Interim Report 2016

The Voith Group in Figures

2015-10-01 to
2016-03-31

2014-10-01 to
2015-03-31

2,155

1,815

2,038

2,108

Return on sales in %1)

97
4.8

120
5.7

Result before taxes1)

18

-82

Net result

-48

-131

Cash flow from operating activities

-48

-143

Total cash flow

11

-511

Investments

59

39

in € millions

Orders received1)
Sales1)
Profit from operations1), 2)

1)

Equity755

874

Equity ratio in %

13.8

16.0

Balance sheet total 3)

5,461

5,451

Employees 3) , 4)

19,742

20,2233)

 xcluding the discontinued Group Division VE­ oith ­Industrial S­ ervices; previous year restated.
See “Notes on segment reporting” in the notes to the Group interim financial statements.
3)
Reference date March 31, 2016, compared to September 30, 2015.
4)
Without apprentices.
1)

2)

Contents

Foreword

01
02

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

02 Business development and earnings position of the Group Divisions

17

03 Net assets and financial position

24

04 Employees

27

05 Subsequent events

29

06 Risks and opportunities

30

07 Forecast report

32

Group interim financial statements
Consolidated statement of income

38

Consolidated statement of comprehensive income

39

Consolidated balance sheet

40

Consolidated statement of changes in equity

42

Consolidated cash flow statement

44

Basis of the interim consolidated financial statements and accounting policies

45

Notes on segment reporting

49

Segment information by business segment

50

Notes to the statement of income and the balance sheet

52

Other notes

59

Responsibility statement66

4Voith Interim Report 2016

Foreword
Dear reader,This report outlines the facts, figures and background to the first six months ofthe current 2015/16 fiscal year – a period which was demanding and eventful
for the Voith Group. In a difficult economic and competitive setting and with noeconomic tailwind to speak of, we have consistently pressed ahead with theGroup transformation process and successfully developed our operative business.
Today we can say that we are on course and making good progress towards newstrength in the current fiscal year, despite the challenging economic environment.
In the first half year of 2015/16 the Voith Group’s operative business developed
strongly despite a subdued investment climate, particularly in those industries mostaffected by the fall in commodity and oil prices. Our continuing operations, that is
excluding Voith Industrial Services, have generated a gratifying increase in orders
received, which are up by almost one fifth to a total of 2.16 billion euros – albeit
largely driven by a major project from Canada for our hydropower business Voith
Hydro. The Group’s orders on hand have increased since the end of the year. We
are therefore confident that our capacities in most areas will be put to full use in
the months ahead.
We have been able to hold revenues from continuing operations almost stablecompared to the previous year. This is satisfactory from our point of view bearing
in mind negative currency effects, the restrained or even contracting state of theeconomy in key regions which has already been referred to and the persistently
difficult market situation confronting Voith Paper and, in certain customer industries, Voith Turbo as well.
With regard to results, non-recurring items in the first half year in particular have
obscured the fact that our Group-wide Voith 150+ success program and its
measures to enhance efficiency have – as we expected – increasingly borne fruit.
All Group Divisions have developed robustly and returned clear profits. Total profit
from operations of the three Group Divisions has risen slightly in comparison withthe same period last year.
One-time valuation effects on foreign currency items at the holding level havenonetheless slightly depressed the Group’s profit from operations. The net income
for the period has improved significantly, but remains negative: High impairment
charges, including on securities positions, have for the time being prevented areturn to profitability. None of this, however, should obscure the fact that thefundamental earnings power from the Group’s operative business is slowly but
surely improving.

Voith Interim Report 2016

The non-recurring effects will also impact the key figures for the results for theyear as a whole. After these first six months we therefore no longer expect higher
profit from operations or that we will achieve our originally projected clearly positive
Group net result for the year. In a persistently fragile economic setting, especiallyfor the capital goods industries and in the light of the robust development ofbusiness in the first half year we nonetheless confirm our forecast for sales andorders. Both will likely remain at around the same level for the year as a whole asin the previous year.
We have completed important groundwork in recent months for the strategic
refocusing of the Voith Group on its technology and engineering competence forthe digital age and are making rapid progress towards the announced milestones
for our Group-wide success program. All the announced measures have been
implemented on schedule. In early May we were able to conclude an agreementon the sale of our technical industrial services provider Voith Industrial Services,which no longer fits in with our future strategic focus. Another milestone was thelaunch, announced in December 2015, of the new Voith Digital Solutions Group
Division, which commenced operations on April 1, 2016 following the extensive
preparatory work undertaken in the first half of the fiscal year. Voith pools its
know-how and capacities for the digital industry in the new Group Division. We
have clear objectives and plans for further expansion: With Digital Solutions weare taking a logical step towards transforming Voith into a company which will playa key role in shaping the digital shift in our industries and markets.
Voith’s new positioning will therefore also take on clearer contours. We still havequite some way to go. But we know where we want to go and we know whatneeds to be done in order to position the Voith Group successfully for the digitalage and to lead it into a sustainably successful future.

Best regards

Dr. Hubert Lienhard
President and CEO

5

Group interim management reportfor the period from October 2015 to March 2016

01

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

8
17
24
27
29
30
32

8

Group interim management report

01

Business development andearnings position of the Group

Voith Interim Report 2016

Voith continues to make progress on its journey toachieving new strengths. With the launch of the newGroup Division Voith Digital Solutions and the sale of amajority shareholding in the Voith Industrial Services
segment in the current fiscal year the announced
important milestones towards focusing the Group on
its technology and engineering strengths in the digitalage have been achieved. The operational business isalso in line with plan. Although the investment climate is
subdued we have been able to maintain our sales levels
at approximately the same level as in the previous year,
and increase orders received substantially. The Groupnet result has improved but remains negative, due to theeffect of a number of non-recurring items.

01.1. Overall assessment

Robust business development
Our Group-wide Voith 150+ success program has increasingly borne fruit in thecurrent fiscal year and the measures have been completed as planned. In the firsthalf of the 2015/16 fiscal year (October 1, 2015 to March 31, 2016) we were able
to stabilize Voith Group sales at almost the same level as in the previous year.
Orders received increased by 19%, profiting from a major order in the hydropowerbusiness. Orders on hand increased to almost € 5.5 billion. Profit from operations is down on the previous year, primarily due to valuation effects on foreign
currency items. After adjusting for these effects which affected the Group Holding, profit from operations was at approximately the same level as in the previous
year, despite additional spending on the topic of Industry 4.0. The Group’s threesegments were all able to increase or at least stabilize their profit from operations.
Given the volatile state of the majority of our target markets, which are characterized by a low level of global economic growth, weak investment levels, plummeting
oil and raw materials prices and high competitive pressure, we consider that Voith’sability to maintain its overall stability is a sign of the Group’s particular robustness.
Despite the satisfactory operative developments, the Group reports a negative net
result of €-48 million due to the effect on results of impairment charges totaling€ 71 million. The impairment charges were recorded against securities and against

Voith Interim Report 2016

Group interim management report9

the assets of the Voith Industrial Services Group Division which was classified asheld for sale. Adjusted for these impairment charges, the Group net result would
have been positive at € 23 million. The Group’s result has improved significantly
compared to the previous year, which was heavily affected by charges recorded
for restructuring expenses.
The Group figures for sales, orders received and results from operations include thecontinuing operations Voith Hydro, Voith Paper, and Voith Turbo. V­ oith ­Industrial­Services, on the other hand, is presented in this interim report as a discontinued operation in compliance with the International Financial Reporting Standards(IFRS 5) due to the ongoing sale process, consistent with the presentation in the
Annual Report 2015. The contribution to profits made by ­Voith ­Industrial ­Services
is included in the consolidated statement of income under net result from discontinued operations. The figures for the previous year have been adjusted accordingly
in the interim financial statements for the first half of the 2015/16 fiscal year. These
adjustments are taken into account in the following sections.

01.2. Economic

environment

Global growth rates remain at theprevious year level
In the first half of the Voith fiscal year 2015/16 global economic trends did not live
up to the expectations of economic analysts issued at the end of 2015, the datethat our last annual report was published. Although there is a continued expectation of solid growth for 2016 the growth rate forecasted in the latest estimatesis only at the previous year’s level (2015: +3.1 %). For example, in April 2016 theInternational Monetary Fund (IMF) reduced its forecast for 2016 global growth to+3.2 % (forecast as of October 2015: +3.6 %) and its forecast for 2017 to +3.5 %(forecast as of October 2015: +3.8 %). In this, the expectations for the emerging markets in particular have deteriorated, with a smaller deterioration for mostindustrial nations. Overall the projected growth is primarily driven by the consumer
goods sector; in contrast, hardly any worldwide growth is expected in the infrastructure and investment goods sectors.
Despite this, emerging markets as a whole continue to grow at a faster rate than
the advanced economies (IMF forecast for 2016: +4.1 %). Economic growth inChina – weighed down by significant excess capacity, high levels of private debt
and the transition to more domestic consumption – has continued to weaken,
which is painful for export-based economies such as Germany’s, and affects the
manufacturers of investment goods especially hard. Despite this, China is a driverof global growth. India is growing at a faster rate than China; however, this is froman overall lower base. Brazil is in recession for the second year in succession, asa consequence of unresolved structural problems aggravated by a political crisis.
Further, the recession has significantly worsened. Investments in infrastructure
have to all intents and purposes ground to a halt. Contrary to recent expectations Russia will probably remain in recession in 2016 as a consequence of thepersistently low raw material prices and, to a lesser extent, of sanctions applied10Group interim management report

Voith Interim Report 2016

by Western countries. The poor economic conditions in Russia are having an
above-average effect on the German mechanical engineering sector.
The slow economic recovery in the industrial nations has continued, albeit mainly
based on the consumer goods sector; the IMF estimates growth of 1.9 % for2016 (forecast as of October 2015: +2.1 %). The economy in the USA is expected
to grow at a slower rate than originally assumed in 2016 due to the increase in
the value of the dollar. Despite this, the USA continues to show above-average
growth compared to other industrial nations (forecast for 2016: +2.4 %). The eurozone continues to grow at a moderate rate, supported by low energy prices andthe low euro exchange rate. Investment activity continues to be cautious despite
historically low interest rates. In Germany, which is growing at a rate consistent
with the average rate recorded by euro zone countries, the demand for consumer
goods and services has been an important support for the economy. The demandfor investment goods, on the other hand, has been weak, which has resulted in
the level of orders received by mechanical and plant engineering companies being
lower than expected. The German mechanical and plant engineering sector thus
expects revenues to grow by no more than around 1 % in 2016.

Changed economic climate: economic growth in 2016
Real year-on-year change in GDP, 2016
Forecastacc. IMF

World output
Advanced
economies
United States
Euro zone 3)

AR 20151)

3.6 %Interim 2016 2)

3.2 %AR 20151)

2.2 %Interim 2016 2)

1.9 %AR 20151)

2.8 %Interim 2016 2)

2.4 %AR 20151)

1.6 %Interim 2016 2)

1.5 %AR 20151)

1.6 %Interim 2016 2)

1.5 %AR 20151)
Emerging market anddeveloping economies Interim 2016 2)

4.1 %Germany

China
ASEAN-5
India
BrazilRussia4.5 %AR 20151)

6.3 %Interim 2016 2)

6.5 %AR 20151)

4.9 %Interim 2016 2)

4.8 %AR 20151)

7.5 %Interim 2016 2)

7.5 %AR 20151)-1.0 %

Interim 2016-3.8 %

2)

AR 20151)-0.6 %

Interim 2016 2)-1.8 %

Source: International Monetary Fund (IMF), World Economic Outlook (WEO), April 2016, October 2015
AR = Annual Report; Interim = Interim Report1)
Forecast IMF, as of October 2015.
2)
Forecast IMF, as of April 2016.
3)
Including Germany.

/2,6

Voith Interim Report 201611

Group interim management report

Of Voith’s five target markets, the only significant growth market was the transport& automotive sector. Investments in the raw materials market and, in particular, inthe oil & gas market contracted by a much greater margin than the expectations
we published in the Annual Report 2015. The investment climate in the energy
and paper markets remained extremely cautious.

01.3. Sales

Group sales at almost the same level asin the previous year
The Voith Group recorded sales from continuing operations in the first half of the
2015/16 fiscal year of € 2,038 million (previous year: € 2,108 million, -3 %). Groupsales do not include the sales of the discontinued Group Division ­Voith ­Industrial­Services. Group sales were slightly down due to the negative currency effects
as a result of the higher euro exchange rate compared to the previous year. The
currency effects, which affected Voith Hydro in particular, were responsible forapproximately half of the fall in Group sales. Overall the sales trend was in linewith our expectations, so that we remain on course to achieve our annual forecast(“same level as previous year”).
The three Group Divisions report diverging trends. While Voith Turbo was able toincrease sales slightly (+3 %) and Voith Hydro (-1 %) was almost at the same level
as in the previous year, as expected sales recorded by Voith Paper were significantly (-11 %) lower than the exceptionally high figure recorded in the first half ofthe previous year.

Detailed information on the development of sales in the separate Group
Divisions can be found in section 02,“Business development and earnings
position of the Group Divisions.”

Sales were approximately evenly spread between the three Group Divisions: sales
at Voith Hydro represented 32 % of total sales (previous year: 31 %), Voith Paper
34 % (previous year: 37 %) and Voith Turbo also recorded 34 % of the total (previous year: 32 %).

Sales Group1)

Sales total € 2,038 million1)in € millions

by Group Division

4.302

Voith ­Turbo
34 %2,1082)2,038

2014/15

Full fiscal year

Voith ­­Hydro
32 %2015/16First half year

 xcluding the discontinued Group Division
E­Voith ­Industrial ­Services.
2)
Previous year restated.

Voith Paper
34 %First half year 2015/16

1)

1)

Excluding the discontinued Group Division­Voith ­Industrial ­Services.

12Group interim management report

01.4. Orders received

Increase in orders received

Voith Interim Report 2016

The Voith Group secured new orders totaling € 2,155 million in the first half of the
2015/16 fiscal year in its continuing operations (previous year: €1,815 million), an
increase of 19 %. Our orders on hand increased from € 5,286 million at the end of
the previous fiscal year to € 5,494 million at March 31, 2016.
The high percentage increase in orders received cannot be extrapolated forward
for the full reporting year, as it is affected by the cyclical nature of the way in whichhydropower projects are awarded. As a result of being awarded a major project in
the reporting period, and given a very unbalanced market distribution in the previous year, Voith Hydro on its own recorded a 123 % increase in orders received
in the first half of the year compared to the first half of the previous year. However,
we expect that the situation will return to normal in the second half of the yearwith the result that we assume that we will report orders received for the wholeof the 2015/16 fiscal year at approximately the same level as in the previous year,
as forecast in the 2015 Annual Report. Orders received fell by 6 % at Voith Paperand by 11 % at Voith Turbo.
Detailed information on the developmentof orders received in the separate Group
Divisions can be found in section 02,“Business development and earnings
position of the Group Divisions.”

The orders received were also negatively affected by negative currency effects,
which affected Voith Paper in particular, but which were relatively insignificant at
Group level due to the high operational increase. 3x M

Orders received Group1)

Orders received total € 2,155 million1)

Orders on hand Group1)

in € millions

by Group Divisionin € millions

Voith ­Turbo
30 %

4.389

5,494

2014/15

2015/16

2,155

1,8152)

2014/15

Full fiscal year

5,286
Voith ­­Hydro
39 %2015/16First half year

 xcluding the discontinued Group Division
E­Voith ­Industrial ­Services.
2)
Previous year restated.

Voith Paper
31 %First half year 2015/16

Full fiscal year

First half year

1)

1)

Excluding the discontinued Group Division­Voith ­Industrial ­Services.

1)

Excluding the discontinued Group Division­Voith ­Industrial ­Services.

Voith Interim Report 2016

01.5. Results

13Group interim management report

Satisfactory trends in operating activities,
charges against net annual result
As in the Annual Report 2014/15 ­Voith I­ndustrial ­Services is presented as a discontinued operation. The separate income and expense components in the consolidated statement of income contain the continuing operations and are consequently
shown after adjustment for the relevant share of V
­ oith ­Industrial ­Services. The overall contribution to the Voith Group’s profits made by ­Voith ­Industrial ­Services is
included under net result from discontinued operations. The income statement forthe previous year has been adjusted in the same way.
Trends in the operational earnings indicators reported by the three Group Divisions were stable overall; however, the profit from operations of the Voith Groupfell compared to the previous year due to valuation effects on individual foreign
currency items at Group Holding. The net result in the reporting period was negative (€ -48 million) due to non-recurring items; however, it significantly improved
compared to the previous year, in which our results were heavily affected by
restructuring expenses.

We refer to section 01.3. of thismanagement report for information on
the development of sales.

The Group’s total output fell by 3 % to € 2,072 million (previous year: € 2,144 million)
corresponding to sales. The change in the total output of the Group Divisions waslargely consistent with the change in sales (Voith Hydro -1 %, Voith Paper -10 %and Voith Turbo +1 %).
The cost of materials fell to € 881 million (previous year: € 937 million, -6 %). The
ratio of the cost of material to total output fell to 42.5 % (previous year: 43.7 %). This
was largely driven by Voith Paper as the level of activity in the new machine business, which has a high proportion of material expenses to sales, was lower compared to the same period in the previous year.
Owing to the impact of restructuring projects currently being implemented personnel costs were reduced to € 715 million (previous year: € 723 million, -1 %). Current

Operational result before non-recurring items
Group1) in € millions

Net result Groupin € millions
-131

-48

2014/15

2015/161032)
82

2014/15

2015/16

Excluding the discontinued Group Division­Voith ­Industrial ­Services.
2)
Previous year restated.
1)

14Group interim management report

Voith Interim Report 2016wage cost increases of around 3 % worked counter to this trend. The personnel
expense ratio (ratio of personnel expenses to total output) increased to 34.5 %(previous year: 33.7 %).
Depreciation and amortization totaled € 66 million (previous year: € 72 million, -8 %).
Voith Paper was able to reduce charges for depreciation and amortization by€ 5 million, primarily as a result of reductions in production capacity. The proportion of depreciation and amortization to total output in the Group fell to 3.2 %(previous year: 3.4 %).
The balance of other operating expenses and income increased to € 329 million(previous year: € 308 million, +7 %). Lower gains on currency exchange, amongst
other things, as a result of valuation effects on certain individual foreign currency
positions, and an increase in warranty costs contributed to this increase. The ratio
to total output increased to 15.9 % (previous year: 14.4 %).

See section 02 of this management
report for detailed information on
the development of the profit fromoperations and the ROCE for eachGroup Division.

The operational result before non-recurring items fell to € 82 million (previous year:€103 million, -20 %). The profit from operations used for internal management
purposes amounted to € 97 million (previous year: €120 million, -19 %). The returnon sales fell to 4.8 % as a result of the lower profit from operations (previous
year: 5.7 %) and the ROCE (return on capital employed) fell to 9.1 % (previous
year: 10.7 %).
The non-recurring result in the reporting period totaled € -5 million (previous year:€ -143 million). In the same period in the previous year the non-recurring result wassignificantly affected by the expenses associated with the package of measures
implemented at Voith Paper and in connection with the Group-wide excellence
initiatives forming part of the Voith 150+ success program. In the current period
the non-recurring result includes expenses from these measures that did not
qualify to be recorded as provisions in previous year and from income generated
as a result of the measures. The non-recurring result also includes personnel
related expenses incurred at Voith Turbo as part of measures taken to address
the current weakness in the oil & gas industry, in mining and in the steel industry.
Expenses were also recorded at a subsidiary of Voith Paper in connection withthe correction of a period allocation accounting item. The non-recurring result
was recorded by Voith Hydro € +5 million (previous year: € -15 million), Voith Paper€ -8 million (previous year: € -109 million), Voith Turbo € -5 million (previous year:€ -14 million) and € +3 million was recorded by Group Holding activities (previous
year: € -5 million).
The balance of interest expenses and interest income amounted to € -36 million(previous year: € -33 million, -8 %). This includes € 2 million expenses from the€ 300 million loan note placed in November 2015.

Voith Interim Report 2016

Group interim management report

15

The other financial result totaled € -28 million (previous year: € -8 million) andincludes income from investments (€ 8 million, previous year: € 0) and impairment
charges of € -36 million recorded against securities and charged to the income
statement (previous year: € -8 million).
Income taxes totaled € -27 million (previous year: € -41 million). This amountincludes income taxes relating to other periods of € +1 million (previous year: an
expense of € -18 million). There were no tax effects relating to significant amountsof expenses included in non-recurring items in the previous year.
The net result from continuing operations amounted to € -9 million (previous year:€ -123 million).
The net result from discontinued operations, which represents the contribution
made by ­Voith ­Industrial ­Services to the Voith Group, was € -38 million (previous
year: € -8 million). This result is affected by non-recurring impairment charges
recorded against assets of € -35 million in the reporting period.
As a result of the above the Group net result amounted to € -48 million (previous
year: € -131 million).

01.6. Significant events

Formation of a new Group Division:
Voith Digital Solutions
As part of our digital agenda we announced the formation of Voith Digital Solutions, a new Group Division, in December 2015. In future we will concentrate theGroup’s entire Industry 4.0 know-how in this division. Voith Digital Solutions will
also include all digital sector venture and start-up activities. The new Group Division will focus on developing digital business models for sectors in which Voith isalready active as well as for new activities.
We are currently establishing the structures in which existing skills already available in the Group in the automation, software, IT, digitalization and sensor ­sectors
can be concentrated and developed further in the new Group Division. In future,
however, Voith Digital Solutions will also develop and market new p­ roducts
and services.
As the new Group Division is still in the start-up phase, the orders received, sales
and results will continue to be reported in the three existing Group Divisions.

16Group interim management report

Voith Interim Report 2016

Changes in Group management functions
Dr. Roland Münch, until now Chairman of the Management Board of Voith Hydro,
has been appointed as Chairman of the Management Board of Voith Digital­Solutions with effect from January 1, 2016. Having been a Member of the Management Board of Voith GmbH for many years he will switch position within the
Board to assume the important task of leading us to success in the digitalization
sector and in Industry 4.0.
Uwe Wehnhardt will succeed Dr. Roland Münch as head of the hydropower business. Uwe Wehnhardt has been with the Voith Group since 2007. His last position was as Chief Operating Officer and a Member of the Management Board ofVoith Hydro. He was appointed as Chairman of the Management Board of Voith
Hydro and a Member of the Management Board of Voith GmbH with effect fromJanuary 1, 2016.
In October 2015, Carsten J. Reinhardt resigned his position as Chairman of theManagement Board of Voith Turbo and a Member of the Management Board ofVoith GmbH. Dr. Uwe Knotzer has been appointed his successor in both positions.
Dr. Knotzer has worked for the Voith Group since 2002 and has been a Memberof the Management Board of Voith Paper since 2012.

Voith Interim Report 201602

Group interim management report

17

Business development andearnings position of the Group
Divisions
Our three Group Divisions have developed successfullyin the first six months of the 2015/16 fiscal year andreport firm profits in the period. In addition to its goodbasic business, Voith Hydro also benefited from theaward of a new major project. Voith Paper is making
good progress following a phase of intensive restructuring and has been able to increase its profitability. Voith
Turbo has been able to increase sales slightly and holdresults stable despite the fact that difficult market
conditions apply in two of its markets – oil & gas andraw materials.

02.1. Voith Hydro

Closing slightly ahead of plan
Voith Hydro can look back over a good first half year in which, in addition to good
ongoing basic business, the award of a major project means that more than half ofthe orders planned for the full year have already been received. With sales almost
unchanged, Voith Hydro has been able to increase its profit from operations andits profitability. Voith Hydro is doing well for the full year 2015/16.

Sales at almost the same level as in theprevious year
Voith Hydro generated sales of € 652 million in the first half of the 2015/16 fiscal
year, almost unchanged compared to the high level recorded in the same period
in the previous year (previous year: € 656 million, -1 %), slightly exceeding our
expectations. A very strong service business has contributed to this, as well as
higher than expected sales for hydropower plant equipment and modernization.
Voith Hydro sales were burdened by negative currency effects, excluding theseeffects the figures would have shown a slight growth.

18Group interim management report

Voith Interim Report 2016

Orders received dominated by the award ofa major project
Tenders awarded in the first half of 2015/16 were significantly up on the same
period in the previous year in what is generally a stable hydropower plant market.
In the previous year the volume was spread very unevenly over the year, and only
a very small proportion of the total of all contracts were awarded in the first halfof the fiscal year. In the current reporting period the market was dominated bylarge projects that have now been awarded, some of them following years of delay.
Voith Hydro benefited appropriately from the high volume of orders awarded andwas able to increase the level of orders received in the reporting period significantly. As a result the orders received totaled € 839 million, more than double thelevel in the same period in the previous year (previous year: € 376 million, +123 %).
A major project in Canada was a significant contributor to the pleasing level oforders received. The service business has also developed very well. Orders on
hand increased significantly to € 3,426 million at March 31, 2016 (September 30,
2015: € 3,139 million).
The high percentage increase in orders received in the first half of 2015/16 cannot
be extrapolated forward for the fiscal year as a whole, firstly because the total

Sales Voith ­­Hydro

Profit from operations Voith ­­Hydroin € millionsin € millions

101

1313

652

656

2014/15

Full fiscal year

2014/15

2015/16First half year

48

43

Full fiscal year

2015/16First half year

Orders received Voith ­­Hydro

Orders on hand Voith ­­Hydroin € millionsin € millions

1404

3,426

3,139
839

376

2014/15

Full fiscal year

2015/16First half year

2014/15

Full fiscal year

2015/16First half year

Voith Interim Report 2016

Group interim management report

19

includes one project that is larger than average, and secondly because the figures
for the first half year in the previous year were unusually low. Less than 30 % of
the total contract volume was received in the first half of the fiscal year 2014/15.
However, we are optimistic that we will improve on the forecast published in ourannual report (orders received “falling tangibly”) and that we will close the current
fiscal year with orders received only slightly down on the previous year.
There have been very positive trends in the established hydropower markets in
the USA and Canada in the reporting period. We have had above-average success in winning modernization and service contracts. In addition we have been
awarded a € 315 million contract to supply turbines and generators as part of theSite C project to construct a new power plant in Canada.
Asia remains one of the most important sales markets for Voith Hydro, whereby,in addition to China and Japan, the other prosperous and stable countries inSoutheast Asia are of growing importance. We have been awarded a contract
for the Nikachhu hydropower plant, the first time we have obtained a contract in
Bhutan. This South Asian country has embedded environmental protection in its
constitution and has invested heavily in hydropower, exporting some of the energy
generated from this source to neighboring countries.
The continuing economic and political crisis in Brazil, an important market forhydropower plants, is preventing the award of large infrastructure projects, andas a result the demand for new hydropower plants is also currently experiencing
a standstill.
The European market remains difficult given the current energy policy framework,
current excess capacity, and low energy prices resulting from the energy transition.
Although the market for small hydropower projects (power plants with a generating
capacity of 30 megawatts per unit) remains difficult in many countries due to thelack of subsidy and financing models, we have managed to win contracts in thissegment, for example in Japan, India, Southeast Asia and Canada.

Increased profit from operations
Voith Hydro was able to increase its profit from operations in the first half of2015/16 to € 48 million (previous year: € 43 million, +10 %), which was above
plan. The return on sales improved to 7.3 % (previous year: 6.6 %) and the ROCE
to 19.5 % (previous year: 17.5 %).

20Group interim management report

02.2. Voith Paper

Profitability increased

Voith Interim Report 2016

Voith Paper considers itself confronted with a market that remains difficult in parts.
Accordingly, sales and orders received in the reporting period are below the same
period in the previous year. Due to the success of the restructuring measures,
Voith Paper has been able to increase its profits from operations and its profitability. We consider Voith Paper to be on course to achieve all significant key figures
forecasted for the year as a whole.

Sales lower than in the strong first half ofthe previous year
Sales at Voith Paper in the first half of 2015/16 totaled € 689 million (previous year:€ 776 million, -11 %). The fall in sales was wholly attributable to the project business (new machines and major rebuilds). However, the comparative figures for thesame period in the previous year were exceptionally high due to the high level oforders on hand brought forward from previous periods. As expected, our business with products, consumables and services benefited from the light increase

Sales Voith ­Paper

Profit from operations Voith ­Paperin € millionsin € millions

58

1506

776

689

19

17

2014/15
Full fiscal year

2014/15

2015/16First half year

Full fiscal year

2015/16First half year

Orders received Voith ­Paper

Orders on hand Voith ­Paperin € millionsin € millions

1505

699

961

946

2014/15

2015/16658

2014/15

Full fiscal year

2015/16First half year

Full fiscal year

First half year

Voith Interim Report 2016

Group interim management report21

in paper production worldwide, generating a small increase in sales. Overall,
Voith Paper sales in the reporting period were almost in line with plan. We are
expecting a stronger six months in the second half of the fiscal year, and accordingly maintain our forecast of stable sales for the 2015/16 fiscal year as a whole.

Orders received below the previous year level
Voith Paper received orders totaling € 658 million (previous year: € 699 million, -6 %)in the reporting period. This total includes growth for the business with products,
consumables and services, whereas the project business recorded a fall compared to the same period in the previous year. After adjusting for currency effects,
which weighed on the value of orders received by Voith Paper, orders received
were almost at the same level as in the same period in the previous year. Although
our orders received in the first half of the year were slightly below plan, we expect
orders received for the 2015/16 fiscal year as a whole to be at around the samelevel as in the previous year, as forecast in our latest Annual Report. Orders on
hand totaled € 946 million at March 31, 2016 (September 30, 2015: € 961 million).
The production of graphic paper is declining worldwide, while the board andpackaging paper and tissue sectors are recording growth in most regions. Also,
even though the production of paper worldwide is increasing again, this low levelof growth is, for the most part, being absorbed by the use of existing production
capacity. Accordingly, there is a low level of interest among paper manufacturers
for investments in new plants.
In China, excess existing capacity limits the demand for new machines andmajor refurbishment projects. Paper manufacturers in the other Asian countries
appeared unsettled by weaker growth levels in China. In Brazil, the exacerbationof the recession and political uncertainty resulted in a cautious investment climate,despite the good results of Latin American paper and tissue manufacturers. Voith
has been successful in this difficult environment; for example, we were awarded
contracts for three tissue machines in South America. Projects for new paper
machines are being offered for tender in North America again.
We have been able to gain new orders for new machines and major rebuilds forthe manufacture of tissue and board and packaging paper, as well as for specialty paper.

Returns increased
Voith Paper has increased its profit from operations by 16 % to €19 million (previous year: €17 million), despite lower sales. The cost savings achieved as a resultof the restructuring have had an impact, and overall the return on sales improved
to 2.8 % (previous year: 2.2 %). The ROCE improved significantly to 5.1 % given
the improvement in profit from operations and the lower level of capital employed(previous year: 3.9 %).

22Group interim management report

02.3. Voith Turbo

Challenging first half year

Voith Interim Report 2016

The four Voith Turbo divisions have experienced diverging trends in the reporting
period: While Power, Oil & Gas and Mining & Metals suffered from deteriorating
market conditions, the Rail and Commercial Vehicles divisions have developed
well. Overall Voith Turbo has recorded a slight increase in sales and stabilized its
profit from operations. The level of orders received, however, has fallen markedly.

Sales increased by 3 %Voith Turbo’s sales in the reporting period totaled € 691 million (previous year:€ 669 million, +3 %). In the Rail division we have been able to make significant
increases in sales, already at a high level, and the Commercial Vehicles division,
too, has recorded a slight sales increase. In the Power, Oil & Gas division and inparticular in the Mining & Metals division, sales have fallen due to the lower levelsof orders received in the previous year, which was a consequence of the market
situation at the time. We retain our forecast that Voith Turbo sales for the year asa whole will remain stable.

Sales Voith ­Turbo

Profit from operations Voith ­Turboin € millionsin € millions

91

1470

691

669

2014/15
Full fiscal year44

2014/15

2015/16First half year

43

Full fiscal year

2015/16First half year

Orders received Voith ­Turbo

Orders on hand Voith ­Turboin € millionsin € millions

1,187

1,505

733

1,123

653

2014/15

Full fiscal year

2015/16First half year

2014/15

Full fiscal year

2015/16First half year

Voith Interim Report 2016

Group interim management report

23

Fall in orders received due to market conditions
In the first half of the 2015/16 fiscal year Voith Turbo received new orders worth
a total of € 653 million (previous year: € 733 million). With an 11 % fall in recorded
orders received, Voith Turbo is below plan. Orders on hand totaled €1,123 million
at March 31, 2016 (September 30, 2015: €1,187 million).
Orders received were below plan due to the extremely difficult market conditions
confronting the Power, Oil & Gas (POG) and Mining & Metals (M&M) divisions. The
price of crude oil fell further at the start of Voith’s fiscal year 2015/16, with the priceof Brent oil falling to new lows of below 30 US dollars per barrel in January 2016 –representing a fall of approximately 70 % since the summer of 2014. Despite asubsequent recovery, the price of oil at the end of the reporting period remains
at the same low levels seen during the financial crisis. As a result of the dramatic
deterioration in their earnings, oil companies have reduced their investment levels
and service activities to a minimum in the reporting period. In addition, due to thecommodity slump, mining companies have maintained low levels of investment
for a considerable period now, and this trend continues. Given this backgroundthe Power, Oil & Gas and Mining & Metals divisions have recorded significant falls
in orders received.
The Commercial Vehicles division, on the other hand, could maintain orders at
almost the same level as in the previous year. In the Rail division our orders
received were, as expected, lower than in the same period of the previous year,
although still at a high level. The lower level is due to the sharper competitive situation in China.

Profit from operations at previous year level
Profit from operations at Voith Turbo amounted to € 43 million in the first half ofthe 2015/16 fiscal year, comparable with the same period in the previous year
(previous year: € 44 million). Although the efficiency improvements resulting from
Voith 150+ had a positive influence on results these have been offset by therecording of additional risk provisions and changes in the sales mix. As a result,
the return on sales fell to 6.3 % (previous year: 6.5 %). The ROCE improved slightly
to 11.9 % (previous year: 11.8 %).

24

03
03.1. Balance sheet

Group interim management report

Voith Interim Report 2016

Net assets and financial position
The structure of the Voith Group’s assets, equity andliabilities is robust. Owing to the negative net resultand valuation adjustments to pension provisions, theequity ratio has fallen to 13.8 %. The overall cash flow
was positive.

Equity reduced by negative Group result and by
upward valuation adjustments to pension provisions
The balance sheet total as at March 31, 2016 was € 5,461 million and has onlychanged marginally compared to September 30, 2015 (previous year: € 5,451 million, +0 %). There were only insignificant shifts between current and non-current
assets on the asset side of the balance sheet. On the liabilities side there has
been a shift from current liabilities to non-current liabilities. Equity has fallen as aresult of the negative net result and valuation adjustments to pension provisions.
Non-current assets fell by a total of €19 million to € 2,519 million (previous year:€ 2,538 million, -1 %). The € 22 million fall in the carrying value of property, plantand equipment was primarily a result of depreciation of € 57 million and disposalsof €15 million, less new investments made of € 56 million. Non-current securities
fell by € 36 million as a result of valuation effects.
Current assets increased by € 29 million to € 2,942 million (previous year: € 2,913 million, +1 %) primarily due to the increase in receivables from customer-specific contracts; these include long-term contracts accounted for under the percentage ofcompletion method (increase of € 51 million, of which € +65 million related to Voith
Hydro and € -14 million related to Voith Paper).
Non-current liabilities increased significantly by € 387 million to € 2,318 million (previous year: €1,931 million, +20 %) primarily as a result of the successful placing ofa € 300 million loan note. The loan is for general business purposes, in particular
for refinancing financial liabilities. In the course of its placement, banks and institutional investors subscribed to promissory notes in tranches with terms of five,seven and ten years at fixed and variable interest rates. The increase in the pension
provision (€ +55 million) as a result of the lower discount rates applied in Germany,
the USA and Canada also contributed to the increase in non-current liabilities.
Current liabilities could be reduced by € 258 million to € 2,388 million (previous
year: € 2,646 million), primarily as a result of the repayment of short-term bank liabilities (€ -188 million). Other provisions presented in current liabilities (€ -27 million)
primarily include the lower balance on restructuring provisions (€ -29 million). The

Voith Interim Report 201625

Group interim management reportincrease in current other liabilities (€ +52 million) is primarily the result of higher
down payments received on account of orders from customers (€ +40 million).
Further information concerning theassets / liabilities held for sale isprovided in the Notes to the Interim
Report.

As in the previous year, the reported amounts for assets held for sale and liabilities
directly associated with the assets classified as held for sale primarily include theassets and liabilities of the V­ oith I­ndustrial ­Services Group Division.
The net balance of deferred tax assets and liabilities increased by € 22 million, primarily driven by the higher pension provisions, resulting from valuation adjustments.
Equity fell to € 755 million (previous year: € 874 million, -14 %). This fall was primarily
the result of the Group’s negative net result, valuation changes to pension provisions, and dividend payments made. Accordingly, the equity ratio fell to 13.8 %(previous year: 16.0 %).

03.2. Liquidity

Total cash flow positive
The cash flow from operating activities amounted to € -48 million in the first half ofthe 2015/16 fiscal year (previous year: € -143 million). The year-on-year improvement was mainly due to a lower increase in the net working capital in the period
under review (€ +70 million; previous year: € +222 million).
Cash flow from investing activities totaling € -30 million was primarily a result of
payments made for investments made in property, plant and equipment and intangible assets of € -67 million (previous year: € -52 million), less receipts from thedisposal of property, plant and equipment of € 29 million (previous year: € 6 million).
Cash flow from investing activities in the same period of the previous year totaling€ -557 million was primarily due to payments for financial assets (€ -529 million),most of which was as a result of the acquisition of the shareholding in KUKA
Aktiengesellschaft.
Cash flow from financing activities of € 89 million primarily resulted from the changes
to financial liabilities described above. The previous year figure of €189 million was
primarily driven by drawdowns of loan capital.
Total cash flow was positive and amounted to €11 million (previous year:€ -511 million).

Development of cash flow

First half year
2015/16First half year
2014/15

Cash flow from operating activities

-48

-143

Cash flow from investing activities

- 30

- 557

Cash flow from financing activities

89

189

Total cash flow

11

-511

in € millions

26

Group interim management report

Voith Interim Report 2016

Net debt, measured as the difference between interest-bearing financial liabilities and liquid financial assets, amounted to € 734 million (September 30, 2015:€ 574 million).

03.3. Investments andFurther investments in productivity

R&D expenses

Voith Group has invested € 59 million in the first half of the 2015/16 fiscal year (previous year: € 39 million, +49 %). This does not include the investments made in the
discontinued V­ oith ­Industrial ­Services Group Division of € 8 million (previous year:€12 million). The investment ratio, as a percentage of Group sales, amounted to
2.9 % (previous year: 1.9 %). The largest investments in property, plant and equipment were made by Voith Turbo, which has invested in developing its Shanghai
plant. Regionally, investments were focused on Germany and Asia. As a result of
the low level of investments in previous years, depreciation amounted to € 66 million (previous year: € 72 million, -8 %).
Research and development expenses in the reporting period totaled € 92 million(previous year: €103 million, -11 %). The ratio of research and development to sales
in the half year was therefore 4.5 % (previous year: 4.9 %).

03.4. Financial investments
and participatinginterests

There were no reportable transactions affecting financial investments and­participating interests from a Group perspective in the first half of the fiscal year
2015/16.

Voith Interim Report 201604

27

Group interim management report

Employees
At the end of the first half of the 2015/16 fiscal year
we employed around 19,740 people. These figures
do not include the around 17,460 employees in the
discontinued V­ oith I­ndustrial S­ ervices Group Division.
Reorganization and restructuring as part of theVoith 150+ success program are proceeding according
to plan. Around 480 jobs were reduced during thereporting period.

Further reduction in number of employees with
implementation of Voith 150+
As at March 31, 2016, we employed 19,742 full-time equivalents (excluding apprentices) in the Voith Group. Overall, this is 481 or 2 % fewer jobs than at the end of
the last fiscal year (September 30, 2015: 20,223). This figure does not include the17,463 jobs (previous year: 17,253) in the discontinued ­Voith ­Industrial ­Services
Group Division.
This decrease in jobs is largely due to the Voith 150+ success program which iscurrently being implemented worldwide. The greatest impact was on the Voith
Paper Group Division (-715 jobs) and, to a lesser extent, the Voith Turbo Group
Division (-128 jobs) and Voith Hydro (-114 jobs). A total of 475 jobs were addedin the Group Holding; this reflects the shift of indirect functions from the Group
Divisions to the Group Holding in the framework of Voith 150+.

Employees Group1)

20,223

19,742

2014/15

2015/16

Full fiscal year
1)

Employees total 19,7421)
by Group DivisionFirst half year

Excluding the discontinued Group Division­Voith ­Industrial ­Services.

Voith ­Turbo
31 %Voith ­­Hydro
26 %Voith Paper
36 %

Other
7%

First half year 2015/16
1)

Excluding the discontinued Group Division­Voith ­Industrial ­Services.

28Group interim management report

Voith Interim Report 201636 % of employees with Voith Paper
Excluding the discontinued personnel-intensive ­Voith ­Industrial S­ ervices Group
Division, Voith Paper has, with 36 % of the total headcount, more employees
than any other Group Division. 7,025 people were working there at the end of
the period under review (previous year: 7,739 employees). Voith Turbo had 6,126
employees (previous year: 6,254) or 31 % of the Group’s headcount. With 5,074
people, Voith Hydro employed 26 % of the Group’s total workforce (previous year:
5,188 employees). The remaining jobs (1,517, previous year: 1,042) were in indirect
central functions and in areas with a holding function.

Restructuring and reorganization-related job cuts
according to plan
The reorganization of our indirect activities as part of the Group-wide successprogram Voith 150+ has now been largely completed. The target of reducing theworkforce by 720 should be achieved, as announced, by the end of the current
fiscal year. The job cuts made as part of the restructuring of Voith Paper whichwere decided on last year as well as timely capacity adjustments in Voith Turboand Voith Hydro will be implemented as planned by the end of 2016.
Owing to the ongoing cycle of low oil and raw material prices, which has persisted for much longer than anticipated, and the correspondingly low level ofinvestment in the oil and gas industry as well as in mining and steel production,
we took temporary measures in 2016 for several Voith Turbo locations to support
these industries.

Voith Interim Report 201605

Group interim management report

29

Subsequent events
In May 2016 we entered into a sale and purchase agreement with Triton, an investment company, under which Triton will acquire a majority shareholding in theGroup’s ­Voith I­ndustrial S­ ervices segment. The acquirer will continue the businessusing a new brand identity and name. Voith retains a 20 % shareholding and will
provide support during the transition period. The completion of the sale and purchase agreement is subject to the approval of the responsible antitrust authorities.
In 2015 we announced that the Voith Group will, in view of the digital age, focus
its portfolio on its technology and engineering competence. As a result, we sought
an acquirer for the technical industrial service activities, which are heavily dependent on customer process know-how (e.g. in the automobile sector) and whichmake up the ­Voith I­ndustrial ­Services segment.
No further significant developments have occurred since the end of the first halfof the 2015/16 fiscal year (March 31, 2016).

30

06

Group interim management report

Voith Interim Report 2016

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

Risk management aligned toward increasing thevalue of the Company
Entrepreneurial activity involves making decisions under conditions of uncertainty. To safeguard against risks that could jeopardize the Group and/or its companies as a going concern, Voith operates a consistent and binding Group-widerisk management system. It should contribute to increasing the value of the Groupand its companies by reducing potential risks and the probability of their occurring. At the same time, the system is intended to produce a state of equilibrium
between correctly assessed risks and the exploitation of opportunities.

Risks
To the best of our knowledge at the time this report went to press, there are no
risks to the Voith Group’s ability to continue as a going concern. For our assessment of the risk situation we refer in all cases to our 2015 annual report in which
we describe risks which could have a significantly negative effect on our net
assets, financial position and results of operations and which could cause theresults to deviate negatively from those forecast/targeted. Significant changes
are presented in the following.
Since the publication of our annual report the risk situation has deteriorated somewhat. We continue to regard substantially lower than anticipated global economic
development as the most serious economic risk. In this respect developments in
China and Brazil will need to be observed particularly closely. The pace of growthin China, the world’s largest economy by purchasing power parity, has tailed
off consistently over a period of several years. Brazil is now in recession for thesecond year in succession and the International Monetary Fund has again downgraded its forecasts for 2016 and 2017. These developments are already adverselyVoith Interim Report 2016

Group interim management report31

affecting both the global economy as a whole and Voith’s results in particular. Further deterioration in these two key emerging markets could make it more difficult
for us to achieve annual targets. In the meantime we regard the spread of Islamic
terrorism to Europe as a relevant risk for the global economy.
We have identified heightened exchange rate volatility as a new economic risk. On
the one hand, greater fluctuations are related to translation risks and to our ability
to forecast the results of our business. On the other, if the value of the euro rises
against other important currencies, as was the case in the first half of the fiscal
year 2015/16, the competitiveness of our products on the world market would
suffer and make it more difficult for us to export to regions outside the euro zone.
A further market risk which could negatively impact the earnings position of Voith
Paper is increasing pressure on prices in the important Chinese market. This not
only affects project business, but also the consumables which are increasingly indemand in connection with more stable paper production.
We regard the United Kingdom’s possible departure from the European Union asa new political risk. If the June referendum in the United Kingdom were to resultin Brexit, this would almost certainly have a negative impact on the economic­situation in Europe and, as a result, on the Voith Group’s business position.

Opportunities
As well as risks we also perceive a number of opportunities which could havepositive effects on our net assets, financial position and results of operations, andcause the results to deviate positively from those forecast/targeted. We also referin all cases to the annual report as regards the assessment of our opportunity
situation. We consider all the significant opportunities described in that report ascontinuing to apply.
One new opportunity could be a change of government in Brazil and that country’s emergence from its current political and economic crisis. This would havea positive influence on the global economy and, more immediately, on our own
business. We regard this as the currently most significant opportunity for Voith,
although if such a change comes about we would only anticipate a tangible impact
in the following fiscal year.
From our current perspective the value of the euro is unlikely to fall any further
than envisaged in our plans. In this respect there is little prospect that our products might benefit on world markets from a cheaper euro.

32

07

07.1. Business environment

Group interim management report

Voith Interim Report 2016

Forecast report
Based on developments during the reporting period we
confirm the Group’s annual sales and orders forecast.
Against the backdrop of a continuing subdued
investment climate we expect both sales and orders
received to remain stable in the 2015/16 fiscal year.
Profit from operations will benefit from the efficiency
gains derived from Voith 150+ but, owing to valuation
effects on foreign currency items, will probably, contrary
to our original plans, be lower than in the previous year.

Global economic recovery remains fragile
Economic analysts currently assume that the global economy will continue todevelop strongly. After worldwide economic growth of 3.1 % in 2015 the International Monetary Fund (IMF) is forecasting rates of global growth of between 3.2 %and 3.5 % for 2016 and 2017 respectively. The IMF forecasts rates of growth for
emerging markets of between 4.1 % in 2016 and 4.6 % in 2017. Important exceptions to this positive trend are Brazil and Russia, both of which are in recession.
According to current IMF projections, these two countries will only return to positive rates of growth in 2017 (Russia) and 2018 (Brazil). With projected GDP growthof +6.5 % for 2016 and +6.2 % for 2017 China continues to play its role as theworld economy’s locomotive for growth. Nonetheless, economic indicators raise
fears of further subdued trends which may impact export-oriented economies
such as the Germany economy.
The slow economic recovery will probably continue at a steady rate in the industrialized nations. On the back of growth of 1.9 % in 2015 the IMF now projects rates
of growth of 1.9 % (2016) and 2.0 % (2017). The low energy prices in the USA due
to production of its own shale gas and oil are responsible for the reindustrialization of the country and are expected to generate significantly higher GDP growththan in Europe. We again anticipate low rates of growth in the euro zone in 2016
and 2017 at about the same level as in 2015. This is based on the assumption that
oil-importing countries continue to benefit from the low oil prices resulting froma market glut. While forecasts show that Germany is expected to grow at similar
rates as the euro zone as a whole, below-average performance is expected of its
engineering industry.

Voith Interim Report 201633

Group interim management report

The environment for capital goods remains difficult. We perceive little stimulus for
growth and an ongoing gloomy investment climate in the energy market owing to
the uncertain future of the global economy and regulatory regimes. In the market
for paper we anticipate that investment in new paper machines will remain low
while demand for consumables and services is expected to rise slightly. The willingness to commit to investments in the oil & gas market will probably recede in thelight of current oversupply and correspondingly low oil prices. Given the growing
backlog in investment in our target market raw materials we anticipate growing
medium-term demand for mining equipment but no improvement in the courseof the current fiscal year. We continue to be optimistic about the key segments ofthe transport & automotive market.
The forecast for our business is based on the assumption of there being no major
economic or political turbulences.chs

Economic growth
Real change in GDP on the previous year1)

World output
Advanced
economies
United States
Euro zone 2)
Germany
Emerging market anddeveloping economies
China
ASEAN-5
India
BrazilRussia

2016

3.2 %

2017

3.5 %

2016

1.9 %

2017

2.0 %

2016

2.4 %

2017

2.5 %

2016

1.5 %

2017

1.6 %

2016

1.5 %

2017

1.6 %

2016

4.1 %

2017

4.6 %

2016

6.5 %

2017

6.2 %

2016

4.8 %

2017

5.1 %

2016

7.5 %

2017

7.5 %

2016

-3.8 %

2017

0.0 %

2016

-1.8 %

2017

0.8 %

Source: International Monetary Fund, World Economic Outlook, Apr. 2016
1)
Forecasts.
2)
Including Germany.

34Group interim management report

07.2. Future development of

Stable development of the Voith Group

Voith Interim Report 2016

the Company

With regard to the achievement of our Group’s annual forecast as published withthe presentation of the annual report in December 2015, we are confident with thefirst half of the year behind us that our sales and orders received are on target. We
continue to anticipate ongoing stable development of Group sales in the 2015/16
fiscal year. The level of orders received is also projected to be at much the samelevel as last year. Nonetheless, our projected results must be adjusted downwards.
While the measures taken as part of Voith 150+ are, as announced, having a positive impact on profits, the resulting gains in efficiency – assuming comparable
exchange rates at the end of the fiscal year – will probably be canceled out by
valuation effects on foreign currency items and profit from operations is therefore
expected to decrease noticeably (projection in the 2015 annual report: “growslightly”). This will have a slightly negative impact on ROCE. As things currently
stand we will not – in particular owing to the non-recurring effects described in
section 01.5. – be able to achieve our target of a clearly positive net result.

All three Group Divisions return a profit
All the Group Divisions will again return a clear profit from operations in fiscal
2015/16, although – depending on what are in part difficult markets – their sales
and orders received will not develop uniformly. We are continuing to work on
increasing our results and on achieving a tangible improvement in profitability.
For Voith Hydro, bearing in mind the positive development during the period
under review, we are confident that orders received and sales will be higher in
2015/16 than originally planned. Assuming that the volume of projects remains
at much the same level as last year we anticipate somewhat fewer orders being
received than in the previous year (projection in the 2015 annual report: “tangible
decline”). Sales in the 2015/16 fiscal year will probably remain at much the samelevel as in the previous year (projection in the 2015 annual report: “slightly lower”).
Profit from operations will, as predicted, decrease slightly. ROCE will continue tobe stably high in accordance with our planning.
We confirm our projection for Voith Paper for the current fiscal year. We assume
that sales and orders received throughout the 2015/16 fiscal year will stabilize
at a level that is on a par with the previous year. The cost savings generated by
restructuring in recent years will continue to have an impact, and we consequently
expect a noticeable improvement in profit from operations compared to the previous year. ROCE should also increase substantially compared to the previous
year up to a high single-digit percentage rate for the entire 2015/16 fiscal year.
Voith Turbo expects somewhat higher sales in the second half of the year compared to the figures for the reporting period. As a result, at the present juncture
the target of achieving reasonably stable sales development compared to theprevious year will be achievable over the entire year. The successes of the efficiency improvement measures taken as part of Voith 150+ are having an impact
on results. Voith Turbo’s profit from operations will increase significantly, even

Voith Interim Report 2016

Group interim management report35

if – owing to a change in sales mix and further provisions to cover warranty
issues – the increase is not quite as strong as originally anticipated. The profitability indicator ROCE will also improve slightly compared to the previous year.
We announced in the 2015 annual report that achievement of our targets in theVoith Turbo Group Division depended crucially on market conditions in the oil& gas and raw materials markets. Owing to the drastic fall in oil, gas and many
raw material prices, now continuing over a much longer period than expected,
Voith Turbo will probably not manage to achieve the forecast constant level oforders received. Instead we assume that, compared to the previous year, orders
received will fall substantially.
Forecasts are always subject to considerable uncertainty. A host of macroeconomic and industry-specific factors can influence, positively or negatively, thedevelopment of individual Group Divisions or the entire Group. For informationon the significant risks and opportunities which could lead to a negative/positive forecast deviation, we refer to section 06 “Risks and opportunities” of thismanagement report.

Group interim financial statements
for the period from October 2015 to March 201602

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

38
39
40
42
44
45
49
50
52		
59
66

38

Group interim financial statements

Voith Interim Report 2016

Consolidated statementof incomefor the period from October 1, 2015 to March 31, 2016in € thousands

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

2015-10-01 to
2016-03-31

2014-10-01 to
2015-03-31

2,038,317

2,107,830

33,60835,812

2,071,925

2,143,642

171,171

203,875

Cost of material-880,682-937,050

Personnel expenses-715,338-723,438

Depreciation and amortization-65,515-71,966-499,962-511,786

Operational result before non-recurring items

81,599103,277

Non-recurring result-4,853-142,954

Operational result

76,746-39,677

Other operating expenses

Result from companies accounted for using the equity method

5,422

-931

Interest income

4,226

6,016

Interest expenses-40,758-39,091

Other financial result-27,925-8,450Result before taxes from continuing operations

17,711-82,133

Income taxes-26,796-41,136

Net result from continuing operations-9,085-123,269

Net result from discontinued operations-38,471-8,153

Net result-47,556-131,422

Net result attributable to shareholders of the parent company-52,972-138,238

Net result attributable to holders of non-controlling interests

5,416

6,816

Voith Interim Report 2016

39

Group interim financial statements

Consolidated statementof comprehensive income
for the period from October 1, 2015 to March 31, 20162015-10-01 to
2016-03-31

2014-10-01 to
2015-03-31-47,556-131,422

Remeasurement of defined benefit plans-58,958-118,352

Taxes on components of other comprehensive income that will not be recycled
through profit or loss in later periods

18,396

26,164-10

214

in € thousands

Net result
Components of other comprehensive income that will not be recycled
through profit or loss in later accounting periods:

Components of other comprehensive income that will be recycled
through profit or loss in later accounting periods:
Gains/losses on available-for-sale financial assets
Gains/losses on cash flow hedges-1,7610

Gains/losses on currency translation-7,17753,095

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

2,777-2,138

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

582

-25

Other comprehensive income-46,151-41,042

Total comprehensive income-93,707-172,464· Total comprehensive income attributable to shareholders of the parent company-99,695-185,860· Total comprehensive income attributable to holders of non-controlling interests

5,988

13,396-93,707-172,464

40Group interim financial statements

Voith Interim Report 2016

Consolidated balance sheet
as at March 31, 2016in € thousands

2016-03-31

2015-09-30

A.

Non-current assets

I.

Intangible assets

452,261

458,974

II.

Property, plant and equipment

1,037,047

1,058,902

III.

Investments accounted for using the equity method

614,826

617,882

IV.

Securities

75,029111,206

V.

Other financial assets

37,82536,045VI.

Other financial receivables

58,14452,735

VII.

Other assets

19,28021,524

VIII. Deferred tax assets

224,814

180,803

Total non-current assets

2,519,226

2,538,071

B.

Current assets

I.

Inventories

632,755

610,501

II.

Trade receivables

656,071

664,858

III.

Receivables from customer-specific contracts

328,048276,773

IV.

Securities

51,29362,187

V.

Current income tax assets

60,08963,949VI.

Other financial receivables

108,174

130,294

VII.

Other assets

VIII. Cash and cash equivalents

IX.

Assets held for sale

119,019

86,478445,888434,9532,401,337

2,329,993

540,354582,961

Total current assets

2,941,691

2,912,954

Total assets

5,460,917

5,451,025

Voith Interim Report 2016in € thousands

A.

EquityI.

Issued capital

41

Group interim financial statements

2016-03-31

2015-09-30

120,000

120,000

II.

Revenue reserves

511,095

624,938

III.

Other reserves-20,534-15,565

IV.

Profit participation rights

6,600

6,600

Equity attributable to shareholders of the parent company

617,161

735,973

V.

Profit participation rights

96,80096,800VI.

Other interests

40,874

41,470Equity attributable to holders of non-controlling interests

137,674

138,270

Total equity

754,835

874,243

B.

Non-current liabilities

I.

Provisions for pensions and similar obligations

777,882

722,673

II.

Other provisions

260,601

234,774

III.

Income tax liabilities

IV.

Bonds, bank loans and other interest-bearing liabilities

V.

945

325

1,147,312

841,642

Other financial liabilities

28,25748,454VI.

Other liabilities

30,60332,282

VII.

Deferred tax liabilities

72,88650,851

Total non-current liabilities

2,318,486

1,931,001

C.

Current liabilities

I.

Provisions for pensions and similar obligations

28,05528,604II.

Other provisions

279,872

307,065

III.

Income tax liabilities

60,79074,229IV.

Bonds, bank loans and other interest-bearing liabilities

188,505

377,985

V.

Trade payables

392,768

397,928

VI.

Liabilities from customer-specific contracts

55,887

46,128VII.

Other financial liabilities

218,236

282,979

VIII. Other liabilities

IX.

Liabilities directly associated with the assets classified as held for sale902,756

850,410

2,126,869

2,365,328

260,727

280,453

Total current liabilities

2,387,596

2,645,781

Total equity and liabilities

5,460,917

5,451,025

42Group interim financial statements

Voith Interim Report 2016

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

2015-10-01

Issued capital

Revenue
reserves

Available-for-salefinancial assets

Cash flow
hedgesCurrencytranslation

120,000

624,938

3,992-1,067-9,410

Net result-52,972

Other comprehensive income-41,7542-1,243-6,414-94,726

2-1,243-6,414

3,994-2,310-15,824

Total comprehensive income

0

Allocation of reserves toprofit participation rights-5,590Share of income attributable toprofit participation rights
Dividends-15,000

Adjustments to the group of consolidated
companies affecting non-controlling interests-1,968Non-controlling interests – put options

1,822

Other adjustments

1,619

2016-03-31

120,000

511,095

Equity attributable to shareholdersof the parent companyin € thousands

2014-10-01

Issued capital

Revenue
reserves

Available-for-salefinancial assets

Cash flow
hedgesCurrencytranslation

120,000

737,573

4,491-1,063

10,808

Net result-138,238

Other comprehensive income-88,707149

043,260-226,945149

043,2604,640-1,06354,068

Total comprehensive income

0

Allocation of reserves toprofit participation rights-5,590Share of income attributable toprofit participation rights
Dividends-15,000

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

Other adjustments
2015-03-31

1,105
120,000

489,956

Voith Interim Report 201643

Group interim financial statements

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

Profitparticipationrights

Total

ProfitparticipationrightsOtherinterests

Total

Total
equity-9,0806,600

735,973

96,80041,470138,270874,243-52,972

5,416

5,416

-47,5562,686

0-46,723572

572-46,1512,686

0-99,695

0

5,988

5,988

-93,707363-5,227

5,227

5,227

0

-363

-363

-5,227-5,227-5,590-6,3946,600-15,000-2,297-2,297-17,297-1,968-1,099-1,099-3,067

1,822-4,440-4,440-2,618

1,619

1,252

1,252

2,871

40,874

137,674

754,835

617,161

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

Profitparticipationrights

Total

ProfitparticipationrightsOtherinterests

Total

Total
equity-7,3066,600

871,103

96,80063,400160,200

1,031,303-2,324

0

6,816

6,816

-131,422-47,622

0

6,580

6,580

-41,042-2,3240-185,860

013,396

13,396-172,464

363-5,227

5,227

5,227

0

-363

-5,227-138,238-363-5,227-5,590-15,000-3,222-3,222-18,2220-1,080-1,080-1,080-1,187-3,183-3,183-4,3701,105-9,6306,600

664,571

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

67,150163,950

828,521

44

Group interim financial statements

Voith Interim Report 2016

Consolidated cash flow statement
2015-10-01 to
2016-03-31

2014-10-01 to
2015-03-31

Result before taxes from continuing and discontinued operations-21,514-87,844

Depreciation and amortization

144,952

113,100

Interest expenses/income

36,90933,336

Other non-cash items-6,21222,502

Gains/losses from the disposal of property, plant, equipment and intangible assets-14,446

1,102

0

169

in € thousands

Gains/losses from the disposal of consolidated companies
Gains/losses from investments-8,169-146

Changes in other provisions and accruals-76,664

57,505

Change in net working capital-70,114-222,437

Interest paid

-7,340-7,340Interest received

3,549

3,549

Dividends received

9,071

1,353

Tax paid-38,252-57,727

Cash flow from operating activities-48,230-142,878

Investments in property, plant, equipment and intangible assets-66,851-51,814

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

29,3896,123

Investments in financial assets-2,246-529,581

Subsequent purchase payments for earlier acquisitions

0

169

Receipts and payments in connection with the disposal of consolidated subsidiaries

0-3,868Proceeds from the disposal of financial assets

273

535

Changes in investments in securities

9,749

21,642

Cash flow from investing activities-29,686-556,794

Dividends paid

-22,887-23,003

Acquisition of non-controlling interests-3,0670

New bonds, bank loans and overdrafts

351,214

256,509

Repayment of bonds, bank loans and overdrafts-232,507-28,119

Changes in other interest-bearing financial receivables and liabilities-3,687-16,851

Cash flow from financing activities

89,066

188,536

Total cash flow

11,150-511,136-215

19,1260-2,381

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

434,953

800,823

Cash and cash equivalents at the end of the period

445,888306,432

Voith Interim Report 2016

Group interim financial statements

45

Basis of the interim consolidated
financial statements
and accounting policies
Voith GmbH (Voith) is a company founded in Germany with international activities. The Company’s registered offices are located in Heidenheim an der Brenz
at St. Pöltener Strasse 43. Voith is entered in the commercial register (under thenumber HRB 725621) at the Registration Court in Ulm, Germany. The interim consolidated financial statements prepared by Voith are published in the Bundesanzeiger [German Federal Gazette] in German. As a domestic issuer of debt securities pursuant to Sec. 2 (1) Sentence 1 German Securities Trading Act (WpHG),
Voith prepares this half-year financial report in accordance with the provisions ofSec. 37w WpHG and the requirements of IAS 34 “Interim Financial Reporting.”
The interim consolidated financial statements for the first half of the 2015/16 fiscal
year were prepared in accordance with the International Financial Reporting Standards (IFRS) for interim financial reporting as endorsed by the European Union. In
comparison to the full annual report as at September 30, 2015, the interim consolidated financial statements are condensed in scope.
The unaudited interim consolidated financial statements do not include all of theinformation and disclosures required for consolidated financial statements andmust therefore be read in conjunction with the consolidated financial statements
for the year ended September 30, 2015. The interim financial statements are presented in euros and the figures have been rounded using standard commercial
principles.
Within the framework of preparing the interim consolidated financial statements
pursuant to IFRS, it is necessary to make certain estimates, judgments andassumptions that could have an impact on the amount and presentation of assets
and liabilities recognized in the reporting, as well as on the disclosures on contingent assets and contingent liabilities on the reporting date and on the income andexpenses reported for the period. Actual amounts may differ from the estimates.
Changes in estimates, judgments and assumptions could have a material impact
on the interim financial reporting.
The accounting and valuation policies applied by the Group in these interim consolidated financial statements generally correspond to the accounting and valuation policies applied in the IFRS consolidated financial statements for the previous
fiscal year. Income taxes are recorded on the basis of an estimate of the weighted
average annual income tax rate expected for the full year, taking account of thetax impact of any circumstances that can only be allocated to the respective
period under review.

46

Group interim financial statements

Voith Interim Report 2016

Amendments to IAS and IFRS standards resulting from the Improvement Cycles(2010–2012 and 2011–2013) were implemented for the first time in the first halfof the 2015/16 fiscal year. None of the IAS and IFRS standards applied for the
first time had a significant effect on the net assets, financial position and resultsof operations of the Group.

Basis of consolidation

The following significant companies are included in the consolidated financial
statements:

2016-03-31

2015-09-30· Germany

43

43· Other countries

127

128

Total number of fully consolidated companies

170

171

· Germany

6

6· Other countries

1212

Total number of companies accounted for using
the equity method18

18Voith GmbH and its fully consolidated subsidiaries:

Companies accounted for using the equity method

There were no new companies fully consolidated for the first time in this reporting period.

47

Voith Interim Report 2016

Group interim financial statements

	Business combinations

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

	Acquisition of further
interests in entities overwhich the Group alreadyhas control

The remaining 20 % interest in Voith Turbo Co., Ltd., Seoul/Republic of Korea was
acquired in the first half of the current 2015/16 fiscal year. The acquisition priceamounted to € 3,067 thousand.

	Disposals of shareholdings
in 2014/15

The Voith Turbo segment has disposed of its shareholding in a subsidiary in thefirst half of the 2014/15 fiscal year. The sale was part of the planned process of
streamlining its portfolio. In total, the sale resulted in the disposal of non-­current
assets of €1,075 thousand, current assets of € 3,819 thousand, non-­current­liabilities of € 245 thousand and current liabilities of € 2,444 thousand. The saleprice totaled € 955 thousand. A loss of €169 thousand resulted from the sale. The
loss is reported within operating results.

	Disposals and discontinued
operations in the 2015/16
fiscal year

There were no disposals of subsidiary entities in the first half of the current 2015/16
fiscal year.
An announcement was made in February 2015 of the Voith Group’s intention toconcentrate its focus on its technology and engineering competence and to dispose of the ­Voith ­Industrial ­Services segment. Accordingly, as in the fiscal year
2014/15 ­Voith I­ndustrial ­Services is presented as held for sale and accounted for
as a discontinued operation.

48

Group interim financial statements

Voith Interim Report 2016

The net result from discontinued operations included in the statement of income
includes the following:in € thousands

2015/16

2014/15

Sales

482,248

560,053

Changes in inventories and other own work capitalized

7,138-3,625

Other operating income

14,107

12,256-498,045-554,609

5,448

14,075

Non-recurring result-44,791-21,933

Operational result-39,343-7,858Operating expenses
Operational result before non-recurring items

Financial result
Result before taxes
Income taxes
Net result

119

2,147

-39,224-5,711753-2,442-38,471-8,153The non-recurring result presented includes an impairment charge of € 35,200 thousand resulting from reducing the carrying value to fair value less costs of disposal.
Cash flow from discontinued operations:in € thousands

2015/16

2014/15

Cash flow from operating activities-22,412-10,569

Cash flow from investing activities-7,137-15,388

Voith Interim Report 2016

Group interim financial statements

49

Notes on segment reporting
The structure of the segments and the methods used to calculate the segment
information have remained unchanged since September 30, 2015.
When calculating the profit from operations, the following profit/loss components
were taken into consideration. These components remain unchanged comparedto the last consolidated financial statements:

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

Other adjustments
Other adjustments contain effects that, based on their operating character, arenormally shown as other operating income and expenses in the consolidated
statement of income. In determining the profit from operations, these adjustments
are eliminated as non-recurring items so as to facilitate a better assessment of
the operating activities by segment.
The capital employed as at the March 31, 2016 reporting date is an average value
derived from the values as at the end of the period under review and as at theend of the previous period. The capital employed on the reporting date of September 30, 2015 is an average value derived from the values as at the reporting date of September 30, 2015, the reporting date for the previous half-yearlyfinancial statements, and as at the end of the previous period under review as at
September 30, 2014.

50

Group interim financial statements

Voith Interim Report 2016

Segment information bybusiness segment
Voith ­H ydroin € millions

Voith ­Paper

Voith ­Turbo

2015 /16

2014 /15

2015 /16

2014 /15

2015 /16

2014 /15

652

656

689

776

691

669

2

2

10

12

3

3

Total segment sales

654

658

699

788

694

672

Profit from operations

48

43

19

17

43

44

Average capital employed

489

478

758

843

729

738

5,074

5,188

7,025

7,739

6,126

6,254

External sales
Sales with other segments

Employees

2)

1)
2)

Subtotal for Voith Hydro, Voith Paper and Voith Turbo.
Statistical number of persons employed at the balance sheet date compared to September 30, 2015.

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

2015/16

2014/15

Profit from operations

97

120

Operating interest income

-14

-17

Other adjustments00

Non-recurring result

-5

-143

5

-1

Interest result

-37

-33

Other financial result

-28

-8

Result before taxes from continuing operations

18

-82

Income from companies accounted for using the equity method

Voith Interim Report 2016

51

Group interim financial statements

Reconciliation

Total core business 1)

Total

2015 /16

2014 /15

2015 /16

2014 /15

2015 /16

2014 /15

2,032

2,101

6

7

2,038

2,108

15

17

-15

-17

0

0

2,047

2,118

-9

-10

2,038

2,108

110

104

-13

16

97

120

1,976

2,059

174

155

2,150

2,214

18,225

19,181

1,517

1,042

19,742

20,223

52

Group interim financial statements

Voith Interim Report 2016

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

	Selected notes to thestatement of income

Other operating incomein € thousands

2015/16

2014/15

Income from the utilization of contract-specific provisions

54,99949,314

Income from the reversal of provisions and accruals

24,93521,716

Foreign exchange gains

38,112

99,404

Recovered bad debts

4,729

2,153

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

4,807

768

Rental and lease income

2,297

1,998

Income from insurance indemnification payments

15,923

4,001

Other income

25,36924,521

171,171

203,875in € thousands

2015/16

2014/15

Increase in provisions and accruals

111,90778,283

Other selling expenses

141,031

151,558

Other administrative expenses

121,680

116,401

Foreign exchange losses

52,79871,139Rent for buildings and machinery

23,22825,088Bad debt allowances

11,785

5,267

666

594

36,86763,456499,962

511,786

Other operating expenses

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

Voith Interim Report 2016

53

Group interim financial statements

Non-recurring result
Voith generally defines expenses and income arising from major restructuring activities, measures addressing personnel capacity, and the discontinuation operations
as exceptional items and presents them under the non-recurring result.
The non-recurring result in the reporting period totaled € -5 million (previous year:€ -143 million).
Non-recurring items in the same period in the previous year primarily included
expenses in connection with a package of measures taken by Voith Paper (concentrating its activities to just a few locations and cuts of 900 jobs worldwide) as
well as in connection with excellence initiatives forming part of the Group-wide
success program Voith 150+ (restructuring of administrative activities worldwide,
combining standardized administrative functions across divisions and cuts of 720jobs). Further expenses were also incurred in connection with the planned sale ofshareholdings and due to adjustments to the purchase prices of sales of shareholdings already completed. Individual contributions to non-recurring items weremade by Voith Hydro (€ -15 million), by Voith Paper (€ -109 million), by Voith Turbo(€ -14 million) and by activities with holding functions (€ -5 million).
In the first half of the fiscal year 2015/16 the non-recurring result includes individual
items of expenses for which it was not permitted to record a provision in the previous year, gains on the sale of real estate property, and the release of provisions
from both packages of measures implemented in the previous year. In addition,
non-recurring items include personnel-related expenses from measures taken atVoith Turbo in the fiscal year 2015/16 to counter the weakness in the oil and gas,
mining and steel production sectors. An expense of €16 million was also recordedin the current period to correct an accounting timing recognition error made at an
Asian subsidiary of Voith Paper. Individual contributions to non-recurring items in
the reporting period were made by Voith Hydro (€ +5 million), Voith Paper (€ -8 million), Voith Turbo (€ -5 million), and by activities with holding functions (€ +3 million).
The non-recurring result includes the following:in € thousands

2015/16

2014/15

Personnel expenses-16,222-134,395-34-7,378Other expenses

Depreciation and amortization of non-current assets-17,323-2,117

Income from the reversal of provisions

18,085

663

Income from the disposal of property, plant and equipment

10,245

0

396

273

-4,853-142,954

Other income

54Group interim financial statements

Voith Interim Report 2016

Other financial resultin € thousands

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

2015/16

2014/15

8,184

144

-36,205-8,46396-131-27,925-8,450

Income taxes
Income taxes totaled € -27 million (previous year: € -41 million) and include income
taxes relating to other periods of €1 million (previous year: an expense of € -18 million). There were no tax effects relating to significant amounts of expenses included
in non-recurring items in the previous year.

Voith Interim Report 2016

Group interim financial statements

	Selected notes to thebalance sheet

Intangible assets

55

In the first half of the 2015/16 fiscal year an amount of € 3 million (previous year:€ 4 million) was invested in intangible assets. Amortization amounted to € 9 million(previous year: €10 million) and impairment losses to € 0 (previous year: € 5 million). The figures for this and the previous year no longer include investments andamortization by ­Voith I­ndustrial ­Services.

Property, plant and equipment
Investments in property, plant and equipment amounted to € 56 million in the firstsix months of the 2015/16 fiscal year (previous year: € 35 million). Depreciation
amounted to € 57 million (previous year: € 62 million) and impairment losses to€ 0 (previous year: € 2 million). The figures for this and the previous year no longer
include investments and amortization by V
­ oith I­ndustrial ­Services.

Inventories
Inventories consist of the following items:in € thousands

2015/16

2014/15

Raw materials, consumables and supplies

208,139

210,797

Work in progress

202,646

181,006

Finished goods and merchandise

140,352

141,561

Prepayments

81,618

77,137

632,755

610,501

56

Group interim financial statements

Voith Interim Report 2016

Assets held for sale and liabilities directly associatedwith assets classified as held for sale
At March 31, 2016 this position primarily includes the assets and liabilities of ­Voith­Industrial ­Services, a discontinued operation. For further details see the section “Disposals and discontinued operations in the 2015/16 fiscal year.”
The carrying amounts of the major groups of V
­ oith I­ndustrial ­Services assets andliabilities held for sale are as follows:

Assetsin € thousands

2016-03-31

2015-09-30

162,044

199,656

A. Non-current assets
Goodwill
Other intangible assets

7,630

8,024

Property, plant and equipment

63,76963,927

Investments accounted for using the equity method

19,294

18,075

Securities

5,458

6,467

Other financial assets

599

599

Other financial receivables

596

22,798Other assets

607

315

Deferred tax assets

9,751

9,477

Total non-current assets

269,748

329,338

Inventories

58,68335,004

Trade receivables

158,105

177,928

Receivables from customer-specific contracts

19,084

17,318B. Current assets

Securities
Current income tax assets

0

17

6,332

4,853

Other financial receivables

9,020

10,698Other assets

16,4207,805

Total current assets

267,644

253,623

Assets held for sale537,392

582,961

Voith Interim Report 2016

57

Group interim financial statements

Liabilitiesin € thousands

2016-03-31

2015-09-30

Provisions for pensions and similar obligations

22,19820,755

Other provisions

7,208

30,4090335

A. Non-current liabilities

Income tax liabilities
Bonds, bank loans and other interest-bearing liabilities
Other financial liabilities

0

129

3,191

3,996

Deferred tax liabilities

15,361

15,116

Total non-current liabilities

47,95870,740B. Current liabilities
Provisions for pensions and similar obligations

1,261

1,316

Other provisions

38,921

38,945

Income tax liabilities

5,811

3,593

33

178

57,16367,341

731

770

Bonds, bank loans and other interest-bearing liabilities
Trade payables
Liabilities from customer-specific contracts
Other financial liabilities

51,44961,481Other liabilities

57,40036,089Total current liabilities

212,769

209,713

Liabilities directly associated with assets classified
as held for sale

260,727

280,453

58

Group interim financial statements

Voith Interim Report 2016

EquityA dividend of € 0.13 per share was distributed from the retained earnings of Voith
GmbH. This equates to €15,000 thousand (previous year: €15,000 thousand). Distributions totaling € 5,590 thousand were made to holders of profit participation
capital (previous year as at March 31, 2015: € 5,590 thousand). Dividends totaling€ 2,297 thousand were distributed to other holders of non-controlling interests(previous year as at March 31, 2015: € 3,222 thousand).

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

USA

2016-03-31

2015-09-30

2016-03-31

2015-09-30

Discount rate

2.02

2.42

3.60

4.05

Pension increases

1.50

1.50

0

0

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

Current

Non-current

2016-03-31

Current

Non-current

2015-09-30

Bonds

76,179654,621730,800

79,367654,523

733,890

Bank loans

69,724415,283

485,007258,340

114,107372,447

Financial liabilities from leases

194

904

1,098

306

997

1,303

Notes payable

678

0

678

274

0

274

3,079

1,906

4,985

0

0

0

Derivatives used to hedge financialtransactions
Other financial liabilities

38,651

74,598113,249

39,69872,015

111,713

188,505

1,147,312

1,335,817

377,985

841,642

1,219,627

Voith GmbH successfully issued a loan note of € 300 million on the market inNovember 2015. The loan is for general business purposes, in particular for the
purposes of refinancing financial liabilities.
Under this loan issue, banks and institutional investors subscribed for loan notes
in tranches with maturities of five, seven and ten years, carrying both fixed andfloating interest rates.

Voith Interim Report 2016

59

Group interim financial statements

Other notes	Contingent liabilities,
contingent assets andother financial obligations

There are risks in connection with the recognition of transfer prices in foreign
jurisdictions amounting to € 4 million (previous year: € 4 million) and amounting to€ 40 million in connection with legal disputes (previous year: € 33 million). A successful outcome is currently expected in both cases.
Neither Voith GmbH nor any of its Group companies are involved in any current
or foreseeable taxation, legal or arbitration proceedings that could materially influence their economic situation.
Further changes may be made to the tax positions of German companies owing
to the ongoing tax field audit.
Guarantee obligations€ 25,258 thousand).

amountto€ 28,918

thousand(previous

year:

Moreover, other financial obligations are as follows:in € thousands

2016-03-31

2015-09-30

Purchase commitments for capital expenditures

26,001

12,696

Obligations arising from non-cancelable operating leases

126,630

144,326

Other

2,093

1,531

154,724

158,553

60

Group interim financial statements

Voith Interim Report 2016

	Additional information on
financial instruments
Amount recognized in the balance sheet inaccordance with IAS 39
IAS 39measure­Carrying
ment
amountcategory 2016-03-31

in € thousands

Amortized
cost

Cost

Fair value
through
equityFair value
through
profit orloss

Amount­recognizedin thebalancesheet inFair value
accordancewith IAS 17 2016-03-31

Assets:Cash and cash equivalents

LaR

445,888445,888445,888

Trade receivables

LaR

656,071

656,071

656,071

Receivables from construction contracts

LaR

328,048

328,048

328,048

49,41049,41049,410

6,048

Other financial assets and securities

164,147· F inancial investments

LaR· Loans

LaR

6,048

· I nvestments

AfS

31,777· S ecurities

AfS

Derivative financial instruments

6,048
31,77776,912

1)

76,912

76,91239,366· Forward exchange contracts

FAHfT

6,382

6,382

6,382

· Interest rate hedges

FAHfT

118

118

118

· Forward exchange contracts(fair value hedges)

n. a.

24,501

24,501

24,501· Interest rate hedges (fair value hedges)

n. a.

8,365

8,365

8,365

Other receivables

121,660· F inancial receivables

LaR

14,108

14,108

14,108· S undry financial assets

LaR

107,552

107,552

107,552

Trade payables

FLAC

392,768

392,768

392,768

Bonds/bank loans/notes

FLAC

1,216,485

1,216,485

1,244,922

Liabilities:

Financial liabilities from leases

n. a.

Derivative financial instruments

1,098

1,098

38,530· Forward exchange contracts

FLHfT

6,185

6,185

6,185

· Interest rate hedges

FLHfT

3,079

3,079

3,079

n. a.

27,36027,36027,360· Forward exchange contracts(fair value hedges)· Interest rate hedges (cash flow hedges)

n. a.

1,906

Other financial liabilities

FLAC

113,249

107,168

Sundry financial liabilities

FLAC

212,948

212,948

LaR

1,607,125

1,607,125

1,906

1,906

6,081

413,252
212,948

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

AfS

108,689

Financial assets held for trading (FAHfT)

FAHfT

6,500

Financial liabilities measured atamortized cost (FLAC)

FLAC

1,935,450

Financial liabilities held for trading (FLHfT)

FLHfT

9,264

1)

31,77776,9126,500

1,929,369

6,081
9,264

 he available-for-sale financial instruments include investments whose fair values
T
were not reliably measurable and for which a sale is not currently planned.

Voith Interim Report 2016

61

Group interim financial statements

Amount recognized in the balance sheet inaccordance with IAS 39
IAS 39measure­Carrying
ment
amountcategory 2015-09-30

in € thousands

Amortized
cost

Cost

Fair value
through
equityFair value
through
profit orloss

Amount­recognizedin thebalancesheet inFair value
accordancewith IAS 17 2015-09-30

Assets:Cash and cash equivalents

LaR

434,953434,953434,953

Trade receivables

LaR

664,858

664,858

664,858

Receivables from construction contracts

LaR

276,773276,773276,773

60,00460,00460,004

5,861

Other financial assets and securities

209,438· F inancial investments

LaR· Loans

LaR

5,861

· I nvestments

AfS

30,184· S ecurities

AfS

113,389

Derivative financial instruments

5,861
30,184

1)

113,389

113,389

31,022· Forward exchange contracts

FAHfT

7,245

7,245

7,245

· Interest rate hedges

FAHfT

6,919

6,919

6,919

· Forward exchange contracts(fair value hedges)

n. a.

6,020

6,020

6,020

· Interest rate hedges(fair value hedges)

n. a.

10,838

10,838

10,838Other receivables

144,458· F inancial receivables

LaR

11,476

11,476

11,476· S undry financial assets

LaR

132,982

132,982

132,982

Trade payables

FLAC

397,928

397,928

397,928

Bonds/bank loans/notes

FLAC

1,106,611

1,106,611

n. a.

1,303

Liabilities:

Financial liabilities from leases
Derivative financial instruments

1,149,358
1,303

107,147· Forward exchange contracts

FLHfT

6,722

6,722

6,722

· Forward exchange contracts(fair value hedges)

n. a.

100,425

100,425

100,425

Other financial liabilities

FLAC

111,713102,315

Sundry financial liabilities

FLAC

224,286

224,286

Loans and receivables (LaR)

LaR

1,586,907

1,586,907

Available for sale (AfS)

AfS

143,573

Financial assets held for trading(FAHfT)

FAHfT

14,164

Financial liabilities measured atamortized cost (FLAC)

FLAC

1,840,538

Financial liabilities held for trading(FLHfT)

FLHfT

6,722

9,398

417,059
224,286

IAS 39 measurement categories:

1)

30,184

113,389
14,164

1,831,140

9,398
6,722

 he available-for-sale financial instruments include investments whose fair values
T
were not reliably measurable.

62Group interim financial statements

Voith Interim Report 2016

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

2016-03-31

Level 1

Level 2

Level 3

Securities

76,912Derivative financial instruments

39,36676,91200039,366

038,530038,530

0

6,081

0

0

6,081

2015-09-30

Level 1

Level 2

Level 3

Securities

113,389

113,38900Derivative financial instruments

31,022031,0220

Derivative financial instruments

107,147

0

107,1470Liabilities arising from the acquisition ofshareholdings in other companies

9,398

0

0

9,398

AssetsLiabilities
Derivative financial instruments
Liabilities arising from the acquisition ofshareholdings in other companiesin € thousands

AssetsLiabilities

The three-level fair value hierarchy divides the input factors used in the measurement techniques to measure the fair value into three levels, as follows:
Level 1:
Input factors quoted in active markets accessible to the Company for identicalassets or liabilities on the measurement date.
Level 2:Other inputs than those at level 1 for which observable market data that relates
directly or indirectly to the financial assets or liabilities is available.
Level 3:
Input factors for which there is no observable market data.
No reclassifications were made between the fair value hierarchies in the first halfof the 2015/16 fiscal year.
The fair values of derivative financial instruments allocated to level 2 of the fair value
hierarchy are taken from the daily observable market prices and interest curves.
In addition, fair value measurement includes the risk of both counterparty default
and default on the part of the holder. Input factors that take account of counterparty credit risk can be obtained from observable credit default swaps (CDS) fromthe institutes participating in the respective transaction. At Voith the market CDS
rate was used to calculate the Group’s own credit risk.

Voith Interim Report 2016

Group interim financial statements

63

The fair values of liabilities from acquisitions of shareholdings in other companies allocated to level 3 of the fair value hierarchy are based on internal planning
data. These are measured using the discounted cash flow projections taken fromthe latest business planning prepared by management. The planning assumptions
are adjusted to reflect the current information available.
The fair values of financial assets and financial liabilities measured at cost or amortized cost, which need to be measured to meet disclosure requirements, are calculated as follows:
Cash and cash equivalents, trade receivables and other financial receivables are
subject to floating interest and fall due within one year. For this reason, their carrying amounts approximate their fair values on the reporting date.
Because trade payables and other financial liabilities generally have short residual
terms, the carrying amounts approximate the fair values.
The market values of unlisted bonds, bank loans and other financial liabilities arecalculated as the present value of the payments associated with the liabilities,
based on the applicable term structure of interest rates and Voith GmbH’s credit
spread curve determined for different currencies.

Offsetting of financial instruments
Derivative financial instruments of € 26,060 thousand are subject to potential offsetting under master netting agreements (previous year: € 20,450 thousand). The
agreements do not meet the criteria for net presentation in the balance sheet
due to the fact that the Group does not have a current legal right of setoff, as
the right is conditional on the occurrence of future events.

64Group interim financial statements	Transactions with relatedparties and individuals

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

Voith Interim Report 20162016-03-31

2015-09-30

Liabilities to family shareholders

20,266

19,476

Receivables from associates, incl. advances paid

4,285

2,815

957

828

Liabilities to associates
Receivables from other investments, including advances paid

9,393

13,085

Impairment of receivables from other investments-1,428-81

Liabilities to other investments, including advances received

10,304

10,580Receivables from joint ventures

170

252

Liabilities to joint ventures

556

1,355

Receivables from the ultimate parent company

189

196

5,958

5,770

2015/16

2014/15Services purchased from associates

612

1,334

Services rendered to associates

61

321

Liabilities to the ultimate parent companyin € thousands

Services purchased from other investments

3,293

3,240

Services rendered to other investments

4,967

7,093

Services purchased from joint ventures

1,542

1,871

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

206

283

5,855

5,269

391

354

Guarantees have been issued in favor of one associate, one joint venture and otherinvestments amounting to €11,836 thousand (previous year: €11,836 thousand),€1,858 thousand (previous year: €1,462 thousand) and € 826 thousand (previous
year: € 543 thousand), respectively.
The Group has obligations under outstanding purchase orders with the ultimate
parent, amounting to € 2,525 thousand (previous year: € 4,242 thousand), and toassociates, amounting to € 4,649 thousand (previous year: € 0).
No capital increases were carried out in favor of joint ventures and associates in
the first half of the 2015/16 fiscal year (previous year: € 2,567 thousand).

Voith Interim Report 2016

Subsequent events

Group interim financial statements

65

In May 2016 we entered into a sale and purchase agreement with Triton, an investment company, under which Triton will acquire a majority shareholding in theGroup’s ­Voith I­ndustrial S­ ervices segment. The acquirer will continue the businessusing a new brand identity and name. Voith retains a 20 % shareholding and will
provide support during the transition period. The completion of the sale and purchase agreement is subject to the approval of the responsible antitrust authorities.
In 2015 we announced that the Voith Group will, in view of the digital age, focus
its portfolio on its technology and engineering competence. As a result, we sought
an acquirer for the technical industrial service activities, which are heavily dependent on customer process know-how (e.g. in the automobile sector) and whichmake up the ­Voith I­ndustrial ­Services segment.
No further significant developments have occurred since the end of the first halfof the 2015/16 fiscal year.

Heidenheim an der Brenz, May 13, 2016

Voith GmbH
The Board of Management
Dr. Hubert Lienhard
Dr. Hermann Jung
Bertram Staudenmaier
Dr. Roland Münch
Carsten J. Reinhardt (until October 19, 2015)
Dr. Uwe Knotzer (since October 19, 2015)
Uwe Wehnhardt (since January 1, 2016)

66

Group interim financial statements

Voith Interim Report 2016

Responsibility statement
To the best of our knowledge, and in accordance with the applicable reporting
principles for the interim financial reporting, the interim consolidated financial statements give a true and fair view of the assets, liabilities, financial position and profit
or loss of the Group in accordance with German accepted accounting principles,
and the Group interim management report includes a fair review of the development and performance of the business and the position of the Group together witha description of the principal opportunities and risks associated with the expecteddevelopment of the Group in the remaining fiscal year.

Heidenheim an der Brenz, May 13, 2016
Voith GmbH
The Board of Management
Dr. Hubert Lienhard
Dr. Hermann Jung
Bertram Staudenmaier
Dr. Roland Münch
Carsten J. Reinhardt (until October 19, 2015)
Dr. Uwe Knotzer (since October 19, 2015)
Uwe Wehnhardt (since January 1, 2016)

Imprint
Publisher:
Voith GmbH
St. Pöltener Strasse 43
89522 Heidenheim, Germany
Phone: +49 7321 37-0
Fax: +49 7321 37-7000
E-mail: info@voith.com
www.voith.com

Respecta Silk 60, used for this Voith
Interim Report 2015, is a recycled
paper manufactured in accordancewith the international FSC® standard. The cellulose is partly manufactured from certified, i.e. responsibly
managed, forests. Careful forestry
practice ensures, among other things,
that biological diversity and ecological processes are not disturbed whenwood products are removed from theforest. The paper was manufactured
with Voith equipment.
Printed in Germany© Voith GmbH, 2016-05

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

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