority of economic
risks. Because the individual markets follow different economic cycles, a fall in sales on the markets such as oil & gas,
raw materials and energy that traditionally respond more
slowly to economic trends is offset by growth on the fastresponding paper and transport & automotive markets. This
diversification strategy was put to the test during the economic crisis in 2008 and 2009: we were one of the few companies to grow sales and earnings even during the crisis.
An international gearing and local roots
Voith has a long history of international activity. At a time
when most German companies were only focusing on thedomestic market, Voith was already delivering its products
all over the world. At the beginning of the 20th century, wewere already building turbines for projects in the USA andAsia and selling paper machines to what was then AustroHungary and to Russia and Sweden. This makes Voith oneof Germany’s pioneers in foreign trade. The company began
establishing production facilities in other countries at a very
early stage in an endeavor to establish greater proximity to
the customer and to shorten transport routes. Voith’s first
production location outside of Germany was opened in 1903
in St. Pölten near Vienna, while the first manufacturing site
outside of Europe was set up in Brazil in 1964. Other international locations followed, for example in the USA in theearly 1980s. Voith now has its own companies in more than
50 countries. More and more of these are in Asia, for example in India (since the 1960s) and in China (since the 1990s).

Consolidated Financial Statements

Today, around one-quarter of consolidated sales are generated in the Americas, Asia and Europe excluding Germany
respectively, while Germany accounts for more than 20%.
Voith has made it its goal to expand its presence further andset down roots in its international markets that are just as
strong as in Germany today. This is why we see ourselves
as a local actor in the individual locations, with its productdevelopment, engineering, production and industrial ser­vices
making major contributions to the development of each national economy. Our actions center on offering our customers the perfect solutions for the challenges that each of themfaces, regardless of whether they are in countries focusing
on developing infrastructures or in highly-developed industrial countries where there is a demand for intelligent technologies for optimum efficiency in business. The key to achieving
this aim lies in local management and stuff who understandmarket circumstances and the mentality as well as the needsof the customers because it is part of that culture.
Technical innovation through research anddevelopment
Voith’s position on the global market is based above allon its technical innovative power. Since the Company was
founded, our engineers have been writing history with theirinventions in the field of technology. Voith currently has morethan 11 000 active patents around the world, and this figure
increases by roughly 400 each year. There is no contradiction between a pioneering spirit on the one hand and permanence on the other. This is why we invest in research anddevelopment for new products even and specifically in difficult economic times. More than €250 million was invested ineach of the past three years, even throughout the economiccrisis. Detailed information on the current focus areas of our
R&D activities is provided in Section V of this management
report under “Research and development”.

Voith Annual Report 2011 | 79

I.4. Macroeconomic situation
Megatrends point the way
Climate change and an increasing scarcity of resources,
globalization and mobility, urbanization and demographic
change—these are the megatrends of the present era. Whilethese developments can be seen as risks for business insome cases, they constitute major opportunities for companies like Voith. However, the Company must observe socialand ecological changes and create space for new ideas anddevelopments. In this way, it can come up with timely solutions to upcoming challenges.
Our success, particularly in times of crisis, is based on a
far-sighted positioning on the growth markets and the development of an innovative product portfolio. Our products
provide answers to urgent questions of our time, such as
CO2-free energy generation, mobility in megacities and production methods that use as few resources as possible.

Economic recovery slowed by shocks andstructural problems
In the 2010/11 fiscal year the recovery of the global economy that had begun to take root in the previous year initially continued, as in prior periods, at differing paces in the
different regions around the world. However, the year 2011
was characterized by a range of dramatic events. One such
event was the earthquake disaster in Japan, which impacted
on the supply chains of some industries, with the automotive industry in particular being hit. This did not result in any
major economic setback for the Voith Group as a whole. The
global economy is struggling due to unresolved structuralproblems that result in uncertainty on the markets. These
problems include national debt levels in the euro zone andin the USA, high unemployment in the USA and in some
euro-zone countries, and increased inflationary tendencies
around the globe, particularly in some important emerging
markets such as India and China. The general uncertainty
resulted in turbulence on the financial markets, which has
been reflected in a sharp fall in share prices since mid-July
as well as very volatile prices and could also have an effecton some of Voith’s customers under certain circumstances.
Since the second half of the 2010/11 fiscal year, numerous
economic indicators such as purchasing managers’ indices,
consumer surveys and the IFO business index are pointing
toward a dip in the global economy. Based on these data,
we expect weaker growth and assume that the risks for the
global economy have increased overall. Most economic institutes share this view. For example, the International Monetary Fund (IMF) corrected its forecasts downward in September 2011 and is now predicting a global growth rate ofjust 4.0% for the whole of 2011. Growth in the industrializedcountries is expected to make a weak contribution, at just
1.6% in 2011 based on IMF forecasts after more than 3% in
2010. The USA’s GDP is expected to grow by a mere 1.5%
in 2011, while an increase of 1.6% is reckoned with for the
euro zone. Germany is continuing to benefit more than most80 | Voith Annual Report 2011

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Consolidated Financial Statements

industrialized countries from the demand for capital goodsin the emerging markets. With forecast growth of 2.7% in
2011, it is the exception amongst Europe’s major national
economies. The emerging and developing economies are
growing at a much faster rate than the industrialized nations, although growth has also lessened there during theyear under review. The IMF is forecasting average growth of
6.4% for the emerging markets in 2011. The Chinese economy alone is likely to expand by 9.5% over the whole of 2011.

tion, investments in modernization and increased efficiency
as well as in reducing the CO2 emissions of existing power
plants are also expected. By contrast, the developing andemerging economies—with China at the forefront—continue
to focus more on conventional than on renewable energy
sources in their exceptionally fast increase in capacities.
Seen globally, the share of renewables in electricity generation is set to increase. This will also raise the potential forpumped storage power plants.

Voith markets benefit from economic recovery in 2010/11

Oil & gas: still major energy sources
The oil & gas market includes both the extraction of crude
oil and natural gas and the processing, transport and marketing of these fossil fuels. Voith ­Turbo and Voith ­Industrial­S ervices supply the market with specialized products andser­vices. Demand for oil and gas is closely tied to the development of the economy, albeit with a certain time lag. After
falling to its lowest level for many years in 2009, worldwide
demand for oil and gas has veered upwards again since thespring of 2010 and in Voith’s 2010/11 fiscal year. The growing demand for the end product went hand in hand with arise in investments in equipment and in spending for maintenance measures for oil-drilling platforms and refineries.
Oil and gas will continue to be the world’s most commonlyused energy source in the next 25 years. Demand for fossil fuels will rise noticeably in the developing and emerging economies, in particular in China, while demand in theOECD countries will tend to drop off. The strongest-growing
providers of oil and gas will be the developing countries—
headed up by Brazil—followed by North America and certain states of the former Soviet Union. By contrast, western
Europe will become less important as a provider.

All five of Voith’s markets were buoyed by the economic
recovery in the year under review. Not only the markets that
respond more quickly to economic trends (paper and transport & automotive) but also the slow-responding markets(energy, oil & gas and raw materials) are on a clear path for
growth.
Energy: demand for electricity rises further
The energy market encompasses the conversion of various
primary energy sources such as coal, gas, wind or hydropower into electricity and alternative forms of storage. This
market is served by the Group Divisions Voith Hydro, Voith­Industrial S­ ervices and Voith T­ urbo. The higher global economic output led to a rise in demand for energy in the year
under review. The thermal power station segment is backon a course for growth in 2011 after delays in the awardingof major projects resulted in a slight drop in 2010. After asideways movement in the previous year, the hydro power
market is also starting to show signs of recovery in the year
under review. Other renewable energy sources such as solar
power and wind power continued to develop positively. In
the medium and long term, growth prospects on the overall energy market are positive owing to growing demandaround the world for more electricity—especially in theworld’s densely populated national economies. In the industrialized countries, regenerative energy sources are currently
the strongest-growing forms of energy generation. In addi-­ aper: return to high pre-crisis levels
P
The paper market is served by the Group Division Voith­­Paper. After the collapse in 2008 and 2009 on account of
the economic crisis, the paper market recovered very well in
2010, thanks primarily to catch-up investment measures. In
regional terms, the strongest growth was recorded in South

Voith Annual Report 2011 | 81

America and in Asia—particularly in China. The growth rates
were influenced by the high demand for packaging and tissue paper. Per capita consumption of all types of paper inthe emerging countries continues to be significantly lower
than the average for all industrialized countries. This means
that, in the medium and long term, key stimulus for thepaper market will continue to emanate from these growth
regions (particularly China and India). At the same time, demand is growing in all markets for new technologies thatwill make the paper production process more efficient while
consuming fewer resources.
Raw materials: emerging markets as a growth driver
We define raw materials as valuable minerals extracted fromthe earth, such as coal, copper and iron ore, as well asother geological materials such as stone and sediment usedas building materials. The raw materials oil and gas are accounted for separately as part of the oil & gas market. The
segments of the raw materials market that are of relevancefor Voith are the mining sector and the steel industry. Bothare supplied by the Group Division Voith ­Turbo. After the
raw materials boom came to an abrupt end in 2009, themarket has picked up again markedly since 2010. The
growth drivers included the rise in industrial production as
well as increased activity in the construction sector. The
growth and industrialization process in the emerging anddeveloping countries reversed the long-term trend of a falling ratio of raw materials in relation to GDP. In particular,
there was a massive increase in China’s share in the global
consumption of raw materials. Investments in the construction sector experienced double-digit percentage growth in2011, but are not expected to match the pre-crisis level
before 2013. Steel production, which had fallen sharply in2009 on account of the recession, has been climbing at afaster pace than economic growth since 2010.

82 | Voith Annual Report 2011

Transport & automotive: market segments growat different rates
The transport and automotive market includes diverse
transport routes and the means of transport used on themfor moving people and goods. This heterogeneous market
is served by two Voith Group Divisions: Voith ­Turbo supplies products and systems for rail transport, commercial
vehicles and ships. In addition to automobile manufacturers
and automotive suppliers, Voith ­Industrial ­S ervices serves
the rail segment and the aviation sector. After the dramatic
collapse in 2009, the car and commercial vehicle industry experienced record sales in 2010 and 2011, buoyed
by strong demand in Asia. In recent years the rail sector
has experienced a boom triggered chiefly by the projectto expand the high-speed rail system in China. The entire
project has been under review since mid-2011 with the aimof improving quality assurance, and this will cause a slowdown in global market growth. The generally positive trend
in the rail segment will continue in future, however, driven by
government infrastructure projects intended to facilitate themobility of people. The marine segment suffered right into
Voith’s 2009/10 fiscal year from a huge drop in freight traffic,
and showed first slight signs of recovery in the year underreview. The market for engineering ser­vices for the aviationindustry was shaped by a drop in the volume of projects
awarded as well as consolidation of the EADS suppliers.

The Group

Contributions

Management Report

Consolidated Financial Statements

II. Business development andearnings position of the Group
II.1. Overall view
Record year for Voith
Voith can look back on a very successful fiscal year in which
all of the key indicators were increased. All Group Divisions
experienced growth, with sales rising by 8% at group level.
With a 20% increase in orders received, we surpassed therecord figure of the boom year 2007/08. Our orders on handexceeded the €6 billion threshold for the first time in the
Company’s history. In line with our target—sustainable profitable growth—we improved our profitability further. Our operational result before non-recurring result rose at a higher
rate than sales, at 18%. The net income for the year greweven more substantially, by 64%.

The results in the year under review are particularly pleasing
in light of the strong previous-year figures: not only did Voith
come through the recession without a collapse in sales or
results, it exhibited continuous growth in the difficult phasefor the global economy. This is reflected in the accumulated
rise in group sales in the past three years by €685 million.
The positive business development of recent years is theresult among other things of the Group’s successful portfolio strategy. It was this strategy that made it possible tocompensate for opposing developments on our five coremarkets, which are subject to different business cycles. The
Company also benefited from the consistent continuationof its internationalization process, which began at an earlystage. This allowed us to avail ourselves of the opportunities
offered by the growth dynamics on the emerging markets,
especially in China, India and Brazil.

Voith Annual Report 2011 | 83II.2. Sales
8% growth from an already-high level

Sales Groupin € millions

In the 2010/11 fiscal year, the Voith Group grew sales by
8% to €5 594 million (previous year: €5 198 million). All fourGroup Divisions experienced growth, with the highest growthof 13% at Voith T­ urbo (for the sales development of the individual Group Divisions, see Section III of this management
report on “Business development and earnings position of
the Group Divisions”).
Each of the four Group Divisions contributed between 18%(Voith ­Industrial ­Services) and 33% (Voith ­Paper) to Groupsales. Sales in the Group show a fairly even geographicaldistribution, reflecting Voith’s balanced business presencein the world’s major economic regions. In the 2010/11 fiscal year, roughly a quarter of total sales came from theAmericas, Asia, Germany, and Europe excluding Germany,
respectively. Voith responded at an early stage to the rising demand from countries such as China, India and Brazil,
contributes actively to value creation in these economies andparticipates in the rapid growth in these regions. The shareof sales achieved in Asia has risen again, to 27% (previous
year: 25%). 27% of Group sales also originate in the regionof Europe excluding Germany (previous year: 29%). The
Americas region contributed 23% to Group sales (previous
year: 24%) and Germany 21% (previous year: 20%).

5 198

2008/09

2009/105 594

2010/11

Sales total €5 594 million
by Group Division
Voith ­Turbo
27%

Voith Hydro
22%

Voith ­Paper
33%

Voith ­­Industrial­Services18%

by region
Americas
23%

Asia
27%

84 | Voith Annual Report 2011

5 085

Germany
21%
Europeexcluding Germany
27%
Other
2%

The Group

Contributions

Consolidated Financial Statements

Management Report

II.3. Orders Received
20% rise in orders received

Orders received Groupin € millions

In the 2010/11 fiscal year, the Voith Group received €6 358
million in new orders, exceeding the previous year’s figure(€5 300 million) by 20%. Orders on hand rose by €608 million to €6 044 million (previous year: €5 436 million) as at theend of the fiscal year, September 30, 2011.
Voith Hydro recorded the strongest growth of the four Group
Divisions. At Voith Hydro orders received were up by 81%
thanks to large-scale projects, in particular winning the Belo
Monte project in Brazil for the world’s third-largest hydropower plant as well as a range of other major projects in a
lot of different countries. However, the resulting unusuallyhigh volume of orders received cannot be rolled forward forthe coming years.

6 358
4 958

2008/095 300

2009/102010/11

Orders on hand Groupin € millions
5 045

2008/09

6 044

5 436

2009/102010/11

Voith Annual Report 2011 | 85

Voith P­ aper was still the Group Division with the largest shareof orders received (31%, previous year: 38%). Voith Hydro(previous year: 18%) contributed 28%, while Voith ­Turbo
accounted for 25% (previous year: 26%). Voith ­Industrial­Services made a contribution of 16% (previous year: 18%).
There is a relatively healthy balance in the regional distribution of orders received. Orders from the Americas as a wholeclimbed to 30% (previous year: 25%), chiefly because of verylarge-scale hydro power projects in Brazil. After 30% in theprevious year, 21% of orders were sourced in Asia in theyear under review. Europe excluding Germany accounted for
28% of orders (previous year: 24%), and Germany contributed 19% (previous year: 20%) of the Group’s orders received.

Orders received total €6 358 million
by Group Division
Voith ­Turbo
25%

Voith Hydro
28%

Voith ­Paper
31%

Voith ­­Industrial­Services16%

by region
Americas
30%

Asia
21%

86 | Voith Annual Report 2011

Germany
19%
Europeexcluding Germany
28%
Other
2%

The Group

Contributions

Consolidated Financial Statements

Management Report

II.4. Capacity utilization
Noticeable increase in headcountEmployees Groupas at 30 September

937 new jobs were created throughout the Group in the
2010/11 fiscal year. The total number of employees in theVoith Group (not including apprentices) rose from 39 754 in
the previous year to 40 691 as at September 30, 2011. This
represents an increase of 2%.
Looking at the divisions, the following picture emerges: Voith
Hydro (+107 employees), Voith ­Paper (+584) and Voith ­Turbo(+543) all saw sharp rises in personnel capacities in the year
under review. At Voith I­ndustrial S­ ervices, by contrast, in net
terms 2% of jobs (-406) were cut, with decreases in Northand South America being partially offset by increases in Germany and Asia.

39 32939 75440 691

2008/09

2009/102010/11

Employees total 40 691

As a provider of industrial ser­vices, Voith ­Industrial S­ ervices
accounts for 46% of the total headcount (previous year:48%), making it the largest Group Division in terms of staff
numbers. 18 464 people were working there at the end of
the year under review. With 9 937 people, Voith ­Paper employed 23% of the Group’s headcount as at September 30,
2011, unchanged from the previous year. With 5 965 staff
members, Voith T­ urbo made up 15% (previous year: 14%) of
the Group’s headcount. Voith Hydro employed 5 345 people,
and thus a share of 13% (previous year: 13%) of the Group’s
entire workforce.
Regarding the trend in capacity utilization in the divisions,see also Section III “Business development and earnings
position of the Group Divisions”.

by Group Division
Voith ­Turbo
15%
Voith ­Paper
23%
Other
3%

Voith Hydro
13%
Voith ­­Industrial­Services46%

by region

Americas
27%
Asia
11%

Germany
43%
Europeexcluding Germany
18%
Other
1%

Voith Annual Report 2011 | 87

Approximately 650 new jobs in Germany andAsia respectively
The new capacities were increased in a targeted manner andtake into account the individual requirements of the Group
Divisions in the respective regions. The Group had 17 429
employees in Germany at the end of the fiscal year. This
constitutes an increase of 653 or 4% in comparison to September 30, 2010 (16 776). All four divisions contributed tothis growth.
We hired 75 new employees in the Europe excluding Germany region. As at the fiscal year-end, we had 7 462 employees
in this region (previous year: 7 387).
All Group Divisions significantly expanded their personnel
capacities in Asia, where a total of 656 new employees were
hired. Thus the number of Voith employees in this highgrowth region increased to 4 557 (previous year: 3 901).
Employee numbers were down by 470 in the Americas, with
11 030 employees in total at the end of the fiscal year (previous year: 11 500). In particular, headcount was reduced inthis region at the Voith I­ndustrial S­ ervices Group Division,
while the other divisions increased jobs in South America,
particularly Voith P­ aper.
As a result, the year-on-year regional distribution is only marginally changed. Germany continues to be where Voith has
the most employees, with a share of 43% of the Group’s
total workforce (previous year: 42%). The Americas were still
the second most important region with a 27% share (previous year: 29%). We employed 18% of our staff members in
the Europe excluding Germany region (previous year: 19%).
At 11% (previous year: 10%), Asia accounted for the smallest
portion of the Group’s headcount, but this share is growing.

88 | Voith Annual Report 2011

Continued strong ethic for basic and further training
We once again invested substantially in training and maintained the number of apprentices as well as the quality of
training. At the close of the 2010/11 fiscal year, 1 246 apprentices and students were employed at Voith locations
around the globe (previous year: 1 232). Once again, we
trained considerably more apprentices than we needed forour own purposes, thus giving many young people goodprospects for future employment. In view of the mediumterm shortage of suitably qualified specialists to be expectedin Germany owing to demographic trends, we see this as aninvestment in our future as well as Germany’s future as anindustrial location.
Because we strive for long-term employment relationships,
we consider it important for our employees to be open tolife-long learning. We offer various internal training measuresand also work together with external educational institutions.
In the year under review, more than 2 100 employees took
part in the Group’s standardized internal training programs
worldwide that accompany professional or management career paths. There were also various external seminars andinternal training measures that were selected locally according to specific requirements at individual entities.
Significant rise in personnel requirements inmedium term
We increased personnel levels in response to the positive
order situation. This meant that HR operations in the year
under review naturally focused on attracting, selecting andhiring new staff.
Our personnel requirements will rise considerably in themedium term. The demographic shift on the European andNorth American market will result in a large number of employees leaving the Group by the end of the decade, combined with a diminishing number of graduates who have finished their training. We will increase our staff numbers substantially in the growth markets of Asia in order to meet ourThe Group

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Management Report

growth targets. At the same time, competition for suitableprofessionals and executives is intensifying in those areas.
The challenge of continuing to find a sufficient number ofqualified staff for Voith is thus the key topic for the coming
years.
Greater emphasis on personnel marketing activities
In light of this situation, personnel marketing will have an
important role to play. This includes all measures aimed atraising the awareness of Voith as a strong brand on the labormarket and positioning the Company as an attractive employer—a task that concerns all major Voith locations worldwide. As far as university marketing is concerned, since thisfiscal year we have been focusing on a small number of universities, handpicked according to clear criteria, with which
we have stepped up our cooperation. Examples of specificprojects include projects to accompany doctorates and carryout tutoring programs. Voith not only has its own employees
on site, but also invites the students to visit major locations
and to use the trip to experience the complex production
processes firsthand. Going forward, we want to implement
tried-and-tested employer branding strategies systematicallyat our large international locations, too.
In the year under review, we gave more than 270 interns
within the Group the possibility to familiarize themselves withwork in an international technology group and to test theirskills in a day-to-day work environment. In addition to theoption to join the Company as a direct entry employee, we
also offer graduates attractive traineeships in technical andcommercial professions. We have continued the long-standing close cooperation with the universities of cooperativeeducation (“Duale Hochschulen”, formerly “Berufsakademien”) in Germany.

Consolidated Financial Statements

to this target group. One particularly noteworthy measure inthis respect was the participation of the Salzgitter locationin the summer of 2011 at IdeenExpo, the largest hands-on
event for natural sciences and technology in Germany. In
the year under review, more than 80 grammar-school attendees made use of the chance to familiarize themselveswith a technical or commercial profession at Voith by doing
an internship for school pupils.
HR information management to be optimized
In light of globalization and the demographic development,
our corporate growth targets will pose major challenges for
the HR department. High-performance HR information systems were identified as important strategic pillars for Voith’s
HR work, providing a key basis for functioning processes
and well-founded decisions. The 2010/11 fiscal year marked
the launch of a range of activities and projects geared towards gathering, processing and making available HR-relevant data. The first project stage was defined as analysis,
which is to be completed in the spring of 2012. The aim is tobe able to provide HR ser­vices at a local, regional or glob­allevel in future, depending on requirements. As a result, theefficiency and effectiveness of the HR processes is to beraised Group-wide—from recruiting new employees, payroll
accounting, time management and training systems to personnel development and succession planning. In particular
there are plans to support systematic talent managementthat will help to advance existing employees in their careerand secure a sufficient number of suitable new employees
for the long term.

In order to continue to be able to hire a sufficient numberof new employees and graduates in future, we are alreadydirecting our personnel marketing activities at school children who are at the stage of deciding what professional paththey wish to pursue. Various initiatives and cooperations ofindividual company locations with local schools are geared

Voith Annual Report 2011 | 89II.5. Results
Net income at an outstanding level
The highly successful 2010/11 fiscal year was reflected in the
excellent development of earnings. Net income for the year
rose by 64% to €200 million (previous year: €121 million).
The increase in total output to €5 621 million (previous year:€5 193 million, +8%) was largely the result of the rise in sales
already described. In addition, the increase in changes ininventories and own work capitalized of €32 million, due tothe very good order situation, contributed to the increase intotal output.
Cost of material increased to €2 309 million (previous year:€2 081 million, +11%) during the year under review. The
material ratio (the relationship between cost of material andtotal output) increased slightly to 41.1% (previous year:
40.1%). Higher material purchase prices and the development in changes in inventories led to an increase in the material ratio.
Personnel expenses rose by €132 million or 7% to €1 983
million (previous year: €1 851 million). The relationship between personnel expenses and total output fell slightly to
35.3% (previous year: 35.7%) despite the absolute increasein headcount and moderate increases in employee salaries.

90 | Voith Annual Report 2011

Depreciation and amortization increased by €26 million to€189 million (previous year: €163 million). This increase was
essentially due to a higher level of depreciation and amortization on account of the high level of capital expenditure in
the past and impairment losses recognized on development
costs and on property, plant and equipment.
The operational result before non-recurring result rose by
18% to €416 million (previous year: €353 million). Return onsales rose to 7.4% (previous year: 6.8%).
The non-recurring result of €-14 million (previous year: €-13
million) contains measures introduced during the year underreview to adjust staffing and structures. These affect theVoith I­ndustrial S­ ervices and Voith T­ urbo Group Divisions.
Voith I­ndustrial S­ ervices contributed €-10 million, primarily
due to adjustments within the scope of restructuring theGroup Division as well as the associated sale of subsidiaries. Voith ­Turbo contributed €-4 million to the non-recurring
result due to planned restructuring activities.

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Consolidated Financial Statements

Management Report

Interest income fell by €16 million to €19 million (previous
year: €35 million). The lower level of cash and cash equivalents, particularly in countries with a high interest level, as
well as the reduction in securities (reversal of multi-asset
fund in the second half of the previous year) also played arole here. Interest expenses came to €-102 million (previous year: €-105 million). The reduction of financial liabilities(repayment of a bond issued on the capital market of €145
million and a note loan of €148 million) was implemented
only in the second half of the fiscal year. Consequently, thisdid not result in a greater decrease in interest expenses.
The other financial result came to €-2 million (previous year:€-39 million). In the previous-year period, there was a writedown of €-39 million recognized in profit or loss on marketable securities held as financial assets.

Operational result before non-recurring result Groupin € millions
416
324

2008/09353

2009/102010/11Net income Groupin € millions
200

The other items in the consolidated statement of incomechanged in line with the pattern of business development.

121
77

2008/09

2009/102010/11

Voith Annual Report 2011 | 91

III. Business development and earnings positionof the Group Divisions
III.1. Voith Hydro
Exceptionally strong new business
Full-line supplier for hydro power plants
For more than 100 years, hydro power plants throughout theworld have been fitted with turbines and their mechanicalequipment from Heidenheim. As a full-line supplier for hydropower plants, today Voith Hydro is one of the world’s leadingindustrial partners for power plant operators. This applies
both to the field of power generation—using traditional hydropower as well as ocean energy—and to the area of storing
electric power.
Voith Hydro’s portfolio of products and ser­vices covers theentire life cycle of large and small hydro plants and includes
all major components: generators, turbines, pumps and automation systems (monitoring and control systems). lt also
extends to the after-market business, which includes the
supply of spare parts and maintenance ser­vices. In the fieldof ocean energies Voith Hydro develops innovative technologies for utilizing tidal currents and waves.
Palpable recovery on the hydro power market
The global hydro market developed very positively in the year
under review. The development in the large hydro segment
hinges on the realization of individual major infrastructure
projects that are usually dependent on decision-making
processes spanning several years. In the 2009/10 fiscal year
there were no orders at all for large projects in Brazil, a traditionally strong sales region. However, this segment developed unusually well during the year under review. A decisive
contribution was made by Belo Monte, a single major project

92 | Voith Annual Report 2011

with an installed capacity of more than 11 gigawatts. Thanks
to another large-scale project, Teles Pires, Brazil was by far
the largest hydro power market in the year under review.
In the small hydro segment (power plants with less than 30
megawatts capacity), where the percentage growth is expected to be stronger in the medium term, the recovery of
the previous year was interrupted. On the mature markets,
in Europe and NAFTA, the service business is gaining groundbecause of the increasing age of the equipment.
Increased sales
In the 2010/11 fiscal year, Voith Hydro increased its sales
by 6% to €1 228 million (previous year: €1 158 million). This
constitutes a very strong sales development in light of thelower number of orders received in the previous year. Thisdevelopment was recorded thanks to the high order volumes
in recent years, the effect of which on sales was delayedowing to long project and production lead times.
Most sales were recorded in emerging economies. The
strongest region in the year under review was still SouthAmerica, driven by exceptionally large projects in Brazil.
As in the previous fiscal year, significant portions of total
sales came from Europe excluding Germany and from Asia
respectively.

The Group

Contributions

Consolidated Financial Statements

Management Report

Sales Voith Hydro

Employees Voith Hydroin € millions

as at September 30

1 087

1 158

1 228

2008/09

2009/102010/114 681

2008/09

5 238

5 345

2009/102010/11

Profit from operations Voith Hydro

Orders received Voith Hydroin € millionsin € millions
1 762

90
76

1 305

63
972

2008/09

2009/102010/11

2008/09

2009/102010/11

Voith Annual Report 2011 | 93

Orders received up by 81%
Voith Hydro performed very successfully in the positive market environment and secured new orders totaling €1 762 million. This is an increase of 81% on the previous year (€972
million). At the end of the fiscal year on September 30, 2011,
orders on hand amounted to €3 252 million. This is €431
million more than on the cutoff date in the previous year
(September 30, 2010: €2 821 million).

A further large-scale infrastructure project in Brazil playeda major role in the higher number of orders received in theyear under review. As the consortium leader for the project,
Voith Hydro will be responsible for the electromechanicalequipment for the planned hydro power plant Teles Pires.
The order comprises the delivery of the 404 MVA generatorsfor five Francis units for the power plant as well as the main
ancillary systems for the operation of Teles Pires.

The core markets for our hydro business are still SouthAmerica, NAFTA and China. In Asia, Japan and India also
played a significant role in the year under review, as did Russia and Turkey in Europe. Voith Hydro was able to acquire
several very large orders in the year under review. The very
high volume of orders received achieved as a result constitutes an exceptional situation that cannot be assumed tocontinue in the coming years.

We were also able to win an order in eastern Europe witha nine-digit figure in terms of volume. The utility RusHydro
commissioned us to participate in modernizing the Saratovskaya power plant in the southwest of Russia. Together
with a Russian partner, we will modernize the Kaplan turbines and increase their output by 13% per unit. The turbine
runners have a diameter of 10.3 meters, making them someof the worldwide largest of their kind.

The most notable event in the year under review was theorder from the Brazilian power plant operator Norte Energia
to equip the world’s third-largest hydro power plant, Belo
Monte. After completion, Belo Monte with its 11 gigawatts
will generate the same amount of electricity as 10 nuclear
power plants or 15 coal-fired power plants. As the technical leader for the project, Voith Hydro will supply four 620
megawatt Francis turbines and generators, the entire auto­
mation systems as well as all high-voltage transformers. The
order volume for Voith Hydro alone will be in excess of €400
million.

We also received an order from the Portuguese utility EDP(Energias de Portugal) for equipment for the pumped storage
power plant Frades II. As the leading partner in a consortiumwith Siemens Portugal, Voith Hydro will supply the entire
electromechanical equipment for two reversible pumped
storage sets. This groundbreaking project makes use ofvariable-speed technology: by varying the rotational speed,
the pumped storage sets for Frades II can infinitely adjust
their pumping capacity and extract different electricity volumes from the grid. This is a major advantage in combination with wind power and solar energy, where performanceis unsteady.

94 | Voith Annual Report 2011

The Group

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Management Report

We received a further order in the field of pumped storage
technology from French-speaking Switzerland. In the F­ orces
Motrices Hongrin-Léman power plant, two new machinegroups in a new subterranean cavern will raise the power
plant’s installed capacity from 240 megawatts at present to
480 megawatts. Voith Hydro will supply two radial pumps
for this purpose. In addition, orders from Turkey and Iceland
contributed to the positive order intake from Europe.
In the USA and Canada, Voith Hydro won several orders,
including one to overhaul the Canadian power plant Decew
Falls 1 in the province of Ontario. The original equipment of
the hydro power plant, which was delivered at the beginningof the 20th century, also originated from Voith.
Unlike in the previous year, Asia made a significant contribution to orders received again. In China, two different operators commissioned us to provide the equipment for theirhydro power plants. We are supplying three Francis turbineswith a capacity of 400 megawatts each for the new Yang Qu
power plant on the Yellow River. The turbines are expected
to be installed by 2016. We also won an order to expand the
Yan Tan power plant on the Hongshui River. We will supply
generators for two machine units with 340 megawatts ofcapacity each. Other orders were received from India andSouth Korea. In Japan, we took over the turbine business ofthe machine manufacturer Ebara in the year under review,thus reinforcing our position on the Japanese market.
We were also successful in the small hydro segment (power
plants with less than 30 megawatts capacity) and partici­
pated appropriately in the market growth. For example, we
won several small hydro orders from India and the USA as

Consolidated Financial Statements

well as one from Switzerland. Voith also recorded growth in
the year under review in the after-market business, which includes the supply of spare parts and maintenance ser­vices.
Increase in personnel to cope with high order volume
To be able to cope with the large number of orders acquired
and to maintain its customary level of quality while meeting
deadlines, Voith Hydro again added to its personnel capacity
during the period under review. At fiscal year-end 2010/11,
the equipment manufacturer for hydro power plants employed 5 345 persons, up more than 100 on the previous
year (5 238, +2%).
Most of the jobs were created in Asia and Germany. New
employees were also hired in Europe excluding Germany
and in South America with the new location in Manaus.
More than half of Voith Hydro’s employees work in emerging
economies.
Production capacities extended and modernized
After the extensive investments in new production locationsin the previous year, Voith Hydro once again made significant
investments in its production capacities during the period
under review, albeit at a lower level. All told, the Group Division’s investments came to €44 million in the 2010/11 fiscal
year (previous year: €90 million, -51%).
In Manaus in Brazil, further investments were made in theyear under review in the completely new production locationthat was under construction in the previous year. The Manaus
location, where almost all types of mechanical turbine components can now be produced, is to supply the large power
plant projects planned in the north of Brazil. Thanks to Voith

Voith Annual Report 2011 | 95

Hydro’s production locations in São Paulo and Manaus, allcomponents that the company provides for hydro power
plants can now be manufactured locally in Brazil with Brazilian executives and local specialist staff.
The new workshop in St. Pölten in Austria, already underconstruction in the previous year, commenced operations in
the year under review. Within the global manufacturing network, St. Pölten is the competence center for milled Pelton
runners, which are applied for particularly high heads. Investments were also made in fitting existing production locations
with machines at the Shanghai and São Paulo locations.
Greater emphasis on R&D
Voith Hydro invested heavily in research and development
once again in the 2010/11 fiscal year. The Group Division
raised its R&D expenditures by 5% to €82 million in the year
under review (previous year: €78 million). The Group’s R&D
ratio thus remained unchanged at 6.7% of consolidated
sales.
Development work focused among other things on optimizing pumped storage technology. Pumped storage power
plants play a significant role in the expansion in renewableenergy generation. Owing to the dependence of wind andsolar power on particular times of the day and weather conditions, these sources of energy require storage capacities
which at present can only be provided economically andin significant volumes by pumped storage technology. In

96 | Voith Annual Report 2011

recent years, Voith Hydro’s focus was on pumped storage
sets comprising pump turbines and motor generators witha speed that is completely variable. This technology will be
used for the first time in the Portuguese project Frades II.
Variable-speed pumped storage units extend the scope of
application of the machine sets, making them more flexible.
They can be regulated steplessly even when the pumps arein operation and can thus balance out grid fluctuations interms of capacity and frequency. Conventional machine setswith a fixed rotational speed do not allow this scope for direct grid regulation. Instead, their pumping capacity has tobe regulated subsequently by adding further machine setsor power plants. Combining wind farms with variable-speed
pumped storage makes them more reliable and more profitable in terms of energy supply.
Voith Hydro also made progress in the relatively new areaof harnessing ocean energy during the year under review.
In July 2011, the world’s first commercial wave power plant
went into operation in Spain. Voith supplied 16 Wells turbines for the plant located in the sea port of Mutriku on
the Basque coast. The power plant has a total capacityof 300 kilowatts and produces enough electricity for 250
households. The wave power plant, which is operated by
the Basque energy agency Ente Vasco de la Energia (EVE),
was integrated in Mutriku’s new breakwater (for which plans
had already been made) and thus blended into the natural
surroundings with a minimum of intervention.

The Group

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Management Report

In South Korea, the prototype of our tidal current machine
was installed on the seabed and put into operation in theyear under review. The first test runs showed extremely
satisfactory results that comprehensively confirm the assumptions from the development phase. The test phase inSouth Korea is expected to end in the 2011/12 fiscal year.
Its successful conclusion will be an important milestone on
the path towards large-scale tidal current projects with an
installed capacity of more than 100 megawatts, which willthen be able to supply tens of thousands of households withelectricity from the sea. The planned tidal current farm on theSouth Korean coast will have an installed capacity of morethan 150 megawatts when completed, making it the largestof its kind in the world.

Consolidated Financial Statements

Profit from operations up 19%
Voith Hydro recorded a profit from operations of €90 million
in the year under review. Despite the substantial researchexpenses for the development of ocean technologies, thisfigure far exceeded the previous-year result (previous year:€76 million, +19%). Thanks to the efficient management of
the projects, the return on sales rose from 6.6% in the previous year to 7.4%.

Another important step on the path towards commercial use
of tidal currents is the intensive testing of the first one megawatt tidal current turbine. Voith has reserved a test berth forthis purpose in the waters off Scotland’s Orkney Islands, inthe European Marine Energy Centre (EMEC). The preliminary
work for installing the turbine was completed in July 2011
together with a cooperation partner. The turbine weighsaround 200 metric tons, and in order to be able to anchor it
safely on the seabed a pile of almost 24 meters in length andtwo meters in diameter was driven deep into the rocky seabed. The next step is for Voith to install the one megawatttidal current turbine on top of this foundation to commence
its two-year test run. The turbine will measure 13 meters indiameter, and the electricity produced during the test phasewill be fed into the public grid for the Orkney Islands.

Voith Annual Report 2011 | 97III.2. Voith ­­Industrial ­Services
Return-based growth strategy shows success
Provider of technical ser­vices to industry
Voith I­ndustrial S­ ervices is a high-performing service provider
for key industries such as the automotive, energy, chemical,
petrochemical, mechanical engineering and aerospace sectors. Its portfolio covers everything from maintenance andtechnical cleaning to facility management, assembly andplanning ser­vices and complex engineering ser­vices.
Voith I­ndustrial S­ ervices reorganized its previous five divisions into four new divisions at the beginning of the 2010/11
fiscal year. The Automotive and Energy-Petro-Chemicals divisions offer industry-specific solutions for the automotive
and process sectors. Under the DIW brand, the Industries
division provides comprehensive regional ser­vices related tooperating and managing industrial locations in Europe. The
Engineering S­ ervices division offers contract engineering forthe aerospace industry, automakers and manufacturers ofrail vehicles.
Improved business climate
Conditions for Voith I­ndustrial S­ ervices were considerably
more favorable in the period under review than in the previous year. Almost all of the customer sectors served by Voith­Industrial S­ ervices experienced an upturn. Development wasparticularly positive in the automotive industry, with strong
growth in China and a return to rising sales figures in North
America and Europe. The good development of the rail
market is also worth mentioning. In the year under review,
the slow-responding energy, and oil & gas markets also
saw renewed growth. The aerospace market, by contrast,
contracted.
Focus on high-margin activities
In the 2010/11 fiscal year, Voith I­ndustrial S­ ervices continued to pursue two major strategic goals. First, it maintained
its focus on profitable businesses and industries, and it adjusted its service portfolio accordingly. The reorganization

98 | Voith Annual Report 2011of the divisions, through which Voith ­Industrial ­Services has
sharpened its focus and pooled its expertise in individual
industries, was well received by the market.
The second strategic goal pursued by Voith ­Industrial­Services was to globalize its business, which has traditionallybeen rooted in Europe, and to further increase its diversification in individual regions. New business activities in up-andcoming regions were promoted, for example in the emirateof Qatar, where in the previous year we entered into a joint
venture aimed at serving process industries in the Persian
Gulf. In India, Voith ­Industrial ­Services opened a location in
the city of Bangalore during the year under review—its third,
alongside Pune and Chennai. The first order was won during
the period under review: Voith I­ndustrial S­ ervices will handle maintenance of the production plant for Toyota Kirloskar
Motor Private Limited. Strong sales growth was achievedin China thanks to high market growth in the country, forexample in the automotive supply industry.
Positive trend at Voith ­Industrial ­Services
following decreases
Voith ­Industrial ­Services benefited from the positive development in nearly all the customer sectors it serves. Following
the decrease in the previous year, Voith I­ndustrial S­ ervices
grew its sales by 5% to €1 006 million in the 2010/11 fiscal year (previous year: €956 million). Sales are therefore inline with our expectations. Owing to the short throughput
times of service contracts, Voith ­Industrial ­Services does notrecord the volume of orders on hand. Consequently, its figures for sales and orders received are identical.
Most of Voith ­Industrial ­S ervices’ sales continue to comefrom Germany. The share of sales in Europe excluding Germany region increased noticeably. We see particular room
for improvement in the Asia region, which up to now has
accounted for a small proportion of Voith ­Industrial ­Services’sales.

The Group

Contributions

Consolidated Financial Statements

Management Report­ ervices
Sales Voith I­­ ndustrial S

Profit from operations Voith ­­Industrial ­Servicesin € millionsin € millions

1 012*

2008/09

956*

1 006

2009/102010/11*Previous years restated due to a change in the internalreporting structure.

40
32*

33*

2008/09

2009/102010/11*Previous years restated due to a change in the internalreporting structure.

Employees Voith ­­Industrial ­Services
as at September 30
18 858*18 870*18 464

2008/09

2009/102010/11*Previous years restated due to a change in the internalreporting structure.

Voith Annual Report 2011 | 99

Varying developments in the divisions
The trend in the various divisions of Voith I­ndustrial S­ ervices
was uneven. While Automotive and Energy-Petro-Chemicals
grew and Industries remained more or less stable, the Engineering S­ ervices division saw a slight decrease.

contrast, the energy market—i.e. business with conventional
power plants and wind farms—did not develop as well as
expected. The award of a full-service contract from UK windfarm operator FKI Engineering Ltd. for a wind farm with a
total capacity of 46 megawatts was encouraging.

The greatest nominal and percentage increase in sales wasachieved by the Automotive division, which benefited fromthe boom in automotive manufacturers’ and suppliers’ business. Development was encouraging in Germany, Europe(excluding Germany), and Asia. In the year under review,
we extended several framework agreements in Europe andwon new ones. In Germany, for example, we concluded amulti-year agreement with BMW in Berlin for ser­vices including production technology maintenance. We took on technical and infrastructure facility management for eight locations for Faurecia, a German automotive supplier. In Poland,
Volkswagen Motor Polska tasked Voith I­ndustrial S­ erviceswith providing maintenance and building management fora further three years. Business with the Daimler locationin Kecskemét, Hungary, was successfully established. We
took on paint-shop cleaning for KIA in the Slovak Republic.
Overall, we succeeded in increasing business in productionrelated, technically complex areas. Examples include bodyshop maintenance for Daimler in Bremen and maintenancefor BMW in Leipzig. However, we also achieved importantsuccesses in emerging markets: in Brazil, we concluded a
new contract with Ford for facility management of the SBC
plant in São Paulo—a project in which more than 150 of ouremployees are actively involved. In India, we won a contractfrom construction equipment manufacturer Caterpillar.

The Industries division held its ground in a fiercely contested
market environment and saw stable sales. Positive economic
development, particularly in Germany and Austria, and thegood order situation in the German mechanical engineering
segment, brought about an improved resource utilization.
For example, MAN Diesel & ­Turbo SE increased the scopeof its existing technical ser­vices contract with Voith and extended the agreement by three years. New customer Bosch
Rexroth, a world-leading specialist in drive and control
technologies, tasked Voith I­ndustrial S­ ervices with machinecleaning ser­vices for 900 different machines. The contract
also covers cleaning of halls, roadways and facilities in thepaint shop. Both agreements were already in place in the
2010/11 fiscal year and contributed to the good sales in theyear under review. Moreover, the Industries division used thepositive fiscal year to further optimize its structure and organization. In particular, the division promoted the new areaof energy efficiency in light management. In this connection,
Voith ­Industrial ­Services won contracts from big-name companies to replace conventional lights with LEDs.

Sales in the Energy-Petro-Chemicals division grew at a low
rate. Major impetus for growth in this area came from projectbusiness with shutdowns in refineries and petrochemicalplants in Germany, the Benelux countries and Scandinavia.
This included shutdowns for Shell, a comprehensive maintenance agreement with Karlsruhe Institute of Technology
and an engineering and assembly project for Lenzing AG. By

100 | Voith Annual Report 2011

The Engineering ­Services division remained below its previous-year level, despite strong growth in ser­vices for rail vehicle manufacturers. Within the scope of a development contract for long-distance double-decker trains, our Engineering
division was directly integrated into Bombardier’s development network. However, decreasing business with engineering ser­vices for the German aerospace industry could not be
offset by increasing activities outside Germany, for example
in the UK and Spain. We notched up an important successin India, where the Airbus Engineering Center in Bangalore
has taken us on as a first-level supplier in flight physics,
making us a first-choice supplier. The acquisition of the busi-

The Group

Contributions

Management Report

Consolidated Financial Statements

ness of French engineering service provider Alema Concept
expanded the offering for the aerospace market. In addition,
Voith Engineering ­Services was approved by the European
Aviation Safety Agency (EASA) as a design organization in
February 2011. The approval entitles companies to perform
design changes and repairs to aircraft cabin interiors. Forus, this means closer collaboration with airlines and aircraft
manufacturers.

Investments in internationalization
Following two years of reluctance to invest, Voith I­ndustrial­Services increased its investments significantly in the year
under review. The service specialist invested a total of €15
million (previous year: €10 million, +57%) in property, plantand equipment. This mainly pertained to investments in replacements and for new contracts. The regional focus ofinvestments lay in Europe (including Germany).

Aiming for greater regional balance
Most of Voith ­Industrial ­Services’ orders continue to comefrom Germany, followed by Europe excluding Germany. In
the medium term, the Company wants to achieve a greater
regional balance. In particular, it intends to expand its market
position in the USA, Brazil, China and India in order to participate more in the growth of these markets.

Increased return on sales
During the year under review, Voith ­Industrial ­Services concentrated on high-margin business in order to enhance
its earnings. In keeping with this priority, Voith ­Industrial­Services had deliberately accepted a decline in sales in favorof achieving an increase in profits in the previous year. In the
2010/11 fiscal year, Voith I­ndustrial S­ ervices saw a returnto growth in sales volumes while improving its profit. The
service specialists generated a profit from operations of €40
million in the year under review, 21% up on the previous-year
figure (€33 million). The return on sales increased year on
year from 3.5% to 4.0%.

Total number of employees down slightly
In this personnel-intensive business, employment trends varied from one region and division to the next depending on
business developments. While new employees were hired in
Asia, headcount was reduced in North and South America.
In Germany and Europe (excluding Germany), headcountrose slightly. At the end of the period under review, Voith­Industrial ­Services employed a total of 18 464 persons (previous year: 18 870). This is a total of 406 jobs (-2%) downon the previous year. The Company employs the greatest
number of employees in Germany, followed by Europe (excluding Germany). The division with the highest number of
employees is Automotive. In this division, headcount remained almost at the previous-year level. The Engineering­S ervices division saw significant growth. This was due on
the one hand to additional activities in India and on the otherto the acquisition of the business of French company Alema
Concept.

Voith Annual Report 2011 | 101

III.3. Voith ­Paper
Growth to an even higher level
Leading-edge technology and ser­vices for the paperindustry
Voith ­Paper has been a pioneering partner to the paper industry for many years, providing leading-edge technologies
and products for the entire papermaking process from asingle source: from pulp (derived from wood or wastepaper) through to finished paper. Voith ­P aper optimizes thepapermaking process by means of continuous innovations.
Its focus is on resource-saving products and technologies
aimed at ensuring maximum efficiency in the consumptionof energy, water and fiber.
Worldwide recovery of paper market continues
The market in which Voith P­ aper operates is defined by
the paper industry’s investments and service expenses. On
the one hand, Voith ­Paper generates business through thegrowing paper market’s need for new machines to fill capacity gaps. On the other, business is generated on the basis ofexisting production capacity in the market—through modernization measures, requirements for replacement parts andparts subject to wear and tear, and ser­vices.
­ aper and board production increased sharply in theP
2010/11 fiscal year. In Asia and South America, growth related to all types of paper; in North America and Europe,by contrast, packaging, tissue and special-purpose papers
saw growth, while the market for graphic papers shrank.
­Paper manufacturers invested heavily in new plants. Demandfor consumables, replacement parts and ser­vices also rose.

102 | Voith Annual Report 2011

While all regions saw growth, in North America this was
weaker than in the other regions. The growth drivers wereSouth America and Asia, particularly China.
Increased sales
Voith ­Paper increased its sales in the year under review by
6% to €1 827 million (previous year: €1 723 million), thus
meeting our expectations. Once again, Asia accounted forthe largest share. Europe and the Americas also contributed
significant shares of sales.
Orders received again top two billion euros
Orders received remained very encouraging. In the period
under review, Voith ­Paper won new orders totaling €2 005
million. Orders received are therefore roughly at the highlevel of the previous year (€2 009 million). This is a very encouraging result as some projects planned by customers
for the year under review had already been brought forward
to the 2009/10 fiscal year leading to the very high numberof orders received in the period. As at fiscal year-end on
September 30, 2011, orders on hand increased to €1 494
million (previous year: €1 333 million). This corresponds toa rise of €161 million compared to the end of the previous
year under review.
Both in the systems business and in the product and service
business, Voith ­Paper benefited from its strategic commitment to sustainable technologies. Fiber sources, and energy
and water consumption have become central challenges forpaper manufacturers. Resource efficiency is therefore becoming increasingly important when contracts are awarded.

The Group

Contributions

Consolidated Financial Statements

Management Report

Sales Voith ­Paper

Employees Voith ­Paperin € millions

as at September 30
1 743

1 723

2008/09

2009/10

1 827

9 500

9 353

2010/11

2008/09

2009/10

Orders received Voith ­Paper

Profit from operations Voith ­Paperin € millionsin € millions
2 009

2 005

9 937

150

2010/11

143

128
1 338

2008/09

2009/102010/11

2008/09

2009/102010/11

Voith Annual Report 2011 | 103

In the systems business (new machines and major rebuilds),
Voith P­ aper was able to secure various new orders. The regional distribution within the large industrial systems segment has changed. While orders received in the previous
year focused on China, Voith ­Paper also received importantorders from India, Brazil and Europe in the 2010/11 fiscal
year. For example, Finnish/Swedish paper and packaging
manufacturer Stora Enso ordered a new paper machine forthe production of testliner at its Polish location in Ostroleka.
Stora Enso intends to leverage the new plant to meet risingdemand for corrugated board. Manufacturer Mead Westvaco ordered a machine for producing board and packaging papers at its Brazilian location in Santa Catarina. Indian
paper producer JK P
­ aper Ltd. tasked us with delivering acomplete paper machine for producing uncoated and pigmented woodfree papers. Overall, Asia remained the mostimportant sales region.
We also achieved important successes with tissue machines.
In recent years, we successfully reentered this growing segment of the paper market, thanks above all to our innovative
ATMOS (advanced tissue molding system) technology. In theyear under review, we sold another three ATMOS machines,
two in North America and one in Europe. At the same time,business with conventional tissue machines picked up. The
ATMOS process enables premium tissue papers to be produced cost-effectively while conserving resources: ATMOS
machines use one-fifth fewer fibers than conventional tissue
machines. Moreover, ATMOS technology allows the use of
100% recycled paper, while TAD technology, which is now
over 40 years old, can handle 20% at most.
Systems for producing board and packaging papers werealso in high demand. For example, we received a large-scaleorder from the Fushun Mining Corporation for a new paper
machine for packaging papers. The Fushun PM 2 will go into
operation in China in 2012. However, we also won orders inthe specialty-paper segment: orders for two large bank-note
paper machines were received from India and Russia.

104 | Voith Annual Report 2011

In its product and service business (products, consumables
and ser­vices) Voith P­ aper saw a significant upswing. In addition to the worldwide increase in paper production, there
were one-off benefits resulting from customers restocking
their inventories of consumables, which had been reduced
to a minimum during the recession.
Overall, it is apparent that the number of projects is rising,but they are associated with a smaller order volume on average. This trend will continue and intensify over the next
few years. Product and service business and business withrebuilds will increase relative to business with new machines.
Personnel build-up in China
In line with the positive economic development, Voith ­Paper
created 584 new jobs in the year under review. As at September 30, 2011, Voith P­ aper had 9 937 employees, 6%
more than in the previous year (9 353). New hires at ourChinese location Kunshan particularly contributed to thisgrowth. As part of our growth program in the Asia region,
we have implemented an infrastructure and the processes
required to win, integrate and develop employees. New jobs
were also created in Germany and South America. Capacity
utilization is good in all regions.
Significant increase in capital expenditures
Following limited investing activity aimed at improving liquidity in the previous year, Voith ­Paper stepped up its capital
expenditure in the 2010/11 fiscal year at a greater rate than
the increase in sales. Voith P­ aper invested a total of €75
million in property, plant and equipment in the year underreview (previous year: €52 million), 42% up on the previous
year.
The focus of investments lay in China. For example, the Kunshan location was expanded by adding new production halls
and office buildings. The expansion of the plant is intended
to more firmly anchor Voith ­Paper’s business activity in thearea. Supporting our customers with local business units

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Consolidated Financial Statements

enables us to meet their specific requirements even better.
In the other regions, investments in replacements and maintenance were at the usual level.

From the outset, energy consumption during this flotation
stage was reduced by around one-third and operating costs
decreased significantly.

R&D activities continue to focus on technologies that
consume fewer resources
At €98 million, Voith Paper’s expenditures on research anddevelopment in the reporting year were slightly down on theprevious year’s high figure (€104 million, -6%). The ratio of
R&D expenditures to sales was 5.4% (previous year: 6.1%).
As in earlier years, activities focused on the development of
new technologies that save energy, fibers and fresh water.
The goal is to further improve the paper manufacturing process as regards environmental sustainability and resource efficiency. This results in solutions that not only take into consideration ecological aspects but also enable considerable
economic benefits in the form of cost savings for customers.

In the year under review, Voith ­Paper also presented the first
non-radioactive sensor for tissue production. Producers oftissue paper can use this to perform quality measurements
without the need for radioactive sources that were requiredin the past.

In the year under review, Voith ­P aper launched a large
number of new product developments on the market—for
example, the DeaerationFoamPump (DFP) 4 000, which en­
ables paper manufacturers to considerably reduce investment costs. The DFP improves the flotation mechanism, aproven deinking process. The innovative product from Voith­Paper reduces the space required for the building area; inaddition, it eliminates costs for the tank, pipes and pumps.
The DFP 4 000 is already in operation with the first customers in Europe, the Americas and Asia. As a result of thesuccess of this new development, we have changed ourstandard for flotation systems and will focus on the DFP
4 000 in the future.
A further newly developed product, LowEnergyFlotation(LEF), considerably reduces energy consumption in the flotation process. Flotation is one of the most energy-intensive
areas of stock preparation, particularly in the production ofnewsprint. In the year under review, LEF was used for the
first time in a paper machine installed at a customer site.

Another new development, SynStron yarn, a polyester
monofilament (PET), increases the useful life of dryer fabrics
used in paper machines. Voith fabrics made from SynStron
yarn filaments are highly resistant to heat, humidity and damage, and boast improved hydrolysis resistance.
Following testing at Voith’s ­Paper Technology Center in theprevious year, SolarMax achieved excellent results in fieldtests at customer sites during the year under review. SolarMax is an energy-saving solution for fast-running paper
machines: thanks to a new combination of press felt androll cover in the press section, dewatering performance isconsiderably improved.
Efforts to develop new and improve existing resource-saving
products were recognized in the year under review with the
Sustainable Development Supplier Award of the Canadianpaper manufacturer Cascades for the second consecutive
time. A key reason for selecting Voith P­ aper as a supplier
was the particular focus on conserving resources in the
Company’s philosophy.
Profit from operations increases at a faster rate
than sales
Voith ­Paper achieved profit from operations of €143 million(previous year: €128 million). This constitutes growth of 12%
on the previous year. The return on sales improved to 7.8%
(previous year: 7.4%).

Voith Annual Report 2011 | 105

III.4. Voith ­Turbo
Profitable growth trajectorySpecialist for power transmission
Voith ­Turbo helps millions of people, goods and machines
to move safely from place to place each and every day. Ourleading-edge technologies transmit and control power under
extreme conditions—safely and in a resource-efficient manner. Drive components and systems from Voith are used ina wide range of industries, wherever power has to be converted into controlled movement.

The relevant market for the Marine division has recoveredfrom the slump caused by the recession. However, financing problems, particularly in Europe, and rising raw materials
prices continue to burden the shipbuilding industry. Nevertheless, there was significantly increasing demand for ships
for deployment in the oil & gas sector and special-purpose
vessels for installing and supplying offshore wind farms inthe year under review.

Entire market environment recovers
Voith ­Turbo provides leading-edge technologies to four ofVoith’s five core markets. In most segments of importanceto the Company, the business climate improved.

The market for rail vehicles is characterized by a long-term
growth trend. This is due to the expected expansion of infrastructure in the world’s most populous states, especially in
Asia and South America. As the result of a safety review, theplanned expansion of the Chinese rail network is currently
delayed, particularly in the high-speed segment. In Europe,
tight public-sector budgets have led to a slower development. The North American market is seeing initial impetus
for growth.

The industrial sector developed very positively in the 2010/11
fiscal year, although growth rates varied between the various industries served by Voith ­Turbo. There was particularlyhigh demand from the mining sector, energy producers, andthe oil & gas sector. Mechanical and plant engineering companies also saw a strong upswing, while the steel sector
recovered only slowly. From a regional point of view, thegreatest impetus for growth for the Industry division camefrom China and India, and also, in the oil and gas business,from the Middle East.

The Road division serves the market for trucks, buses andagricultural vehicles. The commercial vehicle market wascharacterized by sustained positive development in theyear under review, albeit with large regional differences.
The strongest impetus for growth came from Asia, above
all from China, the world’s largest truck market, as well asfrom South America, in particular Brazil, and once again from
Western Europe. In the bus market, too, intense project activity in Asia and South America contrasted with a sluggish
European market.

Voith ­Turbo comprises four divisions: “Industry”, “Marine”,“Rail” and “Road”.

106 | Voith Annual Report 2011

The Group

Contributions

Consolidated Financial Statements

Management Report

Sales Voith ­Turbo

Employees Voith ­Turboin € millions

as at September 30

1 232

2008/09

1 349

2009/101 520

2010/11

5 965

5 428

5 422

2008/09

2009/10

Orders received Voith ­Turbo

Profit from operations Voith T­ urboin € millionsin € millions
1 572
1 292

2010/11

163

1 351

135
113

2008/09

2009/102010/11

2008/09

2009/102010/11

Voith Annual Report 2011 | 107

Sales up by 13%
In the 2010/11 fiscal year, Voith ­Turbo increased its sales by
13% to €1 520 million (previous year: €1 349 million).
All four divisions contributed to this growth. The Road andRail divisions saw a double-digit percentage increase. The
Industry division, which contributes most to Voith ­Turbo’s
total sales, also saw a considerable increase in sales. Following the decrease in the previous year, the Marine division
recovered and also returned to growth.
More than half of sales in the past fiscal year were again
achieved in Europe (including Germany). The importance of
the already strong Asian market continued to grow, thanks
especially to demand from China and India. Asia accounted
for more than one-quarter of sales. The remaining shares insales came from the Americas and from growing markets
such as Australia and Africa.
Large rise in orders received
Orders were significantly up on the previous year. In the
2010/11 fiscal year, Voith ­Turbo won new orders totaling€1 572 million. The increase of 16% on the previous year(€1 351 million) surpassed our expectations. While the Marine and Rail divisions were only slightly up on the previous-year level, the other two divisions saw double-digit percentage growth rates. Orders on hand slightly increased to€1 298 million as at fiscal year-end on September 30, 2011(previous year: €1 282 million, 1%).
The Industry division, where we had still expected a sideways movement at the close of the 2009/10 fiscal year, increased its number of orders received by just under onethird. This exceeded the record figures of the pre-crisis year
2007/08. For the Industry division as a whole, Asia, with
China and India, remained the strongest region in terms ofgrowth. For the oil and gas business, the Middle East has

108 | Voith Annual Report 2011

become increasingly significant. In this context, an order fora total of 36 BHS gear units for an oil and gas field in Saudi
Arabia should be highlighted. In India’s energy sector, the extremely high level of activity continued, with Voith T­ urbo profiting from this due to its strong market position. We saw asignificant number of orders for the WinDrive for wind farms
in North America as well as a first delivery of serial products
to a Chinese wind farm manufacturer. Due to the growth in
the raw materials market, demand for start-up components
for the mining sector also rose. Growth in the mining sector
was no longer confined to China but was driven by several
regions. In the recovering steel market, we secured a strategically important order for heavy-duty universal joint shafts
in a Brazilian steelworks.
Orders received in the Marine division remained stable inthe year under review. Orders for special-purpose vessels
for installing and maintaining offshore wind farms in Europe
contributed significantly to orders received. Entry into thisnew segment was made possible by the successful launchof new products such as the Voith Radial Propeller and theVoith Inline Thruster with 1.5 megawatts of input power.
In the Rail division, orders received were slightly up on
the high level of the previous year. New orders from North
America and Europe offset the decrease in the recently verystrong Asian area, in particular China—for example, in theyear under review Voith T­ urbo won contracts for public passenger transport in Washington D.C. and Chicago, as well as
for the Italian state railway. Particularly worthy of mention isa first contract from Finland for the delivery of complete drive
systems for trams in Helsinki. There were several contracts
from South America. For example, a rail vehicle manufacturer ordered Voith components for monorails, space-saving
single-rail systems that will be used for public passenger
transport in São Paulo.

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Contributions

Management Report

The Road division contributed significantly to absolute andpercentage growth of the Voith ­Turbo Group Division. Orders
received increased strongly compared to the previous year,
which had still been adversely affected by the recession.
The continuing recovery on the truck market was reflected
in higher sales of retarders by Voith T­ urbo, which saw a return to the pre-crisis record level. We were also able to increase the number of orders received in the market for bus
drives. Apart from a large-scale contract for London, procurement activity in the European bus market was subdued.
This was offset by very encouraging development in Central
and South America, China and the Asia-Pacific area. For
example, in the 2010/11 fiscal year various new cities were
won for buses with DIWA automatic transmissions, including São Paulo and Curitiba, Panama City, Singapore, Macao
and Perth.
More than 500 jobs createdOn balance, Voith T­ urbo hired 543 new employees during
the fiscal year and had a total workforce of 5 965 as at September 30, 2011 (previous year: 5 422 +10%). Headcount
was increased in all divisions. From a regional perspective,a large portion of the new jobs was created in Germany.
The workforce was also significantly increased in Asia. The
increased personnel capacity ensures Voith ­Turbo’s performance and ability to deliver, and puts us in a position to benefit from future growth opportunities.
Investments remain at a high level
In the 2010/11 fiscal year, Voith ­Turbo invested a total of €59
million (previous year: €72 million, -18%) in property, plantand equipment. All four divisions invested in modernizing
and expanding their production capacities. In addition, theRail division completed the factory development project atthe Heidenheim location, where transmissions and complete
drive units for rail vehicles are manufactured. The project had

Consolidated Financial Statements

begun in the previous year. As a result, Voith ­Turbo’s investments were focused on Germany. However, Voith ­Turbo also
made major investments in the growth regions of the world.
Successful new product launches
The R&D expenditures of Voith ­Turbo reached €79 million
in the year under review (previous year: €78 million, +2%).
The R&D ratio was thus 5.2% (previous year: 5.7%) of sales.
R&D activities focused on increasing efficiency, reducing
fuel consumption, and minimizing CO 2 and other emissions. All four divisions made significant achievements andlaunched new products on the market. The product range
was extended to include SteamTrac, a waste heat recovery
system that reduces the fuel consumption of combustion
engines. The new product versions offer additional fields ofapplication.
One focus in the Industry division was on further developing couplings for mining applications. For example, new, socalled “XL profiles” were launched on the market in the year
under review. A new generation of Safeset couplings withsignificantly improved torque transmission for rolling mill applications was also introduced, as was a new hybrid drive
solution in the hydraulics area.
In order to expand existing offshore business, the Marine
division developed new sizes of the Voith Radial Propellers
that had been introduced in the previous year. The Voith
Radial Propeller makes it possible to position offshore platforms such as drilling vessels while countering forces fromcurrents, winds and waves.
In the Rail division, a new drive system was developed aspart of the Voith-Powerpack product range. The drive system, which integrates the new Voith diesel engine, meets theVoith Annual Report 2011 | 109

emissions standards that will apply from 2012 onwards. In
addition, new standard final drives were created for worldwide deployment in electric locomotives, as well as the
Galea rail vehicle head for passenger transport, which consists of composite materials and integrated energy-absorbing structures.
Development in the Road division focused on hybrid drives
for buses. North America is a key market for these drives.
Voith T­ urbo opened a development center for hybrid drives
in San Diego, California, in the 2010/11 fiscal year. The DIWA
automatic transmission was also further developed, and its
sixth generation is currently being approved for series production at all major bus manufacturers.

110 | Voith Annual Report 2011

Profit from operations up 21%
Profit at Voith ­Turbo developed very favorably. Profit fromoperations was up 21% to €163 million (previous year: €135
million). In addition to the very good sales mix, this is due tothe recovery of the divisions that were still to some extent
affected by the recession in the 2009/10 fiscal year. Thisdevelopment was also supported by the structural adjustments undertaken at these divisions in the previous years,
which led to a rise in earnings when business picked up
again. Return on sales rose to 10.7% (previous year: 10.0%).

The Group

Contributions

Management Report

Consolidated Financial Statements

IV. Net assets and financial position of the Group
IV.1. Balance sheet structure
Composition of assets and equity and liabilities soundThe balance sheet of the Voith Group continues to be characterized by a healthy structure of assets and equity andliabilities. Total assets had fallen to €5 815 million in comparison to September 30, 2010 (previous year: €5 902 million).
Non-current assets were up to €2 477 million (previous year:€2 408 million). In particular as a result of acquisitions madeduring the period under review, intangible assets increased
to €718 million (previous year: €703 million). The increase
in securities from €173 million to €262 million is explainedby marking financial assets available for sale to market andrecognizing the resulting gains and losses directly in equity.
Current assets fell by a total of €165 million to €3 328 million(previous year: €3 493 million). The decrease in cash andcash equivalents to €927 million (previous year: €1 175 million), primarily due to debt redemption, played a major role
here. On the other hand, inventories and trade receivables
increased by a total of €48 million to €1 972 million (previous
year: €1 924 million) due to the positive order situation.
Non-current liabilities fell to €1 762 million (previous year:€2 015 million). This is due, on the one hand, to the early
repayment of a note loan of €148 million; on the other hand,a loan of €100 million was reclassified to current liabilities as
it fell due in the 2011/12 fiscal year.

Current liabilities remained at a stable level in comparison to
the previous year and fell only marginally to €2 759 million(previous year: €2 779 million).
The item other liabilities, which decreased by €62 million to€1 079 million (previous year: €1 141 million), contributed tothis reduction. The customer advances included in this item
decreased by €80 million.
On the other hand, current interest-bearing financial liabilities
increased by a total of €31 million to €327 million (previous
year: €296 million). This includes the reclassification of the€100 million loan to current liabilities mentioned above, therepayment of a bond issued on the capital market due in July
2011 of €145 million, additional net borrowing of €48 million
as well as a €31 million increase in liabilities to shareholders.
The Group had equity of €1 287 million (previous year:€1 107 million) as at September 30, 2011. The equity ratio
improved to 22.1% (previous year: 18.8%). In addition to thenet profit for the year, the measurement of securities had apositive effect on the amount of equity. Dividend paymentsof €98 million (previous year: €25 million) decreased equity.
The profit participation rights issued in previous periods
total­ing €83 million are still contained in equity. In the year
under review, additional profit participation rights amounting
to €15 million were issued, which also constitute a component of equity pursuant to the criteria of IAS 32.

Voith Annual Report 2011 | 111

IV.2. Liquidity
Positive cash flow from operating activities
Due to the good operational result, cash flow from operating
activities totaling €244 million (previous year: €390 million)
was generated. The decrease in comparison to the previous year is explained by the increase in net working capital,
particularly due to an increase in inventories as well as adecrease in customer advances received.
The cash flow from investing activities amounted to €-217
million (previous year: €-159 million). This is attributable tothe changes in investments in securities. In particular, thedisposal of the multi-asset fund led to a net cash inflow of€63 million in the previous year. In the year under review incontrast, there was a net cash outflow of €9 million.

included here at an amount which is €20 million higher (previous year: €23 million) than the amount recognized in thebalance sheet.
The net debt ratio is not covered by the accounting policies
based on the International Financial Reporting Standards(IFRS) and its definition and calculation may diverge fromthe practice of other companies. In contrast to the carrying
amount, which is based on the effective interest rate ­method,
the ratio is calculated by measuring financial liabilities at theirhigher nominal repayment amount.

Development of cash flowin € millions

There was a cash flow from financing activities in financial liabilities of €-288 million in the period under review (previous
year: €-32 million). This was due in particular to the cashtransactions already described above (repayment of a bondissued on the capital market and a note loan).
The total cash flow came to €-261 million (previous year:€199 million). More details of cash flow are provided in thesection on the consolidated statement of cash flows.
Net debt as the internally defined difference between interest-bearing financial liabilities and realizable financial assets
is an important ratio for banks, analysts and rating agencies.
Net debt at the end of the reporting period as at September 30, 2011, amounted to €-52 million (= net asset position;
previous year: net debt: €0.4 million). Based on measurement at the repayment amount, the financial liabilities are

112 | Voith Annual Report 20112010/11

2009/10

Cash flow from operating activities

244

390

Cash flow from investing activities

-217

-159

Cash flow from financing activities

-288

-32

Total cash flow

-261

199

The Group

Contributions

Consolidated Financial Statements

Management Report

IV.3. Investments
Investments remain at a high level

Investments and depreciationin € millions

In the year under review, Voith again made substantial investments in strengthening productivity and in the strategicorientation of the Group. The total volume of capital expenditures by the Voith Group in the 2010/11 fiscal year was €211
million (previous year: €234 million, -10%). The investment
ratio of 3.8% of consolidated sales (previous year: 4.5%)
underscores our long-term corporate strategy, which we, as
an innovative technology group, consider necessary.
The value of investments in the year under review was once
again significantly higher—by €22 million—than depreciation and amortization of €189 million (previous year: €163
million). While the nature of Voith ­Industrial ­Services’ business requires lower levels of capital expenditures (investment
ratio: 1.5%), the three manufacturing Group Divisions reinvested a significantly higher share of their sales. The highest
investment ratio was reported by Voith P­ aper (4.1%).

255

234

211

151

163

2008/09

2009/10Investments

189

2010/11

Depreciation

Investments total €211 million
by Group Division
Voith ­Turbo
28%

Voith ­Paper
35%

Voith Hydro
21%
Voith ­­Industrial­Services
7%
Other
9%

by region

Americas
24%
Asia
17%

Germany49%
Europeexcluding Germany
10%

Voith Annual Report 2011 | 113

IV.4. Financial investments/
participating interests
Half of total investments made in Germany

Targeted acquisitions

In regional terms, almost half (exactly 49%) of total capital
expenditures (previous year: 47%) was in Germany, specifically for modernization work at several existing production
facilities at the Heidenheim location. Investments in Asia increased significantly year-on-year. 17% of the Voith Group’s
total capital expenditures was in Asia (previous year: 11%)
where €35 million was invested, particularly in China. For
example, a new Voith P­ aper manufacturing site was openedat the Company’s Chinese location in Kunshan. Voith T­ urbohas expanded its rail assembly capacities in China, and Voith
Hydro put new machines into operation at its Chinese location in Shanghai. 24% (previous year: 32%) of total capital
expenditures was in the Americas. There were particularly
significant investments in Brazil, where Voith Hydro completed construction of a new manufacturing site in Manaus
and invested in production machinery in São Paulo. As in
the previous year, 10% of total capital expenditures wasinvested in Europe excluding Germany. Particular mention
should be made here of the new turbine production plant in
St. Pölten in Austria, where construction started in the previous year and has now been completed. The St. Pölten site
focuses on hydro power. In addition to the other individual
large-scale investment projects, there was the usual level ofinvestments in replacements and maintenance in all Group
Divisions and regions.

To strengthen its position in Japan, the Voith Hydro Group
Division took over the turbine business of turbine manufacturer Ebara Corporation (Tokyo, Japan) through the acquisition of individual assets. The company is included by way offull consolidation in the consolidated financial statements.

Detailed information on the investing activities of each of
the Group Divisions can be found in Section III, “Businessdevelopment and earnings position of the Group Divisions”.

114 | Voith Annual Report 2011

Voith ­Industrial ­Services acquired the business operationsof French engineering service provider Alema Concept SAS(Toulouse, France) through an asset deal, thus expanding its
offering for the aerospace market. The company is includedin full in the consolidated financial statements.
In addition, Voith I­ndustrial S­ ervices increased its shareholding in Terne AS (Mongstad, Norway) from 40% to 60%,
thereby gaining control of the company. The company istherefore included in full in the consolidated financial statements. The acquisition is intended to increase Voith I­ndustrial­Services’ presence in the Norwegian petrochemical market.
The Voith P­ aper Group Division purchased 100% of theshares in MinPlus-CDEM Holding B.V. (Vaassen, Netherlands) and its subsidiaries in the year under review. The
companies are fully consolidated. In conjunction with thepurchase, Voith P­ aper acquired the rights and patents toa technology for processing deinking sludge that occurs
during paper production. The CTC technology converts thesludge into useable minerals and energy.
Voith ­Turbo purchased 50% of the shares in FlowLink Systems Private Ltd. (Coimbatore, India). This investment isaccounted for using the equity method in the consolidated
financial statements. The Indian company manufactures
valves for industrial applications.

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Management Report

Consolidated Financial Statements

V. Research and development
Focus on technologies that conserve resources
Innovative products and ser­vices have been the cornerstoneof the Company’s future business success for many years.
As a technology group, Voith traditionally invests heavily—and significantly more than the industry average—in researchand development. In the 2010/11 fiscal year, Voith’s R&D expenditures came to €259 million (previous year: €266 million,-2%). Compared with consolidated sales, the Voith Group’s
R&D ratio in the 2010/11 fiscal year was 4.6% (previous year:
5.1%).
Voith’s research and development activities are internationally organized. The focus is on Germany; centers in the Americas, Asia and Europe excluding Germany contribute valuablespecialized R&D input in the relevant Group Divisions.
Voith’s ambition is to anticipate solutions to future challenges. For this reason, the R&D strategy is systematicallyaligned with global megatrends and in particular with therequirements of the world’s growth regions. Environmental
friendliness, resource and energy efficiency as well as clean
and renewable energy generation are not only the key challenges facing the 21st century but also the central themes ofour research and development strategy at Voith.
Hydro power is the major form of renewable energy that isalready capable of producing a constant flow of electricity inthe quantities needed by industry and at competitive prices.
Worldwide, hydro power has a share of around 80% of all
renewable energy sources used. In the 2010/11 fiscal year,
a considerable portion of our research efforts was directed

to improving pumped storage technologies as a supportinghydro solution, without which a future-oriented power mix
with an increasing share of wind and solar energy would not
be economically feasible. The innovative field of ocean energy was another focal point. In this context, the world’s firstcommercially used wave power plant went into operation in
the year under review. Key milestones were also reached in
the further development of tidal current energy technology.
For paper manufacturers, Voith developed various new solutions during the year under review, which offer customers
considerable cost benefits as well as taking environmental
issues into account. Numerous new products were launched
and achieved initial market success, for example two innovations in the area of flotation systems used in the deinking
process. Voith’s efforts to develop resource-saving products
for the paper industry were again recognized with an international award during the year under review.
In drive and braking systems, Voith focused on resourceefficient solutions and minimizing CO2 and other emissions
in all areas of application—whether industrial, marine, rail orroad. The product range was expanded for SteamDrive, theinnovative drive system that uses exhaust heat, which wasintroduced in the previous year. Hybrid drives for buses werealso further developed. To this end, a dedicated development center for the U.S. hybrid market was opened.
At the end of the year under review, we established a centernear Munich for developing processes and production procedures for carbon-fiber products. At the development cen­ter,
we also pool the Company’s existing skills and knowledge

Voith Annual Report 2011 | 115

in the field of composites across division boundaries. For
example, we are today already using CFRP for lightweightcomponents for ship propellers, in tidal power plants, inpaper machines and in drive systems, among other applications. The aim is to further extend our expertise in thisfield as the benefits of this material—such as low weight,
high resilience and good formability—lead us to expect thatthe use of carbon-fiber components will become increasingly significant in light of the demand for resource-efficient
production in many industries.
Detailed information on the R&D activities of each Group
Division can be found in Section III, “Business development
and earnings position of the Group Divisions”.

116 | Voith Annual Report 2011

Research and developmentin € millions
254

266

259

2008/09

2009/102010/11

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Contributions

Management Report

Consolidated Financial Statements

VI. Non-financial performance indicators
Sustainable business management

Responsibility for the environment

Our corporate strategy is characterized by sustainable thinking. Voith follows the approach of giving equal consideration to economic, ecological and social factors. This holistic
perspective has been supported by the shareholding Voith
family since the Company was founded. Only by adopting aforward-looking, long-term business approach can companies remain family-owned and maintain their financial independence over generations.

Environmentally conscious business makes sense not only
from an ecological but also from an economic point of view.
Ensuring the Company remains fit for the future while playing a positive part for the environment is a central challenge
for Voith.

We apply sustainable action across the Company’s entire
value added chain. Our goal is to securely anchor the ideaof sustainable business throughout the whole Group. Voith
began setting up systematic, integrated sustainability management in 2008. This process is driven by the central Corporate Sustainability function created at the beginning of
2009, which develops strategies and concepts and helps
the operating units put these into practice. The Sustainability Council, comprising the head of Corporate Sustainability
and the sustainability managers of the Voith Group Divisions,
reports directly to the CEO of the Voith Group. The council
develops key topics, performance indicators and targets,and regularly assesses the Company’s performance withregard to sustainability. In addition, sustainability organizations have been set up in the four Group Divisions. These
organizations are responsible for implementing the agreed
targets and measures.
In 2011, Voith published its first comprehensive sustainability
report, which will appear annually in the future. This reportcontains detailed information on sustainability management
at Voith, including specific goals, performance indicators andresults.

As a manufacturing company, Voith relies on finite resources. Steel and plastics are the materials we require in large
quantities in order to manufacture our products. In addition,water and energy are used during production. For economic
reasons, efficient use of materials and resource conservation
are already top priorities for us. We are constantly seeking
potential for using resources more efficiently in all our business units, particularly in purchasing, design and production.
Another goal is to reduce the Group’s CO 2 emissions, including those of our products and ser­vices, and to increaseenergy efficiency within the Company. Processes and technologies are continually being developed for this purpose.
To reduce Voith’s ecological footprint, we have identified
three core areas: CO 2 emissions, waste levels and fresh
water consumption. For all three, the Group’s management
has set out specific medium-term targets, quantified in relation to annual sales, which we adhere to.
How do we implement our environmental goals in day-today operations? Our environmental management comprises
the structures and processes that we use to ensure compliance with the relevant standards and laws. It is incorporated
in an integrated risk and quality management system. Furthermore, Voith has developed an ecological business management (EBM) concept aimed at creating economic added
value by considering ecological aspects in the areas of ener-

Voith Annual Report 2011 | 117gy and resources. We use our EBM approach to pursue thevision of a factory that meets its own energy requirements
and constantly reuses resources. To bring us closer to our
long-term goal, we analyze the production of Voith products
and our ser­vices with regard to sustainability, and evaluate
and test new technologies. In the 2009/10 fiscal year, Voith­Paper was the first Group Division to introduce EBM as an
overarching business principle. Since the 2010/11 fiscal year,
EBM methods have been successively adopted by all Group
Divisions.
Responsibility for our products
Voith products are of high quality, innovative, reliable andsafe—this self-image guides us to act with care and foresight. When we talk about product responsibility, we focus
primarily on three aspects: product strategy, the supply
chain and product quality.
Voith pursues a product strategy that is aligned with future
market requirements. In light of the megatrends of climatechange and increasingly scarce resources, we promote theuse of alternative and regenerative fuels by developing products and ser­vices that enable the exploitation of wind andwater for generating electricity. We are constantly working
on improving the efficiency of our products and on deploying
resources ever more efficiently in the manufacturing process.
Many Voith technologies—such as hydro power plants andpaper machines that use a high proportion of recycled raw
materials—already play an important part in making business more environmentally friendly and helping conserve
resources.

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A second key element within the scope of our product responsibility is a transparent supply chain based on partnership with our suppliers. Social, ecological and economic
factors are given equal weight when we select our suppliers. When making procurement decisions, for example, weplace great importance on resource-saving process chains
and supply chains.
We ultimately aim to ensure consistently high-quality products that offer the highest safety standards. Our customers count on the reliability and long life span of Voith products. They expect our technology to be accurate, robust
and completely safe. We also express this promise in our
slogan “Voith—Engineered Reliability”. The high quality ofour products is based on a safety concept built on four
cornerstones. Skilled and experienced employees who arecontinuously learning are the first of these. Second, we regard clarity in the development process as indispensable.
Integrated management systems and corresponding audits
ensure compliance with general and industry- or businessspecific standards in the areas of process organization, quality, risk, industrial safety, health and environmental protection. Strict acceptance criteria that must be observed when
Voith products are commissioned are the third cornerstoneof our safety concept. Acceptance requires comprehensive
documentation and is supported by employee training at thecustomer’s site. Fourth, in close collaboration with our customers, Voith develops extensive modernization and servicing models to ensure that installed systems remain leadingedge throughout their entire life cycle—in some cases, for
30 or 40 years or more.

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Responsibility for our employees
Voith is a fair employer with high expectations as regards
performance. Skilled, motivated and loyal employees are thebasis for our innovative capability and competitiveness. We
therefore focus on offering our employees challenging tasks
and prospects for their personal development. We expect
our managers to ensure personal and participative working relationships within their teams. At the same time, weplace high demands on our employees: our technologies
and projects are both challenging and complex. Our aim is
to integrate and meet the expectations that customers fromvarious cultures have of us.
While we are a rapidly growing multinational company withinternational teams, we have consistent values and standards, which we put into practice across the boundaries of divisions, countries and cultures. We place considerable value
on equal opportunities for all our employees, irrespective of
nationality, religious orientation, gender and age. We see thediversity of our employees at all hierarchy levels as giving us
an international competitive advantage.
In order to maintain the performance of our more than 40 000
employees, we promote and require vocational training in theform of lifelong learning. To this end, we offer wide-ranging
training measures—both within the Company and in collaboration with external educational institutions—that enable
personal development within the scope of professional or
executive career paths. In order to offer employee-specificdevelopment opportunities within our global Group, we expressly welcome and support changes of function as well
as moves across division boundaries and national borders.

Consolidated Financial Statements

To achieve our growth targets in the future, we will needeven more employees than in the past. That is why we wish
to retain experienced employees at Voith and also be an attractive employer for highly qualified applicants. A key decision criterion for young people is the compatibility of careerand family. We therefore offer a large number of part-timeworking models; a combination of home office and presence at the Company is also possible. Childcare also makes
working easier for young families. For example, at our Heidenheim location we support the Kindervilla e.V. initiative sothat employees with families can be sure their children are ingood hands over the course of the day and can pursue theircareers. We are also striving to introduce similar models atother key locations worldwide.
I­ndustrial safety and employee health and safety are top priorities for us. Both topics are firmly anchored in the Group’s
corporate objectives. To optimize our employees’ safety andour preventive protective measures, we introduced a comprehensive management system in the 2009/10 fiscal year.
Our executives are given goals that they cascade to the
managers in their unit. All Voith employees with HR responsibility are informed in detail, made aware of the relevant
topics and trained accordingly. They, in turn, pass on theirknowledge to their employees and guide them toward safety-conscious behavior.
Social responsibility
Business success gives rise to obligations. This has always
been the Voith family’s view. And to this day, we feel boundto the tradition of the founding family. In conjunction with
the Hanns-Voith-Stiftung, which came into being in 1953,
and Fundação Voith, founded in Brazil in 2004, Voith GmbH

Voith Annual Report 2011 | 119

VII. Subsequent events
supports projects not only in the areas of education, training
and science, but also in the fields of sports, arts, culture andsocial welfare.
Various criteria are used to determine whether a project
merits funding. For example, the theme of the project must
focus on one of the above-mentioned areas. It must aim tohave a broad impact and foster the community or increase
the attractiveness of a Voith location for the people living
there. Moreover, it should have a link to the Voith company.
This notwithstanding, Voith provides assistance in urgent humanitarian crises, for example after the severe earthquake
and tsunami disaster in Japan in March 2011.

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With effect as at November 1, 2011, Voith ­Industrial ­Services
sold DIW Service GmbH. The company specializes in temporary employment for skilled workers. The sale continues
Voith I­ndustrial ­Services’ strategic realignment, which began
in October 2010. The company sold, DIW Service, has approximately 70 core employees and around 830 employees
engaged by customers as temporary workers.
There were no other significant events after the end of the
2010/11 fiscal year.

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Consolidated Financial Statements

VIII. Risks and opportunities
VIII.1. Risks
VIII.1.1. Risk and quality management
Oriented to increasing the value of the Company
Entrepreneurial activity includes making decisions underconditions of uncertainty. Risk is therefore an integral part ofentrepreneurial activity. 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. Existential threats are defined as
aggregate risk potential that threatens more than 50% of
equity or more than 10% of sales.
All the elements of risk management have been brought together in a risk management system. This is not only geared
to meeting legal requirements. It should also contribute toincreasing the value of the Group and its companies by reducing potential risks and the probability of their occurrence.
At the same time, the system is intended to produce a stateof equilibrium between correctly assessed risks and the exploitation of opportunities. In early 2011, Voith began putting
its internal control systems (ICS), which had already been
implemented worldwide, on a shared foundation. The basis
for this is a Group-wide guideline governing internal control
systems. The ICS is part of the risk management system
aimed at ensuring the appropriateness and reliability of internal reporting and external financial reporting, the effectiveness, efficiency and propriety of operating activities, aswell as compliance with the Voith Code of Conduct and theguidelines of the Voith Group. Risk and quality management
are interlinked and integrated in a comprehensive internal
controlling system.

Distributed nature of the risk management system
Voith has a distributed risk management system. Responsibilities are clearly defined for the differentiated risk profiles at
all levels of the Company.
The risk management process itself breaks down into fourstages: isk identification: Voith constantly monitors macroecoR
nomic developments, and developments in specific industries as well as internal business processes that could affect the situation of the Group. A risk catalog helps identify individual risks.
• Risk analysis and assessment: The risks identified in thisway are assessed in terms of the potential damage they
could cause and the probability—expressed as a percen­
tage—that they will be realized. Wherever possible, thescope of potential damage is quantified as a cost factor.
Worst-case scenarios are assumed and their impact on
the Group’s financial situation is examined.
• Risk management: Analysis and assessment of the identified risks gives Voith’s management the data it needs todecide whether risks can be avoided, reduced by suitableactions or distributed by signing appropriate agreements,
or whether they have to be accepted and contained bymeans of optimized processes and controls.
• Risk monitoring and reporting: A multi-tiered set of controlling and reporting tools helps the Board of Management toanalyze risks and take well-founded decisions.
•

Voith distinguishes between two risk groups:
1.	Risks to the Group: These comprise external risks, management risks, financial risks and infrastructure risks.
2.	Risks to performance: These are regarded by Voith ascontractual risks and technical risks.

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VIII.1.2. Risks to the Group
External risks
In fall 2011, the major world economies had either alreadyreached their pre-crisis GDP levels or were about to do so.
However, there is a growing recognition that the rapid recovery in the wake of the deep recession of 2008/09 wasachieved at the cost of hugely increased national debt inmany countries, particularly in western industrialized countries. The debt crisis of some western countries poses a
significant risk for the world economy. In the USA and some
euro-zone countries, high unemployment is also an issue.
Due to the accumulated deficits, the ability of the countries
affected to act is severely limited. If several countries simultaneously implement ongoing cuts in order to balance
their budgets, this could have a noticeable negative impact
on global economic growth. We see a further risk that the
turbulence on the financial markets triggered by the euro
crisis could lead to a new financial crisis and affect the real
economy. Moreover, the political implications of the recent
financial and economic crisis and of the current debt crisis
have led to few concrete results. A change in political sentiment, stricter regulation of individual markets, changes tothe tax system, protectionist trends or amended forms ofinternational cooperation are, for example, conceivable.
The emerging financial crisis and its possible consequences
for the financial system, particularly the further developmentof the European debt problems, present the greatest danger
in the medium term. In light of the risks and unsolved problems described above, we cannot rule out a negative impact
on singular areas of Voith’s business in the near future. The
Group’s Board of Management has therefore decided tomaintain the defined goals for the coming fiscal year, despite
the current unclear situation on the financial markets, which
will certainly affect Voith customers. Voith has a diversified
portfolio in terms of both markets and regions, strong market
positions, healthy finances and a stable liquidity position,and monitors all key indicators on a monthly basis. Voith

122 | Voith Annual Report 2011

therefore believes it is well placed to rapidly respond to any
consequences of phases of recession and to leverage theopportunities offered by upward trends at an early stage.
In this context, the Voith GmbH Board of Management willcontinue to respond decisively to changing market conditions in the future.
Management risks
Voith has developed and operates a reliable reporting system that also encompasses its risk and quality management
systems. Group accounting plays a pivotal role in this system and was converted to International Financial Reporting Standards (IFRS) in the 2005/06 fiscal year. No risks ofmaterial Group management errors are perceivable at thepresent time.
Liquidity and financial risks
The Voith Group’s diversified financing structure is designed
to safeguard long-term stability. On the basis of the positive
business development during the recent economic and financial crisis, and a new risk assessment, the sizable liquidity cushion of the previous year was reduced. In May 2011,a note loan and a bond issued on the capital market due inJuly 2011 were repaid prematurely with the Company’s own
funds. A new syndicated loan, which replaces the previous
syndicated credit facility and is available until at least 2016,
was concluded in June 2011. Additional free and confirmed
credit lines complement the availability of sufficient liquidity
at all times. This enables the Group to pursue sustainablegrowth and remain sufficiently flexible to respond to changes
in the market environment.
In February 2011, the investment grade rating given by theagency Moody’s continued to be “Baa2 stable”.
In September 2010, Voith liquidated assets previously held
in a multi-asset portfolio. As a result, the Group now essentially holds only isolated direct investments. Fluctuationsin the value of these investments as a whole are recognized

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directly in equity. Market price losses are recognized in profit
and loss only if there is objective evidence that the fair valueof an investment is sustainably or significantly impaired. The
sustainability criterion is met if the impairment lasts longer
than 12 months. If the fair value of the investment falls morethan 30% below its cost, this is regarded as a significant
impairment. It should be noted that all investment decisions
are based on thorough analysis of fundamental data. In theevent of unusual stock price movements, existing stock
price risks are analyzed immediately and corresponding action is taken.
To contain risks to cash flows in different currencies, defined foreign currency management procedures are appliedconsistently throughout the Group. All Group companies are
required to hedge foreign currency items when these occur.
Moreover, interest risks are covered by appropriate hedges.
Voith uses a variety of derivative financial instruments suchas forward exchange contracts and interest rate swaps tohedge transactions. These instruments are defined anddocumented at the start of a hedge in line with the goals ofcorporate risk management.
To guard against political and economic risks associatedwith deliveries and ser­vices provided by the Group Divisions,
the Group buys commensurate insurance from government
export credit insurance agencies, from the private-sector insurance market and from banks. The Group also maintains
adequate provisions to cover all other operating risks.
No particular liquidity or financial risks are perceivable at thepresent time. For more information, please refer to the notes
to the consolidated financial statements.

Consolidated Financial Statements

Infrastructure risks
In the area of infrastructure risks, Voith primarily identifies IT
risks, human resources risks, compliance risks and environmental protection risks and contamination, against which theCompany takes specific countermeasures.
Our successful business activities are underpinned by upto-date, secure information technology. This is why wehave our own group IT unit which ensures that reliable dataprocessing ser­vices are provided from its own data center.
The IT experts at Voith manage the whole IT infrastructure
for the entire Group and also maintain the specific application systems used by each Group Division. To minimize
the risk of outages, redundancy is built into the central systems at two data-processing centers. As part of an emergency exercise, a data center was shut down in each of the
2009/10 and 2010/11 fiscal years and operation with the
backup systems was tested successfully. Moreover, various
initiatives were launched in the year under review to intensify
the topics of information security and data protection, andincrease awareness of them within the Group.
Highly qualified professionals and executives are a key toour products, our image and ultimately to the success andgrowth of Voith. When it comes to ensuring we have a sufficient number of such employees, we compete with otherinternational players and act with foresight. With a broad
spectrum of measures, such as training and development
programs, international career development prospects, performance-linked compensation systems, a family-friendly
human resources policy and flexible working hours, we offer
an attractive work environment. This is confirmed by our traditionally very low employee turnover rate.

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At Voith, we base all our actions on integrity and trust. Corruption is strictly prohibited in the Voith Group guidelines.
The clear and unambiguous guidelines and values definedby the Group’s Board of Management are summarized inthe Voith Code of Conduct. This is binding for all Voith employees worldwide and provides clear-cut rules of behavior
toward third parties such as business partners, competitors, political parties and government authorities. Compliance with these principles is monitored by the Group’s
Compliance Committee and the compliance officers in theGroup Divisions. Voith also supports all efforts to contain andeliminate corruption worldwide and demands integrity in acontext of fair competition. For compliance management in
the Voith Group, see section I.2. of this management report(“Values, guidelines, compliance”).
To avoid environmental and health risks, all production
processes in the Voith Group are subject to strict corporate
guidelines on quality, risk management, and industrial safety
and environmental protection. An integrated management
system monitors compliance with these guidelines and ensures that production and products meet consistently highquality and environmental standards. Since the 2009/10 fiscal year, data relevant to the environment has been systematically recorded and analyzed. Environmental risks canthus be identified at an early stage and appropriate countermeasures initiated. Adequate provision has been made forresidual risks.
No particular risks relating to the Group’s infrastructure areperceivable at the present time.

VIII.1.3. Risks to PerformanceContractual risks
Regular checks ensure that adequate provisions are madeto cover the legal risks throughout the Group. In particular,
these include risks relating to warranties, liability, contractual
penalties, guarantees and the possibility of inadequate orincorrect price calculations. Liability and property insurance
in line with standard industry practice is taken out to coverpotential damages and/or liability risks.
Appropriate provisions are made for special risks arising fromexisting contracts if these risks can be reliably quantified.
Technical risks
The technical risks identified by Voith are innovation-relatedrisks, sourcing risks and sales risks due to decreasing customer satisfaction.
Innovation-related risks are a key risk area for a technology group like Voith. The future profitability of the Company
hinges on its ability to develop marketable products andser­vices and use the most state-of-the-art production technologies and service processes. Voith invests large sums ofmoney to further improve and refine existing technologies,
and to research and develop new products, systems andser­vices. With more than 11 000 active patents to its nameand more than 400 new patents filed on average every year,
Voith ranks as one of the world’s most innovative companies
in the industries it serves.
Collaboration with suppliers on the global procurement markets involves three types of risk: supply outages, unforeseen cost increases and non-compliance with environmental

124 | Voith Annual Report 2011

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Consolidated Financial Statements

VIII.2. Opportunities
and social standards. We have embedded the measures tosecure our supplies—supplier selection and order processing—in our processes. Moreover, a permanent Group-widerisk management process has been implemented to identify
supply risks and the risk of insolvency among suppliers at an
early stage. The dual sourcing system excludes dependence
on individual suppliers to the greatest possible extent. Backup strategies are thus in place in case suppliers who provide
core components for the Group’s business pro­cesses should
default. Moreover, in the 2010/11 fiscal year Voith once again
used all means at its disposal to contain the risks posed bycost increases. It did so by concluding fixed-price contracts.
Suppliers’ compliance with environmental and social standards is checked by means of audits.

VIII.2.1. Macroeconomic opportunities

Our customers’ satisfaction is key to achieving sales success and maintaining or increasing our market share. For
this reason, we develop technologies for and in cooperation
with our customers that help them get ahead. Never let acustomer down: That is our goal and the guiding principle forour employees’ dealings with customers. Maintaining longterm partnerships is a high priority for us. We are proud tohave collaborated with many customers, suppliers and otherbusiness partners over generations—some of our relationships even go back over 100 years. In order to objectively
assess and enhance our customer service, we perform corresponding research.

In light of the potential of the emerging markets to catch up
in the areas of productivity, incomes and living standards,
and demographic development, the significance of theseregions for the global economy will continue to increase.
Voith offers the capital goods and ser­vices that are urgently
needed to develop the economic infrastructure in emerging
countries. This portfolio includes hydro power plants, paper
machines, components for the development of local public
transport and rail transport networks, products for use inpower plants, steel mills and production of raw materials,
and technical ser­vices for new factories and high-performance industries. We see participating in the dynamic development in these regions and contributing to their added
value as an opportunity for Voith. To take advantage of thesegrowth opportunities, we established new offices, production
sites and service centers and hired new employees in recent
years, particularly in Asia and Brazil. These investments indeveloping the international markets also benefit German
locations where research and development, quality control
and production are strengthened.

VIII.1.4. Overall Risk
To the best of our knowledge at the time this report went topress, there are no risks which could jeopardize the ability of
the Voith Group to continue as a going concern.

Emerging from the recession stronger than everNot only did Voith come through the recent recession without a slump in sales or results, it exhibited continued growthin this difficult phase for the global economy. We have usedthe economic crisis in order to tailor our product and service
portfolio as well as our organization to changed conditions.
Research and development activities have been pursued
with undiminished intensity and focused on the global challenges facing humanity and the needs of growth markets.
Even under difficult macroeconomic conditions, Voith’s diversified product and service portfolio offers the Group opportunities for profitable growth.

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VIII.2.2. Strategic opportunities
Global orientation
At Voith, internationalization is a long-established tradition.
Today, Voith has its own production, service and sales cen­ters in more than 50 countries in all regions of the world.
We are working on further globalizing our business. This isachieved by establishing new locations and expanding existing ones, not only for production but also for product development, as well as by putting down even deeper roots in
the regions. This global orientation enables us to participate
in and contribute to dynamic development in the world’s
growth regions. In the emerging markets, we see the opportunity to make an important contribution to the many infrastructure projects. In the highly developed industrial countries, we consider ourselves ideally positioned to participate
in modernizing existing plants with our ecologically friendly
technologies geared to sustainable business.
A diversified, profitability-focused portfolio
Under the umbrella of Voith GmbH, the four Group Divisions
protect the Group against excessive dependence on business in specific branches of industry. At the same time, theintegration of each of the Divisions in the Group as a wholeenables synergies to be leveraged by bringing together innovative strength and know-how. In this context, we endeavor—both in the Group and in each and every Group
Division—to achieve diversified sales structures according
to regions, markets and product groups. Greater attention ispaid to profitability aspects as regards the strategic development of the product portfolio.
Strong innovative power
As a global provider of leading-edge technology and industrial ser­v ices Voith attaches great importance to researchand development. Despite adverse economic conditions,

126 | Voith Annual Report 2011

Voith has invested over a quarter of a billion euros in R&D ineach of the last three fiscal years, producing key innovations
which lay the groundwork for future business successes. We
see a strategic growth opportunity in transferring our existing expertise to new areas of application, serving additionalparts of the value added chain in existing customer sectors
and developing new markets.
Long-term corporate development
The Voith Company has been owned by the Voith family
since its inception in 1867. To this day, the main concern of
the Board of Management, the Supervisory Board and theshareholders alike is to expand the successful company andpass it on in better shape than ever to the next generation.
Thanks to an appropriate dividend policy, Voith has sufficientfinancial resources to fuel continuous, attractive growth, thetrajectory of which can be planned over extended periods.
An equity ratio of 22.1% (previous year: 18.8%) and a stablefinancial position are the sound basis on which the Groupwill continue to develop successfully in the future.

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Consolidated Financial Statements

VIII.3. Internal control andrisk management system for the Groupfinancial reporting process
Proper and reliable accounting
As a company that raises funds on the capital markets, Voith
GmbH is required by Section 315 (2) No. 5 German Commercial Code (HGB) to describe the key elements of its internal control and risk management system with regard to
the Group financial reporting process.
The aim of the accounting-related internal control and risk
management system is to guarantee that accounts are prepared correctly and reliably and to ensure that consolidated
and separate financial statements comply with the applicableregulations.
The following structures and processes have been implemented in the Group:
The Corporate Board of Management of Voith GmbH bears
overall responsibility for the internal monitoring and risk management system with regard to the Group financial reporting
process. All levels of the Company (companies, Group Division management companies, Voith GmbH as management
holding company) are integrated through a strictly definedmanagement and reporting organization.
Accounting is decentrally organized. Accounting entries arerecorded individually by the companies in the Group. Assistance is obtained from external experts with regard to the accounting treatment of complex subareas, such as pensions.
The consolidated financial statements are prepared by adding information to the separate financial statements to create
standardized reporting packages which are then included in
the consolidation system. The boards of management of thecompanies issue documented declarations stating that thereporting package is complete, accurate and complies withthe applicable regulations.

Uniform recognition and measurement based on the regulations for the Voith GmbH consolidated financial statements
is ensured by Group accounting guidelines. Changed accounting rules are constantly adapted and communicatedby Voith GmbH. The quality of the guidelines is ensured byan ongoing exchange between the departments responsible.
Group-wide reconciliation of balances takes place worldwide
via an intranet-based platform. The deadlines for the different parts of the reporting package are stipulated in the
consolidation system and centrally monitored in the courseof the preparation process. All consolidation activities areundertaken centrally at Voith GmbH.
The control activities designed to ensure that consolidated
accounts are prepared properly and reliably include the analytical review as well as processing and inspection of key
and complex business transactions by various people. The
quality of financial reporting is also ensured by regularly reconciling planning scenarios and external accounts at all levels of the company. Checks on system access based on
an authorization concept as well as programmed plausibility
checks in the IT systems ensure that processes are complete and precise.
The internal audit department performs regular, independent
reviews of the functionality, correctness, reliability and efficiency of all internal control and risk management systems
in the Voith Group. Suitable measures are taken to remedy
any gaps or weaknesses that may be identified.

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IX. Forecast report
IX.1. Business environment
Generally positive economic expectations
overshadowed
As at the editorial deadline for this management report inNovember 2011, the overall situation was highly volatile andcharacterized by continued uncertainty. We expect economic growth to slow down in the 2011/12 fiscal year. The
International Monetary Fund (IMF), for example, forecasts
an increase in global gross domestic product of just 4.0%
for 2011 and 2012. This trend will vary considerably fromregion to region. At 1.9%, average growth in the industrialized countries in 2012 can be described as weak. Germany’s growth rate is likely to fall to 1.3% in 2012. In theemerging markets, by contrast, an increase of 6.1% is again
expected in 2012. The IMF predicts growth rates of 9.0%
for China, 7.5% for India and 3.6% for Brazil. The moderate
growth scenario from a global perspective is threatened bya range of risks in the industrialized countries which Voith isobserving closely. If the situation were to escalate criticallyin the further course of the year, particularly in the event of
one or more euro-zone countries defaulting on their sovereign debt, this would have additional, as yet unforeseeable
consequences which could also impact Voith’s businessdevelopment.

Voith markets with prospects for the future
In the Company’s opinion, all five markets served by Voith
will continue to see a moderate growth trajectory in the
coming two fiscal years. However, the nature and course ofthis trajectory will depend on the development of the global
economy as a whole, which is currently difficult to predict.
The energy market has achieved an economic turnaround.
The market is characterized by increasing demand, for bothclean, renewable energy and for electricity generated byconventional means. Hydro power will continue to play animportant role in the energy mix of the future.
Demand for oil and gas will rise due to the vast energy requirements in countries outside the OECD. Increased investing activity can be expected in the industry due to more
stringent safety requirements and investments in new equipment for extracting difficult-to-access reserves.
In the paper market, which is growing overall, the main impetus will continue to come above all from China, India andSouth America. Increased consumption of all types of paper
can be expected due to the rapidly growing middle classin these regions. The more mature markets offer selective
growth potential, particularly when it comes to board andpackaging papers as well as tissue papers.
The raw materials market is heavily dependent on the economy in the short term, but is characterized by a long-term
growth trend. Future development is driven by growth andindustrialization in the up-and-coming Asian countries on the
one hand and by increasing global energy demand linked tohigh demand for coal on the other.
All the segments of the transport & automotive market thatare relevant for Voith are expected to develop positively during the coming two years.

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Consolidated Financial Statements

IX.2. Future development of the Company
Continued positive development based on slower
growth of the global economy
For the coming two fiscal years, we expect business to continue to develop well for the Voith Group, and assume that all
four Group Divisions will further increase their sales and theirprofit from operations in the reporting periods 2011/12 and2012/13. Our expectations for Voith are based in particular
on infrastructure expansion in Asia, with China accounting
for a large portion of new investments during this phase.
This development forecast is based on the assumption thatthe global economy will grow more slowly but will not fallback into recession.
At Voith Hydro, the high number of orders on hand will leadto rising sales in the coming two years. Increasing sales will
also affect earnings. The unusually high volume of orders received in the 2010/11 fiscal year cannot be rolled forward forthe coming years. In the next two fiscal years, we expect themarket here to return to normal, with the number of orders
received stabilizing at virtually the same level as before thecrisis year 2008/09. Voith Hydro sees the greatest potential in the two fiscal years in Brazil and India, where a large
number of hydro power plant projects, some of them largescale, are scheduled. In North America and Europe modernization projects and new plants are planned. In Europe,
an improvement can be expected in particular in the areaof pumped storage plants. However, achieving the budgeted figures will hinge on the actual realization of announced
large-scale projects. In the medium term, too, we see theprospects for Voith Hydro as positive. As a result of the nuclear disaster in Japan, the hydro power sector is enjoying
increasing acceptance worldwide. This will have a delayed
effect due to the long planning and approval times involved.
Moreover, in connection with the expansion of renewableenergy sources, increased demand is expected in the areaof pumped storage power plants. We will do our utmost to
play an appropriate part in this attractive market.
At Voith ­Industrial ­S ervices, we expect satisfactory sales
growth and an increasing profit from operations for the
2011/12 and 2012/13 fiscal years. In the short term, theGroup Division sees a good order situation in all the sectors
served by the Energy-Petro-Chemicals division. As a resultof the new energy concept in Germany, the energy unit isfocusing on technologies for regenerative and conventionalenergy generation. In the business with automobile manufacturers and suppliers, we expect a further slight increase
following a strong year under review. From a regional perspective, growth impetus will come above all from Asia, Brazil and the Middle East. In particular, the return on sales ofVoith ­Industrial ­Services should continue to improve during
the coming two fiscal years.

Voith Annual Report 2011 | 129

Voith ­Paper plans a higher level of sales and profit from operations in the coming two fiscal years. We also expect orders
received to be up over both years. Our planning is based on
growing consumption of all kinds of paper worldwide. As thepaper market grows, the paper industry will be faced withrising prices for raw material and energy. Fiber sources, andenergy and water consumption are therefore becoming central challenges for paper manufacturers. With our environmentally compatible solutions that reduce operating costs,
we consider ourselves ideally placed in this highly competitive market and also see good medium-term opportunities
for Voith P­ aper’s technological solutions.
For the 2011/12 and 2012/13 fiscal years, Voith ­Turbo expects increasing sales and profit from sales. Orders received
in the 2011/12 fiscal year are anticipated to remain at thehigh level of the previous period and to see a considerable
increase in the reporting period 2012/13. All four divisions—
Industry, Marine, Rail and Road—are expected to contribute to this positive development. In the Industry division, themining sector, the oil and gas industry as well as energy
producers and mechanical and plant engineering companies
will continue to generate high demand in the medium term;
China and India remain regional growth drivers, together with
the Middle East in the oil and gas business. The Marine divi-

130 | Voith Annual Report 2011

sion expects the order situation to be good in Central andSouth America, and sees sustained growth potential in thesegment for offshore applications. The outlook for the Raildivision is also generally positive. There is, however, continued uncertainty regarding development in China, where thegovernment is reviewing the expansion of the high-speed
network. In the Road division, Voith expects on the whole
positive development.
Profitable growth in the GroupFor the 2011/12 and 2012/13 fiscal years, Voith expects
Group sales to increase based on the assumption of a continued, albeit slower, growth of the global economy. This
expectation is founded in the high number of orders on handat the end of the year under review, the very high level of orders received, which, with the exception of the normalization
effects at Voith Hydro described above, developed at an almost constantly high level in the 2010/11 fiscal year, and theeven more marked increase in new orders anticipated in the
2012/13 fiscal year. Thanks to an improved product mix andefficiency gains, Voith looks forward to even better results forthe planning period ahead, both in terms of profits from its
operations and its net income. Our business planning anticipates higher investments. From a regional perspective, mostThe Group

Contributions

Management Report

Consolidated Financial Statementsof the investments are again planned for the current growthmarkets of China, India and Brazil. These investment volumes are financed using cash flow from operating activities.
No major changes to the financing structure are planned.
Forecasts are always subject to considerable uncertainty.
A host of macroeconomic and industry-specific factors caninfluence, positively or negatively, the corporate planningof individual Group Divisions or the entire Group. We willclosely observe further developments and, where necessary,
respond rapidly and decisively to changing conditions. In
light of the greater general economic risks and in order toavoid achieving growth at the cost of increasing businessrisk, we will thoroughly check large investments in particularprior to approval, taking into account the development of therelevant business. In this way, we wish to avoid setting up
capacities that cannot be utilized promptly. The aim of Voith
GmbH’s Board of Management is to keep the Company ona secure footing for the long term and to actively steer it outof this challenging decade of the 21st century. Voith is ideallyequipped for the challenges of the future: we have a portfolio that is fit for the future, sufficient liquidity with reliablelong-term access to capital, an efficient organization and an
outstanding workforce.

Voith Annual Report 2011 | 131

North America
Sales: €714 million

EuropeEmployees: 4 966

Sales: €2 659 million
Employees: 24 891

AfricaSales: €106 million
Employees: 117

Asia /Australia /Oceania
Central/South America
Sales: €563 million
Employees: 6 064

Sales: €1 552 million
Employees: 4 653

The Group

Contributions

Management Report

Consolidated Financial Statements

Consolidated Financial Statements

134

Consolidated statement of income

135

Consolidated statement of comprehensive income

136

Consolidated balance sheet

138

Statement of changes in equity

140

Consolidated cash flow statement

141

Notes to the consolidated financial statements for the 2010/11 fiscal year

163

Notes to the consolidated statement of income

168

Notes to the consolidated balance sheet

189

Notes to the consolidated cash flow statement

190

Notes on segment reporting

192

Segment information by business segment

194

Segment information by region

195

Other notes

211

Responsibility statement

Voith Annual Report 2011 | 133

Consolidated statement of income
for the period from October 1, 2010 to September 30, 2011in € thousandsNote2010/11

2009/10

Sales

(1)

5 593 591

5 197 606

Changes in inventories and other own work capitalized(2)

27 522-4 591

5 621 113

5 193 015

Total output

Other operating income(3)

392 663

328 868

Cost of material(4)-2 309 304-2 080 888

Personnel expenses(5)-1 982 615-1 851 461-188 976-162 927-1 116 468-1 073 586

416 413353 021-14 124-13 277402 289

339 744

Share of profits from associates

3 659

4 219

Interest income

19 43334 535Interest expenses-101 832-105 167-1 859-39 318

321 690234 013-122 040-112 545

Net income

199 650

121 468

Net income attributable to shareholders of the parent company

178 449

100 053

Net income attributable to holders of non-controlling interests

21 201

21 415

Depreciation and amortization
Other operating expenses(6)

Operational result before non-recurring result

Non-recurring result(7)

Operational result

Other financial result(8)

Income before taxes

Income taxes

134 | Voith Annual Report 2011(9)

The Group

Contributions

Management Report

Consolidated Financial Statements

Consolidated statement ofcomprehensive income
for the period from October 1, 2010 to September 30, 2011in € thousands

2010/11

2009/10Net income

199 650

121 468

Gains/losses (-) on available-for-sale financial assets

89 31224 368

Gains/losses (-) on cash flow hedges

6 007-5 725

Gains/losses (-) on currency translation-8 47355 125-125

12 28815106

Tax on other comprehensive income-19 734-979

Other comprehensive income

67 00285 183

Total comprehensive income

266 652

206 651

Total comprehensive income attributable to shareholders of the parent company

243 185

177 949

Total comprehensive income attributable to holders of non-controlling interests

23 46728 702266 652

206 651

Gains/losses (-) on net investments in foreign operations
Share of associates in other comprehensive income

Voith Annual Report 2011 | 135

Consolidated balance sheet
as at September 30, 2011
Assetsin € thousands

A.

Note

2011-09-30

2010-09-30

Non-current assets

I.

Intangible assets(10)

718 057

702 744II.

Property, plant and equipment(11)

1 162 045

1 155 131

III.

Investments in associates(12)

29 23320 811IV.

Securities(16)

261 602173 198

V.

Other financial assets(12)

31 41632 484VI.

Other financial receivables(15)

93 204

105 727

VII. Other assets(15)

41 73861 462

VIII. Deferred tax assets(9)

140 129

156 256

2 477 424

2 407 813(13)

822 079784 051

Total non-current assets

B.

Current assets

I.

Inventories

II.

Trade receivables(14)

1 150 432

1 139 697

III.

Securities(16)

49 94441 401

IV.

Income tax assets

79 10981 153

V.

Other financial receivables(15)

131 414

159 948

VI.

Other assets(15)

167 582

110 912(17)927 140

1 175 359

3 327 700

3 492 521

10 054

1 447

Total current assets

3 337 754

3 493 968

Total assets

5 815 178

5 901 781

VII. Cash and cash equivalents

VIII. Assets held for sale

136 | Voith Annual Report 2011(18)

The Group

Contributions

Management Report

Consolidated Financial Statements

Equity and liabilitiesin € thousandsNote2011-09-30

2010-09-30

A.

EquityI.

Issued capital

120 000

120 000

II.

Revenue reserves

901 450

810 467

III.

Other reserves

125 337

60 601IV.

Profit participation rights

6 600

6 600

1 153 387

997 668

Equity attributable to shareholders of the parent company
V.

Profit participation rights

91 80076 800VI.

Other interests

42 14432 788133 944109 588(19)

1 287 331

1 107 256

Equity attributable to holders of non-controlling interests

Total equity

B.

Non-current liabilities

I.

Provisions for pensions and similar obligations(20)

423 895

408 991(21)

155 347

163 979

7 263

4 660

934 292

1 180 325

II.

Other provisions

III.

Income tax liabilities

IV.

Bonds, bank loans and other interest-bearing liabilities

(22)

V.

Other financial liabilities(24)

28 13038 404VI.

Other liabilities(24)

82 36284 151

VII. Deferred tax liabilities(9)

130 927

134 599

1 762 216

2 015 109

Total non-current liabilities

C.

Current liabilities

I.

Provisions for pensions and similar obligations(20)

25 67925 839(21)

303 784

336 130

109 905

94 783327 084

296 397

II.

Other provisions

III.

Income tax liabilities

IV.

Bonds, bank loans and other interest-bearing liabilities

(22)

V.

Trade payables(23)

587 805

525 481

VI.

Other financial liabilities(24)

325 897359 901(24)

1 078 690

1 140 885

2 758 844

2 779 416

6 787

0

Total current liabilities

2 765 631

2 779 416

Total equity and liabilities

5 815 178

5 901 781

VII. Other liabilities

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

(18)

Voith Annual Report 2011 | 137

Statement of changes in equity
Equity attributable
to shareholders of the parent companyin € thousands

Issuedcapital

Revenue
reserves

Available-for-salefinancial assets

Cash flow
hedgesCurrencytranslation

2010-10-01

120 000

810 467

24 164-5 53449 42971 175

4 396-10 744

71 175

4 396-10 744

95 339-1 13838 685

Net income

178 449

Other comprehensive income
Total comprehensive income0

178 449

Allocation of reserves toprofit participation rights-4 587

Acquisition of non-controlling interests-1 112

Share of income attributable to profit
participation rights
Issue of profit participation rights
Dividends-76 000

Contributions from holders
of non-controlling interests
Non-controlling interests—put options-1 243

Other adjustments-4 524

2011-09-30

120 000

901 450

Equity attributable
to shareholders of the parent companyin € thousands

Issuedcapital

Revenue
reserves

Available-for-salefinancial assets

Cash flow
hedgesCurrencytranslation

2009-10-01

120 000

737 263-442-1 565884

24 606-3 96948 54524 606-3 96948 54524 164-5 53449 429Net income

100 053

Other comprehensive income
Total comprehensive income0

100 053

Allocation of reserves toprofit participation rights-4 405Acquisition of non-controlling interests-10 439

Share of income attributable to profit
participation rights
Dividends-9 949Contributions from holders
of non-controlling interests
Non-controlling interests—put options-1 752Other adjustments
2010-09-30

138 | Voith Annual Report 2011-304
120 000

810 467

The Group

Contributions

Management Report

Consolidated Financial Statements

Equity attributable to holders
of non-controlling interests
Net investments inforeign operations

Profit participation rights

Total

Profit participation rights

Other interests

Total

Total equity-7 4586 600

997 668

76 80032 788109 588

1 107 256

178 449

21 20121 201

199 650

64 736

2 266

2 266

67 00223 46723 467266 652

4 224

0

-531

-1 643-91-91

0

243 1850363-4 2244 224-1 112-363-7 549

6 600

-531

-363

-4 224-4 224-4 5870

15 000

15 000

15 000-76 000-17 755-17 755-93 755

0

4 728

4 728

4 728

-1 243-4 077-4 077-5 320-4 524

3 524

3 524

-1 00042 144133 944

1 287 331

1 153 387

91 800Equity attributable to holders
of non-controlling interests
Net investments inforeign operations

Profit participation rights

Total

Profit participation rights

Other interests

Total

Total equity-16 1726 600

846 568

76 80026 842103 642950 210100 053

21 415

21 415

121 468

77 896

7 287

7 287

85 18328 70228 702206 6514 224

0-1 544-11 983-4 224-4 405

8 714
8 714

0

177 949

0181-4 2244 224-10 439-181-7 458

6 600

-181

-1 544-4 224-9 949-10 476-10 476-20 425

0

505

505

505

-1 752-9 299-9 299-11 051-304-1 942-1 942-2 24632 788109 588

1 107 256

997 668

76 800Voith Annual Report 2011 | 139

Consolidated cash flow statementin € thousands

2010/11

2009/10

Income before taxes

321 690234 013

Depreciation and amortization

192 016205 551

Interest expenses/income

82 39970 632Other non-cash items-8 221

9 999

Gains (losses) from the disposal of property, plant, equipment and intangible assets-10 269-2 077

Gains (losses) from investments-137-2 343

Changes in other provisions and accruals-39 486-20 981

Change in net working capital-127 539

38 492

Interest paid

-73 409-74 695

Interest received

16 61233 872

Dividends received

2 253

5 252

Tax paid-112 390-107 654

Cash flow from operating activities

243 519390 061

Investments in property, plant, equipment and intangible assets-210 916-233 417

Proceeds from disposal of property, plant, equipment and intangible assets

26 07218 059Investments in financial assets-13 160-8 945-64-117-10 495

0

938

2 215

Changes in investments in securities-8 94963 143

Cash flow from investing activities-216 574-159 062

Dividends paid

-98 342-24 830

Contributions from holders of non-controlling interests

4 728

505

Acquisition of non-controlling interests-1 643-15 292

Other changes in equity

15 0000

New bonds, bank loans and overdrafts

103 326

49 675

Repayment of bonds, bank loans and overdrafts-349 144-8 58638 185-33 804

Cash flow from financing activities-287 890-32 332

Total cash flow

-260 945

198 667

Subsequent payments on purchase price of previous acquisitions
Acquisitions of subsidiaries
Proceeds from the disposal of financial assets

Changes in other interest-bearing financial receivables and liabilities

Exchange rate movements, valuation changes and changes in consolidated Group12 72653 565

Cash and cash equivalents at the beginning of the period

1 175 359

923 127

Cash and cash equivalents at the end of the period

927 140

1 175 359

For more information, refer to the “Notes to the consolidated cash flow statement”.

140 | Voith Annual Report 2011

The Group

Contributions

Management Report

Consolidated Financial Statements

Notes to the consolidated financial
statements for the 2010/11 fiscal year
General information

Consolidated GroupThe legal form of Voith AG changed as of October 1, 2010
to Voith GmbH. Voith GmbH (Voith) continues to operate asa company which raises funds on the capital markets fromits headquarters at St. Pöltener Str. 43, Heidenheim an derBrenz, and is required by Sec. 290 in conjunction with Sec.
315a German Commercial Code (HGB) to prepare consolidated financial statements. The Company is entered in thecommercial register (under the number HRB 725621) at theRegistration Court in Ulm, Germany. The consolidated financial statements prepared by Voith are published in the elektronischer Bundesanzeiger [Electronic German Federal Gazette].

The Voith Group is divided into four Group Divisions: Voith
Hydro, Voith ­Industrial ­Services, Voith ­Paper and Voith ­Turbo.
Details of the business activities pursued by the Group Divisions are provided in the explanatory notes to the segment
reporting.

The Board of Management of Voith GmbH authorized theconsolidated financial statements for presentation to the Supervisory Board on November 22, 2011.
Pursuant to EU Regulation (EC) No. 1606/2002 in conjunction
with Sec. 315a HGB, the consolidated financial statementsof Voith GmbH for fiscal 2010/11 were prepared in accordance with International Financial Reporting Standards (IFRS)
and the interpretations of the International Financial ReportingStandards Interpretations Committee (IFRS IC). This regulation requires all companies that participate in the capital markets (i.e. whose issued debt is traded on a regulated market in
an EU member state) and are domiciled in the EU to prepare
their consolidated financial statements solely on the basis of
IFRS as endorsed by the EU. The term IFRS also includes theInternational Accounting Standards (IAS) that are still valid.
All binding pronouncements of the International AccountingStandards Board (IASB) as well as the additional requirementsof German commercial law pursuant to Sec. 315a HGB havebeen taken into account.

In addition to those companies acting as holding companies,
the 2010/11 consolidated financial statements also include
all the Group’s major manufacturing, service and sales companies both in Germany and other countries as at September 30 of each fiscal year. The financial statements of thesubsidiaries are prepared for the same reporting period as
for the parent, using consistent accounting policies.
Subsidiaries are consolidated in full at the time when theVoith Group obtains control over them and are deconsolidated as soon as the parent loses control over the subsidiary.
In four cases, Voith exercises control as defined in IAS 27
owing to a majority of voting rights in the relevant decisionmaking bodies.
In two cases, while Voith has a majority shareholding it does
not control the company, as the composition of the decision-making bodies is based on equal representation.

The preparation currency for the consolidated financial statements is the euro. Except where explicitly stated otherwise,
all amounts are stated in thousands of euros (€ thousands).
In the balance sheet, assets and liabilities are stated either
as current or non-current items in line with their maturity. Assets and liabilities that will be realized or will mature within 12
months of the end of the period under review are classified as
current. Inventories and trade receivables and payables arealways classified as current items. The consolidated statement of income was prepared in accordance with the natureof expense method.

Voith Annual Report 2011 | 141

The following companies are included in the consolidated
financial statements:

Pursuant to Sec. 264b HGB, the following limited partnerships are exempt from the duty of corporations to prepare,audit and disclose financial statements.

2011-09-30 2010-09-30
Voith GmbH and its fully
consolidated subsidiaries:
Germany

68

75

Other countries

151

148

Total fully consolidated companies

219

223

Associates accounted forusing the equity method:
Germany

44

Other countries

11

12

Total associates accounted
for using the equity method

15

16

The main companies consolidated in full for the first timein the period under review are the MinPlus-CDEM Groupin Vaassen, Netherlands, Hydronaut s.r.l. in Milan, Italy,
and Terne AS, Mongstad, Norway, which was previously­accounted for using the equity method.
The reduction in the number of fully consolidated domestic
companies is due in the main to the fact that companies
were merged within the Group.
An exhaustive list of the companies and other investments
included in the consolidated financial statements is an integral part of the consolidated financial statements and is also
filed as a section of the consolidated financial statementswith the elektronischer Bundesanzeiger in German.
Companies in which Voith GmbH has the power to directly
or indirectly exercise a significant influence on financial andoperating policy decisions (associates) are accounted forusing the equity method. FlowLink Systems Private Ltd.,
Coimbatore, India, 50% of which is held by Voith, and Voith­Industrial S­ ervices Qatar W.L.L., Doha, Qatar, 49% of which
is held by Voith, were included for the first time in the period
under review. Terne AS, Mongstad, Norway, was fully consolidated for the first time in the period under review. Two
foreign companies accounted for using the equity method
were dissolved in the period under review.

142 | Voith Annual Report 2011

VIEH	Voith ­­Industrial Services­­
Process GmbH & Co. KG,
Stuttgart
VIAS	Voith ­­Industrial Services­­
Ltd. & Co. KG, Stuttgart
VIGG	Voith ­­Industrial Services­­
Grundstücks GmbH & Co. KG,
Stuttgart
VIME 	DIW Mechanical Engineering GmbH & Co. KG,
Stuttgart
VIPH 	Voith ­­Industrial Services­­­Paper GmbH & Co. KG,
Heidenheim
VIPS 	DIW Instandhaltung GmbH & Co. KG, Heidenheim
VISD 	DIW Gastro GmbH & Co. KG, Munich
VISK 	Voith ­­Industrial Services
GmbH & Co. KG, Stuttgart­­
VIST 	DIW Instandhaltung Ltd. & Co. KG, Stuttgart
VIZ	Voith ­­Industrial Services
Holding GmbH & Co. KG,­­
Heidenheim
VPAH 	Voith ­Paper Automation GmbH & Co. KG,
Heidenheim
VPES	Voith ­Paper Environmental Solutions GmbH & Co. KG,
Ravensburg
VPFZ 	Voith ­Paper Fabrics GmbH & Co. KG, Heidenheim
VPH 	Voith ­Paper GmbH & Co. KG, Heidenheim
VPMG 	Voith ­Paper Krieger GmbH & Co. KG,
Mönchengladbach
VPR 	Voith ­Paper Fiber & Environmental Solutions GmbH& Co. KG, Ravensburg
VPRR 	Voith ­Paper Rolls GmbH & Co. KG, Heidenheim
VPWE 	Voith ­Paper Rolls GmbH & Co. KG, Weißenborn
VPZ	Voith ­Paper Holding GmbH & Co. KG, Heidenheim
VHH 	Voith Hydro GmbH & Co. KG, Heidenheim
VHHC	Voith Hydro Ocean Current Technologies GmbH &Co. KG, Heidenheim
VHZ 	Voith Hydro Holding GmbH & Co. KG, Heidenheim
VTA 	Voith ­Turbo GmbH & Co. KG, Heidenheim
VTGO	Voith ­Turbo Aufladungssysteme GmbH & Co. KG,
Gommern
VTHL 	Voith ­Turbo H+L Hydraulic GmbH & Co. KG,
Rutesheim
VTKH	Voith ­Turbo Hochelastische Kupplungen GmbH &Co. KG, Essen

The Group

Contributions

Management Report

VTLH	Voith T­ urbo Lokomotivtechnik GmbH & Co. KG,
Heidenheim
VTRH 	Voith T­ urbo Advanced Propeller Technologies
GmbH & Co. KG, Hohen Luckow
VTSH 	Voith T­ urbo Schneider Propulsion GmbH & Co. KG,
Heidenheim
VTSK 	Voith T­ urbo Scharfenberg GmbH & Co. KG,
Salzgitter
VTWH	Voith T­ urbo Wind GmbH & Co. KG, Heidenheim
VTZS	Voith T­ urbo Verdichtersysteme GmbH & Co. KG,
Zschopau
VODG 	Voith Dienstleistungen und Grundstücks GmbH &Co. KG, Heidenheim
VOC 	Voith Composites GmbH & Co. KG,
Garching near Munich
VZB 	J.M. Voith GmbH & Co. Beteiligungen KG,
Heidenheim

Consolidated Financial Statements

VHFK	Voith Fuji Hydro K. K., Kawasaki-shi/Japan
VHP 	Voith Hydro Ltda., São Paulo (SP)/Brazil
VHPO	Voith Hydro GmbH & Co KG, St. Pölten/AustriaVHS	Voith Hydro Shanghai Ltd., Shanghai/China
VHY	Voith Hydro Inc., York (PA)/USA
VTI	Voith ­Turbo, Inc., York (PA)/USA
VICU	Voith ­­Industrial ­­Services Inc., Cincinnati (OH)/USA
VIKI	Voith ­­Industrial ­­Services GmbH, Kirchseeon
VIW	DIW Instandhaltung GmbH, Vienna/Austria
VIWA	Voith ­­Industrial ­­Services Limited,
Warwick/United Kingdom
Business combinations in fiscal 2009/10
There were no business combinations in fiscal 2009/10.
Business combinations in fiscal 2010/11

The following corporations do not have to fulfill the duty
to prepare and disclose financial statements provided thatthe prerequisites in accordance with Sec. 264 (3) HGB are
met because they are included in the consolidated financial
statements of Voith GmbH.
VOFS	Voith Financial ­Services GmbH, Heidenheim
VOFZ	Voith Finance GmbH, Heidenheim
Pursuant to Sec. 264b No. 3 HGB and Sec. 264 (3) No. 4
HGB, the consolidated financial statements of Voith GmbHare filed with the elektronischer Bundesanzeiger.
In addition to the companies listed above, the following significant companies are also included in the consolidated financial statements:
VPFS	Voith P­ aper Fabric & Roll Systems Inc.,
Wilson (NC)/USA
VPA	Voith P­ aper Inc., Appleton (WI)/USA
VPIT	Voith IHI P­ aper Technology Co., Ltd., Tokyo, Japan
VPP	Voith P­ aper Máquinas e Equipamentos Ltda.,
São Paulo (SP)/Brazil
VPS	Voith P­ aper GmbH, St. Pölten/Austria
VPSO	Voith P­ aper S.r.L., Schio (Vicenza)/Italy

Acquisition of MinPlus-CDEM Holding B.V.
The Voith ­Paper Group Division purchased all of the interestsand voting rights in MinPlus-CDEM Holding B.V. (Vaassen,
Netherlands) and thus in its subsidiaries as at January 14,
2011. The know-how and patents of CDEM allow Voith ­Paper
to manufacture sludge processing facilities. These facilities
provide the customers of Voith ­Paper with a unique solution
for their sludge processing in the paper manufacturing pro­cess. They round off Voith ­Paper’s product portfolio, emphasizing the company’s ideal suitability as a business partner
for environmentally aware one-stop solutions for the paperindustry.
Part of the intangible assets purchased, e.g. the know-how ofthe employees, cannot be recognized, as the recognition criteria are not met. Apart from that, the goodwill stems from theaforementioned expected positive effects for the Voith ­Paper
Division. The goodwill is not tax deductible.

Voith Annual Report 2011 | 143

The following amounts resulted for the assets and liabilities
purchased:

The other combinations in the period under review were as
follows:

Balance sheet itemin € thousands
Intangible assets
Receivables
Cash and cash equivalents

Fair values on theacquisition date
8 218
8
103

Liabilities and deferred tax liabilities- 2 193

Carrying amount

6 136

Goodwill

3 846

Purchase price of the interests purchased

9 982

Cash and cash equivalents-103

Amount financed by liabilities
Cash outflows

Other business combinations

0
9 879

Consideration in the form of cash and cash equivalents has
already been given in full. There are no other purchase pricecomponents. No purchase price adjustments are planned.
Under an agreement for advisory ser­vices, Voith ­Paper paid
€200 thousand to the seller in 2011 (recognized as other operating expenses). A loan of €500 thousand was granted tothe seller for the duration of five years (recognized in noncurrent assets in the balance sheet).

Acquisition of the majority of interests in Terne AS,
Mongstad, Norway
The Voith ­Industrial ­Services Group Division stepped up its
interests and voting rights from 40% to 60% with effect from
July 1, 2011 and thus obtained control. The purchase pricepayable for the additional interests purchased was paid in fullin the form of cash and cash equivalents. There are no otherpurchase price components. No purchase price adjustments
are planned. Terne AS is an industrial company that provides
multidisciplinary (electrical/mechanical) projects and ser­vices.The acquisition is intended to increase Voith ­Industrial­Services’ presence in the Norwegian petrochemical market.
Part of the intangible assets purchased, e.g. the know-how
of the employees, cannot be recognized, as the recognition
criteria are not met. Apart from that, the goodwill stems fromthe aforementioned expected positive effects for the Voith­Industrial ­Services Division. The equity investment in Terne AS
was previously accounted for in the consolidated financial
statements using the equity method. There were business
relationships between the company acquired and the Voith
Group prior to the acquisition in the form of completed sales
and ser­vices. These relationships between the acquirer andthe company acquired existing as at the date of the businesscombination are not part of the acquisition method. Open
receivables and liabilities are settled in the course of ongoing
business transactions.

The incidental acquisition costs amounted to €22 thousand.
In fiscal 2010/11, MinPlus-CDEM Holding B.V. and its subsidiaries contributed sales totaling €475 thousand and a net lossof €176 thousand to the Voith Group’s consolidated statement of income. If the business combination had alreadytaken place on October 1, 2010, the Group’s sales would
have been €5 594 million and the Group’s net income for theyear would have been €199 million.

144 | Voith Annual Report 2011

Acquisition of a business division of
Alema Concept SAS, Toulouse, France
The Voith I­ndustrial S­ ervices Group Division acquired thebusiness operations of the French engineering service provider Alema Concept SAS (Toulouse, France) through an asset deal with effect from July 1, 2011, thereby expanding
its offering for the aerospace market. The purchase pricepayable was paid in full in the form of cash and cash equivalents. There are no other purchase price components. No

The Group

Contributions

Management Reportpurchase price adjustments are planned. In addition to theassets and liabilities taken over by the acquiring company,
further intangible assets were recognized provided that therecognition criteria were met. The goodwill recognized in the
consolidated financial statements represents the positive
development of the Voith I­ndustrial S­ ervices Group Division
expected from taking over the operations.
Acquisition of a business division from
EBARA Corporation
Effective April 22, 2011, the Voith Hydro Group Division acquired the assets belonging to the Hydro Power Turbines
business division from EBARA Corporation, Tokyo, Japan, as
part of an asset deal. The assets taken over mainly involve
registered patents, technical know-how and other intangible
assets. No liabilities were taken over. The main objective ofthe takeover is to secure business possibilities in the areaof restoring, maintaining and overhauling turbine facilities,
particularly those installed by EBARA. The purchase pricepayable was paid in full in the form of cash and cash equivalents. There are no other purchase price components. Nopurchase price adjustments are planned. The purchase pricepaid represents the value of the intangible assets taken over;there was no excess goodwill payable.
The incidental acquisition costs for the other business combinations amounted to €316 thousand in total.
The other business combinations result in total sales of€2 275 thousand and a contribution to the statement of income of the Voith Group amounting to €291 thousand in the
2010/11 fiscal year. If the business combination had alreadytaken place on October 1, 2010, the Group’s sales would
have been €5 601 million and the Group’s net income for theyear would have been €200 million.

Consolidated Financial Statements

The following amounts of assets and liabilities were acquiredin the fiscal year from the acquisitions presented in a condensed manner:
Balance sheet item
Fair values on theacquisition datein € thousands
Intangible assets

2 507

Other non-current assets

46

Inventories

763

Receivables

1 126

Other assets

1 402

Cash and cash equivalents

2 761

Provisions-1 744

Liabilities and deferred tax liabilities-2 851

Carrying amount

4 010

Value of old interests recognized to date

-1 578Non-controlling interests-1 476

Goodwill

2 421

Purchase price of the interests purchased

3 377

Cash and cash equivalents-2 761

Amount financed by liabilities
Cash outflows

0616

Based on current assessments, all of the receivables acquired are fully recoverable. The total goodwill reported is not
tax deductible. The remeasurement of the interests shownin the table above resulted in an accounting gain of €225
thousand. This was reported in the item share of p
­ rofits fromassociates. The non-controlling interests were recognized atfair value. This was based on benchmark prices from contractual agreements with shareholders in the past.

Voith Annual Report 2011 | 145

Basis of consolidation
In relation to business combinations in previous years, expenses of €5 763 thousand (previous year: €4 995 thousand)were recognized in the fiscal year under review for writedowns on assets disclosed in the context of purchase priceallocation.
Acquisition in fiscal 2010/11 of interests in entities overwhich the Group already has control
In fiscal 2010/11, further interests were acquired in entities
over which the Group already has control. At Hydronauts.r.l., Milan, Italy, the interest was stepped up to 60% witheffect from July 1, 2011. The remaining 15% in Voith ­Turbo
Advanced Propeller Technologies GmbH & Co. KG, Rostock, was taken over with effect from October 1, 2010. The
total purchase price paid for both transactions amounted
to €1 643 thousand. The total for Group equity changed
accordingly.
Sale of subsidiaries
A subsidiary with non-current assets of €853 thousand, current assets of €1 471 thousand and liabilities of €979 thousand was sold in the fiscal year. A loss of €1 345 thousand
was realized in the course of the sale. This was presented in
the non-recurring result.

Acquisition accounting is performed using the acquisition
method in accordance with IFRS 3 (revised). Accordingly,
the consideration transferred to the seller plus the amount of
any non-controlling interests and the fair value of the previously held equity interests in the acquiree are offset against
the fair value of the acquired assets and liabilities as at
the acquisition date. Any excess of cost over the carrying
amount is capitalized as goodwill. Excesses of the carrying
amount over cost are recognized in profit or loss.
Any contingent consideration is recognized at acquisitiondate fair value. Subsequent changes to the fair value of thecontingent consideration which is deemed to be an asset
or liability is recognized in accordance with IAS 39 either in
profit or loss or as a change to other comprehensive income.
If the contingent consideration is classified as equity, it is notremeasured and its subsequent settlement is accounted forwithin equity.
In the case of business combinations achieved in stages thatgive rise to control over an entity, or in the case of disposalsof shares which result in loss of control, the previously heldor remaining equity interests are remeasured at fair value
through profit or loss.
A change in the parent’s ownership interest in a subsidiarythat does not result in a loss of control is accounted for as
an equity transaction. This is why business combinations
achieved in stages where the Group already has control ordisposals of shares without a loss of control are recognizeddirectly in equity from fiscal 2009/10 onwards.

146 | Voith Annual Report 2011

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Contributions

Management Report

Consolidated Financial Statements

Foreign currency translation
Business combinations involving companies that are under
the common control of one or more parties are presented
using the pooling-of-interest method. Under this method,
gains or losses on disposal are, for reasons of immateriality, offset directly in equity in the reserves. In the case of
acquisitions, excesses of cost over the carrying amount andexcesses of the carrying amount over cost are offset in full
against reserves.
The same accounting policies are used to determine Voith’sshare in equity of all companies accounted for using theequity method.
Receivables and liabilities between the consolidated entities
are netted. Intercompany profits in inventories and non-current assets are eliminated in the consolidated statement ofincome. Intercompany sales and other intercompany income
are netted against the corresponding expense. Deferred tax
is recognized for consolidation transactions that are recognized in profit or loss.

The consolidated financial statements are presented ineuros, which is Voith GmbH’s functional currency. Financial statements prepared by subsidiaries that use a different
functional currency are translated as follows:
The equity of foreign entities included in the consolidated
financial statements is translated at historical rates. All otheritems on the balance sheet are generally translated to thepresentation currency at the rates applicable as of the reporting date. Goodwill arising from business combinations
before transition to IFRS is an exception to this rule and is
still translated at historical rates.
In the statement of income, income and expenses are translated at the average exchange rates. Retained earnings andlosses are translated using the relevant historical exchange
rate.
Differences arising from currency translation are netted withother reserves.
Foreign currency transactions in local financial statements
are translated at the exchange rate on the effective date of
the transactions concerned. At fiscal year-end, the resultant
monetary items are measured at the closing rate and any
exchange rate gains or losses are recorded as unrecognized
gains or losses in profit or loss.
Exchange differences arising from loans denominated in foreign currencies (where these are used to hedge a net investment in foreign operations) are recognized in equity until theunderlying net investment is disposed of. These exchange
differences give rise to deferred tax items that are also recognized in equity.

Voith Annual Report 2011 | 147

In the period under review, currency translation was basedon the following key exchange rates:
Exchange rates between the euro and the main foreign currencies in the Voith Group:
Closing rate
2011-09-30

Average rate

2010-09-30

2010/11

2009/10

US dollar

1.34171.3655

1.39651.3612

Brazilian real

2.49082.31522.30562.4136

Pound sterling

0.86140.86660.87050.8720Swedish krona

9.21989.19099.04309.8353

Norwegian krone

7.8786

7.9946

7.86878.1297

Canadian dollar

1.39831.4006

1.38151.4293Australian dollar

1.38071.4102

1.36201.5165Chinese renminbi

8.56769.13459.13449.2727103.4211

114.0629

112.7896

121.4525

Japanese yen

148 | Voith Annual Report 2011

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Contributions

Management Report

Consolidated Financial Statements

Accounting policies
The consolidated financial statements are prepared using thehistorical cost method. The only exceptions to this rule arederivative financial instruments, available-for-sale financial
instruments and assets measured at fair value through profit
or loss. All these exceptions are recognized at fair value.
Acquisitions and disposals of financial assets are always re­cognized at the settlement date. Regular way acquisitions
or disposals of available-for-sale securities are recognizedon the trade date.

Operating expenses are recognized as expenditure at thetime when a service is used and other sales-related ex­penses are recognized as incurred. Taxes on income arecalculated in accordance with tax law in the countries inwhich the Group operates.

In accordance with IAS 27, consistent accounting policies
are used to prepare the separate financial statements for thecompanies included in the consolidated financial statements.
The main accounting policies are listed and explained below:

For all categories of financial instruments recognized in accordance with IAS 39, net gains or losses as defined in IFRS
7 result from the measurement or disposal of financial instruments. At Voith, such income and expense items mainly
consist of foreign exchange gains and losses, impairments
and gains/losses from the sale of financial instruments. Neither current interest income and expenses nor dividend income are included.

Income and expenses

Intangible assets

Sales (less various cash and other discounts granted tocustomers) are recognized when products or merchandise
have been delivered and/or ser­vices rendered and when therisk of ownership has been transferred to the customer. In
the case of long-term construction contracts, revenue is re­cognized using the percentage-of-completion method. A
detailed explanation of this method is provided in the notes
on “Long-term construction contracts”.

Intangible assets acquired for a consideration are recognized at acquisition cost and amortized on a straight-line
basis over their estimated useful lives. Most of these assets
are software programs that are amortized over a three-year
period.

Interest expenses and interest income are recognized asthey accrue. (The effective interest method, i.e. the imputed
interest rate, is used to discount estimated future cash receipts over the expected maturity of the financial instrument
to the net carrying amount of the financial asset).
Dividend income is recognized when the Group’s right toreceive the payment is established.

Internally generated intangible assets are capitalized as development costs based on their production costs, provided
that manufacture of these assets meets the recognition criteria stated in IAS 38 and, in particular, it is probable that
future economic benefits will flow to the Group. Production
costs include all costs that are directly attributable to thedevelopment process. These assets are amortized using
the straight-line method from the start of production for adefined period, usually between three and ten years. If therequirements for capitalization are not satisfied, expenses
are recognized in profit or loss in the fiscal year in which they
were incurred.

Voith Annual Report 2011 | 149

Impairment losses are recognized in accordance with IAS
36 if the higher of the recoverable amount (the present valueof expected future cash flows from the use of the assets
concerned) and the fair value less costs to sell falls below
their carrying amount. Should the reasons for impairment
losses recognized in previous periods no longer apply, these
impairment losses are reversed.

Voith Hydro:
After a record orders received in the 2010/11 fiscal year, which
was influenced mainly by recording individual major projects,
Voith Hydro expects orders received to return to normal levelsin the plan years. Sales increase on par with the developmentof orders received. In the long term, the Group Division expects to see a slight increase in new orders and sales.

Borrowing costs that are directly attributable to intangible
assets are capitalized as part of the cost of those assets.

Voith ­Industrial ­Services:
Voith ­Industrial S­ ervices expects sales growth in its relevantmarkets in the coming years. Higher rates of growth are anticipated in emerging countries in particular in the medium
term. Orders received and sales are planned to be significantly above their current level in the longer term.

Goodwill is subjected to annual impairment tests. For impairment testing, goodwill is assigned to essentially four cashgenerating units. In line with the management’s internal reporting practices, these cash-generating units are identified
on the basis of the Group’s operating activities. Voith has
therefore defined the Group Divisions of Voith Hydro, Voith­Industrial ­Services, Voith ­Paper and Voith ­Turbo as its fourcash-generating units.
To determine whether goodwill is impaired, a calculation
based on value in use is applied in the Voith Group. This isbased on the management’s current planning. The planningpremises are adjusted to reflect the current information available. Key assumptions underpinning calculations of value in
use include assumptions about the trend in incoming orders
and sales, growth rates, extrapolated cash flow forecasts
beyond the planning horizon, and discount rates. Due account is taken of reasonable assumptions regarding macro­economic trends and historical developments.
The Board of Management of Voith GmbH assumes thatmarkets will continue to recover in fiscal 2011/12. The assumptions for the four Group Divisions outlined below are
based on this view:

150 | Voith Annual Report 2011

Voith ­Paper:
Voith ­Paper expects sustained growth in all Group Divisions,markets and regions in the coming years. Orders received
and sales are planned to be significantly above their current
level in the longer term.
Voith ­Turbo:
Voith ­Turbo’s markets are expected to grow modestly during the first plan period after the above-average growth in
the past three years. In the following fiscal years and in thelonger term, we expect growth in orders received and sales
that corresponds to the average historical growth rates overthe past 20 years.
A small increase in margins due to efficiency gains is planned
for all Group Divisions.
Cash flow forecasts are based on the detailed financial
budget for the coming year, on the financial planning figures
for the coming two years and on well-founded top-downplanning for a two to five-year period. Cash flows for periods after the fifth fiscal year are extrapolated at a constant
approximately 1% growth rate. These growth rates do not
exceed the average long-term growth rates of the businessareas in which the corresponding cash-generating units
operate.

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Contributions

Management Report

The discount rates are derived from a calculation of theweighted average cost of capital, which is itself based on thefinancing costs of comparable competitors for each of the
cash-generating units. The discount rates applied reflect theequity risk specific to each cash-generating unit. After-tax
interest rates of 7.5% (previous year: 8.6%) for Voith Hydro,
7.0% (previous year: 7.7%) for Voith I­ndustrial S­ ervices,
8.4% (previous year: 8.4%) for Voith P­ aper and 7.4% (previous year: 7.8%) for Voith T­ urbo were used to calculate
the present value of future net cash inflows. Extrapolation
to the pre-tax rate that must be stated pursuant to IAS 36
results in interest rates of 10.1% (previous year: 11.8%) for
Voith Hydro, 9.4% (previous year: 10.5%) for Voith ­Industrial­Services, 11.5% (previous year: 11.4%) for Voith P­ aper and10.1% (previous year: 10.8%) for Voith ­Turbo.
Property, plant and equipment
Property, plant and equipment are stated at cost less depreciation and any impairment losses. The cost of internallyproduced property, plant and equipment includes all directly attributable production costs and an appropriate shareof production overheads. Depreciation is recognized on astraight-line basis over the following useful lives:

Consolidated Financial Statements

Repair and maintenance costs are recognized as expenses
at the time when they are incurred. Any major renewals or
improvements are capitalized. Borrowing costs that are directly attributable to property, plant and equipment are capitalized as part of the cost of those assets.
Leased assets
Whether an arrangement is or contains a lease depends on
the substance of the arrangement and requires a decision to
be made on whether fulfillment of the agreement depends on
the use of a particular asset and whether the arrangement
conveys the right to use the asset.
Leases that transfer substantially all risks and rewards incidental to use of the leased asset to a Voith company (thelessee) are classified as financial leases. In such cases, thelessee recognizes the leased asset at the start of the lease
period and writes it down over the asset’s useful life. A corresponding liability is recognized and then settled by the lease
payments. The interest component is recognized in the interest result. All other leases in which Voith Group companies
act as the lessee are stated as operating leases. The lease
payments for operating leases are recognized as expenses
using the straight-line method over the term of the lease.

Useful life
Buildings

40 to 50 years

Plant and machinery

4 to 15 years

Other equipment, furniture and fixtures

4 to 12 years

Property, plant and equipment are subjected to an impairment test if unusual events or market developments indicatethat they may be impaired. To this end, the carrying amountof an asset or cash-generating unit is compared with its
recoverable amount, which is defined as the higher of fairvalue less costs to sell and value in use. Impairment losses
are reversed if the fair value of a previously impaired asset
subsequently increases again.

Financial assets and securities
Shares carried under financial assets as other investments
are generally recognized at fair value. Where no active market exists for individual companies and it is impracticable
to determine their fair value, shares are stated at cost. The
carrying amount of such assets is written down if there is
objective evidence that they are impaired.
Associates are recognized using the equity method and arestated at the amount of equity held by the Voith Group plus
any goodwill. Changes in the share of associate equity thatare not recognized in profit or loss are likewise recognizeddirectly in equity in the consolidated financial statements.

Voith Annual Report 2011 | 151

In accordance with IAS 39, loans classified as non-current
loans are recognized under other financial assets at amortized cost, adjusted (where necessary) for impairments.
In accordance with IAS 39 distinctions between “held-fortrading”, “available for sale”, “held-to-maturity” and “financial
assets at fair value through profit and loss” must be madefor securities that are classified as non-current or current
assets. The securities held by the Voith Group are normallyavailable for sale. To a small extent, however, the Group also
makes use of financial instruments that are held for trading
and securities that, at initial recognition, are designated as
at fair value through profit or loss. The latter securities are
certificates authorized for stock market trading and convertible bonds that are structured and non-divisible. Securities
are also assigned to this category to eliminate measurementinconsistencies in the accounting for long-term employee
benefits.
Where market values can be obtained, securities are statedat their market value, otherwise they are measured using
alternative methods. Where no market value is available andit is impracticable to reliably determine fair value, securities
are recognized at cost.
Available-for-sale securities are recognized separately in­equity, taking due consideration of deferred taxes, until suchtime as they are realized. Available-for-sale securities are­assets that are not held for trading.
The carrying amounts of non-current financial assets andavailable-for-sale securities are regularly tested for objective
evidence that they are impaired. Such evidence can takethe form of substantial financial difficulties on the part of the
debtor or changes in the technological, economic and legal
environment. Objective evidence that equity instruments may
be impaired is given if there is a prolonged or significant de-

152 | Voith Annual Report 2011cline in their fair value. The criterion of a prolonged decline
is met if the decline lasts longer than 12 months. If the fairvalue of the investment falls more than 30% below its cost,this is regarded as a significant impairment. If this happens,
the amounts hitherto recognized in equity are recognized in
profit or loss.
Fair value
The fair value of investments for which an organized market
exists is determined by the quoted market price at the reporting date. Where no active market exists, valuation techniques are used to determine the fair value. The techniques
used by Voith for this purpose aim to reflect objective criteria
as accurately as possible and to simulate an active market.
This is done, for example, by analyzing discounted cash
flows, referring to arm’s length transactions between knowledgeable, willing and independent partners, and drawing on
comparisons with the current fair value of other essentially
identical financial instruments.
Inventories
Raw materials and supplies, merchandise, work in progress
and finished goods are all stated under inventories at thelower of cost and net realizable value. In addition to direct
costs, costs of conversion include an appropriate portionof necessary materials and production overheads as wellas production-related depreciation that can be directly allocated to the production process. The weighted average
cost, or cost based on the first-in, first-out (FIFO) method
is capitalized in the balance sheet. Appropriate allowance ismade for inventory risks associated with slow-moving stocks,
reduced salability, etc. When the circumstances that previously caused inventories to be written down below cost no
longer exist, the write-down is reversed.

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Contributions

Management Report

Long-term construction contracts
Long-term construction contracts are recognized in accordance with the percentage-of-completion (PoC) method. The
percentage of completion per contract to be recognized is
calculated as the ratio of the actual costs incurred to overall
anticipated costs of the project (“cost-to-cost method”). Recognized revenue is then stated as sales and, after deducting
customer advances and installments, as trade receivables. If
the outcome of a construction contract cannot be estimatedreliably, it is not possible to calculate contract revenue andcosts based on the percentage of completion. In such cases,
revenue is recognized at the amount of costs incurred for theconstruction contract to date, while the contract costs are
immediately recognized in full in the period under review inwhich they are incurred. Appropriate provisions are formed
to cover expected losses on such contracts based on recognizable risks.
Receivables and other assets
Receivables and other assets (with the exception of financial
derivatives) are stated at nominal value or at cost and are
regularly tested for impairment individually. Where objective
evidence of possible loss exists (if the debtor is experiencing substantial financial difficulty, if it is highly probable that
insolvency proceedings will be opened against the debtor, if
the debtor defaults on or is delinquent in interest or principal
payments, if significant adverse changes in the technological,
economic or legal environment occur, if there is a significant
or prolonged decline in the fair value of a financial instrument below its cost, or if legal proceedings are opened, forexample), then individual allowances are effected in an impairment account to allow for these factors. To the extent
that impairments are derived from historical bad debt rates
on a portfolio basis, a drop in the total volume of receivables

Consolidated Financial Statements

reduces such provisions and vice versa. Impaired receivables
are derecognized when they are assessed as uncollectible.
Interest-free or low-interest receivables due in more than one
year are discounted.
Derivative financial instruments and hedging
Voith uses a variety of financial derivatives—such as forward
exchange contracts and interest rate swaps—to hedge underlying transactions. Essentially, the Group applies two
policies—either the fair value hedge accounting of firm commitments or cash flow hedge accounting—to hedge operating business transactions.
At the inception of a hedge relationship, the Group formallydesignates and documents the hedge relationship and therisk management objective and strategy for entering into
the hedge. This documentation includes identification of thehedging instrument, the hedged item or transaction, the nature of the risk being hedged, and how the Group will assess the hedging instrument’s effectiveness in offsetting theexposure to changes in the hedged item’s fair value or cash
flows that is attributable to the hedged risk. Such hedges
are expected to be highly effective in offsetting changes infair value or cash flows and are assessed on an ongoingbasis to determine that they actually have been highly effective throughout the financial reporting periods for which they
were designated.

Voith Annual Report 2011 | 153

Hedges which meet the strict criteria for hedge accounting
are accounted for as follows:
Fair value hedges
Fair value hedges are hedges of the Group’s exposure tochanges in the fair value of a recognized asset or liability oran unrecognized firm commitment that is attributable to aparticular risk and could affect profit or loss for the period.
For fair value hedges, the carrying amount of the hedged
item is adjusted for gains and losses attributable to the risk
being hedged, the derivative is remeasured at fair value, andgains and losses are recognized in profit or loss.
For fair value hedges relating to hedged items carried at amortized cost, the adjustment to carrying amount is amortizedthrough profit or loss over the remaining term to maturity.
When an unrecognized firm commitment is designated asa hedged item, the subsequent accumulated change in thefair value of the firm commitment that is attributable to thehedged risk is recognized as an asset or liability with thecorresponding gain or loss being realized in the statement ofincome. Changes in fair value of the hedging instrument arealso recognized in the profit or loss for the period.
The Group discontinues fair value hedge accounting if thehedging instrument expires, is sold, terminated or exercised, or if the hedge no longer meets the criteria for hedge
accounting. Every adjustment to the carrying amount of ahedged financial instrument is released to income using theeffective interest method. As soon as there is an adjustment,
the reversal may begin, and shall begin no later than when
the hedged item ceases to be adjusted for changes in its fairvalue attributable to the risk being hedged.

154 | Voith Annual Report 2011

Cash flow hedges
Cash flow hedges are hedges of the Group’s exposure tovariability in cash flows that is attributable to a particularrisk associated with a recognized asset or liability or a forecast transaction and could affect profit or loss. The effective portion of the gain or loss on the hedging instrument isrecognized directly in equity, while the ineffective portion isrecognized in profit or loss.
Amounts directly recognized in equity are recognized in profit
or loss in the period during which the hedged transaction
affects profit or loss, for example when hedged financial income or expenses are recognized or when a forecast saleor purchase occurs. Where the hedged item is the cost ofa non-financial asset or liability, the amounts recognized inequity are transferred to the initial carrying amount of thenon-financial asset or liability.
If the forecast transaction is no longer expected to occur,amounts previously recognized directly in equity are transferred to profit or loss. If the hedging instrument expires, issold, terminated or exercised without replacement or roll­over, or if the designation as a hedge is revoked, amounts
previously recognized in equity remain as a separate item in
equity until the forecast transaction occurs. If the forecast
transaction is no longer expected to occur, the amount isrecognized in profit or loss.
Where no hedging relationship with an underlying transaction exists (i.e. where hedge accounting does not apply),financial derivatives are classified as held-for-trading instruments. Changes in the fair value of these instruments arerecognized in profit or loss.

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Contributions

Management Report

Financial derivatives with positive fair values are stated underother financial receivables; those with negative fair values arestated under bonds, bank loans and other interest-bearing
liabilities or other financial liabilities.
A treasury tool is used to manage all external hedges.
A treasury tool is also used to calculate the fair value of
forward exchange contracts. The original forward rate iscompared with the forward rate calculated at the reporting date. The difference is discounted to the reporting date.
The forward rate is calculated based on interest rates forthe two currencies determined by straight-line approximation on the basis of current EURIBOR or LIBOR rates. The
fair value of options, interest rate swaps and interest rate
caps is based on information supplied by the banks. This
information is calculated on the basis of certain assumptions
and using recognized valuation models (Black-Scholes andHeath-Jarrow-Morton).
Embedded derivatives
When the Group becomes party to the contract, it assesses
whether any embedded derivatives should be separated
from the host contract. A reassessment is not made unlessthere is a substantial change in the terms of the contractthat significantly modifies the cash flows that would otherwise
have been generated from the contract. Where embedded
derivatives exist, they are recognized at fair value as financial
assets held for trading. Embedded financial derivatives withpositive fair values are stated under other financial receiv­
ables; those with negative fair values are stated under bonds,
bank loans and other interest-bearing liabilities or other financial liabilities.
Cash and cash equivalents
Cash and cash equivalents include cash in hand and checks,
cash at banks and other cash equivalents. Under this item,
cash at banks includes both daily deposits and time deposits
with fixed maturities of up to three months.

Consolidated Financial Statements

Non-current assets and disposal groups held for saleNon-current assets and disposal groups held for sale areclassified as assets held for sale or correspondingly as liabilities directly associated with assets classified as held for sale
if their carrying amount is to be recovered principally througha sales transaction rather than through continuing use. Thiscondition is regarded as met when the sale is highly probableand the asset or disposal group is available for immediatesale in its present condition. In this case management has
decided to sell the asset and it is expected that the sale willtake place within 12 months from the date of classification.
Non-current assets held for sale are measured at the lowerof their carrying amount and their fair value less costs tosell. Assets held for sale are not subject to depreciation andamortization.
Deferred and current taxes
In accordance with IAS 12, deferred tax assets and liabilities are recognized for temporary differences between tax
reporting and reporting for IFRS purposes. Deferred tax assets are also recognized for unused tax losses insofar as itis reasonable to expect that they will be realized in the near
future. Deferred taxes that relate to items recognized directlyin equity are also themselves recognized in equity. Deferredtaxes are calculated based on the tax rates enacted or substantively enacted by the reporting date that apply or are
expected to apply in the countries concerned at the time ofrealization. Deferred tax assets on unused tax losses that are
not likely to be realized within a foreseeable period (normally
two years) or that are not covered by deferred tax liabilities
are either written down or not recognized at all. Deferred tax
assets and deferred tax liabilities may be netted if the Group
has a legal right to offset current tax assets against current
tax liabilities and they relate to income taxes levied by thesame taxation authority.
Current taxes are calculated and reported in accordance withthe tax laws and regulations valid for each company.

Voith Annual Report 2011 | 155

Profit participation rights
Pursuant to IAS 32, the conditions defined for the issues of
profit participation rights amounting to €83 400 thousand in
fiscal 2006/07 and fiscal 2008/09 require these rights to bereported as a separate component of the Group’s equity. In
fiscal 2010/11, additional profit participation rights amounting to €15 000 thousand were issued, which also constitutea component of equity pursuant to IAS 32. Interest is notreported as interest expenses, but is treated in a similar manner as a dividend obligation.

The portion of actuarial gains and losses to be recognized isthe excess determined pursuant to IAS 19.92, divided by the
expected average remaining working lives of the employees
participating in a given plan.
In some countries, Voith is required by law or contract tomake minimum contributions into a plan over a certain period. When these amounts are not fully recoverable by thecompany after payment and therefore not recognized as an
asset under IAS 19.58 (“assets ceiling”), a liability is recognized through profit or loss.

Provisions for pensions and similar obligations

Other provisions

In accordance with IAS 19, provisions for pension obligations are measured based on actuarial methods using theprescribed projected unit credit method for defined benefit
plans. This method considers not only the pensions and future claims known at the end of the period under review
but also future anticipated increases in salaries and pensions. Defined benefit obligations are measured based on
the proportion of future benefits accrued at the reporting
date. Measurement includes assumptions about the future
development of certain parameters that could affect the actual future benefit amount. The 10% corridor rule prescribedby IAS 19.92 is applied when recognizing actuarial gains andlosses in the balance sheet and in profit or loss.

In accordance with IAS 37, provisions are formed for all
discernable risks and uncertain obligations in that amountthat is likely to be realized. These provisions are not netted
against recourse claims. Provisions are recognized where
the Group has present obligations in respect of third parties
as a result of a past event and it is probable that an outflow
of resources will be required whose amount can be estimated reliably. Provisions for warranty claims are based on
historical claim trends and estimated future trends. Specificprovisions are set up for known claims. Provisions for outstanding expenses, onerous contracts and other businessrelated obligations are measured based on ser­vices still tobe rendered, usually in the amount of the production costs
expected to be incurred.

In measuring its defined benefit liability pursuant to IAS
19.54, a company must recognize a portion of its actuarial
gains and losses as income or expenses if the net cumulative unrecognized actuarial gains and losses at the end of
the previous period under review exceeded the greater of:a)	10% of the present value of the defined benefit obligation
at that date (before deducting plan assets); andb) 10% of the fair value of any plan assets at that date.

156 | Voith Annual Report 2011

Provisions which do not lead to an outflow of resources in
the following year are carried at the discounted settlement
amount at the end of the period under review. The discountrate used is derived from market interest rates. The settlement amount also includes the estimated cost increases. If
an amount set aside as a provision is expected to be refunded (through an insurance claim, for example), the refundedamount is stated separately as an asset if it is almost certain
to be realized. Income from refunds is not netted against
expenses.

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Management Report

Liabilities
Current liabilities are stated at the amount needed to settle the obligation. Financial liabilities are measured at theiramortized cost. Amortized cost corresponds to the cost of
the financial liabilities adjusted for repayments, issue costs
and the amortization of any debt discounts or debt premiums. Where liabilities serve as underlying transactions in thecontext of hedging relationships, they are stated according
to the fair value of the hedged risk. Gains and losses arerecognized in profit or loss.
Liabilities arising from leases that are classified as financeleases in accordance with the criteria laid out in IAS 17 arerecognized at the present value of the minimum lease payments at the start of the lease. Thereafter, they are statedunder financial liabilities at their amortized cost. Lease payments are split into an interest component and a principal
component. The interest component of each payment is recognized as an expense in profit or loss.
Government grants
Government grants are recognized if there is reasonablecertainty that they will be received and if the Group complies with the conditions attached to the grant. Grants also
include low-interest or interest-free government loans. Costrelated grants are recognized as income over the periods
necessary to match them with the costs that they are intended to compensate. Cost-related grants are netted withthe costs for which they are granted.
Where the grant relates to an asset, it is recognized asdeferred income and released to income in equal annual
amounts over the expected useful life of the related asset.

Consolidated Financial Statements

Where the Group receives non-monetary grants, the asset
and the grant are recorded at nominal amounts and released
to the statement of income over the expected useful life of
the relevant asset by equal annual installments.
Classification of holders of non-controlling interests
in limited partnerships and based on repayment rights
and put options
In accordance with IAS 32, financial instruments that entitle the holder to repayment of the capital made available tothe company must be classified as liabilities. In companies
that operate as limited partnerships, partners have the rightunder German law to demand repayment of the capital they
have made available to the company. This right cannot be
excluded by the partnership agreement. This provision also
extends to other comparable repayment rights of holders of
non-controlling interests with a settlement agreement. Put
options create a similar obligation pursuant to IAS 32.
a) Put options
Where the right to terminate non-controlling interests exists in the form of a put option, the corresponding portionof the non-controlling interests is not derecognized but istreated as a component of equity during the period underreview. Accordingly, a share of net income for the fiscal year
is also allocated to holders of non-controlling interests. At
every reporting date, it is assumed that the put option will
be exercised; the corresponding non-controlling interests arereclassified from equity to financial liabilities. This financial
liability is recognized in the amount of the estimated compensation obligation and measured at fair value. The difference between this liability and non-controlling interests as ashare of equity is treated as a transaction between owners
and recognized from fiscal 2009/10 onwards as an increaseor decrease in equity. Until fiscal 2008/09 transactions wereregarded as a business combination achieved in stages

Voith Annual Report 2011 | 157

and the difference stated as goodwill. By choosing to apply
the transitional rule under IAS 27 the Group retained theseamounts.
b) Limited partnerships
The interests held in limited partnerships as well as noncontrolling interests with comparable termination rights aretreated in the same way as put options. The liabilities aremeasured at amortized costs taking into account the attribut­
able share of net income.
If non-controlling interests in limited partnerships are terminated or if corresponding put options are exercised, thefinancial liabilities recognized prior to termination/exercise of
the put options are reclassified as other financial liabilities.
Financial guarantee contracts
Financial guarantee contracts issued by the Group are thosecontracts that require a payment to be made to reimburse
the holder for a loss it incurs because the specified debtor
fails to make a payment when due in accordance with theterms of a debt instrument. These financial guarantee contracts are treated as insurance contracts as defined by IFRS
4, i.e. the financial guarantee contracts are recognized ascontingent liabilities until utilization becomes probable. When
this is the case, the corresponding obligation is recognized.
Exercise of judgment and estimates by management
Some accounting policies require critical estimates that involve complex and subjective assessments and the use ofassumptions, some of which are inherently uncertain andsubject to change. These critical accounting estimates canvary from period to period and significantly impact a company’s financial position and/or earnings. The management
explicitly points out that future events will often deviate fromplanning assumptions, and that it is normal for estimates tohave to be adjusted.

158 | Voith Annual Report 2011

Significant estimates and assumptions have to be made in
the following areas of accounting:
Revenue recognition from long-term construction
contracts
Much of the business done by Voith P­ aper and Voith Hydrotakes the form of construction contracts. By contrast, thisapplies only in special cases at Voith ­Industrial ­Services. The
Group generally accounts for construction contracts using
the percentage-of-completion (PoC) method, according towhich sales are recognized according to the degree of completion. Accurate estimates of the percentage of completionare of vital importance to this method. Depending on themethod used to measure the percentage of completion, themost significant estimates concern the total contract cost,
the costs to complete, the total contract revenue, and contract risks.
The management of Voith’s operating subsidiaries constantly reviews all estimates that are needed in the accounting
for construction contracts and adjusts them as and whennecessary.
Such examinations are part of the management’s normal accounting activities at operating level. For details of carrying
amounts, refer to note 14.
Trade and other receivables
Allowances for doubtful receivables require extremely good
judgment on the part of management. They also necessitate
an analysis of the individual debtors that covers their creditworthiness, current economic trends and an examination ofhistoric default scenarios. For details of carrying amounts,
refer to notes 14 and 15.
Impairment of goodwill
Determining the recoverable amount of a cash-generating
unit to which goodwill was allocated involves estimates bymanagement. To calculate the value in use, planning for

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Contributions

Management Report

the next five years is based on management’s expectations
adjusted for economic trends and historic developments.
Estimates of growth, the weighted average cost of capitaland tax rates are likewise based on reliable information thatreflects the risks associated with operating business in eachgiven industry or division. For details of carrying amounts,
refer to note 10 and the segment reporting.
Development costs
Development costs are capitalized if the requirements of IAS
38 are met. Initial capitalization is based on management’s
estimate that it can demonstrate technical and economic
feasibility. Forecasts of the expected future economic benefit to be gained from assets are essential to the decision
whether or not costs are to be capitalized. For details ofcarrying amounts, refer to note 10.
Pension obligations
Estimates of pension obligations depend significantly on key
assumptions about discount factors, expected returns onplan assets, expected salary increases, mortality rates andthe trend in healthcare costs. The assumptions used to calculate the discount factor reflect the interest rates that canbe realized on high-quality fixed-income instruments withappropriate maturities. Assumptions regarding expected returns on investments are determined by a uniform base thattakes account of long-term historic returns and the structure of the portfolio. For details of carrying amounts, refer
to note 20.

Consolidated Financial Statements

estimates also include warranty-related and litigation costs.
Provisions for restructuring are based on well-founded plansfor expected activities. These plans are reviewed and approved by the Board of Management. For details of carrying
amounts, refer to note 21.
Taxes
The Voith Group has business operations in many countries
and is subject to many different tax laws. Both current anddeferred taxes on income must be calculated for each individual taxable entity. To calculate deferred tax assets on
unused tax losses and temporary differences, for example,
assumptions must be made about the possibility of realizing
sufficient taxable income in the future and the interpretationof complex tax legislation. For details of carrying amounts,
refer to note 9.
Outside Germany, Voith has substantial refund claims withregard to sales tax (valued-added tax) that has already been
paid. These payments can normally be netted with the sales
tax that is charged on domestic sales in that country. Since
our Brazilian subsidiary has such a strong focus on exports,
however, its refund claims cannot be fully offset against the
charged sales tax that it must pass on to the tax authorities.
Realization of these claims therefore depends on government approval of resale activities. Since the timing of suchapproval is very uncertain, expected future cash flows haveto be discounted based on management’s estimates. In lightof the prevailing uncertainty, these claims have been mea­
sured conservatively.

Other provisions
Significant estimates influence the formation of provisions
for anticipated losses on construction contracts, warrantyrelated costs and litigation. Voith forms provisions for losses
in all cases where current estimates of the total contract
cost exceed expected contract revenues. Such estimates
are subject to change in light of new information regarding
the percentage of completion. Onerous contracts are identified by monitoring project progress and constantly updating
estimates of total costs, all of which requires good judgment
if certain performance standards are to be reached. These

Voith Annual Report 2011 | 159

Adoption of amended and new standards andinterpretations
Changes in accounting policies due to first-time application of revised and new IFRS and IFRIC
In fiscal 2010/11, the following revised and new IFRS andIFRIC were applied for the first time.
Amendments to IAS 32: “Financial Instruments:
Classification of Rights Issues”
The amendments to IAS 32 clarify the recognition of rights
issues which are denominated in a currency other than anentity’s functional currency.
Amendments to IFRS 2: “Share-Based Payment”
The changes made to IFRS 2 concern the reporting of
the conditions governing exercise and cancellations and­changes to cash-settled share-based payments.
IFRIC 15: “Agreements for the Constructionof Real Estate”
IFRIC 15 addresses the issue of when revenue and the related costs arising from the sale of units of real estate are to berecognized in cases where agreements have been reached
between the project developer and the buyer before completion of the construction phase.
IFRIC 17: “Distributions of Non-Cash Assets to
Owners”
IFRIC 17 sets out the accounting for a liability in connection
with distributions of non-cash assets.
IFRIC 18: “Transfers of Assets from Customers”
This interpretation deals with the accounting treatment of
arrangements whereby an entity receives from a customer
an item of property, plant and equipment that the entity mustthen use either to connect the customer to a network or toprovide the customer with ongoing access to a supply of
goods or ser­vices.

160 | Voith Annual Report 2011

IFRIC 19: “Extinguishing Financial Liabilities with
Equity Instruments”
IFRIC 19 clarifies the accounting treatment for equity instruments issued by an entity to its creditor to extinguish all orpart of a financial liability following renegotiation of its terms
and conditions.
Annual improvements projects–April 2009 and May 2010
The amendments encompass specific corrections and clarification of content and terminology. Of the amendments fromMay 2010, only the amendment of IFRS 3 is relevant for the
fiscal period 2010/11.
The first-time application of the amendments presented had
no material impact on the net assets, financial position andresults of operations of the Voith Group.
Adoption of the following IFRS and IFRIC was not yet compulsory in fiscal 2010/11 and/or they had not yet been endorsed by the European Commission for adoption in theEuropean Union.
Amendment to IAS 24: “Related Party Disclosures”
The amendments to IAS 24 clarify in particular the definitionof a related entity or person. Adoption of the amendments
is compulsory for fiscal years beginning after December 31,
2010. No impact on the Voith Group is currently expected.
Amendments to IFRS 7: “Disclosures—Transfers ofFinancial Assets”
The amendments improve users’ understanding of transfer
transactions of financial assets (for example, securitizations)
including the understanding of possible risks that may remain with the entity that transferred the assets. The amendments also require additional disclosures if substantial transfers are undertaken towards the end of the period underreview. IFRS 7 is to be applied for the first time to fiscal
years beginning on or after July 1, 2011. Potential effects on
additional disclosures in the notes for the Voith Group are
currently being assessed.

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Management Report

IFRS 9: “Financial Instruments”
The International Accounting Standards Board (IASB) has issued a new international Financial Reporting Standard (IFRS)
on the classification and measurement of financial instruments. The standard represents the conclusion of the first of
three project phases for the replacement of IAS 39 “Financial Instruments: Recognition and Measurement” by a new
standard. IFRS 9 introduces new regulations for the classification and measurement of financial assets. The regulations
must be applied for fiscal years from January 1, 2013; early
adoption is permitted. Potential effects on the net assets,financial position and results of operations of the Voith Groupare currently being assessed.
Amendment to IFRIC 14: “Prepayments of a Minimum
Funding Requirement”
The amendment applies when an entity is subject to minimum funding requirements and pays the amounts in advance. The amendment now allows an entity to recognize
the economic benefit from such prepayment as an asset.
The amendment becomes compulsory for fiscal years fromJanuary 1, 2011. This amendment is not currently expected
to impact materially on the Voith Group.
Amendments to IAS 12: “Income Taxes: Recovery ofUnderlying Assets”
Pursuant to IAS 12, the measurement of deferred taxes
generally hinges on whether the company realizes the carrying amount of an asset by use or by sale. If the asset ismeasured using the remeasurement method pursuant to IAS
40 (“Investment Property”) or IAS 16 (“Property, Plant andEquipment”), it is difficult and subjective to assess whether
an asset is realized by sale or by use.
The amendment introduces a rebuttable presumption thatthe carrying amount is recovered through sale. The amendment is effective for fiscal years beginning on or after January 1, 2012. This amendment has no impact on the Voith
Group because the revaluation method is not used.

Consolidated Financial Statements

Amendments to IAS 1: “Presentation of Financial
Statements”
As a result of the amendment, the “other comprehensive
income” presented in the statement of comprehensive income must in future be broken down to distinguish between
income that is later reclassified to the statement of income
and income that is not. Adoption of the amendments is compulsory for fiscal years after January 1, 2012.
Amendments to IAS 19: “Employee Benefits”
The most significant amendment to IAS 19 is that in future
the actuarial gains and losses will be recognized directly inequity. The corridor method to smooth unexpected fluctuations in pension obligations is no longer used. As Voith usedthe corridor method in the past, there will be larger fluctuations in equity in the future. A further change relates to taking
into account the interest on plan assets. More extensive disclosures in the notes (e.g. disclosures on the financing strategy, sensitivity analyses) are also required in future. Adoptionof the amendments is compulsory retrospectively for fiscal
years after January 1, 2012.
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” and SIC-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 provisions for accounting for joint ventures to date.
The most significant change in IFRS 11 compared with
IAS 31 is the abolition of proportionate consolidation for joint
ventures; in future, joint ventures must always be accounted
for using the equity method.

Voith Annual Report 2011 | 161

IFRS 12: “Disclosures of Interests in Other Entities”
The objective of IFRS 12 is to prescribe disclosures on information that provides the users of financial statements witha basis for assessing the nature of interests in other entities(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.
IFRS 10, 11 and 12 are applicable for fiscal years from January 1, 2013. Potential effects on the net assets, financial position and results of operations and on additional disclosuresin the notes of the Voith Group are currently being assessed.
IFRS 13: “Fair Value Measurement”
IFRS 13 defines fair value, provides a framework for measuring fair value in one single IFRS and prescribes disclosureson the measurement of fair value.
IFRS 13 is applied if another IFRS prescribes or permits
measurement at fair value, or disclosures on the measurement of fair value are required. IFRS 13 is applicable prospectively for fiscal years beginning on or after January 1,
2013. Potential effects on the net assets, financial position
and results of operations of the Voith Group are currently
being assessed.

162 | Voith Annual Report 2011

Annual improvements project—May 2010
The amendments encompass specific corrections and clarification of content and terminology. The amendments are applicable for the first time for fiscal years beginning on or afterJanuary 1, 2011.
At present, the Voith Group does not plan early application of
the new or amended standards and interpretations.

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Management Report

Consolidated Financial Statements

Notes to the consolidated statement of income(1) Sales(3) Other operating income

By divisionin € thousands

2010/11

2009/10

Core businessin € thousands

2010/11

2009/10

Income from the utilization ofcontract-specific provisions

99 66086 304Voith Hydro

1 227 703

1 157 431

Income from the reversal of provisions

94 17099 608Voith ­Industrial ­Services

1 005 734

956 063*

Foreign exchange gains

95 32354 314Voith ­Paper

1 826 608

1 723 234

Recovered bad debts

11 203

10 193Voith ­Turbo

1 520 130

1 349 027

5 580 175

5 185 755

Gains on the disposal of non-current
and current assets

12 4479 563

13 416

11 851*Other income

79 86068 886

5 593 591

5 197 606

392 663

328 868

Other*Previous year restated due to change in internal reporting structure.

By regionin € thousands

Gains on the disposal of non-current and current assets include no gains (previous year: €0) from the disposal of assets held for sale.

2010/11

2009/10

Germany

1 151 749

1 058 129

Rest of Europe

1 507 112

1 496 448

Americas

1 277 416

1 230 462

in € thousandsAsia

1 511 542

1 296 940

Other

145 772

115 627

Cost of material and supplies andof purchased merchandise

5 593 591

5 197 606

Voith Group(4) Cost of material

Cost of purchased ser­vices

2010/11

2009/10

1 782 198

1 632 766

527 106

448 122

2 309 304

2 080 888

2010/11

2009/10

1 605 413

1 498 432

377 202353 029

1 982 615

1 851 461

­ ervices totaling €2 022 million (previous year: €1 837 million)S
are included in the sales figures.

(5) Personnel expenses(2) Changes in inventories and own workin € thousands

capitalized

Wages and salariesin € thousands

2010/11

2009/10

Changes in inventories of finished goods
and work in progress

8 693- 23 049

Other own work capitalized

18 82918 45827 522-4 591Social security, pension andother benefit costs

Voith Annual Report 2011 | 163

(7) Non-recurring result
Number of employees
Annual average

As at the reporting date2011-09-30 2010-09-30

2010/11

2009/10

Wage earners

23 59023 26823 83423 781

Salaried
employees

16 42315 93416 85715 97340 01339 20240 69139 754Trainees andinterns

1 246

1 232

1 246

1 232

41 25940 43441 93740 986

Number of employees by region
Annual average

As at the reporting date

2010/11

2009/10

2011-09-30 2010-09-30

Germany

17 12016 64317 42916 776

Rest ofEurope

7 411

7 270

7 462

7 387

Americas

11 01411 361

11 03011 500

Asia

4 270

3 738

4 557

3 901

198

190

213

190

40 01339 20240 69139 754

The non-recurring result primarily includes expenses arisingfrom major restructuring activities as well as measures addressing personnel capacity.
The non-recurring result shows the measures initiated in fiscal 2010/11.
These affect the Voith ­Industrial ­S ervices and Voith ­Turbo
Divisions.
The following expenses have been incurred:in € thousands

2010/11

2009/10

Personnel expenses-7 126-16 199

Impairment losses

-699

-561

Other expenses-6 299-2 0100

5 493-14 124-13 277

2010/11

2009/10

136

2 343

- 2 011-582

Impairment of associates0-1 227-330-40 254

Income from the reversal of provisions

Other regions(8) Other financial resultin € thousands
Income from investments(6) Other operating expenses

Impairment of other investmentsin € thousands

2010/11

2009/10

Impairment of securities

Increase in provisions

189 996

222 483

Income from securities and loans

Other selling expenses

359 309342 527

Other administrative expenses

290 563245 156

Foreign exchange losses

85 82772 548Rent for buildings and machinery

69 89767 634

Bad debt allowances

13 24012 015Losses on the sale of non-current andcurrent assets

2 211

7 207

105 425

104 016

1 116 468

1 073 586

Other expenses

164 | Voith Annual Report 2011

346

402

-1 859-39 318

The impairment losses recognized on other investments
concern available-for-sale financial instruments that aremeasured at amortized cost.

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Management Report

Consolidated Financial Statements(9 ) Income taxesin € thousands

2010/11

2009/10

Current taxes-134 005-112 814

Deferred taxes

11 965269-122 040-112 545

Current taxes include domestic income taxes and comparable foreign income taxes that are calculated in accordancewith the local tax laws valid for each subsidiary.
For individual Group companies, deferred tax items are recognized for temporary differences between carrying amounts
for tax reporting and the carrying amounts recognized under
IFRS, as well as for consolidation measures recognized in
profit or loss. Deferred tax assets are also recognized forunused tax losses that can be reasonably expected to berealized in the near future. The average income tax rate forGerman companies is 29.84% (previous year: 29.84%).
Deferred taxes are calculated at the tax rates valid in therespective countries.
In the period under review, deferred tax income arising from
temporary differences amounted to €17 685 thousand (previous year: deferred tax expenses of €21 795 thousand).
In the fiscal year 2010/11, deferred tax expenses from unused tax losses amounted to €5 720 thousand. This mainly
includes write-downs of deferred tax assets recognized in
the fiscal year 2009/10 of €1 505 thousand and reductions
in deferred tax assets from losses carried forward by adjustment of the previous-year losses carried forward of €5 748
thousand. The effects from the use of loss carryforwards inthe previous year largely approximated the recognition ofnew, previously unrecognized loss carryforwards.

sand that came into being in the fiscal year 2009/10. In
addition to this, the recognition of a loss carryforward notrecognized in the fiscal year 2008/09 exceeded the amountof the loss carryforwards used in the fiscal year 2008/09 by€16 243 thousand. Income was offset by write-downs on thedeferred tax assets recognized in the fiscal year 2008/09 of€1 398 thousand.
Furthermore, current income tax from the use of deferred
tax assets on loss carryforwards not recognized in the previous year fell by €4 037 thousand (previous year: €2 911
thousand).
As at September 30, 2011, unused tax losses of €31 786
thousand (previous year: €87 347 thousand) for German
trade and corporate income taxes, plus another €376 531
thousand (previous year: €407 050 thousand) for German
trade tax, plus €107 154 thousand (previous year: €108 965
thousand) for previously non-deductible interest expenses
under German law, and €69 064 thousand (previous year:€62 621 thousand) for foreign taxes were not recognized asdeferred tax assets as there was no reasonable expectationthat the related deferred tax assets would be realized in thenear future. Owing to the ongoing tax field audit at companies in Germany and abroad, further changes may be madeto the losses carried forward.
In Germany, losses carried forward do not lapse. Outside
Germany, losses carried forward can normally be realized
within a maximum of five to ten years.

In the fiscal year 2009/10, deferred tax income from unused
tax losses amounted to €22 064 thousand, mainly s­ temmingfrom the recognition of loss carryforwards of €5 460 thou-

Voith Annual Report 2011 | 165

The following table provides a detailed overview of deferredtaxes as at the reporting date:in € thousands

2011-09-30
Deferred tax
assets2010-09-30

Deferred tax
liabilities

Deferred tax
assetsDeferred tax
liabilities

Intangible assets

11 08962 511

9 785

70 127

Property, plant and equipment*

2 896

56 56517 40656 679Financial assets and securities

2 418

21 024

7 536

1 400

Inventories and receivables*

19 98151 80623 24884 616

Other assets

5 414

21 4433 698

29 409Pension provisions

37 045

1 004

37 287

2 674

Financial liabilities

5 036

7 491

5 488

8 470

Other provisions and liabilities*

98 166

6 515

111 409

11 340

Write-downs on deferred tax assets arising from temporary differences*-15 375-5 839

Unused tax losses

70 891

Netting*-97 432-97 432-130 116-130 116

Disclosure in the balance sheet

140 129

130 927

156 256

134 599*Previous year restated.

As far as the origin of the deferred taxes from other comprehensive income is concerned, refer to note 19.
Reconciliation of expected and effective tax expenses:
The income of Voith GmbH and its subsidiaries in Germany
is subject to corporate income tax and trade tax. Profits
earned outside Germany are taxed at the current rates valid
in the countries concerned. Expected tax expenses were
calculated based on a tax rate of 29.84% (previous year:
29.84%) that takes into account the legal structure of theVoith Group relevant for tax purposes.

166 | Voith Annual Report 201176 354

The Group

Contributions

Management Reportin € thousands

2010/11

2009/10

Profit before income tax

321 690234 013

Expected tax expenses

95 99269 830Deviations from expected tax rates-1 061655

384- 2 396

Effect of changes in tax rates
Tax-free income-14 408-8 906

Non-deductible expenses

26 21967 843

Taxes relating to other periods

29 87012 949Change in write-downs ondeferred tax assets-23 561- 22 238

Other tax effects

8 605-5 192

Income taxes

122 040

112 545

37.9%

48.1%

Effective tax rate (%)

Consolidated Financial Statements

No deferred taxes were recognized on temporary differencesof €752 082 thousand (previous year: €665 453 thousand)arising on investments in subsidiaries, since the criteria
specified in IAS 12.39 were met.
5% of distributions by foreign subsidiaries to Germany are
subject to German taxation. In addition, any withholding
taxes and dividend-related taxes abroad are incurred. Further income tax implications must also be observed in thecase of distributions from subsidiaries abroad to anotherforeign entity. The potential tax effects were not calculated
in view of the disproportionately high effort that this would
have entailed.

Voith Annual Report 2011 | 167

Notes to the consolidated balance sheet(10) Intangible assets
Development of intangible assets from 2009-10-01 to 2010-09-30
Franchises,industrial rights
and similar rights
and assets as wellas licenses in suchrights and assets

Goodwill

Development
costs

Prepayments

Total

164 746631 04082 7293 230

881 745

0

0

0

0

0

Currency translation differences

2 013

3 607

110

0

5 730

Additions

7 363

0

20 089304

27 756

0

0

31

0

31

-4 3340-3 262-18-7 614

0

-776

0

0

-776

Transfers

3 430

0

20

-3 075375

Cost
2010-09-30

173 218633 871

99 717441

907 247

Accumulated amortization andimpairment
as at 2009-10-01-93 146-54 179-32 2220-179 547

Currency translation differences-1 3930-78

0-1 471

Amortization-18 0130-8 8880-26 901in € thousands
Cost
2009-10-01

Changes in the consolidated Group

Capitalized interests
Disposals
Other adjustments

Impairment losses00- 2 892

0-2 892

Disposals

2 864

0

3 390

0

6 254

Transfers

54

0

0

0

54

-109 634-54 179-40 6900-204 503

63 584579 692

59 027441

702 744

Accumulated amortization andimpairment
as at 2010-09-30
Carrying amountas at 2010-09-30

No impairment losses pursuant to IAS 36 were required tobe recognized on goodwill on the basis of impairment tests
performed.
Impairment losses were recognized on development costs
for individual assets, as the future potential unit sales volumes in the areas concerned have decreased and calculat-

168 | Voith Annual Report 2011

The Group

Contributions

Management Report

Consolidated Financial Statements

Development of intangible assets from 2010-10-01 to 2011-09-30
Franchises,industrial rights
and similar rights
and assets as wellas licenses in suchrights and assets

Goodwill

Development
costs

Prepayments

Total

Cost
2010-10-01

173 218633 871

99 717441

907 247

Changes in the consolidated Group

10 685

6 351

0

0

17 036

143

1 105

-9

0

1 239

12 8130

17 262

1 485

31 560

0

0

99

0

99

-2 8190-1 263-13-4 095

346

2 614

0

0

2 960

5 368

0

-56

- 293

5 019

0

-1 74700-1 747

Cost
2011-09-30

199 754642 194

115 7501 620

959 318

Accumulated amortization andimpairment
as at 2010-10-01-109 634-54 179-40 6900-204 503

Currency translation differences

126

0

11

0

137

Amortization-18 8770-10 3200-29 197

Impairment losses-1 0020-9 4220-10 424

Disposals

2 302

0

1 238

0

3 540

Transfers

-814

0

0

0

-814

-127 899-54 179-59 1830-241 261

71 855588 01556 5671 620

718 057

in € thousands

Currency translation differences
Additions
Capitalized interests
Disposals
Other adjustments
Transfers
Reclassification to assets held for sale

Accumulated amortization andimpairment
as at 2011-09-30
Carrying amountas at 2011-09-30

ing the recoverable amount showed that there are thus nolonger sufficient potential benefits. Impairment losses in theyear under review relate solely to the Voith ­Turbo segment
and amount to €10 424 thousand (previous year: €1 245
thousand). In the previous year the Voith P­ aper segment wasalso affected with impairment losses of €1 647 thousand.

Impairments are shown in the statement of income under
depreciation and amortization.
Capitalized interest is based on an interest rate of 4.75%.

Voith Annual Report 2011 | 169

(11) Property, plant and equipment
Development of property, plant and equipment 2009-10-01 to 2010-09-30
Land andbuildings
includingbuildings on
third-party land

Plant andmachinery

Other
equipment,
furniture andfixturesPrepayments
and assets
underconstruction

Total

679 446

1 204 907

474 689

101 754

2 460 796

0

0

0

0

0

Currency translation differences

17 08845 450

7 557

6 361

76 456

Additions

20 52662 05343 47779 877

205 933

Disposals-6 046-40 260- 23 071-1 870-71 247

Transfers

29 56340 0665 345-75 349-375

0-1 502-153

315-1 340Cost
2010-09-30

740 577

1 310 714

507 844

111 088

2 670 223

Accumulated depreciationand impairment
2009-10-01-288 026-784 983-328 733

0-1 401 742

Currency translation differences-5 426- 27 783-4 7410-37 950

Depreciation-16 172-71 661-44 6030-132 436

Impairment losses

-671

-337

- 251

0

-1 259

Disposals

3 710

32 24620 308056 264

Transfersin € thousands
Cost
2009-10-01

Changes in the consolidated Group

Other adjustments

-56

-308

310

0

-54

Reversal of impairment losses

0

0

0

0

0

Other adjustments

0

1 223

862

0

2 085

Accumulated depreciationand impairment
2010-09-30-306 641-851 603-356 848

0-1 515 092

Carrying amountas at 2010-09-30

433 936459 111150 996

111 088

1 155 131

170 | Voith Annual Report 2011

The Group

Contributions

Management Report

Consolidated Financial Statements

Development of property, plant and equipment from 2010-10-01 to 2011-09-30
Land andbuildings
includingbuildings on
third-party land

Plant andmachinery

Other
equipment,
furniture andfixturesPrepayments
and assets
underconstruction

Total

740 577

1 310 714

507 844

111 088

2 670 223

0

46

0

0

46

Currency translation differences

1 856

3 451

-531

-4 887-111

Additions

16 56158 01754 61250 632179 822in € thousands
Cost
2010-10-01

Changes in the consolidated Group

Capitalized interest

1

0

0

16

17

Disposals-15 423- 27 814-36 289-4 380-83 906

Transfers

29 40034 7598 680-77 858-5 019Reclassification to assets held for sale

-1 159-140-1 3420-2 641Other adjustments

2 628

662

4 234

-41

7 483

Cost
2011-09-30

774 441

1 379 695

537 208

74 5702 765 914

Accumulated depreciationand impairment
2010-10-01-306 641-851 603-356 848

0-1 515 092-432-1 593229

0-1 796

Depreciation-17 695-75 876-47 5060-141 077

Impairment losses-2 112-6 529-336

0-8 977

Disposals

9 529

25 13928 4400

63 108Transfers

910

750

-846

0

814

1 234

140

1 075

0

2 449

0

0

0

0

0

-2 047

-521

-730

0

-3 298

Accumulated depreciationand impairment
2011-09-30-317 254-910 093-376 522

0-1 603 869

Carrying amountas at 2011-09-30

457 187

469 602160 686

74 570

1 162 045

Currency translation differences

Reclassification to assets held for sale
Reversal of impairment losses
Other adjustments

Voith Annual Report 2011 | 171

For individual product areas of the Voith ­Turbo segment thateach constitute a cash-generating unit, impairment losses
had to be recognized on the basis of current viability calculations. In detail, impairment losses of €4 106 thousand and€2 732 thousand were recorded on machinery for two cashgenerating units. An impairment loss totaling a further €2 112
thousand has to be recognized on the joint assets of thesecash-generating units (land and buildings). The recoverable
amount used for the calculation in each case corresponded
to the fair value less costs to sell. As there is no active market, discounted cash flow projections were used for this purpose based on an objective purchaser perspective.

Of the prepayments and assets under construction, €23 166
thousand relates to buildings (previous year: €34 401 thousand), €45 236 thousand to plant and machinery (previous
year: €69 581 thousand) and €6 168 thousand to non-production equipment (previous year: €7 106 thousand).
Land in the amount of €0 (previous year: €2 376 thousand)has been pledged.
Property, plant and equipment include the following assets:
Finance leasesin € thousands

In the previous year, the Voith ­Turbo segment was affectedby impairment losses of €432 thousand.
Further impairment losses due to reduced values in use
based on impairment tests relate to the Voith ­P aper segment with respect to a figure of €27 thousand (previous year:€588 thousand). In the previous year, the Voith ­Industrial­S ervices segment was affected by impairment losses of€239 thousand.
Impairments are shown in the statement of income under
depreciation and amortization.

Land
Plant and machinery
Other equipment, furniture and fixtures

2011-09-30 2010-09-30
4 084

3 683

625

800

1 048

1 239

5 757

5 722

Buildings, plant and machinery and other equipment, furniture and fixtures classified as finance leases are stated under
this item. The corresponding lease liabilities are shown as
financial liabilities. Depreciation totals €841 thousand (previous year: €1 018 thousand).
No contingent rent was recognized in profit or loss.

Due to the reassessment of the useful lives of certain machinery, depreciation increased by €1 797 thousand in thefiscal year. This depreciation is included in depreciation andamortization.

172 | Voith Annual Report 2011

The Group

Contributions

Management Report

Consolidated Financial Statements(12) Investments in associates/Other financial assets
Development of financial assets from 2009-10-01 to 2010-09-30
Investments inassociates

Other
investments

Long-term
loans

Total

17 20847 4819 866

74 555

0

0

0

0

213

0

334

547

Additions

6 634

5 896

2 055

14 585

Disposals-4 389-1 211-754-6 354

Transfers

2 532- 2 532

0

0

Other adjustments

-109

- 216

0

-325

22 08949 41811 501

83 008in € thousands
Cost
2009-10-01
Changes in the consolidated Group
Currency translation differences

Cost
2010-09-30
Accumulated impairment
2009-10-010-25 032-3 067-28 099

-51

265

-19

195

-1 227-582

0-1 80900

0

0

Accumulated impairment
2010-09-30-1 278-25 349-3 086-29 713

Carrying amount2010-09-30

20 81124 0698 415

53 295Currency translation differences
Impairment losses
Disposals

Voith Annual Report 2011 | 173

Development of financial assets from 2010-10-01 to 2011-09-30
Investments inassociates

Other
investments

Long-term
loans

Total

Cost
2010-10-01

22 08949 41811 501

83 008Changes in the consolidated Group-1 5780

0-1 578

184

- 21

-170

-7

Additions

13 597

3 913

1 039

18 549

Disposals-3 804-145-1 105-5 054

Transfers

23

- 23

0

0

Other adjustments0- 2 594

0-2 594Cost
2011-09-30

30 51150 54811 26592 324

Accumulated impairment
2010-10-01

in € thousands

Currency translation differences-1 278-25 349-3 086-29 713

Currency translation differences

0

0

-14

-14

Impairment losses0- 2 0110-2 011Other adjustments

0

63

0

63

Accumulated impairment
2011-09-30-1 278-27 297-3 100-31 675

Carrying amount2011-09-30

29 23323 2518 165

60 649The disposal of other investments generated accounting
gains of €1 thousand (previous year: €141 thousand). Since
their fair value could not be reliably estimated, these investments had previously been recognized at amortized cost.
The table below summarizes the aggregate key data for thematerial associates accounted for using the equity method.
in € thousands

2011-09-30 2010-09-30

Equity79 93768 180Liabilities

144 389

141 607

Total equity and liabilities

224 326

209 787Sales

448 452474 601

9 394

10 287

Net income for the year

174 | Voith Annual Report 2011

The Group

Contributions

Management Report

Consolidated Financial Statements(13) Inventories
Inventories consist of the following items:in € thousands

2011-09-30 2010-09-30

Raw material and supplies

269 816

246 977

Work in progress

270 161

270 259

Finished goods and merchandise

156 493

131 645

Prepayments

125 609

135 170822 079784 051

Write-downs of inventories amounted to €17 006 thousand(previous year: €19 320 thousand) and were recognized as
expenses. Reversals of write-downs totaling €10 668 thousand (previous year: €2 502 thousand) were effected. Theseamounts are included in the cost of material.
No inventories were assigned as collateral in the period
under review (carrying amount in the previous year: €0).

Trade receivables are classified as current assets. As at September 30, 2011, the volume of receivables that was notexpected to be realized within one year was €9 505 thousand(previous year: €20 438 thousand).
€3 929 thousand (previous year: €7 165 thousand) of tradereceivables are interest-bearing.
As was the case in the previous year, no trade receivables
serve as collateral for liabilities.
Bad debt allowances developed as follows:in € thousands
Impairment at the beginningof the fiscal year

-42 660-45 735

Additions-12 668-11 772

Utilization

598

6 256

Reversal

10 556

8 755

659

-164

-43 515-42 660

Changes in consolidated Group/translation adjustments(14) Trade receivables

2011-09-30 2010-09-30

Impairment at the endof the fiscal year

Trade receivables consist of the following items:in € thousands

2011-09-30 2010-09-30

Trade receivables

873 590826 718

Bad debt allowances-43 515-42 660

Receivables from
customer-specific contracts

320 357

355 639

1 150 432

1 139 697

Reversals totaling €10 556 thousand (previous year: €8 755
thousand) consist of reversals of specific allowances of€10 556 thousand (previous year: €7 778 thousand) andportfolio-based allowances of €0 (previous year: €977
thousand). Additions of €12 668 thousand (previous year:€11 772 thousand) consist of additions of specific bad debt
allowances in the amount of €11 408 thousand (previous
year: €11 772 thousand) and portfolio-based allowances of€1 260 thousand (previous year: €0).

Voith Annual Report 2011 | 175

Credit insurance is used to manage default risk in trade receivables. Hermes cover is used to secure receivables fromforeign customers.
Future receivables from customer-specific construction contracts recognized using the percentage-of-completion method are determined as follows:in € thousands

2011-09-30 2010-09-30

The aggregate amount result of costs
incurred and recognized to date

4 613 457

4 200 875*

Progress billings to date-2 974 249-2 341 752*

Gross amount due from customers

1 639 208

1 859 123

Advances received (“progress billings”)-1 358 899-1 542 032

280 309317 091

Thereof receivables fromconstruction contracts

306 457

344 343

Thereof liabilities fromconstruction contracts-26 148-27 252*Previous year restated.

Receivables from customer-specific service contracts total€13 900 thousand (previous year: €11 295 thousand) and liabilities from customer-specific service contracts total €1 470
thousand (previous year: €2 087 thousand).
Further advances received for customer-specific contracts
amounting to €665 178 thousand (previous year: €794 252
thousand) for which no contract costs have been incurred todate are included in other liabilities. None of these advanceswere received for customer-specific service contracts.

176 | Voith Annual Report 2011

Sales relating to customer-specific contracts totaled€2 289 695 thousand (previous year: €2 180 446 thousand).
€115 044 thousand of this amount is from service contracts(previous year: €91 913 thousand). Amounts billed to customers and progress billings are shown under trade receivables.
An amount of €7 520 thousand (previous year: €7 712 thousand) in trade receivables is held as retentions by customers. Retentions are amounts of progress billings that are notpaid until conditions specified in the contract are satisfied.
This includes €147 thousand (previous year: €425 thousand)for service contracts.

The Group

Contributions

Management Report

Consolidated Financial Statements(15) Other financial receivables and other assets
Other financial receivablesin € thousands

Current

Non-current

2011-09-30

Current

Non-current

2010-09-30

Derivatives used to hedge operationaltransactions

18 1214 470

22 59140 98314 81455 7970

39 06539 065261

40 68940 950Derivatives used to hedge financial transactions
Financial receivables

43 268352

43 62052 2242 644

54 868Sundry financial assets

70 02549 317

119 342

66 48047 580114 060

131 41493 204

224 618

159 948

105 727

265 675in € thousands

Current

Non-current

2011-09-30

Current

Non-current

2010-09-30

Prepaid expenses

24 47217 45541 92721 961

11 99933 960

Other non-financial assets

143 11024 283167 393

88 95149 463

138 414167 582

41 738209 320

110 91261 462172 374

Other assets

At the reporting date, other assets totaling €37 782 thousand (previous year: €38 348 thousand) served to secure
liabilities and contingent liabilities. They may be drawn on if
the underlying obligations are not fulfilled or if the contingent
liabilities are realized.
Impairment of financial receivables, sundry financial assets
and other assets developed as follows:in € thousands
Impairment at the beginningof the fiscal year

2011-09-30 2010-09-30-4 037-5 186

Additions

-572

- 243

Utilization

22

55

Reversal

647

1 438

-5

-101

-3 945-4 037

Changes in consolidated Group/translation adjustments
Impairment at the endof the fiscal year

Additions totaling €572 thousand (previous year: €243
thousand) consist of additions to specific allowances of€110 thousand (previous year: €237 thousand) and portfolio-based allowances of €462 thousand (previous year:€6 thousand). Reversals totaling €647 thousand (previous
year: €1 438 thousand) consist of reversals of specific allow­
ances of €610 thousand (previous year: €1 425 thousand)and portfolio-based allowances of €37 thousand (previous
year: €13 thousand).

(16) Securities
Available-for-sale securities totaling €9 580 thousand (previous year: €9 930 thousand) are used to cover future pension
obligations.

Voith Annual Report 2011 | 177

(17) Cash and cash equivalents
This item mainly consists of time deposits held at banks.
in € thousands

2011-09-30 2010-09-30

Checks32

37

Cash on hand

568

635

Cash equivalents

7 436

7 356

Cash at banks

919 104

1 167 331

927 140

1 175 359

Cash at banks earns interest at floating rates based on dailybank deposit rates.
Short-term deposits are made for varying periods of between one day and three months, depending on the immediate cash requirements of the Group. These deposits earninterest at the respective short-term deposit rates.
As in the previous year, no cash at banks served as collateralfor liabilities.

(18) Assets held for sale and liabilities
directly associated with assets classified
as held for sale
The assets held for sale of €10 054 thousand (previous
year: €1 447 thousand) relate to intangible assets of €1 747
thousand, property, plant and equipment of €267 thousand,trade receivables of €5 485 thousand and other assets of€1 285 thousand from the Voith ­Industrial ­Services segment
and property, plant and equipment of €1 270 thousand fromthe Voith P­ aper segment.

178 | Voith Annual Report 2011

The liabilities directly associated with assets classified asheld for sale of €6 787 thousand (previous year: €0) exclusively relate to the Voith ­Industrial ­Services segment. Thesecomprise liabilities to employees of €4 351 thousand, trade
payables of €476 thousand, provisions of €373 thousand
and other liabilities of €1 587 thousand.
The assets classified as held for sale and the liabilities of
the Voith I­ndustrial S­ ervices segment stem from the plannedsale of entities in fiscal 2011/12. Expected losses from thissale are taken into account by means of impairment losses
on intangible assets and property, plant and equipment of€699 thousand as well as in the form of a provision of €1 310
thousand. Both effects are reported in the non-recurring
result.
In the Voith ­Paper segment, a production location was relocated. The land and buildings at the old production site will
be put up for sale.
The level from the Voith ­Paper segment in the previous yearof €1 447 thousand will be reclassified to non-current assets
this year, as the planned sale did not take place in fiscal
2010/11 despite continued intentions to sell.

The Group

Contributions

Management Report

Consolidated Financial Statements(19) Equity
Issued capital and revenue reserves

Other comprehensive income consists of:Since September 30, 2006, issued capital in Voith GmbHof €120 000 thousand has, without change, been held byshareholders (until September 30, 2010: 30 149 100 equity
owners) in the form of 120,000,000 company shares (until
September 30, 2010: 30 149 100 ordinary shares).

in € thousands

2010/11

2009/10

Gains/losses (-) on
available-for-sale financial assets

89 31224 368

Gains/losses (-) in the current period

87 590-14 417

Transfer to profit and loss

1 722

38 7856 007-5 725

Gains/losses (-) in the current period

3 517-7 082*

Transfer to profit and loss

2 490

1 357*The revenue reserves consist of retained earnings generated
by Voith GmbH and its consolidated subsidiaries.
Other reserves
Other reserves include the effects of currency translation offoreign subsidiaries, gains/losses from available-for-sale securities and cash flow hedges (pursuant to IAS 39) and gains
on the hedging of net investments (pursuant to IAS 21).
The statement of comprehensive income shows the gains
and losses on individual components of “other reserves”
which are recognized directly in equity.

Gains/losses (-) on
cash flow hedges

Gains/losses (-) on
currency translation-8 47355 125

Gains/losses (-) in the current period-8 47355 125

Gains/losses (-) on
net investments in foreign operations-125

12 288

Gains/losses (-) in the current period-125

12 28815

106

Tax attributable to othercomprehensive income-19 734-979

Other comprehensive income

67 00285 183

Share of associates in othercomprehensive income(cash flow hedges)*Previous year restated.

Voith Annual Report 2011 | 179

Deferred taxes on the components of other comprehensive
income are as follows:in € thousands

2011

2010

PretaxDeferred tax

After tax

PretaxDeferred tax

After tax

Gains/losses (-) on
available-for-sale financial assets

89 312-18 149

71 16324 368163

24 531

Gains/losses (-) on
cash flow hedges

6 022-1 6344 388-5 6191 584-4 035

Gains/losses (-) on
currency translation-8 4730-8 47355 125055 125

-125

49

-76

12 288- 2 726

9 562

86 736-19 734

67 00286 162-979

85 183

Gains/losses (-) on
net investments in foreign operations
Other comprehensive income

Profit participation rights

Appropriation of net income at Voith GmbHPursuant to the criteria defined in IAS 32, the Group’s profit
participation rights, with a nominal volume of €98 400 thousand (previous year: €83 400 thousand) constitute Groupequity. The rights in question are lower-ranking bearer profit
participation rights with variable compensation, no bullet
maturity and no right of termination on the part of the creditors. A subsidiary issued profit participation rights amounting
to €76 800 thousand in fiscal 2006/07. The same subsidiaryissued an additional €15 000 thousand in fiscal 2010/11. In
fiscal 2008/09, what was then Voith AG issued profit participation rights totaling €6 600 thousand. Subject to theapproval of the appropriate governing body, profits totaling €4 594 thousand are scheduled to be distributed for the
total items for fiscal 2010/11.

Management proposes that the retained earnings be carriedforward. The dividend distributed in the fiscal year amounted
to €76 000 thousand (previous year: €9 949 thousand). The
distribution per share in the fiscal year amounted to €0.63(previous year: € 0.08 per share).

Holders of non-controlling interests
The major portion of non-controlling interests is held by theco-owners of the subsidiaries Rif Roll Cover Srl, Italy, Voith
Fuji Hydro K.K., Japan, Voith IHI P­ aper Technology Co, Ltd.,
Japan, Voith Hydro Shanghai Ltd., China, Voith ­Paper Fabrics India Ltd., India, and VG Power AB, Sweden.

180 | Voith Annual Report 2011

Additional disclosures on capital management
Voith is a family-owned company. As such, it is obliged tomaintain a robust and sustainable financial profile that en­
ables the Group to meet its earnings and growth targets.
Voith manages capital with the aim of maximizing the return on capital. Equity and interest-bearing financial liabilities
are those elements of Group capital that are of relevance tocapital management activities.
in € thousands

2011-09-30 2010-09-30

Equity1 287 331

1 107 256

Interest-bearing financial liabilities

1 261 376

1 476 722

2 548 707

2 583 978The Group

Contributions

Management Report

Consolidated Financial Statements

Year on year, equity rose by 16% in the period under review.
Net income, exchange rate effects and the fact that securities were marked to market made a positive contribution to
the development of equity. Dividend payments had a negative impact on the amount of equity. The interest-bearing
financial liabilities fell by 15%, mainly due to the repaymentof a bond of €146 million and the early repayment of a noteloan of €148 million. For details on the composition of interest-bearing financial liabilities, refer to note 22.

contractual requirements or on a voluntary basis. Once thecontributions have been paid, there are no further obligations for the Company. Current contributions are recognized
as pension expenses in the period concerned. In 2011, theyamounted to €116 748 thousand for the Voith Group as awhole (previous year: €117 550 thousand).

The Articles of Association of Voith GmbH do not define any
special capital requirements.

The pension provisions for defined benefit plans are determined in accordance with IAS 19 using the projected unit
credit method. For this purpose, the future obligations aremeasured on the basis of the pro rata employee benefit obligations earned at the end of the period under review. Pension provisions are calculated taking into account development assumptions for those factors which affect the benefit
amount. All defined benefit plans require actuarial valuations.

(20) Provisions for pensions andsimilar obligations
Provisions for pensions are recognized for benefits in theform of retirement, invalidity and dependents’ benefits pay­able under pension plans. The benefits provided by theGroup vary according to legal, fiscal and economic framework conditions of the country concerned and are usually based on the length of employee service and level of
remuneration.
The Group’s post-employment benefits include both defined
benefit plans and defined contribution plans. In the case ofdefined contribution plans, the Company pays contributions
to state or private pension schemes based either on legal or

The majority of the pension plans are defined benefit plansthat take the form of unfunded or funded schemes.

Owing to their benefit status, the obligations of the US Group
companies in particular in respect of post-retirement medicalcare are also carried under provisions for pensions. These
post-retirement benefit provisions take into account the expected long-term rise in medical costs.
Insofar as foreign Group companies have plan assets, these
consist essentially of stocks, fixed-interest bonds and realestate. Insurance cover forms the plan assets of domestic
companies. The plan assets of the Group companies do notinclude any financial instruments issued by entities of theVoith Group.

Voith Annual Report 2011 | 181

in € thousands

2011-09-30

2010-09-30

2009-09-30

2008-09-30

2007-09-30

Present value of funded benefit obligations

214 550

220 334

190 976

180 915

199 407

Fair value of plan assets-154 625-150 552-118 429-125 058-137 260

Deficit59 92569 78272 54755 85762 147

Present value of unfunded obligations

489 300

510 021418 976369 810373 292

Effect of limits on capitalizable plan assets

0

9

0

0

0

295

935

0

0

0

-99 937-145 903-61 592-9 880-31 152

Unrecognized past service costs

-9

-14

-338

0

92

Provision in the balance sheet

449 574434 830

429 593415 787404 379

Thereof current

25 67925 83924 931

11 53222 122Adjustment for minimum funding requirements
Unrecognized actuarial gains and losses (-)

The present value of defined benefit obligations comprises
the following items:

The development of plan assets is shown in the table below:
in € thousandsin € thousands

2011-09-30 2010-09-30

Fair value of plan assets
at the beginning of the period

150 552

118 429609 952

Expected return on plan assets

9 842

8 801

12 583

Actuarial gains(+)/losses(-)

1 069

3 663

30 78332 622Contributions to funds

6 307

20 183-37 412

89 114

Benefits paid

-11 005-10 8220

137

Plan settlements-4 366

0

39

2 010

2 187

8 288

154 625150 552

Defined benefit obligation
at the beginning of the period

730 355

Current service cost

15 111

Interest cost (pursuant to IAS 19)
Actuarial losses(+)/gains(-)
Past service costs
Changes in the consolidated Group

-80

0

Other

Plan settlements-4 3660

Currency translation differences

Benefits paid

-34 663-33 553

987

5 727

3 135

13 773703 850730 355

Other
Currency translation differences
Defined benefit obligation
at the end of the period

2011-09-30 2010-09-30

Fair value of plan assets
at the end of the period

The actual return on invested plan assets amounted to€10 911 thousand (previous year: profit of €12 464 thousand).
The contributions that are expected to be paid into the plansin the following period amount to €9 374 thousand (previous
year: €5 356 thousand).

182 | Voith Annual Report 2011

The Group

Contributions

Management Report

The expected long-term rate of return on fund assets is calculated based on the portfolio’s actual long-term returns, on
historical returns in the market as a whole, and on forecasts
of probable returns on the classes of securities held in theportfolio. These forecasts are based on the expected rateof return for comparable pension funds for the remaining
service period (investment horizon) and on experience gathered by the managers of large portfolios and experts in theinvestment industry.
The fund assets consist of the following components:in %2011-09-30 2010-09-30

Securities

22%

42%

Bonds

60%

41%

Real estate

3%

4%

Other

15%

13%

100%

100%

Actuarial gains or losses stem from changes in port­folios andvariances in actual trends (e.g. income and pension ­increases,
interest rate changes) compared with the ­assumptions madein the calculations.

Consolidated Financial Statements

The following amounts were recorded in the statement ofincome:in € thousands

2011-09-30 2010-09-30

Current service cost

15 111

12 583

Interest cost on benefit obligation

30 78332 622

Expected return on plan assets-9 842-8 8010261

Recognized actuarial gains
and losses

5 243

2 683

Losses on plan settlements

649

0

Effect of limits on capitalizable
plan assets

-9

589

Past service cost

Current service cost, past service cost, the effects of plancurtailments or settlements and realized actuarial gains andlosses that relate to defined benefit obligations are statedunder personnel expenses. The effect arising from the limiton the defined benefit asset is recognized under other operating expenses. Expected returns on plan assets and realized actuarial gains and losses that relate to the plan assets
are also recognized under other operating expenses. Interest
cost on pension obligations is stated in the interest result.

Voith Annual Report 2011 | 183

The Voith Group’s calculation of pension provisions is basedon the following assumptions:
Germany and Austria
in %

USA

2011-09-30

2010-09-30

2011-09-30

2010-09-30

Discount rate

4.75%

4.25%

4.5%

4.5%

Expected return on plan assets

4.5%

4.5%

7.5%

7.5%

Salary increases

3.0%

3.0%

1.96%

2.12%

Pension increases

2.0%

1.96%

0%

0%

8.0%/ 8.5%
5.0%

8.0%/ 8.5%
5.0%Annual increase in healthcare costs
Initial medical trend rate (pre-65/post-65)
Ultimate medical trend rate (pre-65/post-65)

If healthcare costs increased by 1%, current service costand interest cost would increase by a total of €82 thousand(previous year: €60 thousand), while the present value ofpension obligations would increase by €817 thousand (previous year: €913 thousand). If costs decreased by 1%, current service cost and interest expenses would decrease by
a total of €89 thousand (previous year: €47 thousand), while
the present value of pension obligations would decrease by€995 thousand (previous year: €793 thousand).
Experience adjustments, i.e. the effects of deviations between previous actuarial assumptions and what actually occurred, are shown in the table below:in %2011-09-30

2010-09-30

2009-09-30

2008-09-30

2007-09-30- As a percentage of the present valueof the defined benefit obligations

+0.6%

-1.7%

-0.6%

-0.2%

0%

- As a percentage of the fair value of plan assets

+0.7%

+2.4%

-9.8%

-8.2%

+1.9%

Difference between projected assumptions andactual values (+ gains/- losses)

184 | Voith Annual Report 2011

The Group

Contributions

Management Report

Consolidated Financial Statements(21) Other provisions
The development of provisions is shown below:

2010-09-30

Change inthe consolidatedGroup

Utilization

Additions

Reversals

Personnel-related
provisions

95 678323-21 949

17 902Other tax
provisions

10 0720-2 861

Warranty provisions

218 608

9

Other contractrelated provisions

98 578Sundry provisionsin € thousands

Transfers

Discounting
effectCurrencytranslationdifferences

2011-09-30-3 914

558

41

48

88 687

5 129

-312

-3 029

0

-435

8 564

-62 330

104 099-47 386

0

7

-545

212 462317-34 083

51 244-31 329

43

20

949

85 73977 173

1 125-18 721

13 730-11 159

2 428

270

-1 16763 679500 109

1 774-139 944

192 104-94 100

0338-1 150459 131in € thousands

2011-09-30

2010-09-30< 1 year> 1 year< 1 year> 1 year

Personnel-related provisions

25 82762 86025 67370 005

Other tax provisions

6 909

1 655

3 975

6 097

Warranty provisions

155 371

57 091

171 367

47 241Other contract-related provisions

74 747

10 99288 6399 939

Sundry provisions

40 93022 74946 47630 697303 784

155 347

336 130

163 979

Voith Annual Report 2011 | 185

Personnel-related provisions mainly comprise phased retirement and long-service bonuses. In the case of provisions
for phased retirement, the amount and maturity of the future payments to be made to the beneficiaries are uncertain.
Warranty provisions are accrued for statutory and contractual obligations as well as for non-contractual warranty. Other
contract-related provisions include obligations for ser­vices
still to be rendered on customer orders, or parts of orders,that have been billed, obligations for service and maintenance contracts and for commission provisions. In thesecases, the amount and timing of future expenses hinges oncompletion of the orders concerned. Sundry provisions include items such as obligations arising from personnel adjustment and restructuring measures. The underlying mea­sures are expected to be completed within the next two
fiscal years

Financial liabilities totaling €944 thousand (previous year:€546 thousand) are secured by other assets.
The Voith Group’s current and non-current bonds and its
bank loans are denominated in the following currencies:in € thousands

2011-09-30 2010-09-30

Euro

751 712983 605

US dollar

280 251277 630

Chinese renminbi

38 7030

Swedish krona

20 86970 775

Other currencies

7 508

5 010

1 099 043

1 337 020

Notes on net debt
Net debt as the difference between financial liabilities andrealizable financial assets is an important indicator for banks,
analysts and rating agencies. This indicator is not covered by
the accounting policies based on the International Financial
Reporting Standards (IFRS) and its definition and calculation
may diverge from the practice of other companies.

(22) Bonds, bank loans and otherinterest-bearing financial liabilities
Financial liabilities include the following items:in € thousands

2011-09-30 2010-09-30

Bonds

859 182

999 273

Bank loans

239 861337 747

Financial liabilities from leases

3 803

4 133

Notes payable

4 325

7 522

39

7 136

154 166

120 911

1 261 376

1 476 722

Derivatives used to hedge financialtransactions
Other financial liabilities

186 | Voith Annual Report 2011

In contrast to the carrying amount, which is based on theeffective interest method, the indicator is calculated by mea­suring financial liabilities at their higher nominal repayment
amount.

The Group

Contributions

Management Report

Consolidated Financial Statements(23) Trade payables
Net debt as defined in the Company includes the items:in € thousands
Bank loans

2011-09-30 2010-09-30
239 861337 747

Bonds*

878 925

1 021 775

Other interest-bearing financial liabilities

162 333

137 493

Securities-311 546- 214 599

Cash and cash equivalents-927 140-1 175 359

Other realizable financial receivables
and loans-94 089-106 615-51 656442

in € thousands
Trade payables
Liabilities from construction contracts

2011-09-30 2010-09-30
560 187496 14227 61829 339587 805

525 481€1 600 thousand (previous year: €3 604 thousand) of trade
payables is not due within a year.

*Based on measurement at the repayment amount, bonds are included
at an amount which is €20 million higher (previous year: €23 million)
than the carrying amount.

Lease liabilities relate solely to finance lease obligations. Mostof the underlying lease contracts include a purchase option.
Finance lease liabilities are settled during the contractual period and had the following maturities as at the reporting date.
in € thousands

2011-09-30 2010-09-30

Total future minimum lease
payments (gross)

4 807

5 049

Due in less than one year

735

1 144

Due between one and five years

1 731

2 080

Due in more than five years

2 341

1 825

Present value of future
minimum lease payments

3 803

4 133

Due in less than one year

624

995

Due between one and five years

1 382

1 760

Due in more than five years

1 797

1 378

Interest component of future
minimum lease payments

1 004

916

Voith Annual Report 2011 | 187

(24) Other financial liabilities/other liabilities
Other financial liabilitiesin € thousands

Current

Non-current

2011-09-30

Current

Non-current

2010-09-30

Derivatives used to hedge operationaltransactions

35 016

7 022

42 03826 0786 720

32 798Personnel-related liabilities*

132 8237 097

139 920135 3728 045

143 417

Sundry financial liabilities

158 058

14 011172 069

198 451

23 639222 090

325 897

28 130354 027359 90138 404398 305

At fiscal year-end, personnel and social security liabilities included outstanding annual bonus payments and unpaid wages,salaries and social security contributions.
Other liabilitiesin € thousands

Current

Non-current

2011-09-30

Current

Non-current

2010-09-30

Tax liabilities

80 52545 856

126 381

66 91647 302114 218

Advances received

895 5280895 528975 0850975 085

Deferred liabilities

4 999

18 99723 9963 146

23 76426 910Sundry liabilities*

97 63817 509115 147

95 73813 085

108 823

1 078 690

82 362

1 161 052

1 140 885

84 151

1 225 036

*Reported partly under other liabilities in the previous year.

Tax liabilities principally relate to VAT.
Subsidies for other expenses were granted for a figure of€145 thousand (previous year: €1 092 thousand).

Government grants
in € thousands

2010/11

2009/10As at October 1

11 36210 893Granted during the fiscal year

2 586

1 805

Realized in profit or loss

-6 145-1 336As at September 30

7 803

11 362

Subsidies totaling €7 658 thousand (previous year: €10 270
thousand) were granted for capital spending on non-current
assets. €3 780 thousand thereof (previous year: €7 197
thousand) was granted subject to the condition that the assets would be kept in operating assets for at least five years.
A provision of €777 thousand (previous year: €0) was formed
for unfulfilled conditions and other contingencies.

188 | Voith Annual Report 2011

Subsidies totaling €1 482 thousand (previous year: €4 017
thousand) were received. Of this amount €988 thousand(previous year: €2 396 thousand) was for capital spending
on non-current assets and €494 thousand (previous year:€1 621 thousand) was for other expenses.
In addition, further subsidies totaling €769 thousand (previous year: €1 395 thousand) were netted with cost items.
In Brazil, government-subsidized export credits are granted
to local Voith companies.

The Group

Contributions

Management Report

Consolidated Financial Statements

Notes to the consolidated
cash flow statement
In fiscal 2010/11, the change in securities was made up
of cash inflows totaling €12 924 thousand (previous year:€250 506 thousand) and cash outflows totaling €21 873 thousand (previous year: €187 363 thousand).
Disclosures required relating to the acquisition of consolidated entities are provided in the section on “Business combinations in fiscal 2010/11”.
Cash and cash equivalents include checks, cash on hand,cash equivalents and cash at banks.

Voith Annual Report 2011 | 189

Notes on segment reporting
Information on the segment data
Business is managed according to the different products andindustries and corresponds to the internal reporting structure
to the management of Voith GmbH. Because of a change in
the internal reporting structure, the previous period data for
the I­ndustrial S­ ervices segment were adjusted. The structureof the other segments has remained unchanged compared
to September 30, 2010.
Segment data is essentially compiled using the same presentation and measurement methods as the consolidated
financial statements. Intercompany sales are effected atmarket prices and intersegment transactions and businessare all undertaken in accordance with the uniform accounting policies used for the consolidated financial statements.
In the Voith Group, the key indicator to assess and manage the individual segments is return on capital employed(ROCE). The calculation of ROCE is defined as profit fromoperations in relation to capital employed.
Profit from operations is the basis for calculating ROCE andthus a key management indicator. Basically, it is an operational indicator derived from external reporting, the operational result before non-recurring result. In line with the calculation of profit from operations, the following profit/loss
components are taken into consideration:

190 | Voith Annual Report 2011

Operating interest income
Operating interest income is defined as interest received by
the Company on the long-term financing of receivables from
customers or as the imputed interest effect attributable tothat portion of customer advances that is not used to finance inventories and PoC receivables.
Other adjustments
Other adjustments include effects which, based on theiroperating character, are normally shown as other income
and expenses in the consolidated statement of income. In
determining the profit from operations, these adjustments
are eliminated as exceptional effects so as to facilitate theassessment of the operating activities by segment.
Capital employed is defined as operating net assets. It is theaggregate of property, plant and equipment and intangible
assets (excluding goodwill), inventories, trade receivables,
other non-interest-bearing assets and income tax assets aswell as prepaid expenses less trade payables, non-interestbearing liabilities and income tax liabilities as well as deferredincome and advances received, which are deducted up to
the amount of inventories and PoC receivables.
The capital employed as at the reporting date is an average value derived from the values as at the end of the period under review, the reporting date for the interim financial
statements and as at the end of the previous period underThe Group

Contributions

Management Report

Consolidated Financial Statements

Information on the activities in thesegments
review. In contrast to the provisions of IAS 21 the assets andliabilities of foreign subsidiaries are translated at the averageexchange rate for the period under review. Owing to the useof averages, the capital employed cannot be reconciled to
the figures in the consolidated balance sheet on any given
reporting date.
Consolidation entries were taken into account in full when
the capital employed was calculated.

Voith Hydro—is a joint venture company that combines thestrength of two leading hydro power component suppliers
to create a leading, full-line supplier for hydro power plants.
Its key products are Francis, Pelton, Kaplan, bulb and pumpturbines. The Group Division also produces generators andgenerator drive units for all kinds of turbines, as well as
excitation and diagnostic systems, frequency convertors,
insulation systems, switching systems for all voltages andtransformers.

Capital expenditures concern intangible assets (excluding
goodwill) and property, plant and equipment. Additions due
to business combinations are not included.

Voith ­­Industrial ­­Services—is one of the leading providers oftechnical, consulting and management ser­vices in industrial
contexts.

Sales are broken down regionally, based on the customer’s
domicile. Non-current assets, consisting of property, plantand equipment and other intangible assets are allocatedbased on the location of the asset.

Voith ­Paper—is a leading provider of complete process lines
for the papermaking industry. An established process supplier to the paper industry worldwide, Voith has amassed a
wealth of experience covering everything from fiber technology through processing to printing technology. Voith
develops solutions that span the entire papermaking pro­cess, from fiber to finished paper—and this is true for every
type of paper: graphic grades, board, packaging papers,
tissue paper and special-purpose papers. Voith is also oneof the global leading manufacturers of forming fabrics, wet
felts and dryer fabrics for the world’s cellulose and paper­industry.
Voith ­Turbo—specializes in mechanical, hydrodynamic andelectronic drive and braking systems for road, rail, marine
and industrial applications. Voith T­ urbo crafts customized
solutions ranging from individual machines to end-to-end
process solutions.
Operating and reportable segments as defined in IFRS 8 are
identical.

Voith Annual Report 2011 | 191

Segment information by business segment
Voith Hydro

Voith ­Industrial ­Services

Voith ­Paperin € millions

2010/11

2009/102010/11

2009/10External sales

1 228

1 158

1 006

956

1 827

1 723

7

6

40

37

36

43

1 235

1 164

1 046

993

1 863

1 766

Profit from operations

90

76

40

33

143

128

Depreciation and amortization ofproperty, plant and equipment &intangible assets2)

26

21

16

17

69

70

Investments3)

44

90

15

10

75

52

Segment goodwill

14

14

203

201

223

219

Capital employed

529

440

178

185

819

796

ROCE

17.1%

17.3%

22.6%

17.9%

17.4%

16.0%

Employees4)

5 345

5 238

18 46418 870

9 937

9 353

Sales with other segments
Total segment sales

5)

2010/11

2009/10

1)

Subtotal for Voith Hydro, Voith I­ndustrial S­ ervices, Voith ­Paper and Voith ­Turbo.

2)

Excluding depreciation and amortization included in the non-recurring result, as not included in profit from operations.

3)

Excluding additions due to new acquisitions and financial assets.

4)

Statistical number of persons employed at fiscal year-end.

5)

Previous year restated due to a change in the internal reporting structure.

192 | Voith Annual Report 2011

The Group

Contributions

Voith ­TurboManagement Report

Total Core Business1)

Consolidated Financial Statements

Reconciliation

Total

2010/11

2009/102010/11

2009/102010/11

2009/10

1 520

1 349

5 581

5 186

13

12

5 594

5 198

6

5

89

91

-89

-91

0

0

1 526

1 354

5 670

5 277

-76

-79

5 594

5 198

163

135

436

372

19

10

455

382

68

46

179

154

10

9

189

163

59

72

193

224

18

10

211

234

140

138

580

572

8

8

588

580

734

703

2 260

2 124

123

104

2 383

2 228

22.2%

19.2%

19.3%

17.5%

19.1%

17.1%

5 965

5 422

39 71138 88340 69139 754980

5)

2010/11

2009/10871

The defined components “Operating interest income” and“Other adjustments” are not shown directly in the consolidated statement of income and are therefore disclosed
separately in the following reconciliation of the profit fromoperations to income before taxes.
Reconciliation of total of profit from operations toincome before taxesin € millions

2010/11

2009/10

Profit from operations

455

382

Operating interest income

-32

-32

Other adjustments-73

Non-recurring result

-14

-13

4

4

Interest result

-82

-71

Other financial result

-2

-39

Income before taxes

322

234

Share of profits from associates

Voith Annual Report 2011 | 193

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

Non-current assets

in € millions

2010/11

2009/10in € millions

Germany

1 152

1 058

Other countries

4 442

4 140

2010/11

2009/10

Germany967

992

Other countries

913

866

of which Europe

1 507

1 496

of which Europe

283

274

of which Americas

1 277

1 231

of which Americas

413

402

of which Asia

1 512

1 297

thereof USA

225

223

thereof China

989

698

of which Asia

214

187

of which others

146

116

of which others

3

3

5 594

5 198

1 880

1 858

Total

194 | Voith Annual Report 2011

Total

The Group

Contributions

Management Report

Consolidated Financial Statements

Other notes
Contingent liabilities, contingent assets
and other financial obligations

Contingent liabilities

Appropriate provisions have been recognized in the relevantGroup companies to cover potential obligations arising fromtaxation, legal and arbitration proceedings.

The contingent liabilities listed below are stated at face value.
No provisions were made to cover these contingencies, as
the risk of their realization is regarded as low:

Possible tax risks exist outside Germany concerning the tax
recognition of expenses amounting to a maximum of €11
million (previous year: €13 million). In connection with therecognition of transfer prices outside Germany, in addition
there are risks of €5 million (previous year: €5 million) andof €23 million (previous year: €9 million) for legal disputes.
As things stand, a successful outcome is expected in bothcases.

in € thousands
Guarantee obligations
Warranties

2011-09-30 2010-09-30
35 03536 910632

901

35 66737 811

Most of the guarantee obligations mature in 2015.

Owing to failure, due to an end customer, to comply withspecific rules concerning the receipt of tax incentives outside
Germany, the recognition of tax privileges is currently disputed by the tax authorities. The maximum risk is currently €41
million (previous year: €39 million), although the assessment
undertaken by the engaged lawyers suggests that there is
still a good chance of the tax privileges being recognized
and the maximum risk will not therefore materialize.
Neither Voith GmbH nor any of its consolidated companies
are involved in any current or foreseeable taxation, legal or
arbitration proceedings that could materially influence theireconomic situation.
Owing to the ongoing tax field audit of the German companies, further changes may be made to tax items.
The Voith Group has contingent tax assets totaling approximately €9 million (previous year: €10 million) outside
Germany.

Voith Annual Report 2011 | 195

Other financial obligations
In addition to liabilities, provisions and contingent liabilities,
the Voith Group also has other financial obligations, in particular those arising from rental and lease agreements forbuildings, land, plant, machinery, and other non-productionrelated tools and equipment.
in € thousands

2011-09-30 2010-09-30

Purchase commitments for capital
expenditures

48 21519 989Obligations arising from non-cancelable
operating leases

137 326

136 024

Other

1 231

740

186 772

156 753

Assets leased under operating leases led to cash outflows
totaling €69 897 thousand (previous year: €67 634 thousand) in the period under review. These payments were recognized as expenses and mostly related to leased vehicles,machinery and buildings. The majority of leases run for between one and 16 years. Some companies have the optionof extending their rental contracts.

Future minimum lease payments include €5 559 thousand(previous year: €5 319 thousand) from sale and leaseback
transactions.
An immaterial amount of cash inflows is expected from noncancelable subleases of assets under non-cancelable operating leases within the Group.
The “Other obligations” item consists essentially of maintenance agreements.
€3 665 thousand (previous year: €1 653 thousand) was collected under operating leases in which Voith acts as the lessor. These mainly relate to leases for Group products foruse in the long term. The leases run for between one andfive years. Some contracts contain an option for extending
the lease.
The total of future minimum lease payments for non-cancelable operating leases in which Voith acts as the lessor isshown below:
in € thousands

The total of future minimum lease payments for non-cancelable operating leases is shown below, broken down by
maturity.
in € thousands

2011-09-30 2010-09-30

Nominal value of future minimum lease
payments
Due in less than one year

49 23047 665Due between one and five years

65 32662 110Due in more than five years

22 77026 249137 326

136 024

196 | Voith Annual Report 20112011-09-30 2010-09-30

Nominal value of future minimum lease
payments
Due in less than one year

1 412

1 952

Due between one and five years

2 147

0

0

0

3 559

1 952

Due in more than five years

The Group

Contributions

Management Report

Consolidated Financial Statements

Additional information on financial instruments
Carrying amounts, amounts recognized in the balance sheet and fair values by measurement category.
Amount recognized in the balance sheet
in accordance with IAS 39

in € thousands

IAS 39measureCarrying
ment
amount Amortizedcost
category 2011-09-30

Cost

Fair value
through
equityFair value
through
profitor loss

Amountrec­ognizedin thebalancesheet inaccordancewith IAS 17

Fair value
2011-09-30

Assets:Cash and cash equivalents

LaR

927 140927 140927 140

Trade receivables

LaR

830 075

830 075

830 075

Receivables from construction contracts

LaR

320 357

320 357

320 357

Other financial assets and securities

342 962

Financial Assets Loans and Receivables

LaR

39 567Available for Sale Financial Assets

AfS

293 213

Financial Assets Held for Trading

FAHfT

0

0

0

Financial Assets at Fair Value
through Profit and Loss

FAfvtpl10 18210 18210 182Financial derivatives
Derivatives not used for hedging
Derivatives used for hedging

39 56739 56723 251

269 962269 962*

61 656
FAHfT

5 638

n.a.

56 018Other receivables

1 728

5 638

5 638

54 29056 018162 962

Financial receivables

LaR

43 62043 62043 620Sundry financial assets

LaR

119 342

119 342

119 342560 187

560 187

560 187

1 103 368 1 103 368

1 140 768

Liabilities:
Trade payables

FLAC

Bonds/bank loans/notes

FLAC

Financial liabilities from leases

n.a.

Financial derivatives
Derivatives not used for hedging
Derivatives used for hedging

3 803

3 803

42 077
FLHfT

7 521

7 521
2 230

32 326

7 521

n.a.

34 556

Other financial liabilities

FLAC

154 166

154 166

154 166

34 556

Other liabilities

FLAC

311 989

311 989

311 989

IAS 39 measurement categories:
Loans and Receivables (LaR)
Available for Sale (AfS)LaR

2 280 101 2 280 101

AfS

293 213

Financial Assets Held for Trading (FAHfT)

FAHfT

5 638

23 251

269 962
5 638

Financial Assets at Fair Value
through Profit and Loss (FAfvtpl)

FAfvtpl10 18210 182Financial Liabilities Measured at
Amortized Cost (FLAC)

FLAC

Financial Liabilities Held for Trading (FLHfT)

FLHfT

2 129 710 2 129 710
7 521

7 521

*Available-for-sale financial assets (AfS) include investments whose fair value could not be determined reliably.
Voith Annual Report 2011 | 197

Amount recognized in the balance sheet
in accordance with IAS 39

in € thousands

IAS 39measureCarrying
ment
amount Amortizedcost
category 2010-09-30

Cost

Fair value
through
equityFair value
through
profitor loss

Amountrec­ognizedin thebalancesheet inaccordance
Fair value
with IAS 17 2010-09-30

Assets:Cash and cash equivalents

LaR

Trade receivables

LaR

784 058

784 058

784 058

Receivables from construction contracts

LaR

355 639355 639355 639

Other financial assets and securities

1 175 359 1 175 359

1 175 359

247 083

Financial Assets Loans and Receivables

LaR

30 918Available for Sale Financial Assets

AfS

206 993

Financial Assets Held for Trading

FAHfT

0

0

0

Financial Assets at Fair Value
through Profit and Loss

FAfvtpl

9 172

9 172

9 172

Financial derivatives
Derivatives not used for hedging
Derivatives used for hedging

30 91830 91824 069182 924

182 924*

96 747
FAHfT

9 450

n.a.

87 297

Other receivables

797

9 450

9 450

86 50087 297170 376

Financial receivables

LaR

54 86854 86854 868Sundry financial assets

LaR

115 508

115 508

115 508496 142496 142496 142

1 344 542 1 344 542

1 436 927

Liabilities:
Trade payables

FLAC

Bonds/bank loans/notes

FLAC

Financial liabilities from leases

n.a.

Financial derivatives
Derivatives not used for hedging

4 133

4 133

39 933
FLHfT

9 984

n.a.

29 949Other financial liabilities

FLAC

120 910120 910120 910

Other liabilities

FLAC

365 508

365 508

365 508

Derivatives used for hedging

8 040

9 984

9 984

21 90929 949IAS 39 measurement categories:
Loans and Receivables (LaR)
Available for Sale (AfS)LaR

2 516 350 2 516 350

AfS

206 993

Financial Assets Held for Trading (FAHfT)

FAHfT

9 450

9 450

Financial Assets at Fair Value
through Profit and Loss (FAfvtpl)

FAfvtpl

9 172

9 172

Financial Liabilities Measured at
Amortized Cost (FLAC)

FLAC

Financial Liabilities Held for Trading (FLHfT)

FLHfT

24 069182 924

2 327 102 2 327 102
9 984*Available-for-sale financial assets (AfS) include investments whose fair value could not be determined reliably.

198 | Voith Annual Report 2011

9 984

The Group

Contributions

Management Report

IFRS 7.27 measurement categoriesin € thousands
2011-09-30

Level 1

Level 2

Level 3

AssetsOther
financialassets andsecurities

280 144280 144

00

Financialderivatives

61 656061 656042 077042 0770Liabilities
Financialderivatives

in € thousands
2010-09-30

Level 1

Level 2

Level 3

Consolidated Financial Statements

The three-level fair value hierarchy distinguishes between fairvalues based on the nature of the input parameters used forvaluation, thereby revealing the extent to which observable
market data is available for determining fair values. Three
categories are distinguished:
Level 1:
Fair values are determined on the basis of quoted market
prices.
Level 2:
Fair values are determined using valuation techniques inwhich the inputs are based on directly observable market
data.
Level 3:
Fair values are determined using valuation techniques where
the inputs are not based on directly observable market data.
Cash and cash equivalents, trade receivables and other financial assets 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.

AssetsOther
financialassets andsecurities

192 096

192 0960

0

Financialderivatives

96 7470

96 747039 933039 9330

Because trade payables and other financial liabilities generally have short residual terms, the carrying amounts approximate the fair values.

Liabilities
Financialderivatives

The market values of unlisted bonds, bank loans and otherfinancial liabilities are calculated by Voith as the present
value of the payments associated with the liabilities, basedon the applicable term structure of interest rates and thecredit spread curve determined for different currencies.

Voith Annual Report 2011 | 199

Risk management
Net gains and losses for each category of instrument:

Principles of financial risk management

2010/11

The Voith Group is a global player. In the course of ordinary
business, some of its liabilities, assets and transactions are
exposed to risks arising from changes in interest rates andexchange rates. These risks could affect its net assets, financial position and results of operations. The aim of financial
risk management is to manage and limit these risks.

in € thousands

Other net
Impairments gains/losses

Total

Loans and receivables(LaR)-2 037

12 357

10 320Available-for-sale financial
assets-3 365-463-3 828Financial assets at fair val­ue through profit or loss

0

1 093

1 093

Held-for-trading financial
assets

0

3 008

3 008

Financial liabilities mea­
sured at amortized cost0

-7 118-7 118Other net
Impairments gains/losses

Total

2009/10in € thousands
Loans and receivables
(LaR)

1 740

-1 205535

Available-for-sale financial
assets-40 836-469-41 305

Financial assets at fair val­ue through profit or loss

0

978

978

Held-for-trading financial
assets0-4 288-4 288Financial liabilities mea­
sured at amortized cost0

-15 065-15 065

The principles of the Group’s financial policy are laid downby the Voith GmbH Board of Management and monitored by
the Supervisory Board. Voith Finance GmbH, Heidenheim,
a wholly owned subsidiary of Voith GmbH, implements thefinancial policy and regularly reports to the managing director responsible for finances on the financial position of theGroup and current risk exposures. Certain financial transactions require special approval by the Group’s management.
Long-term refinancing is undertaken by Voith GmbH.
Simple derivative financial instruments are used to limit therisks arising both from operating business and from the resultant financing requirements. These instruments are usedin accordance with clearly defined, uniform, Group-wide
guidelines. Compliance with these guidelines is verified on
an ongoing basis. Hedge transactions and cash investments
are placed only with financial institutions that have first-classcredit ratings.
Credit risk

For the net gains and losses from available-for-sale financial
assets without an effect on income, see note 19.

The Voith Group does business only with recognized, creditworthy third parties. We verify the creditworthiness of customers who wish to do credit-based business with us.

Interest income includes €18 165 thousand (previous year:€33 282 thousand) and interest expenses include €100 714
thousand (previous year: €103 057 thousand) for financial assets or financial liabilities not measured at fair value
through profit or loss.

Cash and cash equivalents:
For the purposes of risk management, cash and cash equi­valents consist essentially of cash and short-term deposits.
Default risks associated with term deposits are limited by
selecting solvent banking partners and by spreading cash

200 | Voith Annual Report 2011

The Group

Contributions

Management Reportacross multiple counterparties. A creditworthiness limit (derived from credit default swaps/rating/deposit protection) is
established for banks and compliance is continuously verified. In addition, Voith invests in securities in the context ofits strategic liquidity reserve and has the associated risks
monitored centrally. Securities may only be traded by consolidated companies with the approval of Voith Finance.
Trade receivables:
Credit risk arising from the delivery of goods and ser­vices
expresses itself in terms of counterparty risk, manufacturing risks and political export-related risks. Handling of theserisks is governed by binding rules throughout the Voith
Group. The maximum risk of default is limited to the carrying
amount of the trade receivables, which is €830 075 thousand (previous year: €784 058 thousand). The maximum default risk for receivables arising from long-term construction
contracts is €320 357 thousand (previous-year: €355 639
thousand).

Consolidated Financial Statements

default of the counterparty, with a maximum exposure equal
to the carrying amount of these instruments. For details offinancial guarantees, please refer to the discussion of contingent liabilities. This kind of loss can occur if individual business partners fail to meet their contractual obligations. As arule, no collateral exists for such an eventuality.
The Voith Group is not exposed to any material concentration of risks. Corporate policy is to avoid concentration of
credit risk in a single financial institution. Instead, the Groupinvests with a variety of creditworthy financial institutions.
The Group’s customer structure is not materially concentrated in any particular geographic region. The Group tests
doubtful accounts for impairment considering certain customers, historical trends, branches of industry and various
other information.

All orders above a defined value are subject to general risk
assessment requirements. Without special permission fromthe relevant governing bodies, Group companies do not accept orders from customers whose credit rating falls below
a defined threshold and who cannot furnish an adequate
guarantor.
Political export risks must always be hedged for risks classified as Euler Hermes country category 3 or higher unless approval is issued by the decision-making bodies. Further risk
assessment is also activated for orders upward of definedvalues. Necessary credit insurance is obtained via export
credit agencies (ECAs), on the private insurance market orby means of bank products.
With respect to credit risk arising from the other financial
assets of the Group, which comprise cash and cash equivalents, available-for-sale financial assets and certain derivative
instruments, the Group’s exposure to credit risk arises from

Voith Annual Report 2011 | 201

The following credit risks are inherent in financial assets:
2011-09-30

Thereof not impaired but past due at thereporting date by:

Gross value

Thereof not
impaired or
past dueless than
90 days

between90 and 180 days

more than
180 days

Trade receivables

873 590594 079

149 81947 65539 034

Other financial assets and securities

342 962342 962

Other financial receivables

166 907162 026

1 015

86

520

Gross value

Thereof not
impaired or
past dueless than
90 days

between90 and 180 days

more than
180 days

Trade receivables

826 718559 886

136 042

20 22032 597

Other financial assets and securities

247 083

247 083

Other financial receivables

174 413168 562

2 244

31

213

in € thousands

2010-09-30

in € thousands

Receivables of €403 thousand (previous year: €770 thousand) which were subject to amended contract terms because they would otherwise have been impaired or past due
were recognized at the reporting date.
The carrying amounts of cash and cash equivalents, receiv­
ables from construction contracts and derivatives are neither
impaired nor past due.
Liquidity risk
To ensure that it can always meet its financial obligations,
Voith has sufficient cash lines and has negotiated a syndicated credit facility with its banking partners.
Cash lines are used to cover the short-term financing ofworking capital. By contrast, the syndicated credit facility
serves as a reserve out of which temporary funding can beprovided for significant investments. The syndicated credit
facility was renegotiated in June 2011 and is available fora further five years. It has not been drawn at present. To
safeguard internal and external growth, Voith procures longterm funding on the capital markets by issuing bonds, private
placements and individual bank loans.

202 | Voith Annual Report 2011

Thereof not impaired but past due at thereporting date by:

Cash pools, intercompany loans and the allocation of external bank credit lines to individual operating units protectgroup companies’ liquidity. Voith Finance produces monthly
finance status reports for the entire Group once a month.
Balances of central bank and cash pool accounts and guarantees are available on a daily basis.

The Group

Contributions

Management Report

Consolidated Financial Statements

The table below lists the undiscounted, contractually agreed
cash outflows from financial instruments:
Cash flows < 1 yearin € thousands

Balance
as at2011-09-30 Fixed rate

Cash flows 1–5 years

Cash flows > 5 years

Floating
rate

Repayment

Fixed rate

Floating
rate

Repayment

Fixed rate

Floating
rate

Repayment

Trade payables

560 18700558 587

0

0

1 747

0

0

0

Bonds/bank loans/notes

1 103 368

36 2993 516

231 968

130 415

10 171

209 662

24 1882 209

644 798

Financial liabilities fromleases

3 803

0

0

735

0

0

1 731

0

0

2 341

Other financial liabilities

154 166476

585

94 459

0

0

662

0

0

59 045

Sundry liabilities

311 98900

290 88100

16 886

0

0

4 247

Financial derivatives

42 077

Outflows00

315 876

0

0

110 689

0

0

124

Inflows00- 285 24100-109 139

0

0

-124

4 101 1 207 265

130 415

10 171

232 238

24 1882 209

710 431

2 175 590

36 775

Cash flows < 1 yearin € thousands
Trade payables
Bonds/bank loans/notes

Balanceas at2010-09-30 Fixed rate

Floating
rate

Cash flows 1–5 years

Repayment

Fixed rate

Floating
rate

Cash flows > 5 years

Repayment

Fixed rate

Floating
rate

Repayment

496 14200492 539

0

0

3 748

0

0

0

1 344 542

49 8738 866

230 728

159 997

11 089392 087

56 4383 541

706 581

Financial liabilities fromleases

4 133

0

0

1 144

0

0

2 080

0

0

1 825

Other financial liabilities

120 910

1 180

366

64 507

127

0

1 719

0

0

54 684

Sundry liabilities

365 50800

333 87300

28 335

0

0

3 988

Financial derivatives

39 933

Outflows

00

242 979

00

92 80900771

Inflows

00- 208 28200

-81 478

0

0

-795

9 232 1 157 488

160 124

11 089439 300

56 4383 541

767 054

2 371 168

51 053Voith Annual Report 2011 | 203

Other potential payment obligations, which can materialize at
any time, exist in the form of financial guarantees of €35 667
thousand (previous year: €37 811 thousand).
Solvency is ensured and liquidity can be managed using
current securities and cash equivalents which can be transformed into cash at any time.
Derivatives include cash outflows on derivative financial instruments with negative market values for which gross cash
settlement has been agreed. The cash outflows for thesefinancial derivatives are matched by corresponding cash inflows which are shown separately in the table above underinflows and outflows (gross). On the other hand, where a net
cash settlement is effected, cash outflows are netted withcash inflows.
Financial market risks
Foreign exchange risks:
Global production and trading activities expose the Voith
Group to risks arising from fluctuations in exchange rates.
Foreign exchange risks exist in particular wherever receiv­
ables, liabilities, cash and cash equivalents and orders received (firm commitments/forecast transactions) are or will
be denominated in a currency other than the functional currency of the Group company concerned.
For the Voith Group, the foreign exchange risk relates mainly
to the US dollar. Changes in the exchange rate affect bothearnings and Group equity. If the US dollar rises by 5%,this reduces our pre-tax profit by €2 382 thousand (previous year: €7 259 thousand) and equity (including the effect from pre-tax profit) by €2 330 thousand (previous year:€1 389 thousand). If in contrast the US dollar falls by 5%, thisincreases our pre-tax profit by €2 256 thousand (previous
year: €6 554 thousand) and equity (including the effect frompre-tax profit) by €2 209 thousand (previous year: €1 241
thousand).
Most currency hedging is undertaken by Voith Finance.
Transaction risks arising from the international delivery of
goods and ser­vices are mainly limited by forward exchange
contracts, currency swaps and combined interest rate andcurrency swaps. Essentially, all foreign currency transac-

204 | Voith Annual Report 2011

tions at the Voith Group must be hedged. Major items on thebalance sheet and orders (upward of a value of USD 1 million) are hedged individually within the framework of hedge
accounting.
Before external hedges are agreed, in the context of projectbusiness, both the hedge relationship and the objectives ofand strategies for risk management must be documented in
respect of the underlying (hedged) transactions.
Hedges must be highly effective if they are to satisfy Voith’srisk management strategy. Where hedge relationships areverifiably effective, the transactions qualify for hedge accounting. As a result, fluctuations in the exchange rate do
not affect profit or loss, nor do they influence project costing.
In the Voith Group, derivative financial instruments are tradedexternally by Voith Finance on behalf of consolidated companies. Consolidated companies in countries subject to foreignexchange restrictions hedge their currency risks locally. The
enterprise-wide treasury management tool is used for central
scheduling, monitoring and documentation of all foreign currency hedges entered into by Voith Finance or consolidated
companies.
Interest rate risks:
The Voith Group’s exposure to interest rate risks arising fromexternal refinancing is analyzed and managed centrally by
Voith Finance. Medium to long-term assets and liabilities with
fixed interest rates are the main source of interest rate risks
at the Group, as changes in market rates of interest cancause the value of a financial instrument to fluctuate. Risks
to the market value of fixed-interest receivables and payables
are hedged on a case-by-case basis. Risks to market value
are hedged by interest rate swaps and combined interest
rate and currency swaps, which usually qualify for hedge
accounting.
The relevant asset positions are essentially bank balancesthat are invested in the money market and/or are used tofund the existing cash pool. The consolidated companies
that participate in the cash pool operate a daily zero-balancing policy and therefore have no exposure to externalinterest rate risks.

The Group

Contributions

Management Report

Consolidated Financial Statements

On the cost side, interest rate risks arise from bonds placedon the capital market and a private placement in the USA as
well as a variety of bank loans. The fixed interest rate on the
US private placement was swapped for a floating rate andthe resulting cash flow risk hedged by interest rate caps accordingly. The other bonds are subject to fixed interest andare not subject to any interest fluctuation risk.
The carrying amounts of those key financial instruments thatare exposed to interest rate risks are grouped by contractually defined maturity in the following table:
Less than
one year

1–2 years

2–3 years

3–4 years

4–5 years

More than
5 years

Total

927 140

0

0

0

0

0

927 14000150 2760

74 13754 512278 925

127 617

19

0

0

0

0

127 636

0

0

0

0

0

580 257

580 257

Bank loans

100 09313

12 013

106

0

0

112 225

2010-09-30
in € thousands

Less than
one year

1–2 years

2–3 years

3–4 years

4–5 years

More than
5 years

Total

Cash and cash equivalents

1 175 359

0

0

0

0

0

1 175 359

Bonds

145 73100

150 5150

125 529421 775

Bank loans

77 443

34

34

34

34

269

77 848

2011-09-30
in € thousands
Floating interest rate
Cash and cash equivalents
Bonds
Bank loans
Fixed interest rates
Bonds

Floating interest rate

Fixed interest rates
Bonds
Bank loans

0

0

0

0

0

577 498

577 498218

100 09313

159 56213

0259 899

If the market rate of interest had been 100 bps higher (lower)
as at September 30, 2011, earnings would have been €5.2
million higher (lower) (previous year: €6.8 million). Equity
would have changed accordingly.

Voith Annual Report 2011 | 205

Risks relating to securities and stock prices:
Voith has shares and other available-for-sale securities of€270 million (previous year: €183 million). Stock price risks
are reflected on the balance sheet and not in the consolidated statement of income, unless the criteria for impairment
are met. A 10% change in the underlying stock prices would
cause equity to change by 10% of the carrying amount of
the stocks concerned.
For shares and other securities at fair value through profit orloss of €7 million (previous year: €6 million), a 10% change
in the underlying stock prices would change pre-tax profit
by 10% of the carrying amount of the respective securities.
It should be noted that all existing stock price risks are analyzed continuously and suitable actions taken.
Commodity price risk:
Voith is exposed to risks arising from changes in commodity prices, as these also affect the semi-finished goods that
we need. Corporate Purchasing regularly reviews the nature, volume and scheduling of the Group’s materials requirements. On request by Corporate Purchasing, and in
consultation and agreement with consolidated companies,
suitable forward commodity contracts can be arranged by

206 | Voith Annual Report 2011

Voith Finance to limit any latent commodity price risks. No
forward commodity contracts were in place during the fiscal
year. In addition, increases in the price of materials can bepassed on to customers to some extent.

The Group

Contributions

Management Report

Consolidated Financial Statements

Hedge relationships:
The following items are used to hedge foreign exchange andinterest rate risks:
2011-09-30
in € thousands

Nominal values*< 1 year> 1 year

Positive market values

Negative market values< 1 year< 1 year> 1 year> 1 year

Forward exchange contracts (fair value hedges)

559 523156 780

13 5803 734

26 397

5 929

Forward exchange contracts (cash flow hedges)

34 178

0

1 728

0

862

0

Cash and cash equivalents (cash flow hedges)

26 000

0

0

0

1 368

0

Interest rate swaps (fair value hedges)

0242 230

036 9760

0Interest rate swaps (cash flow hedges)

0

0

0

0

0

0

Other derivatives

153 507281 367

2 813

2 825

6 426

1 095

Total

773 208680 377

18 12143 53535 0537 024

2010-09-30
in € thousands

Nominal values*< 1 year> 1 year

Positive market values

Negative market values< 1 year< 1 year> 1 year> 1 year

Forward exchange contracts (fair value hedges)

588 767

219 11435 73812 12716 426

5 484

Forward exchange contracts (cash flow hedges)

20 327

0

797

0

1 030

0

Interest rate swaps (fair value hedges)

100 000

238 008261

38 3740

0Interest rate swaps (cash flow hedges)0

148 000

0

0

0

7 009

Other derivatives

154 708

265 635

4 448

5 002

8 710

1 274

Total

863 802

870 757

41 24455 50326 166

13 767*Nominal value refers to the volume of the hedged transactions in thelocal currency, translated at the closing rate.

Fair value hedges
The Group uses fair value hedges primarily to hedge interest
rate and foreign exchange risks.
In fiscal 2010/11, a loss of €37 098 thousand (previous year:
a loss of €5 449 thousand) was recorded for derivative financial instruments classified as fair value hedges. Since thehedges were classified as highly effective, measurement of
the hedged transactions at the reporting date produced acontrary profit/loss in the same amount.
There were no effects on earnings from ineffective hedges in
the 2011 and 2010 reporting periods.

Voith Annual Report 2011 | 207

Changes in the value of financial derivatives that do not meetthe requirements defined for hedge accounting by IAS 39 arerecognized in profit or loss at the reporting date.
Cash flow hedges
On September 30, 2011, the Group held forward exchange
contracts to hedge expected future sales and purchases forwhich firm commitments exist.
The main terms and conditions of the forward exchange
contracts were negotiated in line with the terms and conditions agreed for the hedged transactions. The underlying
transactions are expected to be carried out within one year.
Hedge relationships designed to hedge cash flows from expected future sales were classified as highly effective. Accordingly, an unrealized loss of €3 532 thousand (previous
year: €6 976 thousand) was recognized in Group equity inother reserves as at September 30, 2011.
Due to the realization of hedged transactions in the courseof the period under review, the relevant accumulated losses
amounting to €2 490 thousand (previous year: €1 357 thousand) were transferred from other reserves to profit or loss.
Of the amount reclassified to the income statement, €2 003
thousand was transferred to the interest result and €487
thousand to the operational result.
Research and development costs
In fiscal 2010/11, research and development costs totaled€259 449 thousand (previous year: €265 861 thousand).
Of this amount, €17 361 thousand (previous year €20 121
thousand) was capitalized as development expenditurein the balance sheet. The remaining expenses consist of€164 892 thousand (previous year: €172 628 thousand),208 | Voith Annual Report 2011

which includes both amortization on these capitalized development expenses and activities for non-customer-specificnew developments and improvements, as well as €77 196
thousand (previous year: €73 112 thousand) for development activities capitalized in the context of customer-specificorders.
Related parties
In the course of its ordinary business activities, Voith GmbH
maintains relationships both with the subsidiaries listed inthese consolidated financial statements and with other related entities and individuals (holders of non-controlling interests, family members who are shareholders, and membersof the Supervisory Board and the Board of Management).
In fiscal 2007/08, one subsidiary of Voith GmbH was soldto family shareholders in the context of a transaction undercommon control. This company, JMV GmbH & Co. KG, Heidenheim, is now the parent company of the Voith Group.
All business transactions with related parties are conducted
at arm’s length conditions.
Members of management or members of the Supervisory
Board of Voith GmbH and family member shareholders also
serve on the supervisory boards of other companies withwhich Voith maintains relationships in the course of its ordinary business activities. Any transactions involving thesecompanies are conducted at arm’s length conditions.
A total of €743 thousand (previous year: €76 thousand) was
paid at customary market rates to members of the Supervisory Board and former members of the Board of Management for consulting and other ser­vices.

The Group

Contributions

Management Report

Consolidated Financial Statements

The majority of intercompany deliveries and ser­vices to related parties (entities and individuals) are shown in the tablebelow:in € thousands

2010/11

2009/10

Liabilities to family shareholders

67 90637 123­Services purchased from associates

4 519

7 508

­Services rendered to associates

10 60720 122

Receivables from associates

552

5 057

Liabilities to associates

274

707

­Services purchased from other investments

2 190

665

­Services rendered to other investments

25 73324 380Receivables from other investments, incl. advances paid

11 63211 140

Impairment of receivables from other investments

-9

-448

Liabilities to other investments including advances received

29 81625 030­Services purchased from the parent company

12 196

8 842

536

467

4

214

3 189

1 904

­Services rendered to the parent company
Receivables from the parent company
Liabilities to the parent company
Liabilities to holders of non-controlling interests

69 38761 590Receivables from holders of non-controlling interests

31 26931 496

Advances to holders of non-controlling interests

13 92010 854­Services purchased from holders of non-controlling interests

53 50268 601­Services rendered to holders of non-controlling interests

43 13360 927

Liabilities to family shareholders include current floating-rate
clearing accounts and pension obligations.
For more information on the profit participation rights of€98 400 thousand (previous year: €83 400 thousand) granted to family shareholders, please refer to note 19.
Research and development ser­vices in the amount of €1 838
thousand (previous year: €1 692 thousand) were provided
and charged to the Group by one related party.
Guarantees of €12 146 thousand (previous year: €12 146
thousand) and €2 177 thousand (previous year: €1 684 thousand) were assumed on behalf of an associated company
and other investments.

Voith Annual Report 2011 | 209

Remuneration of governing bodies

Events after the period under review

Total compensation for members of the management ofVoith GmbH, including pension expenses, came to €12 547
thousand in the period under review (previous year: €11 458
thousand). This amount includes long-term compensation components totaling €4 136 thousand (previous year:€3 603 thousand). These long-term compensation components include service cost totaling €2 185 thousand (previous year: €1 548 thousand).

With effect as at November 1, 2011, Voith ­Industrial ­Services
sold DIW Service GmbH. The company specializes in temporary employment for skilled workers. The sale continues
Voith I­ndustrial ­Services’ strategic realignment, which began
in October 2010. The company sold, DIW Service, has approximately 70 core employees and around 830 temporary
workers.

The members of the Supervisory Board received compensation of €489 thousand (previous year: €507 thousand).
The present value of all defined benefit obligations in respectof current members of management was €22 653 thousandat the reporting date (previous year: €20 430 thousand). The
present value of all defined benefit obligations in respect offormer members of the Board of Management was €18 176
thousand (previous year: €18 676 thousand). Plan assetsof €8 754 thousand (previous year: €3 530 thousand) havebeen formed for current members of management. Plan assets of €7 986 thousand (previous year: €9 037 thousand)have been formed for former members of the Board of­Management. These amounts are stated in note 20 of thenotes to the consolidated financial statements.
€1 282 thousand (previous year: €1 275 thousand) was spenton pension and other payments to former members of theBoard of Management.

Auditor’s fees and ser­vices
The following fees (including reimbursement of expenses)
were paid to the independent auditor for the ser­vices rendered in fiscal 2010/11:
in € thousands

2010/11

2009/10Annual audit

1 982

1 797

Other assurance or valuation ser­vices

102

18

Tax advisory ser­vices

213

145

Other ser­vices

64

57

2 361

2 017

210 | Voith Annual Report 2011

Apart from the events presented in the report, no further
significant developments occurred since the close of fiscal
2010/11.

Heidenheim/Brenz, November 22, 2011

Voith GmbH
The Board of Management
Dr. Hubert Lienhard
Dr. Hermann Jung
Dr. Hans-Peter Sollinger
Peter Edelmann
Martin Hennerici
Bertram Staudenmaier
Dr. Roland Münch
The consolidated financial statements of Voith GmbH as at
September 30, 2011 as authorized for issue and the unqualified audit opinion issued thereon by Ernst & Young GmbH,
Wirtschaftsprüfungsgesellschaft, Stuttgart, were filed in German at the elektronischer Bundesanzeiger [Electronic Federal
German Gazette] (available at www.ebundesanzeiger.de).

The Group

Contributions

Management Report

Consolidated Financial Statements

Responsibility statement
To the best of our knowledge, and in accordance with theapplicable reporting principles, the consolidated financial
statements give a true and fair view of the assets, liabilities,
financial position and profit or loss of the Group, and theGroup management report includes a fair review of thedevelopment and performance of the business and theposition of the Group, together with a description of the principal opportunities and risks associated with the expecteddevelopment of the Group.

Heidenheim/Brenz, November 22, 2011

Voith GmbH
The Board of Management
Dr. Hubert Lienhard
Dr. Hermann Jung
Dr. Hans-Peter Sollinger
Peter Edelmann
Martin Hennerici
Bertram Staudenmaier
Dr. Roland Münch

Voith Annual Report 2011 | 211

The Voith Group and its shareholdings
as at September 30, 2011

Significant Associated Companies and ShareholdingsGroup sharein %Voith GmbH, Heidenheim / Germany

100.0

Voith IT Solutions GmbH & Co KG, St. Pölten / Austria

100.0

Voith Corporate Management (Shanghai) Co., Ltd., Shanghai / China

100.0

Voith Composites GmbH & Co. KG, Garching / Germany

100.0

J.M. Voith GmbH & Co. Beteiligungen KG, Heidenheim / Germany

100.0

Voith Assekuranz Vermittlung GmbH, Heidenheim / Germany

100.0

Voith Dienstleistungen und Grundstücks GmbH & Co. KG, Heidenheim / Germany

100.0

Voith Finance GmbH, Heidenheim / Germany

100.0

Voith Financial ­Services GmbH, Heidenheim / Germany

100.0

Voith IT Solutions GmbH, Heidenheim / Germany

100.0

Voith Theta GmbH, Heidenheim / Germany

100.0

Voith IT Solutions Inc., Wilson (NC) / United States

100.0

Voith Hydro Holding GmbH & Co. KG, Heidenheim / Germany*

65.0

Kössler Gesellschaft m.b.H., St. Georgen / Stfd. / Austria

100.0

Voith Hydro GmbH & Co KG, St. Pölten / Austria

100.0

Voith Hydro da Amazonia Ltda., Manaus / Brazil

100.0

Voith Hydro Ltda., São Paulo (SP) / Brazil

100.0

Voith Hydro ­Services Ltda., São Paulo (SP) / Brazil

100.0

Voith Hydro Inc., Brossard (QC) / Canada

100.0

Voith Hydro S.A., Santiago de Chile (Las Condes) / Chile

100.0

Voith Hydro Shanghai Ltd., Shanghai / China

80.0

VH Auslandsbeteiligungen GmbH, Heidenheim / Germany

100.0

VHG Auslandsbeteiligungen GmbH, Heidenheim / Germany

100.0

Voith Hydro GmbH & Co. KG, Heidenheim / Germany

100.0

Voith Hydro Ocean Current Technologies GmbH & Co. KG, Heidenheim / Germany

80.0

Voith Hydro Private Limited, Noida / India

100.0

Voith Hydro S.P.A., Cinisello Balsamo (MI) / Italy

100.0

Voith Fuji Hydro K. K., Kawasaki-shi, Kanagawa / Japan

50.0

Voith Hydro Mexico, S. de R.L. de C.V., Huixquilucan, Edo de Mexico / Mexico

100.0

Voith Hydro AS, Oslo / Norway

100.0

Voith Hydro Sarpsborg AS, Sarpsborg / Norway

100.0*The proportionate holding for the Hydro companies relates to Voith Hydro Holding GmbH & Co. KG, Heidenheim / Germany.

212 | Voith Annual Report 2011

The Group

Contributions

Management Report

Consolidated Financial Statements

Group sharein %Voith Hydro Lima S.A.C., San Isidro—Lima / Peru

99.0

Voith Hydro S.R.L., Bucharest / Romania

100.0

Voith Hydro S.L., Ibarra (Guipúzcoa) / Spain

100.0

VG Power AB, Västerás / Sweden

51.0

Voith Hydro Limited Sirketi, Sögütözü Ankara / Turkey

100.0

Peak Hydro ­Services, Inc., Chattanooga (TN) / United States

100.0

Voith Hydro Inc., York (PA) / United States

100.0

Voith ­Industrial ­Services Holding GmbH & Co. KG, Heidenheim / Germany

100.0

Voith I­ndustrial ­Services GmbH, Steyr / Austria

100.0

DIW Instandhaltung GmbH, Vienna / Austria

100.0

Voith ­Industrial ­Services N.V., Kapellen (Antwerp) / Belgium

100.0Voith Serviços Industriais do Brasil Ltda., São Paulo (SP) / Brazil

100.0

Voith ­Industrial ­Services (Shanghai) Co., Ltd., Shanghai / China

100.0

Voith ­Industrial ­Services s.r.o., Kosmonosy / Czech Republic

100.0

DIW Service s.r.o., Prague / Czech Republic

100.0

Voith ­Industrial ­Services A / S, Ringsted / Denmark

100.0

Voith Engineering ­Services Sarl, Toulouse / France

100.0

Voith Engineering ­Services GmbH, Bremen / Germany

100.0

Voith Engineering ­Services Holding GmbH, Bremen / Germany

100.0

Voith Engineering ­Services GmbH, Chemnitz / Germany

100.0

Voith Engineering ­Services GmbH, Hamburg / Germany

100.0

DIW Instandhaltung GmbH & Co. KG, Heidenheim / Germany

100.0

Voith ­Industrial ­Services ­Paper GmbH & Co. KG, Heidenheim / Germany

100.0

Voith ­Industrial ­Services GmbH & Co. KG, Karlsruhe / Germany

100.0

Voith ­Industrial ­Services GmbH, Kirchseeon / Germany

100.0

Voith ­Industrial ­Services GmbH, Mainhausen / Zellhausen / Germany

100.0

DIW Gastro GmbH & Co. KG, Munich / Germany

100.0

DIW Aircraft ­Services GmbH, Stuttgart / Germany

100.0

DIW Instandhaltung Ltd. & Co. KG, Stuttgart / Germany

100.0

DIW Mechanical Engineering GmbH & Co. KG, Stuttgart / Germany

100.0

DIW Service GmbH, Stuttgart / Germany

100.0

Voith Annual Report 2011 | 213

Group sharein %Voith ­Industrial ­Services Beteiligungen GmbH, Stuttgart / Germany

100.0

Voith ­Industrial ­Services Beteiligungsverwaltungs GmbH, Stuttgart / Germany

100.0

Voith ­Industrial ­Services GmbH, Stuttgart / Germany

100.0

Voith ­Industrial ­Services Grundstücks GmbH & Co. KG, Stuttgart / Germany

100.0

Voith ­Industrial ­Services Ltd. & Co. KG, Stuttgart / Germany

100.0

Voith ­Industrial ­Services Process GmbH & Co. KG, Stuttgart / Germany

100.0

Voith ­Industrial ­Services Kft., Györ / Hungary

100.0

DIW Service Kft., Veszprém / Hungary

100.0Voith Engineering ­Services Private Limited, Karnataka / India

100.0

Voith ­Industrial ­Services India Private Limited, Pune / India

100.0

Voith ­Industrial ­Services S de RL de CV, Saltillo Coahuila / Mexico

100.0

Voith Railser­vices B.V., Twello / Netherlands

100.0

Terne AS, Mongstad / Norway

60.0

Premier Manufacturing Support ­Services Poland Sp. z. o.o., Gliwice / Poland

100.0

Voith ­Industrial ­Services Sp. z. o.o., Poznan / Poland

100.0

Voith ­Industrial ­Services O.O.O, St. Petersburg / Russian Federation

100.0

Voith ­Industrial ­Services, s.r.o., Bratislava / Slovakia

100.0Voith Engineering ­Services SL, Madrid / Spain

100.0

Newtec Kemiteknik AB, Trollhättan / Sweden

100.0Voith Engineering ­Services Limited, Bristol / United Kingdom

100.0

Voith ­Industrial ­Services Holding Ltd., Warwick / United Kingdom

100.0

Voith ­Industrial ­Services Limited, Warwick / United Kingdom

100.0

Voith ­Industrial ­Services Inc., Cincinnati (OH) / United States

100.0

Voith ­Paper Holding GmbH & Co. KG, Heidenheim / Germany

100.0

Voith ­Paper Argentina S.A., Carapachay—Buenos Aires / Argentina

100.0

Voith ­Paper Australia and New Zealand Pty. Ltd., North Ryde (NSW) / Australia

100.0

Voith ­Paper Fabrics GmbH, Frankenmarkt / Austria

99.8

GAW technologies GmbH, Graz / Austria

35.0

Voith ­Paper Rolls GmbH & Co KG, Laakirchen-Oberweis / Austria

100.0

Voith ­Paper Automation GmbH & Co KG, St. Pölten / Austria

100.0

Voith ­Paper GmbH, St. Pölten / Austria

100.0

214 | Voith Annual Report 2011

The Group

Contributions

Management Report

Consolidated Financial Statements

Group sharein %Voith ­Paper Rolls GmbH & Co KG, Wimpassing / Austria

100.0

Voith Mont Montagens e Serviços Ltda., Barueri (SP) / Brazil

100.0

Meri Sistemas e Tecnologia Ltda., São Paulo (SP) / Brazil

55.3

Voith ­Paper Máquinas e Equipamentos Ltda., São Paulo (SP) / Brazil

100.0

Voith ­Paper Air Systems Inc., Saint-Laurent-Quebec / Canada

100.0Servicios y Suministros Voith Chile Ltda., Concepción, Coronel / Chile

100.0

Voith ­Paper Rolls Guangzhou Co., Ltd., Guangzhou City / China

100.0

Voith ­Paper (China) Co., Ltd., Kunshan, JiangSu / China

100.0

Voith ­Paper Fabrics (China) Co., Ltd., Kunshan, JiangSu / China

100.0

Voith ­Paper Rolls (China) Co., Ltd., Kunshan, JiangSu / China

100.0

Voith ­Paper International Trading Co., Ltd., Shanghai / China

100.0

Voith ­Paper Oy, Vantaa / Finland

100.0

Voith ­Paper Fabrics SAS, Montbron / France

100.0

Voith ­Paper SAS, Orsay / France

100.0

Voith ­Paper Air Systems GmbH, Bayreuth / Germany

100.0

Voith ­Paper Automation GmbH & Co. KG, Heidenheim / Germany

100.0

Voith ­Paper Fabric & Roll Systems GmbH, Heidenheim / Germany

100.0

Voith ­Paper Fabrics GmbH & Co. KG, Heidenheim / Germany

100.0

Voith ­Paper GmbH & Co. KG, Heidenheim / Germany

100.0

Voith ­Paper Rolls GmbH & Co. KG, Heidenheim / Germany

100.0

VP Auslandsbeteiligungen GmbH, Heidenheim / Germany

100.0

Voith ­Paper Krieger GmbH & Co. KG, Mönchengladbach / Germany

85.0

MERI Environmental Solutions GmbH, Munich / Germany

65.0

Voith ­Paper Automation GmbH, Neuwied / Germany

100.0

Voith ­Paper Environmental Solutions GmbH & Co. KG, Ravensburg / Germany

100.0

Voith ­Paper Fiber & Environmental Solutions GmbH & Co. KG, Ravensburg / Germany

100.0

Voith ­Paper Karton- und Verpackungspapiere Forschungs GmbH, Ravensburg / Germany

100.0

Voith ­Paper Rolls GmbH & Co. KG, Weißenborn / Germany

100.0

Voith ­Paper Fabrics India Ltd., Faridabad (Haryana) / India

74.0

Voith ­Paper Technology (India) Ltd., Kolkata / India

100.0

PT. Voith ­Paper, Jakarta / Indonesia

100.0

PT. Voith ­Paper Rolls Indonesia, Karawang—West Java / Indonesia

76.0

Voith Annual Report 2011 | 215

Group sharein %RIF ROLL COVER SRL, Basaldella (Udine) / Italy

51.0

Voith ­Paper S.r.L., Schio (Vicenza) / Italy

100.0

Voith IHI ­Paper Technology Co., Ltd., Tokyo / Japan

49.0

Voith ­Paper Co., Ltd., Tokyo / Japan

100.0

Voith ­Paper Fabrics Asia Pacific Sdn. Bhd., Ipoh, Perak Darul Ridzuan / Malaysia

100.0

Voith ­Paper Fabrics Ipoh Sdn. Bhd., Ipoh, Perak Darul Ridzuan / Malaysia

100.0

Meri Sistemas Ambientales S.A. de C.V., Monterrey / Mexico

45.5

Voith ­Paper Fabrics B.V., Haaksbergen / Netherlands

100.0

MinPlus-CDEM Holding B.V., Vaassen / Netherlands

100.0Voith ­Paper B.V., Vaassen / Netherlands

100.0Voith ­Paper AS, Lier / Norway

100.0

Voith P­ aper Fabrics AS, Tranby / Norway

100.0

Voith P­ aper Technology Russia GmbH, St. Petersburg / Russian Federation

100.0

Voith P­ aper Fabrics, S.A., Guissona (Lérida) / Spain

100.0

Voith P­ aper S.A., Ibarra (Guipúzcoa) / Spain

100.0

Voith P­ aper ­Services S.L., Ibarra (Guipúzcoa) / Spain

100.0

Voith P­ aper Fabrics Gusum AB, Gusum / Sweden

100.0Voith P­ aper Fabrics Högsjö AB, Högsjö / Sweden

100.0Voith P­ aper Fabrics Holding AB, Högsjö / Sweden

100.0Voith P­ aper AB, Karlstad / Sweden

100.0Voith ­Paper Rolls AB, Lessebo / Sweden

100.0Voith ­Paper Walztechnik AG, Zurich / Switzerland

100.0

Voith ­Paper Fabrics Blackburn Ltd., Blackburn (Lancashire) / United Kingdom

100.0

Voith ­Paper Fabrics Holding Ltd., Blackburn (Lancashire) / United Kingdom

100.0

Voith ­Paper Fabrics Stubbins, Ltd., Bury (Lancashire) / United Kingdom

100.0

Voith ­Paper Ltd., Manchester / United Kingdom

100.0

Voith Meri Environmental Solutions, Inc., Appleton (WI) / United States

65.0

Voith ­Paper Inc., Appleton (WI) / United States

100.0

PFR, Inc., Newark (DE) / United States

100.0

Massachusetts PFE, Inc., Orange (MA) / United States

100.0

PFS I, Inc., Salisbury (NC) / United States

100.0

Syn Strand Inc., Summerville (SC) / United States

100.0

216 | Voith Annual Report 2011

The Group

Contributions

Management Report

Consolidated Financial Statements

Group sharein %Voith ­Paper Fabrics Waycross, LLC, Waycross (GA) / United States

100.0

Voith ­Paper Fabric & Roll Systems Inc., Wilson (NC) / United States

100.0

Voith ­Turbo GmbH & Co. KG, Heidenheim / Germany

100.0

Voith ­Turbo Pty. Ltd., Wetherill Park (NSW) / Australia

100.0

Voith ­Turbo GmbH, St. Pölten / Austria

100.0

Voith ­Turbo Vertriebs GmbH, St. Pölten / Austria

100.0

Voith ­Turbo S.A. / N.V., Brussels / Belgium

100.0Voith ­Turbo Ltda., São Paulo (SP) / Brazil

100.0

Voith ­Turbo Limited, Hong Kong / China

100.0

Voith Lutong Urban Rail Gearbox Technology (Changchum) Co., Ltd, Lutong / China

50.0

Voith Schaku KTK Coupler Technology Co., Ltd., Shanghai / China

50.0

Voith ­Turbo China Co., Ltd., Shanghai / China

100.0

Voith ­Turbo Power Transmission (Shanghai) Co., Ltd., Shanghai / China

100.0

Voith ­Turbo s.r.o., Brno / Czech Republic

100.0

Voith ­Turbo A / S, Gadstrup / Denmark

100.0

Voith T­ urbo SAS, Noisy-le-Grand Cedex / France

100.0

Voith T­ urbo Hochelastische Kupplungen GmbH & Co. KG, Essen / Germany

100.0

Voith T­ urbo Aufladungssysteme GmbH & Co. KG, Gommern / Germany

100.0

Voith T­ urbo Antriebstechnik Beteiligungen GmbH, Heidenheim / Germany

100.0

Voith T­ urbo Auslandsbeteiligungen GmbH, Heidenheim / Germany

100.0

Voith T­ urbo Lokomotivtechnik GmbH & Co. KG, Heidenheim / Germany

100.0

Voith T­ urbo Schneider Propulsion GmbH & Co. KG, Heidenheim / Germany

100.0

Voith T­ urbo SMI Technologies GmbH & Co. KG, Heidenheim / Germany

51.0

Voith T­ urbo Vertriebsgesellschaft mbH, Heidenheim / Germany

100.0

Voith T­ urbo Wind GmbH & Co. KG, Heidenheim / Germany

100.0

Voith T­ urbo Advanced Propeller Technologies GmbH & Co. KG, Rostock / Germany

100.0

Voith T­ urbo H+L Hydraulic GmbH & Co. KG, Rutesheim / Germany

100.0

Voith T­ urbo Scharfenberg GmbH & Co. KG, Salzgitter / Germany

100.0

Voith T­ urbo BHS Getriebe GmbH, Sonthofen / Germany

100.0

Voith T­ urbo BHS Getriebe Holding GmbH, Sonthofen / Germany

100.0

Voith T­ urbo Verdichtersysteme GmbH & Co. KG, Zschopau / Germany

100.0

Voith Annual Report 2011 | 217

Group sharein %Voith ­Turbo Kft., Biatorbágy / Hungary

100.0

FlowLink Systems Private Ltd., Coimbatore / India

50.0

Voith ­Turbo Private Limited, Hyderabad (A.P.) / India

100.0

Hydronaut s.r.l., Milan / Italy

60.0

Voith ­Turbo Drive Systems s.r.l., Montichiari / BS / Italy

100.0

Voith ­Turbo s.r.l., Reggio Emilia / Italy

100.0

Voith ­Turbo Co., Ltd., Kawasaki-shi, Kanagawa / Japan

100.0

Voith ­Turbo Co., Ltd., Seoul / Korea

80.0

Voith ­Turbo S.A. de C.V., Mexico (D.F.) / Mexico

100.0

Voith T­ urbo B.V., Twello / Netherlands

100.0Voith ­Turbo AS, Oslo / Norway

100.0

Voith ­Turbo sp. z o.o., Wola Krzysztoporska / Poland

100.0

Voith ­Turbo Kazan GmbH, Kazan / Russian Federation

91.0

Voith ­Turbo Pte. Ltd., Singapore / Singapore

100.0

Imfuyo Air Products (Proprietary) Limited, Bedfordview / South Africa

23.6

Imfuyo Projects (Pty) Ltd., Benoni / South Africa

47.0

Imfuyo Locomotives (Proprietary) Limited, Parktown / South Africa

47.0

Voith Property Company (Pty) Ltd., Witfield (Boksburg) / South Africa

100.0Voith ­Turbo (Pty) Ltd., Witfield (Boksburg) / South Africa

100.0Voith ­Turbo S.A., Coslada (Madrid) / Spain

100.0

Voith ­Turbo Safeset AB, Hudiksvall / Sweden

100.0Voith ­Turbo AB, Spanga-Stockholm / Sweden

100.0Voith ­Turbo Co. Limited, Kaohsiung City 812 / Taiwan

100.0Voith ­Turbo Güç Aktarma Tekniği Ltd. Şti., Çankaya-Ankara / Turkey

100.0Voith Middle East FZE, Dubai / United Arab Emirates

100.0

H+L Hydraulic Ltd., Croydon (Surrey) / United Kingdom

100.0

Voith ­Turbo Limited, Croydon (Surrey) / United Kingdom

100.0

Voith ­Turbo Rail Systems Ltd., Croydon (Surrey) / United Kingdom

100.0

Voith ­Turbo Inc., York (PA) / United States

100.0

218 | Voith Annual Report 2011

The Group

Contributions

Management Report

Consolidated Financial Statements

Important events
October 2010

November 2010

December 2010

Mercedes-Benz Manufacturing Hungary Kft.
assigns facility management duties for thetechnical infrastructure and cleaning of its newplant in Kecskemét, Hungary, to Voith. This
service contract will run for three years.

For over ten years, the Limpet wave-driven
power plant on Scotland’s isle of Islay has been
operating successfully. Limpet was the world’s
first wave-driven power plant to produce electricity in commercially significant amounts andfeed it to the local power grid. During this time,
the power plant’s operational availability was
also increased and stood at 98% in 2010.

Energias de Portugal places an order with Voith
for all electromechanical systems in its Frades II
pumped storage power plant.

At the Canadian paper manufacturer Cascades, the PM 2 which was recently modernized by Voith successfully goes into service.
The PM 2 is the first tissue machine in North
America to be equipped with ATMOS technology. This technology allows manufacturers to
produce high-quality hygienic papers exclusively from recycled fiber. And ATMOS technology can also significantly reduce the energy
consumption needed to produce premium tissue paper.
Voith receives an order from Deutsche Bahn
for 242 drive systems for its regional railcars
known as the “Regio Shuttle”. This order includes DIWA rail drives, gearboxes and coolingsystems.
Voith receives an order from the Singapore bus
operator SBST for 600 automatic transmissions for its Volvo double-decker buses andMercedes conventional buses.

Caterpillar India Private Ltd. in Chennai, India,
issued a project management contract to Voith
for the inspection of its newly installed enamelling system.
Voith introduces the first non-radioactive sensor for tissue paper producton. This provides
manufacturers of hygienic paper with a newtool to control the quality of their production –without using a radioactive source, which wascommon in the past.
Voith receives an order for 650 drive components to be installed in Volvo transit buses in
Perth, Australia.

Voith receives an order from Statkraft in Turkey
to supply all of the electromechanical systems
for its Kargi Hydropower Plant.
Voith and FKi Engineering Ltd. in Great Britain
conclude a full-service agreement for the maintenance of a windpark in Austria with a total
output of 46 megawatt.
The Karlsruhe Institute of Technology extends
the maintenance contract for its electrotechnical systems with Voith for an additional four
years.
The Indian paper manufacturer, JK Paper Ltd.,orders a complete paper machine from Voith.
This Rayagada PM 6 unit will produce highquality uncoated as well as pigmented woodfree papers.
Voith receives an order from the Fushun Mining Corporation for a new packaging paper
machine.
At Tamil Nadu Newsprint and Papers, a new
Voith paper machine starts operations. Here,the PM 3 will produce printing and writing
paper from bagasse or cane trash.
The German rail freight company, DB Schenker
Rail, puts its first fleet of Gravita 10 BB locomotives into service.
Voith receives an order for over 600 automatictransmissions for Volvo buses. The buses wereordered by Mibus, a Panamanian transportation company.

Voith Annual Report 2011 | 219

January 2011

February 2011

March 2011

Starting in 2011, Voith will take over the maintenance of the KIA enamelling line in Slovakia.
The project will run for one year.

Voith receives an order for three Francis turbines, each with an output of 400 megawatt,for the new Yang Qu Power Plant in China.

Voith receives an order from the pumped storage power station Forces Motrices HongrinLéman SA Plus, Switzerland, for the installationof two additional turbine groups.

Voith receives an order to produce and install
double mantled pipelines for Lenzing AG. The
order also includes project management, engineering, pre-fabrication, and assembly of thepipeline system as well as its inspection prior
to commissioning.

In St. Pölten, Austria, Voith Hydro opens a new
production facility.

Voith opens its own facility for industrial ser­vices in Doha, Qatar.
Voith acquires the rights and patents for awaste treatment technology designed for paper-relate sludge. De-inking sludge is produced,
when ink pigments are removed from repro­
cessed waste paper and usually disposed.
With the new CTC technology, minerals andenergy can be recycled from this sludge.
In Vigo, Spain, four new offshore vessels
go into operation: two support ships were
equipped with the Voith Roll Stabilization (VRS)
system and two Voith Schneider Propellers(VSP) each. Also a supply ship with five VSPs
and a VRS, as well as a 160 meter long offshore construction vessel with five VSPs anda VRS.
Voith receives an order from Vossloh Locomotives GmbH in Kiel, Germany, for eight turbodrives. The end-customer will be a private railway operator in France.
MTU in Friedrichshafen, Germany, orders 18
Voith turbo-drives for the Russian automotive
manufacturer Metrowagonmash.

Voith is certified as an approved design organization by the European Aviation Safety Agency(EASA). And in India, Voith Engineering Services becomes one of the three first-level suppliers in flight physics.
Voith assumes maintenance duties for 550 municipal buses in four depots of London United.
For the second time, Voith receives the “Sustainable Development Supplier Award” from the
Canadian paper manufacturer Cascades.
Saudi-Aramco’s Shaybah Gas Refinery places
an order with Voith for a modular control coupling and a Vorecon.
Voith receives an order for more than six Vorecons for a coal-fired power plant in Raipur,
India.
Voith wins a contract for delivering DIWA automatic transmission for 104 standard buses and
184 double-decker buses in London.
Voith tests its new RAVE tugboat concept ina laboratory.
In Hamburg, Germany, Deutsche Bahn puts
its first Voith Gravita 10 BB locomotive into
operation.
The Polish auto manufacturer Solaris and Voith
introduce the new Urbino 18 DIWAhybrid drive.

220 | Voith Annual Report 2011

Voith signs a contract for equipping the Brazilian Belo Monte Hydropower Plant.
Voith receives an order to modernize theDecew Falls 1 Power Plant in Ontario, Canada.
Ford Brazil assigns facility management duties
in its São Paulo SBC plant to Voith.
Voith assumes maintenance responsibilities
from BWW in Berlin for its production and conveyor systems.
Voith receives an order for the relocation of a
Freudenberg production facility in Berlin, involving around 200 pieces of equipment.
Volkswagen Motor Polska assigns its maintenance and facility management duties to Voith
for the first time.
At the Moorim Paper Group in South Korea,
Voith’s recently delivered Dong Hae PM 1
paper machine goes into operation.
Voith receives an order from Capital Steel,
China, for a large universal joint shaft in a steel
mill.
Yutong, the Chinese auto manufacturer, delivers 155 buses with Voith’s DIWA automatictransmissions to Macao.
Municipal buses with DIWAhybrid drives are introduced to the general public by Voith, Solaris
Bus & Coaches and BOGESTRA AG.

The Group

Contributions

May 2011

June 2011

Voith Fuji Hydro announces acquisition of
the turbine division from Ebara, an industrial
manufacturer.

China’s Da Tang Yan Tan Hydropower Company places an order with Voith for two generators, each with an output of 340 megawatt, for
its Yan Tan Hydropower Plant on the Hongshui
River.

May/June: Just off the coast of the South Korean province of Jeollanam-do, Voith begins
operations of its prototype for a tidal power
plant. The power produced during its commissioning will be fed into the local power grid.

In Germany, Voith expands its business withthe automotive supplier Faurecia. In addition toservicing six of its current locations, new facility
management contracts were also awarded for
its facilities in Pappenheim and Weißenburg.

For the Chinese Xiluodu Hydropower Projecton the Jinsha River, Voith supplies the firstFrancis turbine runner. In total, Voith will supply
the power plant with three power units, each ofwhich consists of a Francis turbine and generator with an output of 770 megawatt.

At BMW in Berlin, Voith’s maintenance contract
starts for production and conveyor systems.

I am pleased to be able to tell you about another very good fiscal year in the 144year history of the Voith family business. In 2010/11, we received orders worth€6.4 billion, thereby clearly exceeding the previous best set in the boom year of
2007/08. Sales rose to €5.6 billion, which is also a record. On an especially
positive note, our operational result before non-recurring result grew overproportionally to sales, increasing by 18%. And we witnessed an even larger
increase in annual net income, which rose by 64%. In total, the company earned€322 million before tax and €200 million after tax.
I would like to sincerely thank all those who helped make this possible, primarily
our employees and also our partners, who once again chose to do business with
Voith in this fiscal year.
The profit from operations of all four Group Divisions enjoyed double-digit growth,
ensuring that Voith is in excellent shape. The Group enjoys strong foundations andits activities enable us to take advantage of the prospects in our different markets.

Consolidated Financial Statements

April 2011

Voith receives an order for the Budarhals
Power Plant from the Icelandic Lansvirkjun. The
order encompasses all of the plant’s electromechanical equipment.

Dear ladies and gentlemen,
Dear business partners and friends of our company,

Management Report

At Zhumadianshi Baiyun Paper Co. Ltd. theBaiyan PM 8 successfully starts operations.
The PM 8 produces copying and offset papers.
Voith opens an affiliate in the TechnoPark,
Dubai. From Dubai, Voith Turbo will service theentire Middle Eastern market.
Robel Bahnbaumaschinen GmbH awards Voithan order for eight turbo-drives for railcars.
Voith receives a contract from VR-Yhtymä Oy in
Finland for the general refitting of its 34 turbodriven diesel railcars.

Voith receives final inspection approval from
Jiangsu Oji Paper Co. Ltd. for its Nantong
PM 1 paper machine. PM 1 has been operatingin China since May 2010 and produces highquality wood-free coated as well as uncoatedpapers.

Voith opens a third Indian facility in the cityof Bangalore, following its earlier openings in
Pune and Chennai. In Bangalore, Toyota Kirloskar Motor Private Ltd. has awarded Voith amaintenance contract for its production facility.

Volvo Bus Latin America, a leading bus manufacturer for BRT systems, orders 259 DIWA
drives for its standard, jointed and doublejointed buses. The vehicles will be used in Curitiba, Brazil.

Perlen Papier AG approves the final inspectionof the first Integrated EcoMill from Voith. The
PM 7 started operations in September 2010
and produces 360 000 tons of newsprint annually with a wire width of 10 450 mm.

Helsinki City Transport orders 40 new streetcars from the Finnish manufacturer Transtech
and here, Voith will supply all of the drive-train
components.

Stora Enso awards Voith the contract for its
new paper machine which will produce testliner
papers. The production facility will be locatedin Ostroleka, Poland, about 120 km north of
Warsaw. The commissioning is planned for the
first quarter of 2013.

The Warsaw Transit Company orders 150 city
buses from Solaris, equipped with Voith DIWA
automatic transmissions.

Metropolitan buses with DIWAhybrid drives are
introduced to the public by Voith, Solaris Bus& Coaches and BOGESTRA AG.

Voith receives an order from the Saudi Arabianoil company, Saudi-Aramco, for 40 drives, four
Vorecons, four drive regulators, and 20 membrane couplings.

The positive figures are clear confirmation that our four-pillar strategy to ensure
long-term, sustainable growth is the right one:
A balanced, diversified product portfolio that is oriented
towards future markets and global megatrends;• A broad, international setup with deep roots in theregions where we operate;• A technical capacity to innovate. Our engineers
continually strive to develop better products to
help solve the challenges of our times;• Voith’s independence, stability and long-term orientation as
a 100% family-owned company.
•

05 | Voith Annual Report 2011

Voith Annual Report 2011 | 221

The Group

July 2011

August 2011

September 2011

In Mutriku, Spain, the world’s first wave-operated power plant starts commercial operations.
Here, Voith supplied the plant with 16 Wells turbines, with a combined output of 300 kilowatt.

Voith completes preparations for the first onemegawatt tidal current turbine at the European
Marine Energy Center on Scotland’s Orkney
Islands. To anchor this 200 ton-turbine, a
24 meter piling will be drilled into the rocky
seabed and serve as a foundation for the tidal
turbine during its two-year testing phase. To
install the foundation, a special-purpose ship
designed for marine construction projects isused: The “North Sea Giant” which is driven
by five Voith Schneider Propellers, each having
5 160 HP.

Voith announces an order for the modernization of the Saratovskaya Hydropower Plant insouthwest Russia. This power plant’s Kaplan
turbines, with a runner diameter of 10.3 meters, are the largest of their class in the world.

Voith receives a three-year extension of its
contract with VW in Chemnitz for maintenanceand tool management in this motor production
facility.
The automotive supplier, Grob, extends its
contract with Voith for an additional two years
for assembly and commissioning services.
The German paper and cardboard producer,
Varel, restarts operation of its PM 4 paper machine following an extensive modernization.
Here both its production capacity and ecological operating characteristics were improved.
At Nine Dragons in Dongguan, China, thePM 28 starts producing copying and printing
paper.
The Chinese paper manufacturer, Shandong
Sun Paper Industry, starts production operations with its new PM 24 paper machine in
Yanzhou, China.
Voith introduces the world’s first secondarywater retarder to the public. This new retarder
operates by using a motor’s cooling fluid.

222 | Voith Annual Report 2011

Voith wins a maintenance contract from Continental for its facilities in Limbach and Stollberg. This contract has a life span of two years,
with an optional extension of an additional two
years.

Voith assumes responsibility as general contractor for the electromechanical equipment in
the Teles Pires Hydropower Plant, on the riverof the same name, in western Brazil. This order
includes the delivery of five 404 MVA generators, as well as automation of the power plant’s
electrical and mechanical equipment.

Contributions

Management Report

The Voith Group

Consolidated Financial Statements

Contributions

02

Foreword

18

01 provide

08

The Corporate Board of Management

44

02 move

10

Report of the Supervisory Board

60

03 inspire

14

The Supervisory Board

Voith receives two orders in India: It will supply
all of the electromechanical equipment for the
Sainj Run-of-the-River hydropower station in
Himachal Pradesh, as well as the Rongnichu
Run-of-the-River power station.

At Nine Dragons in Dongguan, China, thePM 32 cardboard machine successfully goes
into operation. It is designed to operate at
speeds of 900 m/min. and will produce coatedfolding boxboard.

DIW Austria wins an international contract from
BP: By 2012, a total of 160 BP shops in Austria and Switzerland will be equipped with LED
lighting systems.

The Moorim Paper Group, South Korea, accepts final delivery of the PM 1—only fivemonths after the paper machine’s commissioning.

Voith supplies DIWA automatic transmissions
to the White Russian automotive manufacturer AMAZ for 185 metropolitan buses in the
Ukrainian capital of Kiev.

Management Report

Consolidated Financial Statements

76

I. Business and economic environment

134

Consolidated statement of income

83II.	Business development and earnings position

135

Consolidated statement of comprehensive income

136

Consolidated balance sheet

138

Statement of changes in equity

140

Consolidated cash flow statement

141

Notes to the consolidated financial statementsof the Group92

III.	Business development and earnings positionof the Group Divisions

111

IV. Net assets and financial position of the Group115

V. Research and development

117

VI. Non-financial performance indicators

120

VII. Subsequent events

121

VIII. Risks and opportunities

128

IX. Forecast reportfor the 2010/11 fiscal year
163

Notes to the consolidated statement of income

168

Notes to the consolidated balance sheet

189

Notes to the consolidated cash flow statement

190

Notes on segment reporting

192

Segment information by business segment

194

Segment information by region

195

Other notes

211

Responsibility statement212

The Voith Group and its shareholdings

219

Important events

223

Imprint

The Voith Group in Figures

Imprint

Voith GmbH
Phone: +49 7321 37-0
Fax: +49 7321 37-7000
E-mail: info@voith.com

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

Corporate Communications
Phone: +49 7321 37-3879
Fax: +49 7321 37-7107
E-mail: info@voith.com

2010 /11

2009 /10

Orders received

6 358

5 300

Sales

5 594

5 198

Operational result before
non-recurring result

416

353

Return on sales in %

7.4

6.8

Income before tax

322

234

Net income

200

121

Cash flow from operating activities

244

390

Total cash flow

-261

199

Investments

211

234

Research and development

259

266

in % of sales

4.6

5.1

Equity

1 287

1 107

Equity ratio in %

22.1

18.8

Balance sheet total

5 815

5 902

Employees*

40 69139 754in € millions

Contact

Investor Relations
Phone: +49 7321 37-2332
Fax: +49 7321 37-7010
E-maill: info@voith.com
Voith Hydro
Phone: +49 7321 37-6848
Fax: +49 7321 37-7828
E-mail: info.voithhydro@voith.com
Voith Industrial Services
Phone: +49 711 7841-174
Fax: +49 711 7841-179
E-mail: info.industrialservices@voith.com
Voith Paper
Phone: +49 7321 37-2888
Fax: +49 7321 37-7008
E-mail: info.voithpaper@voith.com
Voith Turbo
Phone: +49 7321 37-2832
Fax: +49 7321 37-7110
E-mail: info.voithturbo@voith.com

FSC®
The BVS and Maxi Offest papers used for theannual report are produced in compliancewith the international FSC standard. The pulp
is partly manufactured from certified, i.e. responsibly managed, forests. Careful forestry
practice also ensures, among other things,
that biological diversity and ecological processes are not disturbed when wood products
are removed from the forest.

Magazine Section:
Burda Creative Group GmbH,
Munich, Germany
Editing/Text (Financial Section):
Seipp Kommunikationsberatung,Cologne, Germany
Typography (Financial Section),
Production:
G2 Werbeidee GmbH,
Munich, Germany
Photo Credits:
A1PIX/Jürgen Gregor: p. 32
Brian Bielmann: pp. 46, 47
Achim Bieniek: p. 70
Corbis/Angelo Cavalli: pp. 56, 57
Corbis/Redlink: pp. 22, 23
Volker Dautzenberg: p. 66
F1 Online: pp. 24, 25
Jeffrey G. Katz: p. 33
Dirk Krüll: pp. 54, 55
Dawin Meckel: pp. 2, 6, 8, 9, 19, 27, 29,
30, 39, 40/41, 42, 45, 48/49, 58, 61,
62/63, 64/65, 68
Rüdiger Nehmzow: pp. 20, 21
Benno Sänger: p. 34
ullstein bild/CARO/Kruppa: p. 43
Voith: pp. 10, 30, 37, 39, 50, 52, 69
laif/Marcos Zimmermann: p. 37
Printing:
Wahl-Druck GmbH,
Aalen, Germany* Without apprentices.

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Production

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Voith records all CO2 emissions produced in
the course of printing and processing the annual report. By making a proportionately equal
investment in a Gold Standard climate project
the corresponding CO2 emissions will be savedin the future and the carbon footprint left by
the Voith annual report compensated for inthis way.

climate neutral
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This annual report is also available in German.
Both versions, as well as press releases andother information, can also be downloaded
from the Internet at www.voith.com
Printed in Germany, ©Voith GmbH, 2011-12

Annual Report 2011

Annual Report 2011
Contributions