voith.com

digitaltransformation
Voith

digital transformation
Interim Report 2018

Voith at a Glance
2016-10-01 to
2017-03-31

2017-10-01 to
2018-03-31

Orders received

2,320

2,291

Sales

1,965

2,049

Profit from operations1)

91

75

Profit from operations in % (core business)

117

119

Return on sales in %

4.6

3.7

Return on sales in % (core business)

6.0

5.8

Result before taxes2)

593

39

Net result

566

29

Cash flow from operating activities

− 40

− 31

1,054

− 162

47

40

Equity3)

1,366

1,331

Equity ratio in % 3)

27.3

27.2

Balance sheet total3)

4,998

4,892

Employees3), 4)

19,04519,014in € millions

Total cash flow
Investments1)	S ee “Notes on segment reporting” in the notes to the Group interim financial statements.
2) Previous year: excluding the discontinued Group Division V­ oith I­ndustrial S­ ervices.
3)	R eference date March 31, 2018, compared to September 30, 2017.
4)	Without apprentices.

Interim Report 2018
Foreword

4

Group Interim Management Report
01. Business development and earnings position of the Group
02. Business development and earnings position of the Group Divisions
03. Net assets and financial position
04. Employees
05. Subsequent events
06. Risks and opportunities
07. Forecast report

8
15
24
27
28
30
32

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

38
39
40
42
44
45

Imprint

65

47
48
50
54
55
64

4

Voith Interim Report 2018
Foreword
﻿S tephan Schaller

Ladies and gentlemen,dear business partners,
The first half of the fiscal year ended on March 31 for the Voith Group. The next day, I assumed theoffice of President and CEO of the Corporate Board of Management from Dr. Hubert Lienhard, who
had held this position for about a decade.
In recent years, the Group has overcome immense structural and financial challenges, has set
the strategic sails on an important new course and has made progress along the way towards a
new phase of sustainable, profitable growth. At the same time, the Voith Group’s performanceover the first half of the year has made it apparent that we have quite a way to go along this path.

Voith Interim Report 2018
Foreword﻿ Stephan Schaller

5“We will stay on course,
remain dedicated to building
up our digital activities andmaking them into a significant
growth driver for our Group.”
Stephan Schaller

The financial performance indicators are sound on the whole,
Voith’s financial situation continues to be very resilient, and theGroup remains on schedule with its strategic initiatives. But it
must also be stated that Voith did not meet all of its objectives
in the first half of the year. This is due, firstly, to the unexpected
weaker development at Voith Hydro and, secondly, to otherexternal circumstances that no business is able to influence. For instance, the impact of considerable
negative currency effects on account of the appreciating euro was felt across the board.
This meant that we fell short of our expectations with regard to orders received, which stood almost
exactly at the previous-year level. We still achieved an increase in sales despite the negative currency
effects – primarily as a result of the high level of orders received in the previous year. And we havetaken another step forward – although only a small one – with regard to the profit from operations of
the core business.
We owe this to the pleasing development of Voith Paper and Voith Turbo – with Voith Paper in particularseamlessly following up on the very good previous year with another set of strong figures, returning
it to its position as the strongest pillar of the Group. The fact that the business with digital solutions
and products is playing an increasingly important role in our traditional activities is another positive
aspect. Our digital innovative products and solutions not only expand our long-standing portfolio, ourstart-up activities are also making good progress. Voith Digital Solutions’ sales more than tripled in
the first half of the year – admittedly starting from a very low base.

For this reason, we will stay on course, remain dedicated to building up our digital activities and making
them into a significant growth driver for our Group. To this end, we are making a conscious decision
to bear a considerable temporary burden on results as already seen in the first half of the year. The
decisive factor is our ability to shoulder the up-front costs for the new activities from current business.
This was the case to date and will remain so in the future.
Over the next few months, we will further increase our efforts in the area of cutting-edge technologies
overall. These include, for example, our own new products such as the IIoT platform (“Industrial Internetof Things”) OnCumulus for which we have great expectations specifically in the business with otherindustrial companies. This also includes, however, our entry into the growth market of e-mobility with
our own, fully electric drive systems for city buses. And last but not least, we are going to integrate
the rapidly growing market for robotics into our portfolio. The strategic partnership entered intowith Franka Emika that will gradually come to life over the coming few months is to be the nucleus
for this.

6Voith Interim Report 2018
Foreword
Stephan Schaller“We must continue to work on
our efficiency and profitability.
We are in a good starting
position to enter into a newphase of profitable growth.”
Stephan Schaller

One core topic for the immediate future is to implement suitablemeasures to improve the underlying conditions for the Voith Groupto settle into a stable, sustainably profitable growth trajectory overthe coming years. In the current fiscal year, this is not likely tobe the case, contrary to original forecasts. In particular, it will bedifficult to make up for the shortfall at Voith Hydro in the remaining
months. In addition, we anticipate ongoing pressure from the currency side over the remainder ofthe fiscal year.

In light of this, we adjusted our outlook for the full year. We now assume that not only the Group’s
orders received but also its sales will be roughly at the previous-year level. The profit from operations
will probably fall perceptibly and will only manage to remain stable after adjustment for currency
effects.
For this reason, it is clear to me what needs to be done now: we must continue to work on our
efficiency and profitability. We are in a good starting position to enter into a new phase of profitable
growth. We have a strong team, a plethora of ideas and the resources necessary to implement them.

Sincerely yours,

Stephan Schaller
President and CEO

Group InterimManagement Reportfor the period from October 2017 to March 2018

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

Page

8
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27
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32

8

Voith Interim Report 2018
Group Interim Management Report
01. Business development and earnings position of the Group

01.

Business development andearnings position of the GroupIn the first half of 2017/18, the operating business of the Voith
Group continued to present itself in good shape. Group salesrose by 4  %, while orders received stood roughly at the previousyear level. The three traditional Group Divisions achieved good
profitability levels and increased their total profit from operations
by 2  %. The core business was impacted by considerable negative
currency effects due to the appreciating euro; adjusted for currency
effects, there was more significant growth in sales, orders received
and profit from operations. The digital transformation of the Groupis progressing on schedule. Taking account of the up-front costs
incurred in this context, the Group saw a profit from operations of€  75 million and net income for the period of €  29 million.

01.1. Overall assessment
Operating business developing well, considerable negative
currency effects
In the first half of 2017/18 (October 1, 2017 to March 31, 2018), the Voith Group saw satisfactory
development overall in a market environment that is brightening in some areas, while Voith Paper stoodout with an excellent performance. Group sales rose by 4 % to € 2,049 million. Orders received stood at€ 2,291 million, roughly unchanged on the previous-year level (− 1 %). Orders on hand rose significantlyto € 5,319 million. Both sales and orders received were impacted by considerable negative currency
effects as a consequence of the appreciation of the euro against virtually all currencies of importanceto the Group in comparison to the previous year. Adjusted for currency effects, sales increased by 10 %and orders received by 3 %.
Alongside the currency effects, one of the reasons for the generally subdued level of orders received
is a weaker development in the Voith Hydro Group Division (− 22 %) due to the market and competitive
situation. In contrast, Voith Paper was once again able to increase its level of orders received in comparison to the already high previous-year level (+ 3 %) and exceeded its planned targets at the end of thereporting period. Orders received likewise rose by 3 % at Voith Turbo. Also in terms of sales, the traditional

Voith Interim Report 2018
Group Interim Management Report
01. Business development and earnings position of the Group

9Group Divisions saw heterogeneous developments. Voith Paper stood out with a rise in sales of 27 %,while Voith Turbo remained roughly at the previous-year level and Voith Hydro saw a decrease of 15 %.
We have continued to improve the profitability of our core business: the total profit from operations
of Voith Hydro, Voith Paper and Voith Turbo increased by 2 % to € 119 million. Adjusted for currency
effects, the growth amounted to 8 %.
In the Voith Digital Solutions Group Division founded in 2016, sales more than tripled from a low level;
the shortfall in profit from operations of € − 37 million was somewhat higher than planned on accountof development costs being pulled forward. At the same time, the digital transformation of the Voith
Group is progressing on schedule.
In the Voith Group seen as a whole, the profit from operations was € 75 million, lower than the previous-year figure (− 18 %) on account of the build-up costs for Voith Digital Solutions. The Group net resultstood at € 29 million. The previous-year figure had been exceptionally high (€ 566 million), with the saleof the shares in KUKA Aktiengesellschaft making a significant contribution. After adjusting for the KUKA
effect in the previous year, there has been a significant rise in the net income for the period.
The net assets and the financial position of the Group remain at a very good level. As at March 31, 2018,
Voith had net liquidity of € 574 million and an equity ratio of 27.2 %.
For the 2017/18 fiscal year as a whole, we now anticipate a stable development for the Voith Group incomparison to the previous year. On account of the negative currency effects and developments in theVoith Hydro Group Division failing to meet our expectations, it will in all probability not be possible toachieve the growth anticipated at the time the 2017 annual report was published.

01.2. Economic environment
Upswing in the global economy still underway
The global economy continued its upswing in the first half of Voith’s 2017/18 fiscal year. In its mostrecent release (April 2018), the International Monetary Fund (IMF) forecast a rate of growth in the
global economy of 3.9 % for 2018 compared with a rate of 3.8 % in 2017. These are the highest rates
of growth since 2011.
Economic momentum has increased significantly in advanced economies, which can be attributed toa general rise in the level of investment. After an increase of 1.7 % in 2016, these countries saw growthof 2.3 % in 2017 according to IMF figures. From today’s perspective, the advanced economies are
forecast to return a growth rate of 2.5 % – better than anticipated by economic analysts at the time of
publication of our last annual report. As a consequence of stronger domestic and international demand,the euro area is recording economic growth in excess of original expectations. The German economy
in particular is proving to be unexpectedly strong. After sound growth in 2017, the US is expected tosee a perceptible increase in momentum over the course of 2018.

10

Voith Interim Report 2018
Group Interim Management Report
01. Business development and earnings position of the GroupThe emerging markets as a whole continue to grow at a higher rate than advanced economies. In thiscontext, the IMF is anticipating growth rates in the emerging markets as a whole of 4.8 % and 4.9 % for2017 and 2018, respectively, with the figure for Asia being higher than the average. China is achieving
the targets set out in its own five-year plan (raising gross domestic product by an annual 6.5 % or more).
Rising international demand, progress being made in the national reform programs and expansionary
monetary policy contribute to the good development of the Chinese economy. India’s economy isbeing supported by ongoing strong demand from private households and is increasingly benefitingfrom the successful implementation of its currency reform. Brazil and Russia are gradually recoveringfrom recession.
The improved economic data exerted a positive influence on the global investment climate. According
to data provided by the VDMA, the German Mechanical Engineering Industry Association, the German
mechanical and plant engineering sector reported a perceptible rise in orders received in the reporting
period in comparison to the previous-year period.
The business environment in most of the five target markets served by Voith has also improved incomparison to the comparative previous-year period.
The paper market in particular is on a stable growth trajectory. Demand for new machines continued
at a high level over the reporting period with clear signals coming from Asia, North America and EMEA,
while developments in South America were weak. Paper production is rising in all regions of the world,

Economic growth
Real year-on-year change in GDP1)

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

2017

3.8 %

2018

3.9 %

2017

2.3 %

2018

2.5 %

2017

2.3 %

2018

2.9 %

2017

2.3 %

2018

2.4 %

2017

2.5 %

2018

2.5 %

2017

4.8 %

2018

4.9 %

2017

6.9 %

2018

6.6 %

2017

5.3 %

2018

5.3 %

2017

6.7 %

2018

7.4 %

2017

1.0 %

2018

2.3 %

2017

1.5 %

2018

1.7 %

Source: International Monetary Fund (IMF), World Economic Outlook, April 2018.
1)
2017: estimates; 2018: forecasts.
2)
Including Germany.

Voith Interim Report 2018
Group Interim Management Report
01. Business development and earnings position of the Group11

which is resulting in increasing demand for consumables and services. Graphic paper is the only paper
grade to see a decline in production.
The energy market saw a slight rise overall, but with significant differences between the individual
segments and regions. The hydropower market remained quiet at the beginning of the current fiscal
year and took some time before gradually picking up. Calculated on the basis of the reporting period
seen as a whole, the market volume was up on the weak previous year, however. Demand for pumped
storage technology is growing, especially from China. Investment in the market for conventional power
plant technology, which is relevant for Voith Turbo, is stabilizing at a low level.
The transport & automotive market remains at a high level. Unit sales of commercial vehicles are expected
to decline slightly in 2018 after significant growth in the previous year. The rail segment is enjoying slight
growth in the current fiscal year. Growth is being driven by the service business.
There is still no significant recovery in the oil & gas market or the raw materials market. Although thefall in prices seems to have stopped on both markets for the time being after several years, investment
activities remain at a low level in the current fiscal year, with the exception of a few segments and regions.

01.3. Sales
Group sales up 4 %In the first half of 2017/18, the Voith Group increased its sales by 4 % to € 2,049 million (previous year:€ 1,965 million).
Group sales suffered from negative currency effects amounting to € 102 million on account of theappreciation of the euro against virtually all currencies of importance to the Group in comparison
to the previous year. Adjusted for currency effects, sales increased by 10 %, which is in line with our
expectations. All three of the traditional Group Divisions were affected by the currency effects, albeit
not to the same degree.

Sales Group

Sales total € 2,049 millionin € millions

by Group Division

Voith ­­Hydro
27 %Voith ­Turbo
30 %Voith Paper
42 %

2,049

1,965

2016/17
Full fiscal year

­Voith ­Digital ­Solutions
1%

2017/18First half year

First half year 2017/18

12Voith Interim Report 2018
Group Interim Management Report
01. Business development and earnings position of the Group

Detailed informationon the developmentof sales in eachGroup Division can befound in section 02.
Business development and earnings
position of theGroup Divisions.

While Voith Paper (+ 27 %) achieved a significant increase in sales, Voith Turbo (− 2 %) exhibited more orless stable development and Voith Hydro (− 15 %) returned a decrease in sales volume, mainly on accountof the market-related fall in orders received seen in the previous year.
Voith Paper made the largest contribution to the Group’s sales (42 %; previous year: 35 %). Voith Turbo
contributed 30 % (previous year: 32 %) and Voith Hydro 27 % (previous year: 33 %). At 1 % (previous year:0 %), the share attributable to Voith Digital Solutions was still small, as expected.

01.4. Orders received
Orders received almost stable
In the first half of 2017/18, the Voith Group secured new orders worth € 2,291 million (previous year:€ 2,320 million; − 1 %).
This figure was at the lower end of our expectations. While Voith Hydro (− 22 %) remained below our
expectations on account of the market and competitive situation, not being able to reproduce the very
positive level of orders received due to, among other things, individual major orders in the previous year,
Voith Paper provided positive surprises and exceeded the high previous-year figure once again (+ 3 %).
Voith Turbo likewise revealed a slight increase in orders received (+ 3 %). Considerable negative currency
effects continued to have an impact on the level of orders received in the core business. Adjusted for
currency effects amounting to € − 97 million, the Group’s orders received increased by 3 %.
Detailed informationon the developmentof sales in eachGroup Division can befound in section 02.
Business development and earnings
position of theGroup Divisions.

Voith Paper contributed 52 % (previous year: 50 %) to the Group’s orders received. Voith Turbo accounted
for 30 % (previous year: 29 %) and Voith Hydro for 17 % (previous year: 21 %).
One positive aspect of note is the fact that the level of orders received was once again higher than sales,
which meant that orders on hand increased significantly in the reporting period, from € 5,193 million at
the end of the past fiscal year to € 5,319 million as at March 31, 2018.

Orders received Group

Orders received total € 2,291 million

Orders on hand Groupin € millions

by Group Divisionin € millions­Voith ­Digital ­Solutions
1%
2,320

2016/17
Full fiscal year

Voith ­­Hydro
17 %

5,193

5,319

2016/172017/18

2,291

2017/18

Voith ­Turbo
30 %First half year

First half year 2017/18

Voith Paper
52 %Full fiscal year

First half year

Voith Interim Report 2018
Group Interim Management Report
01. Business development and earnings position of the Group

13

01.5. Results
Total output improved, profit from operations impacted by
up-front costs for building up new business fields
The operating profitability of our core business remains to a great extent at the previous-year level.
Essentially driven by Voith Paper, the profit from operations from the core business increased by 2 % incomparison to the previous year – at a somewhat slower rate than sales (+ 4 %). In the Voith Group seen
as a whole, the profit from operations declined (− 18 %) on account of the budgeted investments in thedigital agenda, specifically in the new Voith Digital Solutions Group Division. The Group net result, whichin the previous year had been significantly influenced by the sale of the shares in KUKA Aktiengesellschaft,amounted to € 29 million in the reporting period (previous year: € 566 million).
Total output in the Voith Group stood at € 2,099 million (previous year: € 1,994 million; + 5 %). In percent,the rise in total output was slightly higher than the increase in sales (+ 4 %). This resulted from the fact thatthe changes in inventories and other own work capitalized increased from € 29 million in the previous-year
period to € 49 million in the reporting period. Similarly, the Group Divisions’ respective total outputs
essentially developed in line with sales (Voith Hydro − 15 %, Voith Paper + 26 % and Voith Turbo − 1 %).
The cost of materials increased to € 923 million (previous year: € 854 million; + 8 %). The ratio of cost of
materials to total output rose slightly to 44.0 % (previous year: 42.8 %). The increase is essentially due
to a higher ratio of cost of materials to total output in the Voith Paper Group Division.
Personnel expenses stood at € 734 million (previous year: € 724 million; + 1 %). This reflects the practicallyunchanged headcount. The personnel expenses ratio (ratio of personnel expenses to total output) thus
fell slightly to 35.0 % (previous year: 36.3 %).
At € 63 million, depreciation and amortization stood at virtually the same level (previous year: € 64 million; − 2 %). The ratio of depreciation and amortization to total output decreased slightly to 3.0 % (previous
year: 3.2 %).

Detailed informationon the developmentof the profit fromoperations and the
ROCE broken down
by Group Division
can be found in­section 02. Businessdevelopment andearnings position of
the Group Divisions.

The balance of other operating expenses and income increased to € 333 million (previous year: € 276 million; + 21 %). The rise is attributable, among other things, to the fact that the provisions for various
warranty claims from previous periods increased.
The operational result before non-recurring items came to € 46 million (previous year: € 76 million; − 40 %),while the profit from operations, which is an indicator used for internal management purposes, stoodat € 75 million (previous year: € 91 million; − 18 %). The return on sales fell slightly to 3.7 % (previous year:
4.6 %), the ROCE (return on capital employed) to 7.4 % (previous year: 8.5 %).
The non-recurring result stood at € − 4 million (previous year: € −11 million). In the reporting period, thenon-recurring result mainly comprises personnel-related expenses arising from measures to consolidate
production capacities and to improve competitiveness at Voith Hydro in Brazil, as was the case in theprevious year. In the previous-year period, this figure additionally included as a further material item
personnel-related and other expenses arising from measures to consolidate production capacities atVoith Paper in the US. In detail, the contributions to the non-recurring result were as follows: Voith Hydro14

Voith Interim Report 2018
Group Interim Management Report
01. Business development and earnings position of the Group€ − 3 million (previous year: € − 4 million), Voith Paper € −1 million (previous year: € − 6 million) and divisions
with a holding function € 0 (previous year: € −1 million).
The operational result stood at € 42 million (previous year: € 65 million; − 35 %).
The previous year’s result from the sale of associates of € 565 million (first half of the 2017/18 fiscal year:€ 0) contains the effect on results from the sale of the shares in KUKA Aktiengesellschaft completed in
January 2017.
The balance of interest expenses and interest income improved to € −12 million (previous year: € − 38 million; − 68 %). The improvement stems mainly from a fall in interest expenses of € 14 million as a consequence of the repayment of the bond and the partial repayment of the US private placement in theprevious year and from a € 10 million fall in the interest expenses arising from the measurement of financial
liabilities on account of termination rights on the part of holders of non-controlling interests.
The other financial result was positive at € 7 million (previous year: € − 5 million). This item is impacted toa significant extent by income from the sale of the remaining 20 % interest in the former Voith Industrial
Services Group Division (€ 18 million). The opposite effect came from currency gains and losses onlong-term financing positions and the measurement of the related hedge relationships (balance of€ −12 million, previous year: € − 6 million).
Income taxes totaled € −10 million (previous year: € − 26 million). This figure does not contain any taxes
relating to other periods (previous year: € − 9 million).
The net result from continuing operations amounted to € 29 million. The previous-year figure had
been exceptionally high, with the sale of the shares in KUKA Aktiengesellschaft making a significant
contribution (previous year: € 567 million).
In the previous year, the net result from discontinued operations of € −1 million reflected the contribution
to the Voith Group’s net result made by the Voith Industrial Services Group Division, which has beensold, and mainly consisted of adjustments from expected tax expenses in connection with the sale (firsthalf of the 2017/18 fiscal year: € 0).
Bottom line, the Group net result comes to € 29 million (previous year: € 566 million). After adjusting for
the KUKA effect in the previous year, there has been a significant rise in the net income for the period.
Operational result before non-recurring items GroupNet result Groupin € millionsin € millions

566*

76
46
29
2016/17
Full fiscal year

2016/172017/18First half year

Full fiscal year

2017/18First half year

* Including the result from the sale of the KUKA shares.

Voith Interim Report 2018
Group Interim Management Report
02. Business development and earnings position of the Group Divisions

02.

15

Business development andearnings position of the Group Divisions
The three traditional Group Divisions saw heterogeneousdevelopments in the first six months of the 2017/18 fiscal year.
Voith Paper stood out with a perceptible increase in sales andresults while exceeding its targets for orders received. Voith Turbo
was able to maintain a stable profit from operations althoughsales fell slightly and continued the positive trend in orders
received. Voith Hydro fell below our expectations on account of
the market and competitive situation. In total, the profit fromoperations in the core business rose slightly. The expansion of ourdigitalization activities is progressing on schedule. It was possible
to shoulder the up-front costs for Voith Digital Solutions fromcurrent business.

02.1. Voith Hydro
Low level of orders received
Voith Hydro looks back on a weak first half of the fiscal year. Market activities remained at a very low levelat the start of the current fiscal year and did not recover until towards the end of the reporting period,
which left its mark on Voith Hydro’s orders received. The low level of orders received in the previous year
and at the beginning of the reporting period meant that sales also fell in the reporting period. Despite
the decrease, the profit from operations remained at a high level. On account of business lagging behindtargets in the first half of 2017/18, Voith Hydro is likely to fail to meet the forecast for the year.
Fall in sales
In the first half of 2017/18, Voith Hydro generated sales of € 555 million (previous year: € 653 million; − 15 %). The perceptible decrease is essentially a consequence of the low level of orders received
due to the market situation prevailing in the previous year and at the beginning of the reporting period.
In addition, there were delays in construction work for some major projects, which means that revenue
recognition is postponed. A not inconsiderable share of the fall in sales is also attributable to negative
currency effects. The regions with the strongest sales were Asia and North America, where we hadrecorded a high level of orders received in previous years.

16

Voith Interim Report 2018
Group Interim Management Report
02. Business development and earnings position of the Group Divisions

Orders received down on the previous year
The hydropower market remained quiet at the beginning of the current fiscal year and took some time
before gradually picking up. Calculated on the basis of the reporting period seen as a whole, the market
volume was up on the weak previous year, however. Around half of the volume of projects awarded
worldwide was attributable to China, the US and Brazil. At the same time, competition has become
noticeably more intense. With orders received of € 380 million in the first half of 2017/18 (previous year:€ 486 million; − 22 %), Voith Hydro fell short of expectations. The signing of the contract for one major
project was delayed, so that we anticipate a certain catch-up effect in the second half of the fiscal year.
Negative currency effects are putting additional pressure on orders received. Even though we expect astronger second half of the year for Voith Hydro, orders received are likely to fall below targets for thefull year – the timing of the awarding of individual major projects will, ultimately, be the decisive factor
in this respect. At € 2,721 million as at March 31, 2018, orders on hand remained below the high level
seen at the end of the 2016/17 fiscal year (September 30, 2017: € 2,976 million).
Measured in terms of volume awarded, Asia was the dominant hydropower market in the reporting period.
In China, there is great demand for pumped storage power plants that contribute to the reliability ofelectricity supplies and grid stability in light of the volatility of wind and solar power. Voith Hydro won an
extensive order to equip Tianchi pumped storage power plant in the eastern Chinese province of Henan
with a total output of 1,200 megawatts. In Japan, we were awarded the Gokasegawa small hydro project.
The important hydropower market of Brazil, where the awarding of major infrastructure projects wasimpeded by the economic and political crisis for several years, is showing signs of recovery. Modernizationand service activities are picking up since the Brazilian government tendered licenses in 2017 for theoperation of hydropower plants that had previously been state-run to Chinese and European energy
producers. In the reporting period, Voith recorded a further installment of the construction work for
the Belo Monte hydropower plant in Brazil, currently the third-largest hydropower plant in the world.
Construction began in 2012.
In the established North American market, the focus was on modernization and service projects. In thefirst half of 2017/18, Voith was awarded an extensive service contract in the US.
In Europe, where the market remains at a low level owing to the current energy policy situation, existing
excess capacities and low energy prices, we succeeded in winning two noteworthy contracts in thereporting period. In Luxembourg, Voith has taken on the task of modernizing Vianden pumped storage
power plant, which feeds power into the German electricity grid and is used in network regulation within
the scope of the energy transition. In Portugal, we were awarded the contract for the new Alto Tamegahydropower plant.
The service business (“HyService”) remained an important mainstay for Voith Hydro. In the reporting
period, we were successful in tenders for major service projects in the US, France, Japan, Sweden,
India and Italy.

Voith Interim Report 2018
Group Interim Management Report
02. Business development and earnings position of the Group Divisions

17

Branch office opened in Australia
In March 2018, Voith Hydro opened a branch office in Sydney with a view to further expanding its
presence in the Australian and New Zealand hydropower markets. In Australia, investments in renewableenergy are increasing and the share of hydropower in the energy mix is rising. Additional opportunities
arise from projects to equip and modernize existing hydropower plants. The expansion of renewableenergy means that there is increasing need for pumped storage power plants. Our new branch officewill provide support for hydropower and pumped storage projects in Australia and New Zealand andwill, at the same time, act as a local HyService center for manufacturers and customers in the region.
Profit from operations at a high level despite decrease
In the first half of 2017/18, Voith Hydro generated a profit from operations of € 43 million (previous year:€ 53 million). The decrease of 21 % is attributable to the downward trend in sales. Return on sales andreturn on capital employed (ROCE) likewise decreased on account of the decline in earnings but remained
at a good level, nonetheless. For instance, Voith Hydro generated a return on sales of 7.6 % (previous
year: 8.1 %) and an ROCE of 17.6 % (previous year: 21.1 %).

Sales Voith ­­­Hydro

Profit from operations Voith ­­­Hydroin € millionsin € millions653

2016/17
Full fiscal year

53

555

2016/172017/18First half year

43

Full fiscal year

First half year

Orders received Voith ­­­Hydro

Orders on hand Voith ­­­Hydroin € millionsin € millions

2,976

486

2,721

380

2016/17
Full fiscal year

2017/18

2016/172017/18First half year

Full fiscal year

2017/18First half year18

Voith Interim Report 2018
Group Interim Management Report
02. Business development and earnings position of the Group Divisions

02.2. Voith Paper
On a profitable growth trajectory
Voith Paper looks back on a very good first half of the fiscal year. Voith Paper operated successfully in agood market environment and was even able to exceed the high level of orders received in the previous
year. There was a significant rise in sales, and profit from operations increased at an even faster rate.
The improvements in return on sales and ROCE are primarily the result of the successfully completed
restructuring and the activities launched in the recent past to improve productivity. With regard to theforecast for the year, we consider Voith Paper to be very much on the right track.
Significant rise in sales
In the first half of 2017/18, Voith Paper increased its sales by 27 % to € 862 million (previous year: € 678 million) despite considerable negative currency effects. The main factor in this development was an excellent
project business (new machines and major rebuilds) that generated strong sales growth as a consequenceof the high level of orders received in the previous year, especially in the EMEA and Asia regions. Adjusted
for currency effects, the business with products, consumables and services saw stable developments.
The development of sales over the reporting period is, on the whole, within our expectations, so that we
consider ourselves to be on track to meet our forecast for the year (“noticeable rise”).
Orders received up on the high previous-year level
On the basis of a very high level of orders received in the previous year, which was characterized byseveral major projects, Voith Paper succeeded once more in slightly increasing its level of orders received
over the reporting period. In the first half of 2017/18, Voith Paper received new orders of € 1,185 million(previous year: € 1,147 million), a rise of 3 % on the comparative period. Adjusted for currency effects,
there would have been even greater growth. This means that we have exceeded our own expectations.
The project business was the growth driver, but the business with products, consumables and services
also saw a slight rise.
As the good level of orders received seen in the reporting period is essentially attributable to several
major contracts, it is probably not possible to extrapolate this figure to the second half of the year. We are,however, confident that we will be able to exceed our forecast made in the last annual report (“perceptible
fall”) and to generate for the full year orders received roughly at the previous-year level.
Orders on hand rose significantly and stood at € 1,532 million as at March 31, 2018 (September 30,
2017: € 1,228 million).
On the paper market, there was an overall slight rise in production across all paper grades in light of thehealthy global economy. In particular, there is very great demand for board and packaging paper in all
regions apart from South America. There is also strong demand for specialty papers. The productionof graphic paper is the only paper grade still in decline, as expected.
In Asia, papermakers once again made substantial investments in new machinery and the modernizationof existing equipment. A rise in paper prices in conjunction with stricter environmental regulations in
China contributed to this development. The focus of investment was on machines for the manufactureof board and packaging paper. Voith has taken an appropriate share in this development with a goodlevel of orders received from this region and won, among others, two major orders from China.

Voith Interim Report 2018
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02. Business development and earnings position of the Group Divisions

19

In the EMEA region where many manufacturers are currently exploiting their good earnings position to
make strategic investments for the future, the demand for new machines and rebuilds remained strong.
For example, Voith was awarded a large-scale order from Germany for the manufacture of one of themost powerful specialty paper machines in the world and a major contract from Turkey for a machinefor the production of high-quality board and packaging paper.
In North America, the market for new machines also proved to be stronger than expected. In Mexico,
we won an order for a new machine for the manufacture of testliner and heavy duty corrugated board.
In addition, we received orders for two medium-sized rebuilds. In South America, in contrast, investment
activities remained at a low level, with the large Brazilian market in particular falling short of expectations.
Significant increase in profit from operations
In the first half of 2017/18, Voith Paper generated a profit from operations of € 42 million (previous
year: € 30 million). The 41 % rise constitutes a faster rate of increase in comparison to sales. The
improvement in profitability is a reflection of the successfully completed restructuring and the activities
launched in recent years to improve productivity. The return on sales rose to 4.9 % (previous year:
4.4 %). The ROCE was significantly improved and stood at 13.0 % in the reporting period (previous
year: 7.9 %). In addition to the rise in profit from operations, a reduction in the capital employed
contributed to this development.

Sales Voith ­Paper

Profit from operations Voith ­Paperin € millionsin € millions

42

862

678

2016/17
Full fiscal year30

2016/172017/18First half year

Full fiscal year

2017/18First half year

Orders received Voith ­Paper

Orders on hand Voith ­Paperin € millionsin € millions

1,532
1,228
1,185

1,147

2016/17
Full fiscal year

2016/172017/18First half year

Full fiscal year

2017/18First half year20

Voith Interim Report 2018
Group Interim Management Report
02. Business development and earnings position of the Group Divisions

02.3. Voith Turbo
Good business development
Voith Turbo developed well in the first half of 2017/18 in the face of a market environment that remained
challenging in some areas. Although sales fell slightly on account of currency effects, Voith Turbo
succeeded in maintaining a stable profit from operations. Return on sales and ROCE improved. In termsof orders received, Voith Turbo once again achieved slight growth. Based on the developments in thereporting period, Voith Turbo sees itself on course to meet the forecast for the year.
Sales down slightly on the previous year
In the reporting period, Voith Turbo’s total sales stood at € 610 million (previous year: € 621 million). The
slight decline in sales of 2 % is at the lower end of our expectations. Adjusting for negative currency
effects results in a slight rise in sales.
In the Industry division, sales in a still challenging market environment were just below the already low
level seen in the comparative period of the previous year. In the Mobility division, we were not quite able
to match the high level of sales seen in the previous year. In this respect, the ongoing decline in demand
from the large rail market in China was balanced out to a great extent by positive developments in thecommercial vehicle business.

Sales Voith Turbo

Profit from operations Voith Turboin € millionsin € millions

621

610

2016/17
Full fiscal year

2016/172017/18First half year

34

34

Full fiscal year

First half year

Orders received Voith Turbo

Orders on hand Voith Turboin € millionsin € millions

985

1,055

697

675

2016/17
Full fiscal year

2017/18

2016/172017/18First half year

Full fiscal year

2017/18First half year

Voith Interim Report 2018
Group Interim Management Report
02. Business development and earnings position of the Group Divisions

21

Orders received increased by 3 %In the first half of 2017/18, Voith Turbo received new orders worth a total of € 697 million (previous year:€ 675 million; + 3 %). This means that the positive trend seen in the previous year continued, driven
by a good development in the Mobility division. Adjusted for currency effects, there would have been
greater growth. Orders on hand as at March 31, 2018 improved to € 1,055 million (September 30, 2017:€ 985 million).
In the Industry division, we achieved a slight increase in our volume of orders received in comparison
to the previous year. Although the prices of oil and gas and the prices of raw materials have recovered
slightly after years of decline, the investment activities of oil and gas companies and mine operators
alike remained at a low level. The segments of the power plant market relevant to Voith Turbo also saw
a sidewards movement.
In the Mobility division we achieved a perceptible increase in orders received. This development was
driven by good business with DIWA automatic transmissions for buses and retarders for trucks. The rail
market continued to be characterized by delays in the awarding of projects and very intense competitionon account of excess capacities on the part of rail vehicle manufacturers. The service business saw
positive developments.
Increase in profitability
In the first half of 2017/18, Voith Turbo generated a profit from operations of € 34 million that matched
the previous-year level despite the slight decline in sales (previous year: € 34 million). The measures toimprove efficiency launched in the previous year contributed for the first time to this pleasing development
at the upper end of our expectations. Voith Turbo succeeded in achieving a corresponding improvement
in return on sales and ROCE: the return on sales rose to 5.6 % (previous year: 5.4 %); return on capital
employed stood at 10.0 % (previous year: 9.4 %).

22Voith Interim Report 2018
Group Interim Management Report
02. Business development and earnings position of the Group Divisions

02.4. ­Voith ­Digital ­Solutions
Digital agenda driven forward
Under our digital agenda, we are pursuing three strategic directions: firstly, enhancing Voith’s existingproduct portfolio to include digital capabilities that offer customers extended functions and added
value; secondly, developing new digital solutions for our established core markets; and thirdly,
developing new applications and business models for markets not previously served by Voith. The
portfolio offered by Voith Digital Solutions correspondingly extends from automation solutions andcloud-based solutions relating to the “Internet of Things” (IoT) to completely new business models.
Expansion of the digital product portfolio
In the first half of 2017/18, we continued to expand our portfolio of digital offerings. In particular, we
worked intensely on the development of our OnCumulus range of offerings with which we provide
assistance to industrial companies in their digital transformation. The new offerings are based on an
IIoT platform (“Industrial Internet of Things”) developed by Voith: O­ nCumulus.Platform acts as a structural
data hub for data from various sources, for example from machines, ERP systems and external data
sources. In this way, OnCumulus makes it possible for manufacturing companies to use data fromall systems and across all plants and equipment, irrespective of location. OnCumulus is based on
open-source, highly standardized technologies and meets the highest industry standards in terms
of privacy, security and compliance. Over and above the IIoT platform, the offering provides basic
industry-independent functions: OnCumulus.Suite contains special visualization and analysis functions
and easy-to-use tools that support monitoring and optimizing of operating processes. In addition, we
provide added value for our customers with industry-specific applications. These allow manufacturing
companies to increase the reliability and availability of their plants and machines, as well as to optimize
the efficiency and quality of the entire production chain. With the launch of the new offering, applications
from two industry-proven product families for the paper industry are available through OnCumulus ascloud-based applications. In the future, OnCumulus.Platform will be used to run all Voith applications,
whether newly developed or already industry-tested. OnCumulus has already been deployed at several
pilot customers. We presented our range of OnCumulus offerings to a broad professional community
for the first time at the Hannover Messe trade fair in April 2018.

Sales ­Voith ­Digital ­Solutions

Profit from operations ­Voith ­Digital ­Solutionsin € millionsin € millions

14

− 37

− 20
4

2016/17
Full fiscal year

2016/172017/18First half year

Full fiscal year

2017/18First half year

Voith Interim Report 2018
Group Interim Management Report
02. Business development and earnings position of the Group Divisions

23

merQbiz, the digital marketplace for recovered paper, which was launched in the previous year, wasextended in January 2018 to include integrated logistics solutions. To this end, we entered into
an exclusive partnership with C.H. Robinson, one of the world’s largest logistics groups. merQbiz
customers are now offered unmatched freight capacity, competitive real-time pricing online and apowerful supply chain network.
Sales and profit from operations reflect Voith Digital Solutions’ situation as a start-up
In the first half of 2017/18, Voith Digital Solutions generated sales of €14 million (previous year: € 4 million)
with the start-up activities. This is more than a threefold increase on the comparative period. Sales
moved within the parameters we anticipated.
The effect of the first-time consolidation of digital services provider Ray Sono acquired in May 2017, theincreased headcount as well as development and operating costs relating to the new OnCumulus IIoT
platform were reflected on the costs side.
Bottom line, there was a shortfall in profit from operations of € − 37 million in the reporting period (previous
year: €-20 million) that was slightly higher than originally planned on account of development costs
being pulled forward. We regard these costs as a conscious investment in the digital transformation ofVoith, laying the basis for future growth.
Enabler for traditional Group Divisions
In addition to the business results posted in the segment reporting for Voith Digital Solutions, the newGroup Division stands for further sales and profits for the Voith Group. This is because Voith Digital
Solutions – as well as developing new business models such as merQbiz – also provides the threeestablished Group Divisions with support in enhancing their product portfolio in the field of automation
solutions and digital offerings. The resulting sales – amounting in the reporting period to € 112 million(previous year: € 132 million; − 15 %) – and profits are presented in the respective Group Divisions forthe purposes of our segment reporting. The decrease in sales relating to digital solutions in the corebusiness can be attributed to the lower level of project business in the hydropower market. In contrast,
the sales generated with digital solutions in the paper market saw a markedly positive development.
All in all Voith Digital Solutions generated sales for the Voith Group of € 126 million (previous year:€ 136 million; − 8 %).

24Voith Interim Report 2018
Group Interim Management Report
03. Net assets and financial position

03.

Net assets and financial position
The net assets and the financial position of the Voith Groupremain at a very good level. On the basis of the significant rise inliquidity in the previous year, Voith has further reduced its levelof borrowing. With net liquidity of € 574 million and an equity ratioof 27.2 %, Voith is in a strong position for new, profitable growth.

03.1. Balance sheet
Equity ratio remains at a high level
Total assets decreased slightly in comparison to September 30, 2017 by € 106 million to € 4,892 million(previous year: € 4,998 million; − 2 %). On the assets side, non-current financial assets decreased on
account of the sale of the remaining shares in the former Voith Industrial Services Group Division and dueto the repayment of a loan. The equity and liabilities side was impacted by the repayment of long-termbank loans in China.
In total, non-current assets were reduced by € 125 million to € 1,823 million (previous year: € 1,948 million; − 6 %). This drop is primarily attributable to the sale of investments and the repayment of loans.
As a consequence, this item decreased by € 75 million to € 31 million (− 71 %). The € 30 million
decrease in property, plant and equipment to € 948 million results from the fact that depreciation was
higher than investments. Furthermore, non-current other financial receivables fell by € 26 million to€ 63 million (− 29 %).
At € 3,069 million, current assets are virtually unchanged on the previous-year level of € 3,050 million(− 1 %). Within this item, cash and cash equivalents fell by € 170 million to € 412 million (previous year:€ 582 million; − 29 %), primarily on account of current cash investments that, in turn, led to an increasein current securities of € 92 million to € 694 million (previous year: € 602 million; + 15 %). In addition,
inventories and trade receivables increased by € 97 million in total (thereof Voith Hydro € + 88 million).
Furthermore, receivables from customer-specific contracts decreased slightly; these contain long-termorders that are presented using the percentage of completion method (fall of € 12 million; this figurecontains a decrease of € 21 million pertaining to Voith Hydro, an increase of € 7 million pertaining toVoith Paper and an increase of € 2 million pertaining to Voith Digital Solutions).
Non-current liabilities decreased by € 97 million to € 1,540 million (previous year: € 1,637 million; − 6 %).
This essentially results from the repayment of long-term bank loans in China (€ − 57 million). In addition,
non-current other provisions decreased by € 28 million to € 163 million (previous year: € 191 million).

Voith Interim Report 2018
Group Interim Management Report
03. Net assets and financial position

25

Mainly on account of the increase in the discount rates in Germany and the US, the pension provisions
decreased by € 12 million to € 735 million (previous year: € 747 million; − 2 %).
Current liabilities rose slightly by € 25 million to € 2,021 million (previous year: € 1,996 million; + 1 %). The
item “other liabilities” (€ + 101 million) rose primarily on account of a higher level of customer advances(€ + 100 million). In addition, liabilities from customer-specific contracts increased by € 12 million (thereof
Voith Hydro € + 40 million and Voith Paper € − 28 million) and current other provisions by € 8 million on
account of the addition to contract-specific provisions. The opposite effect came from other financial
liabilities (€ − 71 million), mainly on account of a lower level of personnel-related liabilities (€ − 41 million)
and trade payables (€ − 14 million).
The net balance of deferred tax assets and liabilities increased by € 7 million. The increase was mainly
the result of changes in temporary differences.
Equity decreased slightly to € 1,331 million (previous year: € 1,366 million; − 3 %). In this respect, thenegative effects from currency translation and distributions of profit exceeded the positive net income.
The equity ratio of 27.2 % was virtually unchanged on the high previous-year level (27.3 %).

03.2. Liquidity
Cash flow from operating activities slightly improved
The cash flow from operating activities amounted to € − 31 million in the first half of the 2017/18 fiscal year
(previous year: € − 40 million). The improvement on the previous year is the result, among other factors, ofthe smaller rise in net working capital in the reporting period (€ + 29 million; previous year: € + 42 million).
The cash flow from investing activities amounted to € − 57 million in the reporting period (previous year:€ 1,189 million). After the previous year had been primarily characterized by the receipts in connection
with the sale of the shares in KUKA Aktiengesellschaft, the cash flow from investing activities in thereporting period was marked by, among other factors, changes in cash investments in securities(short-term deposits) of € − 92 million (previous year: € +47 million). In addition, payments from purchaseprice adjustments in connection with the sale of Voith Industrial Services in the previous year amounting
to € −16 million were incurred (previous year: € +39 million included in the consolidated cash flow
statement item “purchase price receipts in connection with disposal of companies in previous years”).

Development of cash flow

First half year
2017/18First half year
2016/17

Cash flow from operating activities

− 31

− 40

in € millions

Cash flow from investing activities

− 57

1,189

Cash flow from financing activities

− 74

− 95

Total cash flow

−162

1,054

26

Voith Interim Report 2018
Group Interim Management Report
03. Net assets and financial position

The remaining 20 % interest in the former Voith Industrial Services Group Division was sold and a loan
was repaid in the reporting period. The receipts from the disposal of financial assets of € 92 million
essentially stem from these transactions. The KUKA effect (€ +1,148 million) was reported in this itemin the previous year. The balance of payments for property, plant and equipment and intangible assetsof € − 38 million was slightly lower in comparison to the previous year (€ − 43 million).
We continued to significantly reduce our level of borrowing over the reporting period (net repayment:€ − 53 million; previous year: € − 63 million), essentially on account of the premature repayment of longterm bank loans in China. In addition, payments for dividends (€ − 33 million) were slightly higher thanthe previous-year figure (€ − 26 million). This results in a cash flow from financing activities of € − 74 million(previous year: € − 95 million).
The total cash flow amounted to € −162 million (previous year: € +1,054 million).
Net debt, measured as the difference between interest-bearing financial liabilities and liquid financial
assets, amounted to € − 574 million (= net asset position) (September 30, 2017: € − 648 million).

03.3. Investments and R&D expenses
Further investments in productivity
We invested € 40 million in the Voith Group in the first half of 2017/18 (previous year: € 47 million; − 16 %).
The investment ratio as a percentage of Group sales stood at 1.9 % (previous year: 2.4 %). The decline canbe explained by the fact that significant investment projects, specifically ones relating to the expansionof our locations in China, have to a great extent been completed. In the reporting period, we invested
both in the expansion of our core business and in the development of digital products and services.
Germany, where we maintain the largest locations, was the regional focus of investment. At € 63 million,
depreciation and amortization stood at virtually the same level as in the previous year (previous year:€ 64 million; − 2 %).
In the reporting period, research and development expenses stood at € 101 million (previous year:€ 109 million; − 7 %). All four Group Divisions invested heavily in research and development. The ratio of
the Voith Group’s R&D expenses to sales stood at 4.9 % at the end of the half year (previous year: 5.5 %).

03.4. Financial assets and investments
There were no reportable changes in the area of financial assets and investments in the first half of2017/18.

Voith Interim Report 2018
Group Interim Management Report
04. Employees

04.

27

Employees
With 19,014 employees at the end of the first half of 2017/18, theheadcount in the Voith Group remained almost stable. The build-up
of personnel at Voith Digital Solutions continued. Voith Paper andVoith Turbo created new jobs to a smaller extent, while Voith Hydro
cut jobs as a consequence of the fall in orders received.

Headcount virtually unchanged
As at March 31, 2018, the Voith Group had 19,014 employees (full-time equivalents without apprentices). This means that the number of jobs remained virtually unchanged (September 30, 2017: 19,045;− 31 jobs).
Voith Paper remained the largest Group Division in terms of number of employees with a share of 34 %of the total headcount. At the end of the reporting period, this Group Division had 6,520 employees,
71 more than at September 30, 2017 (6,449 employees). The build-up of personnel mostly took placein the EMEA region, where there is currently a good order situation.
Voith Turbo had 5,438 employees (previous year: 5,408; +30 jobs) or 29 % of the Group’s headcount. In
this context, human resources were built up in particular in two cross-divisional departments: researchand development as well as purchasing, logistics and production.
With 4,260 people, Voith Hydro employed 22 % of the Group’s total workforce (previous year:
4,507 employees). The headcount at Voith Hydro fell by 247, essentially as a consequence of capacity
adjustments in light of the order situation.

Employees Group

Employees total 19,014
by Group Division

19,04519,014­Voith ­Digital ­Solutions
8%

Voith ­­Hydro
22 %Voith Paper
34 %2016/17
Full fiscal year

2017/18First half year

Voith ­Turbo
29 %First half year 2017/18

Other
7%

28

Voith Interim Report 2018
Group Interim Management Report
05. Subsequent events

At the end of the reporting period, Voith Digital Solutions had 1,525 employees (September 30, 2017:
1,397). This corresponds to a share of 8 % of the Group’s headcount. Over the course of the reporting
period, we succeeded in filling 128 new positions with a qualified staff. In this context, we expanded
research and development capacities in particular, hired staff for the OnCumulus IIoT platform and foundreinforcements for Ray Sono and merQbiz.
The remaining jobs (1,271, previous year: 1,284; −13) were attributable to the activities in the Composites
division, the internal administrative and service centers and the divisions with holding functions. We
were able to further reduce the number of positions required as a consequence of the reorganization of
the indirect activities under Voith 150+ and by achieving efficiency gains.

05.

Subsequent events
Stephan Schaller takes up his new post as President and CEO of
the Corporate Board of Management
As announced, Mr. Stephan Schaller commenced his duties as President and CEO of the Corporate
Board of Management of Voith GmbH & Co. KGaA with effect from April 1, 2018; in this role, he willlead the global technology Group into the future. He is thus the successor to Dr. Hubert Lienhard, theCorporate Board of Management’s long-standing President and CEO, who is retiring as planned at theage of 67 after ten years at the top of the Group. As a member of the Voith Shareholders’ Committee,
Stephan Schaller has been involved with Voith since 2015.
Long-standing President and CEO of the Corporate Board of Management Dr. Hubert Lienhard was
appointed to the Shareholders’ Committee similarly with effect from April 1, 2018; in this new role, hewill continue to provide support to the Group’s ongoing development with his professional expertise.

Strategic partnership entered into with robotics start-up Franka Emika
In April 2018, we entered into a strategic partnership with the robotics firm Franka Emika. The partnership
involves Voith taking a direct financial investment of 10 % in this Munich-based robotics specialist andthe creation of the Voith Robotics joint venture.

Voith Interim Report 2018
Group Interim Management Report
05. Subsequent events

29

The plans are for Voith Robotics – A Voith and Franka Emika Company to become a global systemprovider for robot-assisted automation in the digital age. Voith Robotics is to provide both adaptive
lightweight robots from Franka Emika and appropriate software solutions, apps, services and process
consulting for customers worldwide in a wide range of industries and markets. As Voith holds a 51 %interest in the new joint venture and is responsible for its operative management, it will be fully consolidated in the consolidated financial statements of the Voith Group in the future. The 10 % interest inFranka Emika will be recognized in other financial assets in the future.
Franka Emika is a leader in the domain of the design and development of powerful, adaptive andeasy-to-operate state-of-the-art lightweight robot technology. For the first time ever, these systems
make it possible to automate necessary but generally monotonous tasks such as sensitive insertion,screwing and joining tasks as well as inspection and assembly jobs.
With this strategic partnership, Voith is taking another step consistent with its digital agenda. We had
defined robotics as one of the key competencies that we want to add to our portfolio.

Debt reduced further

Further informationon the repayment ofdebt in the reporting
period and thereafter
can be found in section 06. Risks andopportunities.

In view of the very high level of liquidity, we have further reduced our debt. In this context, the volumeof credit under the euro loan arranged in 2011 was reduced from € 770 million to € 550 million as part of
the refinancing in April 2018. Furthermore, the Corporate Board of Management made the decision in
April 2018 to prematurely repay the variable tranches of the note loan in an amount totaling € 139 million
at the end of May 2018.
No further significant developments have occurred since the close of the first half of the 2017/18 fiscal
year (March 31, 2018).

30

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Group Interim Management Report
06. Risks and opportunities

06.

Risks and opportunities
Our assessment of the situation regarding risks and opportunities
has not changed in any significant way since publication of theannual report. There continue to be no risks to the Voith Group’s
ability to continue as a going concern. The most significant risks
which could cause a negative deviation from forecasts or objectives
continue to be external. The risks are matched by opportunities
that could have a positive influence on business development.

Risk management aligned to increasing the value of the Company
Entrepreneurial activity involves making decisions under conditions of uncertainty. To safeguard against
risks that could jeopardize the Group or its companies as a going concern, Voith operates a consistentand binding Group-wide risk management system. It should contribute to increasing the value of theGroup and its companies by reducing potential risks and their probability of occurrence. At the sametime, the system is intended to produce a state of equilibrium between correctly assessed risks andthe exploitation of opportunities.
Risks
To the best of our knowledge at present, there are no risks of any kind which could jeopardize theability of the Voith Group to continue as a going concern. For our assessment of the risk situation, we
generally refer to our 2017 annual report in which we described risks that could have a substantiallynegative effect on our business situation and our net assets, financial position and earnings position andlead to a negative deviation from forecasts or objectives. Any deviations from this are presented below.
The risk situation is more or less unchanged in comparison to the end of the 2016/17 fiscal year. We
continue to consider the most significant risk for Voith to be developments in the global economy thatfall noticeably short of expectations. This said, the nature of the threats to the global economy has
shifted somewhat in comparison to the time when our annual report was published. The introduction ofpunitive tariffs by the US has increased the probability of further substantial obstacles to trade between
the US, China, Russia and Europe. The negative effects on global trade could have a severe impact on
the global economy. The various geopolitical flashpoints, specifically those in the Middle East, eastern
Ukraine, or northeast Asia concerning North Korea, present a significant risk to the global economy inthe event of escalation. The uncertainty surrounding the Brexit negotiations, on the other hand, has beenmoderated in the short term by the agreed transition period until December 2020. The medium-termrisks to the global economy outlined in the 2017 annual report remain in place.

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06. Risks and opportunities

31

In the area of liquidity and financial risks it should be mentioned that we further reduced debt in thereporting period and will continue to do so in the second half of the 2017/18 fiscal year. The Corporate
Board of Management made the decision in April 2018 to prematurely repay the variable tranches of
the note loan in an amount totaling € 139 million at the end of May 2018. This decision stems from thefact that our liquidity position significantly increased in the 2016/17 fiscal year as a consequence ofthe sale of the KUKA shareholding and remains at a very high level even after the repayments of debt
already made. The syndicated euro loan arranged in 2011 and confirmed until 2021 was refinancedin April 2018. The volume of credit was reduced from € 770 million to € 550 million and its term was
extended until 2023 (with two renewal options until 2025). It was possible to adjust the facility to thegood financial position in a favorable market environment. The loan has not been drawn on and isavailable as a strategic liquidity reserve if needed, as are additional bilateral lines of credit available to us
from banks. The syndicated loan placed in China in 2012 for CNY 2 billion was reduced to CNY 1 billion
in March 2018. This loan is available until May 2020 and was 29 % utilized at the reporting date. Thisfacility secures the finance for future investments and for the operating business in the same currency
as the operating business on the local market.
The rating given by Moody’s was raised one level to an investment grade of Baa3 in December 2017.
The rating agency Standard & Poor’s rated Voith for the first time in November 2017, also awarding thecomparable investment grade rating of BBB-. Both rating agencies thus take account of the improved
earnings and financial position of our Company.
A new risk arose after the end of the reporting period: after the US terminated the nuclear treaty with
Iran in May 2018 and announced it would reinstate the economic sanctions against the Islamic Republicof Iran after a transition period of 90 to 180 days, there are concerns that “secondary sanctions” will be
introduced for companies outside the US, i.e. that companies that do not limit their business with Iranwill be put on the list of firms excluded from business with US companies. Discussions at a politicallevel have currently not yet come to a conclusion and the specific details of the US sanctions are
not yet available. However, on the basis of the information currently available, we concur with VDMA,
our industry association, in anticipating considerable impact on Germany’s trade with Iran. The main
reason is the reluctance on the part of banks with regard to financing that is now almost certain to befurther intensified by the US sanctions. Without the support of banks for the financing of projects, itwill be virtually impossible in the future to carry out major infrastructure projects involving companies
like Voith. From today’s perspective, Voith’s could be impacted with regard to activities in the oil &gas, raw materials, transport & automotive and energy markets. For the current fiscal year, however,
we do not see any implications that would significantly jeopardize our ability to meet the forecast for
the year. We are currently reviewing the potential impact on the 2018/19 and following fiscal years. At
any event, the risk to Voith’s earnings position, net assets and financial position is not significant froma Group perspective.
Opportunities
Alongside risks, we see a range of opportunities that could have a positive impact on our businesssituation and net assets, financial position and earnings position and lead to positive deviations fromforecasts or objectives. For an assessment of our situation regarding opportunities, we generally referto the 2017 annual report. We continue to identify the principal opportunities described there.

32

Voith Interim Report 2018
Group Interim Management Report
07. Forecast report

07.

Forecast report
Based on the developments in the reporting period, we confirm
the forecasts for the year for Voith Paper, Voith Turbo and Voith
Digital Solutions. On account of the weaker development at Voith
Hydro and considerable negative currency effects, we have to
make a slight adjustment to the forecast for the Voith Group,
however. We now anticipate stable developments in terms of theGroup’s orders received and sales for the full 2017/18 year. The
three traditional Group Divisions are expected to achieve good
profitability levels, so that we will continue to be able to shoulder
the up-front costs for the digital transformation from our corebusiness. In the Group, i.e. taking account of investments
in building up new business fields, the profit from operations
adjusted for currency effects is anticipated to be roughly at theprevious-year level.

07.1. Business environment
Positive short-term economic conditions
The short-term economic prospects are better than they have been for a long time. Economic analysts
anticipate undiminished economic growth for 2018 and 2019. For example, in its latest release theInternational Monetary Fund (IMF) has forecast global growth rates of 3.9 % for both 2018 and 2019,
following 3.8  % in 2017.
In the medium to long term, however, economic activity might weaken significantly, especially in advanced
economies. This is because short-term growth was purchased at the price of building up burdens on
medium- and long-term development. After many years of extremely loose monetary policy, the limits of
conventional monetary policy have been reached in advanced economies, necessary structural reforms
have been postponed, and the burden of sovereign debt remains high in many countries, for example
in the euro area. In addition, the further development of the global economy is subject to a series ofrisks, the most serious of which include the potential escalation of geopolitical crises and protectionist
tendencies that, in a worst case scenario, could lead to a trade war.

Voith Interim Report 2018
Group Interim Management Report
07. Forecast report

33

Economic growth
Real year-on-year change in GDP1)

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

2018

3.9 %

2019

3.9 %

2018

2.5 %

2019

2.2 %

2018

2.9 %

2019

2.7 %

2018

2.4 %

2019

2.0 %

2018

2.5 %

2019

2.0 %

2018

4.9 %

2019

5.1 %

2018

6.6 %

2019

6.4 %

2018

5.3 %

2019

5.4 %

2018

7.4 %

2019

7.8 %

2018

2.3 %

2019

2.5 %

2018

1.7 %

2019

1.5 %

Source: International Monetary Fund (IMF), World Economic Outlook, April 2018.
1)
Forecasts.
2)
Including Germany.

The positive outlook for the near future is founded on the anticipation of a broad-based upswing. The
advanced economies are expected to enjoy sound economic growth in 2018 and 2019 that, according
to the most recent forecasts by the IMF, will be stronger at 2.5 % (2018) and 2.2 % (2019) than assumed
at the time of publication of our last annual report. Sound growth is similarly expected for Germany andthe euro area as a whole in 2018, with its pace slacking in 2019. In the US, the IMF sees a perceptible
increase in the pace of growth with rates of 2.9 % (2018) and 2.7 % (2019) stemming from the short-term
stimulus from the corporate tax reform passed at the end of 2017. The President’s obscure political
agenda provides for ongoing uncertainty, nevertheless.
The emerging markets seen as a whole should continue to see dynamic developments in 2018 and2019 and, according to an IMF forecast, return growth rates of 4.9 % and 5.1 %, respectively, with
Asia continuing to see above-average growth. High growth rates are expected for China once again
in 2018 and 2019, despite a slightly slacker pace in comparison to 2017. Strong international demandremains the growth driver. In this respect, the Chinese government is attempting to redesign China’s
own economy to achieve more domestic consumption without jeopardizing its growth targets. Statesubsidized excess capacities in many sectors and a high level of private and business debt constitutepotential obstacles to growth. Following the successful implementation of the currency reform, growth34

Voith Interim Report 2018
Group Interim Management Report
07. Forecast reportof the Indian economy is expected to accelerate perceptibly in 2018 and 2019. In this respect, India is
growing at a faster percentage rate than China, albeit at a very low absolute level. We continue to see
dynamic developments in Southeast Asia. The growth rates for South America, Africa and the Middle
East are still expected to fall short of global developments, significantly so in some cases. This also
applies to Brazil, an important sales market. Even though forecasts have been raised for this country,
political uncertainties and the necessary structural reforms remain challenges. Russia is expected tocontinue its recovery but still with low growth rates, however.
In light of this global economic situation, we see a positive environment for capital goods in many
segments also for the second half of the 2018 fiscal year. The trends in our five target markets should
continue as described in section 01.2. Economic environment. The forecast for our business assumes
that there will be no unforeseen major economic or political events.

07.2. Future development of the Company
Clearly positive profit from operations in the Voith Group despitebuild-up costs for the digital transformation
After the end of the first half of the fiscal year, we are confident that we will be able to fulfill the forecasts
for the year for our Voith Paper, Voith Turbo and Voith Digital Solutions Group Divisions published in
the 2017 annual report. In the case of Voith Hydro, it will be difficult for the weaker development in thereporting period on account of the market and competitive situation to be made up for in the second
half of the fiscal year. In addition, considerable negative currency effects in comparison to the previous
year will continue to have an impact on our traditional core business in the second half of the fiscal
year as we do not presume that the euro exchange rate will weaken significantly. For this reason, we
have to make a slight adjustment to our Group forecast for the year. For the 2017/18 fiscal year, we
now expect orders received to remain at a stable level instead of the slight growth originally forecast
in comparison to the previous year (€ 4,368 million). The level of the Group’s orders received will
ultimately depend to a great extent on the timing of the awarding of individual large-scale hydropower
projects. Group sales (forecast in the 2017 annual report: “perceptible rise”) should also come toroughly the previous-year level (€ 4,223 million). Our profitable core business will enable us to shoulder
the up-front costs for the digital transformation from business operations. Taking account of theseinvestments that will be slightly higher in the reporting period than originally planned due to development
costs being pulled forward, the profit from operations in the Group is likely to perceptibly fall below
the previous-year figure (€ 241 million) (forecast in 2017 annual report: “slight growth”). Adjusted for
currency effects, we expect stable development for the Group’s profit from operations. We continue toassume that we will be able to slightly increase our profitability indicator ROCE in comparison to theprevious year (11.5 %).

Voith Interim Report 2018
Group Interim Management Report
07. Forecast report

35

Profitable core business
The Voith Hydro Group Division anticipates a slightly stronger second half of the year but, from today’s
perspective, it will not achieve the development anticipated for the full year, specifically because theawarding of major projects has been postponed. In light of the more positive market situation, we expect
an improvement in the orders received by Voith Hydro in the second half of the fiscal year. In the full2017/18 fiscal year, however, orders received are likely to see a slight decline on account of project delays
and intense competition (previous year: € 1,180 million). In terms of sales, we now anticipate a perceptible
decrease for the full year in comparison to the previous year (€ 1,381 million) as a consequence of the
low level of orders received in the previous year and in the reporting period. The profit from operations
will probably fall perceptibly short of the previous-year figure (€ 106 million) in line with the developmentof sales. The decline in profit from operations is only partially balanced out by a reduction in the capital
employed, which means that the ROCE for the full year will be slightly down on the high level seen in
the previous year (21.8 %).
In the Voith Paper Group Division, the good development over the reporting period permits us to be
confident that we will achieve our forecast for the current fiscal year. We still anticipate a perceptible
rise in sales in comparison to the previous year (€ 1,527 million). The profit from operations will remain
at a good level and is likely to increase slightly in comparison to the previous year (€ 107 million). For the
ROCE (previous year 14.9 %) we continue to expect a perceptible improvement. With regard to orders
received, from today’s perspective we assume that we will be able to exceed our forecast made in thelast annual report (“perceptible fall”) and, in relation to the full year, more or less reach the previous-year
figure (€ 1,813 million).
For the Voith Turbo Group Division, we confirm our forecast for the current fiscal year. We continue
to anticipate a slight increase in sales for the full 2017/18 year in comparison to the previous year(€ 1,283 million) with the profit from operations remaining stable (previous year: € 91 million). The ROCE
should likewise be around the previous year’s level (12.9 %). With regard to orders received, we expect
the positive trend to continue and we forecast slight growth for the full 2017/18 year in comparison to
the previous year (€ 1,344 million).
Concerning Voith Digital Solutions, there is no change to our expectations of strong percentage growthin sales in comparison to the previous year (€ 13 million). In view of the start-up situation, the sales figures
shown for the Voith Digital Solutions Group Division will remain in the double-­digit millions of euros. The
profit from operations will be negative on account of the budgeted build-up costs and cause a shortfall
in profit from operations in the double-digit millions for the Group. In contrast to the forecast made in
the 2017 annual report, this shortfall might slightly exceed the previous year’s figure (€ − 43 million) due
to development costs being pulled forward. We consider the up-front costs for the digital transformation,
which we are able to shoulder from our profitable core business, as an investment in building up abusiness that is intended to become an important growth driver for the Voith Group over the coming years.
Forecasts are always subject to considerable uncertainty. A host of macroeconomic and industry-specificfactors can influence, positively or negatively, the development of individual Group Divisions or the entire
Group. For information on the significant risks and opportunities that could lead to a negative/positive
forecast deviation, we refer to section 06. Risks and opportunities of this management report.

Group Interim Financial
Statements
for the period from October 2017 to March 2018

Page

Consolidated statement of income
Consolidated statement ofcomprehensive income
Consolidated balance sheet
Consolidated statement ofchanges in equity
Consolidated cash flow statement
Basis of the interim consolidated
financial statements andaccounting policies
Notes on segment reporting
Segment information bybusiness segment
Notes to the statement of income
and the balance sheet
Notes to the cash flow statement
Other notes
Responsibility statement

38
39
40
42
44
45
47
48
50
54
55
64

38

Voith Interim Report 2018

Group Interim Financial Statements
Consolidated statement of income

Consolidated statement of income
for the period from October 1, 2017 to March 31, 2018in € thousands

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

2017-10-01 to
2018-03-31

2016-10-01 to
2017-03-31

2,049,434

1,964,940

49,10528,7982,098,539

1,993,738

211,452

194,210

Cost of materials− 922,997− 853,511

Personnel expenses− 734,002− 723,647

Depreciation and amortization− 62,829− 64,106

Other operating expenses− 544,075− 470,330

Operational result before non-recurring items

46,08876,354

Non-recurring result− 3,910−11,366

Operational result

42,17864,988

Share of profit/loss from companies accounted for using the equity method

2,362

6,185

Gains/losses from the disposal of associated companies

0565,078

Interest income

4,906

8,722

Interest expenses−16,905− 46,667

Other financial result

6,457− 4,996

Result before taxes from continuing operations

38,998593,310

Income taxes− 9,936− 26,275

Net result from continuing operations

29,062567,035

0−1,140

Net result

29,062565,895

Net result attributable to shareholders of the parent company

26,097562,313

Net result attributable to holders of non-controlling interests

2,965

3,582

Net result from discontinued operations

Voith Interim Report 2018
Group Interim Financial Statements
Consolidated statement of comprehensive income

39

Consolidated statement ofcomprehensive income
for the period from October 1, 2017 to March 31, 20182017-10-01 to
2018-03-31

2016-10-01 to
2017-03-31

29,062565,895

Remeasurement of defined benefit plans

7,292

44,669Taxes on components of other comprehensive income that will not be recycled through profit orloss in later accounting periods− 9,770−15,807− 79− 9,739in € thousands

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

Components of other comprehensive income that will be recycled through profit orloss in later accounting periods:
Gains/losses on available-for-sale financial assets
Gains/losses on cash flow hedges
Gains/losses on currency translation
Gains/losses on net investments in foreign operations
Taxes on components of other comprehensive income that will be recycled through profit orloss in later accounting periods

193

2,588

− 28,669

12,881−1,283

503

0

− 490

Other comprehensive income− 32,316

34,605

Total comprehensive income− 3,254

600,500

Total comprehensive income attributable to shareholders of the parent company− 6,573

597,113

Total comprehensive income attributable to holders of non-controlling interests

3,319

3,387

− 3,254

600,500

40

Voith Interim Report 2018

Group Interim Financial Statements
Consolidated balance sheet

Consolidated balance sheet
as at March 31, 2018
Assetsin € thousands

2018-03-31

2017-09-30

A.

Non-current assets

I.

Intangible assets

513,495

515,676

II.

Property, plant and equipment

948,220

978,459

III.

Investments accounted for using the equity method

33,78832,006

IV.

Securities

11,098

11,734V.

Other financial assets

31,097

105,954

VI.

Other financial receivables

63,314

89,411VII.

Other assets

11,03010,749VIII.

Deferred tax assets

210,571

204,538

Total non-current assets

1,822,613

1,948,527

547,825

B.

Current assets

I.

Inventories

614,339II.

Trade receivables

745,059

713,899

III.

Receivables from customer-specific contracts

311,811

323,929

IV.

Securities

693,755

601,812V.

Current income tax assets

62,52252,263VI.

Other financial receivables

97,435

101,289

VII.

Other assets

117,064

110,544

VIII.

Cash and cash equivalents

411,810

581,947

3,053,795

3,033,508

15,182

15,845

Total current assets

3,068,977

3,049,535

Total assets

4,891,590

4,997,880

IX.

Assets held for sale

Voith Interim Report 2018
Group Interim Financial Statements
Consolidated balance sheet

41

Equity and liabilitiesin € thousands

2018-03-31

2017-09-30

A.

EquityI.

Issued capital

120,000

120,000

II.

Revenue reserves

1,130,689

1,138,763

III.

Other reserves− 67,795− 37,664

IV.

Profit participation rights

Equity attributable to shareholders of the parent company
V.

Profit participation rights

VI.

Other interests

Equity attributable to holders of non-controlling interests
Total equity

6,600

6,600

1,189,494

1,227,699

96,80096,80044,36941,425

141,169

138,225

1,330,663

1,365,924

B.

Non-current liabilities

I.

Provisions for pensions and similar obligations

735,486

747,282

II.

Other provisions

162,657

190,611

III.

Income tax liabilities

IV.

Bonds, bank loans and other interest-bearing liabilities

V.

320

277

498,949

551,363

Other financial liabilities

35,15635,635VI.

Other liabilities

53,56358,222

VII.

Deferred tax liabilities

53,77753,744

Total non-current liabilities

1,539,908

1,637,134

C.

Current liabilities

I.

Provisions for pensions and similar obligations

29,62629,319II.

Other provisions

351,232

343,082

III.

Income tax liabilities

47,323

46,968

IV.

Bonds, bank loans and other interest-bearing liabilities

72,68982,516V.

Trade payables

495,873

509,741

VI.

Liabilities from customer-specific contracts

58,02545,623VII.

Other financial liabilities

162,569

234,080

VIII.

Other liabilities

803,682

703,493

Total current liabilities

2,021,019

1,994,822

Total equity and liabilities

4,891,590

4,997,880

42Voith Interim Report 2018

Group Interim Financial Statements
Consolidated statement of changes in equity

Consolidated statement of changes in equity
for the period from October 1, 2017 to March 31, 2018
Equity attributable to shareholdersof the parent companyin € thousands

Issuedcapital

Revenue
reserves

Gains/losses onavailable-for-salefinancial assets

Cash flow
hedgesCurrencytranslation

2017-10-01

120,000

1,138,763

1,708− 2,319− 32,553− 2,539−139

193− 28,902

23,558−139

193− 28,902

1,569− 2,126− 61,455

Net result

26,097

Other comprehensive income
Total comprehensive income

0

Allocation of profit participation rights− 5,590

Share of net result attributable toprofit participation rights
Dividends− 25,000

Non-controlling interests – capital contributions
Non-controlling interests – put options− 511

Other adjustments− 531

2018-03-31

120,000

1,130,689

Equity attributable to shareholdersof the parent companyin € thousands

Issuedcapital

Revenue
reserves

Gains/losses onavailable-for-salefinancial assets

Cash flow
hedgesCurrencytranslation

2016-10-01

120,000

532,060

13,968− 4,010− 4,015

Net result

562,313

Other comprehensive income

28,872− 9,828

2,100

13,153591,185− 9,828

2,100

13,1534,140−1,9109,138

Total comprehensive income

0

Allocation of profit participation rights− 5,590

Share of net result attributable toprofit participation rights
Changes in non-controlling interests
as a result of changes in group structure

209

Dividends−18,000

Non-controlling interests – capital contributions
Non-controlling interests – put options− 2,120

Other adjustments
2017-03-31− 313
120,000

1,097,431

Voith Interim Report 2018
Group Interim Financial Statements
Consolidated statement of changes in equity

43

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

Profit participationrights

Total

Profit participationrightsOther interests

Total

Total equity− 4,500

6,600

1,227,699

96,80041,425

138,225

1,365,924

2,965

2,965

29,062

26,097−1,2830− 32,670

0

354

354

− 32,316−1,2830− 6,573

0

3,319

3,319

− 3,254363− 5,227

5,227

5,227

0

− 363

− 363

− 5,227− 5,227− 5,590− 2,384− 2,384− 27,384

1,217

1,217

1,217

− 511

591

591

80

− 531

201

201

− 330

44,369141,169

1,330,663− 25,000− 5,7836,600

1,189,494

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

Profit participationrights

Total

Profit participationrightsOther interests

Total

Total equity− 4,503

6,600

660,100

96,80042,034

138,834

798,934

3,582

3,582

565,895503

034,800

0

−195

−195

34,605503

0597,113

0

3,387

3,387

600,500363− 5,227

5,227

5,227

0

− 363

− 363

− 5,227− 5,227− 5,590562,313

209

− 440

− 440

− 231

−18,000− 2,128− 2,128− 20,128

1,525

1,525

1,525

− 447

− 447

− 2,567− 2,120− 313− 4,000

6,600

1,231,399

96,800

− 28

− 28

− 341

43,903

140,703

1,372,102

44

Voith Interim Report 2018

Group Interim Financial Statements
Consolidated cash flow statement

Consolidated cash flow statement
for the period from October 1, 2017 to March 31, 2018in € thousands

2017-10-01 to
2018-03-31

2016-10-01 to
2017-03-31

Result before taxes from continuing and discontinued operations

38,998594,163

Depreciation and amortization

63,014

66,410Interest expenses/income

11,99937,945

Other non-cash items− 2,220− 569,076

101

− 63

Gains/losses from the disposal of property, plant and equipment and intangible assets
Gains/losses from investments−18,647− 4,509

Changes in provisions and accruals− 50,056− 73,307

Change in net working capital− 29,050− 41,697

Interest paid

− 9,999−10,713Interest received

7,344

8,109

Dividends received

604

3,106

Tax paid− 43,038− 49,826

Cash flow from operating activities− 30,950− 39,458

Investments in property, plant and equipment and intangible assets− 39,645− 48,292

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

1,807

4,663

Investments in financial assets− 2,977−1,914Purchase price payments/receipts in connection with disposal of companies in previous years−16,352

38,506

Proceeds from the disposal of financial assets*

92,175

1,148,422

Proceeds from the disposal of securities

13,48588,840

Payments for the acquisition of securities*−105,331− 41,381

Cash flow from investing activities− 56,838

1,188,844

Dividends paid

− 32,974− 25,718

1,217

1,525

Contributions from holders of non-controlling interests
Acquisition of non-controlling interests

0

− 231

New bonds, bank loans and overdrafts

20,79022,545

Repayment of bonds, bank loans and overdrafts− 74,323− 85,838

Changes in other interest-bearing financial receivables and liabilities

10,693− 7,501

Cash flow from financing activities− 74,597− 95,218

Total cash flow

−162,385

1,054,168− 7,752

10,776

Exchange rate movements and valuation changes
Cash and cash equivalents at the beginning of the period

581,947649,672

Cash and cash equivalents at the end of the period

411,810

1,714,616* Further information can be found in the section entitled “Notes to the cash flow statement”.

Voith Interim Report 2018
Group Interim Financial Statements
Basis of the interim consolidated financial statements and accounting policies

45

Basis of the interim consolidated
financial statements andaccounting policies
Voith GmbH & Co. KGaA (Voith), which has its headquarters at St. Pöltener Str. 43, Heidenheim an
der Brenz, is registered at the commercial register in Ulm, Germany (HRB 735450) and is the parent
company of the Voith Group. The Company was incorporated as Voith GmbH until July 31, 2017. Since
August 1, 2017 the Company has been incorporated in the legal form of a GmbH & Co. KGaA. The Boardof Management of Voith Management GmbH (HRB 735126) is responsible for the strategy and operative
management of the Voith Group. Voith Management GmbH is the personally liable shareholder (generalpartner) of and responsible for the management of the business of Voith GmbH & Co. KGaA.
The interim consolidated financial statements for the first half of the 2017/18 fiscal year were preparedin accordance with the International Financial Reporting Standards (IFRS) for interim financial reportingas endorsed by the European Union. In comparison to the consolidated financial statements as at
September 30, 2017, the interim consolidated financial statements are condensed in scope.
The unaudited interim consolidated financial statements do not include all of the information anddisclosures required for consolidated financial statements and must therefore be read in conjunction
with the consolidated financial statements for the year ended September 30, 2017. The interim financial
statements are presented in euros and the figures have been rounded using standard commercial
principles.
Within the framework of preparing the interim consolidated financial statements pursuant to IFRS, it isnecessary to make certain estimates, judgments and assumptions that could have an impact on theamount and presentation of assets and liabilities recognized in the reporting, as well as on the disclosureson contingent assets and contingent liabilities on the reporting date and on the income and expenses
reported for the period. Actual amounts may differ from the estimates. Changes in estimates, judgments
and assumptions could have a material impact on the interim financial reporting.
The accounting and valuation policies applied by the Group in these interim consolidated financial statements generally correspond to the accounting and valuation policies applied in the IFRS consolidated
financial statements for the previous fiscal year. Income taxes are recorded on the basis of an estimateof the weighted average annual income tax rate expected for the full year, taking account of the tax
impact of any circumstances that can only be allocated to the respective period under review.

46

Voith Interim Report 2018

Group Interim Financial Statements
Basis of the interim consolidated financial statements and accounting policies

In the first half of the 2017/18 fiscal year, the following new and revised IAS and IFRS standards wereapplied for the first time:Standard / interpretation

Amendment / new standard or interpretation

Amendments to IAS 7: Disclosure Initiative

Project as part of the disclosure initiative for IAS 7 Statement of
Cash Flows to improve information provided to users of financial­s tatements about an entity’s financing activities and liquidity.

Amendments to IAS 12: Recognition ofDeferred Tax Assets for Unrealized Losses

Clarification of the accounting for deferred tax assets for unrealized
losses in the case of assets accounted for at fair value.

Improvements to IFRS (2014–2016)

Amendments to standard IFRS 12.

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

Consolidated group
The following companies are included in the consolidated financial statements:
2018-03-31

2017-09-30

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

32

32· Other countries

110

111

142

143

3

3

Associated companies and joint ventures:· Germany· Other countries

11

11

14

14

Business combinations
There were no business combinations in the first half of the current fiscal year and the corresponding
previous-year period.
Acquisition of further interests in companies over which the Group already had control
There were no acquisitions of further interests in companies over which the Group already had control
in the first half of the current 2017/18 fiscal year. The remaining 30 % interest in Voith Paper Integrated
Mill Service Co., Ltd., Kunshan, Jiangsu/China, was acquired in the first half of the 2016/17 fiscal year.
The purchase price amounted to € 231 thousand.

Voith Interim Report 2018
Group Interim Financial Statements
Notes on segment reporting

47

Disposal of shares
Within the scope of the disposal of the Voith Industrial Services segment in the 2015/16 fiscal year, a 20 %interest was retained in the Voith Industrial Services entities sold. In addition, the majority owner was
granted the right to acquire all shares retained by Voith. This call option was accounted for separatelyfrom the interest in the previous year and was exercised by the majority owner in the first half of thecurrent fiscal year. The purchase price of € 36 million was counterbalanced by the investment’s carrying
amount of € 22 million and a liability from the call option of € 4 million. Consequently, the disposal gave
rise to a gain on sale of € 18 million.

Notes on segment reporting
The demarcation between the segments and the methods used to calculate the segment information
remain unchanged in comparison to September 30, 2017.

Reconciliation of profit from operations to the Group’s result
before taxes
The following earnings components are taken into account in the course of calculating the profit fromoperations, unchanged on the most recent consolidated financial statements:
Operating interest income
Operating interest income is defined as interest received by the Company on the long-term financing
of receivables from customers, or as the imputed interest effect attributable to that portion of customer
advances that is not used to finance inventories and PoC receivables.
Other adjustments
Other adjustments contain effects which are, as a rule, shown as other operating income and expenses
in the consolidated statement of income on account of their operating nature. In the course of calculating
the profit from operations, these items are adjusted as non-recurring effects in order to facilitate a better
assessment of segments’ business operations.

48

Voith Interim Report 2018

Group Interim Financial Statements
Segment information by business segment

Average capital employed
The capital employed presented as at the March 31, 2018 reporting date constitutes an average value derived from thevalues as at the current reporting date and as at the end of the previous year. The capital employed as at September 30,
2017 presented as a comparative figure is an average value derived from the respective figures as at the September 30,
2017 reporting date, as at the reporting date of the previous half-year financial statements and as at the reporting date of theprevious financial statements dated September 30, 2016.

Segment information by business segment
Voith ­H ydroin € millions

Voith ­Paper

Voith ­­Turbo

2017/18

2016/172017/18

2016/172017/18

2016/17

Sales with third parties

555

653

862

678

610

621

· Thereof attributable toVoith Digital Solutions

53

68

42

33

17

31

Sales with other segments

2

4

8

10

6

1

557

657

870

688

616

622

Segment sales, total
Profit from operations

43

53

42

30

34

34

Average capital employed2)

482

489

646

721

682

703

4,260

4,507

6,520

6,449

5,438

5,408

Employees3)
1)
2)
3)

Sub-total of Voith Hydro, Voith Paper and Voith Turbo.
Average capital employed in comparison to September 30, 2017.
Statistical headcount on reporting date in comparison to September 30, 2017.

As the earnings component “Operating interest income” is not shown directly in the consolidated statement of income, thisitem is presented separately in the reconciliation of total profit from operations to result before taxes presented below.

Voith Interim Report 2018
Group Interim Financial Statements
Segment information by business segment­Voith ­D igital ­S olutions

Total Core Business 1)

Reconciliation

49

Total

2017/18

2016/172017/18

2016/172017/18

2016/172017/18

2016/17

2,027

1,952

14

4

8

9

2,049

1,965

112

132

14

4

0

0

126

136

16

15

74

62

− 90

− 77

0

0

2,043

1,967

88

66

− 82

− 68

2,049

1,965

119

117

− 37

− 20

−7

−6

75

91

1,810

1,913

77

44

142

132

2,029

2,089

16,21816,364

1,525

1,397

1,271

1,284

19,014

19,045Reconciliation of total profit from operations to the Group’s result before taxes:in € millions

2017/18

2016/17

Profit from operations

75

91

Operating interest income

−12

−15

Non-recurring result

−4

−11

Other adjustments

−16

0

2

6

Share of profit/loss from companies accounted for using the equity method
Gains/losses from the disposal of associated companies

0

565

−12

− 38

Other financial result

6−5Result before taxes from continuing operations

39

593

Interest result

50Voith Interim Report 2018

Group Interim Financial Statements
Notes to the statement of income and the balance sheet

Notes
Ko
to the statement of income andthenzern-Gewinn-und-Verlust-Rechnungbalance sheet
The following information is limited to those issues that provide useful additional information for theunderstanding of the amounts disclosed in the statement of income and in the balance sheet.

Selected notes to the statement of income
Other operating incomein € thousands

2017/18

2016/17

Income from the utilization of contract-specific provisions

73,59556,720

Income from the reversal of provisions and accruals

40,42842,676

Foreign exchange gains

43,54336,408Other income

53,88658,406211,452

194,210in € thousands

2017/18

2016/17

Increase in provisions and accruals

136,859

101,128

Other selling expenses

137,869

144,456

Other administrative expenses

118,649

124,461

Foreign exchange losses

45,45932,109Rent for buildings and machinery

24,80025,567

Other operating expenses

Other expenses

80,43942,609544,075

470,330

Non-recurring result
Voith generally defines expenses and income arising from major restructuring activities, measures
addressing personnel capacity and the discontinuation of operations as exceptional items and presents
them under the non-recurring result.

Voith Interim Report 2018
Group Interim Financial Statements
Notes to the statement of income and the balance sheet

51

The non-recurring result totaled €−4 million (previous year: €−11 million).
In the reporting period, the non-recurring result primarily includes personnel-related expenses arisingfrom measures to consolidate production capacities and to improve competitiveness at Voith Hydro in
Brazil. In detail, the contributions to the non-recurring result were as follows: Voith Hydro €−3 million
and Voith Paper €−1 million.
In the first half of the 2016/17 fiscal year, the non-recurring result mainly comprised personnel-related
and other expenses arising from measures to consolidate production capacities at Voith Hydro in Brazil
and at Voith Paper in the US. In detail, the contributions to the non-recurring result in the previous-year
period were as follows: Voith Hydro €−4 million, Voith Paper €−6 million and divisions with a holding
function €−1 million.
In detail, the non-recurring result includes the following:in € thousands

2017/18

2016/17

Personnel expenses− 3,869− 8,001

Sundry other expenses− 944− 4,719

Income from the reversal of provisions

354

156

Sundry other income

549

1,198

− 3,910−11,366in € thousands

2017/18

2016/17

Gains/losses from investments

18,6473,656

0− 2,304

Other financial result

Impairment of securities and other investments
Currency gains on long-term financing positions

10,102

24,296

Currency losses on long-term financing positions− 26,139− 22,461

3,790− 8,272

57

89

6,457

− 4,996

Valuation of derivatives used to hedge financial transactions
Sundry other financial result

Income taxes
Income tax expenses totaled €−10 million (previous year: €−26 million). This figure does not contain any
expenses from taxes relating to other periods (previous year: €−9 million).

52

Voith Interim Report 2018

Group Interim Financial Statements
Notes to the statement of income and the balance sheet

Selected notes to the balance sheet
Intangible assets and property, plant and equipment
In the first half of the 2017/18 fiscal year, € 7 million (previous year: € 8 million) was invested in intangible
assets and € 33 million (previous year: € 40 million) in property, plant and equipment. Amortization of€ 9 million (previous year: € 8 million) was recognized on intangible assets and depreciation of € 54 million(previous year: € 56 million) on property, plant and equipment.
Inventories
Inventories consist of the following items:in € thousands

2018-03-31

2017-09-30

Raw materials and supplies

214,654

194,785

Work in progress

174,753

146,166

Finished goods and merchandise

141,601

131,483

Prepayments

83,33175,391

614,339547,825

Assets held for sale and liabilities directly associated with assets held for sale
As in the previous year, this item contains, as at March 31, 2018, an investment that is classified asheld for sale.
EquityA dividend of € 0.21 per share was distributed from the unappropriated retained earnings of Voith
GmbH & Co. KGaA, i.e. € 25,000 thousand (previous year as at March 31, 2017: € 18,000 thousand).
Distributions of € 5,590 thousand (previous year as at March 31, 2017: € 5,590 thousand) were made in
relation to the profit participation rights. Dividends of € 2,384 thousand (previous year as at March 31,
2017: € 2,128 thousand) were distributed to the holders of non-controlling interests.

Voith Interim Report 2018
Group Interim Financial Statements
Notes to the statement of income and the balance sheet

53

Provisions for pensions and similar obligations
The decrease in pensions and similar obligations is mainly attributable to changes in the actuarial
parameters. The calculation of pension provisions was based on the following assumptions:
Germany and Austria
in %

USA

2018-03-31

2017-09-30

2018-03-31

2017-09-30

Discount rate

2.05

2.00

3.74

3.46

Pension increases

1.70

1.70

0

0

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

Bonds
Bank loans

Current

Non-current

2018-03-31

Current

Non-current

2017-09-30

0

16,751

16,751

0

17,935

17,93527,009337,941

364,950

23,947394,400

418,347

Financial liabilities from leases

226

524

750

246

612

858

Notes payable

1,142

0

1,142

1,151

0

1,151

Derivatives used to hedge
financial transactions
Other financial liabilities

117

9,674

9,791

4,211

15,131

19,342

44,195134,059

178,254

52,961

123,285

176,246

72,689498,949

571,638

82,516551,363

633,879

54

Voith Interim Report 2018

Group Interim Financial Statements
Notes to the cash flow statement

Notes to the cash flow statement
The Voith Industrial Services segment was disposed of in the 2015/16 fiscal year and a 20 % interest
was retained in the Voith Industrial Services entities sold. This 20 % interest was sold in the first half of2017/18. In addition, a loan of € 50 million was repaid to Voith. Within the scope of these transactions, werecorded a cash inflow of € 86 million in the cash flow statement which is reported in the item “Proceedsfrom the disposal of financial assets”.
A total of € 65 million was deposited at selected banking partners as short-term deposits of Voith GmbH& Co. KGaA with original maturity dates of more than 90 days and is reported in the balance sheet item
“Current securities”.

Voith Interim Report 2018
Group Interim Financial Statements
Other notes

55

Other notes
Contingent liabilities, contingent assets andother financial obligations
There are risks in connection with the recognition of transfer prices outside Germany amounting to€ 5 million (previous year: € 5 million) and risks from legal disputes of € 30 million (previous year: € 34 million). A successful outcome is currently expected in both cases.
Neither Voith GmbH & Co. KGaA nor any of its Group companies are involved in any further current
or foreseeable taxation, legal, or arbitration proceedings that could materially influence their economic
situation.
Owing to the ongoing tax field audit of German companies, further changes may be made to tax items.
There are guarantee obligations of € 2,394 thousand (previous year: € 1,161 thousand).
There are in addition the following other financial obligations:in € thousands

Purchase commitments for capital expenditures
Obligations arising from non-cancelable operating leases
Other2018-03-31

2017-09-30

17,812

10,935

109,033

120,506

7,680

6,918

134,525

138,359

56

Voith Interim Report 2018

Group Interim Financial Statements
Other notes

Additional information on financial instruments

Amount recognized in the balance sheet
in accordance with IAS 39

in € thousands

IAS 39measurement
category

Carrying
amount2018-03-31

Amortized
cost

Cost

Fair value
through
equityAmountrecognized in
the balance
Fair value
sheet inthroughaccordance
profit or loss
with IAS 17

Fair value
2018-03-31

Assets:Cash and cash equivalents

LaR

411,810

411,810

411,810

Trade receivables

LaR

745,059745,059745,059

Receivables from construction contracts

LaR

311,811

311,811

311,811
692,010

Other financial assets and securities

735,950· Financial investments

LaR

692,010692,010· Loans

LaR

7,887

7,887

· Investments

AfS

23,210· Securities

AfS

12,843

Derivative financial instruments

7,887
23,2101)

12,843

12,84339,957· Forward exchange contracts

FAHfT

5,534

5,534

5,534

· Forward exchange contracts(fair value hedges)

n. a.

33,86733,86733,867· Interest rate swaps(fair value hedges)

n. a.

556

556

556

Other receivables

83,826· Financial receivables

LaR

19,15919,15919,159· Sundry financial assets

LaR

64,66764,66764,667

Trade payables

FLAC

495,873495,873495,873

Bonds/bank loans/notes

FLAC

382,843

382,843

399,383

Financial liabilities from leases

n. a.

750

Liabilities:

Derivative financial instruments

750

19,689· Forward exchange contracts

FLHfT

11,91911,91911,919· Forward exchange contracts(fair value hedges)

n. a.

6,123

6,123

6,123

· Interest rate swaps(cash flow hedges)

n. a.

1,647

Other loans and borrowings

FLAC

178,254

136,732

Sundry financial liabilities

FLAC

187,826

187,826

Loans and receivables (LaR)

LaR

2,252,403

2,252,403

Available for sale (AfS)

AfS

36,053

FAHfT

5,534

Financial liabilities measured atamortized cost (FLAC)

FLAC

1,244,796

Financial liabilities held for trading (FLHfT)

FLHfT

11,919

1,647

1,647

41,522

213,263
187,826

IAS 39 measurement categories:

Financial assets held for trading (FAHfT)

1)

23,21012,843
5,534

1,203,274

41,522
11,919

The financial assets available for sale (AfS) include investments whose fair value could not be determined reliably and that are currently not planned to be sold.

Voith Interim Report 2018
Group Interim Financial Statements
Other notes

57

Amount recognized in the balance sheet
in accordance with IAS 39

in € thousands

IAS 39measurement
category

Carrying
amount2017-09-30

Amortized
cost

Cost

Fair value
through
equityAmountrecognized in
the balance
Fair value
sheet inthroughaccordance
profit or loss
with IAS 17

Fair value
2017-09-30

Assets:Cash and cash equivalents

LaR

581,947

581,947

581,947

Trade receivables

LaR

713,899

713,899

713,899

Receivables from construction contracts

LaR

323,929

323,929

323,929599,965

Other financial assets and securities

719,500·F inancial investments

LaR

599,965599,965· Loans

LaR

56,98756,987· Investments

AfS

48,967· Securities

AfS

Derivative financial instruments

56,98727,367

13,581

21,6002)21,6001)

13,581

13,581

46,588· Forward exchange contracts

FAHfT

4,820

4,820

4,820

· Forward exchange contracts(fair value hedges)

n. a.

40,73540,73540,735· Interest rate swaps(fair value hedges)

n. a.

1,033

1,033

1,033

Other receivables

106,478· Financial receivables

LaR

25,97525,97525,975· Sundry financial assets

LaR

80,50380,50380,503Liabilities:
Trade payables

FLAC

509,741

509,741

509,741

Bonds/bank loans/notes

FLAC

437,433

437,433

454,275

Financial liabilities from leases

n. a.

Derivative financial instruments

858

858

28,282· Forward exchange contracts

FLHfT

13,892

13,892

13,892· Call option

FLHfT

3,500

3,5002)3,500· Forward exchange contracts(fair value hedges)

n. a.

8,299

8,299

8,299

· Forward exchange contracts(cash flow hedges)

n. a.

1

1

· Interest rate swaps(cash flow hedges)

n. a.

2,590

Other loans and borrowings

FLAC

176,246

136,065

Sundry financial liabilities

FLAC

260,775

260,775

Loans and receivables (LaR)

LaR

2,383,205

2,383,205

Available for sale (AfS)

AfS

62,548

FAHfT

4,820

Financial liabilities measured atamortized cost (FLAC)

FLAC

1,384,195

Financial liabilities held for trading (FLHfT)

FLHfT

17,392

1

2,590

2,590

40,181

210,673
260,775

IAS 39 measurement categories:

Financial assets held for trading (FAHfT)

1)
2)

27,36735,1814,820

1,344,014

40,181
17,392

 he financial assets available for sale (AfS) include investments whose fair value could not be determined reliably.
TA call option embedded in the investment (equity instrument) held by Voith was accounted for separately. The call option in which Voith is the writer grants the
majority owner the right to acquire all shares held by Voith in the period up to 2019.

58

Voith Interim Report 2018

Group Interim Financial Statements
Other notes

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

2018-03-31

Level 1

Level 2

Level 3

Securities

12,843

12,84300Derivative financial instruments

39,957

0

39,9570

Derivative financial instruments

19,6890

19,6890Liabilities arising from the acquisitionof investment shareholdings

41,5220041,522

2017-09-30

Level 1

Level 2

Level 3

AssetsLiabilitiesin € thousands

AssetsSecurities

13,581

13,58100Derivative financial instruments

46,588046,5880Investments

21,6000021,600Derivative financial instruments

28,282

0

24,782

3,500

Liabilities arising from the acquisitionof investment shareholdings

40,1810040,181

Liabilities

The three-level fair value hierarchy divides the input factors used in the measurement techniques tomeasure the fair value into three levels, as follows:
Level 1:
Input factors quoted in active markets accessible to the Company for identical assets or liabilities on
the measurement date.
Level 2:Other inputs than those at level 1 for which observable market data which relates directly or indirectly
to the financial assets or liabilities is available.
Level 3:
Input factors for which there is no observable market data.
No reclassifications were made between the levels of the fair value hierarchy in the first half of the
2017/18 fiscal year.

Voith Interim Report 2018
Group Interim Financial Statements
Other notes

59

The fair values of derivative financial instruments allocated to level 2 of the fair value hierarchy are takenfrom the daily observable exchange rates, associated forward rates and the yield curves. In addition,
fair value measurement includes both the counterparty credit risk and the Group’s own credit risk. Input
factors that take account of counterparty credit risk can be obtained from observable credit default
swaps (CDS) from the banks participating in the respective transaction. At Voith the market CDS rate
was used to calculate the Group’s own credit risk.
As at September 30, 2017, the fair value of the investment allocated to level 3 of the fair value hierarchy
was determined by an impartial appraiser on the basis of an income-based measurement technique andcontained parameters that cannot be observed on the market. On account of contractual subordination,
the economic value of Voith’s investment did not correspond to the proportionate market value of theequity. For this reason, the fair value was based on an options pricing model (binomial model), theinput parameters used at the reporting date were the business model of the investment amounting to€ 138.7 million, capital market interest rates that reflect the term to maturity and the risk profile amounting
to 0.02 % per annum, and share price volatilities of a peer group amounting to 26.0 % per annum.
The value of the embedded call option accounted for separately was determined indirectly from thedifference in carrying amount of the investment with and without the option. In the event of the call
option being exercised by the majority owner, Voith could, depending on the timing of the exercise of
the call option, generate a gain on sale of up to a maximum of € 40.2 million. In economic terms, the call
option limited the maximum revenue Voith could generate from the investment to the option’s strike price.
The call option was exercised by the majority owner in the first half of the 2017/18 fiscal year and theinvestment was sold. For more information on this, we refer to the section entitled “Disposal of shares”.
The fair values of liabilities from the business combination allocated to level 3 of the fair value hierarchy
concern put options held by non-controlling shareholders and were calculated on the basis of internal
planning data. These are measured using the discounted cash flow projections taken from the latest
business planning prepared by management. The planning assumptions are adjusted to reflect thecurrent information available. The material financial liability from a put option amounting to € 26.9 million(previous year: € 26.0 million) was calculated on the basis of a contractually agreed formula for the
calculation of the purchase price upon exercise of the put option. This figure is the result of the grossbusiness value of the investment (equivalent to the three-year average of the EBITDA over the period
from 2020 to 2022, four-year holding period, multiplied by a contractually agreed multiplier) less net
debt, multiplied by the non-controller’s shareholding (40 %). This figure was discounted to the reporting
date using a WACC appropriate for the term of 6 %.
If the business value of the underlying companies were to increase (decrease), this would lead to anincrease (decrease) in the value of the associated liability from the business combination.

60

Voith Interim Report 2018

Group Interim Financial Statements
Other notes

The changes in the fair values of assets and liabilities classified as level 3 in the fair value hierarchy wereas follows:in € thousands

Balance, October 1
Put options from business combinations
Disposal of investments

2018-03-31

2017-09-30− 22,081

9,511

0− 33,367− 21,600

0Exercise of call option from acquisition of investments

3,500

0

Fair value changes recorded in profit or loss

− 550

1,300

Fair value changes recorded in equity

−791

475

− 41,522− 22,081

Balance at the reporting date

The fair values of financial assets and financial liabilities measured at cost or amortized cost, which need
to be determined to meet disclosure requirements, are calculated as follows:
Cash and cash equivalents, trade receivables and other financial receivables are subject to floatinginterest and fall due within one year. For this reason, their carrying amounts approximate their market
values on the reporting date.
Because trade payables and other financial liabilities generally have short residual terms, their carrying
amounts approximate the market values.
The market values of unlisted bonds, bank loans and other financial liabilities are calculated as the present
value of the payments associated with the liabilities, based on the effective yield curve and Voith GmbH& Co. KGaA’s credit spread curve determined for different currencies.

Voith Interim Report 2018
Group Interim Financial Statements
Other notes

61

Transactions with related parties
All business transactions with related parties are conducted at arm’s length conditions as was the casein previous reporting periods. The majority of goods and service transactions with related parties (entities
and individuals) are shown in the two tables below:
in € thousands

2018-03-31

2017-09-30

Liabilities to family shareholders

21,51914,849Receivables from associates

2,659

2,686

742

625

Liabilities to associates
Receivables from other investments, including advances paid

10,513

10,922

Impairment of receivables from other investments−1,412−1,412

Liabilities to other investments and to Voith Management GmbH

20,642

21,361

Receivables from joint ventures

15,817

9,539

Liabilities to joint ventures

1,292

2,808

201

208

8,458

7,604

2018-03-31

2017-03-31

Services purchased from associates

753

629

Services rendered to associates

110Receivables from the ultimate parent company
Liabilities to the ultimate parent companyin € thousands

Services purchased from other investments

2,382

1,642

Services rendered to other investments

6,000

5,038

Services purchased from joint ventures

2,298

1,974

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

227

288

6,880

6,273

583

523

In the first half of the 2017/18 fiscal year, guarantees of € 2,349 thousand (previous year: € 1,361 thousand)were issued in favor of other investments.
The Group has obligations under outstanding orders with the ultimate parent amounting to € 3,964 thousand (previous year: € 2,627 thousand) and with joint ventures of € 12,939 thousand (previous year:€ 173 thousand).

62

Voith Interim Report 2018

Group Interim Financial Statements
Other notes

Material subsequent events
As announced, Mr. Stephan Schaller commenced his duties as President and CEO of the Corporate
Board of Management of Voith GmbH & Co. KGaA with effect from April 1, 2018; in this role, he willlead the global technology group into the future. He is thus the successor to Dr. Hubert Lienhard, theCorporate Board of Management’s long-standing President and CEO, who is retiring as planned at theage of 67 after ten years at the top of the Group. As a member of the Voith Shareholders’ Committee,
Stephan Schaller has been involved with Voith since 2015.
Long-standing President and CEO of the Corporate Board of Management Dr. Hubert Lienhard was
appointed to the Shareholders’ Committee similarly with effect from April 1, 2018; in this new role, hewill continue to provide support to the Group’s ongoing development with his professional expertise.
In April 2018, we entered into a strategic partnership with the robotics firm Franka Emika. The partnership
involves Voith taking a direct financial investment of 10 % in this Munich-based robotics specialist andthe creation of the Voith Robotics joint venture.
The plans are for Voith Robotics – A Voith and Franka Emika Company to become a global systemprovider for robot-assisted automation in the digital age. Voith Robotics is to provide both adaptive
lightweight robots from Franka Emika and appropriate software solutions, apps, services and process
consulting for customers worldwide in a wide range of industries and markets. As Voith holds a 51 %interest in the new joint venture and is responsible for its operative management, it will be fully consolidated in the consolidated financial statements of the Voith Group in the future. The 10 % interest inFranka Emika will be recognized in other financial assets in the future.
Franka Emika is a leader in the domain of the design and development of powerful, adaptive andeasy-to-operate state-of-the-art lightweight robot technology. For the first time ever, these systems
make it possible to automate necessary but generally monotonous tasks such as sensitive insertion,screwing and joining tasks as well as inspection and assembly jobs.

Voith Interim Report 2018
Group Interim Financial Statements
Other notes

63

With this strategic partnership, Voith is taking another step consistent with its digital agenda. We had
defined robotics as one of the key competencies that we want to add to our portfolio.
In view of the very high level of liquidity, we have further reduced our debt. In this context, the volumeof credit under the euro loan arranged in 2011 was reduced from € 770 million to € 550 million as part of
the refinancing in April 2018. Furthermore, the Corporate Board of Management made the decision in
April 2018 to prematurely repay the variable tranches of the note loan in an amount totaling € 139 million
at the end of May 2018.
No further significant developments have occurred since the close of the first half of the 2017/18 fiscal
year (March 31, 2018).

Heidenheim an der Brenz, May 8, 2018
The Board of Management of Voith Management GmbH
Stephan Schaller
Dr. Toralf Haag
Andreas Endters
Dr. Uwe Knotzer
Dr. Roland Münch
Uwe Wehnhardt

64Voith Interim Report 2018

Group Interim Financial Statements
Responsibility statement

Responsibility statement
To the best of our knowledge, and in accordance with the applicable reporting principles for theinterim financial reporting, the interim consolidated financial statements prepared in accordance withgenerally accepted accounting principles give a true and fair view of the net assets, financial positionand earnings position of the Group, and the Group interim management report includes a fair reviewof the development and performance of the business and the position of the Group, together with adescription of the principal opportunities and risks associated with the expected development of theGroup in the remaining fiscal year.

Heidenheim an der Brenz, May 8, 2018
The Board of Management of Voith Management GmbH
Stephan Schaller
Dr. Toralf Haag
Andreas Endters
Dr. Uwe Knotzer
Dr. Roland Münch
Uwe WehnhardtImprint
Publisher
Voith GmbH & Co. KGaA
St. Pöltener Strasse 43
89522 Heidenheim, Germany
Phone: +49 7321 37-0
Fax:
+49 7321 37-7000
E-mail: info@voith.com
www.voith.com

This interim report is also available
in G­ erman. Both versions and otherinformation are available on theInternet for download.
www.voith.com

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