ANNUAL REPORT 2018

CONNECT.
DIVERSITY
EXCELLENCEFORBO – IN EVERYDAY LIFE

DIVERSITY.

Every floor covering fulfils specific functions and is subject
to various types of load. This is why our broad product range
offers the right floor coverings to meet the widest possible
range of requirements and the strictest demands – even inhighly frequented areas. In large-scale projects such as airports,
for example, we combine different materials and floor coverings to create the perfect ambience in every area with the rightflooring.

EXCELLENCE.

Due to their individual surface textures, our belts fulfill a wide
range of different functions in the food processing industry,
thus guaranteeing trouble-free production processes from A to
Z: conveying, heating, cooling, drying, cutting, packing andlots more. The utmost priority and the key to success is compliance with worldwide hygiene standards.

FORBO STANDS FOR 90
YEARS OF INNOVATION
AND DIVERSIFICATION.
STIN OUR 91 YEAR WE STILLFEEL A 100 PERCENTCOMMITMENT TO VALUESSUCH AS RELIABILITY,QUALITY, INNOVATIONAND CUSTOMER SATISFACTION.
In 1928, three leading linoleum manufacturers from
Germany, Sweden and Switzerland founded the‘Continentale Linoleum Union’, which later developed
to become the Forbo Group. A lot of things havechanged since then – technologically and socially.
And things are going to continue changing. We havealways kept our eye on the future in order to beequipped for any new challenges.

1928
The world was recovering fromthe First World War. During the 1920s,
industrial production still largely
involved manual work on heavy
mechanical machines with massive
flywheels. The energy required
was generated locally in coal-fired
furnaces. Nonetheless, with its focus
on linoleum, Forbo was alreadyat that time a very environmentallyfriendly company. Back then, the‘Continentale Linoleum Union’ hadthree production sites in Europe.

2018With its wide product portfolio
and its globally oriented, specialized
and modern production locations,
Forbo can today respond even morediversely to the needs of the cus­
tomer. All of its locations use highly
automated production processes
that fulfill strict requirements in termsof quality, work safety, energy
efficiency, innovation and sustainability. In view of Industry 4.0 as wellas advancing digitalization, we arecertain that change will remain ourconstant companion.

8This E. Schneider

Stephan Bauer

Executive Chairman

CEO‘We have maintained our strong organic sales growth bylaunching innovative collections in all product groups
amid very mixed market conditions in Flooring Systems
and by achieving considerable success among global
key accounts in the private sector. At Movement Systems,
we performed well, offering a wide range of customized
solutions based on our strong application competence
and technical know-how in thriving but highly competitive customer segments such as logistics and food processing.
We increased operating profit despite higher raw-material
costs and the ongoing high level of investments.’

FORBO ANNUAL REPORT 2018 – LETTER TO SHAREHOLDERS9TO OURSHAREHOLDERS
Dear Madam, dear Sir,
In 2018 – the 90th year of Forbo’s history – the Group maintained its strong organic sales growth in a challenging
and mixed market environment and again increased operating profit despite a steep rise in raw-material prices
and a high level of investment in the company’s further growth.
In the Movement Systems division, the various operational areas of our largest and most modern production
site in Pinghu/China, got off to a successful start and have been up and running since autumn 2018. The
qualification and certification of a wide range of product types on the large and complex coating machine
should be completed in the coming months, followed by the production of large batches. This will free up­additional capacity mainly for the Asia/Pacific area in order to cope with the planned growth.
We have systematically implemented our strategy, and both divisions have expanded their presence in targeted
growth markets and distribution structures. This has enabled us to gain market share in key segments despitea challenging environment. At Flooring Systems, we have launched new collections but also strengthened ouractivities in the private sector; at Movement Systems, we have developed customized product applications
with added value for clients in fast-growing segments. Efficiency gains in a number of operational areas plus
some price adjustments enabled us to largely offset the steep rise in raw-material prices, higher depreciations,and increased personnel costs.
When the results in local currencies were translated into the corporate currency, the currency effect was slightly
positive on balance compared with the previous year.
The one-off costs arising the previous year from the antitrust proceedings at Flooring Systems in France havebeen neutralized in this section of the report in the figures from the previous year to ensure better comparability(‘previous year before one-off costs‘).

Continued strong organic sales growth
Both divisions report gratifying sales trends once again
In the year under review, Forbo generated net sales of CHF 1,327.0 million (previous year: CHF 1,246.4 million),
representing a gain of 6.5%; this is reflected in a sales increase of 5.0% in local currencies, driven by positive
currency effects. Both divisions contributed to this solid and continued strong growth in all regions.
Net sales of Flooring Systems rose by 6.6% to CHF 913.2 million (previous year: CHF 856.6 million). In local
currencies, this comes to a sales increase of 5.0%. Innovative new collections in all product groups, major
contributions from the development and expansion in growth markets, along with substantial success inglobal key account activities in the private sector again delivered solid and broad-based growth.
Movement Systems reported net sales of CHF 413.8 million (previous year: CHF 389.8 million), another encouraging increase of 6.2%, or 5.1% in local currencies. The factors driving this continued growth increase were once
again strong contributions from growth markets along with application-specific product innovations for ourcompetitive and thriving segments such as logistics and food processing.

10

FORBO ANNUAL REPORT 2018 – LETTER TO SHAREHOLDERS

Profitability remains strong
Increase in operating profit despite stronger headwind
Efficiency gains in a number of operational areas, additional sales, and some price adjustments enabled us
to largely offset steeply rising raw-material prices, higher logistics costs, higher depreciations arising from anincreased level of investment, and a rise in personnel costs.
Operating profit before depreciation and amortization (EBITDA) was up by CHF 15.8 million, or 7.9%, to
CHF 216.8 million (previous year before one-off costs: CHF 201.0 million). Group operating profit (EBIT) rose by
CHF 12.0 million, or 7.3%, to CHF 175.3 million (previous year before one-off costs: CHF 163.3 million). The
EBITDA margin grew from 16.1% to 16.3% and the EBIT margin from 13.1% to 13.2%.

Double-digit increase in Group profit
Solid profit trend
After tax-related one-off effects in the previous year and based on the Group’s solid operating income as well
as a slight increase in financial income, Group profit from continuing operations rose by 14.9%, or CHF 17.8
million, to CHF 137.6 million (previous year before one-off costs: CHF 119.8 million). The tax rate in the year
under review was 21.7%.

Balance sheet remains robustHigh net liquidity
Net liquidity at year-end stood at CHF 127.4 million (previous year: CHF 195.0 million) despite the share buyback
and the continuing high level of investment. In addition, as at December 31, 2018, Forbo held 198,282 of
its own shares valued at year-end at CHF 273.8 million (previous year: CHF 143.8 million). Of this amount, the150,000 shares repurchased to date (8.33% of the share capital) from the current 2017 – 2020 share buyback
program are earmarked for a capital reduction.
The equity ratio still remains at a high level of 60.4% (previous year: 61.9%) despite the share buyback.
Undiluted earnings per share from continuing operations rose by 18.8% to CHF 82.38 (previous year before
one-off costs: CHF 69.34); the increase was due to the Group’s higher operating results coupled with the sharebuyback effected in the course of 2018.
Broad-based and healthy foundation for sustainable growth opportunities
We continue to steadily expand our global presence with focused activities in growth markets. This, along with
our established market positions plus our healthy and solid financial situation, enables us to implement our
strategy without swerving from our goal: we are driving expansion in growth markets, strengthening the focus
of our distribution structures, targeting increases in capacity, constantly promoting innovation – including
digitization – and potentially taking advantage of external growth opportunities. However, as in the past, we will
make acquisitions only if we can thereby create added value for our shareholders.

11

Proposals to the Ordinary General Meeting
Re-elections to the Board of Directors
All the current members of the Board of Directors will stand for re-election for a further one-year term of office.
Increase in the dividend
In view of the solid balance sheet and higher earnings per share, the Board of Directors will propose to
the Ordinary General Meeting that the dividend for the 2018 business year should be increased by about 10
percent versus the previous year to CHF 21 per share (previous year: CHF 19 per share).
Share buyback program
The Board of Directors will propose to the Ordinary General Meeting that the 150,000 treasury shares repurchased to date as part of the 2017 – 2020 share buyback program be canceled with a corresponding reduction
in capital. It is further proposed that the Articles of Association be amended accordingly and the program
terminated.
At the same time, the Board of Directors proposes that it be authorized, over a period of three years, to repurchase further treasury shares up to a maximum of 10 percent of the share capital via a second trading line on
the SIX Swiss Exchange or by another means in order to reduce capital.

Outlook for 2019
Cautiously optimistic
We expect that the 2019 business year will be even more challenging. The complexity of our activities willcontinue to increase, and this demands carefully thought-out and yet flexible mechanisms for adjustment.
Owing to our global presence, we stand to face increasingly volatile operating conditions on the economic
and political fronts in many countries. We anticipate a generally tougher environment and we expect growth
to slow down.
We are equipped with a strong brand, top-quality products and services, and technical know-how. This makes
us confident that we can gain market share again in 2019 and post a good result despite the anticipatedchallenges.
Against this background – and provided that the currency situation remains unchanged and the economic
environment remains similar – we anticipate a slightly lower increase in sales and Group profit from continuing
operations for 2019.

12

FORBO ANNUAL REPORT 2018 – LETTER TO SHAREHOLDERS

Thank youThanks to employees, business partners, and shareholders
Thanks to the strong commitment and professionalism of our people, and their flexibility, Forbo enjoyeda ­successful year in 2018 despite the many challenges. Many thanks for this.
We also wish to thank our customers, business partners, and suppliers for the close cooperation and theconfidence they have placed in our company.
On behalf of the Board of Directors and the Executive Board, we thank you too, dear shareholders, for theongoing trust and loyalty you show to Forbo.

Baar, March 2019

This E. Schneider
Executive Chairman

Stephan Bauer
CEO

Financial calendar
Ordinary General MeetingPublication of 2019 Half-Year Report
Publication of 2019 Annual ReportApril 5, 2019
July 26, 2019
March 3, 2020

13

CONTENTS
At a glance
Forbo in figures
Strong basis for a solid performance
Sustainable engagement

Activity report
Two divisions with leading market positions
Flooring Systems: 
Targeted activities in the private sector are taking effectMovement Systems:
Successful in highly competitive customer segments

15
18
22
26

31
32
34
40

Organization47
Executive BoardGroup structure 
Board of Directors

48
50
52

The Forbo share

55

Corporate governance report

59

Remuneration report

77

Forbo Group financial report

93

Consolidated balance sheet
94
Consolidated income statement
95
Consolidated comprehensive income statement
96
Consolidated statement of changes in equity
97
Consolidated cash flow statement
98
Notes – accounting principles
99
Notes109
Group companies
136
Report of the statutory auditor
140
Consolidated balance sheets 2014 – 2018
146
Consolidated income statements 2014 – 2018
147

Financial statements for Forbo Holding LtdBalance sheet
Income statementNotes to the financial statements
Proposal for appropriation of available earnings
Report of the statutory auditor

149
150
151
152
157
158

14

15

AT A GLANCE
Forbo in figures
Strong basis for a solid performance
Sustainable engagement

18
22
26

16

2018 AT A GLANCE

17

FORBO IS A LEADINGPRODUCER OF
FLOOR COVERINGS,BUILDING AND­CONSTRUCTIONADHESIVES, AS WELL
AS POWER TRANSMISSION AND
CONVEYOR BELT­S OLUTIONS.
The company employs more than 5,700 people
and has an international network of 26 production
and distribution ­companies, 6 assembly oper­ations and 46 pure sales organizations in a total of
36 countries. Forbo is headquartered in Baar in
the canton of Zug, Switzerland.

18

FORBO ANNUAL REPORT 2018 – AT A GLANCEFORBO IN FIGURES
Forbo is a global player, and its two div­­
isions supply a wide range of industries.
The Group’s global reach means that
it is close to dynamic markets, making
Forbo the first choice as a local partner
for customers that have similar global
requirements. The quality, longevity, andperfor­mance of our products and systems reflect the quality and stability of
our relations with our business partners.

Flooring Systems
16 production facilities in 7 countries and distribution
companies in 26 countries. Sales offices in Europe,
North, Central, and South America as well as Asia/
Pacific.
Floor coverings
Building and construction adhesives
Movement Systems
10 production sites and 6 assembly operations in 9
countries and distribution companies in 30 countries.
About 300 sales and service offices worldwide.
 Production facilities andassembly operations

19

Net sales 	 CHF 1,327.0 million
EBIT 		 CHF 175.3 million
EBIT margin 	
13.2%
Group profit	 CHF 137.6 million

from continuing operations

Earnings per share	
undiluted

CHF 82.38

20

FORBO ANNUAL REPORT 2018 – AT A GLANCE

Net sales by division
Change on previous year
CHF m 2018
913.2
413.8
1,327.0

Flooring Systems
Movement Systems
Total

in %
6.6
6.2
6.5

in localcurrencies in %
5.0
5.1
5.0

In % of total
68.8
31.2
100.0

31.2%

Movement Systems

68.8%
Flooring Systems

Employees by division

Number 2018
3,194
2,503
42
5,739

Flooring Systems
Movement Systems
Corporate Functions
Total

2,503

Movement Systems

3,194

Flooring Systems

42

Corporate Functions

Change onprevious year in %
1.2
6.1
0.0
3.2

In % of total
55.7
43.6
0.7
100.0

FORBO ANNUAL REPORT 2018 – AT A GLANCE

21

Financial overview Forbo Group
2018

2017

2018

2017

Income statement
Net sales
Flooring Systems
Movement Systems
EBITDAEBITDA before one-off costs6)
EBIT
EBIT before one-off costs6)
Group profit from continuing operations
Group profit from continuing operations
before one-off costs6)
Group profit
Group profit before one-off costs6)

CHF m
1,327.0
913.2
413.8
216.8
216.8
175.3
175.3
137.6
137.6

CHF m
1,246.4
856.6
389.8
117.6
201.0
79.9
163.3
36.5
119.8

EUR m1)
1,148.7
790.5
358.2
187.7
187.7
151.7
151.7
119.1
119.1

EUR m1)
1,121.2
770.5
350.6
105.8
180.8
71.9
146.9
32.8
107.8

137.6
137.6

38.7
122.0

119.1
119.1

34.8
109.7

Balance sheet
Total assets
Operating assets
Shareholders’ equity
Net cash

CHF m
980.0
812.4
591.6
127.4

CHF m
1,067.5
832.8
661.2
195.0

EUR m1)
848.3
703.3
512.1
110.3

EUR m1)
960.2
749.1
594.8
175.4

Cash flow statement
Cash flow from operating activities
Cash flow from investing activities
Free cash flow

CHF m
171.2
– 39.1
132.1

CHF m
78.8
– 56.522.3

EUR m1)148.2– 33.8114.4

EUR m1)70.9– 50.820.1

Key ratios
ROS (EBITDA/net sales)
Equity ratio (shareholders’ equity/total assets)
Gearing (net debt/shareholders’ equity)

%
16.3
60.4
– 21.5%9.4
61.9– 29.5

Number5,739

Number
5,559

Employees (as at December 31)
Total employees
Ratios per share
Earnings per share (undiluted)2), from continuing operations
Earnings per share (undiluted)2), from continuing operations
before one-off costs6)
Equity (undiluted)
Dividend

CHF
82.38
82.38

CHF
21.10
69.34

EUR1)
71.31
71.31

EUR1)
18.98
62.37

354.1821.003)382.6019.004)306.5918.183)344.1617.104)

Stock market capitalization (as at December 31)
Stock market capitalization5)

CHF m
2,485.8

CHF m
2,709.0

EUR m1)
2,151.8

EUR m1)2,436.8

1) Euro values translated at the average annual exchange rate of
CHF 1.1552/1 EUR (2018) and CHF 1.1117/1 EUR (2017).

4) Approval of a dividend of CHF 19 per registered share at theOrdinary General Meeting of April 6, 2018.

2) See note 11 ‘Earnings per share’ on page 116 of the financial­report.

5) Total number of shares multiplied by year-end share price.

3) The Board of Directors proposes to the Ordinary General Meetingof April 5, 2019, the distribution of a dividend in the amount of
CHF 21 per registered share.

6) Not factoring in the one-off costs from the antitrust proceedings
at Flooring Systems in France in 2017.

22

FORBO ANNUAL REPORT 2018 – AT A GLANCESTRONG BASIS
FOR A SOLIDPERFORMANCE
Forbo generated strong sales growth
once again in the year under review.
Both divisions contributed to the resultin equal measure amid challenging andmixed conditions. The market forcesin certain countries and customer segments differed greatly in some cases.
The Group again increased operating
profit despite the steep rise in raw-material prices, higher logistics costs, andincreased outlays for investments designed to promote further growth.

Both divisions added innovative products for specific customer segments totheir product portfolio; they expanded
distribution and service structures ingrowth markets; and they streamlined
operational processes by upgrading production and fabrication facilities to thestate of the art in technology.
Given Forbo’s global presence, its established market positions, the above-average investments in recent years, and its
healthy and solid financial situation, theGroup is well equipped to build on thissustainable success despite emerging
new challenges and a general slowdown
in the world economy.

Net sales by geographic area
Change on previous year

Germany
FranceBenelux
Scandinavia
Great Britain/Ireland
Switzerland
Other countries Europe
EuropeUSA
Other countries Americas
AmericasAsia/Pacific and Africa
Total

%
12.6
12.5
10.1
7.8
7.0
2.1
12.5
64.6
16.8
3.9
20.7
14.7
100.0

in %
11.0
4.6
7.8
– 1.4
– 5.2
9.2
15.4
6.4
5.1
10.2
6.1
7.5
6.5

in local currencies in %
6.8
0.7
3.8
– 1.2
– 8.0
9.2
13.6
3.6
5.7
11.9
6.8
9.1
5.0

2018
CHF m
167.0
165.6
134.2
103.7
92.7
28.4
166.0
857.6
223.2
52.0
275.2
194.2
1,327.0

25

50

75

100

125

150

175

200

225

250

275

23

Continued strong organic sales growth
In the year under review, Forbo reported net salesof CHF 1,327.0 million (previous year: CHF 1,246.4 million), representing a gain of 6.5%; this is reflected in asales increase of 5.0% in local currencies owing toslightly positive currency effects. Despite the challenging market conditions, both divisions contributed
to this solid and continued strong growth in all regions
and gained market share in key market segments.

The Flooring Systems division generated net sales of
CHF 913.2 million in 2018 (previous year: CHF 856.6 million). This comes to a substantial increase of 6.6% in thecorporate currency (+ 5.0% in local currencies). All three
regions contributed to this satisfactory growth despite
mixed market conditions, though with different inputs.
The Movement Systems division generated net sales of
CHF 413.8 million in 2018 (previous year: CHF 389.8 million). The result equated to a strong sales increase of
6.2% (5.1% in local currencies). All three regions as well
as most markets and customer segments contributed
to varying degrees to this ongoing sales success.

EBITDA by division

Flooring Systems
Movement Systems
Corporate

2018
CHF m
166.0
60.6
– 9.8

Change onpre­vious year in % – 25 0
8.4
3.2
– 9.3

Solid earnings trend
Forbo once again lifted its operating profit. Higher sales
coupled with efficiency gains in various operational­areas plus individual price adjustments on our partlargely offset the continued steep rise in raw-material
prices, increased logistics costs, higher depreciations
owing to the large investments made in expanding­capacity in recent years and, accordingly, higher personnel costs.
The Group reported higher operating profit before depreciation and amortization (EBITDA), which rose by
7.9% to CHF 216.8 million (previous year before one-off
costs: CHF 201.0 million). EBITDA at Flooring Systems
increased by 8.4% to CHF 166.0 million (previous year
before one-off costs: CHF 153.1 million) owing to higher sales and operational efficiency gains, despite muchhigher raw-material prices. At Movement Systems,
EBITDA rose in similar circumstances by 3.2% to CHF
60.6 million (previous year: CHF 58.7 million), despite
the substantial build-up of capacity in China.
The EBITDA margin for the Group rose from 16.1% to16.3%. At Flooring Systems, the EBITDA margin increased from 17.9% the previous year (before one-off
costs) to 18.2% in the year under review, while atMovement Systems the EBITDA margin decreased by
0.5 percentage points to 14.6% (previous year: 15.1%).

25

50

75

100

125

150

175

Group operating profit (EBIT) increased by 7.4% to
CHF 175.3 million (previous year before one-off costs:
CHF 163.3 million). The Group EBIT margin improved
from 13.1% the previous year to 13.2% in the year under review.
Owing to the solid operating income in the year underreview, Group profit from continuing operations roseby 14.9% to CHF 137.6 million (previous year before oneoff costs: CHF 119.8 million).
Taxes and financial income
The tax rate in the year under review was 21.7% (previous year: 54.4%), in line again with the long-term average. The tax rate in the previous year was influenced
by one-off costs in connection with the antitrust proceedings at Flooring Systems in France plus the sale oftreasury shares.
Financial expenses came to CHF 0.6 million in 2018(previous year: CHF 0.8 million) and consisted in both
years mainly of foreign exchange losses. Offsetting thiswas financial income of CHF 0.9 million (unchanged
from the previous year), consisting of interest income.
On balance, the financial result came to CHF 0.3 million(previous year: CHF 0.1 million).

24

FORBO ANNUAL REPORT 2018 – AT A GLANCE

Free cash flow
2018
CHF m
171.2
– 39.1
132.1

Cash flow from operating activities
Cash flow from investing activities
Free cash flow

Solid cash flow performance
Cash flow from operating activities decreased the previous year especially owing to the one-off costs incurred in connection with the antitrust proceedings at
Flooring Systems in France. However, in the reporting
year, the cash flow performance was back at its usual
solid level. In 2018, the Group generated cash flowfrom operating activities of CHF 171.2 million (previous
year: CHF 78.8 million), equivalent to an increase of CHF
92.4 million. In the wake of exceptionally high capitalspending for capacity expansion the previous year,
cash flow from investing activities decreased by CHF
17.4 million and came to CHF – 39.1 million (previous
year: CHF – 56.5 million). Free cash flow thus amounted
to CHF 132.1 million (previous year: CHF 22.3 million).

2017
CHF m
78.8
– 56.5
22.3

– 100

– 50

0

50

100

150

200

Balance sheet remains robust
Total assets at December 31, 2018, came to CHF 980.0
million (previous year: CHF 1,067.5 million), a declineof CHF 87.5 million. The decrease was due to the sharebuybacks and to currency fluctuations in relation to
the exchange rate on the balance-sheet date. Net­liquidity remains at a comfortable level despite theshare buyback program and the high level of capitalspending. It decreased year-on-year by CHF 67.6 million to CHF 127.4 million (previous year: CHF 195.0 million). Shareholders’ equity declined by CHF 69.6 million, coming to CHF 591.6 million at end-December
2018 (previous year: CHF 661.2 million). The equity ratio still remains at a high level of 60.4% (previous year:
61.9%).

Investments 2014 – 2018

2018
2017
2016
2015
2014

Flooring
Systems
CHF m

Movement
Systems
CHF m

Corporate
CHF m

Total
CHF m

25
22
20
31
30

13
36
17
9
9

0
0
3
0
1

39
58
40
40
40

Efficiency-enhancing and sustainable investments
In addition to increasing efficiency and steadily streamlining processes, our focus is primarily on factors thatare geared to promoting future growth. Capital expend­
iture in the year under review returned to the highcomparable level of earlier years, following a steep rise
the previous year, which was mainly due to the construction of the new Movement Systems plant in Pinghu/China. In the reporting year, Forbo concentrated
its resources in both divisions on key activities andstrategic projects in the areas of product portfolio,
technology, production capacity, and market expansion. Total Group investments in property, plant, andequipment and intangible assets in 2018 came to CHF
38.7 million, which was CHF 19.1 million lower thanthe previous year (CHF 57.8 million).

10

20

30

40

In the reporting year, Flooring Systems invested CHF
25.4 million (previous year: CHF 22.3 million), an increase of 13.9%. This sum includes the installation of a
new digital printing facility with UV ink technology forluxury vinyl tiles plus expanded cutting capacity at thesame production facility in the Netherlands. In the UK,
Forbo installed a new needle punch machine for the
production of carpet tiles and replaced a large press
for the manufacture of Flotex that recycles scrap material into granulates in order to produce new backingsfor modular floor coverings. There were improvements
at other manufacturing sites as well, including ovenpresses with reduced energy consumption, the modernization of heating plants, exhaust air systems andfilter installations, plus additional silos and tanks formore efficient processing of raw-materials.

50

60

25

At Movement Systems, investment in property, plant,
and equipment came to CHF 13.2 million, a decrease of
CHF 22.3 million versus the previous year (CHF 35.5 million). After two years of exceptionally high investments
to complete the new plant in China, besides various
new tools for the fabrication, there was a bigger invest-

ment made in the USA, where a new high-performancemixing plant for production pastes was installed, while
for the fabrication center in Slovakia a state-of-the-art
waterjet cutting machine for perforated belt types has
been developed and built.

Employees by geographic area
Benelux
Germany
Great Britain/Ireland
FranceScandinavia
Switzerland
Other countries Europe
EuropeAsia/Pacific and Africa
USA
Other countries Americas
Americas
Total

%
21.7
12.6
10.5
7.3
3.2
3.1
12.4
70.8
15.1
10.8
3.3
14.1
100

Change onpre­vious year in %
2.6
6.9
– 0.7
– 3.0
15.1
2.9
3.8
2.9
3.1
5.5
3.2
4.9
3.2

2018
1,245
724
600
418
183
180
712
4,062
867
617
193
810
5,739

Selective expansion of headcountAt year-end 2018, the Forbo Group employed 5,739
people. This marks an increase of 180 employees compared with the end of 2017. The increase was mainly
due to capacity expansion and specific team enlargements in operational areas. The minor individual percentage changes in employee levels by and large­reflect market developments in the corresponding
countries and regions and mirror the situation on thebalance-sheet date at the end of the year.

200

400

600

800

1,000

1,200

1,400

The high increase in Germany was due to the capacity
expansion at Movement Systems for an additional shift
required for production of Transilon conveyor belts.
The large increase in Scandinavia can be explained on
the one hand by the acquisition by Movement Systems of a distribution partner in Norway and, on theother hand, by the filling of vacancies at Flooring Systems in Sweden. The above-average increase in the
USA is due to the enlargement of the fabrication teamat Movement Systems for special projects in the fieldof logistics for large key accounts.

26

FORBO ANNUAL REPORT 2018 – AT A GLANCESUSTAINABLE
ENGAGEMENT
A responsible attitude toward the management of resources in all dimensions is
one of the fundamental values at Forbo.
We are committed to protecting the environment and continuously investing ina sustainable future. As a manufacturer
and employer conscious of its responsibilities, Forbo sets very high standards
for health, safety, the environment, andquality.
Social dimension
Forbo promotes a high-performance culture in order tomeet the high demands of our customers and business
partners as well as the requirements we impose on
ourselves. This is why we promote the necessary capa­
bilities and competences at all organizational levels,and support this internally with seminars and further
training activities.
This means that the divisions provide internal training
in a wide range of areas regarding products and applications, sales and marketing, finance, operations, pro­

ject management, strategy implementation, and Forbo’s values. Continuous intensive training in the areaof health and safety includes measures on the topics
of accident prevention, risk awareness, and occupational health and safety, as well as general ongoingpreventive measures.
At the Group level, Forbo has established an internalmanagement training program in collaboration with
the University of St. Gallen as well as other external
partners and internal experts. This practice-oriented
advanced training program for senior managers andpersons in key positions consists of a first training weekthat includes various modules in areas ranging frommanagement and sales to marketing and operations.
A second training week expands on this and includes
leadership modules, focusing on strategic implementation and leadership topics such as dealing with organizational and team changes as well as performance
management. A third training week that builds on theprevious courses was introduced in 2016; it is devoted
mainly to leadership topics that involve implementation of the strategy at various organizational levels. Thisis combined with relevant tools for communication
challenges and cooperation in international, cross-cultural teams.

27

Ecological dimension
Protection of the environment and the generation of
ecological added value are important factors in all of
Forbo’s development and investment decisions. Our
customers also demand efficient and sustainable products and services. Both divisions are meeting these demands by offering purely natural products in theirproduct portfolio.
With linoleum, Flooring Systems offers a floor covering
made of 97% renewable raw-materials of which 72%
are renewable within ten years. Linoleum is made fromthe natural raw-materials linseed oil, natural resin, woodflour and limestone as well as jute and pigments. A natural product through and through, which, in view of its
long service life and positive ecological balance, is regarded as the most environmentally friendly resilient
floor covering available. At the end of its long service
life it can be composted, as it is 100% biodegradable. In
addition to this, linoleum is made from about 45% recycled material, which lowers the consumption of primary raw-materials accordingly.
Vinyl floor coverings receive their elasticity, pliability,and flexibility from plasticizers. Flooring Systems is theleader in the use of phthalate-free plasticizers of thelatest generation. Vinyl floor coverings also contain up
to 45% recycled material in the substrate layer. Within
the framework of our ‘back to the floor’ program, wecollect off-cuts of our vinyl coverings as well as wastematerial from our own production and put these backinto the production of new coverings, for example
for the substrate layer of carpet tiles and Flotex – thewashable textile flooring. Flooring Systems gets 100%of the electricity used at its production locations fromrenewable en­ergy sources.
With the BioBelt, Movement Systems is the first-everconveyor belt manufacturer to develop a biodegrad­able conveyor belt whose physical and dynamic properties are equal to standard belts. The same applies to
its performance and long service life. In BioBelt products, oil-based raw-materials and synthetic-technicalmaterials have been largely substituted by materials
made from renewable, plant-based raw-materials.
In order to maximize environmental compatibility andat the same time increase the product advantages,
Movement Systems has patented some years ago aspecial coating that significantly reduces the friction
between the underside of the belt and the slider bed
compared with conventional conveyor belts.

28

FORBO ANNUAL REPORT 2018 – AT A GLANCESUSTAINABLE
ENGAGEMENT

In the meantime, Movement Systems launched newgenerations of these energy-saving conveyor belts thatare even more efficient. These AmpMiser conveyor belts
display their advantages most clearly where goods arebeing continuously conveyed and many belts are inuse, for example at airports or in logistics and distribution centers. For this type of application, energy savingsof up to 50% are achieved for the overall systems.
We have also made it our aim to continually make ourown activities more sustainable and efficient. We do
this by using less material and energy to realize equi­va­
lent or even better solutions. Both divisions are working constantly on the optimization of production processes in terms of water and energy consumption,
reduction of emissions, reuse of heat generated in the
production process, and the reduction and efficient recycling of waste material in order to reduce the burden
on the environment. A wide range of certifications confirm these efforts. At the same time, we are working on
innovative ideas regarding the materials used in the
production process as well as new application techniques.

FLOORING SYSTEMS
Floor coverings are part of our everyday lives and define our living, leisure, and working spaces. Whether as
a direct end customer, builder of a major project, architect or installer, for every stakeholder group the topic
of sustainability plays an important role in the decision-making process. This is why it is important for
Flooring Systems to differentiate itself from its com­
petitors with comprehensible and convincing arguments, including in terms of sustainability.
With the approach ‘committed to the health of one’Flooring Systems wants, alongside a fully transparent
product declaration, to highlight the sustainability features more clearly than it has done up to now and placethem in correlation to each individual. In creating ahealthy interior space, we concentrate on all aspects of
our installations that contribute positively to safety, hygiene, and well-being. These include avoiding asthma
triggers and allergens, focusing on light-reflecting andacoustic properties, facilitating cleaning and mainten­
ance, and ensuring the overall quality of the interior.

29

MOVEMENT SYSTEMS
Movement Systems’ resource management is basedon the continuous improvement of consumption efficiency through the development and the targeted­implementation of measures for the optimization ofelectricity, gas, oil, and water consumption. Alongsideongoing energy-saving measures, energy recovery is
an important factor, i.e. the use of energy released in
the downstream incineration plant for the purposesof heating. In order to reduce water consumption andavoid unnecessary waste, Movement Systems is increasingly using closed water circulation systems.
Some of the waste water can be used in another production step in order to minimize water requirements.
The reduction and productive reuse of waste material
is increasingly the focus of Kaizen and sustainability
initiatives. Cut-offs from the belts we produce in certain countries are sold to other companies to be reused in their production. The locations in North America collect sanding dust in filters which is thenprocessed as material by external partners in their production. Some of the waste from plastic modular belts
and polyurethane cut-offs is recycled back into ourown production.

Economic dimension
As a listed company, Forbo also engages intensively
with the economic dimension of sustainability. Compliance is enormously important for the reputationand positioning of a company. We are successful as acompany when we meet the expectations of customers, when employees are enthusiastic and committed,
and when we create added value in the long term forour shareholders.
In the year under review, we constantly maintained
our efforts in terms of a conscious attitude to what
we do by reinforcing awareness, particularly regarding
the contents of the code of conduct (by means of
e-learning modules) as well as competition law andanti-­corruption principles, and diligently implementing the risk management process.

30

31

ACTIVITYREPORT
Two divisions with leading market positions

32

Flooring Systems:
Targeted activities in the private sector
are taking effect

34

Movement Systems:
40
Successful in highly competitive customer segments

32

FORBO ANNUAL REPORT 2018 – ACTIVITY REPORTTWO DIVISIONSWITH LEADING
MARKET POSITIONSForbo aims to operate primarily in bu­si­
ness areas in which it has or can achievea leading global market po­sition – something it has achieved for both Flooring
Systems and Movement Systems.

Strategic directions
To be successful in the market place as a Group withdifferently aligned operations, the individual divisions
act independently and flexibly, but always along thestrategic directions defined for the Group as a whole:–– Based on a pronounced customer focus, a high levelof service, innovation, digital transformation, anda strong global brand, we are creating global leadership positions in clearly defined market segments.
–– Due to a strong market orientation, we shapemarkets and drive profitable growth.
–– We are developing significant positions ingrowth markets.
–– We are acquiring companies to extend our productrange, to consolidate and/or reinforce market
access.
–– We are developing a high-performance culture
and providing the relevant skills and competences
at all levels.

Flooring Systems
The Flooring Systems division offers a broad and attractive range of environmentally friendly natural linoleum,high-quality vinyl floors, entrance matting systems forcleaning and drying shoes, carpet tiles, needle felt, and­Flotex, the washable high-tech textile flooring. Thanks
to their ­excellent technical properties and attractive
designs, these flooring products are invariably the first
choice for public buildings, department stores, hos­pitals, and other healthcare facilities, schools, libraries,
commercial and office spaces, leisure centers, shops,
hotels, restaurants, and cafeterias as well as for applications in the residential market. With a market share ofabout 70 percent, Forbo is the world leader in linoleum.
Flooring Systems also provides ready-made adhesives
for floor covering installations, parquet flooring, andceramic tiles, leveling compounds for the constructionindustry as well as liquid floors under the trade nameEurocol.

Movement Systems
Movement Systems is a global industry leader for sophisticated con­veyor and processing belts, plastic
modular belts, top-quality power transmission belts,
as well as timing and flat belts made of synthetic ma­te­rials. These products are known under the brandname Siegling. They are used in a wide range of ap­
plications in industry, trade, and the service sector, including conveyor and processing belts in the food­industry, treadmill belts in fitness studios, and flat belts
in mail distribution centers.

DIVERSITY.

EXCELLENCE.

FLOORINGSYSTEMSDIVERSITYPERFECTLY
INTEGRATED
We always make sure that our sustainably produced
floor coverings blend in naturally with their environment. As well as broadloom material, we also offer awide range of modular products to give building
owners and architects even more scope for creativity.
You can choose from a multitude of materials, colors,
designs, surface textures and formats. And we also
place great value on ensuring that maintenance andcleaning require as little effort as possible.

36

FORBO ANNUAL REPORT 2018 – ACTIVITY REPORTFLOORING SYSTEMS:TARGETED ACTIVITIES IN THE
PRIVATE SECTOR ARE TAKING EFFECT‘We launched innovative and top-quality collections in all product groups that
achieved significant sales success globally – particularly because we focused
our global key account activities on theprivate sector commercial segment, on
customer segments such as shop fittings, office facilities, railway companies
as well as hotels and restaurants. We expanded our distribution structures forJean-Michel Wins
this area specifically as well as for devel- Executive Vice President
opment in growth markets. On the op- Flooring Systems
erational side, we invested in a range oftechnological improvements designed
which successfully adapted its business model
to increase both efficiency and capaci- land,
to the changed market structure. Apart from Norway,
ty. Coupled with targeted measures in demand in northern Europe declined slightly on the
procurement plus some price adjust- whole. Great Britain reported a downturn in sales owments, these have counteracted the ing to the uncertainties surrounding Brexit and the rehigher costs for raw-materials. Overall, cession in the construction industry.
with our attractive portfolio, we have The Americas region posted a significant increase infurther strengthened our position as a sales primarily due to the recovery in the main market,
leading systems supplier in the com- the United States, and in Canada. The upswing was
driven by successful projects with increasing modular
mercial segment.’
flooring solutions plus rising demand in the healthcare
The Flooring Systems division generated net sales of
CHF 913.2 million in 2018 (previous year: CHF 856.6 million). This comes to a strong and solid increase of 6.6%in the corporate currency (+ 5.0% in local currencies).
The division accounted for 68.8% of Group sales. All
three regions contributed to this growth, though withdifferent growth rates. Operating profit (EBIT) rose by
8.8% to CHF 136.5 million (previous year before one-off
costs: CHF 125.5 million) despite the negative impact ofhigher raw-material prices. The EBIT margin increased
by 0.2 percentage points to 14.9% (previous year before
one-off costs: 14.7%).
Strong and solid sales development
The European markets showed a very mixed trend. Our
important core markets, France and the Netherlands,
recorded moderate growth, whereas Germany reported growing demand and registered strong growth also
due to the changed market situation. Southern andEastern Europe posted a gratifying trend, as did Switzer-

and nursing care segments. Brazil and other, smallermarkets in South America turned in a positive performance after a rather restrained development in previous years.
In the Asia/Pacific region, Japan, South Korea, and Turkey made an above-average contribution to the sales
upturn. Various growth initiatives drove this gratifying
trend, and it was supported by the completion of somemajor projects in the healthcare, education, office facilities, and airports segments. China and Australia also
contributed to this big jump in growth despite weakening demand.
The building and construction adhesives activity overall
reported solid and strong growth in sales, due in particular to Russia – mainly driven by the expansion of the
do-it-yourself business – and the Netherlands, where
demand for liquid floors increased. Based on a streamlining of the offer, Germany reported a slight downturnin sales amid fierce market competition.

37

New and innovative collections
in all product groups
In the year under review we introduced attractive
and top-quality collections in all product groups that
achieved significant sales success regionally and globally. Many of these new developments are geared tothe private sector commercial segment and combine
trendy designs, varied color palettes plus new production technologies and new effects employing sustainable materials.
For our new Flotex collection – our washable high-tech
textile flooring – the successful French designer PhilippeStarck created a range of design variations that show
their full effect in large-scale installations.
We enlarged the carpet tile range with a collection forthe office facilities segment; the design is inspired byclouds, and the carpet tiles use an innovative yarn inorder to achieve this effect.
For the newest collection of luxury vinyl tiles, we combined the arrangement of several material layers witha special printing technology to generate unique gradients and a wide range of surface designs. The use ofrefurbished rest material from our homogenous vinyl
production has given rise to a very trendy, colorful, andnew collection of this product line.
The new global broadloom linoleum collection ‘marmoleum marbled‘ will be offered as of 2019 in five updated design types and varied color shades and thicknesses, and will feature sound-absorbing properties.
Above-average growth in vinyl floor coverings
Our application-specific and versatile vinyl flooring­collections all made their presence felt, posting solid
growth rates. The homogenous vinyl flooring productline, introduced the previous year, has become firmly
established, and the luxury vinyl tiles still report growth
rates well into the double-digit range. Acoustic flooringcoverings, primarily for social housing, have sold well,as have antistatic high-tech floorings for special applications in industry and hospitals.
Linoleum floor coverings reported solid growth in all
the different styles and formats.
The textile floor coverings – carpet tiles, Flotex, andneedlefelt floor coverings – made a larger contribution
to sales growth due to increased private sector activities. Sales of the entrance matting systems remained
at about the previous year’s level.

Efficiency-enhancing and sustainable investments
In addition to the numerous activities to enrich our
product portfolio, we invested in a range of improvements at our production sites. Of particular note were
the oven presses with reduced energy consumption,
the modernization of the heating plants, exhaust air
systems and filter installations, plus additional silos andtanks for more efficient processing of incoming rawmaterials.
For our luxury vinyl tiles, we installed a new digital printing facility with UV ink technology that creates additional capacity and at the same time offers options forcustomized design flexibility. We installed a new needle
punch machine for the production of carpet tiles that
reduces yarn consumption and also enables the manufacture of novel carpet tiles. A large press for the production of Flotex was replaced that recycles scrap material into granulates in order to produce new backingsfor modular floor coverings.
The ongoing expansion into growth markets took
many forms. In China we increased the density of the
distributor network in large cities by gaining new distribution partners; in South Korea we expanded our presence in the pharmaceutical segment; in Poland andRussia we began covering new areas outside Warsaw
and within Moscow and we now service the Ukraine
and Kazakhstan markets directly.
Tried and proven strategy
In 2019 we will consistently continue on our path: wewill increase the attractiveness of our product portfolio
even more for customers in the private sector commercial segment; we will proactively follow up the initiatives we have taken in the growth markets; and we will
enhance these market activities with additional innovative and attractive offerings, in the digital sphere too. It
is also key to keep a close watch on raw-material pricetrends and make any necessary price adjustments on
our side.

38

FORBO ANNUAL REPORT 2018 – ACTIVITY REPORTVERSATILE
AND TRENDYCOLLECTIONSForbo floor coverings combine functionality and excellent product quality with
innovative designs; they enhance interior spaces, whose character and appearance are geared to the needs of the people using these spaces. We make every
new development of our products andproduction processes more sustainable
and more environmentally friendly; thatis how we meet the most demanding requirements. In the past year we again
kept our attention on the pulse of technical innovation and design trends.
Many of these new developments are geared to theprivate sector commercial segment; they combine
trendy designs, varied color palettes plus new production technologies and new embossing effects employing sustainable materials across all product groups.

TESSERA CARPET TILE ‘NEXUS’

Innovative carpet tiles
Carpet tiles give a room a special character, create an
atmosphere of warmth, and are especially suitable for
office premises or cozy hotel settings. We have added
two innovative collections to our range of high-quality
Tessera carpet tiles: ‘Cloudscape‘, whose design is visually influenced by natural cloud formations and is available in 16 muted pastel shades. A novel yarn with asophisticated tufting technology was used to achieve
this visual effect. And ‘Nexus‘ – the Latin word means‘connection’ and stands for the design – which combines a metallic web overlay with a striated ground(the striation comes from different pile heights). The
combi­nation creates a visual network of connections.
This trendy collection is available in nine colors, primarily light to dark gray, with a variety of metallic color
effects. Carpet tiles offer flexible layout opportunities
in modern open-plan offices and contrast with thecurrent trend to near-natural designs in pastel shades.

TESSERA CARPET TILE ‘CLOUDSCAPE’39

HOMOGENOUS VINYL FLOOR COVERINGS ‘FABSCRAP’

Unique and versatile vinyl floor coverings
For the newest collection of luxury vinyl tiles, we combined the arrangement of several material layers witha special printing technology partially mixed with asolid pvc color layer to generate unique color tones
and a wide range of surface designs. ‘Allura Fusion‘ received the Red Dot Design Award for 2018 as the bestproduct design of the year. The jury praised the product’s innovative manufacturing process, the color
depth, and the realistic effects along with the natural,
free-flowing design with no repetition of the patterns.
The collection is available in three tile and plank formats. The planks are especially suitable for wider andopen areas with little furniture where the floor itself
can stand out as a design element – the relevant target
groups are galleries or boutiques.

‘AN ATTRACTIVE
COMBINATION OF DESIGNAND FUNCTIONALITY’LUXURY VINYL TILES ‘ALLURA FUSION’

The use of refurbished rest material from our homogenous vinyl production has given rise to a very trendy
and colorful new collection of homogenous vinyl floor
coverings. ‘FabScrap‘ is made completely of recycled
virgin materials. Granules in different colors and different quantities are left over from every production run.
This material is remixed and then used exclusively forthis collection. The colors are mixed in such a way as toproduce four base shades: two gray, one blue, and one
white. The left-over colored granules are mixed withthe base shade of the customer’s choice. That meansthat each roll is colorful and unique in its design and,what’s more, exhibits the usual high quality of Forbo’s
homogenous vinyl floor coverings. And, special in somany ways, adds a unique touch and splashes of color
to sales outlets, school buildings, cafeterias and canteens.

MOVEMENTSYSTEMSEXCELLENCECOMPLETELYFUNCTIONAL
Our belts guarantee smooth operation in every process step and ensure compliance with the most demanding hygiene standards. In the production of
baked goods, the excellent release properties of thesurface texture are especially important to ensure thatthe dough does not stick to the belt, thus saving theamount of flour needed for processing. Innovative
belt edge seals, a smooth belt run to ensure gentle
conveyance, as well as easy cleaning are what distinguish our belts from the others, thus ensuring decisive competitive advantages.

42

FORBO ANNUAL REPORT 2018 – ACTIVITY REPORTMOVEMENT SYSTEMS:

SUCCESSFUL IN HIGHLY COMPETITIVECUSTOMER SEGMENTS‘The construction of the new production
site in Pinghu/China, dominated the reporting year, and it proved a challenge
for many organizational areas locally andinternationally. The operational departments of our largest and most modern
production facility have been well-established since autumn 2018. The large
and complex coating machine is also in
operation. The qualification and certifiMarc Deimling
cation of a wide range of product types Executive Vice President
should be completed in the coming Movement Systems
months, followed by the production oflarge batches. Innovative products cousales growth once again
pled with specific application know-how Strong
All three regions made a solid contribution to the very
were the key to our cross-border success good growth again in the past year. Europe’s share wasstories for all our product groups. At the slightly above-average. Special mention should besame time, we continued to invest in the made of Southern and Eastern Europe. All the countries
Southern Europe turned in a convincing perform­
development and expansion of distribu- ofance and gained market share despite a challenging
tion and service locations, which has fur- environment. Eastern Europe too was positive acrossther strengthened our market position.’
the board. The core market Germany reported solid
The Movement Systems division generated net salesof CHF 413.8 million in the year under review (previous
year: CHF 389.8 million), which reflects strong year-onyear growth of 6.2% in the corporate currency (+ 5.1%
in local currencies). The division accounted for 31.2%
of Group sales. All three regions as well as most markets and all customer segments contributed to varying degrees to this gratifying rise in sales. Various­factors, however, weighed on operating profit (EBIT),
which came to CHF 49.4 million, roughly the previous
year’s level (previous year: CHF 49.3 million). A strong
rise in raw-material prices and higher logistic costs
were partly responsible, while the major capacity­expansion in China and, to some extent, in Germany
too increased depreciations and led to a build-up of­personnel, which weighed disproportionately on theincome statement in the initial start-up phase. The
EBIT margin declined accordingly to 11.9% (previous
year: 12.6%).

growth. Northern Europe posted double-digit sales
growth owing to the takeover of an existing distribution partner in Norway in early May 2018, a move thatstrengthened both our position in the local market in
the food segment and our service structure.
The Americas region reported good sales growth overall, and this was backed up by satisfactory double-digit
growth rates in Mexico and Canada in addition to thecore market USA. USA itself performed solidly, with major projects in the logistics and food processing segments acting as important drivers.
The picture in Asia/Pacific was very positive. The coremarkets, China and Japan, reported satisfactory growth,
while smaller markets in Southeast Asia and India registered double-digit sales gains. South Korea and Turkey
were also positive performers. This growth was basedon a broad array of customer segments, with major
projects in logistics/airports, industrial manufacturing,and sports treadmills.

43Highly competitive logistics segment
booming worldwide
The individual trend in strategic customer segments isshaped in many cases by major projects and by theservice and replacement business. Technical expertiseand application know-how play a key role here. In theyear under review, we reported better-than-average
growth in all regions for the food processing and logistics segments; in the case of logistics this was due inparticular to the boom in online commerce alongside
local and international airport projects as well as courier service providers. New logistics centers are being
built, and at the same time capacity at existing locations is being expanded to cope with ever shorter delivery deadlines. We enlarged our service teams tomeet these changing demands and we expanded specialized training for maintenance personnel at customer sites.
Other customer segments that enjoyed above-average demand were raw-materials processing and industrial manufacturing, with major automotive industry
projects playing a leading role. Sports treadmills andtextiles were two further segments reporting solid
growth. Demand in the tobacco and paper and printing industry segments was modestly positive; paper
and printing was slightly in decline, in line with thegeneral market trend.
Customer-specific innovations
Following versatile belt developments for the logistics
segment the previous year, the division developed numerous innovative products in the year under review –particularly in the food sector – for very specific appli­
cations that offer significant benefits and increase
efficiency in both production and processing.
A new antistatic belt type – used in the manufacture of
biscuits and crackers on cutting lines – was developed
for facilities in which the belt has to be especially cutting- and punching-resistant and is able to provide thenecessary resistance (damping performance) as well as
positional accuracy of the dough pieces for cutting.
Another new series of stable and robust plastic modular belts ensures excellent stability and traction whenconveying plastic containers in the meat and doughsectors. Another series is designed for packaging lines
featuring smooth, enclosed surfaces for goods, for instance small fruits, that have to be conveyed acrossnarrow transfer gaps.

A high-temperature and UV-resistant conveyor belt
has been developed for the industrial manufacturing
segment for use in paint drying on spraying lines.
These systems ensure that UV paints and lacquers, as
employed for instance in furniture manufacture, dry
quickly.
Investments in technology and efficiency
While continuing to invest in development and expansion in growth markets, we also invested in new technologies and efficiency-enhancing measures in various fabrication and production facilities.
Our new high-performance mixing plant for production pastes came on stream at our main production
site in the USA. This enabled us to increase both efficiency and capacity.
A state-of-the-art waterjet cutting machine for perforated operations was developed and built especiallyfor our needs at our fabrication center in Slovakia. It isvery flexible in use, can process belts up to four meters
wide, but can also perforate small already endless belt
types. Furthermore, perforations can now be made inany shape in addition to round perforations, according
to the customer’s need.
The biggest capital expenditure item of Movement
Systems at present, however, is the new plant in Pinghu, which will provide additional production capacity
for Transilon processing belts, mainly for the Asia/Pacific region.
Operational challenges persist
Putting the large and complex coating machine in
Pinghu fully into operation will be the focus especiallyin the first half of 2019 so that we can make full use of
the additional capacity for the Asia/Pacific region.
Global operational processes in the supply chain, fabrication, and manufacturing areas are being more harmonized in detail in order to further enhance effectiveness and efficiency. We will continue to focus ourefforts on activities in growth markets.
At the same time we are working on innovative service
concepts that will yield new options within the framework of Industry 4.0 as well as on expanding the product portfolio in order to gain access to new market segments. For this purpose, interdisciplinary project teams
are working on new technologies for production andfabrication.

44

FORBO ANNUAL REPORT 2018 – ACTIVITY REPORTINDUSTRY-SPECIFICINNOVATIONS
You will find Movement Systems present wherever power is transmitted andautomated production and conveyor
processes have to run smoothly. Our
solutions for different configurations
and requirements across a wide range
of industries are renowned for innovation, precision, reliability, and cost effectiveness. In the year under review, Movement Systems again demonstrated that
it is a professional partner in the development of industry-specific and customized solutions.

TRANSILON BELT FOR CHOCOLATE COATINGS

To match the variety of foodstuffs that are conveyed
on conveyor belts for production, processing and packaging, belt solutions and surface coatings have to be
specifically tailored to these individual requirements
so as to ensure efficiency, quality, hygiene, and carefultransmission of foods. The innovations Movement Systems launched in the year under review combine theseadvantages across various product lines.
Belts are blue for a reason
We developed two new blue Transilon conveyor belts
with the ‘Diamond‘ top-face specifically for the bakery
and fish-processing industries. The surface structure increases traction, or grip, for foodstuffs that do not lie
flush with the belt surface but also ensures the easy release of softer foods such as dough products, pasta or
thinly sliced fish or meats. Since the color blue does notoccur in natural foods, blue-colored belts make it easierand quicker to spot contaminants than on the traditional white belts used in the food industry. The second belt
is even more closely geared to the needs of the bakery
and confectionery industries, for chocolate-coated deli­cacies. The low-shrinkage belt features good heat conductivity along with firmness in the cooling tunnel thatguarantees flawless product quality.

TRANSILON BELT FOR FISH-PROCESSING INDUSTRY

45

PLASTIC MODULAR BELT SERIES 8

TRANSILON-HIGH-TEMPERATURE BELTWe developed two other blue elastic Extremultus flat
belts specifically for packaging, measuring, and labelling of foods such as cheese slices, sliced meats, fish
fillets, and sushi as well as noodles and pasta. One of
the two belts is a little more elastic and versatile in use;
it is more resilient against animal fats, oils and aggressive cleaning agents and prevents moisture build-up.

ing and packaging of meat, fruit and vegetables, aswell as bakery goods. With its rigid modular construction, goods can be conveyed over long distances. The
new Series 13 features an enclosed, smooth top-face,making it ideal for the transport of light foods; it is versatile in use for conveying, drying, cooling and packaging of snacks such as croissants, bagels and donuts.

Extended line of plastic modular belts
A new Series 8 line of stable and robust plastic modular
belts ensures excellent stability and traction whenconveying empty or full plastic containers for process-High-temperature belt for paint drying
A high-temperature and UV-resistant conveyor belt
has been developed for the industrial manufacturing
segment for use in paint drying on spraying lines. Special abrasion-resistant and easy-to-clean belts havegreat benefits in the drying tunnel for the automatedproduction processes used in paint drying. These systems ensure that UV paints and lacquers, as employed
for instance in furniture or window and door element
manufacture, dry quickly.

‘BELT PROPERTIESARE DECISIVE’

46

47

ORGANIZATION
Executive BoardGroup structure
Board of Directors

48
50
52

48

FORBO ANNUAL REPORT 2018 – ORGANIZATIONEXECUTIVE BOARD

Marc Deimling, Stephan Bauer, Urs Uehlinger, Jean-Michel Wins

49

Stephan Bauer

Urs Uehlinger

Stephan Bauer was born in 1961 and is a German citi­
zen. He took a degree in Engineering and Management at the Munich University of Applied Sciences(FH) and began his professional career at BMW in
Munich in 1987 as a project manager for the launch of
new ve­hicle models. From 1991 to 2008 he worked for
Siemens VDO Automotive AG (which became Continental Automotive in 2007) in various regional andglobal management positions in the field of sales andmarketing and general management. In 2004 he wasappointed CEO of Diesel Systems. From 2008 to 2013
Stephan Bauer was CEO and President Control Products & Systems at the Siemens Building Technologies
division, where he was responsible for the entire product spectrum. He joined our company in September
2013 and took over the position of Chief Executive
Officer and Chairman of the Executive Board of the
Forbo Group as of Jan­uary 2014.

Urs Uehlinger was born in 1966 and is a Swiss citizen.
He completed his studies in economics at the University of Zurich with the degree lic. oec. publ. From 1994 to
2001, he worked for ABB Brown Boveri, where he was inaudit and finance functions for almost three years before being appointed CFO in two Group companies,
one for three years, the other for a year. From 2001 to
2004, he was self-employed as the owner of Uehlinger & Partner, with mandates relating to CFO tasks.
From 2004 to 2016, he held various positions at Siemens Building Technologies: for four years he was headof Risk Management, in the three following years CFOof the HVP Heating & Ventilation Products business
unit, and then for five years CFO of the CPS Control
Products & Systems business unit. Urs Uehlinger joined
the Forbo Group in January 2017 and, after an introduction period, took over the function of Chief Financial Officer and was appointed to the Executive Board
effective May 2017.

Jean-Michel Wins

Marc Deimling

Jean-Michel Wins was born in 1967 and is a Belgian aswell as German citizen. He studied business administration and languages at the IPET in Nivelles, Belgium, andbegan his professional career in Germany at Calberson
GmbH, where he held various specialist functions. He
then moved to S­ imut Sicherheit GmbH for two years,
where he was in charge of sales and marketing. From1992 to 1996 he was Export Manager at Brabus GmbHand from 1996 to 2002 he held various sales and man­agerial functions at Hirschmann Electronics. In 2002 heswitched to Grammer AG, headquartered in Germany,
where he held a number of international sales and­se­nior management positions; in 2009 he was appointed Vice President responsible for the Offroad Seating­Business Unit. As a member of the Executive Board,
Jean-Michel Wins took over management of theMovement Systems division in January 2013. He wasappointed as Head of the Flooring Systems division in
January 2018.

Marc Deimling was born in 1970 and is a German citizen. He holds a degree in economics from the Westphalian Wilhelm University in Münster, Germany, andlaunched his professional career as assistant to the
management of M-Tec Textilmaschinenbau GmbH. In
1999 he moved to Dörries Scharmann TechnologieGmbH for six years, where he was head of the Service
Division. From 2005 to 2008 he was a member of management at Gehring GmbH, where he was responsible
for the areas of distribution, project planning, project
management, production, after sales and marketing.
He was then Chief Executive Officer at TMS Turnkey
Manufacturing Solutions GmbH in Austria until the endof 2017, where he was responsible for finance/controlling, IT, procurement, design, production, quality,
after sales and marketing. Marc Deimling was appointed to head the Movement Systems division as a member of the Executive Board in January 2018.

Chief Executive Officer

Executive Vice President Flooring Systems

Chief Financial Officer

Executive Vice President Movement Systems

50

GROUP STRUCTURE
Forbo has performed better than
average in the last years comparedwith other exchange-listed ­com­panies.
With its two focused divisions, theGroup today is a world leader in its
markets, free of debt, and in possessionof considerable resources for further
strategic development. In line with
its strategy, Forbo is tasked with maintaining its successful performance ofrecent years, on the one hand, and –with the means available – of reinforcing and expanding its positions in
the global market through strongorganic growth and acquisitions, on
the other hand.

Tasks of the Executive
Chairman of the Boardof Directors– Leading the Board of Directors– Preparing the decisions of the Board of Directors
and ensuring they are executed– Representing and positioning theGroup in the public– Overall management of strategy ­development and involvement in realizing
key strategic projects– Management of relationships with key
accounts and business as well as sector andcapital market partners

T asks of the Chief
Executive Officer– Operational management of the Group– Leading the Executive Board– Development and operational implementationof the strategies– Implementation and monitoring of multi-yearplanning and budgets– Supporting the Executive Chairman of theBoard of Directors in preparing important
projects relating to strategy as well as personnel
and finances for discussion and decision-taking
by the Board of Directors

FORBO ANNUAL REPORT 2018 – ORGANIZATION

51

BOD / HRNC / RC / AFC

BOD Board of Directors
HRNC Human Resources and Nomination Committee
RC Remuneration Committee
AFC Audit and Finance Committee

Executive Chairmanof the Board of Directors

Board of Directors Office
Investor Relations
Corporate Communications
Internal Audit
CEOStrategy and M & A
Corporate Development
Corporate HR

Executive Vice President
Flooring Systems

Executive Vice President
Movement Systems

CFO

Northern/Central/Eastern
EuropeEurope/Middle East/Africa

Corporate Controlling
and Reporting

Southern Europe/
Middle East/Africa
AmericasAsia/Pacific
Building and Construction
Adhesives
Supply Chain
Business Development
Finance and IT
Process Development
Human Resources

AmericasAsia/Pacific
Plastic Modular and
Flat Belts

Corporate Treasury
Corporate Tax
Risk Management

Operational Areas

Corporate Legal Services

Business andProduct Development

Corporate IT

MarketingF & A Managers
Group Companies

Finance
IT
Human Resources

Member of the Executive Board

52

FORBO ANNUAL REPORT 2018 – ORGANIZATIONBOARD OF DIRECTORS

Dr. Reto Müller, Dr. Peter Altorfer, This E. Schneider, Claudia Coninx-Kaczynski, Michael Pieper, Vincent Studer

53This E. Schneider
Executive Chairman

Member of the Board of Directors of Rieter Holding AG, Winterthur
Member of the Board of Directors of Autoneum Holding AG, Winterthur

Michael Pieper
Vice Chairman

Owner of the Artemis Holding AG, Hergiswil
Chairman of the Management Board of Artemis Group, Hergiswil
Member of the Board of Directors of various Artemis and Franke subsidiaries worldwide
Member of the Board of Directors of Arbonia AG, Arbon
Member of the Board of Directors of Bergos Berenberg AG, Zurich
Member of the Board of Directors of Rieter Holding AG, Winterthur
Member of the Board of Directors of Autoneum Holding AG, Winterthur
Member of the Board of Directors of Reppisch-Werke AG, Dietikon

Dr. Peter Altorfer
Vice Chairman

Partner at the law firm Wenger & Vieli AG, Zurich
Member of the Board of Directors of agta record ag, Fehraltorf
Member of the Board of Directors of BIH SA, Rapperswil-JonaMember of the Board of Directors of the private bank Bellerive AG, Zurich
Further mandates with a foreign bank as well as non-listed investment and real-estate companies
as well as charitable foundations in Switzerland

Claudia Coninx-Kaczynski
MemberMember of the Board of Directors of Swisscontent AG, Zurich
Member of other Boards of Trustees

Dr. Reto Müller
MemberPartner at BLR & Partners AG, Thalwil
Chairman of the Board of Directors of Utz Holding AG, Bremgarten
Member of other Boards of Directors and Advisory Boards

Vincent Studer
MemberPartner, member of the Board of Directors and of the management of T + R AG, Gümligen/Berne
Member of the Board of Directors of Bank EEK AG, Berne
Member of other Boards of Directors or Boards of Trustees

54

55

THE FORBO
SHARE

56

FORBO ANNUAL REPORT 2018 – THE FORBO SHARETHE FORBO SHARE
Following one of the longest uptrends in history, the international stock markets were still reaching new highs
at the start of 2018, but by February they had run into serious turbulence. For the rest of 2018, the stock markets
were subject to political uncertainty, rising interest rates in the USA, new trade tariffs, and a downturn in global
economic growth.
Whereas the Swiss Performance Index (SPI) had reached a new all-time high of 11,041 points by January 2018, it
had fallen about ten percent below this record by early March. The following months saw the market move up
and down with slightly lower volatility. Geopolitical events had a negative impact on market performance especially in the fourth quarter, and December proved to be one of the weakest months ever. The SPI closed out theyear at 9,830 points, equating to a performance of – 8.6% for the whole year.
For a number of years now the Forbo share has been steadily performing better-than-average. In 2018, the share
tracked the performance of the SPI on the whole. The Forbo share price soared to over the CHF 1,600 mark in
January 2018, but was unable to buck the trend of market volatility in the following months. The share pricereached its high of CHF 1,620 for the year by mid-August when Forbo announced its half-year results end of July.
The Forbo share had clearly outperformed the SPI at this point in time. The share price continued to hover aroundCHF 1,600 until early October, but then lost considerable ground in the wake of the general downturn on thestock markets in the fourth quarter. The share closed out the year at CHF 1,381. The performance for the year
came to – 8.2%, which was slightly better than that of the SPI.
If the trend since the end of 2005 is taken into consideration, the Forbo share has outperformed the SPI by morethan five-fold.

The Forbo share in comparison to the SPIForbo share
SPI
120%

1,600
1,400

90%

1,200

60%

1,000
30%
800
0%

600

– 30%

400
31.12.2014

31.12.2015

31.12.2016

31.12.201731.12.2018

57

Share capital
Issued registered shares1)
Thereof:
Shares outstanding
Share buyback programs
Other treasury shares
Reserve shares (without dividend rights)

2018
number1,800,000

2017
number1,800,000

2016
number1,800,000

2015
number
1,990,000

2014
number2,150,000

1,601,718
150,000
26,863
21,4191,704,444
63,105
11,032
21,4191,709,844
068,737
21,4191,708,458
190,000
70,123
21,4191,888,850
158,467
81,264
21,419CHF
180,000

CHF
180,000

CHF
180,000

CHF
199,000

CHF
215,000

160,172
15,0002,686
2,142

170,444
6,311
1,103
2,142

170,984
0
6,874
2,142

170,846
19,0007,012
2,142

188,885
15,847
8,126
2,142

CHF
354
82.4
21.004)
1.35)
1.65)
25

CHF
383
22.4
19.00
1.15)
1.45)
85

CHF
364
74.7
19.00
1.45)
2.05)
25

CHF
300
62.1
17.00
1.45)
2.15)
27

CHF
371
62.0
16.00
1.55)
2.25)
26

CHF
1,620
1,302
1,381
2,916
2,344
2,486

CHF
1,669
1,313
1,505
3,004
2,383
2,709

CHF
1,367
960
1,313
2,461
1,728
2,363

CHF
1,255
811
1,182
2,497
1,613
2,352

CHF
1,043
719
995
2,242
1,545
2,138

Issued nominal capital
Total
Thereof:
Shares outstanding
Share buyback programs
Other treasury shares
Reserve shares (without dividend rights)

Data per share
Group shareholders’ equity per share2)
Group profit per share (undiluted)2) 3)
Gross dividend and cash distribution
Gross dividend yield (in %)

High
Low

Payout ratio6) (in %)Stock market statistics
Share priceMarket capitalization (m)7)

High
Low
Year-end
High
Low
Year-end

1) Par value per share in 2018, 2017, 2016, 2015 and 2014: CHF 0.10
2) Based on the weighted average of the number of shares as set out innote 11 ‘Earnings per share’ on page 116 of the financial report.
3) See note 11 ‘Earnings per share‘ on page 116 of the financial report.
4) Proposal of the Board of Directors to the 2019 Ordinary General Meeting.
5) Calculated on the basis of a cash distribution in the form of a dividend.
6) Gross cash distribution as a percentage of Group profit.
7) Total number of shares multiplied by the corresponding share price.

CORPORATE
GOVERNANCEREPORT

60

FORBO ANNUAL REPORT 2018 – CORPORATE GOVERNANCE REPORTCORPORATEGOVERNANCEREPORTAt Forbo, the concept of corporate governance encompasses the entire set of principles and rules on organization, conduct, and transparency that are designed toprotect the company’s long-term interests. Forbo’s aim is to strike a careful balance
between management and control. The central rules are contained in the Articles of
Association, the Organizational Regulations, and the regulations of the committeesof the Board of Directors. The following information is set out in line with the Direct­
ive on Information relating to Corporate Governance (‘DCG’) and the relevant publications of SIX Swiss Exchange.

Group structure and shareholders
Group structure
Forbo Holding Ltd, domiciled at Lindenstrasse 8, 6340 Baar, is a limited company under Swiss law. The holding
company holds all subsidiaries, directly or indirectly, that belong to the Forbo Group. The operational structure of
the Group is shown in the organizational chart on page 51. The scope of consolidation of Forbo Holding Ltd does
not include any listed companies. The unlisted companies within the scope of consolidation of Forbo Holding Ltd
are listed in the section ‘Group companies’ starting on page 136 of the financial report. The company name anddomicile, share capital, and percentage of participation, along with information relating to the allocation of theGroup company to the Group’s businesses, can also be found in that section of this Annual Report.
Significant shareholders
As of December 31, 2018, 4,129 shareholders were listed in the share register of Forbo Holding Ltd, or 418 (11%)
more than in the previous year. As of December 31, 2018, Forbo Holding Ltd knew of the following significant
shareholders with a holding of more than 3%:
31.12.2018as a percentage
Michael Pieper1)
Forbo Holding Ltd2)This E. Schneider
UBS Fund Management (Switzerland) AG
BlackRock Inc.

27.04
11.02
3.03
3–5
3–5

1) Michael Pieper holds his interest directly and indirectly through Artemis Beteiligungen I AG.
2) Forbo Holding Ltd holds its interest directly and indirectly through Forbo International SA and Forbo Finanz AG.

Disclosure of significant shareholders and significant shareholder groups and their holdings is effected in accord­
ance with the disclosure notices made in the year under review pursuant to Article 120 of the Financial Market
Infrastructure Act (FMIA) and the provisions of the Ordinance of the Swiss Financial Market Supervisory Authority
on Financial Market Infrastructures and Market Conduct in Securities and Derivatives Trading (FMIO-FINMA).

61

Below is a summary of the current notified shareholdings published in the year under review:
On April 12, 2018, This E. Schneider reported that he had exceeded the 3% threshold and that he held 54,285
shares, corresponding to 3.02% of the voting rights.
On October 23, 2018, Forbo Holding Ltd reported that it had exceeded the threshold of 10% and that it held
180,692 of its own shares, corresponding to 10.04% of the voting rights, directly or indirectly via Forbo International SA, Baar, Switzerland, and Forbo Finanz AG, Baar, Switzerland.
Full disclosure reports and all further published disclosure notices can be consulted on the publication platform of
the disclosure office of the SIX Swiss Exchange (www.six-exchange-regulation.com � Publications � Significant
shareholders).
For further information on significant shareholders or shareholder groups, we refer the reader to the table on page
60 and to page 154 of the financial report (duty of disclosure pursuant to Article 663c of the Swiss Code of Obligations (CO)).
Cross-shareholdings
Forbo Holding Ltd has not entered into any cross-shareholdings with mutual capital shareholdings or voting
rights.

Capital structure
Share capital
As of December 31, 2018, Forbo Holding Ltd had a fully paid up share capital of CHF 180,000, divided into
1,800,000 listed registered shares, each with a par value of CHF 0.10. Of this amount:–– 65.97% were registered in the name of 4,100 shareholders with voting rights–– 29.46% were shares of banks or of SIX SIS AG pending registration of transfer–– 4.57% were registered in the share register without voting rights
The shares of Forbo Holding Ltd (security number 000354151/ISIN CH0003541510) are listed on SIX Swiss Exchange. No different categories of shares exist. Each share entitles the owner to one vote. Further information on
the Forbo share can be found on pages 56 and 57. Further information on the rights of participation associatedwith the Forbo share can be found on pages 71 and 72 of this Annual Report.
Based on the authorization granted by the Ordinary General Meeting of Forbo Holding Ltd on April 6, 2017, theBoard of Directors decided to continue the 2017 – 2020 share buyback program and on June 6, 2018, launcheda buyback of a maximum of 116,895 registered shares via a second trading line. The program resulted in the repurchase of a total of 86,895 registered shares by December 31, 2018. Together with the fixed-price share buyback
program concluded on November 29, 2017, a total of 150,000 shares have been therefore repurchased under thecurrent 2017 – 2020 buyback program as of December 31, 2018. At the forthcoming Ordinary General Meetingof April 5, 2019, the Board of Directors will propose a capital reduction by cancelation of the registered shares
repurchased under this share buyback program.

62

FORBO ANNUAL REPORT 2018 – CORPORATE GOVERNANCE REPORT

Conditional and authorized capital
Pursuant to Clause 4 of the Articles of Association, Forbo Holding Ltd has a maximum conditional capital of
CHF 16,645, corresponding to 166,450 registered shares to be paid up in full with a par value of CHF 0.10 each.
The capital increase takes place in accordance with the Articles of Association through the exercise of option
and convertible rights granted in connection with the bonds issued by the company or one of its subsidiaries,or through the exercise of option rights granted to shareholders. Except for shareholder options, shareholders
have no right of subscription. Holders of option or convertible rights are entitled to subscribe to new share issues.
The registration of new shares is subject to the general restriction set out in Clause 6 of the Articles of Associ­ation, which stipulates that shareholders are entered in the share register with voting rights only if they declareexpressly that they have acquired the shares in their own name and for their own account.
There is no authorized capital.
Changes in capital
No changes to the capital of Forbo Holding Ltd were made either in the year under review or in the previous
year.
The Ordinary General Meeting of Forbo Holding Ltd on April 29, 2016, decided, based on the audit report of alicensed audit expert, to reduce the ordinary share capital of the company by CHF 19,000 from CHF 199,000 to
CHF 180,000 by canceling 190,000 shares with a par value of CHF 0.10 each. It was further decided to amend the
Articles of Association accordingly. The capital reduction was effected, and the new share capital of CHF 180,000
was entered in the Commercial Register on July 14, 2016.
Participation certificates and non-voting equity securities (‘Genussscheine’)
Forbo Holding Ltd has issued neither participation certificates nor non-voting equity securities.
Limitations on transferability and nominee registrations
Forbo Holding Ltd does not have any percentage limitations on voting rights. The Board of Directors may only
refuse to register shares in the share register if the purchaser of the shares does not expressly declare at the company’s request that he/she has acquired the shares in his/her own name and for his/her own account.
Pursuant to Clause 6 of the Articles of Association, nominees may be entered in the share register with voting
rights for up to a maximum of 0.3% of the registered share capital entered in the Commercial Register. Over andabove this limit, nominees are only entered provided the name, address, and shareholding of those persons aredisclosed for whose account the nominee holds a total of 0.3% or more of the registered share capital entered in
the Commercial Register.
No statutory privileges exist and there is no restriction on the transferability of the shares of Forbo Holding Ltd.
Convertible bonds and warrants/options
Forbo Holding Ltd has no outstanding convertible bonds nor has it issued any marketable warrants/options.
Details on the long-term incentive plan for the Executive Board, introduced in the previous year, under which
future subscription rights are outstanding, can be found on pages 85 to 89 as well as on pages 126 and 127 ofthis Annual Report.

63

Board of Directors
Members of the Board of Directors
The cut-off date for the following information is December 31, 2018.
With the exception of This E. Schneider, Executive Chairman of the Board of Directors, none of the membersof the Board of Directors listed below holds or has held any operational management positions for Forbo Holding
Ltd or its Group companies. In the three business years preceding the reporting period, no member of theBoard of Directors was a member of the Executive Board of Forbo Holding Ltd and, with the exception of This E.
Schneider, no Board of Directors member sat on the Executive Board of any of its subsidiaries. There are no significant business relationships between the members of the Board of Directors and Forbo Holding Ltd or its
Group companies.
This E. Schneider, Executive Chairman
This E. Schneider, born in 1952, is a Swiss citizen. He studied economics at the University of St. Gallen (lic. oec. HSG)
and at the Graduate School of Business, Stanford University, California, USA. After holding various management
functions in Europe and the USA, he joined the Executive Board of Schmidt Agence AG, where he was responsible
for strategic planning, operations and logistics from 1984 to 1990. From 1991 to 1993, he was Chairman and CEOof the publicly listed company SAFAA, Paris. In 1994, he became a member of the Executive Board of Valora, withresponsibility for the canteen and catering division. From 1997 to 2002, he was Delegate and Vice President of theBoard of Directors of Selecta Group. From March 2004 to December 2013, This E. Schneider was Delegate of theBoard of Directors and CEO, and from January to April 2014 Delegate of the Board of Directors of the Forbo Group.
He has been the Executive Chairman of the Board of Directors since the Ordinary General Meeting of 2014. This
E. Schneider is also a member of the Board of Directors of Rieter Holding AG and Autoneum Holding Ltd.
Michael Pieper, Vice Chairman
Michael Pieper, born in 1946, is a Swiss citizen. He studied economics (lic. oec. HSG) at the University of St. Gallen.
He has been with the Artemis Group (formerly the Franke Group) since 1988 and has been its owner and CEO
since 1989. Among others, he is a member of the Boards of Directors of Arbonia AG, Bergos Berenberg AG, Rieter
Holding AG and Autoneum Holding AG. He was first elected to the Board of Directors of Forbo Holding Ltd in
2000.
Dr. Peter Altorfer, Vice Chairman
Peter Altorfer, born in 1953, is a Swiss citizen. He studied law at the University of Zurich and holds a doctorate
in law (Dr. iur.). He attended the PED program at the IMD, Lausanne. Until 1988, he worked at Bank Leu AG. He
subsequently joined the law firm Wenger & Vieli in Zurich, where he is now a partner, specializing in bank andcompany law as well as estate planning. Peter Altorfer sits on the Boards of Directors of several companies,­including agta record ag in Fehraltorf, BIH SA in Rapperswil-Jona, and of a private and foreign bank, as well as
unlisted ­investment and real estate companies as well as charitable foundations in Switzerland. He has been amember of the Board of Directors of Forbo Holding Ltd since March 2005.

64

FORBO ANNUAL REPORT 2018 – CORPORATE GOVERNANCE REPORTClaudia Coninx-Kaczynski
Claudia Coninx-Kaczynski, born in 1973, is a Swiss citizen. She took a degree in law at the University of Zurich (lic.
iur.) and earned her Master of Law (LL. M.) at the London School of Economics and Political Sciences. From 2006
to 2011, she managed the business of Faerbi Immobilien AG (subsequently Rietpark Immobilien AG) in Zurich asa member of the Board of Directors. Subsequently, until 2014, she implemented various projects for P. A. MediaAG and Swisscontent AG in Zurich (M & A among others). Between 2013 and 2016, she was a member of the Boardof Directors of Tamedia AG, where in 2017 she was appointed Chairwoman of the Pool of Majority Shareholders.
She is a member of the Board of Directors of Swisscontent AG and sits on other Boards of Trustees. She has beena member of the Board of Directors of Forbo Holding Ltd since April 2014.
Dr. Reto Müller
Reto Müller, born in 1951, is a Swiss citizen. He took a first degree in economics and completed his doctorate(Dr. oec. HSG) at the University of St. Gallen. He also completed the Stanford Executive Program and additional
training at IMD, INSEAD and the Harvard Business School. He is a founding partner of the Helbling group of companies, for which he worked from 1984 to 2016. From 2000 to 2011, he was the CEO and Chairman of the Boardand from 2011 to 2016 the full-time Chairman of the Board of Helbling Holding AG. Between 2002 and 2010,
Reto Müller was either a member or Chairman of the Regional Economic Advisory Board (Zurich) of the Swiss
National Bank. He was a member of the Council of SWISSMEM between 2008 and 2016. He is partner at BLR &Partners AG as well as Chairman of the Board of Directors of Utz Group and is on other Boards of Directors andAdvisory Boards. He has been a member of the Board of Directors of Forbo Holding Ltd since April 2011.
Vincent Studer
Vincent Studer, born in 1962, is a Swiss citizen. He graduated from the University of Applied Sciences, Berne, andtrained as a Swiss certified public accountant. In addition, he has completed various national and international
training courses. From 1991 to 2008, Vincent Studer worked at Ernst & Young AG as an external auditor and washead auditor responsible for auditing the statements of national and international companies in various industries.
In 2001, he was appointed a partner in the area of Auditing. Since 2008, he has been a partner and memberof the management and since 2015 a member of the Board of the accountancy and auditing firm T + R AG,­Gümligen/Berne, where he heads the Auditing business unit. Vincent Studer is a member of the Board of Directorsof Bank EEK AG in Berne. He holds further directorships in other companies and foundations. He has been a member of the Board of Directors of Forbo Holding Ltd since April 2009.

65

Board of Directors of Forbo Holding Ltd
as per December 31, 2018
Executive Chairman
THIS E. SCHNEIDER
Executive Director
Vice Chairmen
MICHAEL PIEPER
Non-executive Director
DR. PETER ALTORFER
Non-executive Director
Members
CLAUDIA CONINX-KACZYNSKI
Non-executive Director
DR. RETO MÜLLER
Non-executive Director
VINCENT STUDER
Non-executive Director
Secretary of the Board of Directors
NICOLE GRAF
Non-member

OGM:
AFC:
HRNC:
RC:		
C: 		
M: 		

Ordinary General Meeting
Audit and Finance Committee
Human Resources and Nomination Committee
Remuneration Committee
Chair
MemberFirst elected
at OGM

AFC

HRNC

RC

2004

–

–

–

2000

–

M

M

2005

M

C

C

2014

–

M

M

2011

M

–

–

2009

C

–

–

66

FORBO ANNUAL REPORT 2018 – CORPORATE GOVERNANCE REPORT

Statutory regulations governing the number of permissible activities
pursuant to Article 12 Paragraph 1 Section 1 OaER
In accordance with Clause 22 of the Articles of Association, members of the Board of Directors may hold no morethan five mandates in listed companies and twenty mandates in unlisted legal entities. A mandate is defined
as any activity on the senior managerial or supervisory bodies of legal entities that are entered in the Swiss Commercial Register or comparable foreign registers and do not belong to the Forbo Group. Mandates with associa­ted
companies outside the Forbo Group are deemed to be a single mandate.
Election and term of office
The members of the Board of Directors are elected in individual votes for a one-year term of office, in accordancewith the Ordinance against Excessive Remuneration in Listed Public Companies (OaER). A year is defined as theperiod between two Ordinary General Meetings. In accordance with the Organizational Regulations of Forbo
Holding Ltd, members who have reached the age of 70 resign from the Board of Directors at the Ordinary General Meeting of the following year. The Board may, however, approve exceptions. In determining the compositionof the Board of Directors, importance is attached to the election of independent individuals with international
experience in industrial companies as well as in the financial and consultancy sectors.
The Articles of Association of Forbo Holding Ltd do not contain any regulations that deviate from the statutory
provisions for the appointment of the Chairman, the members of the Remuneration Committee, and the independent proxy.
Internal organizational structure
The allocation of tasks within the Board of Directors and the composition of the Board committees are shown in
the table on page 65.
Decisions are as a general rule taken by the full Board of Directors. The Board constitutes three standing committees from its own ranks – the Audit and Finance Committee (AFC), the Human Resources and Nomination Committee (HRNC), and the Remuneration Committee (RC) – to deal with clearly defined subject areas of overriding
importance. These three committees have mainly advisory and control functions. The members of the AFC and
HRNC are elected by the Board of Directors on an annual basis and can be dismissed at any time. The membersof the RC are elected annually by the Ordinary General Meeting.
As a rule, the Executive Chairman of the Board of Directors chairs the meetings of the Board and the General Meeting. He plans and conducts the meetings of the Board and the General Meeting. The meetings of the Board andthe relevant items on the agenda are prepared by the Executive Chairman. He monitors the execution of themeasures adopted by the Board. He is the direct superior of the CEO, is in regular contact with him, and has anadvisory and supervisory function. In addition, the Executive Chairman represents the Board and the Forbo Groupvis-à-vis the public, the authorities, and the shareholders. The tasks of the Executive Chairman of the Board andthe demarcation of responsibilities from those of the CEO are set out in the section ‘Areas of responsibility’.
The Vice Chairmen are tasked with deputizing for the Executive Chairman should the latter be prevented from
attending for any reason. In accordance with the Organizational Regulations and actual practice, the Vice Chairmen have no further duties.
The Vice Chairmen are elected by the Board of Directors.

67

The Board of Directors meets on being convened by the Executive Chairman as often as business requires but
at least four times a year. The items on the agenda must be announced at least five working days before the dayof the meeting. This notification period may be shortened in urgent cases. In 2018, the Board of Directors met
six times, with meetings lasting between half a day and a whole day. Every Board member participated in all
meetings.
The Executive Chairman may invite members of the Executive Board or other senior employees to attend Board
meetings for individual items. Regular use is made of this option. External consultants may participate in themeetings of the Board of Directors, the AFC, the RC or the HRNC only in exceptional circumstances to deal withparticular items. As a rule, however, the meetings are held without external consultants.
Audit and Finance Committee
The AFC advises the Board of Directors in respect of its duties on behalf of the Group in the areas of financial­reporting, the accounting standards and systems used, and decisions with significant financial implications. The
AFC monitors the activities of the internal auditors and the external auditors. Moreover, it establishes the audit
program of the internal auditors and proposes to the Board of Directors the choice of the external auditors forthe attention of the General Meeting. The CEO and the CFO are regularly requested to attend meetings in anadvisory capacity, while representatives of the internal and external auditors may attend on special invitation.
The AFC convenes as often as business requires, but at least twice a year. In the 2018 business year, two meetings
were held, each lasting about half a day. All members of the AFC were present at both meetings. The external
auditors were present for some items on the agenda of the AFC’s meeting on the financial statements and at themeeting to discuss the scope of the audit and the audit fee. The Ernst & Young representatives responsible forinternal audit attended the discussions of the internal audit reports at both meetings.
Human Resources and Nomination Committee
We refer to the explanations in the remuneration report on pages 78 and 79.
Remuneration Committee
We refer to the explanations in the remuneration report on page 79.
Areas of responsibility
The Board of Directors bears ultimate responsibility for the management of Forbo Holding Ltd. The main dutiesof the Board of Directors are the following non-transferable and inalienable tasks pursuant to the Swiss Code ofObligations and the Articles of Association:–– overall management of the company and issuing of the necessary directives–– definition of the organizational structure–– determination of accounting, financial controlling, and financial planning principles–– appointment and dismissal of persons entrusted with the management of the company–– overall supervision of the persons entrusted with managing the company, particularly with respect tocompliance with the law, Articles of Association, regulations, and directives–– preparation of the Annual Report as well as of the General Meeting and implementation of its resolutions–– preparation of the remuneration report–– notification of the court in the event of over-indebtedness

68

FORBO ANNUAL REPORT 2018 – CORPORATE GOVERNANCE REPORTThe Board of Directors bears ultimate responsibility for supervising and monitoring the management of thecompany and is responsible for the corporate strategy. It issues guidelines for business policy and is regularly
briefed on the current state of business.
Business to be dealt with by the Board of Directors is regularly submitted in advance to the AFC, HRNC, and RC,
ad hoc committees or individual members, depending on the subject, for review or an opinion. With the exception of its non-transferable and inalienable tasks, the Board of Directors may transfer tasks and responsibilities infull or in part to individual members of the Board or to third parties.
The Board of Directors is empowered to take decisions on all matters which are not reserved or transferred to
the General Meeting or another body of Forbo by law, the Articles of Association, or regulations.
Tasks of the Executive Chairman of the Board of Directors:–– chairing of the Board of Directors–– preparation and monitoring of the execution of the decisions of the Board of Directors–– representation and positioning of the Group in the public–– overall management of strategy development and involvement in realizing key strategic projects–– management of relationships with key accounts and with business, sector and capital market partners
Tasks of the Chief Executive Officer:–– operational management of the Group–– chairing of the Executive Board–– development and operational implementation of strategies–– implementation and monitoring of multi-year planning and budgets–– supporting of the Executive Chairman of the Board of Directors in preparing important projects relating tostrategy, personnel, and finances for discussion and decision-taking by the Board of Directors
The CEO reports to the Executive Chairman of the Board of Directors and as a rule participates in all Board meetings dealing with topics that are relevant for the exercise of his function. He is not a member of the Board of
Directors, though. All business management tasks that are not allocated to the Board of Directors or the Executive
Chairman of the Board and that do not require the approval of the Board of Directors are delegated to the CEO
and are carried out by him on his own responsibility. The CEO is responsible for ensuring compliance with theprovisions of the law, the Articles of Association, and regulations throughout the Forbo Group.
In carrying out his tasks, the CEO is supported by the members of the Executive Board, who report to him. The
Executive Board comprises the CEO, CFO, and the Executive Vice Presidents of the two divisions; it is responsible
for the long-term success and market-driven management of the Forbo Group.
The members of the Executive Board are responsible for their particular area of activity and also bear joint responsibility for safeguarding the interests of the Group and achieving the financial Group result.

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Information and control instruments vis-à-vis the Executive Board
At the meetings of the Board of Directors, any member may request information about any matter concerning theForbo Group. Outside the meetings, such requests for information are to be addressed to the Executive Chairman.
The CEO and the other members of the Executive Board inform the Board of Directors at each regular meeting
about the current state of business, important business events, and significant deviations from the budget.
The Chairmen of the AFC, the HRNC, and the RC report at the Board of Directors meetings on the activities of theircommittees and express the opinions and recommendations of the AFC, HRNC or RC on the business items on
which decisions are to be taken. Each member of the Board of Directors has the right to inspect the minutes of
the AFC, HRNC, and RC meetings. The Executive Board reports to the AFC through the CFO in consultation with
the CEO; it reports to the HRNC and RC through the CEO.
The Board is also regularly briefed outside meetings about events and challenges the Group is facing and the general performance of the divisions. In addition, the Executive Chairman and the two Vice Chairmen are in regularcontact when essential policy issues are involved. For important, particularly urgent events, the CEO informs the
Executive Chairman of the Board of Directors immediately.
The Executive Board meets as often as business requires, normally once a month. In the 2018 business year, eleven meetings were held, with the meetings usually lasting half a day.
The CEO chairs the meetings of the Executive Board. For details concerning the participation of members of
the Executive Board in meetings of the Board of Directors and its committees, refer to the sections on internalorgan­ization and on the AFC, HRNC, and RC on pages 66 and 67, as well as 78 and 79.
The Board of Directors fulfils its supervisory and monitoring obligations also by means of financial reporting and
its role in the planning cycle. The internal and external auditors may assist the Board in this task. However, neither
the external auditors nor the internal auditors were invited to any meetings of the Board of Directors in 2018 asthere were no special incidents or topics for discussion.
As part of financial reporting, the Board of Directors is informed as a rule once a month in writing about the company’s current business performance and earnings situation by means of annotated income statements, key ratios,and deviation analyses.
The Board of Directors is, moreover, involved in the company’s planning cycle. As a rule, the existing strategy is
subjected to a thorough review by the Board of Directors in the first half of the year. The revised strategy is quantified in the three-year medium-term plan, which is normally approved at mid-year by the Board of Directors. Basedon the medium-term plan, the Board of Directors sets the budget objectives for the coming business year. Thesebudget objectives form the basis of the detailed budget, which is discussed and adopted by the Board of Directors
in the fourth quarter.
The current business year is assessed in a first estimate always at the end of May and a second estimate in mid-­
October. On completion of the business year, the extent to which the budget has been met is checked and­deviations are analyzed. This analysis is used to derive appropriate measures, which are then implemented in thenext planning cycle.
Internal audit is effected by Ernst & Young, which has been commissioned for this purpose. Internal audit isadministratively subordinated to the Executive Chairman of the Board of Directors, is functionally independent,
and reports directly to the AFC.

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FORBO ANNUAL REPORT 2018 – CORPORATE GOVERNANCE REPORTThe audits are conducted in accordance with an annual plan approved by the AFC. A distinction is made between
ordinary and special engagement audits. The latter consist of limited reviews, follow-up reviews, compliance­audits, and other special engagements. Where necessary, the risks and weaknesses identified in these audits areminimized or eliminated by measures adopted by management and are constantly monitored.
In 2018, nine Group companies were audited by Ernst & Young on the occasion of six internal audits. The internal
audits included, among others, the audit of control points defined in the framework of the internal control system(ICS) as well as various compliance reviews related to the audited business processes. Lastly, additional risks andcontrols in connection with the audited business processes were analyzed. At least four companies in each divisionwere audited in the course of the internal audits.
By means of self-assessments and management controls by division management, the implementation and reliability of the controls introduced with the ICS were examined to ensure that deviations were identified and thatappropriate corrective measures were implemented.
Risk management
The ongoing and systematic evaluation of current and future risks invariably involves identifying and capitalizingon opportunities. Forbo regards risk management as a managerial and working tool designed, among otherthings, to safeguard the tangible and intangible assets of the company.
Forbo has a risk-based insurance coverage in line with industry practice and has appropriately insured in particu­
lar operational risks such as property damage, business interruption and liability. The risks specifically in the areasof property damage and business interruption are examined in the context of periodic risk engineering reportsby external experts. For this purpose, production companies are visited at regular intervals, and comprehensive
surveys are worked through with local management. Action plans are drawn up and implemented based on therisks identified. These risk engineering audits have been prepared since 1990.
As regards business risks, Forbo addresses strategic risks as well as market and financial risks. In the area of market
risks, interest and currency risks are centrally monitored and hedged in certain cases. The liquidity and financing
of subsidiaries are also monitored centrally. For more information on this subject, refer to pages 131 to 134 of thefinancial report.
With regard to the risk management process, refer to the relevant explanations on pages 131 to 134 (note 25 ‘Risk
assessment and financial risk management’) of the financial report.

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Executive Board
Members of the Executive Board, other activities, and vested interests
The members of the Executive Board, their nationality, function, training, and professional career, as well as otheractivities and vested interests, are set out on page 49 of this Annual Report.
Statutory regulations governing the number of permissible activities
pursuant to Article 12 Paragraph 1 Section 1 OaER
In accordance with Clause 22 of the Articles of Association, members of the Executive Board may hold no morethan two mandates in listed companies and seven mandates in unlisted legal entities. The acceptance of mandates by members of the Executive Board is subject to prior approval by the Board of Directors. A mandate isdefined as any activity on the senior managerial or supervisory bodies of legal entities that are entered in the
Swiss Commercial Register or comparable foreign registers and do not belong to the Forbo Group. Mandates
with associated companies outside the Forbo Group are deemed to be a single mandate.
Changes on the Executive Board
Marc Deimling took over management of the Movement Systems division effective January 1, 2018. Jean-MichelWins, former head of the Movement Systems division, has been heading the Flooring Systems division since thebeginning of the year under review.
Management contracts
Forbo Holding Ltd has concluded no management contracts with third parties.

Compensation, shareholdings, and loans
For information on this subject, refer to the remuneration report from page 77.

Shareholders’ participation rights
Voting right restriction and representation
The registration of shares with voting rights in the share register requires the consent of the Board of Directors.
Such consent may be withheld if the purchaser does not expressly declare that he/she has acquired and is holding the shares in his/her own name and for his/her own account. Pursuant to the Articles of Association, nominees
may be entered in the share register with voting rights for up to a maximum of 0.3% of the registered share capital entered in the Commercial Register. The restriction also applies to shares that are subscribed or acquired
through the exercise of a subscription, option or convertible right. Resolutions on the amendment or abrogationof the clause on the registration of registered shares require a majority of two-thirds of the votes represented at
the General Meeting and the absolute majority of the par value of the shares represented.
Deviating from Article 689 Paragraph 2 Swiss Code of Obligations, shareholders who are unable to attend theGeneral Meeting in person may not be represented by any third party of their choosing. They may only be represented by the legal representative, the independent proxy, or another shareholder who is registered in the shareregister.
Electronic participation in the General Meeting
Clause 12 of the Articles of Association defines the rules for electronic issuing of instructions to the independent
proxy; the precise modalities for this are defined by the Board of Directors. In accordance with Clause 14 of the
Articles of Association, voting and elections at the General Meeting are in principle conducted electronically, unless the General Meeting decides that the ballot should be in writing or by a show of hands or the Chairman orders
such a ballot procedure.

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FORBO ANNUAL REPORT 2018 – CORPORATE GOVERNANCE REPORT

Statutory quorums
The Articles of Association of Forbo Holding Ltd do not provide for quorums that are larger than those stipulated
by law for decisions of the General Meeting.
Convening of the General Meeting
The General Meeting is convened in accordance with the statutory provisions.
AgendaShareholders who represent at least 1% of the share capital may request that an item be placed on the agenda.
This request must be communicated to the Board of Directors in writing, indicating the proposals, at least 45 days
before the date of the General Meeting.
Entry in the share register
In accordance with Clause 12 of the Articles of Association, the Board of Directors, in its invitation to the General
Meeting, announces the cut-off date for entries in the share register authorizing shareholder participation andvoting.

Changes in control and defense measures
Duty to make an offer
The Articles of Association of Forbo Holding Ltd do not contain an ‘opting-up’ clause or an ‘opting-out’ clause pursuant to Articles 135 and 125 of the Financial Market Infrastructure Act.
Clause on changes of control
As per year-end 2018, no clauses on changes of control existed in agreements or plans involving members of
the Board of Directors, the Executive Board or other members of management.

Auditors
Duration of the mandate and term of office of the Auditor in Charge
KPMG has been the Forbo Group’s auditors since 2015. The auditors are elected every year by the Ordinary General Meeting on a proposal by the Board of Directors. Rolf Hauenstein has been the Auditor in Charge since April
24, 2015.
Auditing fees
The auditing fees levied by the Group’s auditors for auditing the consolidated financial statements, including thestatutory audit of the individual financial statements of the holding company and the consolidated subsidiaries,
amounted to CHF 0.9 million in the year under review.
Additional fees
The additional consultancy fees that were invoiced by the auditing company amounted to CHF 0.1 million in
2018. These fees were charged mainly for the provision of tax advice and general advisory services.

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Information instruments of the external auditors
Where required, the external auditors prepare for the Executive Chairman of the Board of Directors, the CEO, andthe CFO an annual management letter reporting on their work and the results of their audit at Group level in theyear under review. The key points are submitted to the Board of Directors in the form of a comprehensive report.
The external auditors also prepare management letters on the subsidiaries they have audited. The AFC assesses
and evaluates the proposals and statements thus received and appraises the corrective measures taken by management. At the AFC’s invitation, representatives of the external auditors attend the AFC meetings in an advisory
capacity. The Chairman of the AFC reports on the activities of the AFC and its assessment of the external auditors
at the meetings of the Board of Directors. Any member of the Board of Directors may inspect the minutes of the
AFC meetings.
At its meetings, the AFC assesses the performance and fees of the external auditors as well as their independence
in both their auditing and their non-auditing capacities. This evaluation is based on the documents prepared by
the external auditors and the discussions held with the external auditors in the meetings. It also draws on theevaluation of the CFO, who, if required, obtains the opinion of local management with regard to the audit workfor the subsidiaries. The criteria for the evaluation of the external auditors include, in particular, their technical andoperational competency, their independence and objectivity, punctual delivery of audit reports, the scope andfocus of the audits, and the ability to provide effective and practical recommendations. The assessment by the
AFC forms the basis of the proposal made by the Board of Directors to the Ordinary General Meeting regarding
the choice of the external auditors.

Information policy
Transparency for investors
Forbo provides objective and periodic communication to its shareholders, the capital market, the media, andthe public by reporting in a timely fashion on business trends and activities relevant to the company. The Execu­
tive Chairman of the Board of Directors can be contacted directly for such information.
Shareholders receive summary reports on the business year as well as half-year reports. The Annual Report, likeall other published documents, is available in printed form as well as online at www.forbo.com. The General
Meeting is an additional source of information. Periodic publication of media releases, the annual media andanalysts’ conference, and road shows are further information tools for the media and the capital market.

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FORBO ANNUAL REPORT 2018 – CORPORATE GOVERNANCE REPORT

Ad hoc communication
Registration for the automated dissemination of ad hoc releases in accordance with the guideline on ad hoc publicity of the SIX Swiss Exchange is available at the following addresses:
www.forbo.com � Media � Media releases ‘subscription service’
Notification to shareholders takes place through publication in the company’s official publication provided noother form of information is stipulated by law. Written notification to shareholders takes place through a simple
letter to the addresses listed in the share register.
A financial calendar with the key dates can be found on page 12 of this Annual Report. Further information on
the Forbo share is printed on pages 56 and 57 of this Annual Report.
Publications may be ordered by email, fax, or telephone:
Email communications@forbo.com
Phone + 41 58 787 25 25
Fax + 41 58 787 20 25
The contact address for Investor Relations is:
Forbo International SA
Urs Christen, Head Investor Relations
Lindenstrasse 8
P.O. Box 1339
CH-6341 Baar
Phone + 41 58 787 25 25
The contact address for press information is:
Forbo International SA
Karin Marti, Head Corporate Communications
Lindenstrasse 8
P.O. Box 1339
CH-6341 Baar
Phone + 41 58 787 25 25

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REMUNERATIONREPORT

78

FORBO ANNUAL REPORT 2018 – REMUNERATION REPORTREMUNERATIONREPORT
Introduction
The report meets the provisions of the Ordinance against Excessive Remuneration in Listed Public Companies(OaER), which came into effect on January 1, 2014, and consequently fulfils the requirements of the Swiss Codeof Obligations.
Once a year, in a separate and binding ballot, the Ordinary General Meeting approves the maximum sum for the
total remuneration to be paid to the Board of Directors for the business year following the Ordinary General
Meeting. In addition, a vote is taken on the maximum total amount of fixed remuneration to be paid to the­Executive Board for the business year following the Ordinary General Meeting, the amount of short-term variable
remuneration (bonus/short-term incentive) to be paid to the Executive Board for the business year preceding
the Ordinary General Meeting, as well as the maximum total amount of the long-term participation (long-term
incentive) for the Executive Board for the year of the respective Ordinary General Meeting.
The variable remuneration model for the Executive Board with the short-term incentive was supplemented
by a long-term participation (long-term incentive) component, effective as of January 1, 2017. This long-term
incentive consists of a performance share unit plan. Its aim is to link a significant portion of the Executive Board’s
remuneration even more closely with the company’s long-term success and to make it more responsive to shareholders’ interests. Details on the long-term incentive can be found in the chapter ‘Elements of remuneration of
the Executive Board’ on pages 84 to 86. An amendment to the Articles of Association concerning this matter wasapproved by a large majority at the Ordinary General Meeting on April 6, 2017.
Owing to this change in the remuneration system effective since 2017, shareholders will vote individually at the2019 Ordinary General Meeting on the following four remuneration payments:–– Maximum total remuneration for the Board of Directors for 2020–– Maximum fixed remuneration for the Executive Board for 2020–– Short-term variable remuneration of the Executive Board for 2018 (bonus/short-term incentive)–– Maximum total amount of the long-term participation for the Executive Board for 2019(long-term incentive plan 2019 – 2021)
The total remuneration was approved by a large majority in a consultative vote on the 2017 remuneration reportat the Ordinary General Meeting of April 6, 2018 (agenda item 4.1). Participants in the 2019 Ordinary General
Meeting will also be invited to vote in a consultative ballot on the entire 2018 remuneration report.

Content and methodology for determining
the remuneration
The Human Resources and Nomination Committee (HRNC): task and function
The Human Resources and Nomination Committee (HRNC) advises the Board of Directors in exercising its responsibilities for the Group in matters relating to human resources and nominations both for the Board of Directors
and the most senior level of management. More specifically, the HRNC formulates personnel policy proposals forappointments to the Board of Directors and to the posts of Chairman, CEO, and other Executive Board members
for submission to the Board of Directors. Furthermore, it assesses and approves the proposals of the Executive
Chairman of the Board and the CEO regarding Executive Board appointments and employment contracts. It also
approves the acceptance of mandates by members of the Executive Board in companies that are not part of the
Forbo Group.

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The Human Resources and Nomination Committee meets as often as business requires, but at least twice a year.
In the 2018 business year, the HRNC held three meetings, each lasting a couple of hours.
The Human Resources and Nomination Committee consists of at least two members of the Board of Directors.
The Ordinary General Meeting of April 6, 2018, elected Dr. Peter Altorfer (Chair), Claudia Coninx-Kaczynski andMichael Pieper to the HRNC for the 2018 business year.
The Remuneration Committee (RC): task and function
The Remuneration Committee supports the Board of Directors in defining the principles of remuneration policy
and in determining the remuneration paid to members of the Board of Directors and the Executive Board out of
the total sum of remuneration as approved by the Ordinary General Meeting. It supports the Board of Directors
in drawing up participation programs and in all other tasks related to remuneration. The Remuneration Committee formulates appropriate recommendations for submission to the Board of Directors. The Board of Directors
may delegate further duties and powers to the Remuneration Committee. The Executive Chairman of the Boardof Directors is regularly invited to its meetings in an advisory capacity, as is the CEO in certain circumstances.
Agenda items and matters directly affecting the function or the person of the Executive Chairman of the Boardof Directors or the CEO are deliberated in their absence.
The Remuneration Committee meets as often as business requires, but at least twice a year. In the 2018 business
year, the Remuneration Committee held three meetings, each lasting a couple of hours.
The Remuneration Committee consists of at least two members of the Board of Directors. The Ordinary General
Meeting of April 6, 2018, elected Dr. Peter Altorfer (Chair), Claudia Coninx-Kaczynski and Michael Pieper to theRemuneration Committee for the 2018 business year. The members of the Remuneration Committee are independent (non-executive) members of the Board of Directors, i.e. they have never belonged to the managementof Forbo and have no, or only negligible, business relations with the company, though they may be shareholders.
Decision-making process of the Remuneration Committee
The maximum amount of the total remuneration paid to the Board of Directors and the maximum fixed remuneration paid to the Executive Board are usually determined by the Remuneration Committee once a year in thespring for the following business year and are submitted to the Board of Directors for acceptance at its Marchmeeting. The amount of the short-term variable remuneration (bonus/short-term incentive) and the definitionand objectives of the long-term participation (long-term incentive) for the Executive Board are determined by the
Remuneration Committee once a year in November for the following year.
ProposalAcceptanceApproval

RC
RC
RC

BoD
BoD
BoD

Ordinary General Meeting for the following business year
Ordinary General Meeting for the following business year
Ordinary General Meeting for the preceding business year

RC

BoD

Ordinary General Meeting for the current business year

RC

BoD

Performance targets – Executive Board regarding
long-term participation (long-term incentive)

RC

BoD

Performance targets – CEO

RC

BoD

Remuneration budget
Maximum total remuneration of the Board of Directors
Maximum fixed remuneration of the Executive Board
Short-term variable remuneration of the Executive Board(bonus/short-term incentive)
Maximum total amount of the long-term participation for
the Executive Board for 2017 (long-term incentive)
Performance targets
Performance targets – Executive Board regarding shortterm variable remuneration (bonus/short-term incentive)

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FORBO ANNUAL REPORT 2018 – REMUNERATION REPORT

Important changes in 2018
In the business year 2018, no important changes to the remuneration system were made either for the Board of
Directors or for the Executive Board.

Principles of remuneration for the Boardof Directors and the Executive Board
Forbo’s remuneration strategy is geared to long-term and sustainable corporate development. The aim is toremunerate employees appropriately for their achievements, commitment, and performance, and thereby­encourage their long-term loyalty to the company. The purpose of paying part of the remuneration in the formof shares is to link the interests of the managers to those of the shareholders. The portion of the remuneration
paid in shares is derived from a fixed remuneration amount.
The members of the Board of Directors receive a fixed remuneration, the amount of which is determined basedon whether the member is Board Chairman, a simple Board member or also a member of one of the Board committees. The remuneration is paid out to members of the Board of Directors partly in the form of locked-up sharesin Forbo Holding Ltd.
The members of the Executive Board receive a fixed and a variable remuneration. The fixed remuneration is paid
mainly in cash but may also include shares of Forbo Holding Ltd. The portion paid in shares is derived from afixed remuneration amount. The variable remuneration consists of a short-term remuneration (bonus/short-term
incentive) and a long-term participation (long-term incentive).
The bonus/short-term incentive is a short-term, performance-related remuneration, at least 50% of which must
be taken in the form of locked-up shares of Forbo Holding Ltd (see the description of the management investment plan (MIP) on pages 84 and 85 of this Remuneration Report). The portion paid in shares is derived from afixed remuneration amount. The bonus is derived from the achievement of individual (qualitative) targets byeach Executive Board member and of financial (quantitative) targets by the company. Depending on the function and responsibilities of the Executive Board member in question, these financial targets may be derived fromGroup and/or divisional objectives. It may not exceed 200% of the fixed remuneration of the individual Executive
Board member.
The long-term incentive is a long-term participation plan consisting of a performance share unit plan. At the startof the performance period, each member of the Executive Board is granted a given number of future subscription rights in the form of performance share units (PSUs). One PSU corresponds to a future subscription right toone share. The size of the PSU allocation corresponds to a defined percentage of the fixed remuneration. The
PSUs are subject to a three-year vesting period. They are converted into vested shares only on condition that theGroup’s performance objectives are achieved. At the end of the performance period, the company will determine
whether the objectives set by the Board of Directors at the start of the performance period for the performanceindicators have been reached. Depending on the degree to which the objectives have been reached, a given
percentage of the PSUs will be converted into shares, which are subject to a three-year vesting period.

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The relevant statutory provisions governing the principles of performance-related remuneration, the distributionof shares, and the additional sum for remuneration of new members of the Executive Board who are appointed
after the Ordinary General Meeting are set out in Chapter IV, pages 9 and 10 of the Articles of Association of Forbo
Holding Ltd. These can be found at:www.forbo.com � Investors � Ordinary General Meeting

Determining the remuneration of the Board of Directors
In order to determine the remuneration of the Board of Directors, the compensation paid to Board members ofForbo Holding Ltd is compared periodically with that paid to Board members of comparable industrial companies based on information that is available from publicly accessible sources and from respected market data
providers or is known to Board members from their experience of office in similar companies. Industrial companies are regarded as comparable if they are similar to Forbo in terms of sector, structure, size (sales and numberof employees), geographic presence, profitability, market capitalization, and complexity. As a general rule, no
external consultants are co-opted for determining the remuneration.
The relevant statutory provisions governing the principles of performance-driven remuneration and the distribution of shares are set out in Chapter IV, pages 9 and 10 of the Articles of Association of Forbo Holding Ltd.
These can be found at:www.forbo.com � Investors � Ordinary General Meeting

Elements of remuneration for the Board of Directors
Non-executive members of the Board of Directors
The non-executive members of the Board of Directors receive a fixed remuneration, the amount of which is­determined based on whether the member is Board Chairman, a simple Board member, or also a member of the
Audit and Finance Committee (AFC), the Remuneration Committee (RC) or the Human Resources and Nomination
Committee (HRNC). Of the remuneration, 40% is paid to the Board of Directors in shares of Forbo Holding Ltd. The
portion paid in shares is derived from a fixed remuneration amount. These shares have a lock-up period of three
years. The number of shares issued is determined on the basis of the average price in the ten stock market days
after distribution of a dividend or repayment of par value. If no dividend is distributed or no par value repayment
made, the average price during the first ten stock market days starting on June 1 of the relevant business year
applies. The settlement or payment of the shares usually takes place in November.
For the purpose of reporting the remuneration, the shares issued are valued at fair value on the date of allocation.
The total compensation for the non-executive members of the Board of Directors also includes a lump sum for
expenses plus employer contributions to the usual social insurances.
The non-executive Board members do not participate in the management investment plan (MIP).
Executive Chairman of the Board of Directors
The compensation for the Executive Chairman of the Board of Directors is disclosed separately and included
under total remuneration to the Board of Directors.

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FORBO ANNUAL REPORT 2018 – REMUNERATION REPORTThe remuneration is mainly paid in locked-up shares, which have a lock-up period of three years. The annual cash
payment for the year under review of CHF 310,000 (previous year: CHF 310,000) is used largely for employee
contributions to the pension fund and social security (AHV and IV) and for other levies. The underlying share priceused to calculate the number of shares is the weighted average price of the first ten days on which Forbo Holding Ltd shares were traded on the stock market in 2018, less the reduced value as a result of locking-up the shares(tax value 2018: CHF 1,313.08 per share; previous year: CHF 1,137.27 per share). The share package corresponds
to annual compensation at fair value (excluding the reduction for the lock-up period) of CHF 2,262,960 (1,447
shares); previous year: CHF 2,263,404 (1,671 shares).
With this share package and this cash remuneration, all compensations such as bonuses, inflation, salary adjustments, options, etc. are settled. This share package may not be either pledged or assigned and can be sold inthree years at the earliest. This compensation model is thus also geared to long-term and sustainable corporate
development and is fully consistent with the interests of the company and its shareholders.
The total compensation for the Executive Chairman of the Board of Directors came to CHF 2,999,902 for the year
under review (previous year: CHF 2,943,326). Contained in this amount and reported in the column ‘Other payments’ are employer contributions to the pension fund, other usual social insurances, private use of the company car, contributions for accident and health insurance, and location expenses. The Executive Chairman of theBoard of Directors is not a party to the management investment plan (MIP) or the share-based compensation
program of the Board of Directors.
Remuneration paid
For the remuneration paid to the Board of Directors in the year under review and the details concerning valuationof the shares, the reader is referred to pages 87 to 89 of this remuneration report.

Determining the remuneration of the Executive Board
Basic principles
In order to determine the remuneration of the Executive Board, criteria such as function, responsibility and ex­perience are taken into account and the remuneration paid to Forbo Executive Board members is compared withthat paid to Executive Board members in comparable industrial companies. This is based on information that isavailable from publicly accessible sources and from respected market data providers or is known to the membersof the Remuneration Committee from their experience of office in similar companies. Industrial companies are
regarded as comparable if they are similar to Forbo in terms of sector, structure, size (sales and number of employees), geographic presence, profitability, market capitalization, and complexity. As a general rule, no external consultants are co-opted for determining the remuneration.
Alignment of performance-based remuneration with the corporate strategy
The remuneration strategy of Forbo is geared to its current corporate strategy and linked to the relevant key ratios.
This is reflected in the choice of performance criteria that are derived from Group and/or divisional objectives
depending on the function of the individual Executive Board member; these include net sales, organic growth,
EBIT, net working capital, return on net assets, and growth in earnings per share. The criteria for determining the
remuneration paid to Executive Board members are thus transparent.
The Board of Directors is closely involved in the company’s planning cycle. As a rule, the current corporate strategy is subjected to an in-depth review by the Board in the first half of the year. Once it has been confirmed orrevised, the strategy is quantified in the three-year medium-term plan, which is approved at mid-year by the Boardof Directors. Based on the medium-term plan, the Board of Directors sets the budget objectives for the coming
business year. These budget objectives are the basis for the detailed budget, which is examined and adopted by
the Board of Directors in the fourth quarter.

83

The Board of Directors assesses the current business year by means of an initial estimate at the end of May anda second estimate in mid-October. On completion of the business year, the extent to which the budget has beenreached is checked and deviations are analyzed. The actual amount of the variable remuneration paid out to the
Executive Board is determined on the basis of the achievement of these individual targets. The Board of Directors
defines the relation between budget target achievement and payment ratio.
The short-term, variable remuneration (bonus/short-term incentive) for the previous year is paid out on completion of the business year and after approval by the shareholders. In the case of the long-term participation (longterm incentive), the performance share units are allocated after approval by the Ordinary General Meeting; any
entitlement arising therefrom is determined in March on completion of the three-year performance period andconverted into vested shares.
The contributing factors/performance criteria determining the amount of the payout/share allocation of thevariable remuneration components are linked directly to the company’s success.
The chart below provides a detailed breakdown of the timeline and the interdependence of the corporate targets
and the remuneration.

Planning cycle
1st quarter
Ordinary General Meeting
Corporate strategy
Reviewing/amending strategy
Establishing mid-term plan
Establishing budget
Working out remuneration
Defining maximum total remunerationof Board of Directors
Defining maximum total remunerationof Executive Board
Approving total remuneration of Board of Directors andof fixed remuneration of Executive Board for following
business year by the Ordinary General Meeting
Setting targets for Executive Board
Assessing target achievement and proposal forvariable remuneration elements of Executive Board
Approving short-term, variable remuneration of
Executive Board for previous business year
(bonus/short-term incentive)
Approving maximum total amount of long-term
participation of Executive Board for current business year
(long-term incentive)
Decision period

2nd quarter3rd quarter

4th quarter

84

FORBO ANNUAL REPORT 2018 – REMUNERATION REPORT

Elements of remuneration of the Executive Board
Remuneration of the members of the Executive Board consists of a fixed base salary and two variable compensation components, the bonus/short-term incentive and the long-term incentive.
Fixed remuneration
The fixed base remuneration paid to the Executive Board in the reporting year consists of the gross base salary,
private company car use, and social security payments made by the company. The Remuneration Committee may
also decide that part of the remuneration will be paid in the form of shares in Forbo Holding Ltd (lock-up periodof five years).
Short-term variable remuneration (bonus/short-term incentive)
The bonus/short-term incentive is derived from qualitative (individual) and quantitative (financial) targets, which
are defined in accordance with the operational responsibility of the Executive Board member in question. The
Board of Directors defines and weights the individual and financial targets.
The qualitative targets are geared to the company’s long-term sustainable development and may account for 10%of the bonus/short-term incentive. The remaining 90% depend on the achievement of the financial (quantitative)
targets. The main targets for members of the Executive Board are: net sales of the Group and/or a division (25 to
40% of the variable remuneration), EBIT of the Group and/or a division (50 to 55% of the variable remuneration),and net working capital of the Group and/or a division (5 to 10% of the variable remuneration).
The defined objectives of the short-term variable remuneration are equivalent to 100% target achievement. The
maximum target achievement is 150%. If a given threshold for a particular target is not reached, no bonus for thattarget is paid. Depending on the function, the variable remuneration may be as much as 140% of the fixed remuneration if targets are fully met. If the targets are exceeded, the variable remuneration may be as much as 200%of the fixed remuneration.
The amount of the short-term variable remuneration, which is based on achievement of the individual and Grouptargets, is set in March after completion of the business year and is submitted to shareholders for approval at theOrdinary General Meeting.
Conversion of remuneration into shares in the management investment plan (MIP)
The bonus payment from the bonus/short-term incentive is linked to the management investment plan (MIP),
which was introduced in 2006 and amended in 2012. According to this plan, at least 50% of the annual short-term
variable remuneration of Executive Board members must be paid into the MIP. The portion paid in shares is derived
from a fixed remuneration amount.
As for the remaining 50% of the annual short-term variable remuneration, the Executive Board members may­either draw all or part of it in cash or pay it into the MIP. The Executive Board members may redefine the allocationof this remaining 50% every year. The portion paid in shares is derived from a fixed remuneration amount.
Following the amendment of the MIP, all the sums paid into it will be invested solely in shares of Forbo Holding
Ltd as of January 1, 2013. As a first step, the amount invested in the MIP will be increased by 25%, partly in orderto take account of the three-year lock-up period. In addition, this amount will be multiplied by a factor that tracks
the share price movement. This factor is calculated as follows:

85((SPA – SPP)/SPP) + 1, where ‘SPA’ stands for the share price applicable for the allocation of shares in the year of
allocation and ‘SPP’ for the applicable share price in the previous year. The upper limit for this factor is 1.1 and thelower limit is 0.95.
The relevant share price for the allocation of shares is calculated based on the unweighted average of the closing
prices of the Forbo share in the first 14 trading days in January of the allocation year. The shares are locked-up fora period of three years. They cannot be sold or pledged during this time.

portion in cash
maximum 50%

in cashBonus

portion MIP investment
minimum 50% –maximum 100%

× 1.25× factor 0.95 – 1.1
depending on shareprice development

in shares
three-year lock-up

Foreign members of the Executive Board may acquire stock awards instead of shares. The stock in question willbe transferred after three years.
Long-term participation plan (long-term incentive)
The previous variable model for remuneration of the Executive Board, consisting of a short-term performance-­
related remuneration (bonus/short-term incentive) was supplemented by a long-term participation plan (longterm incentive), effective from January 1, 2017. The amendment was approved by the Ordinary General Meetingof April 6, 2017.
The aim of the long-term incentive is to link part of the remuneration of the Executive Board even more closelywith the company’s long-term success.
The long-term incentive consists of a performance share unit plan. At the start of the performance period, eachmember of the Executive Board is granted a given number of future subscription rights in the form of performance
share units (PSUs). One PSU corresponds to a future subscription right to one share. The size of the PSU allocation
corresponds to a defined percentage of the Executive Board member’s fixed remuneration; the percentage mayvary from 10 to 30 percent. The PSUs are subject to a three-year vesting period. They are converted into vested
shares only on condition that the Group’s performance objectives are achieved. At the end of the performance
period, the company will determine whether the objectives set by the Board of Directors at the start of the­performance period for the performance indicators have been reached. Depending on the degree to which theobjectives are reached, a given percentage of the PSUs will be converted into shares after the three-year vesting
period. Converted shares are locked-up for a period of three years. They cannot be sold or pledged during thistime. Immediately on termination of the plan participant’s employment contract, regardless of whether the plan
participant has terminated the contract or the company has terminated the contract with the plan participant, all
PSUs are forfeited.

86

FORBO ANNUAL REPORT 2018 – REMUNERATION REPORTThe relevant share price for the allocation of PSUs at the start of the performance period is calculated based on
the unweighted average of the closing prices of the Forbo share in the first 14 trading days in January of the relevant year.
The performance indicators of the long-term incentive are geared to the long-term and sustainable developmentof the company and consist of three evenly weighted objectives. These are organic growth, the return on net­
assets (RONA), and growth in earnings per share (EPS).
The long-term incentive objectives are based on a target achievement of 100%. It is not possible to exceed the
maximum target achievement level of 100%. If a member fails to reach a given threshold for an objective, no PSUs
are converted into shares for this indicator.
Foreign members of the Executive Board may draw stock awards rather than shares when the PSUs are converted.
The relevant shares are transferred after three years.
The degree to which objectives have been achieved is determined in March after conclusion of the three-year
performance period.
Actual bonus payments
Readers are referred to pages 87 to 89 of this remuneration report for the amount of the actual short-term variable
remuneration (bonus/short-term incentive) paid to the Executive Board in the year under review and for details
on the valuation and allocation of shares. The number of future subscription rights in the form of performance
share units for the Executive Board as part of the long-term incentive can also be found on these pages.
There are no option plans.

Employment contracts of the Executive Board members
The employment contracts of the Executive Board members are concluded for an indefinite duration with a maximum period of notice of twelve months.
The Board of Directors can order that lock-up periods stipulated in the employment contracts of Executive Board
members in connection with the MIP or the long-term incentive may be revoked wholly or in part upon the­occurrence of defined events (e.g. change of control, termination of employment, retirement or death).
Should changes in control of the company occur, no additional remuneration or benefits will be paid out.
No severance payments have been agreed with Executive Board members.

87Disclosure of remuneration for the Boardof Directors and the Executive Board
Remuneration of the Board of Directors
The total remuneration paid to the non-executive members of the Board of Directors came to CHF 811,423 in theyear under review (previous year: CHF 811,293). This sum consists of the base salary in cash (60% of the remuneration), amounting to CHF 413,198 (previous year: CHF 414,545) and the base remuneration in shares (40% of the
remuneration) of CHF 335,640 (previous year: CHF 334,027). This corresponds to 241 shares (previous year: 212
shares) at a market value of CHF 1,392.70 each (previous year: CHF 1,575.60). The portion paid in shares is derived
from a fixed remuneration amount. This total remuneration includes a lump sum for expenses plus employer contributions to the usual social insurances, which are reported separately in the column ‘Other remuneration’.
The remuneration paid to the Executive Chairman of the Board of Directors is explained in detail on pages 81 and82 of this remuneration report.
Remuneration of the Executive Board
The total remuneration paid to the members of the Executive Board came to CHF 2,764,288 in the year underreview (previous year: CHF 3,268,606), subject to approval of the variable portion by the 2019 Ordinary General
Meeting. This sum includes a fixed base salary of CHF 1,541,548 (previous year: CHF 1,791,179) and short-term
variable bonus remuneration (short-term incentive) of CHF 592,540 (previous year: CHF 849,617), a long-term
participation (long-term incentive) of CHF 222,816 (previous year: CHF 159,793) plus the private use of the­company car, and employer contributions to the pension fund as well as other usual social insurances, which
are reported separately in the column ‘Other remuneration’.
The fixed portion of the base salary paid in shares (lock-up period of five years) came to CHF 329,018 (previous
year: CHF 417,420). The portion paid in shares is derived from a fixed remuneration amount. The portion of thevariable remuneration (short-term incentive plan) paid in shares in connection with the MIP (lock-up period of
three years) came to CHF 520,562 (previous year: CHF 653,856), which is subject to approval by the 2019 Ordinary
General Meeting. The portion paid in shares is derived from a fixed remuneration amount.
For the two actual long-term incentive plans, a total of 259 future subscription rights in the form of performance
share units were issued.

Plan2017 – 2019

Allocationof subscription rights
April 2017

Performance
period2017 – 2019

Vesting
date (PSUs)
April 2020

Unlockingof shares
April 2023

Numberof PSUs
allocated
118

Value PSUs
in CHF(allocation)
159,7932018 – 2020

April 20182018 – 2020

April 2021

April 2024

141

220,931

Payoutfactorto bedetermined

Numberof shares(vesting)
to bedetermined

Value ofshares in CHF(vesting)
to bedetermined

to bedetermined

to bedetermined

to bedetermined

88

FORBO ANNUAL REPORT 2018 – REMUNERATION REPORT

Disclosure of remuneration of the Board of Directors and Executive Board
Remuneration
For the year 20181)

Variable
remunerations

Base salary

CashName and function

SharesCash
CHF

Bonus/short-term incentive2)

Long-term incentive3)

Shares

Allocation performance
share units

CHF

Number

CHF

CHF

CHF

310,000

1,447

2,262,960

426,9422,999,902

Michael Pieper,
Vice Chairman

80,04347

65,457

12,140157,640

Dr. Peter Altorfer,
Vice Chairman

104,842

60

83,562

17,085

205,489

Claudia Coninx-Kaczynski,
member

70,88942

58,493

13,584142,966

Dr. Reto Müller, member
Vincent Studer, member
Board of Directors total6)
Executive Board7)8)9) total
Of whom highest-paid
member of Executive Board(Stephan Bauer)

70,88986,535723,198
1,212,530
400,000

42
50
1,688
225
138

58,493
69,6352,598,600
329,018
201,808

11,107
8,669
489,527
407,384
189,166

140,489
164,839
3,811,325
2,764,288
1,148,034

368
210

CHF

520,562
297,060

Number

141
38

CHF

Total

This E. Schneider,
Executive Chairman5)

71,9780

NumberOther
remuneration4)

222,816
60,0001) The remuneration of the Board of Directors and the Executive Board is reported gross before deduction of employee social insurance contributions. The amounts shown in the table are based on the valuation models used and disclosed in the consolidated financial statements.
2) The variable short-term remuneration of the Executive Board (bonus/short-term incentive) corresponds to the actual degree to whichtargets were reached in 2018 and will be submitted to the April 2019 Ordinary General Meeting for approval. The criterion for determining
the number of shares issued for the variable remuneration is the unweighted average of the closing prices of the Forbo share in the first
14 trading days in January of the allocation year in connection with the MIP. The allocation takes place in April (subject to approval by theOrdinary General Meeting) for the period from January to December of the previous year. The value at allocation was CHF 1,414.57. The
shares are locked up for a period of three years.
3) The long-term incentive for the Executive Board corresponds to the long-term participation plan for 2018 (long-term incentive plan 2018 –2020) and to the number of future subscription rights allocated to the plan in the form of performance share units (PSUs). One PSU corres­
ponds to a future subscription right to one share and is subject to a three-year vesting period.
4) ‘Other remuneration’ includes in particular employer contributions to the usual social insurances, private use of the company car, and lumpsum or on-site expenses.
5) Please refer to pages 81 and 82 of this remuneration report for details on the structure of the remuneration of the Executive Chairman of theBoard of Directors. These details also contain the criterion for determining the number of shares issued and their lock-up periods.
6) The criterion for determining the number of shares issued for the non-executive members of the Board of Directors is the average share pricein the ten trading days after payment of the dividend or repayment of the par value: CHF 1,392.70. The allocation is made at the discounted
tax value of CHF 1,169.30. The shares are locked up for a period of three years and are reported at market value in the table above.
7) Remuneration of the entire Executive Board including the highest-paid Executive Board member.
8) The criterion for determining the number of shares issued for the base salary is the unweighted average of the closing price of the Forbo sharein the first 14 trading days in January of the allocation year. The shares are allocated in April for the period from May of the previous year to
April of the year of allocation. The shares are locked up for a period of five years. The value of the shares allocated was CHF 1,568.00 in 2018
and CHF 1,414,57 for 2019.
9) The criterion for determining the number of shares issued for the variable remuneration is the unweighted average of the closing price of the
Forbo share in the first 14 trading days in January of the allocation year. The shares for the bonus for the business year 2018 will be allocatedin April 2019, subject to approval by the 2019 Ordinary General Meeting. The shares are locked up for a period of three years. The value atallocation was CHF 1,414.57. Foreign members of the Executive Board may acquire stock awards instead of shares. The stock in question willbe transferred after three years.

89

Remuneration
For the year 20171)

Variable
remunerations

Base salary

CashName and function

SharesCash
CHF

Bonus/short-term incentive2)

Long-term incentive3)

Shares

Allocation performance
share units

CHF

Number

CHF

CHF

CHF

310,000

1,671

2,263,404

369,9222,943,326

Michael Pieper,
Vice Chairman

80,76141

64,60012,021

157,382

Dr. Peter Altorfer,
Vice Chairman

104,88653

83,507

17,641

206,034

Claudia Coninx-Kaczynski,
member

71,05337

58,297

13,464

142,814

Dr. Reto Müller, member
Vincent Studer, member
Board of Directors total6)
Executive Board7)8)9) total
Of whom highest-paid
member of Executive Board(Stephan Bauer)

71,05386,792
724,545
1,373,759
400,000

37
44
1,883
283
136

58,297
69,326
2,597,431
417,420
202,634

11,004
8,591
432,643
468,017
187,536

140,354
164,7093,754,619
3,268,606
1,166,906

417
202

CHF

653,856
316,736

Number

118
44

CHF

Total

This E. Schneider,
Executive Chairman5)

195,7610

NumberOther
remuneration4)

159,793
60,0001) The remuneration of the Board of Directors and the Executive Board is reported gross before deduction of employee social insurance contributions. The amounts shown in the table are based on the valuation models used and disclosed in the consolidated financial statements.
2) The variable short-term remuneration of the Executive Board (bonus/short-term incentive) corresponds to the actual degree to whichtargets were reached in 2017 and will be submitted to the April 2018 Ordinary General Meeting for approval. The criterion for determining
the number of shares issued for the variable remuneration is the unweighted average of the closing prices of the Forbo share in the first
14 trading days in January of the allocation year in connection with the MIP. The allocation takes place in April (subject to approval by theOrdinary General Meeting) for the period from January to December of the previous year. The value at allocation was CHF 1,568.00. The
shares are locked up for a period of three years.
3) The long-term incentive for the Executive Board corresponds to the long-term participation plan for 2017 (long-term incentive plan 2017 –2019) and to the number of future subscription rights allocated to the plan in the form of performance share units (PSUs). One PSU corres­
ponds to a future subscription right to one share and is subject to a three-year vesting period.
4) ‘Other remuneration’ includes in particular employer contributions to the usual social insurances, private use of the company car, and lumpsum or on-site expenses.
5) Please refer to pages 77 and 78 of this remuneration report for details on the structure of the remuneration of the Executive Chairman of theBoard of Directors. These details also contain the criterion for determining the number of shares issued and their lock-up periods.
6) The criterion for determining the number of shares issued for the non-executive members of the Board of Directors is the average share pricein the ten trading days after payment of the dividend or repayment of the par value: CHF 1,575.60. The allocation is made at the discounted
tax value of CHF 1,322.90. The shares are locked up for a period of three years and are reported at market value in the table above.
7) Remuneration of the entire Executive Board including the highest-paid Executive Board member.
8) The criterion for determining the number of shares issued for the base salary is the unweighted average of the closing price of the Forbo sharein the first 14 trading days in January of the allocation year. The shares are allocated in April for the period from May of the previous year to
April of the year of allocation. The shares are locked up for a period of five years. The value of the shares allocated was CHF 1,355.71 in 2017
and CHF 1,568,00 for 2018.
9) The criterion for determining the number of shares issued for the variable remuneration is the unweighted average of the closing price of the
Forbo share in the first 14 trading days in January of the allocation year. The shares for the bonus for the business year 2017 will be allocatedin April 2018, subject to approval by the 2018 Ordinary General Meeting. The shares are locked up for a period of three years. The value atallocation was CHF 1,568.00. Foreign members of the Executive Board may acquire stock awards instead of shares. The stock in question willbe transferred after three years.

90

FORBO ANNUAL REPORT 2018 – REMUNERATION REPORT

Advances and loans
As of December 31, 2018, no advances or loans to members of the Board of Directors or the Executive Board were
outstanding.
The relevant statutory provisions concerning advances, loans and employee benefits for members of the Boardof Directors and the Executive Board are set out in Chapter IV, pages 9 and 10 of the Articles of Association ofForbo Holding Ltd, which can be downloaded at:www.forbo.com � Investors � Ordinary General Meeting

Disclosure of shareholdings pursuant to Article 663c CO2018 business year
As at December 31, 2018, the individual members of the Board of Directors and the Executive Board (including
related parties) held the following number of shares in Forbo Holding Ltd:
Shareholdings 2018
SharesName and function
This E. Schneider, Executive Chairman
Michael Pieper, Vice Chairman
Dr. Peter Altorfer, Vice Chairman
Claudia Coninx-Kaczynski, member
Dr. Reto Müller, member
Vincent Studer, member
Total Board of Directors
Stephan Bauer, Chief Executive Officer
Marc Deimling, Executive Vice President Movement Systems
Urs Uehlinger, Chief Financial Officer
Jean-Michel Wins, Executive Vice President Flooring Systems
Total Executive Board

54,611
486,764
1,287
212
632
916
544,422
2,969
3
104
104
3,180

91

As at December 31, 2017, the individual members of the Board of Directors and the Executive Board (including
related parties) held the following number of shares in Forbo Holding Ltd:
Shareholdings 2017
SharesName and function
This E. Schneider, Executive Chairman
Michael Pieper, Vice Chairman
Dr. Peter Altorfer, Vice Chairman
Claudia Coninx-Kaczynski, member
Dr. Reto Müller, member
Vincent Studer, member
Total Board of Directors
Stephan Bauer, Chief Executive Officer
Matthias P. Huenerwadel, Executive Vice President Flooring Systems
Urs Uehlinger, Chief Financial Officer
Jean-Michel Wins, Executive Vice President Movement Systems
Total Executive Board

47,892486,217
1,227
170
590
866
536,962
2,639
2,856
18
195
5,708

92

FORBO ANNUAL REPORT 2018 – REMUNERATION REPORT

Report of the statutory auditor

Report of the Statutory
AuditorTo the General Meeting of Shareholders of Forbo Holding Ltd, Baar

We have audited the accompanying remuneration report of Forbo Holding Ltd for the year ended 31 December
2018. The audit was limited to the information according to articles 14-16 of the Ordinance against Excessivecompensation in Stock Exchange Listed Companies (Ordinance) on pages 88 to 91 of the remuneration report.
Responsibility of the Board of Directors
The Board of Directors is responsible for the preparation and overall fair presentation of the remuneration reportin accordance with Swiss law and the Ordinance against Excessive compensation in Stock Exchange Listed
Companies (Ordinance). The Board of Directors is also responsible for designing the remuneration system anddefining individual remuneration packages.
Auditor's Responsibility
Our responsibility is to express an opinion on the accompanying remuneration report. We conducted our audit inaccordance with Swiss Auditing Standards. Those standards require that we comply with ethical requirements
and plan and perform the audit to obtain reasonable assurance about whether the remuneration report complies
with Swiss law and articles 14 – 16 of the Ordinance.
An audit involves performing procedures to obtain audit evidence on the disclosures made in the remuneration
report with regard to compensation, loans and credits in accordance with articles 14 – 16 of the Ordinance. The
procedures selected depend on the auditor’s judgment, including the assessment of the risks of material
misstatements in the remuneration report, whether due to fraud or error. This audit also includes evaluating thereasonableness of the methods applied to value components of remuneration, as well as assessing the overall
presentation of the remuneration report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion.
OpinionIn our opinion, the remuneration report for the year ended 31 December 2018, of Forbo Holding Ltd complies with
Swiss law and articles 14 – 16 of the Ordinance.
KPMG AG

Rolf Hauenstein
Licensed Audit Expert
Auditor in Charge

Regula Tobler
Licensed Audit Expert

Zurich, 27 February 2019

KPMG AG, Badenerstrasse 172, PO Box, CH-8036 Zurich
KPMG AG is a subsidiary of KPMG Holding AG, which is a member of the KPMG network of independent firms affiliated with KPMG International Cooperative(“KPMG International”), a Swiss legal entity. All rights reserved.

FINANCIAL REPORT
Forbo Group financial report
93
Consolidated balance sheet
94
Consolidated income statement
95
Consolidated comprehensive income statement
96
Consolidated statement of changes in equity
97
Consolidated cash flow statement
98
Notes – accounting principles
99
Notes109
Group companies
136
Report of the statutory auditor
140
Consolidated balance sheets 2014 – 2018
146
Consolidated income statements 2014 – 2018
147
Financial statements for Forbo Holding LtdBalance sheet
Income statementNotes to the financial statements
Proposal for appropriation of available earnings
Report of the statutory auditor

149
150
151
152
157
158

94

FORBO ANNUAL REPORT 2018 – CONSOLIDATED FINANCIAL STATEMENTS

Consolidated balance sheet

AssetsCHF mCurrent assets
Cash and cash equivalents
Current financial assets
Trade receivables
Other receivables
Accrued income and deferred expenses
Inventories
Non-current assets
Non-current financial assets
Deferred tax assets
Property, plant, and equipment
Intangible assets and goodwill
Total assets
Shareholders’ equity and liabilities
CHF mCurrent liabilities
Current financial debt
Trade payables
Other current liabilities
Current tax liabilities
Accrued expenses and deferred income
Current provisions
Non-current liabilities
Non-current financial debt
Deferred tax liabilities
Non-current provisions
Employee benefit obligations
Total liabilities
Shareholders’ equity
Share capital
Treasury shares
Reserves and retained earnings
Total shareholders’ equity and liabilities

The accompanying notes are an integral part of the consolidated financial statements.

31.12.2018

31.12.2017

567.3
127.4
0.1
168.9
26.0
14.8
230.1
412.7
0.3
39.9
259.4
113.1
980.0

638.2
195.4
169.2
27.6
19.4
226.6
429.3
0.3
39.0
267.6
122.4
1,067.5

261.9
0.1
109.2
28.7
16.2
87.7
20.0
126.5
0.0
12.1
40.7
73.7
388.4
591.6
0.2
– 0.1
591.5
980.0

275.3
0.2
105.9
32.4
26.5
91.5
18.8
131.0
0.2
10.8
32.3
87.7
406.3
661.2
0.2
– 0.1
661.1
1,067.5

Note

24
12

13
24
10
14
15

Note

24
24
10
16
17
24
10
17
18

20
20

FORBO ANNUAL REPORT 2018 – CONSOLIDATED FINANCIAL STATEMENTS

95

Consolidated income statement

CHF mContinuing operations
Net sales
Cost of goods sold
Gross profit
Development costs
Marketing and distribution costs
Administrative costs
Other operating expenses
Other operating income
Operating profit
Financial income
Financial expenses
Group profit before taxes
Income taxes
Group profit for the year from continuing operations
Group profit for the year from discontinued operations after taxes
Group profit for the year
Group profit attributable to shareholders of Forbo Holding Ltd

2018

2017

1,327.0– 824.9
502.1– 16.6– 198.1– 96.1– 23.5
7.5
175.3
0.9
– 0.6
175.6
– 38.0
137.6
137.6
137.6

1,246.4– 764.5
481.9– 15.5– 195.8– 94.7– 106.5
10.5
79.9
0.9
– 0.8
80.0
– 43.5
36.5
2.2
38.7
38.7

Note

5

6

7
8

10
21

Earnings per share, total
CHF
Basic earnings per share
Diluted earnings per share

11
11

82.38
82.38

22.36
22.36

Earnings per share from continuing operations
CHF
Basic earnings per share
Diluted earnings per share

11
11

82.38
82.38

21.10
21.10

Earnings per share from discontinued operations
CHF
Basic earnings per share
Diluted earnings per share

1111

The accompanying notes are an integral part of the consolidated financial statements.

1.26
1.26

96

FORBO ANNUAL REPORT 2018 – CONSOLIDATED FINANCIAL STATEMENTS

Consolidated comprehensive
income statement
CHF mGroup profit for the year
Items that will not be reclassified to the income statement:
Remeasurements of employee benefit obligations, net of taxes
Items that are or may be subsequently reclassified to the income statement:
Translation differences
Other comprehensive income for the year, net of tax
Total comprehensive income
Total comprehensive income attributable to the shareholdersof Forbo Holding Ltd

The accompanying notes are an integral part of the consolidated financial statements.

2018

2017

137.6

38.7

11.5

5.7

– 29.6– 18.1
119.5
119.5

36.1
41.8
80.5
80.5

Note

10

FORBO ANNUAL REPORT 2018 – CONSOLIDATED FINANCIAL STATEMENTS

97

Consolidated statementof changes in equity
2018

CHF m
December 31, 2017 (before application of IFRS 9)
Effect of application of IFRS 9 (net of tax)
January 1, 2018 (restated)
Group profit for the year
Other comprehensive income for the year, net of tax
Total comprehensive income
Share-based payments
Treasury shares
Dividend payment
December 31, 2018

SharecapitalTreasuryshares

0.2

– 0.1

0.2

– 0.1

Reserves

0.2

– 0.1

945.1
– 0.4
944.7
137.6
11.5
149.1
4.6
– 160.9– 32.4905.1

Share
capitalTreasurysharesReserves

0.2

– 0.1

0.0

Translationdifferences– 284.0– 284.0– 29.6– 29.6– 313.6

Translationdifferences

Total

661.2
– 0.4
660.8
137.6
– 18.1119.5
4.6– 160.9– 32.4
591.6

2017

CHF m
December 31, 2016
Group profit for the year
Other comprehensive income for the year, net of tax
Total comprehensive income
Share-based payments
Treasury shares
Dividend payment
December 31, 2017

0.0
0.2

The accompanying notes are an integral part of the consolidated financial statements.

– 0.1

941.4
38.7
5.7
44.4
4.4
– 12.6– 32.5945.1– 320.1
36.1
36.1– 284.0

Total

621.4
38.7
41.8
80.5
4.4
– 12.6– 32.5661.2

98

FORBO ANNUAL REPORT 2018 – CONSOLIDATED FINANCIAL STATEMENTS

Consolidated cash flow statement

Cash flow from operating activities
CHF mGroup profit for the year
Profit from disposal of discontinued operations after taxes
Tax expense
Financial result
Depreciation of property, plant, and equipment
Amortization of intangible assets
Loss from the sale of non-current assets
Share-based payments
Income tax paid
Increase in provisions and employee benefit obligations
Increase in net operating working capital1)
Increase (–)/Decrease in other current assets
Net cash flow from operating activities

2018

2017

137.6

38.7
– 2.2
43.5
– 0.1
31.8
5.9

Note

21
10
14
15
26

38.0
– 0.3
35.3
6.2
0.3
4.8
– 39.510.8– 9.8– 12.2171.2

4.4– 37.97.4– 15.9
3.2
78.8

Cash flow from investing activities
CHF m
Purchase of business operations net of cash acquired
Purchase of non-current assets
Proceeds from the disposal of non-current assets
Purchase of non-current financial assets
Interest received
Net cash flow from investing activities

0.8– 39.1– 57.8
0.5
– 0.1
0.9
– 56.5

Cash flow from financing activities
CHF m
Decrease (–)/Increase of current financial debt
Repayment of non-current financial debt
Interest paid
Purchase of treasury shares
Proceeds from sale of treasury shares
Dividend payment
Net cash flow from financing activities

– 0.1
– 0.2
0.0
– 161.0
1.1– 32.4– 192.6

0.1
– 0.2
0.0
– 103.3
90.9– 32.5– 45.0Change in cash and cash equivalents
CHF m
Decrease in cash and cash equivalents
Translation differences on cash and cash equivalents
Total cash and cash equivalents at beginning of year
Total cash and cash equivalents at year-end– 60.5
– 7.5
195.4
127.4

– 22.7
8.4
209.7
195.4

1) Net operating working capital includes the items ‘Trade receivables’, ‘Inventories’, and ‘Trade payables’.

The accompanying notes are an integral part of the consolidated financial statements.

– 1.3– 38.7
0.1

FORBO ANNUAL REPORT 2018 – CONSOLIDATED FINANCIAL STATEMENTS

99

Notes –
accounting principles
1 General information
Forbo Holding Ltd and its subsidiaries (together constituting the ‘Group’) manufacture floorings, construction
adhesives, and drive and conveyor technology. The
Group has a global network of locations with production and distribution as well as pure sales companies.
Forbo Holding Ltd is a public limited company under
Swiss law, domiciled in Baar, Switzerland. It is listed on
the SIX Swiss Exchange (FORN).
These financial statements were approved by the
Board of Directors on February 27, 2019, and released
for publication on March 5, 2019. This financial report
is subject to approval by the Ordinary General Meetingof April 5, 2019.

2 Summary of significant
accounting policies
The principal accounting policies applied in the prep­
aration of these consolidated financial statements are
set out below. These policies have been consistently
applied to all the years presented, unless otherwise
stated.
Basis of preparation
The consolidated financial statements of Forbo Holding Ltd were prepared in accordance with the International Financial Reporting Standards (IFRS) and in compliance with Swiss law.
The consolidated financial statements are preparedin Swiss francs. The Swiss franc is both the functional
currency and the reporting currency of the company.
Unless otherwise noted, all sums are stated in millionsof Swiss francs (CHF m) and are generally rounded to
one decimal place.
The consolidation was done on the basis of the audited financial statements of the subsidiaries preparedaccording to uniform corporate accounting policies.
The reporting date for all Group companies is December 31.

The consolidated financial statements were preparedin accordance with the principle of historical costs, withthe exception of derivatives measured at fair value andpension fund liabilities measured at the net value of the
discounted defined benefit obligations less the fair value of the plan assets.
The preparation of the consolidated financial statements requires management to make discretionary
judgements, estimates and assumptions that can affectthe application of accounting methods and reported
revenues, expenses, assets, liabilities, and contingent
assets and liabilities at the date of the financial statements. Actual results may differ from these estimatesand assumptions. Estimates and the underlying assumptions are being reviewed continually. Revised versions of estimates and assumptions are recognized prospectively. Information about discretionary judgements
as well as assumptions and uncertainty involved in­estimates are contained in note 3 ‘Critical judgements,­estimates and appraisals by management’.
Scope and principles of consolidation
Subsidiaries are companies that are controlled by theGroup. The Group exercises control over a company if
it is exposed to variable returns from its involvement in
the company or possesses rights to the returns and isable to influence these returns by means of its discretionary control over the company. The financial statements of subsidiaries are included in the consolidated
financial statements from the point at which control
begins.
The purchase method of accounting is used to account for business combinations. The value of thetransferred consideration in a business combinationand the acquired identifiable net assets are recognizedat the fair value on the acquisition date. The consideration includes cash payments and the fair value of theassets transferred, liabilities incurred or acquired, andequity instruments issued by the acquirer on the transaction date. Liabilities dependent on future events,
which are based on agreements on contingent considerations are accounted for at their fair value in theaccounting treatment of the acquisition. Acquisition
costs are reported as expenditure in the income statement. Non-controlling interests are measured at theacquisition date with their proportionate share in theidentifiable net assets of the acquired entity.

100 FORBO ANNUAL REPORT 2018 – CONSOLIDATED FINANCIAL STATEMENTS

Goodwill is the excess of the consideration of the business combination and the amount of the non-controlling interest over the identifiable net assets assessed at fair value.
Inter-company transactions, balances, and unrealized
gains or losses on transactions between Group companies are eliminated.
Associates are all entities over which the Group hassignificant influence but not control, generally accompanied by a shareholding of between 20% and 50%of the voting rights. Investments in associates are accounted for using the equity method of accounting
and are initially recognized at cost.
The Group’s share of its associates’ post-acquisition
profits or losses is recognized in the income statement,
and its share of post-acquisition changes in reserves
is recognized in reserves. The cumulative post-acquisition movements are offset against the carrying amountof the investment. When the Group’s share of losses inan associate equals or exceeds its interest in the associate, the Group does not recognize further losses, unless it has incurred obligations or made payments onbehalf of the associate.
Changes in the scope of consolidation
Forbo Finanz AG acquired 100% of the capital of Transmeca AS in Oslo, Norway, effective May 2, 2018. Transmeca AS was an existing customer of Forbo that sells
and distributes fabric conveyor belts. Transmeca AS
is now an additional service point for the Movement
Systems division in Norway. Additionally, the dormant
company Forbo Project Vinyl AB in Gothenburg, Sweden, was liquidated in the period under review.
The subsidiaries included in the group of consolidated
companies are listed under ‘Group companies’ (frompage 136 of this report).

Foreign currency translation
Transactions in foreign currencies
The individual companies prepare their financial statements in their functional currency. The functional currency is the currency of the primary economic environment in which the company operates and generally
corresponds to the local currency. Foreign currencytransactions are translated into the functional currency
using the exchange rates prevailing at the dates oftransaction. Foreign exchange gains and losses resulting from the settlement of such transactions and fromthe translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognized in the income statement.
Foreign operations
The annual statements of foreign Group companies
stated in foreign currencies are translated into Swiss
francs as follows: assets and liabilities at year-end exchange rates; the income statement and cash flow
statement at average exchange rates for the year. Currency translation differences arising from the different
translation of balance sheets and income statements
and from equity capital transactions are recognized inother comprehensive income and taken to profit orloss for the period (reclassified) in the event the foreign
Group company is disposed of.
On consolidation, exchange differences arising fromthe translation of net investments in independent foreign operations are recognized in other comprehensive income. When a foreign operation is disposed of,these exchange differences are transferred to the income statement as part of the gain or loss on sale.

FORBO ANNUAL REPORT 2018 – CONSOLIDATED FINANCIAL STATEMENTS 101

The following exchange rates against the Swiss franc
have been applied for the most important currencies
concerned:
Income statement (averageexchange rates for the year)

Exchange rates
Euro zone
USA
Great Britain
Japan
China
Sweden

EUR
USD
GBP
JPY
CNY
SEK

Discontinued operations
Discontinued operations are recognized separately if acomponent of the Group has either already been discontinued or been classified as ‘held for sale’. The previous-year figures affecting the income statement are
adjusted accordingly and are also presented separately.

Type of productor service
Flooring Systems

Movement Systems

1
1
1
100
100
100

Balance sheet(year-end exchange rates)

2018

2017

2018

2017

1.15520.97861.30580.886014.8000
11.2673

1.11170.98471.26860.877914.5800
11.5360

1.12750.9853
1.25960.895914.3200
11.01171.17050.97631.32030.867415.0100
11.9018

Net sales and revenue recognition
Revenue from contracts with customers is recognizedwhen the control of the goods or services is transferredto the customer. The revenue is based on the contractually agreed transaction price, in other words, theamount to which the Group can be expected to be entitled in return for the transfer of the goods or services
to a customer.

Type and time of the fulfillment of performance obligation, significant terms of payment
The revenue is generated by the sale of goods that are recorded at a point in time, in accordance with the agreed terms.
The sale of goods is based on fixed prices. In some cases, goal-oriented, variable volume discounts are granted. Volume
rebates are deducted from sales in the same amount as expected cash outflows. The payment terms are in line with generalbusiness terms and conditions, with payment due dates ranging from 30 to 60 days.
The warranty periods granted for goods are in line with the general business terms and conditions in the sector; in somecases, these may be longer than prescribed by law. Provisions are made on the basis of the expected cash outflow for known
warranty claims and those expected in future.
The type and time of the fulfillment of the performance obligation and the terms of payment are identical with those for
Flooring Systems.
In addition, a small portion of the services provided by Movement Systems concerns the seamless connection of belting
products. These services are recognized separately as revenue at the time the service is provided.

In contrast, the determining factor for recognition ofrevenue in the previous year was still the transfer ofrisks and opportunities. On the basis of the businessmodels applied by the Group, the time of the transfer
of control of the goods is identical with the transfer ofthe risks and opportunities.

102 FORBO ANNUAL REPORT 2018 – CONSOLIDATED FINANCIAL STATEMENTS

Government grants
Government grants are recognized only when there isreasonable assurance that the related conditions aremet, and the grants will be received. Grants are deducted when arriving at the carrying amount of the asset
concerned and they are recognized in profit or loss
over the period of the depreciable asset by means of areduced depreciation charge.

Income taxes
Income taxes constitute the total of current and deferred income taxes.

Government grants that compensate the company for
expenses incurred are recognized in the income statement accounts in the period in which the expenses tobe compensated accrue.

Deferred tax liabilities are recognized for temporary differences between assets and liabilities in the balance
sheet, and their tax bases if they will result in taxable
income in future. Deferred tax assets are reported for
temporary differences that will result in deductible
amounts in future periods and for tax effects from unused tax losses and tax credits, but only to the extent as
it is probable that sufficient taxable profits will be available against which these differences can be offset. Deferred tax liabilities are not recognized if temporary differences arise from the initial recognition of goodwill.

Research and development
All research costs are posted directly to the income
statement in the period in which they are incurred. Development costs are capitalized only if these costs canbe reliably measured, the product or process is tech­nically feasible and commercially viable, a future economic benefit is likely, and the Group has sufficient resources and intends to complete the development
and exploit the asset. Other development expenses
that do not meet these criteria are taken to the income
statement as soon as they are incurred. Capitalized development costs are measured at the cost of acquisition or production less cumulative amortizations andimpairments.
Share-based payments
Equity-settled share-based payments to employees
are valued at the fair value of the equity instrument on
the date on which the instruments are granted. The fairvalue determined on granting equity-settled sharebased payments is recognized in the income statement over the vesting period and is included in personnel expenses.
Earnings per share
The number of shares used for calculating earnings per
share is determined on the basis of the weighted average number of the shares issued less the weighted average number of treasury shares held. To calculate diluted earnings per share, an adjusted number of shares isdetermined from the total number of shares used to
calculate earnings per share plus the potentially dilutive
effects of shares from employee incentive plans. To takeaccount of the dilutive effect of employee incentive
plans, the number of shares is determined that could
have been purchased at the market price on the basisof the cumulative difference between the market priceand the strike price of the future subscription rights. The
market price used for this purpose corresponds to theaverage price of the shares in the business year underreview. The earnings or diluted earnings per share is
the quotient obtained by dividing the distributable net
profit by the relevant number of shares.

Current income taxes are determined on the basis oftaxable profits and the applicable tax laws of the individual countries. They are recognized as an expense in
the accounting period in which the profits are made.

Deferred tax assets and tax liabilities are measured at
the tax rates that are expected to be enacted in the period in which the asset will be realized or the liability
will be settled. Current and deferred tax assets and liabilities are offset when they arise from the same tax
reporting group, relate to the same tax authority, thelegal right to offset exists, and they are intended to besettled net or realized simultaneously.
Current and deferred income taxes are recognized as
an income tax benefit or expense in the income statement, with the exception of items posted directly toequity or recognized in other comprehensive income.
In this case, the corresponding tax effect is also to berecognized directly in shareholders’ equity or in othercomprehensive income.
Property, plant, and equipment
Property is recognized at cost on acquisition. Land is
not depreciated, but allowances are set aside for impairments that have occurred. All other fixed assets
such as machines, vehicles and operational assets arereported at cost on acquisition less accrued depreciation and impairments.
Betterments that increase the useful lives of the assets,
significantly improve the quality of the output or enable a substantial reduction in operating costs are capitalized and depreciated over the remaining useful
lives.
Depreciation is calculated according to the straight-line
method over the following estimated useful life:FORBO ANNUAL REPORT 2018 – CONSOLIDATED FINANCIAL STATEMENTS 103

Land and buildings
Land 
no depreciation
Buildings
20 to 40 years
Modifications and installations
5 to 10 years orduration of rental contract
Machinery and equipment
Machines, equipment and tools
Other property, plant, and equipment
IT
Vehicles
Other operational assets
Assets under construction
Assets under construction

5 to 10 years
3 to 5 years
5 years
3 to 10 years
no depreciation

If there are signs of an impairment, the recoverable
amount of the asset is determined. If the carrying
amount exceeds the recoverable value, the carrying
amount of the asset is reduced accordingly and thedifference charged to the income statement.
Assets which are held in financial leasing arrangements
are depreciated over their estimated useful life in thesame way as assets belonging to the company or, if thisis shorter, over the life of the underlying lease agreement. The costs of short-term leasing are charged directly to the income statement. The corresponding liabilities are disclosed in the notes (see note 23 ‘Leasing’).
Intangible assets and goodwill
The goodwill generated in connection with businesscombinations is measured at the cost of acquisition
less cumulative impairment losses.

Goodwill is not amortized but tested for impairment
at least at each reporting date or earlier if there aresigns of a potential impairment.
The acquisition costs of trademarks, licenses, customer
relationships, and technologies acquired in a businesscombination correspond to the fair value at the dateof acquisition.
Trademarks with an indefinite useful life are not subject to amortization but are tested for impairment atleast annually. Any impairment is recognized as an expense in the income statement.
Other intangible assets that are acquired by the Groupand have a finite useful life are carried at acquisition or
production costs less cumulative amortization and impairments. The amortization of other intangible assets
with a finite useful life uses the straight-line method;
the following estimated useful lives are applied:
Customer relations Technologies Software 

5 to 15 years
up to 30 years
3 to 5 years

Amortization methods, useful lives, and residual values
are reviewed annually at the reporting date and adjusted where necessary.
Financial instruments
Recognition and initial measurement
Trade receivables are recognized when they occur. Allother financial instruments are recognized when theGroup becomes a contracting party. Financial assets(with the exception of trade receivables with no essential financing component) and financial liabilities arerecognized at fair value the first time. Transaction costs,
which are directly attributable to acquisition or issuance, are added in addition for financial instrumentsthat are not measured at fair value through profit orloss. Trade receivables with no essential financing components are recognized at the transaction price the firsttime.

104 FORBO ANNUAL REPORT 2018 – CONSOLIDATED FINANCIAL STATEMENTS

Classification and subsequent
measurement of financial assets
STANDARD APPLIED AS OF JANUARY 1, 2018
Financial assets are classified in one of the following
categories:–– ‘Amortized cost‘–– ‘Fair value through other comprehensive income‘–– ‘Fair value through profit or loss‘A financial asset is measured at amortized cost if thebusiness model provides for the asset to be held in order to receive contractual cash flows on contractuallyagreed dates. The payments consist only of the nominal value plus interest. Essentially, the financial assets
in the Group consist of cash and cash equivalents andtrade receivables that are reported at amortized costusing the effective interest method less valuation allowances for expected credit losses. Cash and cash
equivalents are stated at nominal value. It includes
cash on hand, bank accounts, and fixed-term deposits
with maturities up to three months from the date ofacquisition.
Derivatives are valued at their fair value. The derivatives
used are accounted for on the day the trade is conducted. Derivative financial instruments are recognized in the balance sheet in ‘Current financial assets’or in ‘Current financial debt’.
The Group recognizes allowances for expected credit
losses on financial instruments that are reported atamortized cost. The Group employs a permissible, simplified model of valuation allowances (‘provision matrix’) for trade receivables. In this valuation allowance
table, expected losses on receivables are determinedon the balance sheet date on the basis of past experience of default probability and of future-oriented expectations based on experience with the customers
and market conditions.
The Group considers a financial asset to be in default if
it is unlikely that the borrower can pay his obligation to
the Group in full without the Group having to take recourse to measures such as the realization of collateral.

STANDARD APPLIED PRIOR TO JANUARY 1, 2018
Financial assets are classified in one of the following
categories:–– ‘Loans and receivables’–– ‘Fair value through profit or loss’
Loans and receivables are loans and receivables granted by the Group with fixed or determinable paymentsthat are not quoted in an active market. They are included in current assets except for maturities greaterthan 12 months after the end of the reporting year, inwhich case they are classified as non-current assets. After initial recognition, loans and receivables are carriedat amortized cost using the effective interest method.
Trade receivables are carried in the balance sheet attheir nominal value less valuation allowances.
Financial assets measured at fair value through profit
or loss are financial assets held for trading. A financial
asset is classified in this category if it was acquired principally for the purpose of selling in the short term. Derivatives also belong to this category. The derivatives
used are accounted for on the day the trade is conducted. Derivative financial instruments are recognized in the balance sheet under ‘Current financial assets’ or in ‘Current financial debt’.
Allowances for doubtful risks are established based on
the maturity structure and discernible solvency risks. In
addition to individual allowances for specific identifiable risks, allowances are also made on the basis of statistically determined default risks.

FORBO ANNUAL REPORT 2018 – CONSOLIDATED FINANCIAL STATEMENTS 105

Classification and subsequent measurementof financial liabilities
Financial liabilities are classified in one of the following
categories:

Shareholders’ equity
Registered shares are classified as share capital at theirpar value. Payments by shareholders above the par value are credited to reserves.

–– ‘Amortized cost‘–– ‘Fair value through profit or loss’

Treasury shares are deducted at their par value fromshare capital. The acquisition costs in excess of par value arising on the acquisition of treasury shares are debited to reserves. On the sale of treasury shares, gains
or losses compared with the par value are credited ordebited to reserves.

The Group’s financial liabilities consist mainly of liabilities from trade payables and, to a lesser extent, of leasing liabilities that are reported at amortized cost using
the effective interest method. With the exception of derivatives, the Group does not have any financial liabilities that are classified as ‘fair value through profit or loss’.
Debt is assigned to current debt, except if the Group
has to settle the obligation earliest 12 months after thereporting date or enjoys an unlimited right to postpone payment of the debt by at least 12 months after
the reporting date. Trade payables are non-interestbearing and are disclosed at nominal value.
Inventories
Inventories are stated at the lower of cost or net realizable value. Cost includes direct material and, if applic­able, other direct costs and related production overheads to the extent that they are incurred in bringing
the inventories to their present location and condition.
The net realizable value constitutes the estimated sales
price less all estimated costs up to completion, as wellas the costs of marketing, sales, and distribution.
Inventories are for the greater part measured at averagecost. Adjustments are made for unsaleable inventories
and inventories with insufficient turnover. Inter-company profits on intra-Group deliveries are eliminated in
the income statement.

Dividends are debited to equity in the period in which
the resolution on their distribution is adopted.
Employee pension plans
The Group maintains various pension plans designed
as defined contribution and defined benefit plans.
These pension plans are established in accordancewith the local conditions in each country. The plans are
funded either by contributions to legally autonomous
pension funds and insurance plans or by recognition of
the pension plan liabilities in the financial statementsof the respective companies.
For defined contribution plans, the costs incurred in
the relevant period correspond to the agreed employer contributions.
For defined benefit plans, the pension costs and liabilities are assessed annually on the basis of various economic and demographic assumptions by independent actuaries according to the ‘projected unit credit
method’. The liabilities correspond to the present valueof the expected future cash flows. The plan assets arestated at market value and deducted from the pension
liabilities. Pension costs, consisting of current service
costs incurred in the relevant period and net interest
expense, less employee contributions, are stated as
personnel expenses in the income statement. Past service costs resulting from changes in pension plans areposted directly to the income statement. Profits orlosses resulting from pension plan curtailments or settlements are immediately taken to the income statement.

106 FORBO ANNUAL REPORT 2018 – CONSOLIDATED FINANCIAL STATEMENTS

Revaluation components include actuarial gains andlosses due to changes in the present value of the pension obligations arising from changes in assumptions
and experience adjustments plus the return on plan
assets less the contributions contained in net interest
expense. Revaluation components are recognized inother comprehensive income, taking deferred taxes
into account, and are never subsequently reclassified
to the income statement.
Provisions
Provisions are recognized if the Group has a current
legal or constructive obligation as a result of a past
event, it is probable that an outflow of resources will
be required to settle the obligation, and a reliable estimate of the amount can be made. The provision isthe best estimate on the reporting date of the amountrequired to meet the current obligation, taking into
account the risks and uncertainties underlying the obligation.

3 Critical judgements, estimates andappraisals by management
The application of the measurement and accounting
principles requires that circumstances and estimates
be assessed and assumptions be made with respect tothe carrying amounts of assets and liabilities. The estimates and the underlying assumptions are based on
past experience and other factors regarded as relevant, including expectations of future events that appear reasonable in the given circumstances. The actual results may, of course, deviate from the estimatesand assumptions of management.
Estimates and the underlying assumptions are reviewed continuously. Revised estimates are recognized prospectively. The following are the main areasin which a significant risk exists in the coming businessyear involving a significant adjustment of the carrying
value of assets and liabilities.

Impairment tests
Along with the regular periodic review of goodwill
and intangible assets with an indefinite useful life,
the carrying amounts of fixed and intangible assets
with a finite useful life are also always reviewed if due
to changed circumstances or other triggering events
these amounts can possibly no longer be realized. Ifsuch a situation occurs, the recoverable amount is­determined based on expected future revenues. This
corresponds to either the discounted expected cash
flows or the expected net sales price.
Important assumptions in the calculations underlying
these impairment tests include growth rates, margins,
estimates and management’s expectations of the future development of net working capital, and discountrates. The actual cash flows may deviate from theplanned discounted future values. Likewise, the useful
lives may be shortened or non-current assets impairedin the event of a change in the use of buildings, machinery and facilities, change or abandonment of locations, or lower-than-expected revenues over the medium term. Further information on this topic can befound in note 14 ‘Property, plant, and equipment’ andnote 15 ‘Intangible assets and goodwill’.
Valuation of pension plan liabilities
Various employee pension plans exist for employees of
the Group. In the valuation of defined benefit plans,
actuarial assumptions are made to estimate future developments. These include assumptions and estimates
relating to the discount rate, the inflation rate as wellas assumptions for future wage trends. In their actuarial calculations for determining employee benefit obligations, the actuaries also use statistical informationsuch as mortality tables and staff turnover rates. If
these parameters change owing to a change in theeconomic situation or market conditions, the subsequent results may deviate considerably from the actuarial reports and calculations. These deviations may
have a significant medium-term effect on expenses
and income from the employee pension schemes andon the comprehensive income statement. Further information on this topic can be found in note 18 ‘Employee benefit obligations’.

FORBO ANNUAL REPORT 2018 – CONSOLIDATED FINANCIAL STATEMENTS 107

Recognition and measurement of provisions
In the conduct of ordinary business activities, a liabilityof uncertain timing and/or amount may arise. Provisions are determined using available information basedon reasonably expected cash outflows. Claims against
the Group may arise that may not be covered, or arecovered only in part, by provisions or insurance benefits. Further information on this topic can be found innote 17 ‘Provisions’.
Income taxes
The Group is obliged to pay income taxes in various
countries. Certain key assumptions are necessary in order to determine income tax in the relevant countries.
There are business events which have an impact on
taxation and taxable profit. Hence, the amount of the
final taxation cannot be determined definitively. The
measurement of current tax liabilities is subject to theinterpretation of tax regulations in the relevant countries. The adequacy of this interpretation is assessed by
the tax authorities in the course of the final assessment
or tax audits. This may result in material changes to tax
expenses. Where the definitive taxation of these business events deviates from the previous assumptions,this will have an impact on the current and deferredtaxes in the period in which the taxation is definitively
determined. Furthermore, determining whether tax
losses carried forward can be capitalized requires a critical estimate of the probability that they can be offset
against future profits. This assessment is based on planning information. Further information on this topic canbe found in note 10 ‘Income taxes’.

4 Application of new or revised­accounting standards
Applied new and revised standards
and interpretations
The Group applied IFRS 9 ‘Financial instruments’ andIFRS 15 ‘Revenue from contracts with customers’ for the
first time as of January 1, 2018. In addition, some othernew or amended standards were applied, which, however, do not have any significant impact on the financial statements. Information from the previous year has
not been restated owing to the transition approaches
that have been chosen.

The impact of the application of IFRS 9 and IFRS 15 is
explained below.
IFRS 9 ‘Financial instruments’The standard IFRS 9 ‘Financial instruments’ includes
new standards for classification and measurement offinancial assets and liabilities, the recognition of impairment allowances, and for the accounting of deriva­
tives used for hedging. The standard replaces IAS 39‘Financial instruments: Recognition and Measurement’.
The implementation of IFRS 9 had no impact on equity
or debt instruments since the Group does not employ
such instruments. The application of IFRS 9 affected
only the calculation and presentation of the allowancefor doubtful receivables because the ‘incurred loss’model in IAS 39 was replaced by an ‘expected credit’loss model, which means that credit losses are recognized earlier under IFRS 9 than under IAS 39.
Owing to the transition approach that has been chosen, IFRS 9 does not require any restatement of the previous year. The reassessment of the valuation of tradereceivables resulted in an increase in the allowance for
doubtful receivables of CHF 0.5 million as per January
1, 2018. This amount was taken to equity (CHF 0.4 million after tax).
IFRS 15 – ‘Revenue from contracts with customers’
The Group implemented IFRS 15 with effect on January
1, 2018, using the cumulative effect method. Accordingly, information for the previous year was not restated and is reported, as heretofore, under the standards
IAS 18 ‘Revenue’, IAS 11 ‘Construction contracts’, and therelevant interpretations. IFRS 15 replaces the current
standards and contains a comprehensive approach todetermine whether, when, and to what extent revenue
from contracts with customers are to be reported.
The implementation of IFRS 15 had no effect on the
consolidated balance sheet, the consolidated income
statement or the consolidated statement of changes
in equity since the business models employed by theGroup, in particular the time of the transfer of controlof the goods, is identical with the transfer of risks andopportunities.

108 FORBO ANNUAL REPORT 2018 – CONSOLIDATED FINANCIAL STATEMENTS

Introduction of new standards
in 2019 and beyond
The following new and revised standards and interpretations that were published by end-2018 but are
not yet mandatory were not applied in advance in thepresent consolidated financial statements.

Standards
New standards or interpretations:
IFRS 16 – ‘Leases’
IFRIC 23 ‘Uncertainty over income tax treatments’Revisions and amendments of standards and interpretations:
Amendments to IAS 28 ‘Long-term interests in associates and joint ventures’
Amendments to IAS 19 ‘Plan amendment, curtailment or settlement’
Amendments to IFRS 3 ‘Definition of a business’
Amendments to IAS 1 und IAS 8 ‘Definition of material’
Amendments to ‘References to the conceptual framework in IFRS standards’
Annual improvements to the IFRS 2015 – 2017 cycle:
Amendments to IFRS 3 ‘Business combinations’ and IFRS 11 ‘Joint arrangements’
Amendments to IAS 12 ‘Income taxes’

Date effective

Plannedapplication***

January 1, 2019
January 1, 20192019 business year
2019 business year

**
**
**
**
**

January 1, 2019
January 1, 2019
January 1, 2020
January 1, 2020
January 1, 20202019 business year
2019 business year
2020 business year
2020 business year
2020 business year****

January 1, 2019
January 1, 20192019 business year
2019 business year*

See the note on the impact on the consolidated financial statements in the next section.
** No significant impact on the consolidated financial statements is
expected.

IFRS 16 ‘Leases’
The standard IFRS 16 introduces a uniform accounting
model in which leases are to be recognized in the lessee’s balance sheet. A lessee recognizes a ‘right-of-use
asset’ that represents his right to use the underlying
asset, plus a debt from the lease that represents his
obligation to make leasing payments. Exceptions are
made for short-term leases and for leases for low-value
assets.
The management has made an assessment of the impact on the financial statements, which shows that
the Group will have to book new assets and debts
for its operational leases, in particular for vehicles andproperty.

From the current perspective, the balance sheet will be
extended by a good CHF 40 million by the first-time
adoption of IFRS 16, because right-of-use assets andleasing liabilities will be reassessed by this amount. The
depreciations and hence operating profit before depreciation and amortization (EBITDA) will increase by
somewhat more than CHF 10 million, while financing
costs and hence operating profit (EBIT) will increaseby about CHF 1 million. The impact on the Group profit for the year is negligible.
The Group has applied the new standard as of January
1, 2019, and recognized a cumulative adjustment in equity at the time of the first application.

FORBO ANNUAL REPORT 2018 – CONSOLIDATED FINANCIAL STATEMENTS 109

Notes

5 Segment reporting
The Group is a global producer of Flooring Systems andMovement Systems. The divisions correspond to the­internal management structure and are run separately
because the products they manufacture, distribute,and sell differ fundamentally in terms of production,
distribution, and marketing.
In the Flooring Systems division, the Group develops,
produces, and sells linoleum, vinyl floorings, entrance
flooring systems, carpet tiles, needle felt floor coverings, Flotex, the washable textile flooring, and building
and construction adhesives as well as various accessory
products required for laying, processing, cleaning, andcare of flooring. In the Movement Systems division, theGroup develops, produces, and sells high-quality conveyor and processing belts, as well as plastic modular

belts, and drive, timing and flat belts made of synthetic
materials. Corporate includes the costs of the Group
headquarters and certain items of income and expenses that are not directly attributable to a specific business.
The Flooring Systems and the Movement Systems­divisions are reportable segments. The identificationof the reportable segments is based on internal management reporting to the Executive Chairman of theBoard of Directors and to the Chief Executive Officerof the Group and hence on the financial information
used to review the performance of the operational
units in order to reach a decision on the allocation of
resources.
Segment information on the reportable segments forthe reporting year:

2018
CHF m
Total sales
Inter-segment sales
Net sales to third parties
Operating profit (EBIT)
EBITDA
Operating assets
Capital expenditure
Number of employees (December 31)

Flooring
Systems
913.2
0.0
913.2
136.5
166.0
523.1
25.4
3,194

Movement
Systems
414.0
– 0.2
413.8
49.4
60.6
275.4
13.2
2,503

Corporate/
Elimination
– 0.2
0.2

Flooring
Systems
856.6
0.0
856.6
42.1
69.7
539.8
22.3
3,157

Movement
Systems
390.0
– 0.2
389.8
49.3
58.7
275.7
35.5
2,360

Corporate/
Elimination
– 0.2
0.2

– 10.6
– 9.8
13.9
0.1
42

Total
1,327.0
0.0
1,327.0
175.3
216.8
812.4
38.7
5,739

Segment information on the reportable segments forthe prior year:
2017
CHF m
Total sales
Inter-segment sales
Net sales to third parties
Operating profit (EBIT)
EBITDA
Operating assets
Capital expenditure
Number of employees (December 31)– 11.5– 10.8
17.3
0.0
42

Total
1,246.4
0.0
1,246.4
79.9
117.6
832.8
57.8
5,559

110 FORBO ANNUAL REPORT 2018 – CONSOLIDATED FINANCIAL STATEMENTSManagement reporting is based on the same accounting principles as external reporting.
The Executive Chairman of the Board of Directors andthe Chief Executive Officer assess the performance ofthe reportable segments based on their operating result(EBIT). The net financial result is not allocated to the segments since it is Corporate Treasury that mainly exercises
central control over the financial result. Inter-segment

sales are transacted at arm’s length. The segments apply
the same accounting principles as the Group. Sales tothird parties, as they are reported to the Executive Chairman of the Board of Directors and the Chief Executive
Officer, are identical with the sales reported in the income statement.
Reconciliation of segment information to the income
statement and balance sheet:
2018

2017

175.3
0.3
175.6

79.9
0.1
80.0

31.12.2018

31.12.2017

812.4
167.6
980.0

832.8
234.7
1,067.5

CHF m
Total segment result (EBIT)
Financial result
Group profit before taxes

CHF m
Total operating assets
Non-operating assets
Total assets

Operating assets include ‘Trade receivables’, ‘Other receivables’, ‘Accrued income and deferred expenses’, ‘Inventories’, ‘Property, plant, and equipment’, and ‘Intan­
gible assets and goodwill’. Non-operating assets include‘Cash and cash equivalents’, ‘Current financial assets’,‘Non-current financial assets’ and ‘Deferred tax assets’.

The following table shows revenue broken down bygeographic region and by the two product groups
that are identical with the reportable segments.

Flooring Systems

CHF mRegions
EuropeAmericasAsia/Pacific and Africa
Total net sales to third parties

Movement Systems

2018
Third-party
sales

2017
Third-party
sales

2018
Third-party
sales

2017
Third-party
sales

693.8
136.3
83.1
913.2

656.0
124.1
76.5
856.6

163.8
138.9
111.1
413.8

150.2
135.4
104.2
389.8

FORBO ANNUAL REPORT 2018 – CONSOLIDATED FINANCIAL STATEMENTS 111

Third-party net sales by destination were generated in
the following regions:

CHF m
Switzerland (domicile)
Germany
FranceBenelux
Scandinavia
Great Britain and Ireland
Other countries Europe
EuropeUSA
Other countries Americas
AmericasAsia/Pacific and Africa
Total net sales to third parties

In the period under review, sales to no single customer
exceeded 10% of total Group sales.

CHF m
Switzerland (domicile)
Germany
FranceBenelux
Scandinavia
Great Britain and Ireland
Other countries Europe
EuropeUSA
Other countries Americas
AmericasAsia/Pacific and Africa
Total operating assets

6 Development costs‘Development costs’, which mainly comprise productdevelopment, amounted to CHF 16.6 million in the reporting year (2017: CHF 15.5 million).

2018
Third-party sales

2017
Third-party sales

28.4
167.0
165.6
134.2
103.7
92.7
166.0
857.6
223.2
52.0
275.2
194.2
1,327.0

26.0
150.5
158.3
124.5
105.2
97.8
143.9
806.2
212.3
47.2
259.5
180.7
1,246.4

Operating assets are distributed over the following regions:31.12.2018
Operating assets

31.12.2017
Operating assets

25.9
82.9
68.4
207.1
29.5
117.4
48.1
579.3
94.3
11.3
105.6
127.5
812.4

30.6
85.6
72.1
211.8
28.2
121.3
49.0
598.6
91.6
11.1
102.7
131.5
832.8

Costs for manufacturing trials, recipe optimization andnew collections are not reported within ‘Development
costs’.
As in the previous year, no development costs were
capitalized.

112 FORBO ANNUAL REPORT 2018 – CONSOLIDATED FINANCIAL STATEMENTS

7 Other operating expenses

8 Other operating income‘Other operating expenses’ comprise expenses of different kinds in connection with structural measures,
legal costs, warranties, taxes on capital, levies based on
local legislation, and allowances for doubtful trade receivables.

‘Other operating income’ comprises a range of income,mainly in connection with the sale of tangible assets,
the release of provisions for legal proceedings, insurance payments, rental income, the sale of material forrecycling purposes, and the release of allowances for
doubtful trade receivables.

The decrease versus the previous year is due to theone-off costs of CHF 83.4 million arising from the now
concluded antitrust proceedings brought against leading flooring manufacturers in France.

In the reporting year, government grants in connection with the construction of the Movement Systems
plant in Pinghu, China, amounting to CHF 1.7 million(2017: CHF 1.7 million) were recognized in the income
statement.

9 Personnel expenses

Personnel expenses
CHF mSalaries and wages
Social security contributions
Employee benefit expenses for defined benefit plans
Total personnel expenses

As at December 31, 2018, the headcount was 5,739(2017: 5,559). The average headcount over the year
was 5,718 (2017: 5,534).
Salaries and wages include share-based payments expenses of CHF 4.6 million (2017: CHF 4.4 million). A­bonus program is available for around 130 managers,which is linked to achieving financial targets set for theGroup, the divisions, and individual objectives (see also
note 19 ‘Employee participation plan’).

2018

2017

315.1
78.8
6.0
399.9

297.2
71.7
5.7
374.6

The cost of the contributions to defined contributionplans, which is included in personnel expenses,
amounted to CHF 14.6 million (2017: CHF 13.6 million).

FORBO ANNUAL REPORT 2018 – CONSOLIDATED FINANCIAL STATEMENTS 113

10 Income taxes

Income taxes
CHF mCurrent income taxes
Deferred income taxes
Total income taxes

2018

2017

40.1
– 2.1
38.0

44.6
– 1.1
43.5

2018

2017

175.6
– 43.480.0– 19.4

– 1.9
3.4
0.5
1.3

– 29.2
4.2
1.1
0.8
– 5.8
4.8
– 43.5

Analysis of tax expense
The following reconciliation explains the difference
between the expected and the effective tax expense:

CHF mGroup profit before taxes
Tax expense at the expected tax rate
Tax effects of:
Non-tax-deductible expenses
Tax-exempt income
Recognition of previously unrecognized tax losses
Utilization of previously unrecognized tax losses
Income taxes from sale of treasury shares
Previous-year taxes and other positions
Effective income tax expenses

Since the Group operates in various countries with different tax laws and rates, the expected and effective
tax expense depends every year on the origin of the
profits or losses in each country. The expected tax expense is the sum of the expected individual tax in-

2.1– 38.0come/expense of all subsidiaries. The expected individual tax income/expense in a country is calculated
by multiplying the individual profit/loss by the tax rateapplicable in the country concerned. The expected tax
rate in the year under review was 24.7% (2017: 24.2%).

114 FORBO ANNUAL REPORT 2018 – CONSOLIDATED FINANCIAL STATEMENTS

Capitalized and non-capitalized tax loss carry-forwards, by expiry date:
2018
CHF m
Expiry after:
1 year
2 years
3 years
4 years
5 years
More than 5 years
Total tax loss carry-forwards

Not capitalized

Capitalized

Total

0.0
0.0
1.1
2.2
4.5
39.3
47.1

0.0
0.0
0.0
0.3
0.0
37.3
37.6

0.0
0.0
1.1
2.5
4.5
76.6
84.7

Not capitalized

Capitalized

Total

0.0
0.0
0.0
1.1
2.0
42.8
45.9

0.0
0.1
0.1
0.0
0.0
50.2
50.4

0.0
0.1
0.1
1.1
2.0
93.0
96.3

2017
CHF m
Expiry after:
1 year
2 years
3 years
4 years
5 years
More than 5 years
Total tax loss carry-forwards

In 2018, no tax loss carry-forwards expired unused(2017: CHF 1.0 million).
Deferred income tax assets and liabilities are offset
when they relate to the same tax jurisdiction, provided

CHF mDeferred tax assets
Deferred tax liabilities
Deferred tax assets, netthat the legal right to offset exists, and they are intended either to be settled net or to be realized simultan­
eously.
The following amounts are shown in the balance sheet:
31.12.2018

31.12.2017

39.9– 12.127.8

39.0– 10.828.2

FORBO ANNUAL REPORT 2018 – CONSOLIDATED FINANCIAL STATEMENTS 115

Deferred tax assets and liabilities, tax credits and tax
charges from deferred taxes (gross):
Deferred tax assets

CHF m
As at December 31, 2017
Changes recognized in income statement
Changes recognized in othercomprehensive income
Translation differences
As at December 31, 2018
Netting
As at December 31, 2018, net

Inventories
7.7
– 0.3

Property,plant, andequipment
1.4
0.0

Provisions
7.7
2.5

Loss carryforwards
13.6
– 2.8

Employeebenefitobligations
17.5

Other
5.9
– 1.1

Total
53.8
– 1.7
– 2.5

– 0.1
14.9

0.0
4.8

0.0
49.6
– 9.7
39.9

Employeebenefitobligations
0.0

Other
1.7

0.0
0.0

0.0
1.7

Total
25.6
0.4
– 3.9
– 0.3
21.8
– 9.7
12.1

– 2.5
0.1
7.5

0.0
1.4

0.0
10.2

0.0
10.8

Deferred tax liabilities

CHF m
As at December 31, 2017
Changes in scope of consolidation
Changes recognized in income statement
Translation differences
As at December 31, 2018
Netting
As at December 31, 2018, net

Inventories
3.2
0.1
– 0.6
0.0
2.7

Property,plant, andequipment
3.6

Provisions
3.7

– 0.5
0.0
3.1

– 1.6
0.0
2.1

Intangible
assets
13.4
0.3
– 1.2
– 0.3
12.2

Decrease in deferred tax assets, net– 0.4

As at December 31, 2018, no deferred tax liabilities on
undistributed profits from consolidated companies
have been recognized, since this income is deemed tohave been reinvested for an indefinite period.

Should there be a distribution, withholding and othertaxes might be incurred, which upon decision may beprovided for accordingly.
Tax expense and income recognized directly in theother comprehensive income statement:
2018

CHF m
Actuarial gains/losses (–) on employee benefit obligations
Translation differences
Other comprehensive income

2017

Before tax

Tax expense

After tax

Before tax

Tax expense

After tax

14.0
– 29.6– 15.6

– 2.5
0.0
– 2.5

11.5
– 29.6– 18.1

6.9
36.1
43.0

– 1.2
0.0
– 1.2

5.7
36.1
41.8

116 FORBO ANNUAL REPORT 2018 – CONSOLIDATED FINANCIAL STATEMENTS

11 Earnings per share
Undiluted earnings per share are calculated by dividing the net profit or loss for the year attributable toshareholders of Forbo Holding Ltd by the weighted
average number of registered shares issued and outstanding in the year under review.

The figure for diluted earnings per share also takes into
account the potential dilution effects if all issued andin-the-money share entitlements (Long-Term Incentive Plan) were to be exercised.
The calculations are based on the following information:

Group profit for the year from continuing operations in CHF million
Group profit for the year from discontinued operations after taxes in CHF million
Group profit for the year in CHF million
Weighted average number of shares
Amount of shares adjusted for long-term incentive plans (LTI)
Weighted average number of shares used to calculate diluted earnings per share

12 Trade receivables
The application of IFRS 9 affected the calculation andpresentation of the allowance for doubtful receivables
because the ‘incurred loss’ model in IAS 39 was replacedby an ‘expected credit loss’ model, which means thatcredit losses are reported earlier under IFRS 9 than un-

Trade receivables
CHF m
Accounts receivable
Notes receivable
Allowance for doubtful trade receivables
Total trade receivables

2018
137.6
137.6
1,670,473
96
1,670,569

2017
36.5
2.2
38.7
1,728,259
1,728,259

der IAS 39. Owing to the transition approach that has
been chosen, IFRS 9 does not require any restatementof the previous year. The reassessment of the valuationof trade receivables resulted in an increase in the allowance for doubtful receivables of CHF 0.5 million as
per January 1, 2018. This amount was taken to equity(CHF 0.4 million after tax).
31.12.2018

31.12.2017

160.0
15.4
– 6.5
168.9

157.4
18.7
– 6.9
169.2

31.12.2018

31.12.2017

46.4
73.6
138.7
– 28.6
230.1

48.6
73.3
135.7
– 31.0226.6

The Group’s credit and market risks and allowances for
doubtful receivables are found in Note 25 ‘Risk Assessment and Financial Risk Management’.

13 Inventories

Inventories
CHF m
Raw-materials and supplies
Work in progress
Finished goods
Valuation allowance for inventories
Total inventories

Expenses for inventories recognized in the reporting
year came to CHF 519.6 million (2017: CHF 487.4 million).

FORBO ANNUAL REPORT 2018 – CONSOLIDATED FINANCIAL STATEMENTS 117

14 Property, plant, and equipment

Cost on acquisition
CHF m
As at January 1, 2017
Additions
Disposals
Transfers
Translation differences
As at December 31, 2017
Changes in scope of consolidation
Additions
Disposals
Transfers
Translation differences
As at December 31, 2018Land andbuildings

112.0
0.9
– 0.9
0.5
16.1
128.6

Machineryandequipment

1.2
– 0.3
18.6
– 9.4
138.7

655.3
6.6
– 7.7
17.2
47.6
719.0
0.1
9.9
– 12.231.3– 26.7721.4

Land andbuildings

Net carrying amountAs at January 1, 2017
As at December 31, 2017
As at December 31, 2018

113.6
1.8
– 7.0
1.4
7.8
117.6

Assetsunderconstruction

17.4
48.1
– 19.1
2.0
48.4

Total
property,plant, andequipment

898.3
57.4
– 15.6

1.6
– 1.2
2.8
– 4.3
116.5

– 53.5
– 1.2
19.2

73.5
1,013.6
0.1
38.2– 13.7– 0.8– 41.6995.8

Machineryandequipment

Other
property,plant, andequipment

Assetsunderconstruction

Total
property,plant, andequipment

106.3
3.4
– 6.9
7.3
110.1
3.5
– 1.2
– 3.8
108.6

0.0

– 5.7
29.3

553.6
21.9
– 7.3
40.3
608.5
24.2
– 12.1– 22.1
598.5

0.0

670.7
31.8
– 15.1
58.6
746.0
35.3
– 13.3– 31.6
736.4

101.2
101.2
109.4

101.7
110.5
122.9

7.3
7.5
7.9

17.4
48.4
19.2

227.6
267.6
259.4

Accumulated depreciation and impairments
CHF m
As at January 1, 2017
Depreciation
Disposals
Translation differences
As at December 31, 2017
Depreciation
Disposals
Translation differences
As at December 31, 2018

Other
property,plant, andequipment

10.8
6.5
– 0.9
11.0
27.4
7.6

Property, plant, and equipment is recognized at amort­ized cost. As in the previous year, no impairments occurred in the year under review.
Maintenance and repair costs amounted to CHF 23.1
million (2017: CHF 21.7 million). The depreciation expense of CHF 35.3 million (2017: CHF 31.8 million) is
included in the items ‘Cost of goods sold’, ‘Development costs’, ‘Marketing and distribution costs’, and ‘Administrative costs’.

25.5

0.0

In the previous year, ‘Property, plant, and equipment’
included leased assets with a net book value of CHF 0.2
million. The leasing liability for fixed assets carried in thebalance sheet amounted to CHF 0.2 million in the previous year.
As at December 31, 2018, there were no assets for whichinterest on borrowed capital was capitalized during the
preparation phase.
As at December 31, 2018, the Group had outstanding
purchase orders for capital goods amounting to CHF
3.1 million (2017: CHF 4.0 million).

118 FORBO ANNUAL REPORT 2018 – CONSOLIDATED FINANCIAL STATEMENTS

15 Intangible assets and goodwill

Cost on acquisition
CHF m
As at January 1, 2017
Additions
Disposals
Translation differences
As at December 31, 2017
Changes in scope of consolidation
Additions
Transfers
Translation differences
As at December 31, 2018

Accumulated amortization and impairments
CHF m
As at January 1, 2017
Amortization
Disposals
Translation differences
As at December 31, 2017
Amortization
Translation differences
As at December 31, 2018
Net carrying amountAs at January 1, 2017
As at December 31, 2017
As at December 31, 2018

The position ‘Brands’ consists mainly of the trademarks
acquired in connection with the acquisition of Bonar
Floors in 2008. ‘Other intangible assets’ consists primarily of the customer relations and technologies, as well
as software, acquired as part of the acquisition of Bonar
Floors.

Other
intangible assets

Total

– 0.4
32.7

77.2
0.4
– 0.1
3.9
81.4
1.6
0.5
0.8
– 3.5
80.8

193.7
0.4
– 0.1
8.9
202.9
1.6
0.5
0.8
– 6.5
199.3

Goodwill

Trademarks

Otherintangible assets

Total

8.7

26.0
0.2

– 0.3
9.0

26.2
0.2
– 0.1
26.3

39.2
5.7
– 0.1
0.2
45.0
6.0
– 0.1
50.9

73.9
5.9
– 0.1
0.8
80.5
6.2
– 0.5
86.2

75.0
79.1
76.8

6.8
6.9
6.4

38.0
36.4
29.9

119.8
122.4
113.1

Goodwill

Trademarks

83.7

32.8

4.7
88.4

0.3
33.1

– 2.6
85.8

0.6
9.3

FORBO ANNUAL REPORT 2018 – CONSOLIDATED FINANCIAL STATEMENTS 119

Goodwill is distributed among the following groups ofcash-generating units:31.12.2018
72.6
4.2
76.8

Flooring Systems
Movement Systems

The goodwill in Flooring Systems comprises primarily
the goodwill acquired in connection with the acquisition of Bonar Floors. The annual impairment test of
goodwill yielded a value in use that was greater thanthe carrying amount.
Intangible assets with an indefinite useful life (goodwill
and trademarks) are subject to an annual impairment
test at cash-generating unit level. The test is carriedout using a standardized method with discounted
cash flow for calculating the value in use. Cash flow for
the first five years is estimated on the basis of the plan
approved by management (detailed planning period).
Cash flows beyond the detailed planning period are­extrapolated to the terminal value by means of using
sustainable earnings. The growth rate underlying theterminal value equals the expected inflation. During
the detailed planning period, relatively constant EBITDA
margins are assumed, which are around 18% (2017:18%) for Flooring Systems and around 16% (2017: 16%)
for Movement Systems.

31.12.2017
74.8
4.3
79.1

The discount rate corresponds to the total weighted
cost of capital before taxes including an average risk
charge estimated by management, and is 9.1% (previous year: 9.4%). The intangible assets with an indefinite
useful life were subject to impairment testing also in
the form of sensitivity analyses.
No change in the basic assumptions that can be regarded as reasonably realistic will result in the carrying
amounts exceeding the recoverable amounts.

120 FORBO ANNUAL REPORT 2018 – CONSOLIDATED FINANCIAL STATEMENTS

16 Accrued expenses anddeferred income

31.12.2018

31.12.2017

41.5
46.2
87.7

42.1
49.4
91.5

Accrued expenses and deferred income
CHF m
Accrued expenses for compensation and employee benefits
Other accrued expenses
Total accrued expenses and deferred income

Accrued expenses for compensation and employee
benefits mainly comprise overtime accruals and commissions. Other accrued expenses include accrued vol-ume rebates, commissions, premiums, interest andgoods and services received but not yet invoiced.

17 Provisions

Provisions
CHF m
As at January 1, 2018
Additions
Used during the year
Released during the year
Translation differences
As at December 31, 2018
Of which current provisions
Of which non-current provisions

Warranty provisions are linked to product sales and are
based on past experience. The provisions for legal
claims relate in part to product liability claims in which
the Group is involved in the course of its normal business. The personnel provisions include in particular
the bonus programs, provisions for paid leave, and potential labor law issues.

Warranty
provisions

Environmental
provisions

5.3
1.5
– 1.5

8.4

– 0.1
5.2

– 0.2
8.2

3.2
2.0

0.0
8.2

Provisions
for legal
claims

Personnel
provisions

Other
provisions

Total

29.8

12.4
4.4
– 1.8
– 1.8
– 0.1
13.1

4.7
0.7
– 0.7
– 0.2
– 0.1
4.4

51.1
16.9
– 4.6
– 2.2
– 0.5
60.7

0.9
28.9

12.8
0.3

3.1
1.3

20.0
40.7

20.3
10.3
– 0.6
– 0.2

Provisions for expected cash outflows arising in connection with the sale of the industrial adhesives activity, including synthetic polymers, which was part ofthe previous Bonding Systems division, to H.B. Fuller
on March 5, 2012, exist for risks in the areas of environmental protection (CHF 4.2 million), litigation (CHF 3.0
million), and others (CHF 1.0 million).

FORBO ANNUAL REPORT 2018 – CONSOLIDATED FINANCIAL STATEMENTS 121

18 Employee benefit obligations
The Group has established several pension plans on
the basis of the specific requirements of the countries
in which it operates. Both defined contribution and defined benefit plans exist in the Group that insure employees against the risks of death and invalidity andprovide old-age pensions.
The liabilities and assets under the main defined bene­
fit plans are assessed annually by independent actuaries using the ‘projected unit credit method’.
Pension plans in the United Kingdom
The Group has two defined benefit pension plans in
the United Kingdom. The main one is the Forbo Superannuation Fund (the FSF), which accounts for about
61% of the Group’s total pension liabilities. The FSF is apension plan whose benefits are based on the final
salary and which pays out a guaranteed pension forlife to its members. The FSF is closed to new entrants.
The composition of the pension liabilities is as follows:
2% to active employees, 32% to deferred members
and 66% to current beneficiaries. New employees in
the United Kingdom who meet certain criteria are
now offered a defined contribution plan.
The FSF operates under trust law and is managed andadministered by the trustees on behalf of the members in accordance with the terms of the Trust Deed
and Rules and relevant legislation. The FSF’s assets areheld by the trust. Responsibility for governance of the
FSF – including investment decisions and contribution schedules – lies jointly with the company and thetrustees. The board of the trustees must be composedof representatives of the company and plan participants in accordance with the FSF’s regulations andBritish pension law.

The pension plan follows an investment strategy that isgeared to the structure of the pension liabilities (‘liability-driven investment’ approach).
The use of any surplus is not subject to any restriction
under the FSF’s articles of incorporation and be usedfreely by the Group. These surpluses are therefore recognized in the balance sheet as assets in accordancewith IAS 19 revised.
Pension plan in Switzerland
The Group pays contributions to an independent pension fund as part of the occupational pension provision(known in Switzerland as the ‘second pillar’). As a min­imum benefit, this independent pension fund must
provide the beneficiary with an old-age pension at thetime of retirement. This pension is paid out of the retirement savings capital at the start of the pension. The
Group meets these liabilities through agreements withpension funds that cover the pension liabilities in full.
The pension liabilities of the Swiss Group companies
account for about 17% of the Group’s entire pension
liabilities. 96% of the liabilities are to active members
and 4% to retired beneficiaries.
The Swiss pension system includes guarantees that expose the company to the risk that it may have to provide additional financing, for instance, if the pension
fund is unable to meet its obligations or decides to end
the insurance relationship. The pension fund guarantees a minimum return and is responsible for the payment of a pension for life once the insurance benefits
fall due. As a result of these guarantees, Swiss pension
plans are treated as defined benefit plans under IFRS,
even though they contain essential elements of defined contribution plans.

122 FORBO ANNUAL REPORT 2018 – CONSOLIDATED FINANCIAL STATEMENTS

The company cannot participate in any surplus of thepension plan. According to Swiss pension law, all surpluses belong to the pension plan and hence to its
members.
Other pension plans
Other notable defined benefit plans exist in France,
Germany, Japan, Sweden, and the USA.
The latest actuarial valuations of the present values ofdefined benefit liabilities and of service costs were
performed as at December 31, 2018, by independentactuaries using the projected unit credit method. The
fair value of the plan assets was determined as at December 31, 2018, based on the information available
when the annual financial statements were prepared.
The weighted average duration of the pension plans(‘plan duration’) is 13.4 years for the United Kingdom,19.4 years for Switzerland, and 15.4 years for the othercountries.
The principal assumptions underlying the actuarial calculations are summarized as follows.

2018

2017

Actuarial assumptions
Switzerland

UK

Other

Weighted

Switzerland

UK

Other

Weighted

0.9
1.9
1.3

2.7
3.9
3.2

1.8
2.8
1.9

2.2
2.4
2.8

0.7
1.8
1.3

2.4
4.1
3.4

1.8
2.7
1.8

2.0
2.4
2.9

23
25

21
23

20
24

21
23

22
24

22
24

20
23

21
24

24
26

23
25

22
25

23
25

24
26

23
25

21
25

23
25

Discount rate (in %)Future increases in salaries (in %)Inflation rate (in %)Life expectancy at age of 65 (in years)
Year of birth 1953
Men
Women
Year of birth 1968
Men
Women

The pension costs for defined benefit plans recognized in the consolidated income statement can besummarized as follows:
2018

2017

Pension costs
CHF mService cost
Interest costs
Interest income on plan assets
Curtailments and settlements
Total actuarial net periodic
pension costs

Switzerland

UK

Other

Total

Switzerland

UK

Other

Total

1.9
0.4
– 0.3

0.6
5.8
– 5.5

2.2
1.0
– 0.1

4.7
7.2
– 5.9

0.5
6.0
– 5.6

2.4
1.0
– 0.1

2.0

0.9

3.1

6.0

1.9
0.4
– 0.3
– 0.5
1.5

0.9

3.3

4.8
7.4
– 6.0
– 0.5
5.7

FORBO ANNUAL REPORT 2018 – CONSOLIDATED FINANCIAL STATEMENTS 123

Changes in pension liabilities under the defined benefit plans:
2018

2017

Benefit obligations
CHF m
As at January 1
Service cost
Employee contributions
Interest costs
Benefits paid
Actuarial gains (–)/losses
Curtailments and settlements
Translation differences
As at December 31

Switzerland

UK

Other

Total

Switzerland

UK

Other

Total

59.9
1.9
0.9
0.4
– 4.5
– 1.5

250.5
0.6

59.0
2.2
0.0
1.0
– 2.4
0.2
– 0.1
– 1.7
58.2

369.4
4.7
0.9
7.2
– 17.3– 26.0– 0.1– 12.2
326.6

63.7
1.9
1.0
0.4
– 2.6
– 0.8
– 3.7

243.2
0.5
6.0
– 10.7
– 0.4

55.3
2.4
0.0
1.0
– 1.8
– 1.3

11.9
250.5

3.4
59.0

362.2
4.8
1.0
7.4
– 15.1
– 2.5
– 3.7
15.3
369.4

57.1

5.8
– 10.4– 24.7– 10.5211.3

59.9

Changes in plan assets of the defined benefit plans atfair value:
2018

2017

Plan assets
CHF m
As at January 1
Interest income on plan assets
Employer contributions
Employee contributions
Return on pension assets (excluding amounts in interest income)
Benefits paid
Curtailments and settlements
Translation differences
As at December 31

Switzerland

UK

Other

Total

Switzerland

UK

Other

Total

39.5
0.3
1.6
0.9
0.0

236.3
5.5
0.3

5.9
0.1
2.3
0.0
– 0.1

281.7
5.9
4.2
0.9
– 12.0

42.2
0.3
1.7
1.0
0.1

225.6
5.6
0.1
4.5

5.7
0.1
1.9
0.0
– 0.2

273.5
6.0
3.7
1.0
4.4

– 4.5

– 10.4– 10.7– 1.8– 10.3209.5– 17.3– 0.1– 10.4
252.9

– 2.6
– 3.2

37.8

– 2.4
– 0.1
– 0.1
5.6

11.2
236.3

0.2
5.9

– 15.1
– 3.2
11.4
281.7

– 11.9Actuarial gains and losses are recognized in the balance sheet under ‘Pension liabilities’ and accounted for
directly in the other comprehensive income.

39.5

Most of the pension plans are financed in full or in partvia outsourced funds. Pension liabilities amounting
to CHF 40.2 million (2017: CHF 40.3 million) out of a
total of CHF 326.6 million (2017: CHF 369.4 million) areunfunded.

124 FORBO ANNUAL REPORT 2018 – CONSOLIDATED FINANCIAL STATEMENTS

Changes in the net liabilities of defined benefit plans
recognized in the balance sheet:
2018

2017

Net liabilities
CHF m
As at January 1
Net pension cost
Employer contributions
Actuarial gains (–)/losses
Translation differences
Net liabilities as at December 31

Switzerland

UK

Other

Total

Switzerland

UK

Other

Total

20.4
2.0
– 1.6
– 1.5

14.2
0.9
– 0.3
– 12.8
– 0.2
1.8

53.1
3.1
– 2.3
0.3
– 1.6
52.6

87.7
6.0
– 4.2
– 14.0
– 1.8
73.7

21.5
1.5
– 1.7
– 0.9

17.6
0.9
– 0.1
– 4.9
0.7
14.2

49.6
3.3
– 1.9
– 1.1
3.2
53.1

88.7
5.7
– 3.7
– 6.9
3.9
87.7

19.3

20.4

Gains and losses of defined benefit pension plans offset in the comprehensive income statement for all segments:
2018

2017

Recognized gains and losses in
the comprehensive income
statement
CHF mActuarial gains/losses (–) in thecurrent period:

Switzerland

UK

Other

Total

Switzerland

UK

Other

Total

1.5

24.7

– 0.2

26.0

0.8

0.4

1.3

2.5

10.2

– 0.3

9.9

1.4

12.2

– 1.2

12.4

– 0.8

– 1.8

0.4

– 2.2

Experience adjustment
Return on pension assets (excluding amounts in interest income)

0.1
0.0

2.3
– 11.9

1.3
– 0.1

3.7
– 12.0

1.6
0.1

0.3
4.5

0.9
– 0.2

2.8
4.4

Total gains/losses (–) recognizedin the comprehensive income
statement before taxes

1.5

12.8

– 0.3

14.0

0.9

4.9

1.1

6.9

Based on adjustment of demographic assumptions
Based on adjustment offinancial assumptions

1.9

1.9

FORBO ANNUAL REPORT 2018 – CONSOLIDATED FINANCIAL STATEMENTS 125

Change in the present value of defined benefit liabilities:

Sensitivities + 50bp
CHF m
Discount rate
Rate of salary increase
Inflation rate
Interest credits on retirement assets

2018

2017

+ 50bp+ 50bp

Switzerland

UK

Other

Switzerland

UK

Other

– 5.2
1.6
1.2
1.3

– 13.2
0.1
7.8

– 4.2
2.6
3.7

– 5.6
1.6
1.3
1.4

– 16.5
0.2
9.8

– 4.2
2.7
3.8

Sensitivities – 50bp

– 50bp

CHF m
Discount rate
Rate of salary increase
Inflation rate
Interest credits on retirement assets– 50bp

Switzerland

UK

Other

Switzerland

UK

Other

5.9
– 1.6
– 1.2
– 1.3

14.7
– 0.1
– 7.2

4.7
– 2.4
– 3.3

6.4
– 1.7
– 1.2
– 1.4

18.4
– 0.2
– 8.9

4.8
– 2.4
– 3.3

The above table describes the effect of the principal
actuarial assumptions on pension liabilities. The tableshows the effect of an isolated change of a single par­ameter, assuming that all other parameters remain­unchanged. The table illustrates the overall effect foreach region. However, sensitivities may differ for individual plans within the regions. Sensitivity analysis
aims to visualize the uncertainty in valuating pension
liabilities under market conditions at the date of valu-

ation. The results cannot be extrapolated owing topossible non-linear effects in the event of changes tothe actuarial assumptions. Moreover, the analysis cannot say anything about the likelihood of these changes occurring, nor can it present the view of the Group
regarding anticipated future changes in pension liabilities. Any measures taken by management to reduce
the risks are also not taken into account in the analysis.

126 FORBO ANNUAL REPORT 2018 – CONSOLIDATED FINANCIAL STATEMENTS

Weighted average asset allocation of the defined benefit plan assets as at December 31:%
Shares
Bonds
Insurance contracts
Other securities
Cash and cash equivalents
Total plan assets as at December 31‘Shares’, ‘Bonds’ and ‘Other securities’ were all quoted
investments. ‘Insurance contracts’ reflects the plan assets of the fully insured companies in Switzerland. As
of January 1, 2019, all Swiss companies have moved toa semi-autonomous insurance scheme. The plan assets
do not include any direct shares or other securities of
the Forbo Group.
Future contributions to defined benefit plans in the following year are estimated on the basis of the period
under review.
Other non-current benefits
The Group does not finance any other non-current
benefits. The plans for long-service bonuses and otherbenefits related to years of service are negligible or do
not qualify as plans for other non-current benefits.

2018

2017

1.9
43.8
15.0
37.2
2.1
100.0

2.0
46.2
15.4
35.9
0.5
100.0

19 Employee participation plan
As of December 31, 2018, there existed the following
share-based remuneration elements:
Remuneration of the Executive Board
Long-term incentive plan
The long-term Incentive consists of a performance shareunit plan. At the start of the performance period, eachmember of the Executive Board is granted a given
number of future subscription rights in the form of performance share units (PSUs). One PSU corresponds to afuture subscription right to one share. The PSUs are
subject to a three-year vesting period, after which they
are converted into vested shares. At the end of the performance period, the company will determine whether
the objectives set by the Board of Directors at the startof the performance period for the performance indicators have been reached. Depending on the degree towhich the objectives are reached, a given percentageof the PSUs will be converted into shares after thethree-year vesting period. Converted shares are locked
up for a period of three years. The relevant share pricefor the allocation of PSUs at the start of the perform­
ance period is calculated from the unweighted averageof the closing prices of the Forbo share in the first 14
trading days in January of the year in which the PSUs
were allocated.

FORBO ANNUAL REPORT 2018 – CONSOLIDATED FINANCIAL STATEMENTS 127

Management investment plan 2012
Short-term variable compensation for the Executive
Board is linked to the Management Investment Plan
(MIP), which was amended in 2012. According to thisplan, at least 50% of the annual short-term variable remuneration of Executive Board members is paid into
the MIP. As for the remaining 50% of the annual shortterm variable remuneration, the Executive Board members may either draw all or part of it in cash or pay it into
the MIP. They may redefine the allocation of this remaining 50% every year. The shares are locked up for aperiod of three years.
The portion of variable remuneration that is settled in
the form of equity instruments is recognized at fair value and reported as a corresponding increase in equity.
The shares distributed under the MIP are issued at theunweighted average closing price of the Forbo sharefor the first 14 trading days in January of the year inwhich they were issued.
The number of shares of Forbo Holding Ltd issued in
the year under review under the MIP was 437 (2017:
1,039). A further 228 shares (2017: 320) were allocatedto Executive Board members in the reporting year aspart of the fix base salary. The share price at measurement date was CHF 1,568 (2017: CHF 1,356).

Remuneration of the Board of Directors
The remuneration of the Executive Chairman of theBoard of Directors is mainly in locked-up shares. The
details and figures for this remuneration model are to
be found on page 135 of this Financial Report and on
pages 81, 82 and 88 of the Remuneration Report. The
number of shares with a three-year vesting period allocated to the non-executive members of the Board of
Directors came to 241 in the reporting year (2017: 212).
The amount charged to the income statement in application of IFRS 2 for shares issued came to CHF 4.6 million in the year under review (2017: CHF 4.4 million).

20 Share capital andcapital management
Share capital
As at December 31, 2018, the share capital of Forbo
Holding Ltd stood at CHF 180,000 (2017: CHF 180,000),
divided into 1,800,000 registered shares with a par valueof CHF 0.10 each. Of this amount 21,419 registeredshares without voting or dividend rights are unchanged
at the disposal of the Board of Directors. Consequently,
1,778,581 registered shares were still eligible for dividends as at December 31, 2018.
Change of shares issued and outstanding:

Total shares outstanding
Treasury shares
Shares with dividend rights:
Treasury shares
Share buyback programs
Own shares with no dividend rights
Total treasury shares
Total shares issued and outstanding

Capital management
By capital management, the Group means management of consolidated shareholders’ equity as well as
optimization of the capital employed. The former includes the fully paid up share capital, the positions‘Treasury shares’, ‘Reserves’, and ‘Translation differences’
and, as per December 31, 2018, it amounted to CHF
591.6 million (2017: CHF 661.2 million).

31.12.2018
Number1,800,000

ChangeNumber031.12.2017
Number1,800,000

26,863150,000
21,419198,282
1,601,718

15,83186,895

11,032
63,105
21,41995,556
1,704,444

102,726– 102,726

128 FORBO ANNUAL REPORT 2018 – CONSOLIDATED FINANCIAL STATEMENTS

21 Discontinued operations and assets
held for sale as well as liabilities directly
associated with assets held for sale
As reported in note 17 ‘Provisions’, there are still provisions amounting to CHF 8.2 million that arise in connection with the sale of the industrial adhesives activity,
including synthetic polymers, of the former Bonding
Systems division. This division was sold to H.B. Fuller on
March 5, 2012, for CHF 384.7 million.

22 Contingent liabilities
The antitrust proceedings originally brought against
leading flooring manufacturers in France in 2013 andcarried since then as a contingent liability were concluded. The one-off costs for Forbo, which were booked
to Operating profit in ‘Other operating expenses’ in
2017, came to CHF 83.4 million.

In this connection, provisions amounting to CHF 2.8
million, or CHF 2.2 million after tax, were released in theprevious year owing to the expiry of warranty periods.

23 Leasing

Leasing
CHF mOperating leasing liabilities:
Up to 1 year
2 – 5 years
More than 5 years
Total operating leasing liabilities

Expenses for operating leasing and rentals charged to
the 2018 income statement totaled CHF 20.8 million(2017: CHF 19.7 million). The Group has no individually significant operating leasing contracts.

31.12.2018

31.12.2017

8.0
19.2
1.1
28.3

7.3
17.1
2.4
26.8

FORBO ANNUAL REPORT 2018 – CONSOLIDATED FINANCIAL STATEMENTS 129

24 Financial instruments
The effect of the first-time adoption of IFRS 9 is described in Note 4 ‘Application of new or revised accounting standards‘ and Note 12 ‘Trade receivables‘.

Classification and fair values
The table below shows the carrying amounts and fairvalues of financial assets and financial liabilities. It does
not contain any information on the fair value of financial assets and financial liabilities if the book value constitutes an appropriate approximate value for their current fair value.

Classification of financial instruments

CHF m
31.12.2018
Financial assets valued at fair value:
Derivative financial instruments

Carrying amount

Fair value throughprofit or loss

Fair value
through OCI

Amortized cost

0.1

Financial assets valued at amortized costs:
Non-current financial assets
Trade receivables
Other receivables
Cash and cash equivalents

Total

0.1

0.3
168.9
5.2
127.4

0.3
168.9
5.2
127.4

109.2
0.1
15.0

109.2
0.1
15.0

Financial liabilities valued at fair value:
Derivative financial instruments
Financial liabilities valued at amortized costs:
Non-current financial debt
Trade payables
Current financial debt
Other current liabilities

The item ‘Derivate financial instruments’ contains open
foreign exchange hedging and swap transactions witha contract value at December 31, 2018 totaling CHF
56.9 million. The foreign exchange rates can be directly observed or determined. The derivatives are therefore assigned to hierarchy level 2. ‘Current financial
debt’ consists of checks issued but not cashed.

130 FORBO ANNUAL REPORT 2018 – CONSOLIDATED FINANCIAL STATEMENTS

Classification of financial instruments
CHF m
31.12.2017
Financial assets valued at fair value:
Financial assets valued at amortized costs:
Other non-current financial assets
Trade receivables
Other receivables
Cash and cash equivalents

Carrying amount
Fair value throughprofit or loss –held for trading

Loans andreceivables

Other
financial liabilities

0.3
169.2
4.6

Total

0.3
169.2
4.6
195.4

Financial liabilities valued at fair value:
Financial liabilities valued at amortized costs:
Non-current financial debt
Trade payables
Current financial debt
Other current liabilities

The carrying amount of the financial assets and financial liabilities valued at amortized cost is a reasonableapproximation for the fair value. The Group did not
hold any significant financial instruments measured atrecurring fair value nor was there any regrouping between the levels of the fair value hierarchy.

0.2
105.9
0.2
16.4

0.2
105.9
0.2
16.4

FORBO ANNUAL REPORT 2018 – CONSOLIDATED FINANCIAL STATEMENTS 131

25 Risk assessment and financial
risk management
The tasks of the Board of Directors include identifying
risks, determining suitable measures, and implementing those measures or having them implemented. The
Board of Directors of Forbo Holding Ltd conducted aGroup-wide risk assessment in the reporting year andalso determined the risks to be managed by particularmanagement levels. The Board of Directors is closely
involved in the assessment of strategic risks and, in
consultation with the Executive Board, ensures that
operational risks are dealt with appropriately and thatthey are duly reported. This approach gives the Board
a complete overview of the key risks and measures.
This broad overview enables the Group to set priorities
and allocate the necessary resources.
The Group is exposed to the following risks arising fromthe use of financial instruments:–– Market risk–– Liquidity risk–– Default risk
Market risk
In its day-to-day operations, the Group uses derivativeand non-derivative financial instruments to manage
the risks and opportunities arising from fluctuations
in exchange rates and interest rates. The various risks
associated with existing assets and liabilities as well asplanned and anticipated transactions are monitored
and managed centrally – with due regard to theGroup’s overall risk exposure. In line with the Group’s
hedging policy, Corporate Treasury constantly monitors both the risk exposure and the effectiveness of thehedging instruments and issues recommendations
with regard to partial or complete hedging of existingrisks.
The Group uses derivative financial instruments solely
to manage financial risks and not for the purpose of
speculation. To hedge its currency risks, the Group uses
mainly currency cash transactions, forward currency
contracts, and currency swap transactions. In orderto manage counterparty risk, derivative financial transactions are concluded only with first-class banks. The
creditworthiness of these institutions is assessed on thebasis of evaluations by leading rating agencies.

No hedge accounting was used in this context in 2018or 2017.
Foreign exchange risk management
Risks arising from short-term currency exposure created by purchases and sales of goods and services(transaction risks) are identified, and selective hedging
strategies are implemented in line with an ongoing­assessment of exchange rate movements. The Group
uses foreign exchange forward and option contracts
with maturities of up to 15 months to hedge against
transaction risk.
Furthermore, risks associated with the translation of assets and liabilities denominated in foreign currencies(translation risks) are managed by establishing an appropriate financing policy.
A realistic assessment of changes in interest rates for
the US dollar, the euro, the pound sterling and the
Swiss franc has no significant impact on the result andthe equity of the Group from the valuation of transactions with financial instruments.
Interest rate risks
Interest rate risks arise from changes in the fair value ofinterest-bearing assets and liabilities caused by fluctuations in interest rates. Since these risks may have anegative effect on net financial profit and shareholders’equity, the Group uses derivatives to manage them ona case-by-case basis. A realistic assessment of changes
in interest rates for the US dollar, the euro, the poundsterling and the Swiss franc has no significant impact
on the result and the equity of the Group from the valu­
ation of transactions with financial instruments.
Liquidity risk
Liquidity risk is the risk that the Group may possibly beunable to meet contractually agreed financial obligations that are settled by delivering cash or other financial assets. Group companies need sufficient cash in order to meet their commitments. Corporate Treasury is
responsible for managing liquidity. The share of the aggregate cash and cash equivalents managed by Corporate Treasury was around 55% on December 31, 2018.
At present, the Group regards a cash level of roughly
CHF 60 million as sufficient to meet its payment obligations at all times.

132 FORBO ANNUAL REPORT 2018 – CONSOLIDATED FINANCIAL STATEMENTS

The maturity structure of the existing financial liabilities
is shown in the following table. These liabilities corres­
pond to contractually agreed maturities and represent

nominal payment outflows. Inflows and outflows offunds from derivative financial instruments are shown
separately.

As at December 31, 2018

CHF m
Interest-free liabilities
Liabilities from finance leasing

Remaining term
to maturity up to
1 year124.3
0.0

Remaining term
to maturity
1 – 2 years

Remaining term
to maturity
2 – 5 years

Remaining term
to maturity
over 5 years

Remaining term
to maturity up to
1 year122.5
0.0

Remaining term
to maturity
1 – 2 years

Remaining term
to maturity
2 – 5 years

Remaining term
to maturity
over 5 years

As at December 31, 2017

CHF m
Interest-free liabilities
Liabilities from finance leasing

Default risk
Default risk is the risk of financial losses in the eventthat a customer or the counterparty in a financial instrument fails to meet his or its obligations. The risk
consists mainly of trade receivables and bank accounts
or short-term deposits with banks. The maximum
amount of the default risk is the book value of the financial assets.
The Group recognizes allowances for expected credit
losses on financial instruments that are reported atamortized costs. It assesses at the end of each reporting period whether there is an objective basis for further impairment of a financial asset and whether theallowances made are still appropriate.
The Group considers a financial asset to be in default if
it is unlikely that the borrower can pay his obligation to
the Group in full without the Group having to take recourse to measures such as the realization of collateral.

0.2

Cash and cash equivalents
With regard to counterparty risk exposure to banks,Group-wide directives stipulate that financial investments and other financial transactions are to be madeonly with first-class banks. Given the credit ratings ofthese counterparties, the Group does not anticipate
any defaults.
Trade receivables
The Group’s default risk is affected mainly by the individual characteristics of its customers. Management,
however, also takes into account the characteristics ofthe customer base as a whole, including the default
risk of the sector and of the countries in which the customers operate, since these factors may also affect thedefault risk.
To manage this risk adequately, the financial creditworthiness of various customers is constantly monitored.
Credit risks are diversified by the company’s broad customer base in various business segments and geographic regions.

FORBO ANNUAL REPORT 2018 – CONSOLIDATED FINANCIAL STATEMENTS 133

Carrying amounts of trade receivables by currency:

CHF m
CHF
EUR
USD
JPY
GBP
CNY
SEK
Other
Total trade receivables, gross

The Group employs a permissible, simplified model ofvaluation allowances (‘provision matrix’) for trade receivables. In this valuation allowance table, expected
losses on receivables are determined on the balance

31.12.2018

31.12.2017

1.3
82.2
26.4
14.2
9.8
8.5
4.4
28.6
175.4

1.6
85.6
25.7
13.1
10.4
8.2
5.2
26.3
176.1

sheet date on the basis of past experience of default
probability and of future-oriented expectations basedon experience with the customers and market conditions.

As at December 31, 2018
CHF m
Not due
Overdue ≤ 30 days
Overdue 31 – 90 days
Overdue 91 – 180 days
Overdue > 180 days
Total

Gross carrying
amount
147.8
14.7
6.5
3.6
2.8
175.4

Loss allowance
2.0
0.5
0.3
0.9
1.5
5.2

Weighted averageloss rate
1.4%
3.4%
4.6%
25.0%
53.6%
3.0%

Credit impaired
0.2
0.1
0.1
0.3
0.6
1.3

2018

2017

– 6.9
– 0.5
– 7.4
– 0.4
0.4
0.8
0.1
– 6.5

– 5.6

Changes in valuation allowances for doubtful trade receivables during the reporting year:

CHF m
As at January 1 (before application of IFRS 9)
Effect of application of IFRS 9January 1, restated
Additions
ReleaseUse
Translation differences
As at December 31

– 1.5
0.1
0.4
– 0.3
– 6.9

134 FORBO ANNUAL REPORT 2018 – CONSOLIDATED FINANCIAL STATEMENTS

Information on the previous year (2017)­according to IAS 39
The age structure of the receivables was as follows at
December 31, 2017:31.12.2017
CHF mTotal trade receivables, grossNot due
Overdue ≤ 30 days
Overdue 31 – 90 days
Overdue 91 – 180 days
Overdue > 180 days
Allowance for doubtful trade receivables
Total trade receivables

Of the total of CHF 27.5 million in trade receivables
past due as at December 31, 2017, CHF 23.1 million
was not subject to a valuation allowance. Allowancesof CHF 2.1 million were made for trade receivables not
yet due and of CHF 4.8 million for trade receivables
past due.

176.1
148.6
14.8
6.2
3.1
3.4
– 6.9
169.2

The creation and release of allowances for doubtful
trade receivables are included in ‘Other operating expenses and income’ in the income statement.

FORBO ANNUAL REPORT 2018 – CONSOLIDATED FINANCIAL STATEMENTS 135

26 Related party transactions
Compensation paid to members of the Board of Directors and Executive Board:
Executive Board
CHF mRemuneration
Employer contributions to the pension scheme
Share-based payments
Total payments

2018
1.47
0.22
0.96
2.65

2017
1.79
0.24
1.10
3.13

The compensation paid to the Executive Board consists of a fixed gross base salary, short-term variable
remuneration in cash, private use of the company car,and social security payments made by the company.
Employer contributions to the pension fund are reported separately. The share-based remuneration paid
to the Executive Board consists of the following elements: a fixed base salary portion, which is paid inshares of Forbo Holding Ltd; short-term variable remuneration under the Management Investment Plan
(MIP) for the reporting year; and the future subscription rights, awarded in the form of performance share
units for the long-term incentive plans 2017 – 2019and 2018 – 2020 (see note 19 ‘Employee participation
plan’).

27 Events after the balance sheet date
Between the balance sheet date and the date of publication of this annual report no event occurred that
could have a significant effect on the 2018 annual financial statements.

Board of Directors
2018
1.03
0.18
2.60
3.81

2017
0.99
0.18
2.60
3.77

Total
2018
2.50
0.40
3.56
6.46

2017
2.78
0.42
3.70
6.90

The remuneration paid to the Board of Directors includes a gross base remuneration in cash, employer
contributions to the usual social insurances, lump sum
and on-site expenses, and private use of the company
car (only for the Executive Chairman).
The share-based remuneration paid to the Board of Directors includes a gross base remuneration in shares,
consisting on the one hand of a 40% portion of the
remuneration in shares for the non-executive Board
members and, on the other hand, of the share-based
portion of the remuneration for the Executive Chairman.
As at December 31, 2018 and 2017, the Group had no
significant receivables due from or liabilities to relatedparties.

136 FORBO ANNUAL REPORT 2018 – CONSOLIDATED FINANCIAL STATEMENTS

Group companies(as at December 31, 2018)

Currency

Share capital

Equityinterest

Wetherill Park, NSW
Wetherill Park, NSW

AUD
AUD

1,400,000
7,100,000

100%
100%

S

Austria
Forbo Flooring Austria GmbH
Forbo Siegling Austria Ges.m.b.H.

ViennaViennaEUR
EUR

73,000330,000

100%
100%

S

Belgium
Forbo Flooring N.V.

Groot-Bijgaarden

EUR

250,000

100%

S

BrazilForbo Pisos Ltda.
Forbo Siegling Brasil Ltda.

São PauloSão Paulo

BRL
BRL

16,564,200
7,008,746

100%
50%

S

CanadaForbo Flooring Canada Corp.
Forbo Siegling Canada Corp.

Halifax
Halifax

CAD
CAD

500,200
501,000

100%
100%

S

Chile
Forbo Siegling Chile S.A.

Santiago

CLP

313,090,945

50%

Czech Republic
Forbo Siegling Česká republika s.r.o.
Forbo s.r.o.

Liberec
PragueCZK
CZK100,000
500,000

100%
100%

Denmark
Forbo Flooring A/SForbo Siegling Danmark A/S

Glostrup
Brøndby

DKK
DKK

500,000
32,300,000

100%
100%

S

Finland
Forbo Flooring Finland Oy

HelsinkiEUR

33,638100%

SFranceForbo Château-Renault S.A.S.
Forbo Participations S.A.S.
Forbo Reims SNC
Forbo Sarlino S.A.S.
Forbo Siegling France S.A.S.

Château-Renault
Reims
Reims
Reims
Lomme

EUR
EUR
EUR
EUR
EUR

1,000,000
5,000,000
3,879,810
6,400,000
819,000

100%
100%
100%
100%
100%

MS

Group company

Registered office

Australia
Forbo Floorcoverings Pty. Ltd.
Forbo Siegling Pty. Ltd.

S Sales
MS Manufacturing and Sales
H Holding/Services
N Not consolidated as at December 31, 2018
D Direct participation of Forbo Holding Ltd

N

N

D

Flooring
Systems

Movement
Systems

Holding/Services

S

S

MS

S

S

S
S

MS

H
MS
S
S

FORBO ANNUAL REPORT 2018 – CONSOLIDATED FINANCIAL STATEMENTS 137

Currency

Share capital

EUR
EUR
EUR
EUR
EUR

15,400,000
2,050,000
500,000
10,230,000
100,000

100%
100%
100%
100%
100%

Derbyshire
Kirkcaldy
Derbyshire
Dukinfield
Derbyshire
Derbyshire

GBP
GBP
GBP
GBP
GBP
GBP

22,000,000
48,000,000
50,77449,500,000
400,000

100%
100%
100%
100%
100%
100%

Hong Kong

HKD

1

100%

Delhi
Pune

INR
INR

15,000,000
26,000,000

100%
100%

Indonesia
PT Forbo Siegling Indonesia

Kabupaten Bandung

IDR

6,344,580,000

100%

Ireland
Forbo Ireland Ltd.

DublinEUR125,000

100%

S

Segrate (Milan)
Paderno Dugnano(Milan)EUR
EUR

60,000120,000

100%
100%

S

Tema S.r.l.

Parma

EUR

50,000

100%

S

Japan
Forbo Siegling Japan Ltd.

Tokyo

JPY

330,000,000

100%

MS

Malaysia
Forbo Siegling SDN. BHD.

Johor Bahru

MYR

2,500,002

100%

S

MexicoForbo Siegling, S.A. de C.V.

Tlalnepantla

MXN

24,676,404

100%

MS

Group company

Registered office

Germany
Forbo Beteiligungen GmbH
Forbo Eurocol Deutschland GmbH
Forbo Flooring GmbH
Forbo Siegling GmbH
Realbelt GmbH

LörrachErfurtPaderborn
Hanover
LörrachGreat Britain
Forbo Flooring UK Ltd.
Forbo Floors UK Ltd.
Forbo-Nairn Ltd.
Forbo Siegling (UK) Ltd.
Forbo UK Ltd.
Westbond Ltd.
Hong Kong
Forbo International Hong Kong Ltd.
India
Forbo Flooring India Pvt. Ltd.
Forbo Siegling Movement Systems
India Pvt. Ltd.

Italy
Forbo Resilienti S.r.l.
Forbo Siegling Italia S.p.A.

S Sales
MS Manufacturing and Sales
H Holding/Services
N Not consolidated as at December 31, 2018
D Direct participation of Forbo Holding Ltd

D

D

Flooring
Systems

Movement
Systems

Equityinterest

Holding/Services

H
MS
S
MS
S

MS
H
H
S
H
H

H

S
S

S

S

138 FORBO ANNUAL REPORT 2018 – CONSOLIDATED FINANCIAL STATEMENTS

Currency

Share capital

Equityinterest

Zaanstad
Krommenie
Krommenie
Krommenie
Coevorden
Spankeren

EUR
EUR
EUR
EUR
EUR
EUR

454,000
11,350,000
1,944,500
13,500,000
3,624,000
113,445

100%
100%
100%
100%
100%
100%

New Zealand
Forbo Siegling Ltd.

Auckland

NZD

650,000

100%

NorwayForbo Flooring AS
Transmeca AS

Asker
Oslo

NOK
NOK

1,000,000
100,000

100%
100%

People’s Republic of China
Forbo Movement Systems (China) Co., Ltd.
Forbo Shanghai Co., Ltd.
Forbo Siegling (China) Co., Ltd.

PinghuShanghai
Shenyang

USD
CHF
USD

25,000,000
4,000,000
16,221,000

100%
100%
100%

S

Portugal
Forbo-Revestimentos, S.A.

Maia (Porto)

EUR

74,850100%

S

Romania
Forbo Siegling Romania S.R.L.

Bucharest

RON

38,000100%

RussiaOOO ‘Forbo Flooring‘
OOO ‘Forbo Kaluga‘
OOO ‘Forbo Siegling CIS‘OOO ‘Forbo Eurocol RUS‘

Moscow
MoscowSaint Petersburg
Stary Oskol

RUB
RUB
RUB
RUB

500,000
158,313,780
400,000
187,181,000

100%
100%
100%
100%

Slovakia
Forbo Siegling s.r.o.

Malacky

EUR

15,281,639

100%

South Korea
Forbo Korea Ltd.

Seoul

KRW

900,000,000

100%Group company

Registered office

Netherlands
Forbo Eurocol Nederland B.V.
Forbo Flooring B.V.
Forbo Flooring Coral N.V.
Forbo NL Holding B.V.
Forbo-Novilon B.V.
Forbo Siegling Nederland B.V.

S Sales
MS Manufacturing and Sales
H Holding/Services
N Not consolidated as at December 31, 2018
D Direct participation of Forbo Holding Ltd

Flooring
SystemsMS
MS
MS

Movement
Systems

Holding/Services

H
MS
S

S

S
S

MS
MS

S

S
MS
S
MS

MS

S

S

FORBO ANNUAL REPORT 2018 – CONSOLIDATED FINANCIAL STATEMENTS 139

Currency

Share capital

Equityinterest

Barcelona
Montcada i Reixac(Barcelona)

EUR
EUR

60,101
1,532,550

100%
100%

S

SwedenForbo Flooring AB
Forbo Siegling Svenska AB

GothenburgKållered (Gothenburg)

SEK
SEK

8,000,000
1,000,000

100%
100%

S

Switzerland
Forbo Financial Services AG
Forbo Finanz AG
Forbo Finanz II AG
Forbo-Giubiasco SA
Forbo International SA

Baar
Baar
Baar
Giubiasco
Baar

D

CHF
CHF
CHF
CHF
CHF

100,000
10,000,000
250,000
100,000
100,000

100%
100%
100%
100%
100%

Thailand
Forbo Siegling (Thailand) Co. Ltd.

Samut Prakan

D

THB

13,005,000100%

Istanbul

TRY

5,500,000

100%

S

United Arab Emirates
Forbo Flooring Middle East DMCC

Dubai

AED

499,000

100%

S

USA
Forbo America Inc.
Forbo America Services Inc.
Forbo Flooring, Inc.
Forbo Siegling, LLC

Wilmington, DE
Wilmington, DE
Wilmington, DE
Wilmington, DE

USD
USD
USD
USD

19,957,259
50,0003,517,000
15,455,000

100%
100%
100%
100%

Group company

Registered office

Spain
Forbo Pavimentos, S.A.
Forbo Siegling Iberica, S.A.U.

TurkeyForbo Hareket ve Zemin Sistemleri Ticaret
Limited irketi

S Sales
MS Manufacturing and Sales
H Holding/Services
N Not consolidated as at December 31, 2018
D Direct participation of Forbo Holding Ltd

D
D

D

Flooring
Systems

Movement
Systems

Holding/Services

S

S

H
H
H
MS
MS

H

S

S

H
H
S
MS

140 FORBO ANNUAL REPORT 2018 – CONSOLIDATED FINANCIAL STATEMENTS

Report of the statutory auditor

Statutory Auditor’s Report
To the General Meeting of Forbo Holding Ltd, Baar

Report on the Audit of the Consolidated Financial Statements
OpinionWe have audited the consolidated financial statements of Forbo Holding Ltd and its subsidiaries (the Group),
which comprise the consolidated balance sheet as at 31 December 2018 and the consolidated income statement,
consolidated comprehensive income statement, consolidated statement of changes in equity and consolidated
cash flow statement for the year then ended, and notes to the consolidated financial statements, including asummary of significant accounting policies.
In our opinion the consolidated financial statements (pages 94 to 139) give a true and fair view of the consolidated
financial position of the Group as at 31 December 2018, and its consolidated financial performance and its
consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards(IFRS) and comply with Swiss law.
Basis for Opinion
We conducted our audit in accordance with Swiss law, International Standards on Auditing (ISAs) and Swiss
Auditing Standards. Our responsibilities under those provisions and standards are further described in the
Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are
independent of the Group in accordance with the provisions of Swiss law and the requirements of the Swiss audit
profession, as well as the IESBA Code of Ethics for Professional Accountants, and we have fulfilled our otherethical responsibilities in accordance with these requirements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion.

Key Audit Matters
Revenue recognition

Valuation of inventories

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of
the consolidated financial statements of the current period. These matters were addressed in the context of ouraudit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do notprovide a separate opinion on these matters.

1

FORBO ANNUAL REPORT 2018 – CONSOLIDATED FINANCIAL STATEMENTS 141

Revenue recognition
Key Audit Matter

Our response

Total consolidated net sales of the financial year 2018 We mainly performed the following audit procedures:amounted to CHF 1,327.0 million (2017: CHF 1,246.4
million). The segment Flooring Systems contributed— We analyzed the process from the purchase order
CHF 913.2 million (2017: CHF 856.6 million) or 68.8%
to the receipt of payment and assessed whether(2017: 68.7%) to total net sales, while the segment
transactions are completely and accurately
recorded in the accounts.
Movement Systems realized CHF 413.8 million (2017:
CHF 389.8 million), representing 31.2% of total net
sales (2017: 31.3%).
— Considering the diverse design of internal control
and IT systems of individual subsidiaries, weNet sales are a key performance indicator for Forbotested the operating effectiveness of identified key
and therefore in the focus of internal and external
controls relating to the proper recognition ofrevenue.
stakeholders. Consequently, when performing theaudit we had a focus on existence of revenue
transactions and their recognition in the appropriate— Based on a statistical sample of delivery notes
period.
and payments received, we assessed the
In both segments, sales arrangements are based onstandardized commercial terms and conditions, whichgovern the transfer of risk and rewards. In the light of
the implementation of IFRS 15, Forbo has analyzed
the business models applied and concluded that thetiming of the transfer of control is identical with thetransfer of risk and rewards. Specific terms ofcontracts may be used depending on the region andthe industry of the buyer. Owing to the types of
products sold by either segment of the Group, thecontractual sales arrangements are not complex. Dueto the large number of transactions, the proper
recognition of revenue nevertheless depends on afunctioning internal control system, adapted to local
circumstances. Furthermore, accurate data on
volumes and prices are central to revenue recognition.

existence of revenues and their recognition in thecorrect period in compliance with IFRS 15.

—

We furthermore performed analytical procedures
on a segment level as well as on the level of
specific individual entities. These included
analyses of price and volume deviations, margindevelopment, the largest clients and the mostsold products as well as analyses of the
distribution of sales throughout the year andspecific months.

For further information on revenue recognition refer to the following:—

Note 2 – Summary of significant accounting policies: net sales and revenue recognition, page 101—

Note 4 – Application of new or revised accounting standards, page 107—

Note 5 – Segment reporting, page 109 – 111

2

142 FORBO ANNUAL REPORT 2018 – CONSOLIDATED FINANCIAL STATEMENTS

Report of the statutory auditor

Valuation of inventories
Key Audit Matter

Our response

Inventory as at 31 December 2018 amounted to CHF
230.1 million (31 December 2017: CHF 226.6 million)
and represents one of the most material asset
positions. Valuation of inventories is consequently ofsignificance to an understanding of the financial
statements.

We mainly performed the following audit procedures:—

Inventory is recognized at acquisition or manufacturingcosts and periodically assessed in terms of—recoverability. For work in progress and finishedgoods that include a significant value added, thedetermination of manufacturing costs partly requires
judgment.

We obtained an understanding of the process
related to controls on incoming and outgoinggoods and related to the identification of obsolete
inventories. Based on this we critically assessed
whether transactions are completely andaccurately recorded in the accounts.
Considering the diverse design of internal control
and IT systems of individual subsidiaries, wetested the operating effectiveness of identified key
controls relating to existence and valuation of
inventories.

Additionally, there is a risk that for work in progress
and finished goods the manufacturing costs exceed
the actual sales price less selling, distribution andadministrative costs (net realizable value).

—

We analyzed the valuation basis of individual
inventory items by reference to the costcalculation of the inventory for different materials,
assessed changes in the valuation basis andmethod and challenged changes in unit costs.

Furthermore, determining valuation allowances
involves a degree of judgment.

—

We critically assessed the adequacy of theprocesses to identify, as well as the basis and themethod to value, obsolete inventories. We
recalculated the valuation allowance for obsolete
inventories and, based on a sample, reconciled it
to the underlying documentation. Furthermore, intesting the valuation of inventories at lower of costor net realizable value, we compared costs andsales prices by reference to a sample.

For further information on inventories refer to the following:—

Note 2 – Summary of significant accounting policies: inventories, page 105—

Note 16 – Inventories, page 116

3

FORBO ANNUAL REPORT 2018 – CONSOLIDATED FINANCIAL STATEMENTS 143

Other Information in the Annual Report
The Board of Directors is responsible for the other information in the annual report. The other information
comprises all information included in the annual report, but does not include the consolidated financial
statements, the stand-alone financial statements of the Company, the remuneration report and our auditor’sreports thereon.
Our opinion on the consolidated financial statements does not cover the other information in the annual report and
we do not express any form of assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read the otherinformation in the annual report and, in doing so, consider whether the other information is materially inconsistent
with the consolidated financial statements or our knowledge obtained in the audit, or otherwise appears to bematerially misstated. If, based on the work we have performed, we conclude that there is a material misstatementof this other information, we are required to report that fact. We have nothing to report in this regard.
Responsibility of the Board of Directors for the Consolidated Financial Statements
The Board of Directors is responsible for the preparation of the consolidated financial statements that give a trueand fair view in accordance with IFRS and the provisions of Swiss law, and for such internal control as the Boardof Directors determines is necessary to enable the preparation of consolidated financial statements that are freefrom material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, the Board of Directors is responsible for assessing the Group’s
ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using thegoing concern basis of accounting unless the Board of Directors either intends to liquidate the Group or to cease
operations, or has no realistic alternative but to do so.
Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as awhole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit
conducted in accordance with Swiss law, ISAs and Swiss Auditing Standards will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material if,
individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users
taken on the basis of these consolidated financial statements.
As part of an audit in accordance with Swiss law, ISAs and Swiss Auditing Standards, we exercise professional
judgment and maintain professional skepticism throughout the audit. We also:— Identify and assess the risks of material misstatement of the consolidated financial statements, whether due
to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence
that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material
misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion,forgery, intentional omissions, misrepresentations, or the override of internal control.
— Obtain an understanding of internal control relevant to the audit in order to design audit procedures that areappropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of theGroup’s internal control.
— Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimatesand related disclosures made.
— Conclude on the appropriateness of the Board of Directors’ use of the going concern basis of accounting and,based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions
that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that amaterial uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosuresin the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our
conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future
events or conditions may cause the Group to cease to continue as a going concern.

4144 FORBO ANNUAL REPORT 2018 – CONSOLIDATED FINANCIAL STATEMENTS

Report of the statutory auditor—

Evaluate the overall presentation, structure and content of the consolidated financial statements, including
the disclosures, and whether the consolidated financial statements represent the underlying transactions andevents in a manner that achieves fair presentation.

—

Obtain sufficient appropriate audit evidence regarding the financial information of the entities or businessactivities within the Group to express an opinion on the consolidated financial statements. We areresponsible for the direction, supervision and performance of the Group audit. We remain solely responsible
for our audit opinion.

We communicate with the Board of Directors or its relevant committee regarding, among other matters, theplanned scope and timing of the audit and significant audit findings, including any significant deficiencies ininternal control that we identify during our audit.
We also provide the Board of Directors or its relevant committee with a statement that we have complied with
relevant ethical requirements regarding independence, and to communicate with them all relationships and othermatters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with the Board of Directors or its relevant committee, we determine thosematters that were of most significance in the audit of the consolidated financial statements of the current period
and are therefore the key audit matters. We describe these matters in our auditor’s report, unless law or
regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determinethat a matter should not be communicated in our report because the adverse consequences of doing so would
reasonably be expected to outweigh the public interest benefits of such communication.

Report on Other Legal and Regulatory Requirements
In accordance with article 728a para. 1 item 3 CO and the Swiss Auditing Standard 890, we confirm that aninternal control system exists, which has been designed for the preparation of consolidated financial statements
according to the instructions of the Board of Directors.
We recommend that the consolidated financial statements submitted to you be approved.
KPMG AG

Rolf Hauenstein
Licensed Audit Expert
Auditor in Charge

Regula Tobler
Licensed Audit Expert

Zurich, 27 February 2019

KPMG AG, Badenerstrasse 172, PO Box, CH-8036 Zurich
KPMG AG is a subsidiary of KPMG Holding AG, which is a member of the KPMG network of independent firms affiliated with KPMG International Cooperative(“KPMG International”), a Swiss legal entity. All rights reserved.

5responsible for the direction, supervision and performance of the Group audit. We remain solely responsible
for our audit opinion.
We communicate with the Board of Directors or its relevant
committee
regarding,other matters,
the STATEMENTS 145
FORBO
ANNUAL REPORT2018 –among
CONSOLIDATEDFINANCIAL
planned scope and timing of the audit and significant audit findings, including any significant deficiencies ininternal control that we identify during our audit.
We also provide the Board of Directors or its relevant committee with a statement that we have complied with
relevant ethical requirements regarding independence, and to communicate with them all relationships and othermatters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with the Board of Directors or its relevant committee, we determine thosematters that were of most significance in the audit of the consolidated financial statements of the current period
and are therefore the key audit matters. We describe these matters in our auditor’s report, unless law or
regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determinethat a matter should not be communicated in our report because the adverse consequences of doing so would
reasonably be expected to outweigh the public interest benefits of such communication.
— Evaluate
the overall
presentation,
structure andRequirements
content of the consolidated financial statements, including
Reporton Other
Legal
and Regulatory

the disclosures, and whether the consolidated financial statements represent the underlying transactions andevents in awith
mannerthat
achieves
presentation.
In accordance
article728apara. 1fair
item
3 CO and the Swiss Auditing Standard 890, we confirm that aninternal control system exists, which has been designed for the preparation of consolidated financial statements— Obtain sufficient appropriate audit evidence regarding the financial information of the entities or businessaccording to the instructions of the Board of Directors.
activities within the Group to express an opinion on the consolidated financial statements. We areresponsible for the direction, supervision and performance of the Group audit. We remain solely responsible
We recommend that the consolidated financial statements submitted to you be approved.
for our audit opinion.
KPMG AG
We communicate with the Board of Directors or its relevant committee regarding, among other matters, theplanned scope and timing of the audit and significant audit findings, including any significant deficiencies ininternal control that we identify during our audit.
We also provide the Board of Directors or its relevant committee with a statement that we have complied with
relevant
ethical requirements regarding independence, andto communicate
with them all relationships and otherRolf Hauenstein
RegulaToblermattersmayreasonably be thought to bear on our independence,
andwhere applicable, related safeguards.
Licensedthat
Audit
ExpertLicensed Audit
ExpertAuditor in Charge
From the matters communicated with the Board of Directors or its relevant committee, we determine thosematters that were of most significance in the audit of the consolidated financial statements of the current period
and
are27
therefore
the2019
key audit matters. We describe these matters in our auditor’s report, unless law or
Zurich,February
regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determinethat a matter should not be communicated in our report because the adverse consequences of doing so would
reasonably be expected to outweigh the public interest benefits of such communication.

Report on Other Legal and Regulatory Requirements
In accordance with article 728a para. 1 item 3 CO and the Swiss Auditing Standard 890, we confirm that aninternal control system exists, which has been designed for the preparation of consolidated financial statements
according to the instructions of the Board of Directors.
We recommend that the consolidated financial statements submitted to you be approved.
KPMG AGKPMG AG, Badenerstrasse 172, PO Box, CH-8036 Zurich

Rolf Hauenstein

Regula Tobler

KPMG
AG is aAudit
subsidiaryof KPMG Holding AG, which is a member of the KPMG networkof independent
firms
affiliated with KPMG International Cooperative
LicensedExpertLicensed
Audit
Expert(“KPMG International”), a Swiss legal entity. All rights reserved.

Auditor in Charge

5

Zurich, 27 February 2019

KPMG AG, Badenerstrasse 172, PO Box, CH-8036 Zurich
KPMG AG is a subsidiary of KPMG Holding AG, which is a member of the KPMG network of independent firms affiliated with KPMG International Cooperative(“KPMG International”), a Swiss legal entity. All rights reserved.

5

146 FORBO ANNUAL REPORT 2018 – CONSOLIDATED FINANCIAL STATEMENTS

Consolidated balance sheets
2014 – 2018
AssetsCHF mCurrent assets
Cash and cash equivalents
Current financial assets
Trade receivables
Other receivables
Accrued income and deferred expenses
Inventories
Non-current assets
Non-current financial assets
Deferred tax assets
Property, plant, and equipment
Intangible assets and goodwill
Total assets

Shareholders’ equity and liabilities
CHF mCurrent liabilities
Current financial debt
Trade payables
Other current liabilities
Current tax liabilities
Current provisions, accrued expenses, and deferred income
Non-current liabilities
Non-current financial debt
Deferred tax liabilities
Non-current provisions
Employee benefit obligations
Total liabilities
Shareholders’ equity
Share capital
Treasury shares
Reserves and retained earnings
Total shareholders’ equity and liabilities

31.12.2018

31.12.201731.12.2016

31.12.2015

31.12.2014

567.3
127.4
0.1
168.9
26.0
14.8
230.1
412.7
0.3
39.9
259.4
113.1
980.0

638.2
195.4
0.0
169.2
27.6
19.4
226.6
429.3
0.3
39.0
267.6
122.4
1,067.5

601.2
209.7
0.0
151.4
19.8
13.9
206.4
388.1
0.2
40.5
227.6
119.8
989.3

509.3
116.3
0.0
147.3
18.8
12.4
214.5
402.8
0.3
39.5
227.3
135.7
912.1

677.1
205.1
49.5
150.6
24.0
17.3
230.6
418.5
0.3
37.2
234.9
146.1
1,095.6

31.12.2018

31.12.201731.12.2016

31.12.2015

31.12.2014

261.9
0.1
109.2
28.7
16.2
107.7
126.5
0.0
12.1
40.7
73.7
388.4
591.6
0.2
– 0.1
591.5
980.0

275.3
0.2
105.9
32.4
26.5
110.3
131.0
0.2
10.8
32.3
87.7
406.3
661.2
0.2
– 0.1
661.1
1,067.5

241.8
0.1
95.4
24.2
20.4
101.7
126.1
0.4
10.9
26.1
88.7
367.9
621.4
0.2
– 0.1
621.3
989.3

232.2
0.1
77.4
36.5
20.3
97.9
120.7
0.9
24.0
25.7
70.1
352.9
559.2
0.2
– 0.1
559.1
912.1

244.2
0.6
86.5
30.0
18.9
108.2
112.6
1.4
26.5
24.2
60.5
356.8
738.8
0.2
– 0.1
738.7
1,095.6

FORBO ANNUAL REPORT 2018 – CONSOLIDATED FINANCIAL STATEMENTS 147

Consolidated income statements
2014 – 2018
CHF m
Net sales
Cost of goods sold
Gross profit
Development costs
Marketing and distribution costs
Administrative costs
Other operating expenses
Other operating income
Operating profit
Financial income
Financial expenses
Group profit before taxes
Income taxes
Group profit for the year from continuing operations
Group profit for the year from discontinued operations after taxes
Group profit for the year

2018

2017

2016

2015

2014

1,327.0– 824.9
502.1– 16.6– 198.1– 96.1– 23.5
7.5
175.3
0.9
– 0.6
175.6
– 38.0
137.6
0.0
137.6

1,246.4– 764.5
481.9– 15.5– 195.8– 94.7– 106.5
10.5
79.9
0.9
– 0.8
80.0
– 43.5
36.5
2.2
38.7

1,185.5– 715.2
470.3– 15.1– 190.7– 95.0– 16.7
4.4
157.2
2.0
– 0.1
159.1
– 31.5
127.6
0.0
127.6

1,139.1– 698.3
440.8– 15.1– 181.1– 89.8– 16.6
4.6
142.8
2.0
– 0.4
144.4
– 28.7
115.7
0.0
115.7

1,226.8– 765.8
461.0– 16.5– 196.6– 94.2– 13.2
8.9
149.4
5.9
– 1.0
154.3
– 30.9
123.4
0.2
123.6

FINANCIAL REPORT
Financial statements for Forbo Holding LtdBalance sheet
Income statementNotes to the financial statements
Proposal for appropriation of available earnings
Report of the statutory auditor

149
150
151
152
157
158

150 FORBO ANNUAL REPORT 2018 – ANNUAL STATEMENTS FOR THE HOLDING COMPANY

Balance sheet for Forbo Holding Ltd(before appropriation of available earnings)
AssetsCHF
Current assets
Cash and cash equivalents
Other receivables from Group companies
Current tax receivables
Accrued income and deferred expenses
Non-current assets
Loans to Group companies
Investments in Group companies
Total assets

Shareholders’ equity and liabilities
CHF
Current liabilities
Current liabilities to third parties
Other liabilities to Group companies
Accrued expenses and deferred income
Current tax liabilities
Shareholders’ equity
Share capital
Statutory reserves:
General reserves
Capital contribution reserves
Reserves for treasury shares
Available earnings:
Retained earnings
Net profit for the year
Treasury shares
Total shareholders’ equity and liabilities

31.12.2018

31.12.2017

42,144,461
3,127,948
38,921,310
62,67032,533423,948,017
118,938,014
305,010,003
466,092,478

16,659,198
1,793,619
14,832,406
33,173423,964,089
118,938,256
305,025,833
440,623,287

31.12.2018

31.12.2017

482,103
157,503

Note

2
5

3
4

Note

6

465,610,375
180,000

16,105,779
143,509
11,992,390
324,047
3,645,833
424,517,508
180,000

8

15,600,000
15,302
5,669,005

15,600,000
15,302
1,008,066

475,362,702
225,439,863– 256,656,497
466,092,478

420,047,659
91,248,219– 103,581,738
440,623,287

2
324,600
5

8

FORBO ANNUAL REPORT 2018 – ANNUAL STATEMENTS FOR THE HOLDING COMPANY 151

Income statement for Forbo Holding Ltd

IncomeCHF
Financial income:From investments in and loans to Group companies
From securities and current investments
Total income

Expenses
CHF
Administrative expenses
Financial expenses:
From investments in and loans from Group companies
Other expenses
Taxes
Total expenses
Net profit for the year

2018

2017

231,822,143
252,298
232,074,441

54,679,844
47,234,377
101,914,221

2018

2017

5,832,570
1,097,828
1,097,828

6,001,204
440,710440,710578,255
3,645,833
10,666,002
91,248,219

Note

9
10

Note

11
12
3
5

– 295,820
6,634,578
225,439,863

152 FORBO ANNUAL REPORT 2018 – ANNUAL STATEMENTS FOR THE HOLDING COMPANY

Notes to the financial statements
for Forbo Holding Ltd
1 Accounting

3 Loans to Group companies

These financial statements have been prepared in accordance with the provisions on accounting and financial reporting of the Swiss Code of Obligations (32ndtitle of the Swiss Code of Obligations). Forbo Holding
Ltd publishes consolidated financial statements according to a generally accepted accounting standard(IFRS). Therefore, in accordance with the provisions on
accounting and financial reporting, the financial statements are presented without disclosure notes relating
to audit fees or a cash flow statement.

Loans to Group companies, amounting to EUR 97.8
million and CHF 12.7 million, are unchanged. The
loans were valued at the rate prevailing on the balance sheet date; unrealized exchange losses werebooked, while unrealized exchange gains were notrecognized.

2 Other receivables from andliabilities to Group companies‘Other receivables from Group companies’ contained
mainly credit balances on the cash pool accounts in
the reporting year and the outstanding claim from theintercompany sale of the subsidiary Forbo Project Vinyl
AB in the previous year. In connection with the cashpool, Forbo Holding Ltd had a liability to Forbo Finanz
Ltd the previous year under ‘Other liabilities to Group
companies’.

4 Investments in Group companies
Investments in Group companies are measured at thecost of acquisition less necessary valuation allowances. Investments in Group companies decreased in thereporting year due to intercompany sale of the subsidiary Forbo Flooring AB to Forbo Finanz Ltd at book value. Furthermore, the investment in Forbo Flooring UK
Ltd. was transferred to Forbo Finanz Ltd at book value
by means of a contribution in kind.
As at December 31, 2018, Forbo Holding Ltd held thefollowing direct investments:

Investments in Group companies
Currency

Share capital(in 1,000)

Equityinterest

Holding/Services
Holding/Services
Services
Holding/Services
Services, Manufacturing,and Sales

USD
EUR
CHF
CHF
CHF

19,957
15,400100
10,000
100

100%
100%
100%
100%
100%

Holding/Services
Manufacturing and Sales
Sales

EUR
MXN
THB

5,000
24,676
13,005100%< 0.1%
69.1%

Company

Registered office

Activity

Forbo America Inc.
Forbo Beteiligungen GmbH
Forbo Financial Services AG
Forbo Finanz AG
Forbo International SA

US-Wilmington, DE
DE-Lörrach
CH-Baar
CH-Baar
CH-BaarForbo Participations S.A.S.
Forbo Siegling, S.A. de C.V.
Forbo Siegling (Thailand) Co. Ltd.

FR-Reims
MX-Tlalnepantla
TH-Samut Prakan

FORBO ANNUAL REPORT 2018 – ANNUAL STATEMENTS FOR THE HOLDING COMPANY 153

5 Taxes

7 Conditional capitalIn the year under review, Forbo Holding Ltd was able
to claim the entire participation deduction on dividend income. The tax burden was higher the previous
year because gains on the sale of treasury shares reported in the financial statements of Forbo Holding
Ltd under commercial law were subject to federal tax,
thus reducing the participation deduction on dividend
income.

Originally, conditional capital of CHF 8.5 million for the
exercise of shareholder options and warrants in connection with a bond issue was created by a resolutionof the Annual General Meeting held on April 27, 1994.
Following the exercise of options in 1994, 1995 and1997 and reductions in the par value by CHF 22 pershare in 2003, CHF 8 per share in 2004, CHF 6 per sharein 2007, CHF 10 per share in 2008, and CHF 3.90 per
share in 2009, the conditional capital on December 31,
2018, remained unchanged against the previous year
at CHF 16,645.

6 Share capital
As at December 31, 2018, the share capital of Forbo
Holding Ltd totaled CHF 180,000 (2017: CHF 180,000),
divided into 1,800,000 registered shares with a par value of CHF 0.10 each. 21,419 registered shares without
voting or dividend rights are at the disposal of theBoard of Directors.
At the Ordinary General Meeting of Forbo Holding Ltd
of April 6, 2017, the Board of Directors was authorized
to buy back the company’s own shares up to a maximum of 10% of the share capital over a period of three
years for the purpose of subsequent cancelation. Under this share buy-back program 150,000 shares havebeen repurchased at a fixed price and via the second
trading line.
Treasury shares
As at January 1, 2018
Additions
Disposals
As at December 31, 2018

8 Treasury shares
The treasury shares directly held in Forbo Holding Ltd
amounting to CHF 256.7 million on the balance sheet
date correspond to the value of all treasury shares valued at cost. The item ‘Reserve for treasury shares’ reflects the carrying amount of the treasury shares heldby subsidiaries of Forbo Holding Ltd, amounting to
CHF 5.7 million (measured at cost of acquisition CHF
6.0 million). Overall, the treasury shares held directly
and indirectly developed as follows over the period
under review:

Cost
CHF
104,591,945
162,415,700– 4,376,683
262,630,962

Number ofregistered shares
95,556
105,926– 3,200
198,282

154 FORBO ANNUAL REPORT 2018 – ANNUAL STATEMENTS FOR THE HOLDING COMPANY

9 Financial income from investments inand loans to Group companies

12 Financial expenses from investments
in and loans from Group companies

Financial income from investments in and loans toGroup companies amounting to CHF 231.8 million(2017: CHF 54.7 million) consists of dividend income of
CHF 231.6 million (2017: CHF 52.2 million) and interestof CHF 0.2 million (2017: CHF 0.2 million). The previous
year also included exchange rate gains of CHF 2.3 million on foreign exchange loans.

Financial expenses from investments in and loans fromGroup companies in the year under review containedin particular losses on current loans in foreign currencies of CHF 0.8 million, interest expenditure for liabilities to Group companies of CHF 0.2 million (2017: 0.1
million) and – in the previous year – securities transfer
tax on the sale of treasury shares amounting to CHF 0.4
million.

10 Financial income from securities
and current investments
Financial income from securities and current investments is equivalent to the net proceeds from the saleof treasury shares. The Group placed 63,000 shares ofForbo Holding Ltd at a price of CHF 1,450 per share aspart of an accelerated bookbuilding process. Of theshares sold, 48,000 treasury shares were held directly
by Forbo Holding Ltd and 15,000 treasury shares were
held indirectly by Forbo International SA.

11 Administrative expenses
Administrative expenses include stewardship costs,
the fees paid to the members of the Board of Directors,
the auditor’s fees, and usual administrative costs, mainly for the Ordinary General Meeting, the share register,
insurance and legally required announcements. Forbo
Holding Ltd does not employ any personnel.

13 Contingent liabilities
Guarantees and letters of support to third parties in favor of Group companies amounted to CHF 6.1 million
at year-end 2018 (2017: CHF 9.9 million), of which as in
the previous year none were utilized.
The Group companies in Switzerland are treated for
purposes of value-added tax as a single-entity subject
to value-added tax (group taxation regime, Article 13,
Federal Act on Value-Added Tax). If one of the Group
companies is unable to meet its payment obligations
to the Federal Tax Administration, the other Group
companies bear joint and several liability.

14 Significant shareholders
According to information available to the Board of Directors, the following shareholders or groups of shareholders with restricted voting rights constituted significant shareholders in the company pursuant to Article
663c Swiss Code of Obligations as at the reportingdate:

Michael Pieper, Hergiswil, and Artemis Beteiligungen I AG, Hergiswil
Forbo Holding Ltd, Baar, together with its two subsidiaries
Forbo International SA, Baar, and Forbo Finanz AG, Baar

Number of shares
486,764
198,282

As percentage
27.04%
11.02%FORBO ANNUAL REPORT 2018 – ANNUAL STATEMENTS FOR THE HOLDING COMPANY 155

Shareholdings
IN 2018
As at December 31, 2018, the individual members of
the Board of Directors and the Executive Board (including related parties) held the following number of sharesin Forbo Holding Ltd:
Shareholdings 2018
SharesName and function
This E. Schneider, Executive Chairman
Michael Pieper, Vice Chairman
Dr. Peter Altorfer, Vice Chairman
Claudia Coninx-Kaczynski, member
Dr. Reto Müller, member
Vincent Studer, member
Total Board of Directors
Stephan Bauer, Chief Executive Officer
Marc Deimling, Executive Vice President Movement Systems
Urs Uehlinger, Chief Financial Officer
Jean-Michel Wins, Executive Vice President Flooring Systems
Total Executive Board

54,611
486,764
1,287
212
632
916
544,422
2,969
3
104
104
3,180

156 FORBO ANNUAL REPORT 2018 – ANNUAL STATEMENTS FOR THE HOLDING COMPANY

IN 2017
As at December 31, 2017, the individual members of
the Board of Directors and the Executive Board (including related parties) held the following number of sharesin Forbo Holding Ltd:
Shareholdings 2017
SharesName and function
This E. Schneider, Executive Chairman
Michael Pieper, Vice Chairman
Dr. Peter Altorfer, Vice Chairman
Claudia Coninx-Kaczynski, member
Dr. Reto Müller, member
Vincent Studer, member
Total Board of Directors
Stephan Bauer, Chief Executive Officer
Matthias P. Huenerwadel, Executive Vice President Flooring Systems
Urs Uehlinger, Chief Financial Officer
Jean-Michel Wins, Executive Vice President Movement Systems
Total Board of Directors

15 Events after the balance sheet date
Between the balance sheet date and the date of publication of this annual report no event occurred that
could have a significant effect on the 2018 annual financial statements.

47,892486,217
1,227
170
590
866
536,962
2,639
2,856
18
195
5,708

FORBO ANNUAL REPORT 2018 – ANNUAL STATEMENTS FOR THE HOLDING COMPANY 157

Proposal for appropriation of available
earnings of Forbo Holding Ltd
The Board of Directors proposes to the Ordinary General Meeting that the available retained earnings, consisting of:2018
CHF
Net profit
Retained earnings
Treasury shares
Total at the shareholders’ meeting’s disposal1)

225,439,863
475,362,702– 256,656,497
444,146,068

be appropriated as follows:
2018
CHF
Distribution ordinary dividend
To be carried forward
Total at the shareholders’ meeting’s disposal1)

1) At the Ordinary General Meeting of April 5, 2019, the Board of Directors will propose an ordinary gross dividend of CHF 21.00 per
registered share (2017: CHF 19.00). No distribution will be made fortreasury shares held by Forbo Holding Ltd or any of its subsidiaries
on the record date, which explains why the amount of ordinary
dividends may therefore still change.

33,636,078
410,509,990
444,146,068

158 FORBO ANNUAL REPORT 2018 – ANNUAL STATEMENTS FOR THE HOLDING COMPANY

Report of the statutory auditor

Statutory Auditor’s Report
To the General Meeting of Forbo Holding Ltd, Baar

Report on the Audit of the Financial Statements
OpinionWe have audited the financial statements of Forbo Holding Ltd, which comprise the balance sheet as at 31
December 2018, and the income statement for the year then ended, and notes to the financial statements,
including a summary of significant accounting policies.
In our opinion the financial statements (pages 150 to 156) for the year ended 31 December 2018 comply with
Swiss law and the company’s articles of incorporation.
Basis for Opinion
We conducted our audit in accordance with Swiss law and Swiss Auditing Standards. Our responsibilities underthose provisions and standards are further described in the Auditor’s Responsibilities for the Audit of the Financial
Statements section of our report. We are independent of the entity in accordance with the provisions of Swiss law
and the requirements of the Swiss audit profession and we have fulfilled our other ethical responsibilities inaccordance with these requirements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion.
Report on Key Audit Matters based on the circular 1/2015 of the Federal Audit Oversight Authority
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of
the financial statements of the current period. We have determined that there are no key audit matters tocommunicate in our report.
Responsibility of the Board of Directors for the Financial Statements
The Board of Directors is responsible for the preparation of the financial statements in accordance with theprovisions of Swiss law and the company’s articles of incorporation, and for such internal control as the Board of
Directors determines is necessary to enable the preparation of financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the financial statements, the Board of Directors is responsible for assessing the entity’s ability tocontinue as a going concern, disclosing, as applicable, matters related to going concern and using the going
concern basis of accounting unless the Board of Directors either intends to liquidate the entity or to cease
operations, or has no realistic alternative but to do so.
Auditor’s Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are freefrom material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes ouropinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted inaccordance with Swiss law and Swiss Auditing Standards will always detect a material misstatement when it
exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate,
they could reasonably be expected to influence the economic decisions of users taken on the basis of thesefinancial statements.

1

FORBO ANNUAL REPORT 2018 – ANNUAL STATEMENTS FOR THE HOLDING COMPANY 159

As part of an audit in accordance with Swiss law and Swiss Auditing Standards, we exercise professional
judgment and maintain professional skepticism throughout the audit. We also:—

Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or
error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is
sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement
resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery,
intentional omissions, misrepresentations, or the override of internal control.

—

Obtain an understanding of internal control relevant to the audit in order to design audit procedures that areappropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness ofinternal control.

—

Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimatesand related disclosures made.

—Conclude on the appropriateness of the Board of Directors’ use of the going concern basis of accounting and,based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions
that may cast significant doubt on the entity’s ability to continue as a going concern. If we conclude that amaterial uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosuresin the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are
based on the audit evidence obtained up to the date of our auditor’s report. However, future events orconditions may cause the entity to cease to continue as a going concern.

We communicate with the Board of Directors or its relevant committee regarding, among other matters, theplanned scope and timing of the audit and significant audit findings, including any significant deficiencies ininternal control that we identify during our audit.
We also provide the Board of Directors or its relevant committee with a statement that we have complied with
relevant ethical requirements regarding independence, and to communicate with them all relationships and othermatters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with the Board of Directors or its relevant committee, we determine thosematters that were of most significance in the audit of the financial statements of the current period and are
therefore the key audit matters. We describe these matters in our auditor’s report, unless law or regulationprecludes public disclosure about the matter or when, in extremely rare circumstances, we determine that amatter should not be communicated in our report because the adverse consequences of doing so would
reasonably be expected to outweigh the public interest benefits of such communication.

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160 FORBO ANNUAL REPORT 2018 – ANNUAL STATEMENTS FOR THE HOLDING COMPANY

Report of the statutory auditor

Report on Other Legal and Regulatory Requirements
In accordance with article 728a para. 1 item 3 CO and the Swiss Auditing Standard 890, we confirm that aninternal control system exists, which has been designed for the preparation of financial statements according to
the instructions of the Board of Directors.
We further confirm that the proposed appropriation of available earnings complies with Swiss law and thecompany’s articles of incorporation. We recommend that the financial statements submitted to you be approved.
KPMG AG

Rolf Hauenstein
Licensed Audit Expert
Auditor in Charge

Regula Tobler
Licensed Audit Expert

Zurich, 27 February 2019

KPMG AG, Badenerstrasse 172, PO Box, CH-8036 Zurich
KPMG AG is a subsidiary of KPMG Holding AG, which is a member of the KPMG network of independent firms affiliated with KPMG International Cooperative(“KPMG International”), a Swiss legal entity. All rights reserved.

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Publisher: Forbo Holding Ltd, Baar/Concept and design: Hotz Brand Consultants, Steinhausen/Zug
Photos: Luxwerk, Zurich/Layout, lithography, and printing: Neidhart + Schön AG, Zurich
Our Annual Report appears in German language and in English translation and can be downloaded fromour website www.forbo.com. The printed German version is authoritative.
All statements in this report that do not refer to historical facts are forward-looking statements which areno guarantee of future performance. They are based on assumptions and involve risks and uncertainties aswell as other factors beyond the control of the company.

Forbo Holding Ltd
Lindenstrasse 8
CH-6340 Baar
Forbo International SA
Lindenstrasse 8
CH-6340 Baar
Phone + 41 58 787 25 25
Fax + 41 58 787 20 25
info@forbo.com
www.forbo.com