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At Home in the World
Voith Annual Report 2013

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The Voith Group in Figuresin € millions

2012/13

2011/12

Orders received

5,194

5,703

Sales

5,728

5,724

Profit from operations¹)

349

381

Return on sales in %

6.1

6.7

Income before tax

90

177

Net income

63

114

Cash flow from operating activities

317

332

Total cash flow

31

-21

Investments

192

272

Research and development

242

267

in % of sales

4.2

4.7

Equity

1,319

1,384

Equity ratio in %

22.9

23.1

Balance sheet total

5,769

5,992

Employees²

43,13442,327)¹) See “Notes on segment reporting” in the notes to the consolidated financial statements.
²) Without apprentices.

At home in the world

Voith Annual Report 2013

Voith is a global technology group. With energy,
oil & gas, paper, raw materials and transport & auto­
motive, the broad portfolio with its plants, products
and services serves five essential markets in all regionsof the world. Voith’s operating business is bundled
in four Group Divisions: Voith Hydro, Voith Industrial
Services, Voith Paper and Voith Turbo.
A large proportion of the world’s paper production is
manufactured on Voith paper machines. A quarterof the energy generated worldwide from hydro power
is produced with turbines and generators from Voith.
Voith’s drive components are found in applications allover the world, both in industrial plants and in roadand rail vehicles, as well as on the waters. The largest
companies trust in the technical services of Voith.
Founded in 1867, Voith employs more than 43,000
people, generates € 5.7 billion in sales, operates inover 50 countries around the world and is today oneof the biggest family-owned companies in Europe.

At home in the world

The Voith GroupAt home in the world

Group Management
ReportConsolidated
Financial Statements

02

03
06
08
12

Foreword
The Corporate Board of Management
Report of the Supervisory Board
The Supervisory Board

14
16
22
28
38
44
50
56

Voith. At home in the world.
Once around the world
When the going gets tough …
The power of four
Project: people
Building models, one-to-one
Apprentices today – movers tomorrow
Cross-border cooperation

64 I. Business and economic environment
71 II.	Business development and earnings position
			of the Group79 III. Business development and earnings position
			of the Group Divisions
97 IV. Net assets and financial position
101 V. Research and development
103 VI. Non-financial performance indicators
105 VII. Subsequent events
106 VIII. Risks and opportunities
114 IX. Forecast report

120 Consolidated statement of income
121 Consolidated statement of comprehensive income
122 Consolidated balance sheet
124 Statement of changes in equity
126 Consolidated cash flow statement
127	Notes to the consolidated financial statements
for the 2012/13 fiscal year150	Notes to the consolidated statement of income
156 Notes to the consolidated balance sheet
178 Notes to the consolidated cash flow statement
178 Notes on segment reporting
180 Segment information by business segment
182 Segment information by region
183 Other notes
199 Responsibility statement		200	The Voith Group and its shareholdings
206 Imprint

Voith Annual Report 2013

At home in the world

Ladies and gentlemen,
Dear business partners andfriends of the Company,

In this annual report for fiscal 2012/13 we report on a year that presented major
challenges to Voith, a family-owned company. The global economic climate
remains tense. Economic growth has slowed down in all key economic regions
around the world. As in previous years, the financial and sovereign debt crisis
continues to impact the investment decisions of our customers. In addition, there
were structural shifts and a noticeable absence of stimulus for growth in the key
markets of our Group.
It was impossible for Voith to remain unaffected in such a business climate. As
expected, orders received were on the decline over the period, in line with theindustry trend. Thanks to the high level of orders received in recent years, Groupsales remained stable at the level of the previous year. All Group Divisions returneda profit from operations. We generated a positive free cash flow and do not carryany net debt. Our net income was heavily burdened by restructuring expenses,
but remains clearly in the black.
The fact that we still manage to generate a solid profit even in such difficult times
is, for us, good evidence of how profitable our Company is and in what good
shape it remains. Our financing for the long term and our stable cash position
give us a free hand and the independence to react decisively to changes in our­markets. Voith is a company that always responds to new challenges rapidly andproactively, but takes a measured approach nevertheless. As a 100% familyowned company, we seek success over the long term and are not driven by abusiness strategy that focuses merely on quarterly results.
In recent months we had to take some business decisions to align Voith to thechanges in the market. In particular, the international paper markets have continued to deteriorate. Ever since the inception of industrial paper production, theVoith Paper Group Division has been a major partner and pioneer to this industry.
We have initiated the restructuring measures needed to retain Voith Paper as oneof the central pillars of our Company and defend its position as a reliable long-term
partner for our customers also in the future.
The world is changing and we participate actively in this process of change. We
regard the changes as an opportunity for further growth for Voith. One of the major
goals for Voith in the coming years is to gain even more of a local footing in our
regions than we have at present. We intend Voith to be a company that has deeproots in all of its markets and is equally at home at all of its locations. In a few selectexamples to be found later in this annual report, we have illustrated where and how
we have already achieved this and how our Company and our employees benefit.

Voith Annual Report 201303

At home in the world“Voith is a company that always
responds to new challenges rapidly
and proactively, but takes ameasured approach nevertheless.”

04

Voith Annual Report 2013

At home in the world

The Group-wide change program, “Voith 150+,” which we initiated in the fall of
2013, will accompany us on the way to our short-term, mid-term and long-termgoals in the coming years. In 2017 Voith will celebrate its 150th anniversary. “Voith150+” bundles initiatives, measures and projects related to our portfolio and products, finances, processes and corporate culture and will show us the way towards
this great anniversary and far beyond.
“Voith 150+” will make Voith fit for the future. We will continue developing ourportfolio of products and services and, in particular, intensify our service activities
in all fields. We are working on our structures. One example is the “Excellence@
Voith” initiative, a key element of “Voith 150+” that is targeted towards optimizing
our structures and workflows and making Voith even more efficient in production,
logistics and all administrative departments.
Finally, I would like to take this opportunity to thank our customers and business
partners who once again put their faith in Voith, as well as all others who accompanied our Company through 2013. I would also like to extend my gratitude to ourboards and to every one of more than 43,000 employees. I fully understand how
much flexibility and commitment we are demanding of them in this period of rapidchange. All Voithians made a solid contribution in the reporting period towards us
overcoming the great challenges facing us.
We see good cause for optimism. Our business model has proved its worth in achallenging environment. Our experience and innovative strengths have enabled
us to gain a strong position in our markets. Our robust constitution, sound equity
ratio and the fact that no net debt is placing a burden on the Company gives us
the headroom and independence we need to pursue the continued strong anddecisive development at Voith.
I would be very happy if you continued to accompany Voith along this journey.
Best regards,

Dr. Hubert Lienhard
President and CEO

Voith Annual Report 201305

At home in the world

The Corporate Board of Management“The world is changing and we participate actively
in this process of change. We regard the changes
as an opportunity for further growth for Voith.”

1
4

06

5

Voith Annual Report 2013

At home in the world1

Hubert Lienhard, President and CEO

2

Hermann Jung, Finance and Controlling3

Hans-Peter Sollinger, Voith Paper

4

Martin Hennerici, Voith Industrial Services

5

Bertram Staudenmaier, Voith Paper

6

Roland Münch, Voith Hydro

7

Carsten J. Reinhardt, Voith Turbo

Voith Annual Report 2013

2

3

7

6

07

At home in the world

Ladies and gentlemen,
The economic environment for the Voith Group in the 2012/13 fiscal year was
dominated by the continuing uncertainties surrounding the global economy andthe unstable situation on the international financial markets. A global recession
was only avoided thanks to key central banks flooding the capital markets withcheap money. In the euro zone the discussion – and the doubts – about the success of the measures undertaken to save the euro in countries like Greece, Ireland,
Italy, Portugal and Spain continues unabated. In addition to austerity measures by
those states within the European Monetary Union, stabilization of the banking andfinancial sector has taken top priority.
At five ordinary meetings and one extraordinary meeting in the year, the Supervisory Board addressed both strategic issues, such as the analysis and development of the Voith portfolio, as well as the challenges and consequences posed by
the economic and structural changes in the markets of relevance to the operating
business of the Voith Group. Voith Paper and Voith Turbo are the two Group Divisions that have been most affected. Currently, Voith Paper is faced by a structural
slump of up to 90% in the market for large paper machines and a shift towards
medium-sized machines. Voith Turbo is suffering from weak demand in the rail
segment for the products offered by Voith, particularly for locomotive technology. The Board supported the measures taken by the management, including
the considerable lay-offs at various locations, with constructive criticism and lively
debate. The ordinary meetings took place on October 8, 2012, December 4,
2012, March 8, 2013 and June 7, 2013, while the extraordinary meeting was held
on September 12, 2013. The founding meeting of the Supervisory Board was held
on February 9, 2013. As usual, all the meetings of the Supervisory Board saw alively and solutions-oriented exchange of opinions with the management.
Discussions were based on detailed written and oral reports by members of the
Corporate Board of Management on the current situation, corporate planning(including financial and investment planning), the development of the Group’s­economic situation and its divisions, particularly in light of the measures needed

08

Voith Annual Report 2013

At home in the world

at Voith Paper and Voith Turbo, developments in the Company’s earnings andfinancial position as well as on the assessment of existing business risks. The necessary and continuing global orientation of the Group and its individual divisions,particularly in Asia, were discussed in detail, both in terms of the product portfolio
and the focus on the services offered as well as the changes to the organizational
structure. The ensuing financial and capital expenditure planning for the current
and subsequent year was unanimously approved at the meeting in October.
The Supervisory Board expressly welcomes the efforts of the Voith Group towards
sustainability and compliance, as expressed in the sustainability report for 2012.
In continuation of the sustainability strategy, the management regularly informed
the Supervisory Board of further progress in improving occupational safety andhealth protection for Voith employees. The Chairman of the Supervisory Board
was also kept constantly informed of significant developments and key decisions
by management. He consulted regularly with the President and Chief Executive
Officer on matters of material importance.
The Personnel Committee met once in the last fiscal year, on December 4, 2012.
There was no need to convene the Mediation Committee formed pursuant toSec. 27 (3) German Codetermination Act (MitbestG).
The Audit Committee met twice, on December 3, 2012 and June 6, 2013. The firstmeeting, which was held in the presence of the auditors who examined the annual
financial statements, conducted an in-depth examination of the financial statements of both the consolidated Group and Voith GmbH for the 2011/12 fiscal year,
and of the report submitted by the auditors, Ernst & Young GmbH Wirtschaftsprüfungsgesellschaft, Stuttgart. The committee and auditors also discussed specificissues relating to the improvements suggested in the management letter, none ofwhich were material to the reporting. Further, the Audit Committee had the management explain the material factors affecting the tax rate of the Group. Beyond
this, the head of the Internal Audit unit discussed the Group audit report prepared
for the fiscal year under review at length with the committee, and reported on
existing deficits and the improvements made in comparison to the previous year.
Moreover, the head of the Compliance Committee reported to the Audit Committee on the additions made to the Compliance Management System (CMS) thathave been put into place since the last report in December 2010, such as training measures, Web-based training, and reported on the lessons learned to dateand other measures, such as the planned certification of the CMS. At its second
meeting, the Audit Committee addressed the unaudited half-yearly financial

Voith Annual Report 201309

At home in the worldstatements of the Group as at March 31, 2013 further to earlier reports it hadreceived on the status of the risk management system at Voith. Lastly, the firewall
concept was discussed in depth.
The shareholders’ meeting on February 9, 2013 granted discharge to the Management Board and the Supervisory Board for their activities in the 2011/12 fiscal year and again appointed the accounting company Ernst & Young GmbH
Wirtschaftsprüfungsgesellschaft, Stuttgart, as auditors for the 2012/13 fiscal
year. The Supervisory Board subsequently approved the corresponding request
to appoint the auditors.
As a consequence of elections of the new employees’ representatives to theSupervisory Board on November 14, 2012 and new ­shareholders’ representatives, who were elected at the shareholders’ meeting on February 9, 2013, thecomposition of the board changed as of the close of the shareholders’ meeting.
Mr. Michael Koob, Dr. Volker Linden, Mr. Richard Obermeier and Mr. Ralf Willeck
have been appointed, in addition to those employees’ representatives who werereappointed, and Mr. Johannes Hammacher and Prof. Dr.-Ing. Dr.-Ing. E. h. HansPeter Keitel were newly appointed to the Supervisory Board in addition to thereappointed representatives of the shareholders.
Members stepping down from the board are Mr. Rudolf Bädorf, Bernd Kauba,
Reinhard Leigraf and Andreas Strobel (all employee representatives) as well as
Dr. F. Oliver Porsche and Dr. Jürgen Weber. In the name of the Supervisory Board
I would like to thank the departing members for their service to the Company, overmany years in some instances, and their commitment to Voith.
The founding meeting of the new Supervisory Board, at which both the standing committee, the personnel committee and the audit committee were formed,
was held on February 9, 2013. At this meeting, the signatory was once again
appointed Chairman and Mr. Gerd Schaible once again Deputy Chairman of theSupervisory Board. Dr. Alan Hippe was appointed Chairman of the Audit Committee at the meeting on March 8, 2013.
The auditor examined and granted its unqualified audit opinion on the accounting
records, the annual financial statements and management report of Voith GmbHand the consolidated financial statements and management report for the Voith
Group as at September 30, 2013. The consolidated financial statements wereprepared in accordance with International Financial Reporting Standards (IFRS).

10Voith Annual Report 2013

At home in the world

In so doing, Ernst & Young GmbH took particular account of the audit focal pointsof “Revenue recognition (PoC)” and “Completeness of the disclosures in the notes”
in accordance with the mandate laid down by the Supervisory Board.
At its meeting on December 5, 2013, the Audit Committee examined the financial
statements prepared for Voith GmbH and the Group and recommended that theSupervisory Board approves said financial statements, which it did at its meeting on December 6, 2013. Both meetings were attended by the relevant member of the auditor’s Management Board and the person who led the audit. They
explained the significant audit findings and were available to provide additional
information. As part of its audit, the Supervisory Board also approved the management report of Voith GmbH and the Group and concurred in the proposal submitted by management regarding the appropriation of net income.
Finally, the Supervisory Board would like to thank the members of the management of Voith GmbH and the management of the subsidiaries, the representativesof the workforce, and above all the employees of the Group for their dedicatedcommitment and successful endeavors in the fiscal year under review, despite
the considerable challenges arising, particularly at the locations in Heidenheim,
Krefeld, Ravensburg and St. Pölten, as well as for the structure of the portfolio
overall and the organization of the Group.

Heidenheim, December 6, 2013

Dr. Manfred Bischoff
Chairman of the Supervisory Board

Voith Annual Report 201311

At home in the world

The Supervisory Board
Dr. Manfred Bischoff

Prof. Dr. Bernd Gottschalk

Chairman,
Chairman of the Supervisory Board Daimler AG,
Stuttgart / Germany

Member of the Board of Managementof Mercedes-Benz AG(retired)

Gerd Schaible*

Johannes Hammacher

Deputy Chairman,
Chairman of the corporate works councilof Voith GmbH,
Heidenheim / Germany

Member of the Board of Management of
Familiengesellschaft J.M. Voith GbR,
Mannheim / Germany(since 2013-02-09)

Rudolf Bädorf*

Dr. Alan Hippe

Vice President Manufacturing & Logistics
and Site Representative of
Voith Paper GmbH & Co. KG,
Heidenheim / Germany(until 2013-02-09)

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

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

Thomas Brezina*
Member of the works councilof the common entity of companiesof Voith Paper Heidenheim,
Heidenheim / Germany

Ulrich Eckelmann*
General SecretaryindustriAll European Trade Union,
Brussels / Belgium

Sonja Gorsch
Teacher,Erftstadt / Germany

12

Bernd Kauba*
Chairman of the works council
DIW Mechanical Engineering GmbH & Co. KG,
Radebeul / Germany(until 2013-02-09)

Prof. Dr.-Ing. Dr.-Ing. E. h. Hans-Peter Keitel
Vice President of the Federation ofGerman Industry e.V.,
Berlin / Germany

Michael Koob*
Construction Manager Voith Industrial Services GmbH,
Speyer / Germany(since 2013-02-09)

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

Voith Annual Report 2013

At home in the world

Reinhard Leigraf*

Klemens Schweppenhäuser

Process technology engineer for special papers,
Voith Paper GmbH & Co. KG,
Ravensburg / Germany(until 2013-02-09)

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

Dr. Volker Linden*
Head of Industrial Property Rights Voith GmbH,
Heidenheim / Germany(since 2013-02-09)

1st Representative of the Metalworkers’ Union,
Heidenheim branch,
Heidenheim / Germany(until 2013-02-09)

Dr. Ophelia Nick

Dr.-Ing. E. h. Jürgen Weber

Veterinarian,Wülfrath / Germany

Chairman of the Supervisory Boardof Deutsche Lufthansa AG,
Cologne / Germany(until 2013-02-09)

Richard Obermeier*
Chairman of the works council
Voith Paper GmbH & Co. KG,
Ravensburg / Germany(since 2013-02-09)

Dr. F. Oliver Porsche
President and CEO of Familie
Porsche AG Beteiligungsgesellschaft,
Salzburg / Austria(until 2013-02-09)

Gerold Schaubmayr*
Chairman of the works council
Voith Turbo GmbH & Co. KG,
Crailsheim/Germany

Andreas Strobel*

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

Ralf Willeck*
First Authorized Representative
IG Metall (Metalworkers’ Union),
Heidenheim / Germany(since 2013-02-09)*Elected by the employees.

Ute Schurr*
Chairwoman of the works council of the common
entity of companies of Voith Turbo Heidenheim,
Heidenheim / Germany

Voith Annual Report 201313

At home in the world1
43,1347
11

14

Company
Employees
Stories
Countries

Voith Annual Report 2013

At home in the world

Voith. At home in the world.

Voith is at home in the world. A world that is running at two different
speeds. It is just as at home in the rapidly developing emerging marketsof Asia and South America as it is in the mature markets of Europe
and the USA. Voith is an established brand worldwide and knows thedifferent requirements of these markets.
When you are at home, you know your way around. You can handle
different situations, cope with different ways of seeing things and getalong with different individuals. Knowing your way around also implies
understanding the way the other person ticks. Real understanding
binds people together across borders, cultural differences and traditions.
And this is just as true at Voith as anywhere else. No matter how different
the regional customs, mentalities and social backgrounds may be, one
thing counts in daily work above all else: the willingness to put yourself
in the other’s shoes and understand where they are coming from. Only
then can be you be at home, all over the world. The stories told on thefollowing pages illustrate how Voith manages this.
The sayings selected to lead into the stories on the following pages
display the same binding character. No matter how different they may
sound in the respective language, their meaning is always the same.
They are universal. And understood by many. They too are at home inmany parts of the world.

Voith Annual Report 201315

At home in the worldजागेगा सो पावेगा
India“The early bird catches the worm.”USA“É melhor prevenir do que remediar.”
South America„Morgenstund hat Gold im Mund.“Germany

早起的鸟儿有虫吃。
China

Thinking as a team. Thinking ahead. Making what wealready have even better. And always being a reliable
partner in the process – Voith’s driving force from thevery beginning. You need get up and go to get places.
16

Voith Annual Report 2013

At home in the worldOnce around the world

When it’s tea time in Dandeli in India, it is sunrise in Montreal. The sun neveractually sets on the Voith world as Voith’s workers are on the job around theclock all around the world. Two unique working days of an audit specialistat Voith Paper.
“No day is like another, each assignment is different,” says Helmut Widauer,“that’s what makes the job so interesting. No two paper machines are completely
identical or behave the same way. Each has got its own character, its own life.”
Then his mobile rings. Yes, he replies, he’s at the airport on the way to India.
Dandeli, India, early afternoon. Helmut Widauer has arrived at the center of the
Indian paper industry. The main task of an audit specialist is to solve systematicallypaper machine problems and to make sure the lessons learned are incorporated
in future developments. “To rapidly get my own idea of what is going on I need tofind my way around the respective process and quality control systems,” he sayson the way to Dandeli Paper, one of the customers of Voith Paper in India.
There is no question as to what the customer expects of him: improve theperformance of the machine, i.e. raise its output and running speed. “In manycases this can only be done on-site in close cooperation with the customer,”he says, while inspecting the paper machine. A job where communication isextremely important. “Asking the right people the right questions – that’s the key
to success.”
Later he looks at the information brought by the colleagues from Kolkata,which provide additional vital information about the condition of the machine. He
brings it all together until he gets a holistic picture of the plant. Only then can heanalyze the actual situation, track down the weak points and rapidly make theright decisions. This requires time, diplomacy, an eye for detail and an ear to theground, and most of all, flexibility. “I can’t leave the plant at 5 p.m. – I don’t evenwant to, because this might mean that in certain cases I might have to start fromscratch the next day.”At 9 o’clock the following morning at the headquarters of Dandeli Paper.
Together with a team of executives, production managers, technicians andmachine operators, Helmut Widauer casts an eye over the first results. In thiscase, the engineer can already demonstrate which changes to the paper machine
can be made immediately and which can be made relatively quickly at this earlystage. But his job is then by no means over, as such recommendations are merely

Voith Annual Report 201317

At home in the world

the first step. They do not substitute the need for a full report, which is generally
the end product of every audit. The respective specialist departments analyze inmore detail the data gathered on-site. They test the proposals made and evaluate their actual potential. “One important partial result of my work could also berecommendations for more detailed examinations of individual machines or stagesof the process,” he explains.
Whatever the final result of a project is, teams under engineers like Helmut
Widauer make sure that the paper machines do exactly what they should bedoing: producing top-quality paper, efficiently, quickly and trouble-free while consuming as few resources as possible. As in this case. “It is always a great feelingwhen you actually do find the real cause of a problem, solve a puzzle and help acustomer.” At the end of his presentation his mobile rings again. The next puzzle
is already waiting, on the other side of the globe, in Canada.

Wednesday

11:00

p.m.

Frankfurt am Main, airport.
On the way to Goa, India,
then on to Dandeli. “A mission
with no borders, a job where
you have to take things into
your own hands.”

18

Voith Annual Report 2013

At home in the world

Thursday

2:30

p.m.

Dandeli, India, center of the
Indian paper industry. “What’s so
exciting about my job? That you
don’t just work in the control
room but on the machine itself.”

Thursday

4:15

p.m.

“You have to be careful
not to develop tunnel vision
when working on the maintask. Often you find otherproblem areas, which theclient might already know of,but might also be totally new.”Voith Annual Report 201319

At home in the world

Thursday

7:00

p.m.

Data check: The data brought
by Helmut Widauer’s colleagues
from Kolkata on technical inputs
provide the first important
indications about the status of
the machine. “It stands toreason that open channels ofcommunication with all those
involved in the project are
absolutely vital to the job anddecisive for its success.”

Thursday

9:30

p.m.

“I put everything I have together
like a puzzle. Only when you
get the big picture of the plant,
can you start tracking down
the weak points.”

Friday9:00

a.m.

The following morning, ameeting at the headquartersof Dandeli Paper. “The way
you present your proposals
plays a huge role in how
willing your client is toimplement the changes.”

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Voith Annual Report 2013

At home in the world

Friday

11:15

a.m.

Presentation, discussion, decision.
“Keeping your eyes and ears open,
being diplomatic – these areindispensable virtues of my job.
And sensitivity, a lot of sensitivity!”

Friday

12:40

p.m.

Discussing the first findingsof the audit and the next
steps for the team. “Themany years of wide
experience of my colleagues
from different departmentsback home is instrumental
here and a key factor in the
success of the project.”

Friday3:00

p.m.

“Finding the right person to ask
the right question – that’s the key
to success.” His mobile rings.
The next assignment is waiting.

Voith Annual Report 201321

At home in the worldजहाँ चाह, वहाँ राह
India“Where there’s a will, there’s a way.”
USA“Quem procura sempre alcança.”
South America„Wo ein Wille ist, ist auch ein Weg.“
Germany

有志者，事竟成。
China

Expanding your knowledge, searching for solutions,
exploiting the lessons learned. Going the extra mileinstead of giving up right away. Going to the maximum
to reach the best.
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Voith Annual Report 2013

At home in the world

When the going gets tough …

Heat, confined space, time pressure: All service engineers supporting
Voith’s mining customers must be ready for long hours of work in some­times extreme conditions.
There are certainly more hospitable places on Earth than Chile’s Atacama
Desert. South America’s large arid wilderness is one of the driest environments on
the planet – in many places it rains less than 1 cm/year. By day the thermometercan clamber up to 40°C. By night it can plummet to 15°C below zero. Anyone
coming here of their own volition needs a very good reason for doing so and theymust be prepared for the extreme conditions.
The service technicians and engineers from the Mining & Metals division ofVoith Turbo in North and South America, who have come to work in various Chilean copper mines, are such individuals. Among other solutions, Voith supplies thefill-controlled couplings to the various mines. In one mine, the company is currently
responsible for the supply of 13 new conveyor drive systems for example. The
installation and commissioning of the drives is a job that places great demands on
both mind and body. The specialists are on call 24 hours a day.
But these team players are used to the requirements and expectations ofcommissioning a new mining conveyor system. From copper mines to iron ore
and gold mines, underground coal mines or open-cast mines, their job is to installdrives, fine-tune the controls and be there in an emergency if defective parts
need to be repaired or replaced. They serve the customers just as reliably as the
products of their company, be it under very tight safety and security regulations
and huge time pressure, in intense heat or freezing cold, in the tightest spaces
or in thin air.
Roland Hoet and his team know the job. The mechanical engineer, who has
been the Director of Mining & Metals in the USA since 2012, puts it this way:
“There is one mine, for instance, which lies at an altitude of 2,300 m in the northern part of the Atacama desert. Special safety training and personal protective
equipment (PPE) are required to work at the mine. Standard safety equipment
includes sun block with SPF40 rating for the extreme solar exposure. Working inother Chilean mines requires special medical clearance.”
Safety plays a huge role in the mines. “Basically, the work is not any more dangerous than a normal manufacturing hall. But the machines are so much larger
that any lapse in concentration could have serious consequences,” says Hoet.

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At home in the world

For this reason, the Voith employees undergo regular training on safety issues
such as protective clothing, first aid or the special traffic regulations for mines,
not to mention all the rules set by the individual countries and specific operators.
However, the physical conditions confronting people in mining operations aremuch more restrictive than the rules. In the deepest nickel mine in Canada, almost
two kilometers underground, it is 45°C, so hot that work is impossible without
the use of air-conditioning. And that’s not to mention the lack of space: “Down ina typical underground coal mine, when we have to replace a drive, for example,
well, that’s an absolute tough job,” says Hoet. “Sometimes the drive equipment
weighs many tons, and the roof is just two meters high. You can’t just drive up
with a forklift. You have to drill in a block and tackle in the mine roof and hoist thedrive equipment to an accessible area.”
To avoid such complicated work you need reliable and robust equipment,
like the components from Voith. The customers must be able to trust it 100% – a
disruption to the activities of a highly productive coal mine can lead to losses of
USD 150,000 per hour.
In critical service jobs, Voith may need to provide several engineers to give
24/7 technical support. Because time is money. And because it often has to goeven faster, sometimes Voith engineers have to fill in and support their colleagues
somewhere else: “We installed fill-controlled couplings at the Oyu Tolgoi copperand gold mine in Mongolia and put them into operation,” says Hoet. “We also
developed the software used to control the couplings and had to integrate it
into the existing control system used by the operation. This process took three
weeks to complete. Our team was shift-working on the job basically right aroundthe clock.”
This is actually nothing out of the ordinary. The fact that the team members
lived on the premises is par for the course in such isolated locations. Nevertheless,the accommodation had a certain charm. As is the local custom, the Voithians
slept in yurts.

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Voith Annual Report 2013

At home in the world“Basically, the work is not any more dangerous than a normal
manufacturing hall. But the machines are so much larger thatany lapse in concentration could have serious consequences.”
Roland Hoet
Director Mining & Metals Voith in North America

Voith Annual Report 201325

At home in the world

2
1

3

1 No mission without a plan.
2 Team spirit, expertise and depth of experience. The building blocks of successful projects.
3 Voith engineers often work under extreme conditions.

26

Voith Annual Report 2013

At home in the world“Special safety training and personal protective equipment (PPE)
are required to work at the mine. Standard safety equipment includes
sun block with SPF40 rating for the extreme solar exposure. Working
in other Chilean mines requires special medical clearance.”
Roland Hoet
Director Mining & Metals Voith in North America

Voith Annual Report 201327

At home in the world„Wer nicht wagt, der nicht gewinnt.“
Germany“Nothing ventured, nothing gained.”USA

没有耕耘，就没有收获。
China“Quem não arrisca, não petisca.”
South Americaिबना जोखिम उठाए कोई लाभ नहीं होता हैै
India

Striding forward. Open for adventure.
Seizing opportunity. This is what makes us
Voithians. Whether young or experienced.
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Voith Annual Report 2013

At home in the world

The power of four

Four continents,
four countries,
four people:
They come from the USA, Brazil, China
and Germany.
They are talented, motivated and fullycommitted to the task. They have their own
perspectives which they bring to the table.
Likewise, each contributes their own ideas,potential and an undistorted view of things.
Yet two qualities they particularly share:a passion for the task. And the energy which
they apply to master their jobs, day in andday out. This is not just a winning handfor each of the individuals themselves but
for the entire Voith Group as a whole.
Here are four personal insights, taken fromthe lives of young Voithians, into what makes
working for Voith so exciting and diverse.
And very often, extraordinary, too.

Voith Annual Report 201329

At home in the world

30

Voith Annual Report 2013

At home in the world

GERMANY

01 /Carolin Ranft“I had only been at Voith in Chemnitz for half a year when
I was offered the position of project manager in the newarea of multibody simulations / bogies.
Setting up the multibody project was a pretty steep challenge but also a signof trust in my work. Before the project we had concentrated mainly on calculating
the strength of static and dynamic bodies, so the multibody project was something new on top of this. In practice, the method is used for such applications as
preventing trains from derailing and in order to harmonize the trains with regard
to safety and comfort.
Today I am responsible for both coordination and the organization of the proj­
ect. This combination is what makes the job so multifaceted. I like having to react
quickly or find a solution together with my team members, maybe a solution thatno one had ever thought of before.
I now have two colleagues for the multibody simulations. In addition, Voith
Engineering Services wants to extend its reach in the automotive industry, which
will greatly expand the scope of our work. For me this is another positive sign of
how important this subject is to the company. And that my commitment pays off.
My wish for the future? Developing multibody simulations into an independent
field of research. I have the freedom I need here, and I get the support I need frommy colleagues, my superiors and also from other departments. Why, then, should
I be afraid of the challenge – after all, they say you grow to the challenge. It is a bit
like trekking. The motivation comes from the challenge. This year I was in Nepal
and did the trek around the Annapurna group. Climbing to 5,400 meters – that’s
confidence building!”

Voith Annual Report 2013

Position

Computational Engineer at Voith Engineering Services in Chemnitz

Seniority

since January 201131

At home in the world

32

Voith Annual Report 2013

At home in the world

BraZIL02 /Peterson Vaz“I have been in Germany since the middle of 2012.
Before, in Brazil I was responsible for coordinating someprojects in the manufacturing area.
And here in Heidenheim I’m working in the Engineering team as a manufacturing costs and processes expert responsible for manufacturing routings forthe development of a new global tool for the optimization of processes and costs.
There I have to define all the manufacturing steps for all components of a power
unit and also validate the results with respect to manufacturing hours. These days
we are working on the finalization of this tool. This is surely the greatest professional and also private challenge I have ever had.
Was it difficult to settle in? Definitely not! I am not the only one here fromanother country. In Heidenheim I work with colleagues from Canada, India, China
and Japan. It is this diversity that makes us what we are: a successful team ofindividuals, all thirsting for knowledge and each one of us from most diverse
backgrounds, and each one pursuing the goal of developing something new andimproving what we already have. When I look back on these eighteen months
I can say that my family and I have truly settled in now in Heidenheim. The only
negative aspect is how far I am from my parents in Brazil.
My next goal? I would like to work as a project manager. I want to take on larger
projects and then become the head of a department. I am getting support frommy more experienced colleagues who happily pass on their knowledge to me.
I am fully aware that I cannot take that for granted. The same holds true forthe regular feedback from my superiors. Or the opportunity to participate in training and coaching. All of this is a sign of how my work is appreciated, and me asa person, too.”

Voith Annual Report 2013

Position

Operations Engineer at Voith Hydro in Heidenheim

Seniority

since August 200733

At home in the world

34

Voith Annual Report 2013

At home in the world

china

03 /

Sky Wang“I am an Environmental Solutions Manager at Voith Paperin Kunshan and have been with the company since
2009.
Back then, Voith was just starting to build up its environmental technology
business in China. For this reason there were hardly any customers who wereinterested in the R2S anaerobic reactor for treating wastewater from paper factories. I was responsible for launching the R2S on the market, a huge task for a
beginner! It took two years of talking to potential customers, visiting reference
projects in Europe and finally bringing the first contract for an R2S in China tocompletion after an eight-month pilot phase.
Naturally, I cannot take all the credit myself. Each and every success at Voith
is the product of good teamwork. One example, when we put one of the first E2E
reactors into operation, we were confronted with a number of challenges. But
in the end we were able to solve all the difficulties because my colleagues and I
cooperated closely and everyone did their very best.
There is a lot that I appreciate about Voith: the intercultural aspect of it, theclose contact with colleagues from all over the world. But that is not all. There arealso the opportunities for personal development. Being able to apply my skills.
This culture was immediately apparent when I started here. Voith appreciates
employees who commit themselves to the task from the very beginning. I am
­p assionate about my job because I feel so good about being here.”

Voith Annual Report 2013

Position

Environmental Solutions Manager at Voith Paper in Kunshan

Seniority

since July 200935

At home in the world

36

Voith Annual Report 2013

At home in the world

USA

04 /

Justin Craig“They say paperwork can wait? Forget it! In my job, thereis hardly any day without some kind of change – and thatis what makes the job so multifaceted.
The tissue paper industry changes fast. That is why our team keeps close
contact with our customers. It’s the only way that let us know what the market isgoing to want tomorrow and initiate the next steps. This makes my day-to-day job
extremely varied and fast-paced. At the same time, this is an incentive to moveahead and not stand still.
When I started at Voith Paper five years ago and in my current position about
one year ago, I had a strong background in textiles from extrusion through weaving, but the paper machine clothing application was new for me. Getting a feelfor the job, asking questions, following things up, understanding the issues, thiswas a challenging task, particularly in light of the fact that I was directly responsible for one of our most important clients in the States. I worked closely with the
Research & Development department of our customer. This is a job that requires
a lot of mutual trust. At the end of the year, the client awarded us their prize forsupplier of the year – that was a great feeling, both for me personally and also for
the whole team.
The team, the colleagues at Voith, these are the real reasons I love to work here.
There are plenty of other interesting positions out there on the market but here in
Florence I have found exactly the kind of team spirit I was looking for: respect andappreciation for the work of all the others in the team, no matter whether you area manager or a standard team member. I believe it is this respect that provides
the foundation for the way we manage to continuously raise the bar with regard
to the performance we deliver.”Voith Annual Report 2013

Position

Operations Engineer at Voith Paper in Florence, Mississippi

Seniority

since June 200837

At home in the worldकथनी और करनी में फर्क है
India“Faça o que eu digo e faça o que eu faço.”
South America“Walk the talk.”USA„Lass Worten Taten folgen.“Germany

言行一致。
China

Credibility, decency, authenticity – qualities that havenothing to do with where you come from, your age or
your education. But everything to do with your attitude.
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Voith Annual Report 2013

At home in the world

Project: people“You are more than your job.” This is a motto many Voithians have taken
to heart. Their personal dedication often goes well beyond what is professionally required. They do a good job and do a lot of good on the side. A
particularly good example of this is the Formare program, which stands forpassion, imagination and the very special energy exhibited by Voithians. As
well as an attitude that makes an impression.
They are 15 to 17 years old. They have attended state schools which do notalways enjoy a very good reputation in Brazil. In addition, schools have not always
encouraged them to pursue their talents. When studying, they do not display any
particular talent at first. They often come from socially disadvantaged families inwhich education is important, but unaffordable. The worst possible starting point,in other words, for starting a professional career, for finding a good apprenticeship, successfully completing the training and getting a job to earn enough to
support a family. Yet at the same time, exactly the right qualifications to becomea participant in the Formare project at Voith in São Paulo to gain professional
qualifications and start a better future.
The word “formare” comes from Latin and means forming, designing andcreating something. At Voith in São Paulo it has been synonymous with a program
ever since 2006. “With our Formare project we want to provide young people who
would otherwise fall through the net with the opportunity of starting a career,” says
Gilson Campos, who is responsible for the Formare program at Voith in Brazil.
The special feature of the program is that Voithians become teachers. Voluntarily.
Long-term. Out of conviction.
Approximately 80 Voith staff from all divisions of the company are currently
serving as Formare teachers. “We win new colleagues in that we regularly informthem about Formare. The good reputation of the program and the word-of-mouth
propaganda between colleagues help,” says Gilson Campos. One of the participants who has been with the project since the beginning is Flavio Gonçalves da
Silva. “I received a lot of really good things, for free. Now I want to give exactly thissame thing back to the students.” He devotes two hours of his time per week toteaching the young people, passing on his knowledge of materials. “I participate in
the project because I can see how much you can attain with hard work, honesty,
and real appreciation for young people.”
Getting into the program, however, is a challenge. Whoever wants to be partof it must initially pass a five-stage application process, including a test of their

Voith Annual Report 201339

At home in the world

knowledge, meetings to assess their group dynamics and a visit to their family.
Once in, the hard work continues: theory is taught every workday from 8 a.m. to
3 p.m. in a classroom on the Voith premises. The theory is then complemented bypractical phases in the Voith workshops. Experienced Voithians teach the young
people in ten different subjects, including business English, communication, technical design, management assistance or hygiene, health and industrial safety.
After nine months, the final test qualifies them as “industry services and systems
assistants,” an occupation that is recognized by the Education Ministry in Brazil.
The voluntary teachers who step forward from the Voith workforce convey morethan just their expertise and know-how. “They pick the young people up from
where they are at and act as coaches, often also personal counselors, who can
support and assist them with their careers. But more than anything, they pass on
the depth of their professional experience.” With the aid of Voithians like F­ lavio
Gonçalves da Silva approximately 20 young people qualify each year for the­Brazilian labor market in this way. All of this within the environment of an industrial
company that is conducive to learning. The fact that approximately 160 young
people have successfully completed the program since its inception and most ofthem are now in the employ of Voith or selected partner firms, says a lot about thequality of the program.
For many of the young people, Formare is a present from heaven. “ThroughFormare, they learn for the first time that they can perform well and that theirwork will be suitably appreciated, and that learning will actually help themadvance their career. Best of all, however, is when they realize that they havepersonal control of their level of performance,” says Gilson Campos. In otherwords, helping them become more self-aware and develop their personality.
Education in the best sense of the word.

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Voith Annual Report 2013

At home in the world“With our Formare project we want to provide young people who would
otherwise fall through the net with the opportunity of starting a career.”
Gilson Campos
Responsible for the Formare program at Voith in Brazil.

Voith Annual Report 201341

At home in the world“Through Formare, they learn for the first time that they can perform welland that their work will be suitably appreciated, and that learning will­actually help them advance their career. Best of all, however, is when
they realize that they have personal control of their level of performance.”
Gilson Campos
Responsible for the Formare program at Voith in Brazil.

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Voith Annual Report 2013

At home in the world

1
2

1

Voith employees pass on their knowledge to the young students in ten different subjects.

2

Around 160 young Brazilians have graduated from the Formare project since its inception.

3

3	Fit for the job. Under the Formare project, around 20 young people are trained for theBrazilian labor market every year.

Voith Annual Report 201343

At home in the worldवक्त का एक टाँका बेवक्त के सौ टाँकों से बढकर हैै
India“A stitch in time saves nine.”USA“É melhor prevenir do que remediar.”
South America„Was du heute kannst besorgen,das verschiebe nicht auf morgen.“Germany

一针及时省九针China

Whoever knows their customers can give them
what they need. Whoever understands theircustomers can offer them products which inspire.
44

Voith Annual Report 2013

At home in the world

Building models, one-to-one

As the word says, a mock-up is a copy of something real – sometimes such agood copy that it is impossible to distinguish it from the real thing. But doesit have to be an entire metro? Yes, it does. You could say that the engineersfrom Voith Engineering Services did a bit of groundwork, under contract from
Bombardier, to ensure that the metro in Sweden’s capital city, Stockholm,
will be able to bring its passengers from A to B using the new system.
You cannot build a new train just like that. You have to act as if. This is what
you call a mock-up. A one-to-one copy of the real thing and so true to detail thatyou might believe the train is about to leave the station. What sounds so easy is, intruth, top-notch engineering expertise paired with a professional approach to serving customer wishes in the best way possible. Working under contract for Bombardier, Voith Engineering Services in Chemnitz constructed a mock-up of a 19-meter
railway vehicle, which Bombardier will later manufacture for the Stockholm metro.
When developing the new metro train, Bombardier, the global leader in railway
technology and headquartered in Canada, applied an innovative development
approach which involved the final customer, the local transport section of theStockholm Regional Council, at the earliest possible development stage of thedesign. As a result, modifications could be incorporated directly in the design andthe metro train matched more closely to the customer’s needs. This is the practicalmanifestation of proximity to customers.
This is naturally just one aspect, but it is not all about design and visualappeal. In addition to aesthetic aspects, the mock-up makes functional aspects
tangible: ergonomics during operation, passenger comfort, and efficient maintenance methods. In addition, barrier-free entry and egress for disabled passengers
can be tested and the workplace of the driver can be presented in real life.
“For a project like this you need a partner with expertise in railway systems,
someone who is absolutely reliable, and meets the highest quality standards,”
says Damian Filer, project manager at Bombardier. In addition, you need a partner who can create a one-to-one model that can be used as a basis for the laterstages of the design process within ten weeks. The engineers at the Voith prototype center in Chemnitz managed that and proved that building a model does notalways have to be simple. But it does have to be quick.

Voith Annual Report 201345

At home in the world

1
2“For a project like this you need a partner with expertise in railway systems, someone who is absolutely
reliable, and meets the highest quality standards.”
Damian Filer
Project manager at Bombardier

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Voith Annual Report 2013

At home in the world1	Top-notch engineering expertise inorder to serve customer wishes.

2	A true-to-life mock-up of a Swedish
metro train is created in just ten weeks.

› Mid-June 2013
In Västerås, Sweden, a team from Voith Engineering Services meets representatives of Bombardier Transportation. Voith becomes the preferred partner for the
coming decision-making process, thanks to its skills in railway technology andexpertise in the construction of mock-ups. But also for practical reasons: Voith
has affiliated companies on location and can promise delivery of the mock-up to
Sweden and its installation on-site.

› July 10, 2013
The Swedish team from Bombardier arrives in Chemnitz to begin negotiations on
the contract. The future partners discuss the services to be delivered, the timeschedule, and the prospective scope of the contract, and close the meeting witha letter of intent to conduct the project in cooperation.

› July 15, 2013
Kick-off in Chemnitz. The project manager, Andreas Silvan, presents the job to theteam. It is clear to all present – the timeline is ambitious, speed and flexibility are
the order of the day. Communication is crux. From now on, weekly coordination
meetings are held with the Bombardier design team. This allows a rapid responseto the suggestions and requests of the client.

› July 18, 2013
The engineers at the Voith prototype center must react flexibly to changes in thescope of the project. From the original five-meter mid-section that was originally planned, the project now calls for almost nine meters and the interior andexterior cladding and driver’s cabin and console have yet to be added, not tomention a simplified version of the platform, which is also part of the mock-up.
Voith takes the changes in its stride. Immediately, six engineers are assigned tothe project instead of three.

› July 22, 2013
The critical phase begins: the concepts for constructing the structural partsneeded for the mock-up and chassis are drawn-up. The structural calculations
are performed and design proceeds. Further sub-contractors are selected, thematerials procured and the details of the manufacturing process prepared.

› August 19, 2013
Manufacturing work begins on the parts. The number of welded assemblies andparts milled from wood, aluminum and steel begins to grow in Voith’s workshops.
The key ingredient to the process: a high-precision 5-axis milling machine that
can handle pieces as large as three by five meters.

› September 16, 2013
Assembly of the mock-up begins on 400 m² of space in the hall of an external
workshop.

Voith Annual Report 201347

At home in the world› September 30, 2013
Fredrik Björnson from Bombardier Transportation inspects the mock-up on-site
at Voith in Chemnitz.

› October 2, 2013
“In addition to the engineering specifications, this project places high demands
on logistics and the need to meet really tight deadlines,” says Steffen Schaarschmidt, Head of prototype construction at Voith Engineering Services. The modelis prepared for transport. Make three out of one: The overall length of 19 meters
necessitates breaking the mock-up into three pieces.

› October 6, 2013
The pieces are loaded onto special transporters for the trip from Chemnitz via
Trelleborg to Västerås, about 100 km west of Stockholm. At the same time, sevenprototype experts from Voith arrive to reassemble this unique piece.

› October 15, 2013
Project manager, Andreas Silvan, travels to Sweden for the official handover ofthe mock-up to Bombardier Transportation. In a letter to Voith, Mattias Jansson,a designer at Bombardier, is effusive in his praise: “I want to take this opportunity
to tell you that I think you have done a fantastic job.”› October 16, 2013
Concept design review No. 1 in Västerås. Representatives of Stockholm’s municipal transport authority see the mock-up of their future metro train for the first time.
The representatives of Bombardier’s clients are unanimous in their conclusion:“A perfect basis for the upcoming discussions and decision-making.”

The mock-up makes it possible to experience
the aesthetic and functional aspects of the
new train.

And what’s next? The mock-up will be fine-tuned to mirror the final design over anumber of stages in the coming months. The great advantage: it can be inspected,
walked through and examined from all sides. The representatives of the various
associations get a hands-on feel for the train and simultaneously can make suggestions for improvements. The ideas are collated, discussed and implemented
in association with Voith. Mission accomplished: the mock-up allows future user
requirements to be accommodated at an early stage of the design process.

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Voith Annual Report 2013

At home in the world“In addition to the engineering specifications, this project places highdemands on logistics and the need to meet really tight deadlines.”
Steffen Schaarschmidt
Head of prototype construction at Voith Engineering Services

Voith Annual Report 201349

At home in the world“Quem encontra um amigo encontra
um tesouro.”South America„Berge kommen nicht zusammen,aber Menschen.“Germany

朋友可相逢，高山永分离。

China

एक और एक ग्यारह होते हैं ै ं
India“Friends may meet, but mountains
never greet.”USA

Trust, appreciation, tolerance – respect has manyother names. The foundation for a long-term
relationship. With customers, partners, employees.
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Voith Annual Report 2013

At home in the world

Apprentices today –movers tomorrow

The easier the formula, the more challenging the actual task: the future of
successful companies lies in well-trained junior talent. People who are masters of their trade. People who not only know the answer to “how” but also
to “why.” And what do you get when you succeed? Well-rounded, qualified
professionals who are ready for the challenges posed by the future, be it in
Kunshan, Heidenheim or in São Paulo.
It has not stopped pouring down in Heidenheim this day in October. The workload is massive. The tasks are not simple. Not to mention the language barriers.
Yet Benny Chen is in a good mood. The head of the Voith training center in Kunshan is one of four Chinese instructors undergoing a number of weeks’ training at
the Voith training center in Heidenheim in the fall of 2013. Chen’s assignment isa big one. He must install Germany’s proven dual-track training concept at Voith
in China and establish it there. “Building up the training program, setting up syllabuses with my German colleagues, defining the topics and contents, this is ahuge incentive for me,” says Chen. This is precisely the reason why he and hiscolleagues have come to Heidenheim.
For China is well on the way to becoming the largest economic power inthe world. And to succeed at this, China needs one thing more than anythingelse: excellently trained up-and-coming talent which not only has great theoreticalknowledge, but also hands-on know-how. This combination is still relatively rareamong young Chinese talent. The focus in the Chinese education system does
not lie on the needs of companies like Voith, but is still placed on the theoretical knowledge learned from books and lectures. “Many school graduates preferan academic career to a sound practical apprenticeship. Companies must often
compensate for the lack of practical experience of university graduates and fill thegap,” says Benny Chen.
However the picture in China is changing. More and more school graduates
are attending the technical school for three or four years, depending on their job
or course, and then do a one-year practical in the company. “This new concept
definitely strengthens the vocational training in China,” says Benny Chen.
In order to install the dual-track training concept in China, Erwin Krajewski,
Head of Technical Training at Voith in Heidenheim, visited the country two years
ago. Together with his Chinese colleagues he inspected schools, visited universities and held discussions with potential cooperation partners. “Training young
people for a changing world and the different needs of the market, that is theVoith Annual Report 201351

At home in the world“With our new training center we will be in a better
position to cover our needs for skilled professionals
in China from our own resources. This will help us
to ensure the high quality of our products and makeus even more competitive.”
Lily Wang
Director Human Resources Voith in China

1

2
3

52

Voith Annual Report 2013

At home in the world1	New training centers are currently being
constructed in both Kunshan and in­Heidenheim.

2	German-Chinese cultural exchange. Voith
trainers come from Kunshan to Germany
to prepare for their new tasks.

3	The future hinges on well-educated
new talent.

common challenge facing us. And an experience from which all instructors profit,”says Krajewski.
What began as a good idea is now taking shape. Literally. In Kunshan thelargest Voith training center outside of Germany is currently being erected. Whenit opens in the spring of 2014, Benny Chen and his three instructors will initiallytrain around 20 young people in subjects like welding, pneumatics and hydraulics,
electrical engineering or CAD. In the mid-term, external professionals will also be
trained here. Lily Wang, Director of Human Resources at Voith Shanghai is convinced that the new concept is the right one. “With our new training center we will
be in a better position to cover our needs for skilled professionals in China fromour own resources. This will help us to ensure the high quality of our products andmake us even more competitive.”
The training concept for China is based on the German “Ausbildung 2020”
model from Voith. The training concept was developed in 2010 and has beenpracticed since 2011. The educational philosophy for tomorrow’s professionals atVoith comprises four pillars: Professional skills, i.e. the ability to master the typicaltasks and issues of the job independently. Social competence, i.e. the ability to
put yourself in the shoes of others, integrate in the group and interact with thesocial environment in a cooperative manner. Performance skills, i.e. the strengthof character to make a commitment and motivate yourself. And last but not least,
emotional skills, i.e. the ability to express your feelings, put them in perspective
and manage them effectively.
The wide palette of competencies is also reflected in the fact that initial learning over four months of all Voith trainees together is part of the newly developed
concept – each trainee learns something from the profession of the other. “Thusa construction mechanic gets an idea of what is important for the IT systems
technician or what a businessman is looking for,” explains the head of the training
team. The apprentices also manufacture items together, for example on a millingmachine. In this way the technical product designer, who later does the drawings, gets a feeling for how he can influence the costs of a product at the drawing
board already, and thus benefit the company.” Learning from each other – theapprentices at Heidenheim will also do this in a new building starting in 2014,as a new training center is also being constructed in Heidenheim, right next toheadquarters. The training concept is reflected in the design of the new building, which features lots of transparency, light and open spaces. A place to swap
ideas, foster networking and learn naturally.

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At home in the world

1

2

For a number of years Voith has been providing proof in São Paulo that
the German dual-track training system can be implemented in practice. In
cooperation with local training institutes Voith has developed a training concept
for Brazil that provides a constant stream of qualified technical staff, which isadjusted to meet the steadily changing conditions on the Brazilian market. “Thetraining philosophy we have drawn up allows us to educate precisely those people
we need for our organization, especially for professions like industrial technicians,
construction mechanics and mechatronics technicians,” explains André Keri, who
is in charge of this matter at Voith in Brazil. Voith cooperates with renowned training institutes in Brazil, like Serviço Nacional de Aprendizagem Industrial (SENAI).
Twice a year, Voith initiates a selection procedure for people seeking anapprenticeship. Generally, an apprenticeship lasts four years. “They are geared
towards 15-year-olds who attend a vocational school in their first year,” explains
Keri. “We are ourselves responsible for the quality of our young talent and it is ourstated goal to offer well-founded training. In the meantime, there is strong competition on the Brazilian labor market. Each company wants to win the best talent
for their training programs.”

54

1	Voith trainees regularly win awards fortheir excellent performance.

2	The instructors will initially teach
20 trainees in Kunshan.

3	Years of success: in Brazil Voith has­provided training to 2,300 professionals
to date.

4	Knowledge transfer: Voith instructors passon their expertise and their experience to
new talent.

Voith Annual Report 2013

At home in the world

3
4

The training staff in Brazil not only concentrates on professional skills. “Wewant people who fit into our culture. People who identify with our values and act
according to our culture,” says the Brazilian instructor. The social skills, the performance skills and the emotional skills are therefore permanent fixtures of the training program in São Paulo. This training concept has proven that Voith is on theright track in Brazil. In the meantime, Voith has successfully trained approximately
2,300 professionals for the Brazilian market. They have a long road behind them,a road which the colleagues in Kunshan are just starting out on. There is therefore
a lot of work ahead for Benny Chen, head of training in China, and his colleagues.
“But even a journey of a thousand miles begins with a single step,” laughs Benny
Chen. And that journey is certainly much easier when you are in a good mood.

Voith Annual Report 201355

At home in the world“Many hands make light work.”USA“A união faz a força.”
South America„Viele Hände – bald ein Ende.“
Germanyएक से भले दोIndia

众人拾柴火焰高。
China

So simple, so easy. Sharing the load means multiplying the success. Team spirit knows no borders,no cultural or language barriers.
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Voith Annual Report 2013

At home in the world

Cross-bordercooperation

Around forty people from five countries work two years long on a projectspanning three continents. This is something special, even for a global
player like Voith. And a great challenge for Leonardo Penteado, project manager at Voith Hydro in Brazil. His recipe for the success of such projects:
open-mindedness, good communication and optimism.
Costa Rica is a pretty green land. This tiny country of 51,000 square kilometerssituated between 8° and 11° North and 82° and 86° West consists almost solelyof chlorophyll. For many, Costa Rica is the “Switzerland of Latin America”, but atouch greener: a small hydro power plant has been in operation at a place called
Cubujuqui since December 2012, a plant installed by Voith under contract to oneof the largest local energy providers in the country, Coopelesca R.L., and theresult of cross-national teamwork.
This can be seen in many respects: the two 11.4 megawatt (MW) Francis turbines were developed in cooperation between Voith Hydro in Brazil and Voith
Hydro in Noida, India, and manufactured by Voith Hydro in Vadodara, also in
India. The hydromechanical parts originate from partner firms in Costa Rica. Voith
Hydro in Brazil is responsible for mechanical and electrical balance-of-plant andautomation systems. The substation equipment has been sourced from partner
firms in Colombia and Costa Rica. To put it in a nutshell: the thick jungle of Costa
Rica is not only home to various spectacles of nature. It is also a melting pot of
nations. The question is, why?
Because there is a great deal of competition on the global market for smallhydro power projects. This is good for the customers and, at the same time, represents a challenge for manufacturers: although prices are falling, at the sametime the competitive situation demands creative solutions, such as in Costa Ricawith turbines from India, substation equipment from Colombia, and expertise invalve systems from partners in Italy. “Bringing in equipment from these different
sources allowed us to optimize our costs and maximize our supply chain,” says
Leonardo Penteado, project manager for the Cubujuqui project at Voith Hydro inSão Paulo.
Coordinating the cross-border project also involved cooperation at all levels of
the organization over a variety of languages, time zones and cultural differences.
It is not always easy but it is feasible, provided communication channels are shortand used regularly, for example, using weekly telephone and video conferences.
“The less virtual communication used, the better. Linguistic misunderstandings

Voith Annual Report 201357

At home in the world

can be solved much more directly if you see your partner in real time on screen,”says Penteado. And when Brazilian and Indian colleagues discover that they
actually mean different things by the same word, the atmosphere is much morerelaxed, it is much easier to laugh about the misapprehension, from screen
to screen.

Bright sparks for Costa
Rica: These colleagues
are representative of
the entire internationalteam that brought the
Cubujuqui project to a
successful conclusion.

The time difference of almost nine hours between South America and India
means that all those involved on the project needed to organize their working
hours more flexibly. More specifically, this meant that the Brazilian team came toa virtual conference at 7:30 a.m. in the morning, and the Indian colleagues at
4 p.m. in the evening. “And as far as e-mails are concerned, we even benefited
from the time difference: the answers to the mails we sent from São Paulo in theevening to Noida in India were in our inbox first thing in the morning.” To express
the benefit another way: work was done on the project worldwide and aroundthe clock.
Is it possible that his own attitudes were helpful here? “Sure! We like talking
to each other and are very optimistic by nature – I believe these are attributes thatare important for such projects.” Nevertheless, every now and again there weresituations when long-distance communication simply was not good enough. For
example, when delays suddenly threatened to arise in the production phase andupstream suppliers to the Indian operations of Voith Hydro in Noida announced
they would be delivering later than intended. This was difficult because it meantthat the turbines could not be shipped to Costa Rica within the set window.

“Sure! We like talking to each other and are very
optimistic by nature – I believe these are attributes
that are important for such projects.”
Leonardo Penteado
Project manager at Voith Hydro in Brazil

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Voith Annual Report 2013

At home in the world

Dimítrius Bicudo de Almedia

Alexandre Alberto Clarindo

Alexandre Facca Pereira

Design and Commissioning Engineer

Plant Engineering Manager

Plant Engineer

Murilo Hinojosa de Sousa

Leonardo Penteado

Eliza Kaoru Kamazuka

Generator Regional Sales Supporter

Project Manager

Commercial Project Manager

Nikhil Kumar

Luiz Lauro De Araújo
Rennó Polatto

Leandro Savio Lenotti
Alves Ribeiro

Commissioning Engineer

Project Coordinator Engineer

Bruna Resende dos Santos

Klaus Sommerkorn

Carlos Eduardo Grillo

Logistics Manager

Technical Director

Automation Engineer

Deputy Manager
Project Management

Voith Annual Report 201359

At home in the world“So I flew to Noida and arranged a meeting with the most important suppliers
and my Indian colleagues,” explains Penteado. A clear demarcation between roles
was vital. “While I emphasized the significance of power production in Costa Rica
and the relevance of international trade, my Indian colleagues stressed how
important the project was for the Indian region.” You mean “good guy, bad guy?”
No, more like “good guy, good guy.” The Indian-Brazilian act managed to masterthe challenge. Thus, also in terms of communication, the Cubujuqui project wastrue intercontinental teamwork.

As if this was not enough, the­hydro power plant in Cubujuqui
features two further innovations. A
completely new hydraulic concept
was developed during the project
as well as a more economic automation solution. Moreover, whatsatisfied the client in Costa Rica will
be applied by Voith Hydro in Brazil
at two other projects. Costa Rica
was a great training ground: “Welearnt from the Cubujuquí project
how teams from the different corners of the globe complement eachother perfectly,” says Leonardo
Penteado. And as far as environmentally friendly hydro power­generation is concerned, the­Cubujuqui hydro power plant has
set a benchmark for Costa Rica’s
energy sector.

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Voith Annual Report 2013

At home in the world

Voith Annual Report 201361

At home in the world

Diversity. Know-how.
Experience. Commitment.
At Voith. At home.

The above stories in this annual report show that diversity is fully athome at Voith, as illustrated by the interesting projects, the professional
teams the strong partners and the different individuals who work at
and with Voith.
Each one of these stories is representative for the commitment of ouremployees. People who give their best, each and every day. Accepting
the challenges and mastering them with expertise and creativity.
And this often means taking the hard road if this leads to better results.
For commitment to excellence is fully at home in the house of Voith.
Moreover, one thing has been at home at Voith since the very beginning:a positive attitude and the conviction that taking a proactive approach isindispensable to success.
This positive attitude is what binds all Voithians worldwide. This is where
they draw their energy from, to ensure that Voith remains successful
for the long term. In Kunshan, in Hyderabad, in Chemnitz, in York or inSão Paulo. In the world. At home.

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Voith Annual Report 2013

At home in the world

Group Management Report

64
71
79
97
101
103
105
106
114

Voith Annual Report 2013

I. Business and economic environmentII.	Business development and earnings positionof the Group
III.	Business development and earnings positionof the Group Divisions
IV. Net assets and financial position
V. Research and development
VI. Non-financial performance indicators
VII. Subsequent events
VIII. Risks and opportunities
IX. Forecast report63

Group Management Report

I. Business and economic environment
I.1.

Group structure and business activities
Voith is a global technology group.
With its broad portfolio of systems,
products and industrial ser­v ices, Voith
serves five essential markets: energy,
oil & gas, paper, raw materials andtransport & automotive. Voith operates in over 50 countries around theglobe, maintaining an extensive network of production, service and sales
units on ev­e ry continent on the planet.
Voith GmbH, based in Heidenheim an
der Brenz, Germany, is the operative
management holding of the Group. It is
100 % family owned. The managementof Voith GmbH is responsible for strategy and operative management of theGroup. The advisory and supervisory bodies are the Shareholders’ Committee and the Supervisory Board. The
latter is also in charge of monitoring
management.
The operating business is bundled
in four Group Divisions: Voith H­ ydro,Voith ­Industrial ­S ervices, Voith ­Paper
and Voith T­ urbo. In each Group Division, legally independent head organizations oversee the activities of the Division’s subsidiaries.

64

As a full service provider in the hydropower market, Voith is a reliable partner for all hydroelectric plant operators
worldwide. Voith ­Industrial S­ ervices isa very powerful ser­v ices provider to
key industries. Voith P­ aper is a partner and systems supplier to the paperindustry, providing technologies, products and ser­v ices for the entire papermaking process. Voith ­Turbo supplies
intelligent drive solutions, highly engineered components and systems that
set industry benchmarks worldwide fortrains, buses, trucks, ships and industrial enterprises.

Organizational structure
Voith Group Divisions
Voith GmbH

Voith
Hydro

Voith
Industrial
Services

Voith
Paper

Voith
Turbo

Corporate control is anchored in a value-based management philosophy thatuses the return on capital employed(ROCE) as the key measure of theCompany’s earnings power. This ratio
is calculated from the profit from operations derived from the operational result prior to non-recurring items
and the capital employed. In addition to
ROCE, which is value-based, operating
net cash flow (ONCF) constitutes thesecond key indicator. This figure servesto assess the Group’s ability to generate sufficient cash flow. All indicatorsand reports submitted to the Corporate Board of Management are basedon these management ratios.

Voith Annual Report 2013

Group Management Report

I.2.

Values, guidelines, compliance
Voith—Engineered Reliability
All of our actions are based on trust.
This maxim is supported and supplemented by our values of professionalism, respect for the individual, helpfulness towards colleagues, openness,reliability and integrity. We summarize our canon of values in our slogan“Voith—Engineered Reliability”. This encompasses our claim of providing reliable and high-quality technology ona sustainable basis and always acting fairly, openly and reliably in dealings with our employees, partners andcustomers.
Our values likewise form the foundation on which the Voith brand is built
and the core of our corporate identity. Our values, and the guidelines derived from them, ensure that Voith acts
according to the same business principles and adopts the same philosophy worldwide. In this way, we marrythe culture of a family-owned businesswith that of a global player.
Voith’s values are the element thatconnects the owner family, the supervisory bodies, management, employees, customers and partners. We offer our employees challenging tasks
and attractive opportunities for the future. We strive to bind those employees
who meet our high demands to Voith

Voith Annual Report 2013

for the long-term. We maintain partnerships with our business partners,
customers and suppliers that often
span several generations. Remainingtrue to our values, we seek out open
dialog with important stakeholders andtarget groups: financial ser­v ices providers and investors, universities andresearch institutes, political groups,
NGOs and interested members of thegeneral public.

Compliance—our values
are binding
The Voith Code of Conduct was defined in 2009 from the legacy of previous group guidelines and our cultureof integrity that was formulated as aprinciple of business conduct back in
1927. The Code of Conduct is a binding set of rules that govern dealings
with customers and business partners, but also dealings between employees within the Group. We require
each and ev­e ry employee to comply
with the applicable laws and also ourown internal guidelines. This applies toall levels of the hierarchy throughout
the Group. Infringements will not betolerated and are countered with sanctions. Rules and standard procedures
are revised continuously to match thelatest requirements.

The main principles addressed by theVoith Code of Conduct are as follows:• Compliance with the rules of faircompetition• No agreements that contravene
competition law• No corruption or bribery: no offeringand granting or demanding andaccepting unfair benefits• Transparency of donations andsponsorship• Maintaining own and respecting
third-party company and patentsecrets• No undue preferential treatment of
suppliers and service providers
The wording of this Code of Conduct isavailable on the Internet at: http://voith.
com/en/group/compliance-187.html
The Compliance program and related
training measures are coordinated anddeveloped by the Compliance Committee, whose chair reports directly
to the CEO. This committee comprises the Head of the Corporate Office(chair), the Head of Corporate Legal Affairs, the Head of Corporate HR Management and the Head of Corporate Internal Audit. The compliance officers in
the individual Group Divisions are responsible for implementing the Codeof Conduct in their respective area of
responsibility and are important contact persons for all issues relating tocompliance.

65

Group Management Report

I.3.

Group strategy
However, it is the ultimate responsibility of each individual employee to act
in accordance with our corporate values. In order to raise awareness of this,
we ask our executives to act as rolemodels and also provide executives
and employees with training and information on topics such as corruption,competition issues and export controls. Each employee has various avenues open to them to report any suspicion of an infringement of the Codeof Conduct without having to fear reprisals. In addition to the complianceofficers working in each entity of theGroup, special helpdesks in Germany,
Austria, Brazil, China, and the US havebeen set up to receive reports andnotifications of infringements. Anonymous complaints are also followed up
using a global system for input from
whistleblowers.
Voith launched a global e-learning
program in November 2011 allowing all Voith employees with PC access to keep up to date with compliance issues at regular intervals. In themeantime, all the relevant employees
have completed the e-learning program. The program has been extended to put more focus on leadership andemployees.

66

Geared towards sustainableprofitable growth
At Voith, business success is defined
as a long-term goal. The 146-year success story of the Voith Company demonstrates that this orientation towards
sustainable growth is the right business strategy.
The commercial success of Voith isbased on four sound pillars that havebeen carefully erected over de­c ades:
our balanced product portfolio, our glob­
al presence, our innovative strengths,
and our financial independence as afamily-owned enterprise.
A balanced product portfolio
Out of its original core business, mechanical and plant engineering, in recent years Voith has systematically expanded its product and service
portfolio to gain a firm foothold in its
core markets of energy, oil & gas, paper, raw materials and transport & automotive. In this respect it has proved
possible to spread sales fairly evenly between our four Group Divisions.
Although the share of sales contributed by each Group Division varies fromyear to year depending on general industry performance, all four contributea significant share to group sales andresults. Our broad strategic positioning
acts as a buffer against the majority of

economic risks. Because economic cycles affect the individual markets at different times, a fall in sales on the markets such as oil & gas, raw materials
and energy that traditionally respond
more slowly to economic trends is offset by growth on the fast-responding
paper and transport & automotive markets and vice versa.
In order to build up a portfolio thatcan successfully cater to market demand, also in the long-term, it is vital that we identify the relevant global megatrends and respond to themin good time. The shift to Asia, demographic changes, continuing urbanization, particularly in the emerging markets, as well as growing demand for
raw materials and energy are the global
megatrends confronting us in the pres­ent day. Voith has responded to theseshifts, in some cases from their very
inception, with innovations, providing
solutions such as climate-friendly electricity generation, sustainable mobility
in the megacities or low-consumption
production methods.
An international gearing andlocal roots
Voith is one of the pioneers in globalism. At the beginning of the 20th
centur y, we were already building
turbines for hydroelectric proj­e cts in
the USA and Asia and selling paper

Voith Annual Report 2013

Group Management Reportmachines to what was then AustriaHungary and to Russia and Sweden.
We began establishing production facilities in other countries at a very early stage in an endeavor to establish
greater proximity to the customer andto shorten transport routes. Voith’s first
production location outside of Germany was opened in St. Pölten near Vienna in 1903. This was followed by additional international locations, such as
the first location outside of Europe established in Brazil in 1964. Voith now
has its own companies in more than 50
countries. More and more of these arein Asia, for example in India (since the1960s) and in China (since the 1990s).
Today, around one quarter of consolidated sales are generated each by theAmericas, Asia and the Europe excluding Germany region, respectively, while
Germany accounts for 20 %. Voith pursues the goal of being as firmly rooted in its international markets as it isin Germany today. This is why we see
ourselves as a local actor at the individual locations. Our product development, engineering, production andindustrial ser­v ices make a major contribution to the local value creation—either in our capacity as an employer
with local management, by way of using local supply chains or local sources of finance. For the coming years wehave set ourselves the goal of fostering

Voith Annual Report 2013

the influence of regional and local entities and granting them greater responsibility to allow them to better address
local market conditions and local cultural aspects within our business. In
this regard, the regions are to play amore important role in our organizational structure. In 2011 we created thefirst regional corporate service center
outside of Europe. The Shanghai Corporate Service Center constitutes a vital interface between China and Germany by supporting Voith firms in thisessential market with such shared ser­vices as human resources, procurement, IT, legal affairs, taxes, mergers& acquisitions, finance and communications. We will begin training young
professionals at our own training cen­
ter in Kunshan in China adapted fromthe German dual-track training systemfrom 2014 onwards.
Strong innovative power
Voith’s position on its markets and regional segments is based among other things on its innovative power. Since
the Company was founded, our engineers have been writing history with
their inventions in the field of technology. Voith currently has many thousandsof active patents around the world, andhundreds more are registered eachyear. There is no contradiction between
a pioneering spirit on the one hand andpermanence on the other. This is why

we invest in research and developmentfor new products even and especially in difficult economic times. Approximately € 250 million was invested ineach of the past five years. Detailed information on the current focus ­areas of
our R&D activities is provided in Section V. of this management report, “Research and development”.
Financial independence
As one of Europe’s major family-owned
enterprises, Voith benefits from the stability and long-term approach taken byits owners. Growth that is both sustainable and profitable is the central
goal of the shareholders, the Supervisory Board and the Corporate Boardof Management. This forms the foundation on which Voith can maintain its
financial independence and pass theCompany on to the next generation ineven stronger shape.
Aided by its modest distribution policy,
Voith has sufficient financial resources
to fuel continuous, attractive growth,
the trajectory of which can be plannedover extended periods. An equity r­ atioof 22.9 % and a stable financial ­position
constitute a sound platform on which
the Group will continue to develop successfully in the future.

67

Group Management Report

I.4.

Macroeconomic situation
Economic recovery fails toeventuate
The global economy did not improveover the course of Voith’s 2012/13 fiscal year ending on September 30, continuing to cool off, particularly in thefirst six months of the period under review. The International Monetary Fund(IMF) was forced to adjust its forecasts
downwards repeatedly over the courseof the period. Currently (as at October 2013) the IMF expects the global economy to grow by 2.9 % in the fullyear 2013. If this were the case, global
economic growth would fall once again
in comparison to 2012, when it came
to 3.2 %. As at the date when we published our last annual report, the IMF
had forecast growth of 3.6 % in 2013.
The corrections to the forecast affectvirtually all regions of the world.
The emerging markets continue to develop much more dynamically than industrial nations. Nevertheless, here too,
the growth rates are no longer as highas they were just a few years ago. In
addition to falling exports on accountof the weak global economy, a dropin commodity prices and concerns regarding the financial stability of someemerging markets have led to a decline
in the growth rates of emerging economies over the mid-term. According to
IMF forecasts, the emerging markets
will grow at an average rate of 4.5 % in2013 compared to 4.9 % in 2012. GDP
growth in China is expected to reach
7.6 % (2012: 7.7 %) with 3.8 % forecast
for India (previous year: 3.2 %). Brazil
will see a rebound, with growth proj­
ected to reach 2.5 % in 2013 compared
to 0.9 % in 2012. Nevertheless, this ismuch slower than originally expected.

68

Economic activity in the industrial
nations remains sluggish, with GDP
growth of just 1.2 % on average forecast by the IMF for the full year 2013
compared to 1.5 % in 2012. The main
factor here is the recession in the e­ urozone which has entered its second
year. According to the IMF forecasts,
the economic product of the eurozone will contract once again in 2013,
like it did in the previous year when it
dropped 0.6 %. In 2013 a further contraction of 0.4 % is expected. Germany will see GDP growth. However, it isproj­e cted to lie at just 0.5 % compared
to 0.9 % in the previous year. In theUSA, the economy continues to recover with the unemployment rate on the
decline and prices for real estate stabilizing. GDP growth is forecast at 1.6 %for 2013 compared to 2.8 % in 2012.
In many industries the investment climate was massively burdened by thewave of uncertainty sweeping the global economy. In addition to the ongoing risks associated with the sovereign
debt crisis in the euro zone, after thesummer greater volatility became evident on the financial markets, in someemerging markets in particular. We
have described the most significant
risks that we perceive on the date thismanagement report is released in Section VIII.1.2 “Risks to the Group”.

Voith markets: gloomy investment
climate prevails
Little to no stimulus for growth wasseen on our markets. Three of the fivemarkets served by Voith—energy, oil& gas and raw materials—displayed
only slight growth in the 2012/13 fiscal year. In spite of a slight increase inpaper production, paper manufacturers once again faced a rapidly deteriorating outlook, leading to a massive
slump in investment in new paper machines. Developments in the transport& automotive market were extremely
disparate across the various segments
and regions.
Energy: rising share of renewablesources
The energy market encompasses theconversion of various primary energy
sources such as coal, gas, wind or hydro power into electricity and alternative forms of storage. This market isserved by the Group Divisions Voith­ ervices and­­Hydro, Voith Industrial S
Voith ­Turbo.
Thanks to rising global energy needs,
investment was seen in all types ofelectricity generation in the period under review, albeit with a different local
focus. Conventional energy sources
continue to dominate global electricity production. The share of coal is on
the wane yet it remains the most important source of electricity worldwide.
Use of coal continued to increase in
China, India and the other emerging
markets, if much less strongly than inrecent years. The massive extractionof shale gas in the USA has marginalized virtually all other energy sources
in North America.

Voith Annual Report 2013

Group Management Report

In an effort to expand their electricity
generating capacity, all regions of the
globe are putting greater emphasis on
renewable energy sources. In 2012 alittle more than 50 % of the new electricity generating capacity created in
the year was devoted to renewable energy sources, which now account for
approximately 26 % of the total existing electricity generating capacity. The
most investment was made in wind energy (39 % of the new generating capacity from renewables), followed byhydro power and solar power (eachaccounting for 26 %). However, easily the greatest share of the installedbase of electricity generating capacityfrom renewable sources (approximately 80 %) is attributable to hydro power.
Although investment in renewable energy sources was higher than in 2010,it has fallen slightly on the peak seenin the boom year of 2011. This decline
can be attributed to various factors inindustrial ­n ations, primarily the boomin shale gas in North America andthe weak economies in southern Europe. In northern Europe, investmentsin pumped storage have been put on
ice as the strong rise in the share of solar in the power mix has inhibited theeconomic feasibility of pumped storage, which is aimed first and foremostat meeting peak demand. Asia, Latin
America, Africa and the Middle East
have all increased their investments inrenewable energy sources. However,this rise was not sufficient to offset the
decline seen in the industrial nations.
Oil & gas: rising levels ofinvestment
The oil & gas market comprises threemain segments: upstream involving
the extraction of crude oil and natural

Voith Annual Report 2013

gas, mid-stream involving transport
via pipelines and tankers, and downstream consisting of refining of crude
oil and natural gas into the various fuels
and raw materials used by the chemicals industry. Voith T­ urbo and Voith
Industrial ­Services provide specialized
products and ser­v ices to all the segments of this market.
Demand for oil and gas, the most im­por­tant primary energy sources, roseslightly in the 2012/13 fiscal year. Driven by growth in the emerging markets,
the International Energy Agency (IEA)
proj­e cts demand for oil to rise by agood 1 % both in 2013 and 2014 andthat demand for natural gas will rise by
more than twice as much as its sharein total global energy consumption increases. The USA is a major factor in
the cor­r e­s pond­ing rise in global gas
production due to the extraction of
shale gas.
Investments in the oil & gas market rose
noticeably in the period under review.
This trend is expected to continue, withthe most emphasis being placed on the
upstream segment. New wells need tobe tapped to satisfy future demand.
Secondly, extraction is becoming increasingly complicated. Expansion of
the downstream segment is not ex­pected to be as strong on the whole,with the main growth due to the installation of additional refinery capacity in
Asia, and China in particular, as well as
the Middle East. Although refinery capacity is stagnating in industrial ­nations,even falling in some regions, the installed base of this segment still consti­
tutes the largest market for indus­trial
ser­vices, maintenance and spare parts.

­ aper: recession hits the market
Pfor paper machines
The paper market is served by theGroup Division Voith P­ aper.
The paper market has been sufferingfrom a fundamental structural shift fora number of years now. The digitiz­­ationof ev­e ryday life has resulted in a fallin demand for graphic grade papers.
As a result, demand for new machinery to manufacture graphic paper has
virtually come to a standstill. By contrast, there is growth potential for tissue papers as consumption r­ ises in theemerging markets of Asia and Latin
America in line with the strongly growing middle class in these countries. Demand is also rising for board and packaging paper in the wake of rising online
shopping. Overall, global paper production rose slightly in the 2012/13 fiscal year but market growth was weaker than the analysts had forecast in
all major regions and segments apartfrom tissue. In particular, Chinese market growth proved to be much weaker than assumed when the annual report for 2012 was published.
Given this gloomier outlook, the willingness of paper manufacturers to commit to new investments in paper machines continued to dissipate in the
period under review. The market for
paper machines is thus in the middle
of a serious recession. The graphic paper segment is starting to settle at a
new and much lower base line. The
slow growth in production is currently
being covered by existing production
capacity. We do not expect to see any
market recovery in the coming years
in Europe. In Asia and Latin America
we assume that demand for machines69

Group Management Report

to make tissue, board, and packaging
paper will rise again in the mid-term.
Raw materials: growth dampened
for the short-term
We define raw materials as valuable
ores and minerals that are extracted
from the earth, such as coal, copperand iron ore, as well as other geological materials such as sediments usedin building. By contrast, the raw materials oil and gas are accounted for separately as part of the oil & gas market.
The segments of the raw materials market that are of relevance for Voith aresurface and sub-surface mining andthe steel industry. Both are supplied by
the Group Division Voith T­ urbo.
In light of the economic developments,
demand for the most important raw
materials was weak in the period under review, which led to an erosion ofprices.
The level of investment in the mining
sector has dropped significantly fromits historical peak in 2012. The slightweakening of economic growth in China was the greatest factor here. Investments in tapping new fields wereparticularly hard hit. By contrast, investment in replacement plant and machinery is expected to keep rising. On
the other hand, stagnating to falling
prices for raw materials puts greaterpressure on producers’ margins. This70

is a driver for investments aimed at improving the efficiency of mining operations. We expect the positive trends inthe mining sector to continue for the
mid-term. A decisive factor in this regard is the rising demand for the raw
materials needed to develop the infrastructure of emerging markets. Other
trends will also favor this development,such as the need to tap more difficult
fields and the increasing automation of
production. The growing investments
in technology made by the mining sector to improve safety standards and reduce the environmental impact of mining represent opportunities for Voith.
Transport & automotive: weakmarket growth overall
The transport & automotive market includes diverse transport routes andthe means of transport used on themfor moving people and goods. Twoof Voith’s Group Divisions serve thisver y heterogeneous market: Voith­Turbo supplies drive solutions as wellas braking systems for the commercial vehicle industry, the railway industry and also the marine segment. Voith
Industrial S­ ervices provides contractengineering to automobile manufacturers and suppliers as well as the railway industry and the aviation industry.
The passenger and commercial vehicle industry continues to grow, driven
chiefly by higher demand from China

and the USA. Global truck production
has risen with the main regional drivers here being the NAFTA countries
and South America. Demand for passenger cars and vans has picked up,
once again, mainly in North America.
Purchases on the bus market remained
dampened.
The rail sector, which is dominated bypublic sector investment in infrastructure, grew slightly in the period under review. Strong stimulus for growthcame from South America, Brazil inparticular, where investment levels
are high in advance of the 2014 Soccer World Cup and the Summer Olympics in 2016. The largest market, China,
showed signs of recovery after many
years of no activity. There is an evident
shift away from high-speed trains to local transport.
The marine market continued to struggle from the weakness in the general
economy. Freight shipping saw overcapacity. Moreover, the lack of available finance, particularly in Europe,
placed an additional burden on ship
construction.
There was an upturn in orders in theaerospace industry, partly for replacement aircraft but also in the wake of theplans to expand fleet sizes.

Voith Annual Report 2013

Group Management Report

II. Business development and earnings position of the Group
II.1.

Overall view
Weak business development in a
stubbornly adverse environment
Voith looks back on a weak fiscal year.
In light of the ongoing cool-down ofglobal economic growth and the generally subdued investment climate, bothorders received and orders on hand
dropped in the Voith Group in the period under review. The high level of orders received in recent years contributed to Group sales remaining stableat € 5,728 million. Consequently, we
failed to meet the targets published in
the 2012 annual report although we dolie in the range of the revised forecast
published in our interim report for 2013.
The development of business at thefour Group Divisions was not uniform.
While Voith ­Hydro and Voith ­Industrial­S ervices enjoyed rising sales, Voith­Paper suffered a large fall in sales andVoith ­Turbo recorded a moderate decline. Moreover, within each Group Division, business developments varied
between the regions and the various
market segments. The stable development overall is a result of our actively
pursuing our portfolio strategy. The diversified structure of the Voith Group
allows us to offset opposing developments in our five core markets andbetween the four Group Divisions. In
order to tailor our organization to permanent changes in the business environment and create a foundation for

Voith Annual Report 2013

the return to profitable growth, we haveinitiated another round of job cuts at
Voith ­P aper, which is suffering froma structural transition and a cyclical
downturn. In the other Group Divisions
we have made surgical adjustments tocapacity. More­over, we have initiatedmeasures to streamline the portfolio
and terminate certain business activities, in this regard.

the profit compared to the previous period. Our bottom-line result therefore
stands at a net income of € 63 million.

In spite of the weak business environment and a significant burden from restructuring expenses, we have once
again returned a profit from operations
in each of our Group Divisions and also a profit for the Group as a whole.
We view our ability to return a profit
even in a difficult business climate as
evidence of our earnings potential andthe robustness of our Company. Nevertheless, we failed to meet the earnings targets we announced in our 2012
annual report. At a group level, the operational result prior to non-recurring
items decreased by 10 % in comparison to the previous year. The decline
is attributable to the fall in the profit
from operations at both Voith T­ urboand Voith Industrial S­ ervices, which
was not compensated for by the risein earnings at Voith ­H ydro and Voith­Paper. The net income of the Groupwas burdened by non-recurring effectsof € 156 million, mainly related to therestructuring measures we have initiated, resulting in a decrease of 44 % in

71Group Management Report

II.2.

Sales
Sales at a stable level
In the 2012/13 fiscal year, the Voith
Group generated sales of € 5,728 million, comparable to the previous
year when sales came to € 5,724 million. Voith H­ ydro and Voith Industrial­S ervices saw an increase in sales of
6 % and 8 % respectively. By contrast,
sales fell at Voith ­Paper by 6 % and by
3 % at Voith ­Turbo.
Thus, Voith H­ ydro accounts for 24 % ofGroup sales compared to 23 % in theprevious period. The share of sales accounted for by Voith Industrial ­Servicesrose to 21 % (previous year: 19 %). Voith­Paper and Voith T­ urbo accounted for
29 % (previous year: 30 %) and 26 %(previous year: 27 %) of Group sales
respectively. Detailed information on
the development of sales at the separate Group Divisions can be found in
Section III of this management report,“Business development and earnings
position of the Group Divisions”.

The regional distribution of group sales
among the most significant economic areas has only changed marginally in comparison to the previous year:
Germany now accounts for 20 % (previous year: 21 %) and Europe excluding Germany for 27 % (previous year:26 %). More than half of total sales in
the 2012/13 fiscal year were generated outside Europe. The Americas contributed 27 % to Group sales and Asia
23 % (previous year: 24 %).

Sales Groupin € millions
5,728

2011/122012/13

Sales total € 5,728 million
by Group Division
Voith ­Turbo
26 %Voith ­Hydro
24 %Voith Paper
29 %Voith ­Industrial­Services
21 %by region

Americas
27 %

Asia
23 %

72

5,724

Germany
20 %EuropeexcludingGermany
27 %
Other
3%

Voith Annual Report 2013

Group Management Report

II.3.

Orders received
Orders received down on theprevious year, as forecast

Orders received Groupin € millions
5,703

2011/12In the 2012/13 fiscal year, the Voith
G ro u p wo n n ew o rd e r s tot a l i n g€ 5,194 million. As announced in therevised forecast made in the 2013 interim report, the Group failed to reachthe figure recorded in the previous year(€ 5,703 million, a decrease of 9 %).

5,194

2012/13

Orders on hand as at the end of the period under review came to € 5,134 million. This is € 940 million down on therecord notched up in the previous year(€ 6,074 million).

Orders on hand Groupin € millions
6,074
5,134

2011/122012/13

Orders received total € 5,194 million
by Group Division
Voith ­Turbo
28 %Voith Paper
26 %Voith ­Hydro
23 %The most significant factor in the decrease of orders received at Group level was a deterioration of 22 % in new
business at Voith P­ aper due to thestructural transition and recession in
the market for paper machines. Orders
received at both Voith H­ ydro and Voith­Turbo were also below the level of theprevious year (down 10 % and 6 % respectively). Voith Industrial S­ ervices, bycontrast, rose by 8 %. Detailed infor-

mation on the development of orders
received at the separate Group Divisions can be found in Section III of thismanagement report, “Business development and earnings position of theGroup Divisions”.
Voith ­Turbo was the Group Division withthe largest share of orders received(28 %, previous year: 27 %), followed byVoith ­Paper, with 26 % (previous year:
31 %). Voith ­Hydro (previous year: 23 %)and Voith Industrial ­Services (previous
year: 19 %) each accounted for 23 % in
the period under review.
Looking at the regional distribution oforders received, Europe excluding Germany accounted for 29 % of new business in the year under review (previous
year: 24 %). North and South America
together accounted for 27 % of new orders received. Germany generated 20 %(previous year: 19 %) of the Group’s orders received. Asia accounted for 18 %of new business in the 2012/13 fiscal
year (previous year: 28 %).

Voith ­Industrial­Services
23 %by region
Germany
20 %Americas
27 %

Asia
18 %

Voith Annual Report 2013

EuropeexcludingGermany
29 %
Other
6%

73

Group Management Report

II.4.

Employees
Headcount rises above 43,000
As at September 30, 2013 we employed 43,134 full-time equivalents (excluding apprentices) in the Voith Group.
In net terms, we added 807 jobs to theVoith Group in the 2012/13 fiscal year
(September 30, 2012: 42,327). This represents an increase of 2 %.
The focus of recruitments was at Voith
Industrial ­Services. A corporate acquisition in the Automotive segment accounts for 854 of the total of 1,048 newjobs in this Group Division. At Voith­Paper the number of employees fell by
596 due to the restructuring measures
undertaken. The headcount at Voith­Hydro and Voith ­Turbo rose slightly in
net terms by 236 and 122 respectively.
Voith Industrial S­ er vices accounts
for 49 % of the total headcount (previous year: 47 %), making it the largest
Group Division in terms of total staff
numbers. 21,032 people were working there at the end of the period underreview. Voith P­ aper employed 9,223
staff as at September 30, 2013, or
21 % of the Group’s headcount (previous year: 23 %). With 6,485 staff members, Voith T­ urbo made up 15 % of theGroup’s headcount as in the previous
year. Voith H­ ydro employed 5,323 people, the same share of the Group’s total
workforce as in the previous year (12 %).

74

Job cuts at Voith P­ aper andVoith ­Turbo
In response to the permanent fall indemand for graphic paper machines
on account of the structural transition,
we initiated a comprehensive restructuring package at Voith ­Paper in May
2012. The majority of the initial job cutsof 990 worldwide were implemented
in the 2011/12 fiscal year and the period under review. We were forced totake further action in the summer of2013 in light of the deepening recession in the market for paper machines
which has now spread to almost all
types of paper and also the critically important Chinese market. We havetherefore announced that another 800
jobs are expected to be lost, spreadover various locations of Voith P­ aperin Germany and Austria. In addition,
we plan to cut roughly 180 jobs fromvarious other Group Divisions at headquarters in Heidenheim to improve ourcost structures. This will primarily affect Voith ­Turbo. These measures represent painful cuts. We have only taken
the decision after weighing up the issue extremely carefully but believe themeasures are unavoidable to align our
European organization to the change
in demand. The measures are necessary if we are to remain competitiveand profitable for the long-term under
the changed conditions on the slowly
growing European market.

Employees Group

42,327

43,134

2011/122012/13

Employees total 43,134
by Group Division
Voith ­Turbo
15 %Voith ­Hydro
12 %Voith Paper
21 %
Other
3%

Voith ­Industrial­Services
49 %by region
Germany
40 %Americas
27 %
Asia
12 %

EuropeexcludingGermany
20 %
Other
1%

Voith Annual Report 2013

Group Management Report

For more information on workforce
trends at the separate Group Divisions,see also Section III of this management report, “Business development
and earnings position of the Group
Divisions”.

40 % of the workforce basedin Germany
The number of employees based inGermany remained more or less unchanged on the previous year at 17,327
as at September 30, 2013 compared
to 17,316 as at September 30, 2012.
Europe excluding Germany recorded
a net increase of 769 in the number ofjobs. As at the end of the fiscal year,
the Group had 8,580 employees in thisregion (previous year: 7,811). Although
Voith ­P aper cut jobs, the total headcount in Europe rose due to the acquisition in the United Kingdom mentioned
above. The other two Group Divisions
created only a few new jobs.
In the Americas, the Voith Group employed 11,580 staff at the end of theyear, 89 more than at the same time ofthe previous year (September 30, 2012:
11,491 employees).
The headcount in Asia at the end of theyear under review of 5,426 was slightly down on the comparable figure of
the previous year (September 30, 2012:
5,481), a fall of 55 staff.
In sum, the regional distribution of
the workforce has barely changed on
the previous year: Voith continues toVoith Annual Report 2013

employ most of its staff in Germany,
which accounts for 40 % of the total
number of employees (previous year:
41 %). The Americas were still the second most important region accountingfor 27 % of the total headcount. We employed 20 % of our staff in Europe excluding Germany (previous year: 18 %).
Asia accounted for 12 % of the total
workforce (previous year: 13 %)First-class training
We once again invested substantially intraining and maintained the large number of apprenticeships. At the close of
the 2012/13 fiscal year, 1,201 apprentices and students were employed atVoith locations around the globe (previous year: 1,206). This provides a large
number of young people with careerprospects.
As a matter of tradition, we set great
store by first-class professional training. We value a holistic approach, i.e.
imparting a combination of both social and professional skills. We tailor
our training contents and methods toaccommodate new findings in the fieldof education and the changing requirements of the market. Our 2020 training
concept has been largely implemented
already. The high quality of our training
is repeatedly demonstrated by the excellent performance of Voith apprentices at state and federal level. In 2012ev­e ry fourth apprentice who completed their training at our largest training location, Heidenheim, passed withan “excellent” grade. In summer 2013 atechnical draughtsman trained by Voith

attained 98 of the 100 possible points
in his final exam, making him the topof his year for the entire nation.
The construction of a new training cen­
ter in Heidenheim made great progressin the period under review. It is expected to open in the first half of 2014. We
also plan to open our own regional
training center at our Chinese location in Kunshan, also in the first half of2014, and will train apprentices there
using a similar system to the German
dual-track work/study system.

Leadership concept installed
We require our employees to be willing to keep on learning over the entire
span of their careers. From a corporate
perspective we offer a challenging program of internal and external training
and personal development measuresthat foster professional, social and intercultural skill sets. In the period under review, approximately 1,900 employees, a similar number as in theprevious year, took part in our internal training programs worldwide which
are designed to accompany their professional or management career paths.
There were also external seminars andinternal training measures that were selected locally according to specific requirements at individual entities.
We installed a new multiple stage leadership program in the Voith Groupduring the period under review. The
Leadership program consists of three
separate programs, one for each of
the three levels of Voith management75

Group Management Reportunderneath top management. Eachtraining program consists of several
modules and is completed within thespace of one year. The participantsof such a training program generally take all modules of one programin unison. The groups are consciously chosen to cross divisional borders
and sometimes even regional borders.
The program is intended to enhanceleadership skills at all levels of management and encourage active interchange between managers. Moreover,it will promote a common understanding and approach towards leadership
throughout all Group Divisions and regions. One component of our leadership concept involves regular, structured discussions between employees
and their superiors. We view such intensive dialog as a prerequisite of targeted personal development.

Diversity & Inclusion program
initiated
We view diversity as a key factor for
our future success. Diversity for us implies recognizing and encouraging differences in our workforce as a whole
as well as in our organizational units
not only in terms of visible characteristics such as gender, age, but also interms of less tangible aspects, suchas skills, cultural background, and religious belief. The goal of inclusion is
to exploit these differences, in order toenhance the creativity and innovative
strengths of the company, and thereby profit commercially as well. We initiated our corporate-wide Diversity &Inclusion (D&I) program in the 2012/13

76fiscal year to promote greater diversity in the group. The program is sponsored by a member of the Corporate
Board of Management and is coordinated by the central human resources
department of the Voith Group. However, the regional focus and implementation is in the hands of the respective
regional offices. A D&I manager is appointed for this task in each of the important regions.
The goal of the first stage is to raiseawareness among staff of the benefitsof diversity and equality of opportunity,
and to anchor D&I in our corporate culture. For this purpose, a train-the-trainer concept was developed in the fiscal
year, under which regional D&I managers will be initially trained, starting in
October 2013, who will then train executives and top management. The various regions identified their own individual fields of action in the period underreview, in which the first activities will
be initiated in the 2013/14 fiscal year.
One vital field of action for all regionsis, for example, increasing the numberof women in management. However,with regard to the age structure in theworkforce, the challenges are very different depending on the demographic
trends of the particular region.

New HR organization
In the period under review the humanresources department initiated a comprehensive transformation process thatis expected to take a number of years.
This involves introducing new uniform
organizational structures and humanresources processes to support efficient and effective cooperation between the human resources department and the various business units.
At the same time, we intend to realize
cost and time-savings by centralizing
administrative processes and increasing the degree of automation for a number of functions, such as payroll or certificate generation. The HR department
should then have more time available
to help form the dynamic change processes of a global player using the right
personnel development tools.
One major prerequisite for functioning processes and well-founded decisions is to have a suite of integrated
and powerful IT systems for human resources. We began to set up a uniform
global personnel information system inthe 2011/12 fiscal year. The first step,
the uniform capture of the master data of all employees, such as internal
professional career paths, will be completed by the beginning of 2014. By reflecting the global structure of our organization in our personnel information
system, reporting paths and sources ofexpertise will be made more transparent, which will facilitate the creation ofvirtual teams across national and divisional borders.
The availability of such master data
constitutes an important foundation
for computer-based HR processes.
Group-wide pilot proj­e cts will begin
in the 2013/14 fiscal year focusing on
two talent management processes: aproj­e ct in China focuses on recruiting
while another proj­ect in Brazil relates tothe employee appraisal interview andVoith Annual Report 2013

Group Management Report

II.5.

Results
goal agreement process. In addition,
the master data will be incorporated
in a number of automatically generated HR reports that will be regularly issued on such indicators as employee
churn, workforce structure and new recruits. In the mid-term we plan to implement strategic workforce planning.
This will allow us to identify our future
demands based on quantitative andqualitative information, broken down
by profession, and derive the associated training measures, recruitments
or job placements to address the need.

Restructuring places significant
burden on the profit for the year
The Voith Group generated a net income of € 63 million in the 2012/13 fiscal year, well down on the net income
recorded in the previous year (€ 114 million, a decrease of 44 %). The greatest factors leading to this decrease inearnings were the burden from the restructuring measures we had initiated and the discontinuation of isolated
business operations.
Total output fell by 1 % to € 5,733 million in the period under review (previous year: € 5,775 million). As sales remained constant, the reduction in total
output was largely due to a decrease
in inventories of work in process. Broken down by Group Division, total output fell 7 % at Voith P­ aper, 5 % at Voith­Turbo, offset by an increase of 9 % in
total output at Voith Industrial ­Services
and 4 % at Voith ­Hydro.
Cost of material decreased by € 31 million to € 2,339 million (previous year:€ 2,370 million, a fall of 1 %). The material ratio, defined as the relationship between cost of material and total output,
remained virtually unchanged at 40.8 %(previous year: 41.0 %).
Personnel expenses rose by 3 %to € 2,154 million (previous year:€ 2,096 million). The change is dueto the higher headcount of the Voith
Group and moderate wage and salary increases. The ratio of personnel
expenses to total output increased
to 37.6 % in the Group (previous year:
36.3 %). This rise in the personnel ratio

Voith Annual Report 2013is due to a rise in personnel expenses
at Voith ­Turbo to build up in advancethe workforce in growth regions, coupled with a fall in total output. The
Group managed to reduce personnel
expenses at Voith ­Paper, largely on account of the restructuring measures initiated in the previous year. However,this reduction was not of a sufficiently
large scale to compensate for the fallin total output, which is therefore also
reflected in a rise in the ratio of personnel expenses to total output. Additionally, the rise in the ratio at Grouplevel is also due to a higher share of
the Group’s total output stemming from
Voith I­ndustrial S­ ervices, a Group Division that typically relies more heavily
on human capital.
Other operating expenses net of otheroperating income dropped to € 756 million (previous year: € 786 million, a fallof 4 %). The ratio of net operating ex­penses to total output decreased to13.2 % (previous year: 13.6 %). The significant cost savings at Voith ­Paper were
the greatest factor in this improvement.
The operational result prior to non-recurring items fell by 10 % to € 308 million (previous year: € 341 million).
The non-recurring result amounted to€-156 million (previous year: €-95 million). This item consists of personnelrelated expenses in connection withthe restructuring measures describedin Section II.4 “Employees” to downsize
the workforce. On the other hand, it also includes the personnel-related expenses of discontinuing certain isolated operations as well as the impairment

77

Group Management Reportlosses recorded on non-current assets and current assets as well as other non-recurring expenses. Total personnel-related expenses amount to€ 96 million (previous year: € 90 million)
with impairment losses and valuation
allowan­c es accounting for € 44 million(previous year: € 2 million) and the netbalance of other non-recurring expenses and non-recurring income coming to
a net expense of € 16 million (previous
year: an expense of € 3 million). In detail, Voith ­Paper accounts for €-64 million of the non-recurring result (previous year: €-84 million), Voith ­Turbo for€-73 million (previous year: €-4 million),
Voith H­ ydro for €-4 million (previous
year: € 0), Voith ­Industrial ­S ervices for€-9 million (previous year: €-7 million)
and entities providing shared ser­v ices€-6 million (previous year: € 0).

The other financial result of € 9 million(previous year: € 1 million) is chiefly due
to dividends of € 9 million received froma financial investment.

 perational result prior toO
non-recurring items Groupin € millions
341

Income taxes of €-27 million (previous
year: €-63 million) contain income fromprevious periods of € 20 million (previous year: € 18 million) mainly on account of changes to tax obligations forprevious years.

308

2011/122012/13

The other items in the consolidated
statement of income changed in linewith the pattern of business development.
Net income Groupin € millions
114

63

Interest income rose by € 1 million to€ 13 million (previous year: € 12 million),
mainly due to higher investments offree cash in currencies offering higher interest rates than those found in
the euro zone. Interest expenses were
cut back to € 89 million (previous year:€ 90 million). The main reason for the
decline is the reduction in financial liabilities in the previous year (repaymentof a loan of € 100 million from the European Investment Bank).

78

2011/122012/13

Voith Annual Report 2013

Group Management Report

III. Business development and earnings positionof the Group Divisions
III.1.

Voith ­Hydro
Improvement in both sales
and results
Full-line supplier forhydro power plants
For more than 100 years, hydro power plants throughout the world havebeen fitted with turbines and mechanical equipment supplied by Voith. As afull-line supplier for hydro power plants,
Voith ­H ydro is now one of the world’s
leading industrial partners for hydropower plant operators. This applies
both to the field of electricity generation and the pumped storage of energy.
Voith ­Hydro’s portfolio of products andser­v ices covers the entire life cycle oflarge and small hydro plants and includes all major components: generators, turbines, pumps and automation systems, including measurement
and control systems, right through toafter­m arket business in spare partsand maintenance ser­v ices. In the fieldof Ocean Energies, Voith ­Hydro offers
innovative technologies such as tidal
current turbines to exploit the energy
from ocean currents.

­ ydro power market weakerHthan expected
In the 2012/13 fiscal year the global hydro power market continued to cool off
and remained below the original expectations. The market for large hydroVoith Annual Report 2013

power systems remains calm. Only a
few major proj­e cts were tendered out.
The small hydro segment (power plants
with a generating capacity of 30 MW
per turbine) was at a distinctively lower
level of activity than in previous years.
Worldwide, no significant pumped storage proj­e cts were awarded. Modernization proj­e cts provided significant
stimulus which have become a major
driver for new orders in many regions.
Service business continued to develop positively: demand for spare partsand maintenance ser­v ices continued
to grow.
The reasons for the weaker market
overall differed from region to region.
Major proj­e cts were once again postponed in the emerging markets during
the year under review. In North America, where large volumes of shale gas
are currently being tapped with a concomitant fall in gas prices, investments
in other forms of electricity generation,
including hydro power plants, are being
held back. In southern Europe the market was dampened by the financial crisis in the region and the high levels ofsovereign debt. In northern Europe theeconomic viability of pumped storage
plants is severely impeded by the political environment in Germany. Due tothe massive expansion of photovoltaics,
solar power is now available on a large
scale at the midday peak times. As aresult, the prevailing business model of pumped storage plants to date,of meeting peak demand and being

compensated accordingly, is coming
under pressure.

Sales up 6 %Voith ­Hydro increased its sales by 6 %to € 1,388 million in the 2012/13 fiscal
year (previous year: € 1,315 million).
Sales in the large hydro segment madethe biggest contribution here.
A large share of sales is still generated in the emerging markets. In addition to South America, Brazil in particular, the regions enjoying the strongest
sales are North America, Europe excluding Germany and Asia.

Fewer new orders in a weak market
In the period under review, Voith­H ydro won orders totaling € 1,190 million. However, on account of the weaker market, orders received failed tomatch the level of the previous year(€ 1,316 million, down 10 %). Nevertheless, the level of orders received is generally satisfactory in light of the contracting market. The main markets for
new business in the period under review were Africa, South America, North
America, eastern Europe and Russia.
Orders on hand came to € 2,880 million as at September 30, 2013 (previous year: € 3,299 million, a decreaseof € 419 million).

79

Group Management Report

Our orders received in the reporting
period were dominated by a numberof modernization and maintenancecontracts, some of them large. The
installed base of hydro power plants
worldwide, which continues to growsteadily, and the increase in runningtimes is widening the focus of modernization to include younger hydropower markets in addition to the established ones in North America andEurope. For example, we won a contract to modernize the Brazilian 1,420
MW Salto Santiago power plant. We
also received the contract for the second stage of the modernization of theRussian hydro power station in Saratov with an order for the rehabilitationof four further turbines. The full proj­
ect comprises the modernization of
21 Kaplan turbines to improve theirgenerating capacity from 60 MW to
68 MW per turbine. In the Democratic Republic of Congo, we have beencommissioned to modernize the Inga
I hydro power plant which went into
operation in the early 1970s. The proj­
ect on the Congo River is financed by
the World Bank, based in Washington
D.C., USA. As part of the Inga I proj­
ect, Voith will fully overhaul two generator turbine units of the hydro power plant. Their generating capacity will
be increased to 55 MW each and theefficiency of the machines will be optimized. Other n­ otable contracts include
the modernization of the Brownlee andOwens Gorge power plants in the USA
and also the San Men Xia hydro power
plant in China. Other major modernization proj­e cts were also won, including proj­e cts in Canada, Norway, Germany and Japan.

80

We were also awarded the contract fora large hydro power plant to be constructed in Angola. We are deliveringand installing four generators and turbines with a total generating capacity of more than 700 MW for the Cambambe II plant on the Cuanza River, as
well as the associated control systems.
This proj­e ct is the single largest individual contract that Voith ­H ydro won
in the year under review. Africa is apromising market for hydro power. On
the one hand, only a small fraction of
the technically feasible potential on thecontinent has been exploited. On theother, many African states are budgeting a high level of spend on their energy sector, with hydro power becoming
increasingly favored as a local and climate friendly source. We won another new construction proj­e ct in Turkey,
a market that also displays enormous
potential. The energy supplier, Kalehan
Enerji, ordered three Francis turbinesfrom Voith H­ ydro for the Upper Kaleköy
power plant, with a generating capacity of 202 MW each, plus the associated equipment. Upper Kaleköy is one ofa cascade of four power plants and is
the second proj­e ct on the Murat River in eastern Turkey. Voith is currently
fitting out the Beyhan-1 hydro power
plant located further downstream. In
Laos we were awarded the contract
to construct the new Nam Hinbounhydro power plant. The contract consists of the complete delivery of two
generator turbine units and the complete electrical and mechanical equipment including the automation systems.
Now that we have established a long
tradition in China as a provider for hydro power plants, the proj­e ct in Laos

Sales Voith Hydroin € millions
1,315

1,388

2011/122012/13

Orders received Voith Hydroin € millions
1,316

2011/121,190

2012/13

Voith Annual Report 2013

Group Management Report

5,323

represents an important milestone for
our Southeast Asian activities. Southeast Asia has huge technically feasiblehydro power potential and will, in our
opinion, evolve to become a significant
hydro power market.

2012/13

In the small hydro power segment, we
won contracts in Japan, India, Latin
America and Turkey. We managed toincrease the volume of new businesswith spare parts and maintenance ser­vices on the previous year.

Employees Voith Hydro

5,087

2011/12

Profit from operations Voith Hydroin € millions

107

100

2011/122012/13

Voith Annual Report 2013

Voith named the best company inthe capital goods industry in Brazil
For the second year running, Voith­H ydro has been chosen as the bestcompany in the capital goods industry in Brazil. This award is a part of the40th special edition of “The Best andBiggest” (“Melhores e Maiores”) issued
by the Brazilian business journal, “Exame”. In sum, 3,500 companies from
19 different industries were appraisedin the course of the award. The ranking
is based on commercial success andconsiders such indicators as growth,
profitability, financial soundness, investment activity and productivity per
employee. We are very pleased that
we are perceived as a local Brazilian
company with German roots and that
our contribution to Brazil, one of themost important hydro power markets
in the world, and its future are viewed
so positively.

Headcount up slightly
As at September 30, 2013, Voith ­Hydro
had 5,323 employees, 236 more thanon the reporting date of the previous
year (5,087). The rise is mainly due tothe staff needed to perform the assembly work at large construction sites inNorth and South America.

Expanded production capacity forsmall hydro and the aftermarket
business
Voith ­Hydro invested € 33 million (previous year: € 37 million, down 11 %) in thecapacity of its value chain. This corresponds to an investment ratio of 2.4 %(previous year: 2.8 %).
In St. Georgen am Steinfeld in Austria, we have started work on expanding the location at Kössler, a subsidiary of the Voith Group. Kössler is ourEuropean competence center for smallhydro technologies. We are erecting ahydro power technology center and a
new production hall at the location for
final assembly. The construction, whichshould be completed in the 2014/15 fiscal year, will significantly increase theproduction capacity of the location. We
are also fitting out a workshop in M
­ ilanfor repair and maintenance ser­v ices inorder to be well positioned in the aftermarket business. The workshop
will be opened at the beginning of the
2013/14 fiscal year. In South America
we brought long-term investment proj­
ects to a successful conclusion in theyear under review. Our Brazilian facility in Manaus is now fully productive81

Group Management Reportand is successfully supplying products
for hydro power proj­e cts in the Amazon region.

R&D: on the road to the
one gigawatt unit
Voith H­ ydro invested heavily in research and development once again
in the 2012/13 fiscal year. R&D expenditure in this Group Division cameto € 83 million, slightly down on the level seen in the previous year (€ 87 million, a decrease of 5 %). The R&D ratio to sales was thus 6.0 % (previous
year: 6.6 %).
One focus of our development work
lies on developing particularly powerfulturbines and generators. We reached
an important technological milestone
on the road to developing the first one
giga­watt generating unit by successfully putting a turbine with a generating capacity of 784 MW into operation at the Xiluodu power plant on the
Jinsha River in China in August 2013.
This is the most powerful generator-turbine unit that we have ever built and isjust the first of three of such units that
we are supplying to the Three Gorges
Corporation.
Development of such powerful units
in the 1,000 megavolt ampere classhinges on developing suitable generator bars. We conducted a series of successful experiments in the year underreview using 25 kV generator bars. This
provided us with important insights into insulation and the technical design82

of high voltage bars and the necessary processes.
In the small hydro segment we continued to concentrate on our innovative
power plant concept, the StreamDiver. After the prototype completed one
year of trouble-free operation in August
2013, within the framework of a cooperation proj­e ct in Austria, it will now
be launched on the market. With theStreamDiver we can now provide hydro power solutions to locations whereconventional hydro power plants werepreviously impossible due, for example,
to low heads or nature reserves. The
StreamDiver means that construction
work in the surroundings is kept to aminimum as the entire drive chain, consisting of the turbine, shaft, bearingsand generator, is housed within one
concrete box. The bearings are lubricated by water. This rules out any riskof contamination of local water. More­over, the StreamDiver is particularly low
maintenance.

Heidenheim location during the period under review and prepared it for installation off the coast of the Orkney
Islands. We installed the turbine in September 2013 and put it into operation
successfully. Depending on how thetest phase develops and its results, wewill operate the plant there for the coming one or two years. The next step will
be to operate a number of plants in theform of a small tidal farm. A number ofproj­e ct developers and energy providers are currently developing such semicommercial farms. We have entered into talks with them regarding equippingthese farms with our system. In February 2013 we signed a Memorandumof Understanding with GDF Suez, theFrench energy giant, to construct asemi-commercial farm of tidal current
turbines in Raz Blanchard. The plan
is for Voith H­ ydro to deliver between
three to six tidal current turbines for thepilot plant, which will be constructedon the Normandy coast, by 2016. The
engineering ser­vices for this plant werecommissioned in July 2013.

In the field of ocean energy we madefurther progress in the 2012/13 fiscal
year in the development of tidal current turbines. After successfully completing a one-year test phase at a model power plant near the South Koreanisland of Jin-do, and intensive analysisof the results, we have taken our tidal current program a step further byconstructing a 1:1 scale 1 MW turbine
at the European Marine Energy Centre(EMEC) in Scotland to bring the novel
low-maintenance tidal current turbine
technology up to a commercial scale.
We constructed the test turbine at ourVoith Annual Report 2013

Group Management Report

M&A: market position reinforced in
Russia, Sweden, and Canada

Improvement in the profit
from operations

Voith ­H ydro has established a joint
venture with Rus­Hydro, the largest hydro power producer worldwide, in thecourse of the period under review. The
foundation of the joint venture strengthens the position of Voith ­Hydro on theimportant Russian hydro power market.

Voith ­H ydro was able to continue thepositive trend in earnings seen in recent years and generated a profit fromoperations of € 107 million. As announced, this result surpasses the result of the previous year of € 100 million, an increase of 7 %. Return on sales
was 7.7 % (previous year: 7.6 %).

In Sweden, Voith ­H ydro increased its
majority shareholding in what was at
the time VG Power AB, Västerås, Sweden, from 51 % to 100 %. This entity,
which was founded in 2002, offers acomprehensive portfolio of ser­vices forhydro power plants. One of its main focuses lies on modernization work, upgrades and overhauls of generators. After joining the Group in 2006, the hydropower specialist has been successfully contributing to proj­e cts all over theworld within the international networkof Voith Hydro. Since August 2013 it
has been trading under its new name,
Voith ­Hydro AB.
In addition, Voith H­ ydro acquired theCanadian company, Vortex Hydrosystems Inc. in February 2013. Vortex­Hydrosystems is a supplier of mechanical equipment to hydro power plants.
The acquisition has bolstered the position of Voith H­ ydro on the growing
market for service business in North
America.
More information on these transactions
can be found in Section IV.4 “Financial investments/participating interests”.

Voith Annual Report 201383

Group Management Report

III.2.

Voith ­­Industrial ­­Services
Prevailing in a difficult climate
Service provider for industry
Voith ­Industrial ­Services is a ­global service provider for key industries: automotive, energy, chemical, petro­c hemical,
mechanical engineering and aerospace.
Its portfolio of ser­vices ranges from facility management, maintenance, andinstallation through to planning anddevelopment.
Voith ­Industrial S­ ervices is organized
into four divisions: the Automotive andEnergy-Petro-Chemicals divisions offer industry-specific solutions for the
automotive and process sectors. The
Engineering S­ ervices division offers
engineering ser­v ices to automakers
and manufacturers of rail vehicles, aswell as the aerospace industry. Under
the DIW brand, the Industries division
provides comprehensive regional ser­vices related to operating and managing industrial locations in Germany andAustria.

No clear trend in the businessenvironment
Developments on the markets in theindustries served by Voith ­Industrial­S ervices were not all uniform in the
2012/13 fiscal year.
There was regional variation in the production of automobiles. In China themarket continued to grow at a very
fast rate. In North America, the market continued to recover. In Europe bycontrast, production generally declined.

84

German manufacturers of premium vehicles profited from the sustained boom
in exports to the Americas and Asia.
The electricity industry in Germany issuffering from falling income from conventional power plants in the wake ofthe new energy concept, which is leading to the closure of some power plants
powered by fossil fuels. As a result, demand for repairs and maintenance was
low in the period under review, also at
the remaining power plants. The European oil and gas market is suffering from a glut. Nevertheless, demand
from refineries remained high, for periodic reasons, in the 2012/13 fiscal
year for ser­v ices related to turnaroundmaintenance proj­e cts. Large turnaround maintenance proj­e cts are generally conducted by refineries at fiveto six year intervals. In the chemicals
industry only a few new proj­e cts andconversions were awarded.

Sales Voith Industrial Servicesin € millions
1,101

2011/121,185

2012/13

The rail sector served by the Engineering S­ ervices division enjoyed growing
levels of investment in infrastructure,primarily in Asia, South America, andeastern Europe. In the automotive andcommercial vehicles sector, numerous
new models and variants provided
growth. Now that the largest manufacturers in the aerospace industry, Airbus
and Boeing, have generally completed development of their new products,
new contracts are expected to concentrate on cabin design as well as production planning and management.
The sector served by our Industries
division developed in a generally stable economic environment with large

Voith Annual Report 2013

Group Management Report

Employees Voith Industrial Services

19,984

21,032differences between the various industries. The competition and pressure on
prices was particularly fierce in infrastructural facility management.

Owing to the short throughput timesof service contracts, Voith ­Industrial­S ervices does not record the volumeof orders on hand. Consequently, its
figures for sales and orders received
are identical.

Sales up by 8 %2011/122012/13

Profit from operations Voith Industrial Servicesin € millions
41
30

2011/12Voith ­Industrial ­Services was able to increase its sales by 8 % in the 2012/13
fiscal year to € 1,185 million (previous
year: € 1,101 million). Sales are therefore in line with our expectations.
The higher sales stem partly from organic growth, primarily due to the Automotive division. However, there werealso several changes in the consolidated Group, most of which affected thedivisions Automotive and Engineering­S ervices, the net effect of which was
to increase sales. Nevertheless, evenafter eliminating these consolidation effects, Voith ­Industrial S­ ervices recorded an increase in sales.

2012/13

Voith ­Industrial ­Services generated justover one half of its sales in Germany.
The Rest of Europe was the second
most important regional market for thisGroup Division. The share of sales accounted for by the Americas decreasedslightly. Asia still accounts for a relatively low, albeit steadily increasing,share of sales. In the mid-term Voith­Industrial S­ ervices aims to achieve agreater regional balance. In particular,
it intends to expand on its market position in North America and South America as well as in China and India in order to participate in the growth of thesemarkets to a greater degree.

Voith Annual Report 2013

Three of the four divisions
record growth
Voith ­Industrial S­ ervices has grown in
the Automotive, Engineering ­S ervices
and Industries divisions. Sales in Energy-Petro-Chemicals were on the
decline.
In the Automotive division, we once
again recorded a significant increase insales after two years of strong volume
growth. In Europe we profited from
our alignment towards manufacturersof premium brands. For example, theBritish manufacturer, Jaguar Land Rover, awarded us a facility management
contract for a number of years for its
new engine factory in Wolverhampton,
United Kingdom, which is scheduled
to open in 2015. Within the frameworkof this contract, we will support Jaguar Land Rover beginning in the construction phase by cooperating closely with the specialists who have been
assigned with the design and installation of the plant and machinery. In addition, the division benefited from thecontinuing trend towards automationand expansion of various automobile
models, e.g. contracts for Volkswagen
and Škoda. More­over, we received acontract for the first time from Ford in
Europe to perform the technical facility
management at its facility in Saarlouis.

85Group Management Report

Excellent business in South America and China contributed to the general growth in sales. A ten-year contract awarded to us by Chery Jaguar
Land Rover for their facility in Changshu, China, is worthy of special mention. The joint venture between the British manufacturer, Jaguar Land Roverand its Chinese partner, Chery Automobiles, engaged us to perform thewheel and tire assembly for the plant.
We also won new business in India,
which has seen modest market developments. We managed to obtaina number of repair and maintenancecontracts, including contracts with
Mercedes-Benz and Volkswagen as
well as Caterpillar, the manufacturerof earthmoving equipment, and automotive suppliers, like ZF Lenksysteme
and Wabco.
In January 2013, Voith ­­Industrial ­Services
acquired ThyssenKrupp ­S ervices Ltd.
in the United Kingdom, reinforcing its
position as one of the leading ser­vices
providers for the automobile industry
in the United Kingdom. The entity was
successfully integrated in the Group in
the year under review and contributed
to the buoyant development of sales in
the Automotive division. For example,
under the new constellation we wereable to win PSA Peugeot Citroën United Kingdom as a customer.
In the 2012/13 fiscal year, Voith ­Industrial­Services won various awards from customers in the automotive industry. Voith
Industrial S­ ervices was awarded withthe “Golden Excellent Service Award”
for the second time in succession by
the Volkswagen powertrain facility in

86

Shanghai. Voith received the golden
award for qualifying as the best of a­total of 155 participating companies
in the category, “Excellent service”. In­India, Voith ­Industrial S­ ervices received
a number of awards in categories suchas safety, service, and Kaizen (the continuous improvement process) from its
customers, Ashok Leyland, one of
the largest truck manufacturers in India, as well as Volkswagen, Toyota and
Fiat.
Sales in the Energy-Petro-Chemicals
division were down on the previous
year. Business with oil and gas refineries in Northern Europe developed
positively. One success was winninga master agreement with the Norwegian oil and gas conglomerate, Stat­oil. We have been assigned the taskof performing numerous maintenanceser­v ices and conversion proj­e cts forthe refinery in Mongstad in future. In
addition, we were awarded with a proj­
ect to modernize the tanks at the Danish refinery in Kalundborg. A numberof turnaround proj­e cts and assemblyproj­e cts were awarded by various refineries in the period under review. These
included turnaround proj­e cts for Neste
Oil, a Finnish oil company, at a refineryin the Netherlands, a refinery operatedby Total in central Germany and the refinery in Lysekil operated by the Swedish oil company, Preem. BP assigned
us with a turnaround proj­e ct for a special ship used to extract, store and load
oil off the coast of Angola. We also wona large automation proj­e ct at the potassium mining operation, K + S KALI GmbH during the period under review. Demand for maintenance workand modernization proj­e cts from electricity providers in Germany remained
extremely weak.
In the 2012/13 fiscal year, Voith ­Industrial­Services was awarded for its industrial
safety by three customers in the field ofenergy-petro-chemicals. As in the previous year, Shell presented us with their
Safety Award for 200,000 work-hours
without an incident or infringement ofsafety procedures at their Rhinelandrefinery. We were also awarded by­Esso Norge AS for the safe executionof a turnaround proj­e ct at an oil refinery in Oslofjord. The high safety stan­dards for the proj­e ct and the excellent
work performed by the proj­e ct manager were awarded separately.
The Engineering S­ er vices division,
which offers contract engineering forthe aerospace, automobile, commercial vehicle and rail vehicle industries,
grew significantly. We recorded strongorganic growth in engineering ser­vices
for train manufacturers. Among othercontracts, we were able to win new
tramline development proj­e cts in China. We managed to win our first engineering proj­e ct in Brazil. The train
manufacturer, Bom Sinal, assigned
the engineers from Voith with the taskof developing the bogies for a diesel
locomotive. We were also successful
in the automotive segment. We wereable to display a new facet of our portfolio of ser­v ices within the frameworkof a proj­e ct for a German manufacturer of premium brand vehicles. At thecustomer’s research and development
center, we operate a mixed reality studio designed to secure both products

Voith Annual Report 2013

Group Management Report

and their production. We not only supplied the technical equipment but also
provide specially trained experts who
facilitate workshops with the customer looking at various aspects of development, planning and production. By
combining a virtual presentation withan inspection of physical prototypes
at an early phase of the development
process, the start of production canbe optimized and problems with serial production avoided. In the aerospace segment, the joint venture with
P3 In­g enieurs­g esell­schaft, which wasestablished in April 2012 but was notconsolidated until the second half offiscal 2011/12, had a strong impact onsales. In the meantime, P3 Voith Aerospace GmbH has been able to establish itself as the largest engineeringser­v ices provider to the aerospace industry in Germany.
In November 2012, the EADS aerospace group once again appointed P3
Voith Aerospace as an “E2S Preferred
Supplier for Engineering ­Services”. Thismeans that Voith remains one of a selected group of just five strategic engineering partners worldwide that are
taken into consideration when new invitations to tender are issued.
The Industries division, which offers
regional ser­v ices related to the operation of industrial facilities in Germany and Austria, was able to increase
its sales slightly. Not only the up-andcoming LED business but also contracts won in the traditional businesslines contributed to this development.
For example, we were able to win thelargest paper manufacturer in Austria,

Voith Annual Report 2013

Sappi Produktions GmbH, as a newcustomer. Our job is to take care of
the infrastructural building management, building technology ser­v ices,international postal system and telephone connections for the company.
We managed to prolong our comprehensive facility management agreement with Alfred Ritter GmbH for another two years. DIW, a subsidiary ofVoith I­ndustrial ­Services, has been providing ser­vices to this chocolate makersince 1986 without interruption.

Over 1,000 new recruits
As at September 30, 2013, Voith­Industrial ­Services employed a total of
21,032 persons (previous year: 19,984).
This is 1,048 employees more than theyear before. Alone 854 of these newjobs can be attributed to the acquisition of ThyssenKrupp ­Services Ltd. in
the Automotive division. After eliminating these consolidation effects, Voith­Industrial S­ ervices created 194 newjobs in the period under review (up 1 %).
From a regional perspective, approximately 40 % of the workforce of Voith­Industrial S­ ervices is employed in Germany, followed by North America andSouth America as well as the Rest ofEurope and Asia.

Increase in capital expenditures
In the period under review, Voith­Industrial S­ ervices invested € 19 million(previous year: € 17 million) in property, plant and equipment, a rise of 11 %.
The main focus of capital expenditure
lay on the Automotive division, wheremost investment was made in relation
to the contracts won by the division.
The regional focus of investments lay
in Germany.

Operations return a profit, albeit
at a lower level
In the period under review, Voith ­Industrial­ ervices generated a profit from operaS
tions of € 30 million and therefore did
not match the result recorded in theprevious year of € 41 million, a decreaseof 26 %. As a result, the profit from operations remained at a healthy level although we failed to fully reach the goals
we had set ourselves. Return on sales
was 2.5 % (previous year: 3.7 %). The
decrease was mainly due to developments in Energy-Petro-Chemicals, which
failed to meet the budget.

87Group Management Report

III.3.

Voith ­­Paper
Decisive response to a
deteriorating market
Partner and trailblazer for thepaper industry
As a partner and pioneer to the paperindustry, Voith ­Paper provides leadingedge technologies and products for theentire papermaking process, all from asingle source. Its continuous stream ofinnovations optimizes the papermaking process. The focus is on developing products and technologies aimed
at ensuring maximum efficiency in the
consumption of energy, water and fiberin order to conserve resources.
At the beginning of the 2012/13 fiscal
year, Voith P­ aper reorganized to create a new structure that gives moreemphasis to the regions it serves. This
combines four regional business units,Asia, EMEA (Europe, the Middle East
and Africa), North America and SouthAmerica, and three global businesslines: Projects, Products & ­S ervices,and Fabric & Roll Systems. By reinforcing the influence and responsibility of the various regions, we aim to
do justice to the different market conditions and satisfy customer needs inthe best way possible.

Heavy recession in the market
for paper machines
The graphic paper machine segment
has been suffering a sustained andmassive slump for a few years now dueto the increasing digitiz­ation of daily life.

88

In addition, the paper market entered acyclical downturn in the year under review. Consumption of paper is growing
even more slowly than forecast at theend of 2012 by a number of recognizedindustry experts. Although global paper production has risen overall, future
growth will be at much slower rates
than originally expected. In particular,
the critical Chinese market proved to
be much weaker than assumed at thetime our annual report for 2012 waspublished. The willingness of paper
makers to invest in new machines has
continued to cool off as a result of thelower than expected consumption of
paper. This affects all regions and paper categories with exception of tissue,
the consumption of which is expected
to rise on account of developments in
Asia and Latin America.
The trends already reported in the previous year have continued. Demand formachinery at the top end of the size
range remains extremely low. Most demand is for compact, locally produced
mid-sized machines with a much lower investment volume. Overall, there isfierce competition on the market. The
number of local competitors is growing, particularly on the critically important Chinese market.

Sales Voith Paperin € millions
1,738

2011/12

1,639

2012/13

Orders received Voith Paperin € millions
1,744
1,366

2011/122012/13

Sales down on the previous year
In the 2012/13 fiscal year, Voith ­Paper’s
sales fell 6 % to € 1,639 million (previous year: € 1,738 million) on accountof the ongoing recession in the market for paper machines. Consequently,

Voith Annual Report 2013

Group Management Report

we failed to reach our target of stabilizing sales at the same level as in theprevious year.

Employees Voith Paper

9,819

2011/129,223

2012/13The decline in sales solely affects business with new machines and large
rebuilds and is primarily due to thesudden fall in orders received in theprevious year. This situation was exacerbated by proj­e ct delays caused bycustomers, which led to a further fallin sales. Business with products, consumables, and ser­v ices remained stable overall. Asia and EMEA are by far
the most important regions for sales.

Profit from operations Voith Paper

Massive drop in orders receivedin € millions
84

86

2011/122012/13

As expected, the recession in the market for paper machines affected orders
received even more than sales. In the
2012/13 fiscal year orders received
fell by 22 % on the previous year to€ 1,366 million as a result (previous year:€ 1,744 million). The decrease is due
solely to business for new machines.
With regard to the tense market, in theinterim report published in May 2013,
we were forced to make downward adjustments to the forecasts made in theannual report 2012. Orders received in
the period under review lie within therange of our adjusted budget. As at theend of the year on September 30, 2013,
orders on hand stood at € 1,134 million,a fall of € 357 million on the previous
year (€ 1,491 million).
The massive slump in new business canbe attributed to a general reluctanceon the part of paper makers to commit
to investments in new machines. Most

Voith Annual Report 2013of all, this trend affected sales in Asia
much harder than expected. By contrast, we were pleased to see growthin South America and North America.
Globally, only a few proj­e cts for new
machines were awarded. In addition,
demand is shifting to more compact
machines, particularly in Asia. This medium-sized segment is characterized byvery intense local competition.
Most of the contracts for new machines
we won in the period under review were
for machines used to manufacture tissue. For example, Voith P­ aper won acontract from Celulosa Argentina todeliver a full-line tissue machine. The
machine to be built in Capitán Bermúdez, approximately 300 km northwestof Buenos Aires, will go into operation
at the beginning of 2015 and will produce approximately 30,000 tons of toilet paper and paper towels. By contrast, the segment for board andpackaging paper, which was still
strong in the previous year, suffered a
sharp decline on account of the recession. One of the few orders in this field
was awarded by the Turkish papermaker, Modern Karton, to whom Voith
supplied a new testliner machine forlight-weight packaging papers. Likewise in the board and packaging segment, a major rebuild proj­e ct wasplaced by Boise, the North American
paper manufacturer, for the conversion
of a machine originally designed tomake newspaper. Activity in the graphic paper machine segment came to a
virtual standstill in the 2012/13 fiscal
year. Orders for products, consumables and ser­v ices remained stable on
the whole.

89

Group Management Report

Voith P­ aper prepares for thechallenges in the paper market
We are applying a range of strategic
approaches, some of which we initiated in previous years, to offset thestructural changes on the paper market, at least to some extent, and to exploit new market opportunities. In orderto establish a greater foothold on theimportant Chinese market, we have invested heavily in new production plantin recent years and built up our local
human resources. With its more regional focus, the new organizational
structure implemented at Voith ­Paperat the beginning of the year under review also reflects the significance ofthe emerging markets for our business.
In order to mitigate cyclical fluctuations, we are reinforcing our businesslines, Products & S­ ervices and Fabric& Roll Systems. Their significance inthe sales mix for Voith ­Paper has increased constantly in recent years, a
trend that is certain to continue. We
are focusing on developing machines
for the growing segment of mediumsized, less capital-intensive machines.
Solutions that consume fewer resources continue to have a high priority forus, as fiber supply, energy and water
consumption are key challenges for paper manufacturers and are becoming
increasingly important decision criteria when orders are awarded.
Due to the increasingly gloomy market outlook and the ongoing serious

90

implications which the structural changes in the market have for business, further job cuts are unavoidable to match
capacity to the new situation. We are
therefore planning to bundle competencies at individual locations and adjust production capacity to mirror thesmaller market. The planning involves
the loss of approximately 800 jobs at
various locations in Germany and Austria. The goal of all these measures is
to secure the profitability and competitiveness of Voith ­Paper for the longterm even under the deteriorating market conditions.

Headcount on the decline due
to job cuts
The restructuring measures initiated in the Projects and the Products&S­ ervices business lines in Europe
in the 2011/12 fiscal year have been
contractually agreed on and, to a certain extent, already been implemented. As at September 30, 2013, Voith­Paper employed 9,223 staff. This represents 596 fewer jobs than one year
ago (September 30, 2012: 9,819, a decrease of 6 %).

extraordinarily high figure recorded in
the previous year of € 137 million, a fallof 51 %. The investment ratio comes to
4.1 % (previous year: 7.9 %).
The focus of investments was once
again on China. At Voith ­P aper City,
opened in 2007 in Kunshan near
Shanghai, we expanded our production capacity in our Fabric & Roll Systems business line, in order to best
serve the growing demand for rollers and roll covers and ensure we canmeet orders from Asian customers at
short notice. Work also commenced ona new cross-divisional training centerat Kunshan. The intensive level of investment in recent years has anchoredthe local presence of Voith ­Paper in
China and laid the foundation for further expansion into Asia. Now that thebulk of our mid-term investment proj­
ects have been realized, the level ofinvestment in China is going to drop
markedly in the coming years. In theother regions, investments in replacements and maintenance were at theusual level.

Further investment in China
Voith P­ aper invested a total of € 67 million in property, plant and equipmentin the 2012/13 fiscal year. As planned,
total investment is well down on theVoith Annual Report 2013

Group Management Report

R&D activities continue to focus ontechnologies that consume fewer
resources

design prevents remoistening of thepaper web and therefore improves the
CD moisture profile.

The research & development expenditures of Voith Paper reached € 98 million in the year under review comparedto € 94 million in the previous year, up
5 %. The ratio of R&D expenditure tosales was 6.0 % (previous year: 5.4 %).
As in earlier years, activities focused on
the development of new technologies
that save energy, pulp and fresh water.
The goal is to further improve the paper
manufacturing process as regards environmental sustainability and resource
efficiency. This results in solutions that
not only take into consideration ecological aspects but also provide considerable economic benefits in the form of
cost savings for customers.

A new range of dryer fabrics has attained new levels of drying efficiency.
The Evaporite family has been developed particularly for applications requiring robust dryer fabrics.

Voith ­Paper launched a large numberof new product developments on themarket in the 2012/13 fiscal year. For
example, Voith now offers complete
pulp drying machines, from headbox
to the cross cutter and bale packaging.
The vertical arrangement of the rollsin the dryer section is innovative andunique. This energy-saving innovation
has been patented by Voith.
We also developed an innovative sealing strip with integrated lubrication for
all kinds of suction rolls. This more efficient means of applying lubricating water has radically reduced the consumption of water. Moreover, the special

Voith Annual Report 2013

The CTC technology launched in theprevious year (“Controlled Thermal
Conversion”) has enjoyed a positive
reception on the market. We have already received a number of orders forpreliminary studies. CTC converts paper sludge, a waste product created
when preparing recycled paper, into
valuable minerals and thermal energy.
Generally, CTC has aroused great interest in the paper industry, both in termsof the greater economy the process affords as well as in regard to the sustainability programs installed by a large
number of customers.
A number of FlowJec dosing units, another innovation launched in the previous year, have been sold and some ofthem are already in operation. FlowJec
is an environmentally friendly dosage
system for adding chemicals and additives to the paper manufacturing
process.
The ProTect measuring system which
we launched in fiscal 2011/12 met withgreat interest worldwide in the period
under review among manufacturers of

all kinds of paper, tissue in particular.
ProTect simplifies the measurement ofpress fabrics which to date has always
been done manually during running operation, thereby greatly improving industrial safety.
BlueLine is a line of products that are
aimed at keeping the consumption ofenergy, water and pulp as low as possible during stock preparation. At thesame time, customers can profit fromthe line’s high level of efficiency, quality and reliability.
The innovative strengths and efforts ofVoith ­Paper in product development
were recognized by an award from amajor customer in the period under review. Kimberly-Clark Corporation, oneof the leading producers of tissue products worldwide, presented Voith P­ aperwith its “Supplier of the Year 2012”
award. Based on a catalog of criteria,
Kimberly-Clark filtered out those suppliers who were most convincing interms of reliability, punctual delivery,
quality, sustainability, and innovative
strengths from over 75,000 suppliers.
Voith has supported Kimberly-Clark
by providing a total roll management
solution and a tissue cylinder service
which help the tissue producer to retain its leadership in a highly competitive market. The constant developmentof roll cover technology at Voith P­ aperreceived special mention in the prize.

91

Group Management Report

Joint venture established forthermal fluidized bed power plants

Profit from operations up
despite the fall in sales

In May 2013, Voith P­ aper establisheda joint venture with the Japanese engineering firm, IHI Corporation. The joint
venture, which operates under thename of Voith IHI EcoSolutions G­ mbH& Co. KG, offers complete thermal fluidized bed power plants, primarily forthe paper industry. These plants facilitate an effective and environmentallyfriendly combustion of solid waste materials generated by the paper production process, thereby generating electricity and steam.

As forecast, Voith ­Paper was able toimprove its profit from operations inspite of the adverse market and the fallin sales. The profit from operations
came to € 86 million, surpassing thefigure for the previous year of € 84 million by 2 %. The return on sales improved to 5.2 % (previous year: 4.8 %).
The cost savings from the restructuring measures initiated in the previous
year are now taking effect successively and contributed to this pleasing
development.

Voith ­Paper also entered into a cooperation agreement with Trützschler Nonwovens, an expert in non-woven fabrics. In future, both companies will offer
full production lines for the manufacture of wet-laid and hydroentangled
non-wovens. The goal of the cooperation is to develop and market innovativeand economical production equipment.

92

Voith Annual Report 2013

Group Management Report

III.4.

Voith ­­TurboBusiness down slightly due tothe weak market and the burdenof extraordinary items
Specialist in power transmission
Voith ­Turbo helps millions of people,
goods and machines to move safely
from place to place each and ev­e ryday. Our technologies transmit andcontrol power under extreme conditions—safely and in a resource-efficientmanner. Intelligent drive solutions andhighly engineered components andsystems from Voith are used in a wide
range of industries, wherever power has to be converted into controlled
movement.
Voith T­ urbo was organized as four divisions in the 2012/13 fiscal year: Industry, Marine, Rail and Road.

Market activity dampened
Voith ­Turbo provides products and ser­vices to four of Voith’s five core markets. Market activity was dampenedin most of the industries served by thecompany.
Overall, investment activity waned in allof the segments of the industrial sectorof relevance for Voith ­Turbo, although
there was variation in the trends between industries and regions. The construction of new power plants in themain markets of China and India has
dropped off noticeably. Mining activity is also declining on account of thefall in the prices for raw materials inall key markets. In the steel market,

Voith Annual Report 2013

which is displaying signs of overcapacity, investments were restricted tomere replacements of obsolete plantand equipment. Project activity in the
global oil and gas industry, by contrast,
remains high, for example in the offshore oilfields of Brazil and the Middle East as well as for the extractionof shale gas in the USA.

Brazil in particular, there was a significant upturn after overcoming the difficulties of making the transition to theEuro 5 emissions standard. In China,
there was a moderate rise in production figures. In the NAFTA countries,
the market stabilized at a relatively
high level.

The marine market continued to remain in the doldrums in the period under review. While the market for bulk
freight and container shipping is suffering from excess capacity and fallingfreight charges, many proj­e cts for tugs,
offshore ships and special ships thatare on the books were postponed due
to a tight supply of finance.

Sales down slightly

The global market for railway vehicles picked up after passing througha trough in the previous year. In China,
the largest market, the focus of activity shifted towards local transport, although even high-speed rail, which has
stagnated recently, picked up again. In
eastern Europe and Russia in particular, there was a noticeable increase inproj­e ct activity. The economic recovery in North America has continued.
In Brazil, investment activity materialized in advance of the upcoming major sports events the country is hosting.
The segments of the commercial vehicles industry relevant to the Road division displayed contrary trends that
resulted in a slight net upturn overall.
The European truck and bus market
was increasingly active in advance ofthe transition to the new Euro 6 emissions standard. In South America, andIn the 2012/13 fiscal year, Voith ­Turbo
generated sales of € 1,500 million compared to € 1,551 million in the previous
year. The fall of 3 % is in agreement withthe forecast we made in our annual report for 2012.
Developments in the individual divisions were not at all uniform. While Railsaw increasing sales, Industry was notable to match the extremely high sales
it recorded in the previous year. Marine
and Road also recorded falling sales.
More than half of sales in the past fiscal
year were again generated in Europe(including Germany). Asia accounted
for more than one quarter of sales. The
remaining shares in sales came fromthe Americas and from growing markets such as Australia and Africa.

Orders received below the highlevel of the previous year
In the 2012/13 fiscal year, Voith ­Turbo
received new orders of € 1,436 million, remaining under the excellent figure recorded in the previous year of€ 1,524 million, a fall of 6 %. As such,

93

Group Management Reportorders received were below our expectations. New business was weaker than expected in the Industry division, in particular. The Marine divisionalso recorded fewer orders than in theprevious year. Both Rail and Road enjoyed higher orders, but they were notenough to offset the fall in the other two
divisions. As a result, orders on handcame to € 1,120 million as at September
30, 2013 (previous year: € 1,284 million,a decrease of € 164 million).
One reason for orders received in the
Industry division being lower than forecast is that demand in the mining sector was down. Unit sales of components for power plants were significantly
down on the previous year, mainly because fewer coal-fired power plants
were constructed in the recently booming markets of China and India. Likewise, fewer orders were received fromthe steel industry. The weak level of activity in these three industries primarily affected drive solutions, BHS turbo
gear units and variable drives. In addition, we were forced to discontinue allbusiness with Iran on account of thetighter export restrictions. However,business in the oil and gas industry
generally developed positively. We enjoyed some notable successes in the
USA and in South America. For example, Williams, a US natural gas producer and pipeline operator, ordered anumber of highly-efficient Vorecon variable speed planetary gears with double converters for a pipeline compressor station. A follow-up order fromPetrobras, the Brazilian oil giant, foranother 28 Vorecon gears for use in
their offshore program is also of note.
We received an important reference94

contract in the field of Chinese pipeline construction from ShenYang Blower Works, one of the largest manufacturers of blowers.

Sales Voith Turboin € millions

Orders received by the Marine division
remained below the figure of the previous year due to finance-related delays
for proj­e cts. The strongest region was
the Europe excluding Germany region.
Of special note are two orders ­received
for Voith Schneider propellers and inline thrusters which will be used in special ships used to transport and supply offshore wind farms in Norway and
the Netherlands.

1,551

1,500

2011/122012/13

Orders received Voith Turbo

Orders received by the Rail divisionwere up slightly on the previous year.
We enjoyed huge gains in eastern Europe. For example, we won a major
contract with the Russian railway network (RZD). We will be delivering thegear units for the new EP 20 series ofelectrically-powered locomotives. On
the huge Chinese market, new business developed positively, whereby
metro systems proj­e cts took precedence. We are delivering our coupler
technology to CRC, a Chinese manufacturer of rail vehicles, for the Shanghai metro. We also received a major
contract from the Chinese Ministryof Rail for delivery of turbo transmissions for special rail vehicles. In Brazil, Voith secured two large contracts
in the metropolitan public transport
sector. In western Europe, where only a few public infrastructure proj­e cts
are currently being financed due to thehigh level of sovereign debt, the market for rail vehicles is dominated by demand in Germany.

in € millions
1,524

1,436

2011/122012/13

Voith Annual Report 2013

Group Management Report

Employees Voith Turbo

6,363

6,485

2011/122012/13

Profit from operations Voith Turboin € millions
151
108

Orders received in the Road divisionwere approximately at the same ­level
as in the previous year. Business withtransmissions for buses grew in theyear under review, with significant
growth recorded in South America.
Overall demand for retarders, used intrucks and buses, remained at thesame level as in the previous year, but
only managed to clamber back to thislevel after recording significant volume growth in the second half of theyear due to the transition to the E­ uro 6emission standard. While sales of our­TurboCompound product dropped dramatically, sales of our air compressors
grew as proj­e cted. Business with vibra­tion dampers for buses and agricultural vehicles picked up. Moreover, service and spare-parts business also
recorded a pleasing upturn.

Marginal increase in theheadcount
2011/12

Most investment in the
Industry division
In the 2012/13 fiscal year, Voith ­Turbo
invested a total of € 51 million (previous year: € 62 million, down 18 %) in
property, plant and equipment. The investment ratio came to 3.4 % (previous
year: 4.0 %).
The largest capital expenditures weremade in the Industry division. A focus
of investment here was on expanding the facility at the Sonthofen location where a new state-of-the-art assembly plant and test station for BHS
gear units was opened. Moreover, theproduction capacity for Vorecon gear
units is currently being expanded at our
Brazilian facility in São Paulo. This investment proj­e ct, which was initiatedin the previous year, should be completed by October 2013. Production capacities were expanded at our locations in China.

2012/13

In advance of the pending proj­e cts ingrowth fields, Voith T­ urbo increased its
headcount by addition of 122 jobs overthe course of the period. As at September 30, 2013 the Group Division employed 6,485 staff, up 2 % on the headcount of the previous year of 6,363.
Most new jobs were created in the
Industry division. However, Rail andRoad also recruited new staff, but to alesser extent. From a regional perspective, the majority of the new jobs werecreated in South America and Asia.

Voith Annual Report 2013

R&D portfolio realigned
In the period under review, Voith ­Turbo
invested a total of € 61 million on research and development, down 29 %on the previous year when it came to€ 86 million. The R&D ratio to sales wasthus 4.0 % (previous year: 5.5 %).
In the 2012/13 fiscal year we realigned
and refocused our R&D activities. We
consolidated the pipeline of new developments and have concentrated
more on developments in the Industry
division.

95

Group Management Report

We successfully launched a number of
new products on the market in the period under review. These include, forexample, our newly developed modular Vorecon gear with double converter, which was put into operation
by a customer for the first time. Thishighly efficient planetary gear is used
at two compressor stations of a gas
pipeline in the USA. In comparison to
the conventional Vorecon, the modular Vorecon with double convertor
displays even greater efficiency over a
wider operating range for the pumps
and compressors.
We extended the range of high-performance universal joint shafts for industrial applications and successfully launched the new CH series on themarket. The universal joint shafts of
the new series can handle very hightorque and are used, for example, insteel mills, heavy engineering or for paper machines. The newly developed
bearing technology increases the lifetime of the components and greatly reduces the idle time and maintenancecosts for the operators.
We founded a competence center for“Electric Drives and Mechatronic Systems” in the 2012/13 fiscal year in order
to increasingly integrate mechatronic
components and systems in our product portfolio for industrial applicationsin the future.
In the Rail division, we have been working on sustainable transport concepts
that conserve natural resources. We
recorded our first orders for the newelectric drive systems development

96

proj­e ct in the year under review. This
involved delivering the first of a totalof 40 new low-floor trams to Helsinki,
which run through the streets of theFinnish capital cleanly while simultaneously saving energy, thanks to ourtraction equipment. We are currently
working on a proj­e ct for electrical drive
systems for new trams for the Chinesecity of Shenyang.
In the Road segment we successfully launched the new DIWA.6 generation of automatic transmissions for buses. This transmission meets the Euro 6
emissions standard, which comes into
force in 2014, and provides an additional 5 % in fuel savings in comparison to
its predecessors. This lowers the operating costs and reduces CO 2 emissions. We won a number of contracts
for Euro 6 vehicles, even before introduction of the new emissions standard, for example, for the Viennese citytransport system and for city and rural
buses and coaches in Belgium.

New organizational structure
Voith T­ urbo introduced a new organizational structure effective from October 1, 2013. The new structure concentrates the activities of Voith ­Turbo on
growth segments and reinforces theroles of the regions. The previous large
Industry division has now been split
into two new strong divisions, Mining& Metals and Power, Oil & Gas. The
Marine division has now been allocated to the latter division as a business
unit. The remaining two divisions, Railand Road, stayed unchanged with thelatter being renamed Commercial Vehicles. The new organization will operate in the three large regions of theAmericas, EMEA (Europe, the Middle
East and Africa) and Asia Pacific. The
regions have been assigned greater responsibility for sales and engineering.

Profit from operations at
a good level, albeit burdened tosome extent
Voith ­Turbo generated a profit from operations of € 108 million in the 2012/13
fiscal year. As announced in the interim report, this lies below the corresponding figure for the previous yearof € 151 million, a decrease of 28 %, on
account of a fall in sales due to theweak market and increasing competition. Moreover, the profit from operations in the current year was burdenedby the loss of lucrative business in Iranon account of the much tighter export
restrictions imposed by the European
Commission and also by items fromprevious periods, namely VAT backpayments. The costs of building up in
advance the headcount in growth regions also had a negative impact on
the profitability in the current year. Allof these factors led to a significant
decrease in the profit from operations
compared to the previous year and also affected the return on sales whichcomes to 7.2 %, compared to 9.7 % in
the previous year.

Voith Annual Report 2013

Group Management Report

IV. Net assets and financial position
IV.1.

Balance sheet
Composition of assets and equity
and liabilities remains soundThe balance sheet of the Voith Group
continues to display a healthy structure of assets and equity and liabilities. Total assets fell to € 5,769 million
in comparison to the previous year
when total assets came to € 5,992 million, down 4 %.
In sum, non-current assets decreasedto € 2,487 million (previous year:€ 2,594 million, down 4 %). Intangible
assets and property, plant and equipment reported under non-current assets fell by a total of € 63 million. In theprocess, the increase due to investments and the effects of first-time consolidation was more than offset by depreciation, amortization and impairment
losses as well as exchange rate effects.
There was a decrease of € 116 million incurrent assets to € 3,282 million (previous year: € 3,398 million). This was primarily due to a reduction of € 122 million in inventories. Voith ­H ydro, Voith­Turbo and Voith ­Paper all contributed
more or less equally to this development, whereby Voith ­Industrial S­ ervices
remained at roughly the same level asin the previous year. The reduction of€ 33 million in current tax assets is primarily due to the payment of tax reimbursements, most of which weregenerated in Germany. On the other
hand, other current assets increasedby € 31 million, chiefly due to higher tax
receivables originating from VAT proceedings. Assets held for sale rose to€ 11 million (previous year: € 1 million)on account of the planned disposal ofa subsidiary.

Voith Annual Report 2013

Non-current liabilities decreased by€ 122 million to € 1,730 million (previous year: € 1,852 million, a fall of 7 %).
This includes a fall of € 163 million in
long-term bonds. This decrease wasdue to two factors. On the one hand,
one tranche of the existing US private placement is scheduled for repayment in the 2013/14 fiscal year andwas therefore reclassified to current liabilities. On the other, exchange rates
also had an effect. Long-term ­liabilities
to banks, by contrast, rose by € 29 million, mainly on account of further drawings made on the syndicated credit facility placed in China in the previous
year. Other non-current provisions roseby € 48 million, generally in association with the restructuring measuresdescribed above.

(previous year: € 1,384 million, down5 %). The net income positively affected the amount of equity. By contrast, equity was reduced by currencytranslation effects, dividend distributions, measurement effects on securities and the acquisition of shares from
non-controlling interests. The equity
ratio remained virtually unchanged at
22.9 % (previous year: 23.1 %).

There was a decrease totaling € 35 million in current liabilities to € 2,721 million(previous year: € 2,756 million). Repayments of short-term liabilities to banks
by an amount of € 43 million played arole in this regard. This repayment islargely associated with the syndicated credit facility in China which wasprovided to fund operating activities
over the short-term. A fall in liabilities to shareholders of € 19 million also helped to reduce financial liabilities.
This was counterbalanced by a rise of€ 139 million in short-term bonds related to the reclassification from noncurrent to current liabilities mentioned
above. Other liabilities dropped by a total of € 119 million, largely on accountof a reduction in prepayments received(down € 107 million).
As at September 30, 2013, the Voith
Group carried equity of € 1,319 million

97

Group Management ReportIV.2.

Liquidity
Improvement in total cash flow
The cash flow from operating activities amounted to € 317 million in the
period under review (previous year:€ 332 million). The decrease of € 15 million is primarily due to a rise of an additional € 14 million in net working capital in comparison to the previous year.
The decrease in net working capital of€ 25 million in the 2012/13 fiscal year
(previous year: decrease of € 11 million) was a result of the reduction ininventories. This, however, was morethan compensated for by the change
in prepayments received from customers and receivables. Other changes incash flow from operating activities incomparison to the 2011/12 fiscal year
are mainly due to lower earnings before tax after eliminating depreciation
and amortization and impairments aswell as lower tax payments, which balanced each other out in cash flow.
The cash flow from investing activities
amounted to a net outflow of € 216
million (previous year: a net outflow of€ 275 million). The decrease in the cash
outflow is largely due to lower capital

expenditure on property, plant andequipment and intangible assets.
The cash flow from financing activities
amounted to a net outflow of € 70 million in the period under review (previous year: a net outflow of € 78 million).
The decrease in the cash outflow ismainly a result of lower net repaymentsof liabilities to banks which were down
€ 32 million on the previous year. These
factors were countered to some extent by dividend payments, which rose
to a net outflow of € 35 million (previous year: an outflow of € 15 million) as
well as the acquisition of further sharesfrom non-controlling interests, leading
to an outflow of € 10 million (previous
year: an outflow of € 3 million).
In sum the cash flow in the period under review came to a net cash inflowof € 31 million (previous year: a net outflow of € 21 million). For more details of
the development of cash flow, pleaserefer to the cash flow statement.

amounted to €-55 million (= net asset
position; September 30, 2012: €-22 million).
Because net debt is measured using
the repayment amount of financial liabilities, these liabilities have been considered at an amount which is € 14 million higher (previous year: € 17 million)
than their carrying amount in the statement of financial position.
The net debt ratio is not covered by theaccounting policies based on the International Financial Reporting Standards(IFRS) and its definition and calculation
may diverge from the practice of other companies. In contrast to the carrying amount, which is based on the effective interest rate method, the ratio
is calculated by measuring financial liabilities at their higher nominal repayment amount.

Net debt, measured as the difference
between interest-bearing financial liabilities and liquid financial assets,

Development of cash flowin € millions

2012/13

2011/12

Cash flow from operating activities

317

332

Cash flow from investing activities

- 216

- 275

Cash flow from financing activities

-70

-78

Total cash flow

31

- 21

98

Voith Annual Report 2013

Group Management Report

IV.3.

Investments
Once again approximately€ 200 million invested

Investments and depreciationin € millions

272

182

2011/12192

In sum, we invested € 192 million in the
2012/13 fiscal year in strengthening our
productivity and in the strategic orientation of the Voith Group. Total investment therefore lies under the extremely
high level of investment in the previous
year of € 272 million. The investment ratio came to 3.4 % of Group sales (previous year: 4.8 %). Total investments
are approximately € 17 million higher
than the depreciation and amortization charge of € 175 million (previous
year: € 182 million, down 4 %).

175

2012/13■ Investments■ Depreciation

Investments total € 192 million
by Group Division
Voith ­Turbo
27 %Voith ­Hydro
17 %Voith Paper
35 %Voith ­Industrial­Services
10 %
Other
11 %

by region
Germany
53 %Americas
12 %
Asia
25 %

Voith Annual Report 2013

EuropeexcludingGermany
10 %The low investment ratio of just 1.6 % at
Voith ­Industrial ­S ervices is due to thenature of its business. The other Group
Divisions reported investment ratios of
4.1 % (Voith ­Paper), 3.4 % (Voith ­Turbo)
and 2.4 % (Voith ­Hydro).

Strong commitment to Asia
continues
We continue to commit ourselves
strongly to Asia, with special focus
on China. However, after the intensive investment activity seen in recent
years, many important proj­e cts havenow been completed in this strongly
growing region and laid the groundwork for further growth in Asia. The
level of investment in the period underreview is still at a high level of € 48 million, but significantly below the levelof investment in the previous year of€ 111 million. As a result, 25 % of our total investment spend was in Asia (previous year: 41 %). In particular, production capacity was expanded in thegrowing Fabric & Roll Systems business in Kunshan, near Shanghai. Voith­Paper City in Kunshan is very close tocompletion.
More than half of the total investments
were made in Germany (53 %, previous year: 37 %). We invested € 101 million here, spread across all four Group
Divisions (previous year: € 99 million).
For example, Voith ­Turbo expanded
its facility for BHS gears at the location in Sonthofen. The construction of
our training center in Heidenheim also played a role here. This means thatmajor investment proj­e cts in Germany
have now been completed.
As in the previous year, 12 % of total
investments were made in the Americas. We invested € 23 million in this region in the period under review (previous year: € 33 million).
At € 20 million (previous year: € 28 million), 10 % of total investments weremade in the Europe excluding Germany region.
Detailed information on the investing
activities of each of the Group Divisions
can be found in Section III, “Businessdevelopment and earnings position of
the Group Divisions”.

99Group Management Report

IV.4.

Financial investments/participating interests
High level of M&A activity inseveral Group Divisions
Voith ­H ydro, Voith ­Industrial ­S ervices
and Voith P­ aper all optimized theirportfolios in the 2012/13 fiscal year bymeans of acquisitions, divestments
and joint ventures.
In March 2013 Voith H­ ydro established a joint venture with Rus­H ydro,
the largest hydroelectricity producer
worldwide. The companies each hold
50 % in the venture, Volga­H ydro LLC,
based in Balakovo, Russia. The entity is consolidated in the Voith consolidated financial statements using theequity method. The foundation of thejoint venture strengthens the positionof Voith ­H ydro on the important Russian hydro power market.
In addition, Voith ­Hydro acquired 80 %of the Canadian company, Vor tex­H ydrosystems Inc. in February 2013.
Vortex ­H ydrosystems is a supplier of
mechanical equipment to hydro power plants. The company, which was
founded in 2001, will act as a business unit of the Voith H­ ydro Group100

Division in future. The acquisition has
bolstered the position of Voith ­H ydroon the growing market for service business in North America.
Voith H­ ydro acquired a further 49 % of
the shares in VG Power AB, Västerås,Sweden, also in the first half of the
2012/13 fiscal year. The Group now
wholly owns the company and also
holds 100 % of the voting rights. The
company has been trading under thename of Voith ­Hydro AB since the endof the 2012/13 fiscal year.
Voith I­ndustrial S­ ervices acquired ThyssenKrupp ­S ervices Ltd. in the United
Kingdom in January 2013. With thisstrategic acquisition, Voith I­ndustrial­S ervices intends to reinforce its position as one of the leading service providers for the automobile industry in
the United Kingdom. ThyssenKrupp­S ervices Ltd. provides facility management ser­v ices, technical cleaning,and process management, primarily tocustomers in the automobile industry.

KG, together with the Japanese heavyequipment manufacturer, IHI Corporation. The company is based in Heidenheim and is held in equal 50 % sharesby Voith and IHI. It is fully consolidated
by Voith as the majority of voting rights
are held by Voith in the relevant decision-making boards.
We sold off our interest in Voith ­Paper
Fabrics SAS, a wholly owned subsidiary based in Montbron, France, in September 2013. The company produces
industrial textiles for various industries.
The background to the sale is the decision of the Fabric & Roll Systems business line to focus on its core business.

Voith ­Paper founded the joint venture,
Voith IHI EcoSolutions GmbH & Co.

Voith Annual Report 2013

Group Management Report

V. Research and development

Focus on technologies thatconserve resources
Innovative products and ser­v ices are
the cornerstone of the Company’s future business success. As a technology group, Voith traditionally invests
heavily—and significantly more than
the industr y average—in researchand development. In the 2012/13 fiscal year, Voith’s R&D expenditures
came to € 242 million (previous year:€ 267 million, down 9 %). The ratio of
Voith Group’s R&D spend to Groupsales came to 4.2 % in the period under review (previous year: 4.7 %).
Voith’s research and development activities are internationally organized.
The focus is on Germany: centers in
the Americas, Asia and Rest of Europe
contribute valuable specialized R&D input in the relevant Group Divisions.
Voith’s ambition is to anticipate solutions to future challenges. For thisreason, the R&D strategy is systematically aligned with global megatrends
and in particular with the infrastructureneeds of the world’s growth regions.

Voith Annual Report 2013

Environmental friendliness, resourceand energy efficiency, urbanization andmobility are not only the key challenges facing the 21st century but also thecentral themes of our research and development strategy at Voith.
One focus of our R&D activities in thehydro power industry was on especially high-performance turbines and generators as well as the related generator
bars. An important technological milestone on the way towards the coming
1 GW units was passed with the commissioning of a 784 MW generator-turbine unit for the Three Gorges proj­e ct
in China. After operating a prototype
for a full year without disruption, ourStreamDiver, an innovative concept
for small hydro power plants that offers major benefits in terms of landscape conservation, is now being readied for its market launch. In the field of
ocean energy we made great progressin the development of tidal current turbines. After scaling up our innovative
low-maintenance tidal current turbine
from a 1:3 scale model to a commercial scale machine, we constructed a
1 MW turbine in the year under review.

In September 2013, we successfully installed the turbine at the European Marine Energy Centre in Scotland and put
the test plant into operation.
During the period under review, Voith
developed various new solutions forpaper manufacturers which offer considerable cost benefits as well as taking environmental issues into account.
Numerous products were launched,for example a full-line pulp drying machine. Other innovations were a sealing strip with integrated lubrication for
all kinds of suction rolls which reduces
water consumption, as well as “Evaporite”, a new product family of particularly robust dryer fabrics. The resource
conserving CTC (“Controlled Thermal
Conversion”) technology first presented in the previous year has enjoyed apositive reception on the market.
At Voith ­Turbo we founded the “Electrical Drives and Mechatronic Systems”
competence center in the 2012/13 fiscal year. This center has been assigned
the task of developing the corresponding components and systems andbringing them to a stage suitable for101

Group Management Reportlaunching on the market. We launched
the Vorecon with double converter on
the market in the period under review.
This planetar y gear displays evengreater efficiency than the standard
Vorecon over a greater operating range
for use with pumps and compressors.
Moreover, we expanded our range ofhigh-performance universal joint shafts
for industrial applications by additionof the CH Series which can handle particularly high torque. Our recent developments in the field of drive and braking systems for rail and road applications enjoyed their first market successes: In Helsinki our first electrical
drive units for trams were put into operation. The first orders were also
placed for the new DIWA.6 generationof automatic transmissions for buses.

We continue to research and develop
industrial production methods for components made of carbon fiber composites at our cross-divisional development center for carbon fiber products.
For many years now we have used
CFRP for lightweight components,
such as ship propellers, as well as intidal power plants, in paper machines
and in drive systems, among other applications. The goal is to further expand
our competence in this field. This is along-term research proj­e ct for which
we hold great hopes for the future. The
benefits of this material—such as low
weight, high resilience and good formability—lead us to expect that the useof carbon fiber components will become increasingly significant in light ofthe demand for resource-efficient production in many industries.

Research and developmentin € millions
267

242

2011/122012/13

Detailed information on the R&D activities of each Group Division can befound in Section III, “Business development and earnings position of theGroup Divisions”.

102

Voith Annual Report 2013

Group Management Report

VI. Non-financial performance indicators

Sustainable business management
We continue the traditions and style ofthe family-owned company Voith witha view to our understanding of sustainability: the obligation to act fairly andto return a profit over the long-term inan ecologically sensible manner. Our
motto is for Voith to make a tangible
contribution to sustainable development. Voith follows the approach of giving equal consideration to economic,
ecological and social factors.
We have identified the following fieldsof activity in which we will address sustainability: sustainable business management, sustainable and profitable
growth (see Sections II, III, IV, and IXof this management report for more
information), responsibility for the environment, responsibility for products,
responsibility for employees and social responsibility.
In 2008, Voith began implementing thestrategic and organizational aspects ofsustainability management throughout
the group, a process that we strive toimprove constantly. Since 2009, Voith
records and analyzes all relevant environmental data, material indicatorsand selected personnel data in a separate sustainability database. The proj­
ect is geared towards the requirementsof the Global Reporting Initiative (GRI)
for sustainability reporting. Voith began
publishing its own comprehensive annual sustainability report in 2011. This
report contains detailed information onsustainability management at Voith, including specific goals, performance indicators and results.

Voith Annual Report 2013

Our expectations on sustainable business imply that our suppliers, too, mustcomply with recognized environmental
and social standards. For this reason,
Voith is installing a corporate-wide concept for incorporating social and economic factors in the terms and conditions of purchase agreements, in thevoluntary disclosures by the suppliers and in the supplier assessments,
as well as performing the necessary
audits.

Responsibility for the environment
At Voith, we have set ourselves thegoal of steadily minimizing our ecological footprint. We expect to createa measurable economic added value
by taking a responsible approach to
the environment. As a global player inthe technology sector that relies intensively on resources, a responsible attitude to raw materials and reducing
energy consumption and the associated CO 2 emissions count among themost important tasks for environmental protection.
We originally defined CO 2 emissions,volumes of waste and fresh water consumption as key indicators of our environmental protection. After reaching
our sales-based reduction targets that
we had initially set for the 2015/16 fiscal
year, we have set ourselves new andmore ambitious goals. The new goals
have been set for the 2017/18 fiscal
year and are indexed to the 2011/12
base year. In these six years we want
to reduce our energy consumption
by 20 %, our volumes of waste by

25 % and fresh water consumption
by 10 %.

Responsibility for our products
We have set ourselves the standard ofproviding top-quality innovative products displaying a level of safety, reliability and efficiency that our customers
can rely on. Our responsibility for products is based on three strategic principles: minimizing the environmental impact as early as in the development
phase, improving quality and safety as
well as securing customer satisfaction.
We pursue a strategy of ensuring our
products make a contribution to theconservation of resources and environmental protection. This firstly involves
greater awareness of the use of raw
materials and the steady reduction ofenergy consumption and the related
CO 2 emissions generated thereby. Secondly, we also strive to make customer
use of our products as energy-efficientas possible using fewer resources. At
three of our four Group Divisions, thebulk of the environmental impact arises during the phase when the products
are in use, primarily on account of thelongevity of our products.
In order to guarantee a consistentlevel of quality and safety worldwide,
Voith has implemented risk and quality management across the group.
This includes instructions on managing technical risks as well as the useof suitable methods and instruments
to ensure the quality of our products,
such as the use of the ISO 9001 quality103Group Management Reportmanagement standard. We train our
employees on quality management
requirements and procedural guidelines. We survey our customers to assess their needs and degree of satisfaction in order to identify any potential
for improvement.

open and participative working relationships within their teams. At thesame time, we place high demands on
our employees: our technologies andproj­e cts are both challenging and complex. Our aim is to integrate and meetthe expectations placed on us by ourcustomers in our various regions andmarkets.

Responsibility for our employees
Qualified, motivated and dedicated employees are the foundation and motor of our success. We intend to bea responsible employer by offering afair workplace to employees in all thecountries in which we operate, while
placing high demands on their performance. We focus on offering our employees challenging tasks and prospects for their personal development.
We expect our executives to ensure

As a global player, Voith brings together people from diverse cultural backgrounds. We are convinced that cultural diversity and a balance between
young and old, men and women are­v ital to the creativity and economic
success of our company. For innovation arises from the interaction of people with different experiences, perspectives and skills. For this reason,
we view diversity in the workforce at
all levels of the hierarchy not just as anelement of our corporate social responsibility, but also as an importantcompetitive advantage. As an employer, we feel that it is our duty to offer our
employees equal opportunities and­e nsure that the workplace is free of­d iscrimination. Under our Diversity &Inclusion program, we are working on
fostering employee diversity and equal
opportunity throughout the entire group(see also Capacity utilization in Section
II.4. of this management report).
We wish to retain experienced employees at Voith and also offer an attractive workplace for highly qualified applicants that can be flexibly adapted
to meet their respective situation. For
this reason, we support employees incombining family life with work. We offer a wide range of part-time working
models; a combination of home officeSustainability: Fields of activity

Long-term, successful growthManage risks
Seize opportunities
Create value

Sustainable
and profitable
growthSustainablebusinessmanagement

Product
responsibility

Reliability
and innovation

Responsibility
for our
employees

Fair employer
with highdemands on
performance

Sustainability
at VoithCommitment
and inspiration

Socialresponsibility
Responsibility
for theenvironment

Resource effciency and environmental protection

104

Voith Annual Report 2013

Group Management ReportVII. Subsequent
eventsand presence at the Company is also possible. At our largest German location, Heidenheim, we offer over 150
places in crèches for the children of
our employees, partly in cooperation
with the City of Heidenheim and another local employer. We want to further expand our portfolio of measures
aimed at supporting families. This also includes such aspects as caring forfamily members.
Occupational safety and health are top
priorities for us. Both topics are firmly anchored in the Group’s goals. The
management system installed at all
production locations in the 2009/10 fiscal year is being continuously refined.
All employees are involved in the occupational safety program. Our executives are given goals that cascade
through the organization to the managers in their unit. Leading employees
bearing responsibility for workers underneath them are kept informed andmade aware of any issues. They train
their staff and address safety issues atregular meetings. In addition, we haveset ourselves the goal of systematically
implementing preventive measures topromote the health of our employees.

Voith Annual Report 2013

In order to maintain the performanceof our more than 43,000 employees,
we promote and require vocational
training in the form of lifelong learning. To this end, we offer wide-ranging training measures—both within the
Company and in collaboration with external educational institutions—that enable personnel development within thescope of professional or executive career paths.

No significant developments have occurred since the close of the 2012/13
fiscal year.

Social responsibility
As part of our commitment to society, we support activities and organiz­ations in the fields of education, social
welfare, sports and culture. We sponsor proj­e cts on the basis of defined criteria that apply throughout the group.
For example, the activities and organizations we sponsor must be recognized charities and be effective on aninternational and intercultural basis. In
addition, it must be ensured that theproj­e ct has a broad impact and foster
the community or increase the attractiveness of the cities in which Voith islocated for the people living there. And,regardless of the above, Voith takes
action where it perceives an urgent humanitarian need.

105Group Management Report

VIII. Risks and opportunities
VIII.1.

Risks
VIII.1.1.

Risk and quality management
Oriented to increasing the value of
the Company
Entrepreneurial activity includes making decisions under conditions of uncertainty. Risk is therefore an integral
part of entrepreneurial activity. To safeguard against risks that could jeopardize the Group and/or its companies
as a going concern, Voith operates
a consistent and binding group-widerisk management system. Existential
threats are defined as aggregate risk
potential that threatens more than 50 %of equity or more than 10 % of sales.
All the elements of risk management
have been brought together in a risk
management system. This is not only
geared to meeting legal requirements.
It should also contribute to increasing
the value of the Group and its companies by reducing potential risks andthe probability of their occurring. At
the same time, the system is intended to produce a state of equilibrium
between correctly assessed risks andthe exploitation of opportunities. The
Group Divisions have developed standardized risk controlling matrices on thebasis of the group-wide guideline governing its internal control systems (ICS)that was implemented in 2011. These
were then rolled out to the entities of
the group in a series of suitable programs such as training measures andinformational events. The adjustments
to the processes and internal control
systems that were needed at the companies to implement these risk control
matrices are close to completion. The

106

ICS is part of the risk management system aimed at ensuring the appropriateness and reliability of internal reportingand external financial reporting, the effectiveness, efficiency and propriety ofoperating activities, as well as compliance with the Voith Code of Conduct
and the guidelines of the Voith Group.
Risk and quality management are interlinked and integrated in a comprehensive internal controlling system.
Distributed nature of the risk
management system
Voith has a distributed risk management system. Responsibilities areclearly defined for the differentiatedrisk profiles at all levels of the Company.
The risk management process itself
breaks down into four stages:
Risk identification: Voith constantly
monitors macroeconomic developments, and developments in specificindustries and internal business processes that could affect the situationof the Group. A risk catalog helps
identify individual risks.
• Risk analysis and assessment: Therisks identified in this way are assessed in terms of the potential damage they could cause and the probability—expressed as a percentage—that they will arise. Wherever possible, the scope of potential damage isquantified as a cost factor. The worst
case is analyzed in each case to assess the greatest possible risk andits impact on the financial situation of
the Group is examined.
• Risk management: Analysis and assessment of the identified risks gives•

Voith’s management the data itneeds to decide whether risks can
be avoided, reduced by suitable actions or distributed by signing appropriate agreements, or whether they
have to be accepted and containedby means of optimized processes
and controls.
• Risk monitoring and reporting: A multi-tiered set of controlling and reporting tools helps the Corporate Boardof Management to analyze risks andtake well-founded decisions.
Voith distinguishes between two risk
groups:1. Risks to the Group: These comprise
external risks, management risks, financial risks and infrastructure risks.
2. R isks to performance: These are regarded by Voith as contractual risks
and technical risks.

Voith Annual Report 2013

Group Management Report

VIII.1.2.

Risks to the Group
External risks
Of all the risks facing the Voith Group,
economic risks could have the strongest negative impact on business development.
The degree of uncertainty in the eurozone remains high. The asset quality review of banks announced for 2014 by
the European Central Bank could reveal additional gaps in the capital adequacy of some European banks anda deterioration of the sovereign debt
crisis. Another haircut of the sovereign
debt of Greece, which is considered
likely by a number of market observers, will trigger further turbulence on
the financial markets.
The unstable and confusing situationin the Middle East bears with it a number of risks which, if they eventuate,
could have a grave impact on oil imports and the price of crude with a potential impact on the global economy
and our business.
These scenarios have been analyzed
by the Voith Group and the management of Voith GmbH is prepared to act
quickly and decisively as soon as market conditions change for the worse.
Voith has a diversified portfolio in termsof both markets and regions, strong
market positions, healthy finances anda stable liquidity position, and monitors
all key indicators on a monthly basis.
Voith therefore believes it is well placed
to rapidly respond to any recessionary consequences and to leverage theVoith Annual Report 2013

opportunities offered by upward trends
at an early stage.
Management risks
Voith has developed and operates areliable reporting system that also encompasses its risk and quality management systems. Group accounting
plays a pivotal role in this system andwas converted to International Financial Reporting Standards (IFRS) in the
2005/06 fiscal year. No risks arisingfrom material Group management errors are perceivable at the present time.
Liquidity and financial risks
The Voith Group’s diversified financing structure is designed to safeguard
long-term stability. Available liquidity remains at a comfortable level. The
syndicated loan placed in China in2012 secures the finance for future investments in the same currency as theoperating business on the local market. This loan was drawn on during theperiod under review, as planned. The
syndicated euro loan arranged in 2011
was prolonged by a further year for thesecond time and now expires in 2018.
It has not been drawn on and is available as a strategic liquidity reserve if
needed, as are available bilateral linesof credit from banks. The credit facilities and the bond placed on the capital
markets are subject to the customarymarket conditions based on Voith’s rating and its contractual terms and conditions. These instruments will securelong-term growth in a changing global market. Voith has given high priority
to the availability of liquidity from existing loan agreements. For this reason, compliance with the terms andconditions of the respective contracts
is monitored on an ongoing basis. As
in the previous years, all contractual
terms and conditions were compliedwith in the 2012/13 fiscal year.
The rating agency Moody’s confirmed
the investment grade “Baa2 stable” rating in February 2013.
With regard to securities, the Groupgenerally holds isolated direct investments. Fluctuations in the value ofthese investments as a whole are recognized directly in equity. Market losses are recognized in profit and loss only if there is objective evidence that thefair value of an investment is sustainably or significantly impaired. The sustainability criterion is met if the impairment lasts longer than twelve months.
If the fair value of the investment falls
more than 30 % below its cost, this isregarded as a significant impairment.
It should be noted that all investment
decisions are based on thorough analysis of fundamental data. Any market risks to share prices are analyzed
continuously.
To contain risks arising from cash flows
in different currencies, defined foreign
currency management procedures areapplied consistently throughout theGroup. All Group companies are required to hedge foreign currency items
when these occur. Moreover, interest
risks are covered by appropriate ­hedges.
Voith uses a variety of derivative financial instruments such as forward
exchange contracts and interest rate
swaps to hedge transactions. These107

Group Management Report

instruments are defined and documented at the start of a hedge in linewith the goals of corporate risk management.
To guard against political and economic risks associated with deliveries andser­v ices provided by the Group Divisions, the Group buys commensurate
insurance from government export
credit insurance agencies, from the private-sector insurance market and frombanks. The Group also maintains adequate cash reserves to cover all otheroperating risks.
Provisions have been recognized in thebalance sheet and contingent liabilities disclosed in the notes to cover thefinancial burden of possible tax risks.
Moreover, neither Voith GmbH nor anyof its subsidiaries are involved in tax
proceedings that could have a material impact on the economic position of
the group. Likewise no such proceedings are foreseeable for the time being.
No particular liquidity or financial risks
are perceivable at the present time.
For more information, please refer tothe notes to the consolidated financial
statements.
Infrastructure risks
In the area of infrastructure risks, Voith
primarily identifies IT risks, human resources risks, compliance risks and environmental protection risks and contamination, against which the Company
takes specific countermeasures.
Our successful business activities areunderpinned by up-to-date, secure

108

information technology. This is why
we have our own IT unit, Voith IT Solutions, which ensures that reliabledata processing ser­v ices are provided from our own data center. The experts at Voith IT Solutions manage thewhole IT infrastructure for the entire
Group and also maintain the specific application systems used by eachGroup Division. To minimize the risk ofoutages, redundancy is built into thecentral systems at two data processing centers. Our information security
management is based on the international standard, ISO/IEC 27001, andthus meets the most stringent standards. Our central computer center operated by Voith IT Solutions Germany
has obtained certification under thisstandard. In China we put a new local
computer center into operation basedon the latest security standards in the
period under review. We have also released a new Group guideline: supplementing the German Data Protection Act, this guideline governs dataprotection throughout the Voith Group
based on the corresponding guidelines of the OECD. This ensures thatthe rights of our employees and business associates to keep their personal data private are respected and any
data protection risks are avoided. The
corporate data protection officer has
been assigned the task of monitoring
compliance with these standards andthe necessary organizational and technical measures have been implemented in IT operations.
Highly qualified professionals and executives are key to our products, ourimage and ultimately to the successand growth of Voith. For this reason,
we strive to bind experienced employees to Voith on the one hand and to remain an employer of choice for newly
trained candidates on the labor market
on the other. When it comes to ensuring we have a sufficient number of such
employees, we compete with other international players and act with foresight. With a broad spectrum of measures, such as training and development
programs, international career development prospects, performance-linked
compensation systems, a family-friendly human resources policy and flexible
working hours, we offer an attractive
work environment. With regard to therecruiting of new staff, we have driven
forward our personnel marketing.
At Voith, we base all our actions on
integrity and trust. The clear and unambiguous guidelines and values defined by the Corporate Board of Management are summarized in the Voith
Code of Conduct. This is equally binding for all Voith employees worldwide
and provides clear-cut rules of behavior
toward third parties such as business
partners, competitors, political parties
and government authorities. Compliance with these principles is monitoredby the Group’s Compliance Committee and the compliance officers in theGroup Divisions and in each entity of
the Group. Voith also supports all efforts to contain and eliminate corruption worldwide and demands integrity in a context of fair competition. For
compliance management in the Voith
Group, see Section I.2. of this management report (“Values, guidelines,
compliance”).

Voith Annual Report 2013

Group Management Report

To avoid environmental and healthrisks, all production processes in theVoith Group are subject to corporate
guidelines on quality, risk management, and occupational safety andenvironmental protection. Integrated
management systems monitor compliance with these guidelines and ensure that both production and products consistently meet the same highquality and environmental standards.
Since the 2009/10 fiscal year, data relevant to the environment has been systematically recorded and analyzed. The
Group Divisions and the main users
at the German locations are trainedin our eco-compliance concept using
the special software developed for theVoith Group. Environmental risks canthus be identified at an early stage andappropriate countermeasures initiated.
Adequate accounting provisions havebeen made for residual risks.
No par ticular risks relating to theGroup’s infrastructure are perceiv­a bleat the present time.

VIII.1.3.

Risks to performanceContractual risks
Regular checks ensure that adequate
provisions have been made to cover
the legal risks throughout the Group.
In particular, these include risks relating to warranties, liability, contractual
penalties, guarantees and the possibility of inadequate or incorrect pricecalculations. Liability and property insurance in line with standard industry
practice is taken out to cover potential
damages and/or liability risks.
Appropriate other provisions are madefor special risks arising from existing
contracts if these risks can be reli­a bly
quantified.
Technical risks
Technical risks relate to innovation-related risks, sourcing risks and sales
risks due to decreasing customer
satisfaction.
Innovation-related risks are a key risk
area for a technology group like Voith.
The future profitability of the company
hinges on its ability to develop marketable products and ser­vices and use themost state-of-the-art production technologies and service processes. Voith
invests large sums of money to further
improve and refine existing technologies, and to research and develop new
products, systems and ser­v ices. With
several thousand active patents to its
name and hundreds more new patents
filed ev­e ry year, Voith ranks as one of
the world’s most innovative companies in the industries it serves. Detailed

Voith Annual Report 2013

information on the current focus a­ reasof our R&D activities is provided in Section V. of this management report, “Research and development”.
Collaboration with suppliers on the
global procurement markets involves
three types of risk: supply outages, unforeseen cost increases and non-compliance with environmental and social
standards. We have embedded effective measures to secure our supplies—
supplier selection and order processing—in our processes. Moreover, apermanent Group-wide risk management process has been implemented
to identify supply risks and the risk of
insolvency among suppliers at an early stage. Our dual sourcing strategy excludes dependence on individual suppliers to the greatest possible extent.
Back-up strategies are thus in place incase suppliers who provide core components for the Group’s business processes should default. Moreover, in the
2012/13 fiscal year Voith once again
used all means at its disposal to contain the risks posed by cost increases. It did so by concluding fixed-pricecontracts. Suppliers’ compliance withenvironmental and social standards ischecked by means of audits.
Our customers’ satisfaction is key toachieving sales success and maintaining or increasing our market share. For
this reason, we develop technologies
for and in cooperation with our customers that help them get ahead. Never let a customer down: that is our goal
and the guiding principle for our employees’ dealings with customers.
Maintaining long-term partnerships is109

Group Management Report

VIII.2.

Opportunities
a high priority for us. We are proud tohave collaborated with many customers, suppliers and other business partners over generations—some of our relationships even go back over 100 years.
We survey customer satisfaction in order to objectively assess and enhance
our customer service.
There are particular requirements tominimize technical risks and contractual risks with regard to long-term proj­
ect business at Voith H­ ydro and Voith­Paper. Project management and controlling, as it has been implemented,
is reviewed continuously to determine
whether the proj­e ct is indeed developing in line with the planning. Any deviations are addressed in good time.

VIII.1.4.

Overall risk
To the best of our knowledge at thetime this report went to press, there
are no risks which could jeopardize theability of the Voith Group to continue
as a going concern.

VIII.2.1. Macroeconomic
opportunities
Helping the emerging markets
create new infrastructure
Even if the era of double-digit, or evenhigh single-digit, growth in the emerging markets appears to have come toan end, the significance of these economies for the global economy continues to grow. Due to the fact that their
growth is now measured on a muchhigher GDP base than even just a few
years ago, growth rates in the mid-­
single-digit range now correlate tohigh absolute growth rates. Voith offers capital goods, products and ser­vices that are in high demand to develop the economic infrastructure in
emerging economies. This portfolio
includes hydro power plants, paper
machines, components for the development of local public transport andrail transport networks, products foruse in power plants, steel mills and theextraction of raw materials, and technical ser­v ices for new factories andhigh-performance industries. We see
participating in the dynamic development in these regions as an opportunity for Voith. To take advantage of thesegrowth opportunities, we have established new offices, production sites
and service centers and hired qualified employees in recent years, particularly in Asia and Latin America, as
well as driven forward the regionalization of the company.
Public investment in infrastructure
has been repeatedly scaled back in
Europe and North America in recent

110

years due to the high levels of sovereign debt. Moreover, the climate for investment in the private sector was also very gloomy on account of the poor
state of the global economy and also
its volatility. If the economies in the euro zone overcome the recession in the
coming year or the political reforms incrisis-ridden countries take effect more
rapidly than expected, the rising tax
revenue will give governments moreleeway to invest. This and a general
improvement in the climate for investment associated with an economic upturn could lead to a release of pentup demand for investment by both the
public and private sector.

VIII.2.2.

Strategic opportunities
Global orientation
Voith has a presence in all regions of
the world, maintaining production, service and sales centers in more than 50
countries spread around the globe. We
began to go global at an early stage
and now perceive our local presence inso many regions as a special strengthof the Group. We never stop working
on further globalizing our business and,in particular, increasing value creation,
particularly in Asia and the Americas.
This is achieved by establishing new
production and development locations and expanding existing ones, aswell as by putting down even deeper roots in the regions. In the emerging markets, we see the opportunity to make an important contribution
to the many infrastructure proj­e cts. In

Voith Annual Report 2013

Group Management Report

the highly developed industrial countries, we consider ourselves ideally
positioned to participate in modernizing existing plant with our ecologically friendly technologies geared to sustainable business.

A diversified, profitability-focused
portfolio
Under the umbrella of Voith GmbH,the four Group Divisions protect theGroup against excessive dependence
on specific branches of industry. At thesame time, the integration of each of
the Group Divisions in the Group as awhole enables synergies to be leveraged by bringing together innovative
strength and know-how. Voith’s markets continue to offer considerable potential for growth for our products. In
this context, we endeavor—both in theGroup and in each and ev­e ry Group
Division—to achieve diversified sales
structures according to regions, markets and product groups.

Strong innovative power
As a global provider of technologies
and industrial ser­v ices Voith attaches
great importance to research and development. Voith has invested roughly a quarter of a billion euros in R&D ineach of the last five fiscal years, evenin times where the economy was faltering, producing key innovations which
lay the groundwork for future businesssuccesses. We see a strategic growth
opportunity in transferring our existing
expertise to new areas of application,

Voith Annual Report 2013serving additional parts of the value
added chain in existing customer sectors and developing new markets.

Long-term corporate development
The Voith company has been ownedby the Voith family since its inception
in 1867. The main concern of the shareholders, the Supervisory Board, theCorporate Board of Management andemployees alike is to expand the company and pass it on in better shapethan ever to coming generations. ­A idedby our modest distribution policy, Voith
has sufficient financial resources to fuelcontinuous, attractive growth, the trajectory of which can be planned overextended periods. An equity ratio of
22.9 % (previous year: 23.1 %) and astable financial position are the soundbasis on which the Group will continue to develop successfully in the future.

Sustainability with opportunities
for all Group Divisions

exploiting. As the technological leader in the hydro power industry, Voith­Hydro is making a contribution towards
a form of power generation that is bothrenewable and climate-friendly. Voith­Industrial ­S ervices puts great store
on sustainability issues, such as environmental protection and occupational safety, and has frequently been
awarded by its customers for doing
so. Voith P­ aper has won a range ofawards in recent years for its innovative
paper production methods that savenatural resources and protect the environment. For its drive solutions andsystems, Voith T­ urbo also relies on lowemission solutions that conserve resources. Among other solutions, theCompany offers self-contained linear
drives and intelligent variable speed
couplings for gas and steam turbinesat power plants which can lead to substantial savings in energy costs. Comprehensive information on sustainability can be found in Section VI of thismanagement report, “Non-financial
performance indicators”.

We have set ourselves the goal of leading our markets and industries also interms of sustainability. We are convinced that those companies whichplace sustainability at the heart oftheir corporate strategy and make it
the theme of their corporate mission
will count among the best and mostsuccessful in their industries in the future. We have increasingly anchoredsustainability throughout the Group’s
value chain. This has resulted in strategic opportunities in all Group Divisions, some of which we are already111

Group Management Report

VIII.3.

Internal control and risk management system
for the group financial reporting process
Proper and reliable accounting
As a company that raises funds onthe capital markets, Voith GmbH is
required by Section 315 (2) No. 5 German Commercial Code (HGB) to describe the key elements of its internal
control and risk management systemwith regard to the group financial reporting process.
The aim of the accounting-related internal control and risk management system is to guarantee that accounts areprepared correctly and reliably and toensure that consolidated and separate
financial statements comply with theapplicable regulations.
The following structures and processes
have been implemented in the Group:
The Corporate Board of Managementof Voith GmbH bears overall responsibility for the internal monitoring and risk
management system with regard to theGroup financial reporting process. All
levels of the Company (companies,
Group Division head organizations,
Voith GmbH as management holding
company) are integrated through astrictly defined management and reporting organization.

112

Uniform recognition and measurement
based on the regulations for the Voith
GmbH consolidated financial statements is ensured by Group accounting guidelines. Changed accounting
rules are constantly adapted and communicated by Voith GmbH. The qualityof the guidelines is ensured by an ongoing exchange between the departments responsible.
Accounting is decentrally organized.
Accounting entries are recorded in
the separate financial statements ofthe subsidiaries of Voith GmbH. Risk
control matrices have been developed
at corporate headquarters for the mostsignificant line items that, from a Group
perspective, are exposed to an elevated risk of misstatement. These matrices must be applied by the subsidiaries when preparing their end-of-year
financial reporting. These matrices present the most significant accountingrelated risks for the line items of thefinancial reporting and contain corresponding instructions on controlling activities, responsibilities and documentation duties. Among other elements,
the control activities comprise analytical reviews as well as processing andcontrolling of key and complex business transactions by different people.

Complex accounting issues (e.g. fi­
nancial instruments) are referred tocorporate departments or external experts (e.g. measuring the pension obligation). The activities and controls forthese subjects are also considered in
the risk control matrices.
T he consolidated f inancial state ments are prepared by adding information to the separate financial statements of the subsidiaries to create
standardized repor ting packages
which are then included in the consolidation system. Once the data has
been fed into the consolidation system, it is then subject to an automated plausibility check. If this returns anerror message, this is reported on by
the individuals in charge of the subsidiaries concerned. The subsidiaries
are supported by contact persons at
headquarters for all accounting-related issues. After the data is finally approved, the respective management,
or in isolated cases the representatives they appoint, issues a letter ofrepresentation confirming the completeness and accuracy of the reporting package in accordance with therelevant requirements and that the internal controls have been conducted
and documented.

Voith Annual Report 2013

Group Management Report

Group-wide reconciliation of balances
takes place worldwide via an intranetbased platform. The various deadlines
for the different parts of the reporting
package are stipulated in the consolidation system and centrally monitored
in the course of the preparation process. All consolidation activities are undertaken centrally at Voith GmbH. The
entire consolidation process is supported by both automatic systemsbased and manual controls.

risk management systems in the Voith
Group. Suitable measures are taken to
remedy any gaps or weaknesses that
may be identified.
Compliance with the internal accounting-related control system is reviewed
by the external auditors in the courseof their audit of the financial statements.
Any deficiencies or flaws that appear
are recorded in a management letter
along with suggested improvements.

The functionality of the controls definedin the internal accounting-related control system is evaluated on a regularbasis. If any weaknesses are identified,
the system is adjusted accordingly.
The quality of financial reporting is also ensured by reconciling planning calculations with the external reporting at
all levels of the company. Checks on
system access based on authorization
concepts as well as programmed plausibility checks in the IT systems used
for the financial reporting ensure thatprocesses are complete and precise.
The internal audit department performs regular, independent reviews of
the functionality, correctness, reliability
and efficiency of all internal control andVoith Annual Report 2013113

Group Management Report

IX. Forecast report
IX.1.

Business environment
Economic growth expected
to flatline
Voith expects the economy to remain
weak in the coming two years and investment climate to remain gloomy.
Economic research institutes and large
financial institutes are talking of moderate growth in the global economy.
For example, in its latest release theInternational Monetary Fund (IMF) is
forecasting growth of 3.6 % in 2014 and
4.0 % in 2015, after 2.9 % in 2013. Nevertheless our outlook remains more reserved. On the basis of our internal
analyses, we expect the growth rates
in our core markets to be lower. The
main factors in this assessment are thehigh levels of general debt, the related
scarcity of finance for major proj­e cts
and the ongoing economic uncertainties.
We will continue to see a world economy running at two speeds, in which
the mature economies show barely
any growth, with most stimulus coming from the emerging markets. The
IMF is forecasting GDP growth of just
2.0 % (2014) and 2.5 % (2015) for theindustrial nations. These forecasts are
based on an assumption that the recession in the euro zone will disappear
in 2014 and that the euro zone countries grow by an average of 1.0 %. The
IMF puts a figure of 1.4 % on Germany’s
growth in 2014. GDP growth in the USA
is forecast to come to 2.6 %. We areconcerned that these growth rates will114

not be attained. This concern is founded primarily on the high levels of debt
run up by most states, companies andbanks as well as private households.
Higher growth rates than the matureeconomies are forecast for the emerging markets, which the IMF expects togrow by 5.1 % (2014) and 5.3 % (2015).
Nevertheless, here too, the economy
has noticeably lost steam. In China
2014, GDP growth of 7.3 % is expected. The IMF forecasts growth of 5.1 %in India. In Brazil GDP is only expected
to increase by 2.5 %. In spite of these
forecasts, we are budgeting on growth
at a relatively low level on the basis of
our proj­e ct pipeline for the emerging
markets, with the exception of China.
The forecast for our business is basedon a much more conservative assumption of growth in the global economy
and our markets. Nevertheless, it also assumes that there will be no economic or political shocks which could
tip the global economy into recession.

Voith’s markets will continue todisplay little sign of growth
In our five core markets we can see little stimulus for growth and an ongoing
gloomy climate for capital investmentsin the next two fiscal years.
The energy market is characterized byincreasing demand, for both renewableenergy and for electricity generated
by conventional means. The generally positive outlook for hydro power will
be hampered in the short to mid-termby the economic uncertainties and thepolitical environment in Europe as wellas the rapid rise of solar power over the
midday period and the expansion of
shale gas activities in the USA.
Demand for oil and gas will rise due tothe increasing need for energy, particularly in countries outside the OECD.
Investment activity in the oil & gas
industry will increasingly shift to theextraction of more difficult reserves
and the need to meet tighter safety
requirements.
Consumption of paper will continue torise gradually, however there will behuge differences between the various
grades of paper and regions. In the
coming two years we assume that demand for new paper machines will remain extremely low on account of thedeteriorating market prospects of paper manufacturers. Demand will be increasingly concentrated in China where
activity will shift to the manufacture oftissue, board and packaging paper. We
do not perceive any demand for new
machines for graphic grade paper inthe coming years.
Investment activity on the market for
raw materials is expected to stagnatein the short-term and shift towards
those investments aimed at increasing

Voith Annual Report 2013

Group Management Report

IX.2.

Future development of the Company
the efficiency of existing mines andquarries. However, in the mid to longterm, the market for raw materials will
see a growth trend driven by the industrialization of emerging markets in Asiaand a strong demand for coal to meetrising energy needs worldwide.
The segments of the transport andautomotive markets relevant to Voith
are not expected to display a uniform
trend, growing moderately overall in the
coming two years, primarily in North
America and Asia. The main reason forthis reluctance towards investments incapital goods can be found in the uncertainties associated with the global economy.

Voith Annual Report 2013

All Group Divisions continue toreturn a profit
In the coming two fiscal years we expect both the sales and orders received by the Voith Group to remain
constant, with earnings improving considerably. All Group Divisions, including Voith P­ aper, which is undergoing
restructuring, will continue to return ahealthy profit from operations, although
their sales and orders received will develop differently, depending on theirmarkets.
At Voith H­ ydro we are planning for aslight fall in sales in the 2013/14 andthe 2014/15 fiscal years on account of
the recent fall in orders on hand andchanges in exchange rates. Nevertheless, we aim to improve our return onsales here and generate a profit fromoperations that matches the current
high level. In spite of the rosy prospects for hydro power in the mid tolong-term, we do not expect to see any
significant recovery in the market in the
coming two years of our planning. The
small hydro market will remain weakfrom our perspective. In North America hydro power is suffering, like all nongas sources of electricity, from the increasing volume of shale gas being
extracted. In southern Europe, the­fi nancial crisis and weak economies
are making business difficult. Global
demand for the modernization of hydro power plants will continue to riseand open up new opportunities in thisattractive business field for Voith H­ ydro.
The pumped storage market in northern Europe is likely to remain dampened by the strong rise in the volume
of solar power fed into the German grid
over the midday peak period from thelarge installed base of solar panels created in the wake of the new energy
concept. We intend to take a corresponding share in new projects awarded and also expand our service business with repairs and maintenance,
and the sale of spare parts. In sum weare forecasting a slight increase in theorders received in the two years covered by the business plan.
At Voith ­Industrial S­ ervices we expect
to see a stable development in sales
in the 2013/14 fiscal year followed bynoticeable growth. Our business plan
forecasts a significant improvementin our profit from operations in both
years. We expect our Industries division to make a considerable contribution to sales, with the up-and-coming LED field being the biggest driverfor growth. We also perceive a positive situation with regard to the orders
expected to be received by the Engineering ­Services division, chiefly on account of the calls for tenders placed byrailway vehicle manufacturers in China, eastern Europe and South America
as well as by manufacturers of automobiles and commercial vehicles, who areplanning numerous new models andvariants. In the Automotive division, we
believe sales will remain stable or only115

Group Management Report

grow slightly at best on account of theflattening growth in global automobile
production. Developments in the Energy-Petro-Chemicals division will depend, among other factors, on whether
the economic environment for electricity producers will improve in Germany
after the national elections in the fall of
2013, with demand for maintenancework on existing conventional power
plants picking up again.
At Voith P­ aper we expect sales to fall
over both years of the planning period
due to the current low level of orders
on hand. Nevertheless, Voith ­Paper will
manage to return a significant profit.
Our business plan forecasts a fall in our
profit from operations in the 2013/14
fiscal year from current levels on account of the falling sales of new paper machines. In the subsequent year,
our profit from operations should risesignificantly on account of the adjustments made to our cost structures.
Orders received are expected to growagain slightly in the coming two years.
This forecast is based on the assumption that the market for paper machines
will recover slightly, particularly in Asia.
Sales of new machines are expected to remain stubbornly low, caught
in the current trough seen in Europe
and North America. In the emerging
markets, particularly in Asia, we are
expecting demand to rise gradually
and will focus on machines to make116

tissue and, on the rise again, board
and packaging papers. We continue
to perceive growth opportunities in ourbusiness with products, consumables
and ser ­v ices.

the growth drivers are expected to be
North and South America, Brazil in particular, as well as eastern Europe, withspecial focus on Russia.

In spite of a recent fall in orders received, Voith T­ urbo is forecasting sales
to remain stable in the 2013/14 fiscal
year, picking up again in the following
year. Supported by the efficiency programs initiated by this Group Division,and the absence of the extraordinary
burdens reported in the year under review, we expect the profit from operations to climb markedly in the coming
two fiscal years. We expect the level of orders received to grow slightly
in both years of the planning period,
due to the recovery of the industrial
sector in particular. The following factors are expected to play a specialrole in this development: we expect
to see buoyant new business in theoil and gas industry, especially in the
NAFTA region as well as in the Middle East. Our outlook for the mining
industry is positive starting in the second year of the planning period. We
expect to see greater activity in power plants in Asia and the USA leading to higher demand from that dateonwards. New business in the transport markets served by Voith T­ urbo is
forecast to grow and will also contribute to the improvement in orders received. From a regional perspective,

Profitability of the Voith Groupon the rise
After several years of dynamic growth,
the focus of the Voith Group in the coming two years will be placed increasingly on improving our returns and our
cash flow. We intend to improve the efficiency of our organization. In order tooperationalize our goals and reinforce
our company for the long-term, we implemented the Voith 150+ program at
the beginning of the 2013/14 fiscal year.
This program bundles a number of initiatives and measures related to products and portfolio, finances, processes and corporate culture. Within theframework of the Voith 150+ program
we have started the “Excellence@Voith”
initiative, which is designed to optimize
our structures and processes. We areconvinced that our fundamental positioning, based on our four Group Divisions serving five large markets, is theright foundation for ongoing successful development in future. We will work
intensively on developing our portfolio
of products and ser­v ices, with a focus
on profitable fields and units, by meansof both organic growth and strategicacquisitions. In the process we aim to

Voith Annual Report 2013

Group Management Reportround off our portfolio, but not completely redesign it. In the mid-term wealso want to grow our sales. In addition to streamlining the portfolio, wewill scout market opportunities for our
existing products and ser­v ices in all of
our Group Divisions in those regions
where we have been underrepresented to date or have no presence at all.
In the 2013/14 fiscal year and the2014/15 fiscal year, Voith is forecasting Group sales to remain at roughly
the same level as the period under review. Our sales proj­e ctions are basedon a continuing high level of orders
on hand and a stable development of
new business over the planning period. With the aid of the measures undertaken to improve efficiency andraise our profitability, we plan to increase Voith’s operational result prior
to non-recurring items. The net incomeof the Group, which was heavily burdened by restructuring expenses andother non-recurring items in the period under review, is expected to rise ata faster rate than the profit from operations. We used the high level of investment in recent years to modernize andgreatly expand the infrastructure of theVoith Group. We now have the installedbase to realize our mid-term goals. For
this reason we are planning lower levels of investment in the coming two fiscal years than in the period under review. These investments will continue

Voith Annual Report 2013

to be financed from the cash flow fromoperating activities. The focus of our­financing strategy will remain on diversity and long-term funding.
Forecasts are always subject to considerable uncertainty. A host of macroeconomic and industry-specific factors
can influence, positively or negatively, the corporate planning of individual Group Divisions or the entire Group.
We will closely observe further developments as they occur and, where
necessary, respond rapidly and decisively to changing conditions. Voith isin excellent shape. Our robust constitution, coupled with our solid equity
ratio and the fact that our company
is not burdened by any net debt, provide us with the headroom we needto implement those decisions we viewas making the most sense. The aim ofVoith GmbH’s Board of Management
is to keep the Company on a securefooting for the long term and to actively steer it out of this challenging decade of the 21st century. Voith is ideallyequipped for the challenges of the future: we have a portfolio that is fit for
the future, sufficient financial strengthwith reliable long-term access to capital, an efficient organization and an outstanding workforce.

117

At home in the world

North America
Sales: € 890 million
Employees: 5,868

Central/South America
Sales: € 624 million
Employees: 5,712

Asia/
Australia

Oceania
Sales: € 1,365 million
Employees: 5,521

EuropeSales: € 2,715 million
Employees: 25,907

AfricaSales: € 134 million
Employees: 126

118

Voith Annual Report 2013

At home in the world

Consolidated
Financial Statements

120 Consolidated statement of income
121 Consolidated statement of comprehensive income
122 Consolidated balance sheet
124 Statement of changes in equity
126 Consolidated cash flow statement
127	Notes to the consolidated financial statements
for the 2012/13 fiscal year150	Notes to the consolidated statement of income
156 Notes to the consolidated balance sheet
178 Notes to the consolidated cash flow statement
178 Notes on segment reporting
180 Segment information by business segment
182 Segment information by region
183 Other notes
199 Responsibility statement

Voith Annual Report 2013119Consolidated Financial Statements

Consolidated statement of income
for the period from October 1, 2012 to September 30, 2013in € thousandsNote2012/13

2011/12

Sales

(1)

5,728,217

5,723,551

Changes in inventories and other own work capitalized

(2)

4,904

51,726

5,733,121

5,775,277

Total output
Other operating income(3)

301,150

380,993

Cost of material(4)- 2,339,049- 2,369,638

Personnel expenses(5)- 2,154,455- 2,095,753-175,371-182,312-1,056,973-1,167,172

308,423

341,395-155,760- 95,278

152,663

246,117

Depreciation and amortization
Other operating expenses(6)

Operational result prior to non-recurring items
Result from non-recurring items(7)

Operational result
Income from companies accounted for using the equity method

4,315

7,445

Interest income

12,812

11,925Interest expenses- 88,524- 89,766

9,044

1,125

90,310176,846- 27,009- 62,857

Net income

63,301

113,989

Net income attributable to shareholders of the parent company

45,05592,347

Net income attributable to holders of non-controlling interests

18,246

21,642Other financial result(8)

Income before taxes
Income taxes

120

(9)

Voith Annual Report 2013

Consolidated Financial Statements

Consolidated statement of comprehensive income
for the period from October 1, 2012 to September 30, 2013in € thousands

2012/13

2011/12Net income

63,301

113,989- 20,226- 54,505

- 409

1,090

Gains/losses on currency translation- 64,963

17,684

Gains/losses from the currency translation of net investments in foreign operations- 2,023

2,885

94

0

1,892

15,669Other comprehensive income- 85,635-17,177

Total comprehensive income- 22,334

96,812·T otal comprehensive income attributable to shareholders of the parent company- 30,602

72,176

8,268

24,636- 22,334

96,812Components of other comprehensive income that will be recycled through profit or loss in later accounting periods:
Gains/losses on available-for-sale financial assets
Gains/losses on cash flow hedges

Share of associates in other comprehensive income
Taxes on components of other comprehensive income that will be recycled through profit or loss in later accounting periods· Total comprehensive income attributable to holders of non-controlling interests

Voith Annual Report 2013121

Consolidated Financial Statements

Consolidated balance sheet
as at September 30, 2013

Assetsin € thousandsNote2013-09-30

2012-09-30

A.

Non-current assets

I.

Intangible assets(10)762,659

770,630

II.

Property, plant and equipment(11)

1,197,087

1,251,711

III.

Investments accounted for using the equity method(12)

37,66336,082

IV.

Securities(16)

215,856

223,840

V.

Other financial assets(12)

27,86236,857VI.

Other financial receiv­ables(15)

71,46587,683

VII. Other assets(15)

27,747

41,731

VIII. Deferred tax assets(9)146,207

145,505

2,486,546

2,594,039

Total non-current assets
B.

Current assets

I.

Inventories(13)

738,642860,220

II.

Trade receiv­ables(14)

1,201,161

1,213,821

III.

Securities(16)

57,781

42,233IV.

Current income tax assets

80,721

113,237

V.

Other financial receiv­ables(15)

114,233

103,840

VI.

Other assets(15)

177,327

145,947(17)

900,967

916,894

3,270,832

3,396,192

VII. Cash and cash equivalents

VIII. Assets held for sale(18)

11,436

1,270

Total current assets

3,282,268

3,397,462

Total assets

5,768,814

5,991,501

122

Voith Annual Report 2013

Consolidated Financial Statements

Equity and liabilitiesin € thousands

A.

EquityI.

Issued capitalNote2013-09-30

2012-09-30

120,000

120,000

II.

Revenue reserves

1,007,826

990,030

III.

Other reserves

29,509105,166

IV.

Profit participation rights

6,600

6,600

1,163,935

1,221,796

Equity attributable to shareholders of the parent company
V.

Profit participation rights

96,80091,800VI.

Other interests

58,03069,942

154,830

161,742(19)

1,318,765

1,383,538

Equity attributable to holders of non-controlling interests
Total equity
B.

Non-current liabilities

I.

Provisions for pensions and similar obligations(20)

432,857

430,022

II.

Other provisions(21)

254,137

206,348

III.

Income tax liabilities

869

3,219

IV.

Bonds, bank loans and other interest-bearing liabilities(22)

863,851

1,000,722

V.

Other financial liabilities(24)

18,076

19,762VI.

Other liabilities(24)

58,176

67,145

VII. Deferred tax liabilities(9)

101,551

125,098

1,729,517

1,852,316

Total non-current liabilities
C.

Current liabilities

I.

Provisions for pensions and similar obligations(20)

26,521

26,887II.

Other provisions(21)

334,121313,092

III.

Income tax liabilities

79,514103,443

IV.

Bonds, bank loans and other interest-bearing liabilities(22)

308,514233,359

V.

Trade payables(23)

562,983

557,513VI.

Other financial liabilities(24)

317,968

317,018(24)

1,085,511

1,204,335

2,715,132

2,755,647

VII. Other liabilities

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

(18)

5,400

0

Total current liabilities

2,720,532

2,755,647

Total equity and liabilities

5,768,814

5,991,501

Voith Annual Report 2013123

Consolidated Financial Statements

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

Issuedcapital

Revenue
reserves

Available-for-salefinancial assets

Cash flow
hedgesCurrencytranslation

2012-10-01

120,000

990,030

57,116- 864

54,808Net income

45,055

Other comprehensive income
Total comprehensive income

045,055

Allocation of reserves toprofit participation rights- 5,412

Changes in non-controlling interests- 4,916-18,994-176- 55,523- 18,994- 176- 55,523

38,122-1,040-715

Share of income attributable to profit
participation rights
Issue of profit participation rights
Dividends-15,000

Capital increases by holders of
non-controlling interests
Non-controlling interests—put options- 3,665

Other adjustments
2013-09-30

1,734
120,000

1,007,826

Equity attributable to shareholdersof the parent companyin € thousands

Issuedcapital

Revenue
reserves

Available-for-salefinancial assets

Cash flow
hedgesCurrencytranslation

2011-10-01

120,000

901,450

95,339-1,13838,685- 38,223

274

16,123- 38,223

274

16,123

57,116-864

54,808Net income

92,347

Other comprehensive income
Total comprehensive income

092,347

Allocation of reserves toprofit participation rights- 4,594

Changes in non-controlling interests

5,746

Share of income attributable to profit
participation rights
Dividends

0

Capital increases by holders of
non-controlling interests
Non-controlling interests—put options- 2,184

Other adjustments- 2,735

2012-09-30

124

120,000

990,030

Voith Annual Report 2013

Consolidated Financial Statements

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

Profit participation rights

Total

Profit participation rights

Otherinterests

Total

Total equity- 5,894

6,600

1,221,796

91,80069,942

161,742

1,383,538

18,246

18,24663,301- 9,978- 9,978- 85,635

8,268

8,268

- 22,334

5,049

0- 5,384-10,300

45,055- 964- 964- 75,6570- 30,602

0363- 5,049

5,049- 4,916- 363- 5,384- 363- 5,049- 5,049- 5,412

0

5,000

5,000

5,000
- 31,530-15,000-16,530-16,530

0

2,000

2,000

2,000

- 3,665

88

88- 3,577

1,734-6,8586,600

1,163,935

96,800

- 354

- 354

1,380

58,030154,830

1,318,765

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

Profit participation rights

Total

Profit participation rights

Otherinterests

Total

Total equity- 7,549

6,600

1,153,387

91,80042,144

133,944

1,287,331

92,347

21,642

21,642

113,989- 20,171

2,994

2,994

-17,177

24,636

24,636

96,8124,231

0- 8,478- 2,732- 4,231- 4,594-10,329-10,329

1,655
1,655

0

72,1760363- 4,231

4,231

5,746
- 363

- 363

- 8,478- 4,2310-5,894Voith Annual Report 2013

6,600

-10,329

037,22637,22637,226- 2,184-16,013-16,013-18,197- 2,735756

756-1,97969,942

161,742

1,383,538

1,221,796

91,800125

Consolidated Financial Statements

Consolidated cash flow statementin € thousands

2012/13

2011/12

Income before taxes

90,310176,846

Depreciation and amortization

211,462

183,330

Interest expenses/income

75,712

77,841Other non-cash items- 9,447

1,000

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

554-1,612

Gains/losses from investments- 8,509- 503

Changes in other provisions and accruals

60,447

50,103

Change in net working capital- 24,601-11,464

Interest paid

- 57,831- 53,496

Interest received

11,343

10,010

Dividends received

12,635

3,716

Tax paid- 44,992-103,794

Cash flow from operating activities

317,083

331,977

Investments in property, plant, equipment and intangible assets-192,176- 271,183

6,509

13,744

Proceeds from the disposal of property, plant, equipment and intangible assets
Investments in financial assets-10,510- 9,389

Acquisition of subsidiaries- 7,076- 8,668

Sale of subsidiaries

5,512

3,027

Proceeds from the disposal of financial assets

13,911

833

Changes in investments in securities- 32,757- 3,648

Cash flow from investing activities- 216,587- 275,284

Dividends paid

- 35,269-14,923

2,000

1,367

-10,300- 2,732

Contributions from holders of non-controlling interests
Acquisition of non-controlling interests
Other changes in equity

5,000

0

New bonds, banks loans and overdrafts

143,081

161,514

Repayment of bonds, bank loans and overdrafts-152,832- 202,974

Changes in other interest-bearing financial receiv­ables and liabilities- 21,480-19,921

Cash flow from financing activities- 69,800- 77,669

Total cash flow

30,696- 20,976

Exchange rate movements, valuation changes and changes in consolidated Group- 46,623

10,730Cash and cash equivalents at the beginning of the period

916,894

927,140

Cash and cash equivalents at the end of the period

900,967

916,894

More information can be found in the section on “Notes to the consolidated cash flow statement”.

126

Voith Annual Report 2013

Consolidated Financial Statements

Notes to the consolidated financial statements
for the 2012/13 fiscal year
General information

Consolidated Group

Voith GmbH (Voith) is a capital market oriented company
operating from its headquarters at St. Pöltener Str. 43, Heidenheim an der Brenz, and is required by Sec. 290 in conjunction with Sec. 315a German Commercial Code (HGB)to prepare consolidated financial statements. The Company
is entered in the commercial register (under the number
HRB 725621) at the Registration Court in Ulm, Germany.
The consolidated financial statements prepared by Voith are
published in the Bundesanzeiger [German Federal Gazette].
JMV GmbH & Co. KG, Heidenheim, is the ultimate parent
company of the Voith Group.

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

The Corporate Board of Management of Voith GmbH authorized the consolidated financial statements for presentation to
the Supervisory Board on November 19, 2013.
Pursuant to EU Regulation (EC) No. 1606/2002 in conjunction
with Sec. 315a HGB, the consolidated financial statementsof Voith GmbH for the 2012/13 fiscal year were prepared inaccordance with International Financial Reporting Standards(IFRS) and the interpretations of the International Financial
Reporting Standards Interpretations Committee (IFRS IC).
This regulation requires all companies that participate in
the capital markets (i.e., whose issued debt is traded on aregulated market in an EU member state) and are domiciledin the EU to prepare their consolidated financial statements
solely on the basis of IFRS as endorsed by the EU. The term
IFRS also includes the International Accounting Standards(IAS) that are still valid. All binding pronouncements of theInternational Accounting Standards Board (IASB) as wellas the additional requirements of German commercial law
pursuant to Sec. 315a HGB have been taken into account.

In addition to those entities acting as holding companies,
the 2012/13 consolidated financial statements also include
all the Group’s manufacturing, service and sales companies
both in Germany and other countries as at September 30 ofeach fiscal year. The financial statements of the subsidiaries
are prepared for the same period as the parent’s financial
statements, using consistent accounting policies.
Subsidiaries are consolidated in full at the time when theVoith Group obtains control over them and are deconsolidated as soon as the parent loses control over the subsidiary. In
14 cases (previous year: twelve), Voith exercises control as
defined in IAS 27 owing to a majority of voting rights in therelevant decision-making bodies.
In two cases (previous year: two), while Voith has a majority
shareholding it does not control the entity, as the composition of the decision-making bodies is based on equal
representation.

The consolidated financial statements have been prepared ineuros. Except where explicitly stated otherwise, all amounts
are stated in thousands of euros (€ thousands).
In the balance sheet, assets and liabilities are stated either
as current or non-current items in line with their term tomaturity. Assets and liabilities that will be realized or will
mature within 12 months of the end of the period underreview are classified as current. Inventories and trade receiv­
ables and payables are always classified as current items.
The consolidated statement of income has been prepared inaccordance with the nature of expense method.

Voith Annual Report 2013127

Consolidated Financial Statements

The following companies are included in the consolidated
financial statements:

2013-09-30

2012-09-30· Germany

60

63· Other countries

143

142

Total fully consolidated companies

203

205

· Germany

64· Other countries

13

12

Total companies accounted for using theequity method

19

16

Voith GmbH and its fully consolidated
subsidiaries:

Companies accounted for using theequity method:

The main companies consolidated in full for the first time in
the period under review were:
Voith T­ urbo Colombia Limitada, Bogotá D.C., Colombia
Voith T­ urbo S. A., Santiago, Chile• Vortex Hydrosystems Inc., Granby, Canada• P3 Voith Aerospace Inc., Wichita, USA• Voith I­ndustrial ­Services (Coventry) Limited, Warwick,United Kingdom• Voith IHI EcoSolutions GmbH & Co. KG, Heidenheim,
Germany••

common control is exercised together with other companies.
Micromat Spannhydraulik GmbH, Rutesheim (shareholding
held by Voith: 50 %), LZH Logistic Zollservice Heidenheim
GmbH, Heidenheim (shareholding held by Voith: 32.55 %)and VolgaHydro LLC, Balakovo, Russia (shareholding heldby Voith: 50 %) were consolidated for the first time in the
period under review using the equity method.
Pursuant to Sec. 264b HGB, the following limited partnerships are exempt from the duty of corporations to prepare,audit and disclose financial statements.
VIEH	Voith ­Industrial ­Services Process GmbH & Co. KG,
Stuttgart
VIAS	Voith ­­­Industrial ­Services Ltd. & Co. KG, Stuttgart
VIGG	Voith ­­Industrial ­Services Grundstücks
GmbH & Co. KG, Stuttgart
VIKI	Voith ­Industrial ­Services GmbH & Co. KG,­Kirchseeon
VIME 	DIW Mechanical Engineering GmbH & Co. KG,
Stuttgart
VIPE	Voith Engineering Personnel ­Services
GmbH & Co. KG, Chemnitz
VISD 	DIW System Dienstleistungen GmbH & Co. KG,
MunichVISK 	Voith ­Industrial ­Services GmbH & Co. KG, Stuttgart
VIST 	DIW Instandhaltung Ltd. & Co. KG, Stuttgart
VIZ	Voith ­Industrial ­Services Holding GmbH & Co. KG,
Heidenheim

An exhaustive list of the companies and other investments
included in the consolidated financial statements is an integral part of the consolidated financial statements and is also
filed with the Bundesanzeiger in German.

VPFZ 	Voith Paper Fabrics GmbH & Co. KG, Heidenheim
VPH 	Voith Paper GmbH & Co. KG, Heidenheim
VPIE	Voith IHI EcoSolutions GmbH & Co. KG,
Heidenheim
VPMG 	Voith Paper Krieger GmbH & Co. KG,
Mönchengladbach
VPRR 	Voith Paper Rolls GmbH & Co. KG, Heidenheim
VPWE 	Voith Paper Rolls GmbH & Co. KG, Weissenborn
VPZ	Voith Paper Holding GmbH & Co. KG, Heidenheim

Companies in which Voith GmbH has the power to directly
or indirectly exercise a significant influence on financial andoperating policy decisions (associates) are accounted forusing the equity method, as are joint ventures over which

VHH 	Voith Hydro GmbH & Co. KG, Heidenheim
VHHC	Voith Hydro Ocean Current Technologies
GmbH & Co. KG, Heidenheim
VHZ 	Voith Hydro Holding GmbH & Co. KG, Heidenheim

The number of fully-consolidated entities remained virtuallyconstant as at September 30, 2013 due to intercompany
mergers.

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Voith Annual Report 2013

Consolidated Financial Statements

VTA 	Voith T­ urbo GmbH & Co. KG, Heidenheim
VTGO	Voith T­ urbo Aufladungssysteme GmbH & Co. KG,
Gommern
VTHL 	Voith ­Turbo H + L Hydraulic GmbH & Co. KG,
Rutesheim
VTKH	Voith ­Turbo HighFlex & Co. KG, Essen
VTRH 	Voith ­Turbo Advanced Propeller Technologies
GmbH & Co. KG, Rostock
VTSH 	Voith ­Turbo Schneider Propulsion GmbH & Co. KG,
Heidenheim
VTSK 	Voith ­Turbo Scharfenberg GmbH & Co. KG,
Salzgitter
VTWH	Voith ­Turbo Wind GmbH & Co. KG, Heidenheim
VTZS	Voith ­Turbo Verdichtersysteme GmbH & Co. KG,
Zschopau
VOC 	Voith Composites GmbH & Co. KG,
Garching near Munich
VODG 	Voith Dienstleistungen und Grundstücks
GmbH & Co. KG, Heidenheim
VZB 	J.M. Voith GmbH & Co. Beteiligungen KG,
Heidenheim
Because they are included in the consolidated financial
statements of Voith GmbH, the following corporations do
not have to fulfill the duty to prepare and disclose financial
statements provided that the prerequisites in accordancewith Sec. 264 (3) HGB are met.
VOFS	Voith Financial S­ ervices GmbH, Heidenheim
VOFZ	Voith Finance GmbH, Heidenheim
VZIV	Voith Industrieverwaltung GmbH, Heidenheim
Pursuant to Sec. 264b No. 3 HGB and Sec. 264 (3) No. 4
HGB, the consolidated financial statements of Voith GmbHare filed with the Bundesanzeiger.
In addition to the companies listed above, the following
significant companies are also included in the consolidated
financial statements:

VPIT	Voith IHI Paper Technology Co., Ltd., Tokyo, Japan
VPP	Voith Paper Máquinas e Equipamentos Ltda.,
São Paulo (SP), Brazil
VPS	Voith Paper GmbH, St. Pölten, Austria
VPSO	Voith Paper S.r.L., Schio (Vicenza), Italy
VHFK	Voith Fuji Hydro K. K., Kawasaki-shi, Japan
VHP 	Voith Hydro Ltda., São Paulo (SP), Brazil
VHPO	Voith Hydro GmbH & Co KG, St. Pölten, AustriaVHS	Voith Hydro Shanghai Ltd., Shanghai, China
VHY	Voith Hydro Inc., York (PA), USA
VTI	Voith ­Turbo, Inc., York (PA), USA
VICU	Voith ­Industrial S­ ervices Inc., Cincinnati (OH), USA
VIW	DIW Instandhaltung GmbH, Vienna, Austria
VIWA	Voith ­Industrial S­ ervices Limited, Warwick,United Kingdom­ ervices GmbH, Mainhausen
VIER	Voith I­ndustrial S

Significant business combinations in the
2011/12 fiscal year
Acquisition of Mongstad Elektro-Olje & Gass AS
and Mongstad Elektro-Industri & Energi AS,
both with registered offices in Mongstad, Norway
The Voith ­Industrial S­ ervices Group Division acquired all of
the interests and voting rights in the two entities effective
December 31, 2011. The acquisition of the two companies
served to round off the customer-geared offering of electricaland mechanical services on the energy and petrochemicalmarket in Norway.
Part of the intangible assets purchased, e.g. the know-how
of the employees, could not be recognized, as the recognition criteria are not met. Apart from that, the goodwill stems
from the aforementioned expected positive effects for theVoith I­ndustrial S­ ervices Group Division. Goodwill is not tax
deductible.

VPFS	Voith Paper Fabric & Roll Systems Inc.,
Wilson (NC), USA
VPA	Voith Paper Inc., Appleton (WI), USA

Voith Annual Report 2013129

Consolidated Financial Statements

The following amounts resulted for the combined assets andliabilities purchased with the two companies:
Balance sheet itemin € thousands

Acquisition
date fair value

Intangible assets

2,778

Non-current assets

186

Inventories

516

Receiv­ables

3,904

Other assets

156

Cash and cash equivalents

3,410

Provisions- 265

Liabilities and deferred tax liabilities- 3,754

Carrying amount

6,931

Goodwill

3,633

Purchase price of the interests purchased

10,564

Cash and cash equivalents- 3,410Amount financed by liabilities
Cash outflows

0
7,154

Business combination with the aerospace engineering
activities of P3 Ingenieurgesellschaft
Effective April 2, 2012, Voith I­ndustrial ­Services and P3 Ingenieurgesellschaft bundled their engineering expertise for theaerospace industry. Under this agreement, the aerospaceengineering activities of Voith I­ndustrial S­ ervices and P3
were transferred into a joint venture.
The new joint venture resulted through an initial issue of new
interests by the existing Voith Engineering S­ ervices Holding
GmbH. These new interests were subscribed by the P3
shareholder in return for the contribution of the subsidiaryP3 Digital S­ ervices GmbH with its subsidiaries. After thistransaction, Voith ­Industrial ­S ervices holds 40 % in Voith
Engineering ­Services Holding GmbH and the P3 shareholder
holds 60 % of the interests.
Individual further aerospace engineering activities of the P3
shareholder performed by subsidiaries abroad were transferred to existing subsidiaries of Voith Engineering ­Services
Holding GmbH.
Both parties hold 50 % of the voting rights in the joint venture.
In terms of the financial and operating policies, Voith has the
majority of the voting rights and thus exercises control as
defined by IAS 27.

Consideration in the form of cash has already been given in
full. There were no other purchase price components. Nopurchase price adjustments are planned. The fair value ofthe receiv­ables acquired corresponded to their contractual
gross amount. The acquisition-related costs amounted to€ 276 thousand (recognized as other operating expenses).
In the 2011/12 fiscal year, the two entities contributed sales
totaling € 14,143 thousand and net income of € 102 thousandto the Voith Group’s consolidated statement of income. If thebusiness combination had already taken place on October 1,
2011, the Group’s sales would have been € 3,692 thousandhigher. The contribution to the Group’s net income for theyear would have been € 182 thousand.

130

Voith Annual Report 2013

Consolidated Financial Statements

The following amounts resulted for the acquired assets andliabilities:
Balance sheet itemin € thousands

Intangible assets
Property, plant and equipment
Receiv­ables
Cash and cash equivalents

Acquisition
date fair value

9,090
328

The fair value of the receiv­ables acquired corresponded totheir contractual gross amount. The payment was expected
to be received in full. The acquisition-related costs amounted
to € 874 thousand (recognized as other operating expenses).

17,080481

Other assets

190

Provisions- 481

Liabilities-15,604

Carrying amount

11,084

Goodwill

25,925

Fair value of the consideration transferred

37,009Equity interests issued- 35,859

Amount financed by liabilities- 754

Cash and cash equivalents- 481

Cash outflow/inflow- 85

The fair value of the consideration transferred was determined by an external appraiser.
The non-controlling interests attributable to P3 amounted
to € 30,085 thousand. The value corresponded to 60 % of
the equity interests issued plus 60 % of the net assets contributed by Voith into the joint venture, measured at carrying
amount.
Part of the intangible assets purchased, e.g. the know-how
of the employees, could not be recognized, as the recognition criteria are not met. Apart from that, the goodwill mostly
stemmed from the synergy effects expected for the Voith­Industrial ­Services Group Division. Goodwill was recognized

Voith Annual Report 2013

taking into account the non-controlling interests attributable
to the P3 shareholder. The transfer of activities outside
Germany gave rise to tax-deductible goodwill amounting to€ 757 thousand.

Sales and the contribution to net income attributable to theshare contributed to the Group by P3 could not be given
because no separate bookkeeping was performed for thetwo units following the merger of the Voith and P3 activities.
If the business combination had already taken place on October 1, 2011, the Group’s sales would have been € 28,462
thousand higher. The contribution to the Group’s net income
for the year would have been € 327 thousand.

Business combinations in the 2012/13 fiscal year
Acquisition of ThyssenKrupp ­Services Ltd.,
United Kingdom
Voith ­Industrial S­ ervices acquired all of the interests andvoting rights in ThyssenKrupp ­S ervices Limited effective
January 18, 2013. With this acquisition, Voith I­ndustrial­Services intends to consolidate its position as one of theleading service providers for the automotive industry in the
United Kingdom. The entity provides facility management
services, technical cleaning and process management.
Part of the intangible assets purchased, e.g. the know-how
of the employees, cannot be recognized, as the recognition criteria are not met, and is therefore subsumed under
goodwill. Apart from that, the goodwill stems from the aforementioned expected positive effect for the Voith ­Industrial­Services Group Division. Goodwill is not tax deductible.

131

Consolidated Financial Statements

The following amounts resulted from the assets and liabilities
acquired from the combination:
Balance sheet itemin € thousands

Intangible assets

Acquisition
date fair value

2,925

Other non-current assets

933

Inventories

145

Receiv­ables

5,507

Other assets

560

Cash and cash equivalents

2,225

Provisions- 3,298

Liabilities- 3,391

Carrying amount

5,606

Goodwill

2,978

Purchase price of the interests purchased

8,584

Cash and cash equivalents- 2,225

Cash outflows

6,359

The purchase price allocation has been completed. Consideration in the form of cash has already been given in full.
There are no other purchase price components. No purchaseprice adjustments are planned.
The fair value of the receiv­a bles acquired corresponds totheir contractual gross amount. The receiv­ables had been
settled by the reporting date.
The acquisition-related costs amounted to € 164 thousand(recognized as other operating expenses).
In the 2012/13 fiscal year, the entity contributed sales totaling € 25,389 thousand and net income of € 3,835 thousandto the Voith Group’s consolidated statement of income. If thebusiness combination had already taken place on October 1,
2012, the Group’s sales would have been € 8,254 thousand132

higher and the Group’s net income for the year would havebeen € 402 thousand lower.
Acquisition of Vortex Hydrosystems Inc., Canada
In February 2013, Voith Hydro acquired 80 % of the sharesand voting rights of the Canadian firm Vortex Hydrosystems
Inc. The Company supplies mechanical equipment to hydropower plants. The purchase price for the shares amounted
to € 718 thousand with goodwill amounting to € 713 thousand. The recognition of goodwill is based on the expectedsynergies for the Voith Hydro Group Division arising from theknow-how of the employees transferred in the course of theacquisition. In the 2012/13 fiscal year, the entity contributed
sales totaling € 1,434 thousand and a net loss for the yearof € 1,100 thousand to the Voith Group’s consolidated statement of income.

Acquisition in the 2011/12 fiscal year of further
interests in entities over which the Group alreadyhas control
In the 2011/12 fiscal year, further interests were acquired inentities over which the Group already has control.
The Voith ­Turbo Group Division increased its interest heldin Hydronaut s.r.l., Milan, Italy, from 60 % to 100 % effective
June 22, 2012. The purchase price paid for the transaction
amounted to € 1,078 thousand. There was a financial liabilityof € 1,140 thousand relating to an existing put option; thiswas derecognized. The reserves within equity changed by
the difference compared to the purchase price.
The Voith ­Industrial ­S ervices Group Division acquired afurther 40 % of the interests in Terne AS, Mongstad, Norway,
with effect from January 2, 2012. The Group now whollyowns the company and also holds 100 % of the voting rights.
The purchase price for the interests was € 1,654 thousand.
Non-controlling interests decreased by € 1,507 thousand.
The difference compared to the purchase price was offset
against the reserves.

Voith Annual Report 2013

Consolidated Financial Statements

Basis of consolidation
Acquisition in the 2012/13 year of further interests inentities over which the Group already has control
Voith Hydro acquired a further 49 % of the interests in VG
Power AB, Västerås, Sweden, in the first half of the 2012/13
fiscal year. The Group now wholly owns the company andalso holds 100 % of the voting rights. The purchase pricewas € 10,300 thousand. Non-controlling interests decreasedby € 5,384 thousand. The difference compared to the purchase price was offset against the reserves.

Divestment of subsidiaries in the 2011/12 fiscal year
In the course of streamlining the service portfolio, the Voith­Industrial ­Services Group Division sold certain subsidiaries
in the 2011/12 fiscal year. In total, it sold intangible assetsof € 1,014 thousand, other non-current assets of € 463 thousand, current assets of € 13,177 thousand and liabilities of€ 10,779 thousand. A loss of € 847 thousand was incurred
as a result of the sale of these entities which was presented
within operational result.

Acquisition accounting is performed using the acquisition
method in accordance with IFRS 3 (revised). Accordingly,
the consideration transferred to the seller plus any non-controlling interests and the fair value of the previously held­equity interests in the acquiree are offset against the fair value of the acquired assets and liabilities as of the acquisition
date. Any excess of cost over carrying amount is recognized
as goodwill. Any excess of carrying amount over cost isrecognized in profit or loss.
Any contingent consideration is recognized at acquisition
date fair value. Subsequent changes to the fair value of thecontingent consideration which is deemed to be an asset or
liability will be recognized in accordance with IAS 39 either in
profit or loss or as a change to other comprehensive income.
If the contingent consideration is classified as equity, it is notremeasured and its subsequent settlement is accounted forwithin equity.
In the case of business combinations achieved in stages thatgive rise to control over an entity, or in the case of disposalsof shares which result in loss of control, the previously heldor remaining equity interests are remeasured at fair value
through profit or loss.

Divestment of subsidiaries in the 2012/13 fiscal year
Due to the focus placed on its core business, Voith Paper
divested of one subsidiary in the 2012/13 fiscal year. In total,
it sold intangible assets of € 664 thousand, other non-current assets of € 2,450 thousand, current assets of € 4,526
thousand and liabilities of € 4,572 thousand. A profit of € 639
thousand was generated as a result of the sale of these
entities which was presented within operational result.

A change in the parent’s ownership interest in a subsidiarythat does not result in a loss of control is accounted for as
an equity transaction. This is why business combinations
achieved in stages where the Group already has control
or disposals of shares without a loss of control have beenrecognized directly in equity from the 2009/10 fiscal year
onwards.
Transactions under common control are recognized using
the pooling-of-interest method. Under this method, gains orlosses on disposal are, for reasons of immateriality, offset
directly in equity in the reserves. In the case of acquisitions,

Voith Annual Report 2013133

Consolidated Financial Statements

Foreign currency translation
any excess of cost over the carrying amount and any excessof the carrying amount over cost are offset in full against
reserves.
The same accounting policies are used to determine Voith’sshare in equity of all companies accounted for using theequity method.
Receiv­ables and liabilities between the consolidated entities
are netted. Intercompany profits in inventories and non-current assets are eliminated in the consolidated statement ofincome. Intercompany sales and other intercompany income
are netted against the corresponding expense. Deferred tax
is recognized for consolidation transactions that are recognized in profit or loss.

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

134

Voith Annual Report 2013

Consolidated Financial Statements

Currency translation is based on the following key exchange rates:
Exchange rates between the euro and the main foreign currencies in the Voith Group:
Closing rate

Average rate

2013-09-30

2012-09-30

2012/13

2011/12US dollar

1.35361.28671.31301.3040Brazilian real

3.01192.61042.76902.4596

Pound sterling

0.83580.79680.83980.8250Swedish krona

8.69468.43728.59938.8102

Norwegian krone

8.14157.3662

7.62767.5805

Canadian dollar

1.3914

1.26611.33491.3132Australian dollar

1.4474

1.2373

1.3285

1.2671Chinese renminbi
Japanese yen

Voith Annual Report 2013

8.28498.08848.12258.2652132.8171100.0988

120.8837

102.4685

135

Consolidated Financial Statements

Accounting policies
The consolidated financial statements are prepared using thehistorical cost method. The only exceptions to this rule arederivative financial instruments, available-for-sale financial
instruments and assets at fair value through profit or loss.
All these exceptions are recognized at fair value. Purchases
or sales of financial assets are always recognized as at thesettlement date. Regular way purchases or sales of avail­ablefor-sale securities are recognized on the trade date.
In accordance with IAS 27, consistent accounting policies
are used to prepare the separate financial statements for thecompanies included in the consolidated financial statements.
The main accounting policies are listed and explained below.

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

Intangible assets
Income and expenses
Sales (less various cash and other discounts granted tocustomers) are recognized when products or merchandise
have been delivered and/or services rendered and when
the risk of ownership has been transferred to the customer.
In the case of long-term construction contracts, revenue isrecognized using the percentage-of-completion method. A
detailed explanation of this method is provided in the notes
on “Long-term construction contracts”.
Interest expenses and interest income are recognized asthey accrue. The effective interest method, i.e. the imputed
interest rate, is used to discount estimated future cash
receipts over the expected term to maturity of the financial
instrument to the net carrying amount of the financial asset.
Dividend income is recognized when the Group’s right toreceive the payment is established.
Operating expenses are recognized as expenditure at thetime when a service is used and other sales-related expenses are recognized as incurred. Taxes on income are

136

Intangible assets acquired for a consideration are recognizedat acquisition cost and amortized on a straight-line basis
over their estimated useful lives. Most of these assets aresoftware programs that are amortized over a three-year
period.
Internally generated intangible assets are capitalized as development costs based on their production costs, provided
that manufacture of these assets meets the recognition
criteria stated in IAS 38 and, in particular, it is probable that
future economic benefits will flow to the Group. Production
costs include all costs that are directly attributable to thedevelopment process. These assets are amortized using
the straight-line method from the start of production for adefined period, usually between three and ten years. If therequirements for capitalization are not satisfied, expenses
are recognized in profit or loss in the fiscal year in which
they were incurred.
Impairment losses are recognized in accordance with IAS 36
if the higher of the recoverable amount (present value of
expected future cash flows from the use of the assets
concerned) or the fair value less costs to sell falls below

Voith Annual Report 2013

Consolidated Financial Statements

their carrying amount. Should the reasons for impairment
losses recognized in previous periods no longer apply, these
impairment losses are reversed.
The reversal posted through profit or loss is limited sothat the carrying amount of the asset does not exceed its
recoverable amount, nor exceed the carrying amount thatwould have been determined, net of amortization, had no
impairment loss been recognized for the asset in prior years.
Borrowing costs that are directly attributable to intangible
assets are capitalized as part of the cost of those assets.
Goodwill is subjected to an impairment test at least annually.
For impairment testing, goodwill is assigned to essentiallyfour cash-generating units. In line with the management’s
internal reporting practices, these cash-generating units are
identified on the basis of the Group’s operating activities.
Voith has therefore defined the four segments Voith Hydro,
Voith I­ndustrial S­ ervices, Voith Paper and Voith ­Turbo as its
cash-generating units.
To determine whether goodwill is impaired, the Voith Groupmeasures the assets of the cash-generating unit against theirfair value less the costs needed to make the sale. If there
is no active market on which fair value can be measured,
it is measured using the discounted cash flow projections
taken from the latest business planning prepared by management. The planning assumptions are adjusted to reflect
the current information available. Key assumptions on whichcalculations of fair value are based include assumptions
about the trend in orders received and sales, growth rates,
extrapolated cash flow forecasts beyond the planning horizon, and discount rates. Due account is taken of reasonableassumptions regarding macroeconomic trends and historicaldevelopments. Based on the fair value measurement ofthese assets there was no indication of a need to record an
impairment loss on goodwill.

Voith Annual Report 2013

The Board of Management of Voith GmbH assumes that
it will continue to see stable business development in the2013/14 fiscal year. The related assumptions for the four
segments are outlined below:
Voith Hydro:
The orders on hand at Voith Hydro develop in a satisfactory
fashion. The fact that no major projects were awarded inemerging markets, with others delayed, coupled with theimpact of the euro crisis (particularly with low demand in
Italy, Spain, Portugal and Turkey) will lead to a fall in market volume in comparison to previous years. With market
volume set to rise slightly over the next few fiscal years,
orders received are likewise expected to increase at Voith
Hydro. Sales increase in line with the development of orders
received. For the terminal value, the Group Division expects
to see a slight increase in orders received and sales.
Voith ­Industrial ­Services:
In the coming years, Voith ­Industrial ­Services expects to see
noticeable sales growth. In the calculation of its terminal
value, it is planning on a slight rise in both orders received
and sales on the basis of the last year of the detailed planning period.
Voith Paper:
Voith Paper is forecasting a fall in the volume of businesswith new paper machines over the detailed planning period(2013/14 and 2014/15). Starting in the 2015/16 fiscal year,
it is planning on moderate growth. In the mid-term, businesswith new machines will settle at a lower level than seen in
the current year. Steady yet moderate growth is forecast for
the Products & ­Services and Fabric & Roll Systems businesslines. For the terminal value, the Group Division expects tosee a slight increase in orders received and sales.
Voith ­Turbo:
After falling in the 2012/13 fiscal year, Voith ­Turbo is expecting the markets to recover in the coming two years of theplanning period, with corresponding growth. In the following
years we expect both orders received and sales to see strong
growth corresponding to the long-term historical average.

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Consolidated Financial Statements

An increase in margins due to efficiency gains is planned
for all Group Divisions.
The cash flow forecast is based on the detailed financebudget for the coming two years and a qualified top-down
projection for the years two to five. Cash flows for periods
after the fifth fiscal year are extrapolated at a constant
approximately 1 % growth rate. These growth rates do not
exceed the average long-term growth rates of the businessareas in which the corresponding cash-generating units
operate.
The discount rates are derived from a calculation of theweighted average cost of capital, which is itself based on
the financing costs of comparable competitors for eachof the cash-generating units. The discount rates appliedreflect the equity risk specific to each cash-generating unit.
After-tax interest rates of 6.3 % (previous year: 6.9 %) for
Voith Hydro, 5.7 % (previous year: 6.3 %) for Voith ­Industrial­Services, 6.9 % (previous year: 7.3 %) for Voith Paper and
6.2 % (previous year: 6.9 %) for Voith ­Turbo were used to
calculate the present value of future net cash inflows.

Property, plant and equipment are subjected to an impairment test if unusual events or market developments indicatethat they may be impaired. To this end, the carrying amountof an asset or cash-generating unit is compared with its
recoverable amount, which is defined as the higher of fairvalue less costs to sell and value in use. Impairment losses
are reversed if the fair value of a previously impaired asset
subsequently increases again.
The reversal posted through profit or loss is limited sothat the carrying amount of the asset does not exceed its
recoverable amount, nor exceed the carrying amount thatwould have been determined, net of depreciation, had no
impairment loss been recognized for the asset in prior years.
Repair and maintenance costs are recognized as expenses
at the time when they are incurred. Any major renewals or
improvements are capitalized. Borrowing costs that are
directly attributable to property, plant and equipment arecapitalized as part of the cost of those assets.

Leased assets
Property, plant and equipment
Property, plant and equipment are stated at cost less depreciation and any impairment losses. The cost of internallyproduced property, plant and equipment includes all directly
attributable production costs and an appropriate share of
production overheads. Depreciation is recognized on astraight-line basis over the following useful lives:
Useful life
Buildings

40 to 50 years

Plant and machinery

4 to 15 years

Other equipment, furniture and fixtures

4 to 12 years

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Whether an arrangement is or contains a lease depends on
the substance of the arrangement and requires a decision to
be made on whether fulfillment of the agreement depends on
the use of a particular asset and whether the arrangement
conveys the right to use the asset.
Leases that transfer substantially all risks and rewards incidental to use of the leased asset to a Voith Group company(the lessee) are classified as financial leases. In such cases,
the lessee recognizes the leased asset at the start of thelease period and writes it down over the asset’s useful life.
A corresponding liability is recognized and then settled by
the lease payments. The interest component is recognizedin the interest result. All other leases in which Voith Group
companies act as the lessee are stated as operating leases.

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Consolidated Financial Statements

The lease payments for operating leases are recognized as
expenses using the straight-line method over the term of
the lease.

Financial assets and securities
Shares carried under financial assets as other investments
are generally recognized at fair value. Where no active market exists for individual companies and it is impracticable
to determine their fair value, shares are stated at cost. The
carrying amount of such assets is written down if there is
objective evidence that they are impaired.
Associates and joint ventures are accounted for using theequity method and are stated at the share of equity held by
the Voith Group plus any goodwill. Changes in the share of
the associate’s equity that are not recognized in profit or loss
are likewise recognized directly in equity in the consolidated
financial statements.
In accordance with IAS 39, loans classified as non-current
loans are recognized under other financial assets at amortized cost, adjusted (where necessary) for impairment.
In accordance with IAS 39 distinctions between “held-fortrading”, “available-for-sale”, “held-to-maturity” and “financial
assets at fair value through profit or loss” must be made forsecurities that are classified as non-current or current assets.
The securities held by the Voith Group are normally available
for sale. To a small extent, however, the Group also makes
use of financial instruments that are held for trading and securities that, upon initial recognition, are designated as at fairvalue through profit or loss. Certain securities are assigned
to this category to eliminate measurement inconsistencies in
the accounting for long-term employee benefits.

alternative methods. Where no market value is available andit is impracticable to reliably determine fair value, securities
are recognized at cost.
Available-for-sale securities are recognized separately inequity, taking due consideration of deferred taxes, until
such time as they are realized. The carrying amounts of
non-current financial assets and available-for-sale securities
are regularly tested for objective evidence that they may be
impaired. Such evidence can take the form of significant
financial difficulty of the debtor or changes in the technological, economic and legal environment. Objective evidence
that equity instruments may be impaired is given if there is a
prolonged or significant decline in their fair value. The criterion of a prolonged decline is met if the decline lasts longer
than 12 months. If the fair value of the investment falls morethan 30 % below its cost, this is regarded as a significant
decline. If this happens, the amounts hitherto recognized inequity are recognized in profit or loss.

Fair value
The fair value of investments for which an organized market exists is determined by the quoted market price at thereporting date. Where no active market exists, valuation
techniques are used to determine the fair value. The techniques used by Voith for this purpose aim to reflect objective
criteria as accurately as possible and to simulate an active
market. This is done, for example, by analyzing discounted
cash flows, referring to arm’s length transactions between
knowledgeable, willing and independent partners, anddrawing on comparisons with the current fair value of otheressentially identical financial instruments.

Where market values can be obtained, securities are statedat their market value, otherwise they are measured using

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Consolidated Financial Statements

Inventories

Receiv­ables and other assets

Materials and supplies, merchandise, work in progress andfinished goods are all stated under inventories at the lowerof cost and net realizable value. In addition to direct costs,
cost includes an appropriate portion of necessary materials
and production overheads as well as production-related
depreciation that can be directly allocated to the production
process. The weighted average cost, or cost based on thefirst-in, first-out (FIFO) method, is capitalized in the balance
sheet. Appropriate allowance is made for inventory risks
associated with slow-moving stocks, reduced salability, etc.
When the circumstances that previously caused inventories
to be written down below cost no longer exist, the writedown is reversed.

Receiv­a bles and other assets (with the exception of derivatives) are stated at nominal value or at cost and are
regularly tested for impairment individually. Where objective
evidence of possible loss exists (if the debtor is experiencing significant financial difficulty, if it is highly probable that
insolvency proceedings will be opened against the debtor, if
the debtor defaults on or is delinquent in interest or principal
payments, if significant adverse changes in the technological,
economic or legal environment occur, if there is a significant
or prolonged decline in the fair value of a financial instrument below its cost, or if legal proceedings are opened, forexample), then individual allowances are recorded using anallowance account to reflect these factors. To the extent that
impairment is derived from historical bad debt rates on a
portfolio basis, a drop in the total volume of receiv­ables reduces such allowances and vice versa. Impaired receiv­ables
are derecognized when they are assessed as uncollectible.
Interest-free or low-interest receiv­ables due in more than one
year are discounted.

Long-term construction contracts
Long-term construction contracts are recognized in accordance with the percentage-of-completion (PoC) method. The
percentage of completion per contract to be recognized is
calculated as the ratio of the actual costs incurred to theanticipated total costs of the project (“cost-to-cost method”).
Revenue received is stated as sales and, after deducting
customer advances and installments, as trade receiv­ables. If
the outcome of a construction contract cannot be estimatedreliably, it is not possible to calculate contract revenue andcosts based on the percentage of completion. In such cases,
revenue is recognized at the amount of costs incurred for theconstruction contract to date, while the contract costs are
immediately recognized in full in the period under review inwhich they are incurred. Appropriate provisions are formed
to cover expected losses on such contracts based on recognizable risks.

140

Derivative financial instruments and hedging
Voith uses a variety of financial derivatives—such as forward
exchange contracts and interest rate swaps—to hedge
underlying transactions. Essentially, the Group applies two
policies—either the fair value hedge accounting of firm
commitments or cash flow hedge accounting—to hedge
operating business transactions.
At the inception of a hedge relationship, the Group formallydesignates and documents the hedge relationship and therisk management objective and strategy for entering into
the hedge. This documentation includes identification of thehedging instrument, the hedged item or transaction, thenature of the risk being hedged, and how the Group will

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Consolidated Financial Statements

assess the hedging instrument’s effectiveness in offsetting
the exposure to changes in the hedged item’s fair value
or cash flows that is attributable to the hedged risk. Suchhedges are expected to be highly effective in offsettingchanges in fair value or cash flows and are assessed on
an ongoing basis to determine that they actually have beenhighly effective throughout the financial reporting periods forwhich they were designated.
Hedges that meet the strict criteria for hedge accounting are
accounted for as described below:
Fair value hedges
Fair value hedges are hedges of the Group’s exposure tochanges in the fair value of a recognized asset or liabilityor an unrecognized firm commitment that is attributable
to a particular risk and could affect profit or loss for theperiod. In the case of fair value hedges, the carrying amountof a hedged item is adjusted by the profit or loss that is
attributable to the hedged exposure. The derivative financial
instrument is remeasured at its fair value and any gains orlosses arising as a result are recognized in profit or loss.
For fair value hedges relating to hedged items carried at amortized cost, the adjustment to carrying amount is amortizedthrough profit or loss over the remaining term to maturity.

accounting. Every adjustment to the carrying amount of ahedged financial instrument is released to income using theeffective interest method. As soon as there is an adjustment,
the reversal may begin, and shall begin no later than when
the hedged item ceases to be adjusted for changes in its fairvalue attributable to the risk being hedged.
Cash flow hedges
Cash flow hedges are hedges of the Group’s exposure tovariability in cash flows that is attributable to a particular risk
associated with a recognized asset or liability or a forecast
transaction and could affect profit or loss for the period. The
effective portion of the gain or loss on the hedging instrument is recognized directly in equity, while the ineffective
portion is recognized in profit or loss.
Amounts directly recognized in equity are recycled to profit
or loss in the period during which the hedged transaction
affects profit or loss, for example when hedged financial
income or expenses are recognized or when a forecast saleor purchase occurs. Where the hedged item is the cost ofa non-financial asset or liability, the amounts recognized inequity are transferred to the initial carrying amount of thenon-financial asset or liability.

When an unrecognized firm commitment is designated asa hedged item, the subsequent accumulated change in thefair value of the firm commitment that is attributable to thehedged risk is recognized as an asset or liability and thecorresponding gain or loss is recognized in the profit or lossof the period. Changes in fair value of the hedging instrument
are also recognized in the profit or loss of the period.
The Group discontinues fair value hedge accounting if thehedging instrument expires, is sold, terminated or exercised, of if the hedge no longer meets the criteria for hedge

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Consolidated Financial Statements

If the forecast transaction is no longer expected to occur,amounts previously recognized directly in equity are transferred to profit or loss. When the hedge expires or is sold,terminated without replacement or rolled over into anotherhedge or if the Group retracts the designation of a hedge,
the previously disclosed amounts remain as a separate itemin equity until the forecast transaction occurs. If the forecast
transaction is no longer expected to occur, the amount isrecognized in profit or loss.
Where no hedging relationship with an underlying transaction
exists (i.e. where hedge accounting does not apply), derivatives are classified as held-for-trading instruments. Changes
in the fair value of these instruments are recognized in profit
or loss.
Financial derivatives with positive fair values are stated underother financial receiv­ables; those with negative fair values arestated under bonds, bank loans and other interest-bearing
liabilities or other financial liabilities.
The Treasury Management System (TMS) is used to manage
all external hedges.
The TMS is also used to calculate the fair value of forward
exchange contracts. The original forward rate is comparedwith the forward rate calculated at the reporting date. The
difference is discounted to the reporting date. The forward
rate is calculated using the interest rates for the respective
currency based on a linear approximation. The fair valueof options, interest rate swaps and interest rate caps iscalculated using information supplied by the banks. This
information is calculated on the basis of certain assumptions
and using recognized valuation models (Black-Scholes andHeath-Jarrow-Morton).

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Embedded derivatives
When the Group becomes party to the contract, it assesses
whether any embedded derivatives should be separated
from the host contract. A reassessment is not made unlessthere is a substantial change in the terms of the contract thatsignificantly modifies the cash flows that would otherwise
have been generated from the contract. Where embedded
derivatives exist, they are recognized at fair value as financial
assets held for trading. Embedded financial derivatives withpositive fair values are stated under other financial receiv­
ables; those with negative fair values are stated under bonds,
bank loans and other interest-bearing liabilities or otherfinancial liabilities.

Cash and cash equivalents
Cash and cash equivalents include cash in hand and checks,
cash at banks and cash equivalents. Under this item, cash
at banks includes both daily deposits and time deposits with
fixed maturities of up to three months.

Non-current assets and disposal groups held for saleNon-current assets and disposal groups held for sale areclassified as assets held for sale or correspondingly as
liabilities directly associated with assets classified as held
for sale if their carrying amount is to be recovered throughsale rather than through continuing use. This condition isregarded as met when the sale is highly probable and theasset or disposal group is available for immediate sale in its
present condition. In this case management has decided tosell the asset and it is expected that the sale will take place
within 12 months from the date of classification. Non-current assets held for sale are measured at the lower of theircarrying amount and their fair value less costs to sell. Assets
held for sale are not subject to depreciation and amortization.

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Consolidated Financial Statements

Deferred and current taxes

Provisions for pensions and similar obligations

In accordance with IAS 12, deferred tax assets and liabilities
are recognized for temporary differences between tax reporting and reporting for IFRS purposes. Deferred tax assets
are also recognized for unused tax losses insofar as it isreasonable to expect that they will be realized in the near
future. Deferred taxes that relate to items recognized directlyin equity are also themselves recognized in equity. Deferredtaxes are calculated based on the tax rates enacted or substantively enacted by the reporting date that apply or are
expected to apply in the countries concerned at the time ofrealization. Deferred tax assets on unused tax losses that are
not likely to be realized within a foreseeable period (normally
two years) or that are not covered by deferred tax liabilities
are either written down or not recognized at all. Deferred tax
assets and deferred tax liabilities may be netted if the Group
has a legal right to offset current tax assets against current
tax liabilities and they relate to income taxes levied by thesame taxation authority.

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

Current taxes are calculated and reported in accordancewith the tax laws and regulations valid for each company.

In measuring its defined benefit liability pursuant to IAS 19.54,
a company must recognize a portion of its actuarial gains
and losses as income or expenses if the net cumulative
unrecognized actuarial gains and losses at the end of theprevious period under review exceeded the greater of:a) 10 % of the present value of the defined benefit obligation
at that date (before deducting plan assets); andProfit participation rightsb) 1
 0 % of the fair value of any plan assets at that date.

According to IAS 32, the conditions pertaining to the issues of profit participation rights amounting to € 103,400
thousand require these rights to be reported as a separate
component of the Group’s equity. Interest is not reported
as interest expenses, but is treated in a similar manner to a
dividend obligation.

The portion of actuarial gains and losses to be recognized isthe excess determined pursuant to IAS 19.92, divided by the
expected average remaining working lives of the employees
participating in a given plan.

Voith Annual Report 2013

In some countries, Voith is required by law or contract tomake minimum contributions into a plan over a certain
period. When these amounts are not fully recoverable by
the Company after payment and therefore not recognized
as an asset under IAS 19.58 (“asset ceiling”), a liability isrecognized through profit or loss.

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Consolidated Financial Statements

Other provisions
In accordance with IAS 37, provisions are formed for all discernible risks and uncertain obligations at the amount that is
likely to be realized. These provisions are not netted against
recourse claims. Provisions are recognized when the Group
has a present obligation to a third party as a result of a past
event and it is probable that an outflow of resources will be
required whose amount can be estimated reliably. Provisions
for warranty claims are based on historical claim trends andestimated future trends. Specific provisions are set up for
known claims. Provisions for outstanding ex­penses, onerous
contracts and other business-related obligations are measured based on services still to be rendered, usually at theamount of the costs to sell.
Provisions which do not lead to an outflow of resources in
the following year are carried at the discounted settlement
amount at the end of the period under review. The discountrate used is derived from market interest rates. The settlement amount also includes the estimated cost increases.
If an amount set aside as a provision is expected to berefunded (through an insurance claim, for example), therefund amount is stated separately as an asset if it is virtuallycertain. Income from refunds is not netted against expenses.

Liabilities
Current liabilities are stated at the amount needed to settle
the obligation. Financial liabilities are measured at their amortized cost. Amortized cost corresponds to the cost of thefinancial liabilities adjusted for repayments, issue costs andthe amortization of any debt discounts or debt premiums.
Where liabilities are accounted for as hedged transactions,they are measured taking into account the market value ofthe hedged risk. Gains and losses are recognized in profit
or loss.

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Liabilities arising from leases that are classified as financeleases in accordance with the criteria laid out in IAS 17 arerecognized at the present value of the minimum lease payments at the start of the lease. Thereafter, they are statedunder financial liabilities at their amortized cost. Lease payments are split into an interest component and a principal
component. The interest component of each payment isrecognized as an expense in profit or loss.

Government grants
Government grants are recognized if there is reasonablecertainty that they will be received and the Group willcomply with the conditions attached to the grant. Grants
also include low-interest or interest-free government loans.
Cost-related grants are recognized as income over the periods necessary to match them with the costs that they areintended to compensate. Cost-related grants are netted withthe costs for which they are granted.
Where the grant relates to an asset, it is recognized asdeferred income and released to income in equal annual
amounts over the expected useful life of the related asset.
Where the Group receives non-monetary grants, the asset
and the grant are recorded at nominal amounts and released
to the statement of income over the expected useful life of
the relevant asset by equal annual installments.

Classification of holders of non-controlling interests
in limited partnerships and based on repayment rights
and put options
In accordance with IAS 32, financial instruments that entitle
the holder to repayment of the capital made available tothe company must be classified as liabilities. In companies

Voith Annual Report 2013

Consolidated Financial Statementsthat operate as limited partnerships, partners have the rightunder German law to demand repayment of the capital they
have made available to the partnership. This right cannot be
excluded by the partnership agreement. This provision also
extends to other comparable repayment rights of holders of
non-controlling interests with a settlement agreement. Put
options create a similar obligation pursuant to IAS 32.
a) Put options
Where the right to terminate non-controlling interests exists
in the form of a put option, the corresponding non-controlling interests are not derecognized but are treated as acomponent of equity during the period under review. Accordingly, a share of net income for the year is allocated toholders of non-controlling interests. At every reporting date,
it is assumed that the put option will be exercised; the corresponding non-controlling interests are reclassified from equity to financial liabilities. This financial liability is recognizedin the amount of the estimated compensation obligation andmeasured at fair value. The difference between this liability
and non-controlling interests as a share of equity is treatedas a transaction between owners and recognized from the2009/10 fiscal year onwards as an increase or decreasein equity. Until the 2008/09 fiscal year transactions wereregarded as a business combination achieved in stages
and the difference stated as goodwill. By choosing to apply
the transitional rule under IAS 27 the Group retained theseamounts.
b) Limited partnerships
The interests held in limited partnerships as well as non-controlling interests with comparable termination rights are treated in the same way as put options. The liability is measured
at amortized costs taking account of the attributable shareof net income.

Voith Annual Report 2013

Amounts reclassified from equity to financial liabilities totaled€ 69,968 thousand in the 2012/13 fiscal year (previous year:€ 71,942 thousand).
If non-controlling interests in limited partnerships are terminated or if corresponding put options are exercised, thefinancial liabilities recognized prior to termination/exerciseof the put options are reclassified as other financial liabilities.

Financial guarantee contracts
Financial guarantee contracts issued by the Group are thosecontracts that require a payment to be made to reimburse
the holder for a loss it incurs because the specified ­debtor
fails to make a payment when due in accordance withthe terms of a debt instrument. These financial guarantee
contracts are treated as insurance contracts as defined by
IFRS 4, i.e. the financial guarantee contracts are recognized
as contingent liabilities until utilization becomes probable.
When this is the case, the corresponding obligation isrecognized.

Exercise of judgment and estimates by management
Some accounting policies require critical estimates thatinvolve complex and subjective assessments and the useof assumptions, some of which are inherently uncertain andsubject to change. These critical accounting estimates canvary from period to period and significantly impact a company’s financial position and/or earnings. The management
explicitly points out that future events will often deviate fromplanning assumptions, and that it is normal for estimates tohave to be adjusted.

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Consolidated Financial Statements

Significant estimates and assumptions have to be made in
the following areas of accounting:
Revenue recognition fromlong-term construction contracts
The Group generally accounts for construction contracts
using the PoC method, according to which revenue isrecognized based on the percentage of completion. Thismethod involves making a precise estimate of the degree ofcompletion. Accurate estimates of the percentage of completion are of vital importance to this method. Depending on
the method used to measure the percentage of completion,
the most significant estimates concern the total contract
cost, the costs to complete, the total contract revenue, andcontract risks.
The management of Voith’s operating subsidiaries constantly reviews all estimates that are needed in the accounting
for construction contracts and adjusts them as and whennecessary.
Such examinations are part of management’s normal accounting activities at operating level. For details of carrying
amounts, refer to note 14.
Trade and other receiv­ables
Allowances for doubtful receiv­ables require significant judgment on the part of management. They also necessitate ananalysis of the individual debtors that covers their creditworthiness, current economic trends and an examination ofhistoric default scenarios. For details of carrying amounts,
refer to notes 14 and 15.
Impairment of goodwill
Determining the recoverable amount of a Group Division towhich goodwill was allocated involves estimates by management. To calculate the value in use, planning for the next
five years is based on management’s expectations adjusted
for economic trends and historic developments. Estimatesof growth, the weighted average cost of capital and tax

146

rates are likewise based on reliable information that reflects
the risks associated with operating business in each given
industry or division. For details of carrying amounts, refer tonote 10 and the segment reporting.
Development costs
Development costs are capitalized if the requirements of
IAS 38 are met. Initial capitalization is based on management’s estimate that it can demonstrate technical and economic feasibility. Forecasts of the expected future economic
benefit to be gained from assets are essential to the decision
whether or not costs are to be capitalized. For details ofcarrying amounts, refer to note 10.
Pension obligations
Estimates of pension obligations depend significantly on key
assumptions about discount factors, expected returns onplan assets, expected salary increases, mortality rates andthe trend in healthcare costs. The assumptions used to calculate the discount factor reflect the interest rates that canbe realized on high-quality fixed-income instruments withappropriate maturities. Assumptions regarding expected
returns on investments are determined by a uniform basethat takes account of long-term historic returns and thestructure of the portfolio. For details of carrying amounts,
refer to note 20.
Other provisions
Recognizing provisions for anticipated losses on construction contracts, warranty-related costs and litigation involves
making significant estimates. Voith recognizes provisions for
anticipated losses in all cases where current estimates of
the total contract costs exceed expected contract revenues.
Such estimates are subject to change in light of new information regarding the percentage of completion. Onerous
contracts are identified by monitoring project progress andconstantly updating estimates of total costs, all of which
requires significant judgment if certain performance standards are to be reached. These estimates also include warranty-related and litigation costs. Provisions for restructuring are

Voith Annual Report 2013

Consolidated Financial Statements

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

Adoption of amended and new standards
and interpretations
Changes in accounting policies due to first-time
adoption of revised and new IFRS and IFRIC
In the 2012/13 fiscal year, the following revised IFRS andIFRIC were applied for the first time.

Voith Annual Report 2013

Amendment to IAS 1: “Presentation of Financial
Statements”
As a result of the amendment, “other comprehensive income”
presented in the statement of comprehensive income mustbe broken down to distinguish between income that is later
recycled through the statement of income, and income thatis not. Currently the statement of comprehensive income
at Voith only contains income that will be recycled throughthe statement of income at a later date. The presentationof the statement of comprehensive income was adjusted
accordingly.
Amendments to IAS 12: “Income Taxes(Deferred Tax: Recovery of Underlying Assets)”
Pursuant to IAS 12, the measurement of deferred taxes generally hinges on whether the Company recovers the carrying
amount of an asset through use or through sale. If the asset
is measured using the remeasurement method pursuant to
IAS 40 (“Investment Property”) or IAS 16 (“Property, Plant
and Equipment”), it is difficult and subjective to assess
whether an asset is recovered through sale or through use.
The amendment introduces a rebuttable presumptionthat the carrying amount is recovered through sale. This
amendment has no impact on the Voith Group because theremeasurement method is not used.
Adoption of the following IFRS and IFRIC was not yet compulsory in the 2012/13 fiscal year and/or they had not yet
been endorsed by the European Commission for adoption
in the European Union.
IFRS 9: “Financial Instruments”
The International Accounting Standards Board (IASB) has
issued a new International Financial Reporting Standard(IFRS) on the classification and measurement of financial
instruments. The standard represents the conclusion of
the first of three project phases for the replacement of IAS
39 “Financial Instruments: Recognition and Measurement”
by a new standard. IFRS 9 introduces new regulations for147

Consolidated Financial Statements

the classification and measurement of financial assets. The
regulations must be applied for fiscal years beginning on orafter January 1, 2015; early adoption is permitted. Potential
effects on the net assets, financial position and results ofoperations of the Voith Group are currently being assessed.
Amendments to IAS 19: “Employee Benefits”
The most significant amendment to IAS 19 is that in future
cumulative actuarial gains and losses will be recognized directly in equity. The corridor method to smooth unexpectedfluctuations in pension obligations is eliminated, including
the recognition, in profit or loss, of actuarial gains and losses
exceeding the 10 % corridor. The expected return on plan
assets will in future be calculated using the discount rate forthe pension obligations. Future top-up amounts relating toGerman phased retirement obligations will in future be added
to the associated provisions in installments. More extensive
disclosures in the notes (e.g. disclosures on the financing
strategy, sensitivity analyses) will also be required in future.
The amendments are effective retroactively for fiscal years
beginning on or after January 1, 2013.
As Voith used the corridor method in the past, there will belarger fluctuations in equity in future. The accumulated actuarial losses as at September 30, 2013 came to € 178 million
and will reduce equity with retroactive effect as at the dateof first-time adoption. The expected return on plan assets
amounting to € 10 million and realized actuarial losses of € 11
million were recognized in profit or loss for the 2012/13 fiscal
year (for the amounts, refer to note 20).
IFRS 10: “Consolidated Financial Statements”
IFRS 10 creates a uniform definition for control and thus a
uniform basis for the existence of a parent-subsidiary relationship and the related demarcation of the consolidated
Group. The new standard replaces IAS 27 (2008) “Consolidated and Separate Financial Statements” and SIC 12“Consolidation – Special Purpose Entities”.

148

IFRS 11: “Joint Arrangements”
IFRS 11 governs the accounting treatment of situations
where a company exercises joint control over a joint venture or a joint operation. The new standard replaces IAS 31“Interests in Joint Ventures” and SIC 13 “Jointly Controlled
Entities – Non-Monetary Contributions by Venturers” as therelevant rules for accounting for joint ventures to date.
The most significant change in IFRS 11 compared with IAS 31
is the abolition of proportionate consolidation for joint ventures; in future, joint ventures must always be accounted forusing the equity method.
IFRS 12: “Disclosure of Interests in Other Entities”
The objective of IFRS 12 is to prescribe disclosures on
information that provides the users of financial statementswith a basis for assessing the nature of interests in otherentities (e.g. subsidiaries, associates) and the related risks
and effects of these interests on the Group’s net assets,financial position and results of operations.
IFRS 10, 11 and 12 are effective for fiscal years beginning on
or after January 1, 2014. Potential effects on the net assets,financial position and results of operations and on additional
disclosures in the notes of the Voith Group are currently
being assessed.
IFRS 13: “Fair Value Measurement”
IFRS 13 defines fair value, provides a framework for measuring fair value in one single IFRS and prescribes disclosureson the measurement of fair value.
IFRS 13 is applied if another IFRS prescribes or permits
measurement at fair value, or disclosures on the measurement of fair value are required. IFRS 13 is applicable prospectively for fiscal years beginning on or after January 1,
2013. The potential impact on the Voith Group is currently
being assessed. At present, no significant changes are expected to the presentation of net assets, financial position
or results of operations.

Voith Annual Report 2013

Consolidated Financial Statements

Amendments to IAS 32: “Financial Instruments:
Presentation”
The amendment specifies the rules on offsetting. In order tosatisfy the new offsetting criteria in accordance with IAS 32,
the current, legally enforceable right of the reporting entity
must not be contingent on any future event and must be
applicable in the normal course of business as well as in theevent of default or insolvency of a counterparty. In addition,
the standard clarifies that a gross settlement mechanism
satisfies the criteria for offsetting provided it eliminates or
results in insignificant credit and liquidity risks, processes
receiv­ables and payables in a single settlement process orcycle and, therefore, ultimately is equivalent to a net settlement. The amendments will become effective for the firsttime for fiscal years beginning on or after January 1, 2014.
Potential effects on the net assets, financial position andresults of operations of the Voith Group are currently being
assessed.
Amendments to IFRS 7: “Financial Instruments:
Disclosures”
The amendments require extended disclosures in the notes
on rights to set off. In addition to extended disclosures relating to offsetting actually applied in accordance with IAS 32,
the amendments introduce disclosures for existing rights to
set off irrespective of whether offsetting is actually performedin accordance with IAS 32. The amendments are effective
retroactively for fiscal years beginning on or after January 1,
2013. Potential extended disclosures in the notes for theVoith Group are currently being assessed.
Amendments to IAS 36: “Impairment of Assets”
The amendment to IAS 36 serves to clarify the disclosure obligations with regard to the measurement of the recoverable
amount of impaired assets. The amendments are mandatory
with retroactive effect for fiscal years beginning on or afterJanuary 1, 2014.

Voith Annual Report 2013

Amendments to IAS 39: “Novation of Derivatives andContinuation of Hedge Accounting”
The amendments to IAS 39 allow hedge accounting to becontinued even in those cases where a counterparty to a
non-listed hedging instrument changes in order to meetthe clearing obligations for the instrument. The instrument
must remain otherwise unchanged and the novation must be
due to laws or regulations requirements. The impact on theVoith Group is currently being assessed. The amendments
take effect on January 1, 2014, whereby early adoption ispermitted.
IFRIC 21: “Levies”
IFRIC 21 provides guidance on when to recognize a liability for a levy imposed by a government. The interpretation
applies both to levies that are recognized as provisions,contingent liabilities or contingent assets pursuant to IAS 37
as well as levies for which both the timing and amount are
already known.
The interpretation governs the accounting treatment oflevies which are imposed by government (including publicauthorities and similar bodies) on the company within theframework of their laws and regulations. The impact on theVoith Group is currently being assessed. IFRIC 21 is effective
retroactively for accounting periods beginning on or afterJanuary 1, 2014.
Annual Improvements Project (2009–2011)—May 2012
The amendments encompass specific corrections and clarification of content and terminology and become effective forthe first time for fiscal years beginning on or after January 1,
2013. Effects on the net assets, financial position and resultsof operations of the Voith Group are currently being assessed.
At present, the Voith Group does not plan to early adopt the
new or amended standards and interpretations.

149

Consolidated Financial Statements

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

By Group Divisionin € thousands

2012/13

2011/12

Income from the utilization ofcontract-specific provisions

109,886

106,897

Income from the reversal ofprovisions and accruals

49,98597,766

Foreign exchange gains

57,40587,592in € thousands

2012/13

2011/12Core business
Voith Hydro

1,387,907

1,315,206

Voith Industrial Services

1,185,466

1,101,015

Voith Paper

1,638,502

1,738,084

Voith Turbo

1,500,475

Other

Recovered bad debts

6,777

10,166

1,551,038

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

3,131

6,941

5,712,350

5,705,343

Rental and lease income

4,382

4,013

15,867

18,208

Income from insurance indemnification
payments

19,117

9,995

5,728,217

5,723,551

Income from the appreciation of
non-current assets
Other income

0

2,112

50,46755,511

301,150

380,993

By regionin € thousands

2012/13

2011/12

Germany

1,149,298

1,202,822

Voith Group

Rest of Europe

1,565,774

1,476,434

Americas1,514,071

1,541,044

Asia

1,312,224

1,354,608

Other

186,850

148,6435,728,217

5,723,551

Gains on the disposal of intangible assets and property,
plant and equipment include gains of € 639 thousand (previous year: € 1,887 thousand) from the disposal of subsidiaries.

(4) Cost of materialin € thousands­ ervices totaling € 2,258 million (previous year: € 2,200 milSlion) are included in the sales figures.

Cost of material and supplies and ofpurchased merchandise
Cost of purchased services

2012/13

2011/121,752,951

1,799,971

586,098

569,667

2,339,049

2,369,638(2) Changes in inventories andown work capitalizedin € thousands

2012/13

2011/12

Changes in inventories of finished goods andwork in progress-14,971

30,040

Other own work capitalized

19,875

21,686

4,904

51,726150

Voith Annual Report 2013

Consolidated Financial Statements(5) Personnel expenses
in € thousands

Wages and salaries
Social security, pension and otherbenefit costs(6) Other operating expenses
2012/13

2011/121,752,720

1,700,824

401,735

394,929

2,154,455

2,095,753

Number of employees
Annual average

As at the reporting date

2012/13

2011/122013-09-30

2012-09-30

Wage earners

25,267

23,66325,344

24,683

Salaried
employees

17,813

17,42917,79017,64443,08041,092

43,13442,327

1,201

1,206

1,201

1,206

44,28142,29844,33543,533

Apprentices
and internsin € thousands

2012/13

2011/12

Increase in provisions and accruals

172,572

213,942

Other selling expenses

341,411368,850

Other administrative expenses

252,875

274,439

Foreign exchange losses

73,919103,617

Rent for buildings and machinery

76,23372,251

Bad debt allowances

8,894

9,577

Losses on the disposal of intangible assets
and property, plant and equipment

3,686

6,151

127,383

118,345

1,056,973

1,167,172

Other expenses

Number of employees by region
Annual average

As at the reporting date

2012/13

2011/122013-09-30

2012-09-30

Germany

17,424

17,04917,327

17,316

Rest of Europe

8,346

7,413

8,580

7,811

Americas11,491

11,385

11,58011,491

Asia

5,594

5,019

5,426

5,481

Other

225

226

221

228

43,08041,092

43,13442,327Voith Annual Report 2013151

Consolidated Financial Statements(7) Result from non-recurring items
The result from non-recurring items primarily includes expenses arising from major restructuring activities as well as
measures addressing personnel capacity and the discontinuation of operations.
The result from non-recurring items in the 2012/13 fiscal year
contains the following items from the various segments:
After initiating comprehensive restructuring in the previous
period, Voith Paper decided on further restructuring measures in the 2012/13 fiscal year on account of the deteriorating recession in the market for paper machines. These
affect the headquarters in Heidenheim and other locationsin Germany and Austria. Expenses of € 64 million from thesemeasures are considered in the result from non-recurring
items, primarily personnel-related expenses.
In the 2012/13 fiscal year, Voith ­Turbo accounted for non-recurring expenses of € 73 million. Measures to reduce theheadcount to improve the cost structures beyond Voith
Paper were initiated at the headquarters in Heidenheim. In
addition, the result from non-recurring items also includes
expenses incurred in association with the planned discontinuation of operations for a product group in the Raildivision. In detail, these involved impairment losses recorded
on intangible assets and property, plant and equipment,
impairments of inventories and other expenses related topotential losses. Further expenses associated with theplanned closure of locations, most of which are impairmentsof non-current assets, are also included in the result from
non-recurring items.
At Voith Hydro expenses totaling € 4 million were incurredthat were posted to the result from non-recurring items. In
addition to personnel-related expenses associated withthe planned job cuts in Heidenheim, non-recurring items
includes other personnel-related expenses and other expenses related to the relocation of business activities andthe related closure of a foreign operation.

152

Voith ­Industrial ­S ervices accounted for non-recurring expenses of € 9 million. The most significant component inthis regard were impairment losses and other expenses
associated with the discontinuation of operations and therelated sale of a subsidiary. However, it also includes personnel-related expenses connected to the changes madeto the organizational structure and adjustments of capacity.
Some of the entities in Heidenheim entrusted with sharedservices for the Group as a whole were also affected by
the job cuts. These entities accounted for non-recurring­expenses of € 6 million in the period under review.
In the 2011/12 fiscal year the result from non-recurring items
mainly comprises the restructuring measures initiated atVoith Paper in the previous period amounting to €-84 million.
In addition, the result from non-recurring items also included
expenses of € 7 million to reduce capacity to address the
structural changes at Voith ­Industrial ­Services and expensesof € 4 million from discontinuing various activities at Voith­Turbo.
In detail, the following expenses were incurred:in € thousands

2012/13

2011/12

Personnel expenses- 96,477- 90,265

Impairment losses- 34,740

0

Other expenses- 21,005- 6,825

Cost of material / Change in inventories- 9,272-1,867

Income from the reversal of provisions

4,357

3,679

Other income

1,377

0

- 155,760- 95,278

The personnel expenses presented mostly comprise measures to adjust personnel capacity such as early retirement
and other termination benefits.

Voith Annual Report 2013

Consolidated Financial Statements(8) Other financial resultin € thousands

2012/13

2011/12

Income from investments

8,509

503

Impairment of other investments and loans-1,328-1,018

- 23

0

1,886

1,640

9,044

1,125

Impairment of securities
Income from securities and loans

The impairment losses recognized on other investments andloans mainly concern available-for-sale financial instrumentsthat are measured at amortized cost.

(9) Income taxesin € thousands

2012/13

2011/12Current taxes- 54,809- 61,351

Deferred taxes

27,800-1,506- 27,009- 62,857

Current taxes include domestic income taxes and comparable foreign income taxes that are calculated in accordancewith the local tax laws valid for each subsidiary.
For individual Group companies, deferred tax items are recognized for temporary differences between carrying amounts
for tax reporting and the carrying amounts recognized under
IFRS, as well as for consolidation measures recognized in
profit or loss. Deferred tax assets are also recognized forunused tax losses that can be reasonably expected to berealized in the near future. The average income tax rate forGerman companies is 29.84 % (previous year: 29.84 %).
Deferred taxes are calculated at the tax rates valid in therespective countries.

Voith Annual Report 2013

Deferred tax income arising from temporary differences
amounted to € 36,154 thousand (previous year: € 2,781
thousand).
The deferred tax expense from unused tax losses came to€ 8,354 thousand in the 2012/13 fiscal year. This amountessentially comprises impairment losses of € 1,072 thousand
recorded on deferred tax assets recognized in the 2011/12
fiscal year, reductions of € 9,835 thousand in deferred tax
assets on unused tax losses due to adjustments to the tax
losses brought forward from the previous year, income of€ 3,214 thousand from the recognition of new deferred tax
assets on the unused tax losses of the reporting period, expenses of € 13,309 thousand from the utilization of unused
tax losses recognized in the previous year as well as incomeof € 11,891 thousand from the recognition of previously unrecognized unused tax losses.
The deferred tax expense from unused tax losses cameto € 4,287 thousand in the 2011/12 fiscal year. This mainly
included write-downs of deferred tax assets recognized in
the 2010/11 fiscal year amounting to € 7,793 thousand, thereduction of deferred tax assets recognized on unused tax
losses due to the adjustment of unused tax losses from theprevious year of € 13,162 thousand and income of € 15,914
thousand from the recognition of deferred tax assets on
unused tax losses in the fiscal year. The effects arising fromuse of the unused tax losses recognized in the previous year
mostly reflected the new unused tax losses recognized.
In addition, there was a reduction of € 7 thousand (previous
year: € 811 thousand) in current income taxes from the useof previously unrecognized deferred tax assets on unused
tax losses.
As at September 30, 2013, unused tax losses of € 477
thousand (previous year: € 6,075 thousand) for German
trade and corporate income taxes, plus another € 458,077
thousand (previous year: € 415,015 thousand) for German
trade tax, plus € 106,722 thousand (previous year: € 122,677

153

Consolidated Financial Statements

thousand) for previously non-deductible interest expenses
under German law, were not recognized as deferred tax assets as there was no reasonable expectation that the related
deferred tax assets would be realized in the near future.
Due to the lack of an ability to utilize tax losses, no deferred tax assets were recognized on unused tax losses of€ 47,885 thousand relating to federal taxes levied by foreign
governments (previous year: € 50,871 thousand) as well as
on unused tax losses of € 84,506 thousand relating to statetaxes levied by foreign governments (previous year: € 84,252
thousand).
Owing to the ongoing tax field audit of the companies inGermany and abroad, further changes may be made to theunused tax losses.
In Germany, unused tax losses do not expire. Outside Germany, unused tax losses can normally be realized within no
more than five to ten years.
The following table provides an overview of deferred taxes
as at the reporting date:2012-09-30

2013-09-30

Deferred tax
assetsDeferred tax
liabilities

Intangible assets

7,893

Property, plant and equipment

11,487

Financial assets and securities

1,071

in € thousands

Deferred tax
assetsDeferred tax
liabilities

68,7499,278

70,14650,911

4,648

57,337

3,716

253

9,937

Inventories and receiv­ables

37,41566,62232,58064,910

Other assets

9,506

19,8396,169

21,407Pension provisions

36,482

2,412

40,862

1,663

Financial liabilities
Other provisions and liabilities
Tax effect on distributable earnings of Group entities

8,617

8,099

4,334

5,122

116,762

11,911

107,993

9,084

0

1,000

0

0

Impairments of deferred tax assets on temporary differences- 4,703-10,688

Unused tax losses

53,38564,584

Netting-131,708-131,708-114,508-114,508

Disclosure in the balance sheet

146,207

101,551

145,505

125,098

As far as the origin of the deferred taxes relating to othercomprehensive income is concerned, refer to note 19.

154

Voith Annual Report 2013

Consolidated Financial Statements

Reconciliation of expected and effective tax expense:
The income of Voith GmbH and its subsidiaries in Germany
is subject to corporate income tax and trade tax. Profits
earned outside Germany are taxed at the current rates valid
in the countries concerned. Expected tax expenses were
calculated based on a tax rate of 29.84 % (previous year:
29.84 %) that takes into account the legal structure of theVoith Group relevant for tax purposes.
in € thousands

2012/13

2011/12

Profit before income tax

90,310176,846

Expected tax expenses

26,94852,771

Deviations from expected tax rates- 3,406

3,211

- 210

- 2,884- 3,733- 5,053

Effect of changes in tax rates
Tax-free income
Non-deductible expenses

20,99923,735

Taxes relating to other periods-19,594-18,471

4,681

8,287

Change in impairments ofdeferred tax assets
Other tax effects

1,324

1,261

Income taxes

27,00962,857

Effective tax rate (%)

29.9 %

35.5 %

5 % of distributions by foreign subsidiaries to Germany are
subject to German taxation. In addition, withholding taxes
and dividend-related taxes abroad are also incurred. Further
income tax implications must also be observed in the caseof distributions from subsidiaries abroad to another foreign
entity. The potential tax effects were not calculated because
it is impracticable to do so.

No deferred taxes were recognized on temporary differencesof € 734,422 thousand (previous year: € 750,306 thousand)arising on investments in subsidiaries, since the criteria
specified in IAS 12.39 were met.

Voith Annual Report 2013155

Consolidated Financial Statements

Notes to the consolidated balance sheet(10 ) Intangible assets
Development of intangible assets from October 1, 2011 to September 30, 2012
Franchises, industrial rights andsimilar rights andassets as well as
licenses in suchrights and assets

Goodwill

Development costsPre­payments

Total

Cost
2011-10-01

199,754642,194

115,750

1,620

959,318

Changes in the consolidated Group

13,27529,5580042,833Currency translation differences

1,189

4,228

150

0

5,567

Additions

22,5550

18,562

041,117

0

0

224

0

224

- 4,4110- 702-1,471- 6,584

Other adjustments

- 336

769

-136

0

297

Transfers

1,718

0

- 593

-129

996

0

0

0

0

0

Cost
2012-09-30

233,744676,749

133,25520

1,043,768

Accumulated amortization and impairments
2011-10-01-127,899- 54,179- 59,1830- 241,261

- 569

0

- 90

0

- 659

- 20,929

0-10,9280- 31,857in € thousands

Capitalized interest
Disposals

Reclassification to assets held for sale

Currency translation differences
Amortization-10- 3,6010- 3,602

Disposals

3,870

0

489

0

4,359

Transfers

- 373

0

67

0

- 306

Reclassification to assets held for sale

0

0

0

0

0

Other adjustments

52

0

136

0

188

-145,849- 54,179- 73,1100- 273,138

87,895622,570

60,14520

770,630

Impairment losses

Accumulated amortization and impairments
2012-09-30
Carrying amount 2012-09-30

Impairment losses of € 5,600 thousand were recognized on
capitalized development costs and other intangible assets
in association with the planned discontinuation of a productgroup in the Rail division at Voith ­Turbo (presented in thestatement of income under the result from non-recurring
items). The recoverable amount used in the impairment test
equates with the value in use, whereby a discount rate of
6.2 % was applied. In the previous year an impairment loss of156€ 3,500 thousand was recorded on the same product groupbased on updated economic feasibility studies.
Impairment losses of € 1,027 thousand were recorded on
goodwill with regard to the planned sale of a subsidiaryin the Voith ­Industrial ­S ervices segment (reported under
the result from non-recurring items, see note 18 for more
information).

Voith Annual Report 2013

Consolidated Financial Statements

Development of intangible assets from October 1, 2012 to September 30, 2013
Franchises, industrial rights andsimilar rights andassets as well as
licenses in suchrights and assets

Goodwill

Development costsPre­payments

Total

233,744676,749

133,25520

1,043,768

Changes in the consolidated Group

2,996

3,691

0

0

6,687

Currency translation differences- 4,123- 3,413- 63

0- 7,599

Additions

8,724

0

19,498

1,177

29,399

0

0

72

0

72

- 5,437

- 664

-13

- 42

- 6,156in € thousands

Cost
2012-10-01

Capitalized interest
Disposals
Other adjustments

343

0

0

26

369

1,032

0

- 793

130

369

0

-1,0270

0-1,027

Cost
2013-09-30

237,279

675,336

151,956

1,311

1,065,882

Accumulated amortization and impairments
2012-10-01- 145,849- 54,179- 73,1100- 273,138

3,094

0

39

0

3,133

- 20,245

0-10,700

0- 30,945

Transfers
Reclassification to assets held for sale

Currency translation differences
Amortization- 96-1,027- 7,6850- 8,808

Disposals

5,353

0

0

0

5,353

Transfers

- 72

0

471

0

399

Impairment losses

Reclassification to assets held for sale
Other adjustments
Accumulated amortization and impairments
2013-09-30
Carrying amount 2013-09-30

Further impairment losses of € 2,181 thousand were recognized on capitalized development costs at Voith T­ urbo in
the period under review on the basis of updated economic
feasibility studies.

0

1,027

0

0

1,027

- 244

0

0

0

- 244

- 158,059- 54,179- 90,985

0- 303,223

79,220621,157

60,971

1,311

762,659

Capitalized interest is based on an interest rate of 4.4 %(previous year: 4.4 %).

In the previous year, impairment losses of € 101 thousand
were recognized on development costs in the Voith Papersegment.

Voith Annual Report 2013157

Consolidated Financial Statements(11) Property, plant and equipment
Development of property, plant and equipment from October 1, 2011 to September 30, 2012Land andbuildings
includingbuildings on
third-party
land

Plant andmachinery

Other
equipment,
furniture andfixturesPrepayments andassets underconstruction

Total

774,441

1,379,695

537,208

74,5702,765,914

0

1,163

421

0

1,584

Currency translation differences

7,572

21,9173,607

205

33,301

Additions

19,262

42,23850,235

119,050

230,785

0

0

0

2,071

2,071

Disposals- 4,690- 29,159- 27,754- 4,545- 66,148

Transfers

4,633

22,442

4,072- 32,143

- 996

0

0

0

0

0

424

2,122

- 2,493

0

53

Cost
2012-09-30

801,642

1,440,418

565,296

159,208

2,966,564

Accumulated depreciation and impairments
2011-10-01- 317,254- 910,093- 376,522

0-1,603,869

Currency translation differences- 3,517-15,606- 2,8910- 22,014

Depreciation-18,519- 77,145- 49,679

0-145,343

in € thousands

Cost
2011-10-01
Changes in the consolidated Group

Capitalized interest

Reclassification to assets held for sale
Other adjustments

Impairment losses

- 310

- 903

- 297

0

-1,510

Disposals

3,122

27,43725,582

056,141

Transfers

75

-124

355

0

306

0

0

0

0

0

Reversal of impairments

Reclassification to assets held for sale

2,112

23

0

0

2,135

Other adjustments- 260- 2,407

1,968

0

- 699

Accumulated depreciation and impairments
2012-09-30- 334,551- 978,818- 401,484

0-1,714,853

Carrying amount 2012-09-30

467,091

461,600

163,812

159,208

1,251,711

158

Voith Annual Report 2013

Consolidated Financial Statements

Development of property, plant and equipment from October 1, 2012 to September 30, 2013Land andbuildings
includingbuildings on
third-party
land

Plant andmachinery

Other
equipment,
furniture andfixturesPrepayments andassets underconstruction

Total

801,642

1,440,418

565,296

159,208

2,966,564

0

15

1,169

27

1,211

Currency translation differences-19,204- 45,041- 9,558- 6,044- 79,847

Additions

14,77435,604

49,11963,466

162,963

757

1,320

0

2,231

4,308

Disposals- 7,719- 38,951- 22,146-1,632- 70,448

Transfers

43,55869,752- 2,015-111,664- 369

Reclassification to assets held for sale

- 8,234-1,332- 335-1,212-11,113

- 202

221

394

0

413

Cost
2013-09-30

825,372

1,462,006

581,924

104,380

2,973,682

Accumulated depreciation and impairments
2012-10-01- 334,551- 978,818- 401,4840- 1,714,853

5,829

29,1386,420

041,387

Depreciation-18,604- 80,480- 46,861

0-145,945

Impairment lossesin € thousands

Cost
2012-10-01
Changes in the consolidated Group

Capitalized interest

Other adjustments

Currency translation differences-13,398- 4,547- 5,0180- 22,963

Disposals

5,331

33,86020,177059,368Transfers

37- 2,116

1,680

0

- 399

5,176

1,011

198

0

6,385

0

0

0

0

0

Reclassification to assets held for sale
Reversal of impairments

268

450

- 293

0

425

Accumulated depreciation and impairments
2013-09-30

Other adjustments- 349,912- 1,001,502- 425,181

0- 1,776,595

Carrying amount 13-09-30

475,460

460,504

156,743

104,380

1,197,087

Voith Annual Report 2013159

Consolidated Financial Statements

Impairment losses were recognized in the previous year forindividual product areas of the Voith ­Turbo segment, eachof which constitutes a cash-generating unit. In detail, impairment losses of € 1,075 thousand were recorded on machinery at one cash-generating unit in the 2011/12 fiscal year. An
impairment loss of € 2,112 thousand recorded on the sharedassets of this cash-generating unit (land and buildings) inearlier accounting periods was reversed in the 2011/12 fiscal
year. The values used in the impairment tests corresponded
to fair value less costs to sell. As there was no active market,
discounted cash flow projections were used for this purpose
based on an objective purchaser perspective. In the 2012/13
fiscal year impairment losses of € 7,849 thousand were recorded on the shared assets of these product areas dueto the plans to discontinue this operation. The recoverable
amount used for the calculation corresponded to the fairvalue less costs to sell in each case. The land and buildings
were valued based on the sales market.

value less the costs to make the sale. This valuation was
based on the price that could be obtained for the machineon the sales market.
Impairment losses of € 2,772 thousand were recorded onland and buildings with regard to the planned sale of a subsidiary in the Voith I­ndustrial ­Services segment (see note 18
for more information).
The impairment losses described above were presented in
the statement of income under the result from non-recurring
items.
Additional impairment losses of € 843 thousand were recorded on property, plant and equipment at Voith ­Turbo, € 42
thousand at Voith I­ndustrial S­ ervices and € 26 thousand atVoith Paper.
Further impairment losses due to reduced values in use wererecorded at Voith Paper (€ 55 thousand), Voith Hydro (€ 310
thousand) and Voith T­ urbo (€ 70 thousand).

Impairment losses totaling € 10,279 thousand were also
recognized in the 2012/13 fiscal year on individual assets
of a product group (land, plant and machinery and otherequipment, furniture and fixtures) of the Rail division at Voith­Turbo due to the plans to discontinue the operation. The recoverable amount used for the calculation corresponded to
the fair value less costs to sell in each case. The assets werevalued on the basis of valuations by independent experts
or offers made by third parties based on the sales markets.

Impairment losses are generally shown in the statementof income under depreciation and amortization. Reversalsof impairment losses are reported under other operating
income. However, significant impairment losses, particularly
those associated with the discontinuation of operations, arepresented under the result from non-recurring items.

Impairment losses were also needed at Voith Paper in the
2012/13 fiscal year in association with the downsizing of capacity described earlier in this report, involving an impairment
loss of € 1,148 thousand on an item of plant. The recoverable
amount used for the calculation corresponded to the fairDue to the reassessment of the useful lives of certain items
of machinery, depreciation increased by € 4,616 thousandin the fiscal year. This depreciation charge is reported in thestatement of income under the result from non-recurring
items.

160

Voith Annual Report 2013

Consolidated Financial Statements

Capitalized interest is mostly based on an interest rate of
6.0 % (previous year: 5.5 %).
Of the prepayments and assets under construction, € 40,365
thousand relates to buildings (previous year: € 66,435 thousand), € 59,144 thousand to plant and machinery (previous
year: € 88,449 thousand) and € 4,871 thousand to non-production equipment (previous year: € 4,324 thousand).
Property, plant and equipment includes the following assets:
Finance leasesin € thousands

2013-09-30

2012-09-30

4,101

4,157

Plant and machinery

805

1,053

Other equipment, furniture and fixtures

254

470

5,160

5,680

Land

Buildings, plant and machinery and other equipment, furniture and fixtures classified as finance leases are stated under
this item. The corresponding lease liabilities are shown as
financial liabilities. The corresponding depreciation totals€ 415 thousand (previous year: € 607 thousand).
No contingent rent was recognized in profit or loss.

Voith Annual Report 2013161

Consolidated Financial Statements(12) Investments accounted for using the equity method/other financial assets
Development of financial assets from October 1, 2011 to September 30, 2012in € thousands

Cost
2011-10-01
Changes in the consolidated Group
Currency translation differences

Investments
accounted forusing theequity method

Other
investments

Long-term
loans

Total

30,51150,548

11,26592,324

0

0

0

0

155

0

119

274

Additions

11,248

5,455

1,702

18,405

Disposals- 4,554-1,424- 2,025- 8,003

Transfers

0

2,000

- 2,000

0

Other adjustments

0

274

0

274

Cost
2012-09-30

37,36056,853

9,061

103,274

Accumulated amortization and impairments
2011-10-01-1,278- 27,297- 3,100- 31,675

0

-12

-12

- 24

0

- 498

- 520

-1,018Currency translation differences
Amortization
Impairment losses
Disposals

0

1,300

1,082

2,382

Transfers0- 2,000

2,000

0

Accumulated amortization and impairments
2012-09-30-1,278- 28,507- 550- 30,335

Carrying amount 2012-09-30

36,082

28,346

8,511

72,939162

Voith Annual Report 2013

Consolidated Financial Statements

Development of financial assets from October 1, 2012 to September 30, 2013in € thousands

Cost
2012-10-01

Investments
accounted forusing theequity method

Other
investments

Long-term
loans

Total

37,36056,853

9,061

103,274

0

0

0

0

- 2,5510- 300- 2,851

Changes in the consolidated Group
Currency translation differences
Additions

9,044

7,794

839

17,677

Disposals- 6,624-11,237-1,363-19,224

Transfers

667

- 667

0

0

Other adjustments

1,653-1,268

0

385

Cost
2013-09-30

39,54951,475

8,237

99,261

Accumulated amortization and impairments
2012-10-01- 1,278- 28,507- 550- 30,335

0

- 35

20

-15

- 608

- 2,036- 742- 3,386

Currency translation differences
Amortization
Impairment losses
Disposals

0

0

0

0

Transfers

0

0

0

0

Accumulated amortization and impairments
2013-09-30- 1,886- 30,578- 1,272- 33,736

Carrying amount 2013-09-30

37,663

20,897

6,965

65,525The disposal of other investments generated accounting
gains of € 348 thousand (previous year: € 40 thousand). Since
their fair value could not be reliably estimated, these investments had previously been recognized at amortized cost.

thousand (previous year: € 7,067 thousand). The following
table summarizes the financial information of the most significant investments in associates (before adjusting to therelative shareholding held by Voith).

Investments accounted for using the equity method include
investments in associates and shares in joint ventures (noneof which were listed companies).

in € thousands

The carrying amount of shares in associates accounted forusing the equity method comes to € 27,343 thousand (previous year: € 26,337 thousand). The profit from associates
accounted for using the equity method comes to € 5,417

Voith Annual Report 20132013-09-30

2012-09-30

Equity83,51681,439Liabilities

140,294

144,018

Total equity and liabilities

223,810

225,457

Sales

655,644487,937

Net income for the year

14,80911,709163

Consolidated Financial Statements(13) Inventories
The following table summarizes the financial information
for material joint ventures, after adjusting to the relative
shareholding held by the Voith Group in the respective joint
venture:Inventories consist of the following items:in € thousands

Raw materials and suppliesin € thousands

2013-09-30

2012-09-30

Non-current assets

3,914

4,706

Current assets

9,206

9,141

Non-current liabilities

1,408

386

Current liabilities

5,834

6,720

Income19,417

17,425

Expenses

19,827

17,183

Some of the entities accounted for using the equity method
have reporting dates other than September 30 of a year.
In those cases, interim financial statements as at September 30 are prepared for these entities unless the effect of thediverging reporting date is not material for the net assets andresults of operations of the Voith Group.

2013-09-30

2012-09-30

241,802275,840

Work in progress

270,067

307,401

Finished goods and merchandise

141,683

140,392

Prepayments

85,090136,587

738,642860,220

Write-downs of inventories amounted to € 25,126 thousand(previous year: € 18,545 thousand) and were recognized
as expenses. Prescribed reversals of write-downs totaling€ 7,114 thousand (previous year: € 5,361 thousand) wererecorded. These amounts are included in the cost of material.
As in the previous year, no inventories were assigned ascollateral.

(14) Trade receiv­ables
Trade receiv­ables consist of the following items:in € thousands

2013-09-30

2012-09-30

Trade receiv­ables

967,125

1,003,016

Bad debt allowances- 33,412- 36,140

Receiv­ables from
customer-specific contracts

267,448

246,945

1,201,161

1,213,821

Trade receiv­a bles are classified as current assets. As at
September 30, 2013, the volume of receiv­ables that was
not expected to be realized within one year was € 14,482
thousand (previous year: € 12,526 thousand).
Of the total, € 643 thousand (previous year: € 2,956 thousand) of trade receiv­ables are interest bearing.

164

Voith Annual Report 2013

Consolidated Financial Statements

As was the case in the previous year, no trade receiv­ables
serve as collateral for liabilities.
Movements in the allowance account for the impairment oftrade receiv­ables were as follows:in € thousandsin € thousands

2013-09-30

2012-09-30

Aggregate amount of costs incurred andrecognized profits less recognized losses
to date5,097,724

4,796,216

Progress billings to date

- 3,549,803- 3,119,751

Gross amount due from customers

1,547,921

1,676,465

Advances received (“progress billings”)-1,324,033-1,450,350

223,888

226,1152013-09-30

2012-09-30

Impairment at the beginning of
the fiscal year

- 36,140- 43,515

Additions- 8,434- 7,767

Thereof receiv­ables from construction
contracts

240,174

232,612

Utilization

3,314

4,965

Thereof liabilities from construction contracts-16,286- 6,497

Reversal

6,166

9,783

Changes in consolidated Group/exchange
differences

1,682

394

Impairment at the end of the fiscal year

- 33,412- 36,140

Reversals totaling € 6,166 thousand (previous year: € 9,783
thousand) consist of the reversal of specific bad debt allowances of € 5,511 thousand (previous year: € 9,783 thousand)and portfolio-based allowances of € 655 thousand (previous
year: € 0). Additions of € 8,434 thousand (previous year:€ 7,767 thousand) consist of additions of specific bad debt
allowances in the amount of € 8,434 thousand (previous
year: € 6,642 thousand) and portfolio-based allowances of€ 0 (previous year: € 1,125 thousand).
Credit insurance is used to manage default risk in tradereceiv­a bles. Hermes cover is used to secure receiv­a blesfrom foreign customers.
Future receiv­a bles from customer-specific construction
contracts recognized using the percentage-of-completion
method are determined as follows:

Voith Annual Report 2013

Receiv­ables from customer-specific service contracts total€ 27,274 thousand (previous year: € 14,333 thousand) andliabilities from customer-specific service contracts total€ 1,816 thousand (previous year: € 621 thousand).
Further advances received for customer-specific contracts
amounting to € 758,998 thousand (previous year: € 809,106
thousand) for which no contract costs have been incurred
to date are included in other liabilities. This includes € 10,208
thousand (previous year: € 6,864 thousand) of advances
received for customer-specific service contracts.
Sales relating to customer-specific contracts totaled€ 2,442,598 thousand (previous year: € 2,299,294 thousand). This includes € 173,402 thousand from service contracts (previous year: € 128,516 thousand). Amounts billed
to customers and progress billings are shown under tradereceiv­ables.
An amount of € 9,227 thousand (previous year: € 6,466 thousand) of progress billings is held as retentions by customers.
Retentions are amounts of progress billings that are not paidby the customer until conditions specified in the contract aresatisfied. This includes € 221 thousand (previous year: € 33
thousand) for service contracts.

165

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

Current

Non-current

2013-09-30

Current

Derivatives used to hedge operational transactions
Derivatives used to hedge financial transactions

Non-current

2012-09-30

13,2791,870

15,1496,058

16,42622,484

10,552

5,356

15,908036,85236,852Financial receiv­ables

35,36850

35,41841,84886

41,934

Sundry financial assets

59,52853,119112,647

51,44045,38996,829114,233

71,465

185,698

103,840

87,683

191,523in € thousands

Current

Non-current

2013-09-30

Current

Non-current

2012-09-30

Prepaid expenses

27,892

12,225

40,11727,267

13,943

41,210

Other non-financial assets

149,435

15,522

164,957

118,680

27,788146,468

177,327

27,747205,074

145,947

41,731

187,678

Other assets

At the reporting date, other assets totaling € 33,618 thousand (previous year: € 37,452 thousand) served to secure
liabilities and contingent liabilities. They may be drawn on if
the underlying obligations are not fulfilled or if the contingent
liabilities are realized.
Impairment of financial receiv­a bles, other financial assets
and other assets developed as follows:in € thousands

Impairment at the beginning of
the fiscal year
Additions2013-09-30

2012-09-30- 3,399- 3,945- 460-1,810Utilization

28

2,049

Reversal

611

383

Changes in consolidated Group/exchange
differences

157

- 76

Impairment at the end of the fiscal year

- 3,063- 3,399

166

Additions totaling € 460 thousand (previous year: € 1,810
thousand) consist of additions to specific allowances of€ 440 thousand (previous year: € 1,810 thousand) andportfolio-based allowances of € 20 thousand (previous year:€ 0). Reversals totaling € 611 thousand (previous year: € 383
thousand) consist of reversals of specific allowances of€ 433 thousand (previous year: € 383 thousand) and portfolio-based allowances of € 178 thousand (previous year: € 0).

Voith Annual Report 2013

Consolidated Financial Statements(16) Securities
Securities totaling € 14,282 thousand (previous year after
adjustments: € 14,287 thousand) are used to cover future
pension obligations.

Assets held for sale and liabilities directly associated withassets classified as held for sale relate to the planned saleof a subsidiary in the 2013/14 year in the Voith I­ndustrial­Services segment.

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

2013-09-30(18) Assets held for sale and liabilities
directly associated with assets classified
as held for sale2012-09-30

Checks112

23

Cash on hand

620

738

Cash equivalents

15,885

7,345

Cash at banks

884,350

908,788

900,967

916,894

Cash at banks earns interest at floating rates based on dailybank deposit rates.
Short-term deposits are made for varying periods of between
one day and three months, depending on the immediate
cash requirements of the Group. These deposits earn interest at the respective short-term deposit rates.

Assets held for sale of € 11,436 thousand consist of property,
plant and equipment of € 4,726 thousand, inventories of€ 3,612 thousand, trade receiv­ables of € 2,973 thousand andother assets of € 125 thousand. Liabilities directly associatedwith assets classified as held for sale of € 5,400 thousandcomprise trade payables of € 1,857 thousand, provisions of€ 611 thousand and other liabilities of € 2,932 thousand.
The losses anticipated from this divestment are taken into
account by means of impairment losses of € 1,027 thousandon goodwill and of € 2,772 thousand on land and buildings.
Both effects are reported in the result from non-recurring
items.
The assets held for sale in the previous year of € 1,270 thousand related to property, plant and equipment carried by
the Voith Paper segment relating to a relocated production
facility.

As in the previous year, no cash at banks served as collateralfor liabilities.

Voith Annual Report 2013167

Consolidated Financial Statements(19) Equity
Issued capital and revenue reserves
Since September 30, 2006, issued capital in Voith GmbHof € 120,000 thousand has, without change, been held bycompany shareholders (until September 30, 2010: ordinary
shareholders) in the form of 120,000,000 company shares(until September 30, 2010: 30,149,100 ordinary shares).
The revenue reserves consist of retained earnings generated
by Voith GmbH and its consolidated subsidiaries.

Other reserves
Other reserves include the effects of currency translationof foreign subsidiaries, gains/losses from available-for-salesecurities and cash flow hedges pursuant to IAS 39, andgains and losses on hedges of net investments as definedby IAS 21.
The statement of comprehensive income shows the gains
and losses on individual components of “other reserves”
which are recognized directly in equity.

Other comprehensive income consists of:in € thousands

2012/13

2011/12

Gains/losses on available-for-salefinancial assets- 20,226- 54,505·G ains/losses in the current period- 20,226- 54,505·T ransfers to profit and loss

00Gains/losses on cash flow hedges

- 409

1,090

·G
 ains/losses in the current period- 409-1,602·T ransfers to profit and loss

0

2,692

Gains/losses on currency translation- 64,963

17,684·G ains/losses in the current period- 64,963

17,684

Gains/losses from currency translation of
net investments in foreign operations- 2,0232,885·G
 ains/losses in the current period- 2,133

2,885· Transfers to profit and loss

110

0

Share of associates in othercomprehensive income (cash flow hedges)

94

0

1,892

15,669- 85,635-17,177

Tax attributable to othercomprehensive income
Other comprehensive income

168

Voith Annual Report 2013

Consolidated Financial Statements

Deferred taxes on the components of other comprehensive income are as follows:
2012

2013
in € thousands

Pre-tax

Deferredtaxes

Gains/losses on available-for-sale financial assets- 20,226

1,256

- 315

139

Gains/losses on cash flow hedges
Gains/losses on currency translation- 64,963

Gains/losses from currency translation of
net investments in foreign operations- 2,023

Other comprehensive income- 87,527

After
tax-18,970

Pre-tax

Deferred
taxes

After
tax

- 54,505

16,121- 38,384

- 20

-176

1,090

- 64,963

17,684

1,070

497-1,526

2,885

- 432

2,453

1,892

- 85,635- 32,846

15,669-17,177

17,684·

Profit participation rights

Appropriation of net income at Voith GmbHPursuant to the criteria defined in IAS 32, the Group’s profit
participation rights, with a nominal volume of € 103,400 thousand (previous year: € 98,400 thousand) constitute Groupequity. The rights in question are lower-ranking bearer profit
participation rights with variable compensation, no bullet
maturity and no right of termination on the part of the creditors. A subsidiary issued profit participation rights amounting
to € 76,800 thousand in the 2006/07 fiscal year. The same
subsidiary issued an additional € 15,000 thousand in the
2010/11 fiscal year. The same subsidiary again issued an
additional € 5,000 thousand in the 2012/13 fiscal year. Backin the 2008/09 fiscal year, what was then Voith AG issued
profit participation rights totaling € 6,600 thousand. Subject
to the approval of the appropriate governing body, profits
totaling € 5,501 thousand are scheduled to be distributed forthe total items for the 2012/13 fiscal year.

The Board of Management proposes to pay a dividendof € 0.13 per share (€ 15,000 thousand in total) out of theunappropriated retained earnings of Voith GmbH, and tocarry forward the remaining € 120,994 thousand. The dividend distributed in the fiscal year amounted to € 15,000
thousand (previous year: € 0). The distribution per share in
the fiscal year amounted to € 0.13 per share (previous year:€ 0 per share).

Holders of non-controlling interests
The major portion of non-controlling interests is held by theco-owners of the subsidiaries P3 Voith Aerospace Holding GmbH, Rif Roll Cover Srl, Italy, Voith Fuji Hydro K.K.,
Japan, Voith IHI Paper Technology Co, Ltd., Japan, Voith
Hydro Shanghai Ltd., China, and Voith Paper Fabrics India
Ltd., India.

Voith Annual Report 2013

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

in € thousands

2013-09-30

2012-09-30

Equity1,318,765

1,383,538

Interest-bearing financial liabilities

1,172,365

1,234,081

2,491,130

2,617,619

169

Consolidated Financial Statements

Year on year, equity fell by 5 % in the period under review.
The net income for the year made a positive contribution to
the development of equity. The reduction in equity is primarily due to currency effects, dividend payments and effects
from marking securities to market. The interest-bearing
financial liabilities fell by 5 %, i.e. remained essentially stable.
For details on the composition of interest-bearing financial
liabilities, refer to note 22.
The articles of association of Voith GmbH do not set forth
any specific capital requirements.

(20) Provisions for pensions and similar
obligations
Provisions for pensions are recognized for benefit obligationsin the form of retirement, invalidity and surviving dependents’
benefits payable under pension plans. The benefits provided
by the Group vary according to legal, fiscal and economic
framework conditions of the country concerned and areusually based on the length of employee service and levelof remuneration.
The Group’s post-employment benefits include both defined
benefit plans and defined contribution plans. In the case ofdefined contribution plans, the Company pays contributions
to state or private pension schemes based either on legal orcontractual requirements or on a voluntary basis. Once thecontributions have been paid, there are no further obligations for the Company. Current contributions are recognized
as pension expenses in the period concerned. In 2013, they170

amounted to € 131,832 thousand for the Voith Group as awhole (previous year: € 129,713 thousand).
The majority of the pension plans are defined benefit plansthat take the form of unfunded or funded schemes.
The pension provisions for defined benefit plans are determined in accordance with IAS 19 using the internationallyrecognized projected unit credit method. For this purpose,the future obligations are measured on the basis of the pro
rata employee benefit obligations earned at the end of theperiod under review. Pension provisions are calculated taking into account development assumptions for those factors
which affect the benefit amount. All defined benefit plans
require actuarial valuations.
Owing to their benefit status, the obligations of the US
Group companies in particular in respect of post-retirement
medical care are also carried under provisions for pensions.
These post-retirement benefit provisions take into accountthe expected long-term rise in medical costs.
Insofar as foreign Group companies have plan assets, these
consist essentially of stocks, fixed-interest bonds and realestate. Insurance cover forms the plan assets of domestic
companies. The plan assets of the Group companies do notinclude any financial instruments issued by entities of theVoith Group.

Voith Annual Report 2013

Consolidated Financial Statementsin € thousands

2013-09-30

2012-09-30

2011-09-30

2010-09-30

2009-09-30

Present value of funded benefit obligations

237,675

265,097

214,550

220,334

190,976

Fair value of plan assets-176,068-177,826-154,625-150,552-118,429

Deficit

61,60787,271

59,92569,782

72,547

Present value of unfunded obligations

575,695

574,742489,300

510,021418,976

Effect of limits on capitalizable plan assets

0

0

0

9

0

Adjustment for minimum funding requirements

0

0

295

935

0

-178,497- 205,786- 99,937-145,903- 61,592

Unrecognized past service costs

573

682

-9

-14

- 338

Provision in the balance sheet

459,378456,909449,574

434,830

429,593

Thereof current

26,521

26,88725,67925,83924,931

Unrecognized actuarial gains and losses

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

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

2013-09-30

2013-09-30

2012-09-30

Fair value of plan assets
at the beginning of the period

177,825

154,625

Expected returns on plan assets

10,217

9,471

2012-09-30

Defined benefit obligation
at the beginning of the period

839,839

703,850

Current service cost

18,406

17,470

Actuarial gains(+)/losses(-)- 3,701

7,591Interest cost (pursuant to IAS 19)

28,34431,967

Contributions to funds

13,085

11,445

Actuarial losses(+)/gains(-)-14,251

115,515

Plan settlements00Past service cost

0

1,604

-11,933-12,818

Changes in the consolidated Group

0

0

-187

- 76

Plan settlements- 4,084-1,674Currency translation differences- 9,238

7,587

Benefits paid

- 36,942- 36,729

Other- 3,503- 3,678

Fair value of plan assets
at the end of the period

176,068

177,825

Currency translation differences-14,439

11,514

Defined benefit obligation
at the end of the period

813,370

839,839

Voith Annual Report 2013

Benefits paid
Other

171

Consolidated Financial Statements

The actual return on invested plan assets amounted to€ 6,516 thousand (previous year: return of € 17,062 thousand).
The contributions that are expected to be paid into the plansin the following period under review amount to € 17,694 thousand (previous year: € 12,186 thousand).
The contributions to funds were mainly made by theemployer.
The expected long-term rate of return on fund assets is calculated based on the portfolio’s actual long-term returns, on
historical returns in the market as a whole, and on forecasts
of probable returns on the classes of securities held in theportfolio. These forecasts are based on the expected rateof return for comparable pension funds for the remaining
service period (investment horizon) and on experience gathered by the managers of large portfolios and experts in theinvestment industry.
The fund assets consist of the following components:in %2013-09-30

2012-09-30

Securities

34 %

16 %

Bonds

44 %

60 %

Real estate

3%

3%

Other

172

19 %

21 %

100 %

100 %

Actuarial gains or losses stem from changes in the portfolio
and variances in actual trends (e.g. income and pension
increases, interest rate changes) compared with the assumptions made in the calculations.
The following amounts were recorded in the statement ofincome.
in € thousands

2013-09-30

2012-09-30

18,406

17,470Interest cost

28,34431,967

Expected return on plan assets-10,217- 9,471

8

2,319

Gains (-)/losses (+) on plan settlements- 4,084-1,674

Recognized actuarial gains and losses

10,667

4,192

0

0

Current service cost

Past service costs

Effect of limits on the defined benefit asset

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

Voith Annual Report 2013

Consolidated Financial Statements

The Voith Group’s calculation of pension provisions is based on the following assumptions:
Germany and Austriain %Discount rateUSA

2013-09-30

2012-09-30

2013-09-30

2012-09-30

3.5 %

3.5 %

4.5 %

3.5 %

Expected return on plan assets

4.5 %

4.5 %

6.5 %

6.5 %

Salary increases

3.0 %

3.0 %

1.8 %

2.0 %

Pension increases

2.0 %

2.0 %

0%

0%

7.8 % / 7.3 %5.0 %8.0 % / 7.5 %5.0 %2010-09-30

2009-09-30

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

If healthcare costs increased by 1 %, current service costand interest cost would increase by a total of € 53 thousand(previous year: € 13 thousand), while the present value ofpension obligations would increase by € 254 thousand (previous year: € 321 thousand). If costs decreased by 1 %, current
service cost and interest expenses would decrease by atotal of € 18 thousand (previous year: € 14 thousand) andthe present value of pension obligations by € 296 thousand(previous year: € 338 thousand).
Experience adjustments, i.e. the effects of deviations between previous actuarial assumptions and what actuallyoccurred, are shown in the table below:in %2013-09-30

2012-09-30

2011-09-30

Difference between projected assumptions andactual values (gains (+)/losses (-))– As a percentage of the present value of the defined benefit obligations- 0.4 %

-1.0 %+0.6 %-1.7 %- 0.6 %– As a percentage of the fair value of plan assets- 2.1 %

+4.3 %+0.7 %+2.4 %- 9.8 %

Voith Annual Report 2013173

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

2012-09-30

Changein theconsoli­d atedGroup

Utilization

Additions

Reversals

Personnel-related
provisions

94,792- 474-18,473

21,510

Other tax
provisions

7,777

0

- 3,309

Warranty
provisions

202,067

0

Other contractrelated provisions

74,516

2,087

Sundry provisions

140,288
519,440in € thousands

Transfers

Discounting
effectCurrencytranslationdifferences

2013-09-30- 5,091

0220-1,41791,067

6,690

- 748

561

0

- 675

10,296- 73,375

88,746- 25,460

279

117- 4,648

187,726- 31,154

56,774-16,235

- 885

22

- 961

84,164-151- 42,406

117,072- 2,833

4,666

546

- 2,177

215,005

1,462- 168,717

290,792- 50,367

4,621

905

- 9,878

588,258

2012-09-30

2013-09-30
in € thousands< 1 year> 1 year< 1 year> 1 year

Personnel-related provisions

23,141

67,92625,58869,204

Other tax provisions

9,608

688

6,929

848

Warranty provisions

127,076

60,650139,396

62,671Other contract-related provisions

66,745

17,41965,255

9,261

Sundry provisions

107,551

107,454

75,92464,364

334,121254,137

313,092

206,348

Refund claims totaling € 11,788 thousand (previous year: € 0)
relating to provisions were capitalized in the reporting period.
Personnel-related provisions mainly comprise phased retirement and long-service bonuses. In the case of provisions forphased retirement, the amount and maturity of the future
payments to be made to the beneficiaries are uncertain.
Warranty provisions are accrued for statutory and contractual obligations as well as for non-contractual warranty. Other
contract-related provisions include obligations for services
still to be rendered on customer orders, or parts of orders,174

that have been billed, obligations for service and maintenance contracts and for commission provisions. In thesecases, the amount and timing of future expenses hinges oncompletion of the orders concerned. Among other items,
other provisions cover the obligations related to changes
in the size of the workforce and restructuring (see note 7
for more details). Most of the underlying measures will becompleted within the next two fiscal years in keeping withthe contracts.

Voith Annual Report 2013

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

Current

Non-current

2013-09-30

Current

Non-current

2012-09-30

Bonds

138,994

707,885

846,8790871,019871,019

Bank loans

112,540

77,732

190,272

156,020

48,691

204,711

Financial liabilities from leases

681

1,675

2,356

713

2,399

3,112

Notes payable

335

0

335

1,434

39

1,473

Derivatives used to hedge financial transactions
Other financial liabilities

0

0

0

0

0

0

55,96476,559132,523

75,19378,573

153,766

308,514

863,851

1,172,365

233,360

1,000,721

1,234,081

Financial liabilities totaling € 382 thousand (previous year:€ 536 thousand) are secured by other assets.
The Voith Group’s current and non-current bonds and its
bank loans are denominated in the following currencies:in € thousands

2013-09-30

2012-09-30

Euro598,720

606,922

US dollar

269,102289,473

Chinese renminbi

131,040

126,751

Swedish krona

25,36133,895

Other currencies

12,92818,6891,037,151

1,075,730

Voith Annual Report 2013175

Consolidated Financial Statements

Notes on net debt
Net debt as the difference between financial liabilities andrealizable financial assets is an important indicator for banks,
analysts and rating agencies. This indicator is not covered by
the accounting policies based on the International Financial
Reporting Standards (IFRS) and its definition and calculation
may diverge from the practice of other companies.
In contrast to the carrying amount, which is based on theeffective interest method, the indicator is calculated bymeasuring financial liabilities at their higher nominal repayment amount.

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

Total future minimum
lease payments (gross)· Due in less than one year
· Due between one and five years· Due in more than five years

Net debt as defined in the Company includes the items:in € thousands

2013-09-30

2012-09-30

Bank loans

190,272

204,711

Bonds*

860,541

887,819

Other interest-bearing financial liabilities

135,214

158,351

Securities- 273,637- 266,073

Cash and cash equivalents- 900,967- 916,894

Other realizable financial receiv­ables
and loans- 66,752- 89,448- 55,329- 21,534

Present value of future minimum
lease payments· Due in less than one year

2013-09-30

2012-09-30

2,596

3,645

748

843

1,210

1,878

638

924

2,356

3,112

681

713

1,070

1,584

· Due in more than five years

605

815

Interest component of future minimum
lease payments

240

533

in € thousands

2013-09-30

2012-09-30

Trade payables

544,881

550,395

Liabilities from construction contracts

18,102

7,118

562,983

557,513· Due between one and five years(23) Trade payables*B ased on measurement at the repayment amount, bonds are included at
an amount which is € 14 million higher (previous year: € 17 million) than the
carrying amount.

€ 2,289 thousand (previous year: € 3,933 thousand) of trade
payables is due in more than one year.

176

Voith Annual Report 2013

Consolidated Financial Statements(24) Other financial liabilities/other liabilities
Other financial liabilitiesin € thousands

Current

Non-current

2013-09-30

Current

Non-current

2012-09-30

Derivatives used to hedge operational transactions

12,854

3,137

15,991

16,5384,454

20,992

Personnel-related liabilities

130,209

6,566

136,775

130,977

5,881

136,858

Sundry financial liabilities

174,905

8,373

183,278

169,503

9,427

178,930

317,968

18,076

336,044

317,018

19,762336,780

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

Other liabilitiesin € thousands

Current

Non-current

2013-09-30

Current

Non-current

2012-09-30

Tax liabilities

76,42822,357

98,78582,45925,113

107,572

Advances received

913,1770913,177

1,020,610

01,020,610

Deferred liabilities

6,505

12,507

19,012

4,060

19,172

23,232Sundry liabilities

89,401

23,312

112,713

97,20622,860120,066

1,085,511

58,176

1,143,687

1,204,335

67,145

1,271,480

Tax liabilities principally relate to sales tax (VAT).

thousand) was granted subject to the condition that theassets would be kept in operating assets for at least five
years. A provision of € 7,447 thousand (previous year: € 746
thousand) was formed for unfulfilled conditions and othercontingencies.

Government grants
in € thousands

2012/13

2011/12

As at October 1

8,424

7,803

Granted during the fiscal year

570

1,738

Realized in profit or loss

- 700

-1,117

Repayment obligations- 2,9980

As at September 30

5,296

8,424

Grants totaling € 5,206 thousand (previous year: € 8,327
thousand) were issued for capital spending on non-current
assets. € 139 thousand thereof (previous year: € 3,661

Voith Annual Report 2013

Grants for other expenses were granted for a figure of € 90
thousand (previous year: € 97 thousand).
Grants totaling € 3,233 thousand (previous year: € 2,378
thousand) were received. Of this amount € 620 thousand(previous year: € 1,260 thousand) was for capital spending
on non-current assets and € 2,613 thousand (previous year:€ 1,118 thousand) was for other expenses.
In addition, further grants totaling € 2,029 thousand (previous
year: € 1,484 thousand) were netted with cost items.

177Consolidated Financial Statements

Notes to the consolidated
cash flow statement

Notes on segment
reportingInformation on the segment data

In the 2012/13 fiscal year, the change in securities wasmade up of cash inflows totaling € 120,604 thousand (previous year: € 98,621 thousand) and cash outflows totaling€ 153,361 thousand (previous year: € 102,269 thousand).
Disclosures required relating to the acquisition of consolidated entities are provided in the section on “Businesscombinations in the 2012/13 fiscal year”.
Cash and cash equivalents include checks, cash on hand,cash equivalents and cash at banks.

Business is managed according to the different products
and industries and corresponds to the internal reporting
structure to the management of Voith GmbH. The structureof the segments has remained unchanged compared to
September 30, 2012.
Segment data is essentially compiled using the same presentation and measurement methods as the consolidated
financial statements. Intercompany sales are effected atmarket prices and intersegment transactions and businessare all undertaken in accordance with the accounting policies used for the consolidated financial statements.
In the Voith Group, the key indicator to assess and manage the individual segments is return on capital employed(ROCE). The calculation of ROCE is defined as profit fromoperations in relation to the average capital employed.
Profit from operations is the basis for calculating ROCE
and thus a key management indicator. Basically, it is anoperational indicator derived from external reporting, theoperational result prior to non-recurring items. In line withthe calculation of profit from operations, the following profit/
loss components are taken into consideration:
Operating interest income
Operating interest income is defined as interest received
by the Company on the long-term financing of receiv­ablesfrom customers or as the imputed interest effect attributable
to that portion of customer advances that is not used tofinance inventories and PoC receiv­ables.
Other adjustments
Other adjustments contain effects which, based on theiroperating character, are normally shown as other operating
income and expenses in the consolidated statement ofincome. In determining the profit from operations, theseadjustments are eliminated as non-recurring effects so
as to facilitate the assessment of the operating activities
by segment.

178

Voith Annual Report 2013

Consolidated Financial Statements

Information on the activities
in the segments
Capital employed is defined as operating net assets. It is theaggregate of property, plant and equipment and intangible
assets (excluding goodwill), inventories, trade receiv­ables,
other non-interest-bearing assets and income tax assets
as well as prepaid expenses less trade payables, non-interest-bearing liabilities and income tax liabilities as well as deferred income and advances received, which are deducted
up to the amount of inventories and PoC receiv­ables.
The capital employed on the reporting date is an averagevalue derived from the values as at the end of the period
under review, the reporting date for the previous six-monthly
financial statements and as at the end of the previous period
under review. In contrast to the provisions of IAS 21 theassets and liabilities of foreign subsidiaries are translated
at the average exchange rate for the period under review.
Owing to the use of averages, the capital employed cannot
be reconciled to the figures in the consolidated balance
sheet on any given reporting date.
Consolidation entries were taken into account in full when
the capital employed was calculated.
Capital expenditures concern intangible assets (excluding
goodwill) and property, plant and equipment. Additions due
to business combinations are not included.
Sales are broken down regionally, based on the customer’s
domicile. Non-current assets, consisting of property, plantand equipment, goodwill and other intangible assets areallocated based on the location of the asset.

Voith Hydro is a joint venture with Siemens that combines
the strength of two major hydro power component suppliers to create a leading, full-line supplier for hydro power
plants. Its key products are Francis, Pelton, Kaplan, bulb
and pump turbines. The Group Division also produces generators and generator drive units for all kinds of turbines, aswell as excitation and diagnostic systems, frequency convertors, insulation systems, switching systems for all volt­
ages and transformers.
Voith ­Industrial ­Services is one of the leading providers oftechnical, consulting and management services in industrial
contexts.
Voith Paper is a leading provider of complete process lines
for the papermaking industry. An established process supplier to the paper industry worldwide, Voith has amassed a
wealth of experience covering everything from fiber technology through processing to printing technology. Voith develops solutions that span the entire papermaking process,from fiber to finished paper—and this is true for every typeof paper: graphic grades, board, packaging papers, tissue
paper and speciality papers. Voith is also one of the global
leading manufacturers of forming fabrics, wet felts and dryer
fabrics for the world’s pulp and paper industry.
Voith ­Turbo specializes in mechanical, hydrodynamic andelectronic drive and braking systems for road, rail, marine
and industrial applications. Voith T­ urbo crafts customized
solutions ranging from individual machines to end-to-end
process solutions.
Operating and reportable segments as defined in IFRS 8 are
identical.

Voith Annual Report 2013179

Consolidated Financial Statements

Segment information by business segment

Voith ­H ydro

Voith ­­­Industrial ­­­S ervicesin € millions

2012/13

2011/122012/13

2011/12External sales

1,388

1,315

1,185

1,101

5

7

27

28

Total segment sales

1,393

1,322

1,212

1,129

Profit from operations

107

100

30

41

Depreciation and amortization of property, plant and equipment and intangible assets2)

28

30

18

17

Investments

33

37

19

17

Sales with other segments

3)

Segment goodwill

15

15

236

237

Average capital employed

505

530

238

201

ROCE

21.1 %

18.9 %

12.6 %

20.3 %

Employees4)

5,323

5,087

21,032

19,984

1)

Subtotal for Voith Hydro, Voith Industrial Services, Voith Paper and Voith Turbo.

2)

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

3)

Excluding additions due to new acquisitions and financial assets.

4)

Statistical number of persons employed at fiscal year-end.

180

Voith Annual Report 2013

Consolidated Financial Statements

Voith Paper

Voith ­Turbo

Total Core Business1)

Reconciliation

2012/13

2011/122012/13

2011/122012/13

2011/12

1,639

1,738

1,500

1,551

5,712

5,705

29

32

5

5

66

72

1,668

1,770

1,505

1,556

5,778

5,777

- 50

Total

2011/122012/13

2011/12

16

19

5,728

5,724

- 66

- 72

0

0

- 53

5,728

5,724

2012/13

86

84

108

151

331

376

18

5

349

381

69

72

49

52

164

171

11

11

175

182

67

137

51

62

170

253

22

19

192

272

222

223

140

140

613

615

8

8

621

623

943

907

805

787

2,491

2,425

157

142

2,648

2,567

9.1 %

9.3 %

13.5 %

19.2 %

13.3 %

15.5 %

13.2 %

14.8 %

9,223

9,819

6,485

6,363

42,063

41,253

1,071

1,074

43,13442,327

The two defined components “Operating interest income”
and “Other adjustments” are not shown directly in the consolidated statement of income and are therefore disclosed
separately in the following reconciliation of the profit fromoperations to income before taxes.

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

2012/13

2011/12

Profit from operations

349

381

Operating interest income

- 37

- 34

Other adjustments-3-5

Non-recurring result

-156

- 95

4

7

Share of profits from associates
Interest result

Voith Annual Report 2013

- 76

- 78

Other financial result

91Income before taxes

90

177

181

Consolidated Financial Statements

Segment information by region

External sales (registered office of customer)in € millions

2012/13

2011/12

Germany

1,149

1,203

Other countries

4,579

4,521

of which Europe

1,566

1,476

of which Americas

1,514

1,541

of which Asia

1,312

1,355

· thereof China

738

825

of which others

187

149

5,728

5,724

2012/13

2011/12

Germany

968

1,002

Other countries

992

1,020

of which Europe

276

290

of which Americas

378

410

· thereof USA

218

227

of which Asia

335

317

· thereof China

291

264

of which others

3

3

1,960

2,022

Total

Non-current assets
in € millions

Total

182

Voith Annual Report 2013

Consolidated Financial Statements

Other notes
Contingent liabilities, contingent assets
and other financial obligations
Appropriate provisions have been recognized in the relevantGroup companies to cover potential obligations arising fromtaxation, legal and arbitration proceedings.
Possible tax risks exist outside Germany concerning the tax
recognition of expenses amounting to a maximum of € 13
million (previous year: € 12 million) for which an additional
provision of € 1 million (previous year: € 3 million) was formed.
The contingent liability relates to part of the overall obligationthat is assumed to have a low probability of occurrence due
to changed contractual bases.
In connection with the recognition of transfer prices outside
Germany, there are additional risks of € 5 million (previous
year: € 5 million) and of € 23 million (previous year: € 10 million) for legal disputes. A successful outcome is currently
expected in both cases.
Owing to failure, due to an end customer, to comply withspecific rules concerning the receipt of tax incentives outside
Germany, the recognition of tax privileges is currently disputed by the tax authorities. The maximum risk is currently € 9million (previous year: € 39 million), although the assessment
undertaken by the lawyers engaged suggests that there is
still a chance of the tax privileges being recognized or theGroup otherwise being held harmless and that the maximum
risk will not therefore materialize. The maximum risk has
dropped considerably on the previous year over the courseof the litigation.

Owing to the ongoing tax field audit of the German companies, further changes may be made to tax items.
From the Voith Group’s perspective, the Group might haverights to offset tax liabilities due to the tax authorities totaling approximately € 9 million (previous year: € 10 million)
outside Germany. There are potential VAT credits of € 8
million in Germany.

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

Guarantee obligations
Warranties

2013-09-30

2012-09-30

36,64937,939362

624

37,011

38,563

Most of the guarantee obligations mature in 2022.

Neither Voith GmbH nor any of its Group companies are
involved in any current or foreseeable taxation, legal or
arbitration proceedings that could materially influence theireconomic situation.

Voith Annual Report 2013183

Consolidated Financial Statements

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

2013-09-30

2012-09-30

Purchase commitments forcapital expenditures

25,89852,313Obligations arising from non-cancelable
operating leases

140,440

129,209910

542

167,248

182,064

Other

Assets leased under operating leases led to cash outflows
totaling € 76,233 thousand (previous year: € 72,251 thousand) in the period under review. These payments mostly related to leased passenger vehicles, machinery and buildings.
The majority of leases run for between one and 15 years.
Some companies have the option of extending their rental
contracts.
The total of future minimum lease payments for non-cancelable operating leases is shown below, broken down by
maturity.
in € thousands

2013-09-30

2012-09-30

Future minimum lease payments include € 2,065 thousand(previous year: € 3,713 thousand) from sale and leaseback
transactions.
Compared to the future minimum lease payments, an immaterial amount of cash inflows is expected from non-cancel­
able subleases of assets.
The “Other” item under other financial obligations consists
essentially of maintenance agreements.
An amount of € 3,093 thousand (previous year: € 3,160 thousand) was collected under operating leases in which Voith
acts as the lessor. These mainly relate to leases for Group
products for use in the long term. The leases run for between
one and five years. In some cases, there is an option ofextending the rental contracts.
The total of future minimum lease payments for non-cancelable operating leases in which Voith acts as the lessor isshown below:
in € thousands

2013-09-30

2012-09-30

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

1,952

2,542

· Due between one and five years

2,090

2,673

0

0

4,042

5,215

· Due in more than five years

Nominal value of future minimum
lease payments·D ue in less than one year

50,81448,456·D ue between one and five years

69,89562,099·D ue in more than five years

19,731

18,654140,440

129,209

184

Voith Annual Report 2013

Consolidated Financial Statements

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

in € thousands

IAS 39measure­ment
category

Carrying
amount2013-09-30

Amortized
cost

Cost

Fair value
through
equityFair value
through
profit or loss

Amount­r ecognizedin the balance sheet in­a ccordancewith IAS 17

Fair value
2013-09-30

Assets:Cash and cash equivalents

LaR

900,967

900,967

900,967

Trade receiv­ables

LaR

933,713

933,713

933,713

Receiv­ables from construction
contracts

LaR

267,448

267,448

267,448

Other financial assets and securities

301,499·F inancial assets, loans and receiv­ables

LaR

54,646·A vailable-for-sale financial assets

AfS

241,831·F inancial assets held for trading

FAHfT

0

0

0

·F
 inancial assets at fair value throughprofit or loss

FAfvtpl

5,022

5,022

5,022

Derivative financial instruments·D erivatives not used for hedging·D erivatives used for hedging

54,64654,646
20,897

220,934

220,934*

37,633
FAHfT

8,063

n.a.

29,570

Other receiv­ables

162

8,063

8,063

29,40829,570148,065· Financial receiv­ables

LaR

35,41835,41835,418·S
 undry financial assets

LaR

112,647

112,647

112,647

Trade payables

FLAC

544,881544,881544,881Bonds/bank loans/notes

FLAC

1,037,486

1,037,486

n.a.

2,356

Liabilities:

Financial liabilities from leases
Derivative financial instruments·D erivatives not used for hedging

1,132,419
2,356

15,991
FLHfT

3,141

n.a.

12,850

Other financial liabilities

FLAC

132,523

132,523

Sundry financial liabilities

FLAC

320,053

314,053

Loans and receiv­ables (LaR)

LaR

2,304,839

2,304,839

Available for sale (AfS)

AfS

241,831

Financial assets held for trading (FAHfT)

FAHfT

8,063

8,063

Financial assets at fair value throughprofit or loss (Fafvtpl)

FAfvtpl

5,022

5,022

Financial liabilities measured atamortized cost (FLAC)

FLAC

2,034,943

Financial liabilities held for trading(FLHfT)

FLHfT

3,141

·D
 erivatives used for hedging

183

3,141

3,141

12,667

12,850132,523

6,000

320,053

IAS 39 measurement categories:
20,8972,028,943

220,934

6,000
3,141

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

Voith Annual Report 2013185

Consolidated Financial Statements

Amount recognized in the balance sheet
in accordance with IAS 39

in € thousands

IAS 39measure­ment
category

Carrying
amount2012-09-30

Amortized
cost

Cost

Fair value
through
equityFair value
through
profit or loss

Amount­r ecognizedin thebalancesheet in­a ccordancewith IAS 17

Fair value
2012-09-30

Assets:Cash and cash equivalents

LaR

916,894

916,894

916,894

Trade receiv­ables

LaR

966,876

966,876

966,876

Receiv­ables from construction
contracts

LaR

246,945

246,945

246,945

38,08638,086302,930

Other financial assets and securities·F inancial assets, loans and receiv­ables

LaR

38,086·A vailable-for-sale financial assets

AfS

260,629·F inancial assets held for trading

FAHfT

0

0

0

·F
 inancial assets at fair value throughprofit or loss

FAfvtpl

4,215

4,215

4,215

·D
 erivatives used for hedging

232,283

232,283*

52,760Derivative financial instruments·D erivatives not used for hedging

28,346

FAHfT

8,161

n.a.

44,599

587

8,161

8,161

44,012

44,599138,763

Other receiv­ables· Financial receiv­ables

LaR

41,934

41,934

41,934· Sundry financial assets

LaR

96,82996,82996,829Liabilities:
Trade payables

FLAC

550,395

550,395

550,395

Bonds/bank loans/notes

FLAC

1,077,203

1,077,203

1,170,446

n.a.

3,112

Financial liabilities from leases

20,992Derivative financial instruments·D erivatives not used for hedging·D erivatives used for hedging

3,112

FLHfT

6,381

6,381
139

14,472

6,381

n.a.

14,611Other financial liabilities

FLAC

153,766

153,766

153,766

14,611

Sundry financial liabilities

FLAC

315,788

315,788

315,788

LaR

2,307,564

2,307,564

IAS 39 measurement categories:
Loans and receiv­ables (LaR)

AfS

260,629

Financial assets held for trading (FAHfT)

FAHfT

8,161

8,161

Financial assets at fair value throughprofit or loss (Fafvtpl)

FAfvtpl

4,215

4,215

Financial liabilities measured atamortized cost (FLAC)

FLAC

2,097,152

Financial liabilities held for trading(FLHfT)

FLHfT

6,381

Available for sale (AfS)

28,346232,283

2,097,152
6,381*Available-for-sale financial assets (AfS) include investments whose fair value could not be determined reliably.

186

Voith Annual Report 2013

Consolidated Financial Statements

IFRS 7.27 measurement categoriesin € thousands

2013-09-30

Level 1

Level 2

Level 3

Other financial
assets andsecurities

225,956

225,95600Derivative
financial
instruments

37,633037,6330AssetsLiabilities
Derivative
financial
instrumentsin € thousands

15,992

2012-09-30

0

Level 1

15,992

Level 20

Level 3

AssetsOther financial
assets andsecurities

236,498

236,49800

Derivative
financial
instruments

52,760052,760020,9920

20,9920Liabilities
Derivative
financial
instruments

Voith Annual Report 2013

The three-level fair value hierarchy distinguishes between fairvalues based on the nature of the input parameters used forvaluation, thereby revealing the extent to which observable
market data is available for determining fair values. Three
categories are distinguished:
Level 1:
Fair values are determined on the basis of quoted market
prices.
Level 2:
Fair values are determined using valuation techniques inwhich the inputs are based on directly observable market
data.
Level 3:
Fair values are determined using valuation techniques where
the inputs are not based on directly observable market data.
Cash and cash equivalents, trade receiv­a bles and otherfinancial receiv­ables are subject to floating interest and fall
due within one year. For this reason, their carrying amounts
approximate their fair values on the reporting date.
Because trade payables and other financial liabilities
generally have short residual terms, the carrying amounts
approximate the fair values.
The market values of unlisted bonds, bank loans and otherfinancial liabilities are calculated as the present value ofthe payments associated with the liabilities, based on theapplicable term structure of interest rates and Voith GmbH’s
credit spread curve determined for different currencies.

187

Consolidated Financial Statements

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

Principles of financial risk management

2012/13

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

Impairments

Other net
gains/
losses

Total

Loans and receiv­ables- 2,859- 20,115- 22,974

Available-for-salefinancial assets

in € thousands- 2,956

1,233-1,723Financial assets at fair value
through profit or loss

0

179

179

Held-for-trading
financial assets

0

1,878

1,878

Financial liabilities measured
at amortized cost

0

9,099

9,099

Impairments

Other net
gains/
losses

Total

589

9,502

10,091

2011/12in € thousands
Loans and receiv­ables
Available-for-salefinancial assets-1,0401,182

142

Financial assets at fair value
through profit or loss

0

871

871

Held-for-trading
financial assets

0- 7,603- 7,603

Financial liabilities measured
at amortized cost0

- 9,149- 9,149

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

For more information on the net gains and losses from available-for-sale financial assets without an effect on income,see note 19.
Interest income includes € 12,812 thousand (previous year:€ 11,002 thousand) and interest expenses include € 59,509
thousand (previous year: € 61,149 thousand) for financial assets or financial liabilities not measured at fair value throughprofit or loss.

188

Voith Annual Report 2013

Consolidated Financial Statements

Credit risk
The Voith Group does business only with recognized,
creditworthy third parties. We verify the creditworthiness ofcustomers who wish to do credit-based business with us.
Cash and cash equivalents:
For the purposes of internal risk management, cash andcash equivalents consist essentially of cash and short-term
securities. Default risks associated with term deposits arelimited by selecting solvent banking partners and by spreading cash across multiple counterparties. A ratings-based
limit (derived from credit default swaps/rating) is monitored
constantly. In addition, the Voith Group invests in securities
and monitors the associated risks centrally. Securities may
only be traded by Group companies with the approval ofVoith Finance GmbH.
Trade receiv­ables:
Credit risk arising from the delivery of goods and services
expresses itself in terms of counterparty risk, manufacturingrisks and political export-related risks. Handling of these risks
is governed by binding rules throughout the Voith Group. The
maximum risk of default is limited to the carrying amount of
the trade receiv­ables, which is € 933,713 thousand (previous
year: € 966,876 thousand). The maximum default risk forreceiv­ables arising from long-term construction contracts is€ 267,448 thousand (previous year: € 246,945 thousand). On
account of the collateral held, the maximum default risk for
trade receiv­ables is reduced by € 132,302 thousand (previous year: € 133,544 thousand) and by € 117,529 thousand(previous year: € 65,827 thousand) for receiv­ables from longterm construction contracts.

falls below a defined threshold and who cannot furnish an
adequate guarantor.
Political export risks must always be hedged for risks
classified as Euler Hermes country category 3 or higher
unless approval is issued by the decision-making bodies.
Further risk assessment is also activated for orders upward
of defined values. Necessary credit insurance is obtained
via export credit agencies (ECAs), on the private insurance
market or by means of bank products.
With respect to credit risk arising from the other financial
assets of the Group, which comprise cash and cash equiva­
lents, available-for-sale financial assets and certain derivative instruments, the Group’s exposure to credit risk arises
from default of the counterparty, with a maximum exposure
equal to the carrying amount of these instruments. For details of financial guarantees, please refer to the discussionof contingent liabilities. This kind of loss can occur if individual business partners fail to meet their contractual obligations. As a rule, no collateral exists for such an eventuality.
The Voith Group is not exposed to any material concentration of risks. Corporate policy is to avoid concentration of
credit risk in a single financial institution. Instead, the Groupinvests with a variety of creditworthy financial institutions.
The Group’s customer structure is not materially concentrated in any particular geographic region. The Group tests
doubtful accounts for impairment considering certain customers, historical trends, branches of industry and various
other information.

All orders above a defined value are subject to general risk
assessment requirements. Without special permission fromthe relevant governing bodies, Group companies do not accept unsecured orders from customers whose credit rating

Voith Annual Report 2013189

Consolidated Financial Statements

The following credit risks are inherent in financial assets:
Thereof not impaired but past due
at the reporting date by:

2013-09-30
Gross value

Thereof not
impaired or
past due

Trade receiv­ables

967,125655,628

Other financial assets and securities

333,349

301,499

Other financial receiv­ables

151,128

143,075in € thousands

less than
90 days

between90 and180 daysmore than
180 days

198,720

21,39857,266

1,929

788

2,527

Thereof not impaired but past due
at the reporting date by:

2012-09-30

in € thousands

Gross value

Thereof not
impaired or
past due

Trade receiv­ables

1,003,016

718,122

Other financial assets and securities

331,987

302,930

Other financial receiv­ables

142,162

136,690less than
90 days

between90 and180 daysmore than
180 days

163,061

35,35154,062

1,351

320

912

The carrying amounts of cash and cash equivalents, receiv­
ables from construction contracts and derivatives are neither
impaired nor past due.

growth, the Voith Group procures long-term funding on thecapital markets by issuing bonds, private placements andindividual bank loans.

Liquidity risk
To ensure that it can always meet its financial obligations,
the Voith Group has negotiated sufficient cash lines andsyndicated credit facilities with its banking partners.

The credit facilities and the bond placed on the capital markets are subject to the customary market conditions basedon Voith’s rating and its contractual terms and conditions. As
in the previous years, all contractual terms and conditions
were complied with in the 2012/13 fiscal year. The rating
agency Moody’s confirmed the investment grade “Baa2stable” rating in February 2013.

The syndicated loan placed in China in 2012 secures thefinance for future investments in the same currency as theoperating business on the local market. This loan was drawn
on during the period under review, as planned. The new facility, which was arranged in 2011, has now been prolonged forthe second time by one additional year and is set to expire
in 2018. It has not been drawn on and is available as a
strategic liquidity reserve if needed, as are available bilaterallines of credit from banks. To safeguard internal and external

190

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

Voith Annual Report 2013

Consolidated Financial Statements

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

Cash flows 1–5 years

Cash flows > 5 years

in € thousands

2013-09-30

Fixed
rate

Floating
rate

Repayment

Fixed
rate

Floating
rate

Repayment

Fixed
rate

Floating
rate

Repayment

Trade payables

544,88100542,591

0

0

2,432

0

0

0

Bonds/bank loans/notes

1,037,486

33,8888,559

245,854

88,69416,013

740,5280604

44,326

Financial liabilities
from leases

2,356

0

0

748

0

0

1,210

0

0

638

Other financial
liabilities

132,523576

401

55,965

0

0

6,455

0

0

70,103Sundry financial
liabilities

320,05300305,11400

14,70900271

Derivative financial
instruments

15,991· Outflows

00

126,2960062,1100

00· Inflows00-114,114

00- 61,58700034,464

8,960

1,162,454

88,69416,013765,857

0

604

115,338

2,053,290

Cash flows < 1 year

Cash flows 1–5 years

Cash flows > 5 years

in € thousands

2012-09-30

Fixed
rate

Floating
rate

Repayment

Fixed
rate

Floating
rate

Repayment

Fixed
rate

Floating
rate

Repayment

Trade payables

550,39500546,461

0

0

4,162

0

0

0

Bonds/bank loans/notes

1,077,203

33,2298,330

157,457

121,630

16,020854,687

0

1,578

46,631

Financial liabilities
from leases

3,112

0

0

843

0

0

1,878

0

0

924

Other financial
liabilities

153,766321

663

75,193

0

0

6,461

0

0

72,112Sundry financial
liabilities

315,78800300,4800015,09700317

Derivative financial
instruments

20,9920

0191,4990062,439000· Outflows· Inflows
2,121,256

Voith Annual Report 201300-178,985

00- 58,91100033,5508,993

1,092,948

121,630

16,020885,813

0

1,578

119,984191

Consolidated Financial Statements

Other potential payment obligations, which can materialize at
any time, exist in the form of financial guarantees of € 37,011
thousand (previous year: € 38,563 thousand).
Solvency is ensured and liquidity can be managed using
current securities and cash equivalents which can be transformed into cash at any time.
Derivatives include cash outflows on derivative financial instruments with negative market values for which gross cash
settlement has been agreed. The cash outflows for thesefinancial derivatives are matched by corresponding cash
inflows which are shown separately in the table above underinflows and outflows (gross). On the other hand, where a net
cash settlement is effected, cash outflows are netted withcash inflows.

Financial market risks
Foreign exchange risks:
Global production and trading activities expose the Voith
Group to risks arising from fluctuations in exchange rates.
Foreign exchange risks exist in particular wherever receiv­
ables, liabilities, cash and cash equivalents and orders
received (firm commitments/forecast transactions) are or
will be denominated in a currency other than the functional
currency of the Group company concerned.
For the Voith Group, the foreign exchange risk relates mainly
to the US dollar. Changes in the exchange rate affect bothearnings and Group equity. If the US dollar rises by 5 %, thisincreases our pre-tax profit by € 6,174 thousand (previous
year: decreases by € 2,793 thousand) and equity (including
the effect from pre-tax profit) by € 6,272 thousand (previous
year: decreases by € 1,988 thousand). If, by contrast, the US
dollar falls by 5 %, this decreases our pre-tax profit by € 5,549
thousand (previous year: increases by € 2,764 thousand) and192

equity (including the effect from pre-tax profit) by € 5,638
thousand (previous year: increases by € 2,036 thousand).
Most currency hedging is undertaken by Voith Finance GmbHand the regional Treasury and Finance Center. Transaction
risks arising from the international delivery of goods andservices are mainly limited by forward exchange contracts.
Essentially, all foreign currency transactions at the Voith
Group must be hedged. Major items on the balance sheet
and orders (upward of a value of USD 1 million) are hedged
individually within the framework of hedge accounting.
Before external hedges are agreed, in the context of projectbusiness, both the hedge relationship and the objectives ofand strategies for risk management must be documented in
respect of the underlying (hedged) transactions.
Hedges must be highly effective if they are to satisfy theVoith Group’s risk management strategy. Where hedge
relationships are verifiably effective, the transactions qualify
for hedge accounting. As a result, fluctuations in the exchange rate do not affect profit or loss, nor do they influence
project costing.
In the Voith Group, derivative financial instruments are traded externally by Voith Finance GmbH on behalf of Group
companies. Group companies in countries subject to foreignexchange restrictions hedge their currency risks locally. The
Group-wide treasury management tool is used for central
scheduling, monitoring and documentation of all foreign
currency hedges entered into by Voith Finance or Group
companies.
Interest rate risks:
The Voith Group’s exposure to interest rate risks arising fromexternal refinancing is analyzed and managed centrally by
Voith Finance GmbH. Medium- to long-term assets andliabilities with fixed interest rates are the main source ofVoith Annual Report 2013

Consolidated Financial Statementsinterest rate risks at the Group, as changes in market rates
of interest can cause the value of a financial instrument tofluctuate. Risks to the market value of fixed-interest receiv­
ables and liabilities are hedged on a case-by-case basis.
Risks to market value are hedged by interest rate swaps andcombined interest rate and currency swaps, which usuallyqualify for hedge accounting.

On the cost side, interest rate risks arise from bonds placedon the capital market and a private placement in the USA
as well as a variety of bank loans. The fixed interest rateon the US private placement was swapped for a floating
rate and the resulting cash flow risk hedged by interest rate
caps accordingly. The other bonds are subject to a fixed
rate of interest.

The relevant asset positions are essentially cash at bank thatis invested in the money market and/or are used to fund theexisting cash pool. The Group companies that participate
in the cash pool operate a daily zero-balancing policy andtherefore have no exposure to external interest rate risks.

The carrying amounts of those key financial instruments thatare exposed to interest rate risks are grouped by contractually defined maturity in the following table:

2013-09-30
in € thousands

Less than
one year

1–2 years

2–3 years

3–4 years

4–5 years

More than
5 years

Total

Floating interest rate
Cash and cash equivalents

900,967

0

0

0

0

0

900,967

Bonds

138,994070,1200051,427

260,541

Bank loans

73,4650077,41100150,876000586,33800586,338

39,075

198

123

0

0

0

39,396

Less than
one year

1–2 years

2–3 years

3–4 years

4–5 years

More than
5 years

Total

Fixed interest rates
Bonds
Bank loans

2012-09-30
in € thousands

Floating interest rate
Cash and cash equivalents

916,894

0

0

0

0

0

916,8940

152,445

077,202

058,172287,819

156,020820036,446

0

192,548

Bonds

0

0

0

0

583,200

0583,200

Bank loans

0

12,000

163

0

0

0

12,163

Bonds
Bank loans
Fixed interest rates

Voith Annual Report 2013193

Consolidated Financial Statements

If the market rate of interest had been 100 bps higher (lower)
at September 30, 2013, earnings from the significant floating rate financial instruments would have been € 4.9 million
higher (lower) (previous year: € 4.4 million). Equity would havechanged accordingly. This effect chiefly originates from floating-rate financial instruments denominated in euro currencyof € 4.0 million (previous year: € 4.4 million).
If the market rate of interest had been 100 bps higher (lower)
as at September 30, 2013, the fair value of the significant
fixed rate financial instruments would have been € 23.6 million lower (higher) (previous year: € 29.3 million).

Commodity price risk:
The Voith Group is exposed to risks arising from changes incommodity prices, as these also affect most of the semi-finished goods that it needs. Voith’s Corporate Purchasing
regularly reviews the nature, volume and scheduling of theGroup’s materials requirements. On request by Corporate
Purchasing, and in consultation and agreement with Group
companies, suitable forward commodity contracts can bearranged by Voith Finance GmbH to limit any latent commodity price risks. No forward commodity contracts were inplace during the fiscal year. In addition, increases in the priceof materials can be passed on to customers to some extent.

Risks relating to securities and stock prices:
The Voith Group holds stocks and other available-for-salesecurities of € 221 million (previous year: € 232 million). Stockprice risks are reflected on the balance sheet and not in
the consolidated statement of income, unless the criteria for
impairment are met. A 10 % change in the underlying stock
prices would cause equity to change by 10 % of the carrying
amount of the stocks concerned.
There is no risk to stocks and other securities at fair value
through profit or loss.
It should be noted that all existing stock price risks areanalyzed continuously and suitable counteraction taken
accordingly.

194

Voith Annual Report 2013

Consolidated Financial Statements

Hedge relationships:
The following items are used to hedge foreign exchange and interest rate risks:
2013-09-30

Nominal values*

Positive market values

Negative market values< 1 year< 1 yearin € thousands< 1 year> 1 year

Forward exchange contracts (fair value hedges)

299,078

125,013

7,734

1,084

9,820

2,847

Forward exchange contracts (cash flow hedges)

11,060

0

162

0

183

0

Cash and cash equivalents (cash flow hedges)> 1 year> 1 year

0

0

0

0

0

0

Interest rate swaps (fair value hedges)

132,978

107,1216,057

14,5330

0Interest rate swaps (cash flow hedges)

0

0

0

0

0

0

Other derivatives

302,497

136,662

5,383

2,680

2,851

290

Total

745,613368,796

19,336

18,297

12,854

3,137

2012-09-30

Nominal values*> 1 year

Positive market values

Negative market values< 1 year< 1 yearin € thousands< 1 year> 1 year> 1 year

Forward exchange contracts (fair value hedges)

299,282

95,326

5,922

2,628

10,604

Forward exchange contracts (cash flow hedges)

3,868

24,540

0

587

0

139

0

Cash and cash equivalents (cash flow hedges)

0

0

0

0

0

0

Interest rate swaps (fair value hedges)

0252,584

035,462

0

0

0

0

0

0

0

0

Other derivatives

Interest rate swaps (cash flow hedges)

152,900

322,673

4,043

4,118

5,795

586

Total

476,722670,583

10,552

42,208

16,5384,454* Nominal value refers to the volume of the hedged transactions in the local currency, translated at the closing rate.

Fair value hedges
The Group uses fair value hedges primarily to hedge interest
rate and foreign exchange risks.
In the 2012/13 fiscal year, a loss of € 12,800 thousand(previous year: a gain of € 7,576 thousand) was recorded
for derivative financial instruments classified as fair value
hedges. Since the hedges were classified as highly effective,
measurement of the hedged transactions at the reporting
date produced a contrary profit/loss in the same amount.

Voith Annual Report 2013

195

Consolidated Financial Statements

There were no effects on earnings from ineffective hedges in
the 2013 and 2012 periods under review.
Changes in the value of financial derivatives that do not meetthe requirements defined for hedge accounting by IAS 39 arerecognized in profit or loss at the reporting date.
Cash flow hedges
On September 30, 2013, the Group held forward exchange
contracts to hedge future forecast sales and purchases
transactions and firm commitments.
The main terms and conditions of the forward exchange
contracts were negotiated in line with the terms and conditions agreed for the hedged transactions. The underlying
transactions are expected to be carried out within one year.
Hedge relationships designed to hedge cash flows fromexpected future sales were classified as highly effective.
Accordingly, an unrealized loss of € 315 thousand (previous
year: € 1,602 thousand) was recognized in other reserves
under Group equity as at September 30, 2013.
Due to the realization of hedged transactions in the courseof the period under review, the relevant accumulated losses
amounting to € 94 thousand (previous year: € 2,692 thousand) were transferred from other reserves to profit or loss.
Of the amount reclassified to the statement of income, € 0(previous year: € 0) was transferred to the interest resultand € 94 thousand (previous year: € 2,692 thousand) to theoperational result.

Research and development costs
In the 2012/13 fiscal year, research and development costs
totaled € 242,129 thousand (previous year: € 266,713 thousand).

balance sheet. The remaining expenses consist of € 152,182
thousand (previous year: € 178,574 thousand), which includes both amortization on these capitalized development
expenses and activities for non-customer-specific new developments and improvements, as well as € 70,377 thousand(previous year: € 69,918 thousand) for development activities
capitalized in the context of customer-specific orders.

Related parties
In the course of its ordinary business activities, Voith GmbH
maintains relationships both with the subsidiaries listed
in these consolidated financial statements and with otherrelated entities and individuals (family members who areshareholders, and members of the Supervisory Board andthe Board of Management).
In the 2007/08 fiscal year, one subsidiary of Voith GmbH wassold to family shareholders in the context of a transaction
under common control. This company, JMV GmbH & Co.
KG, Heidenheim, is now the ultimate parent company of theVoith Group.
All business transactions with related parties are conducted
at arm’s length conditions.
Members of the Board of Management or members of
the Supervisory Board of Voith GmbH and family member
shareholders also serve on the supervisory boards of othercompanies with which Voith maintains relationships in thecourse of its ordinary business activities. Any transactions
involving these companies are conducted at arm’s length
conditions.
A total of € 923 thousand (previous year: € 909 thousand)was paid at customary market rates to members of theSupervisory Board and former members of the Board ofManagement for consulting and other services.

Of this amount, € 19,570 thousand (previous year: € 18,221
thousand) was capitalized as development costs in the

196

Voith Annual Report 2013

Consolidated Financial Statements

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

2012/13

2011/12

Liabilities to family shareholders

27,91547,891Services purchased from associates*

14,977

3,822

682

374

Receiv­ables from associates*

3,452

5,108

Services rendered to associates*

Liabilities to associates*

3,410

1,941

Services purchased from other investments

3,113

3,940

Services rendered to other investments

17,601

22,533

Receiv­ables from other investments, incl. advances paid

8,651

11,726

Impairment of receiv­ables from other investments

- 412

- 320

Liabilities to other investments, including advances received

25,21524,879Services purchased from joint ventures

4,863

4,501

Services rendered to joint ventures

596

561

Receiv­ables from joint ventures

192

607

Liabilities to joint ventures

827

492

10,022

12,485Services purchased from the ultimate parent company
Services rendered to the ultimate parent company

709

824

Receiv­ables from the ultimate parent company

144

163

4,345

3,950

Liabilities to the ultimate parent company* Previous year restated.

Liabilities to family shareholders include current floating-rate
clearing accounts and pension obligations.
For more information on the profit participation rights of€ 103,400 thousand (previous year: € 98,400 thousand)granted to family shareholders, please refer to note 19.
Research and development services in the amount of € 785
thousand (previous year: € 1,939 thousand) were provided
and charged to the Group by one related party.

Guarantees of € 11,836 thousand (previous year: € 11,836
thousand) were issued in favor of one associate, € 1,693
thousand (previous year: € 0) in favor of one joint venture and€ 378 thousand in favor of other investments (previous year:€ 2,870 thousand).
Obligations from outstanding orders payable to the ultimate
parent amount to € 4,634 thousand (previous year: € 3,278
thousand) and those payable to associates amount to€ 2,230 thousand (previous year: € 15,581 thousand).
Capital increases of € 1,781 thousand (previous year: € 862
thousand) were carried out in favor of joint ventures.

Voith Annual Report 2013197

Consolidated Financial Statements

Remuneration of governing bodies

Auditor’s fees and services

Total compensation for members of the Board of Management of Voith GmbH, including pension expenses, came to€ 7,870 thousand in the period under review (previous year:€ 8,450 thousand). This amount includes long-term benefit
components totaling € 1,975 thousand (previous year: € 2,234
thousand). These long-term benefit components include
service costs totaling € 2,193 thousand (previous year:€ 2,154 thousand).

The following fees (including reimbursement of expenses)
were paid to the independent auditor for the services rendered in the 2012/13 fiscal year.

The members of the Supervisory Board received compensation of € 573 thousand (previous year: € 510 thousand).
The present value of all defined benefit obligations in
respect of current members of the Board of Management
was € 32,440 thousand at the reporting date (previous
year: € 29,865 thousand). The present value of all defined
benefit obligations in respect of former members of theBoard of Management was € 22,412 thousand (previous
year: € 26,855 thousand). Plan assets of € 13,955 thousand(previous year: € 10,931 thousand) have been formed for
current members of the Board of Management. Plan assetsof € 9,034 thousand (previous year: € 8,467 thousand) havebeen formed for former members of the Board of Management. These amounts are presented in note 20.
Pension and other payments to former members of theBoard of Management amounted to € 1,528 thousand (previous year: € 5,262 thousand). This includes an amount of€ 0 as defined by IAS 24, 17 (d) (previous year: € 2,970
thousand).

in € thousands

2012/13

2011/12Annual audit

1,826

2,005

Other assurance or valuation services

105

193

Tax advisory services

122

103

Other services

377

223

2,430

2,524

Events after the period under review
No significant developments have occurred since the closeof the 2012/13 fiscal year.

Heidenheim/Brenz, November 19, 2013
Voith GmbH
The Board of Management
Dr. Hubert Lienhard
Dr. Hermann Jung
Dr. Hans-Peter Sollinger
Martin Hennerici
Bertram Staudenmaier
Dr. Roland Münch
Carsten J. Reinhardt
The consolidated financial statements of Voith GmbH as
at September 30, 2013 as authorized for issue and theunqualified audit opinion issued thereon by Ernst & YoungGmbH Wirtschaftsprüfungsgesellschaft, Stuttgart, were filedin German at the Bundesanzeiger [Federal German Gazette](available at www.bundesanzeiger.de).

198

Voith Annual Report 2013

Consolidated Financial Statements

Responsibility statement

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

Heidenheim/Brenz, November 19, 2013
Voith GmbH
The Board of Management
Dr. Hubert Lienhard
Dr. Hermann Jung
Dr. Hans-Peter Sollinger
Martin Hennerici
Bertram Staudenmaier
Dr. Roland Münch
Carsten J. Reinhardt

Voith Annual Report 2013

199

The Voith Group and its shareholdings

The Voith Group and its shareholdings
as at September 30, 2013
Significant Associated Companies and ShareholdingsGroup sharein %Voith GmbH

Heidenheim

Germany

100.0

Voith IT Solutions GmbH & Co KG

St. Pölten

Austria

100.0

Voith Corporate Management (Shanghai) Co., Ltd.

Shanghai

China

100.0

Voith Composites GmbH & Co. KG

Garching

Germany

100.0

J.M. Voith GmbH & Co. Beteiligungen KG

Heidenheim

Germany

100.0

Voith Assekuranz Vermittlung GmbH

Heidenheim

Germany

100.0

Voith Dienstleistungen und Grundstücks GmbH & Co. KG

Heidenheim

Germany

100.0

Voith Finance GmbH

Heidenheim

Germany

100.0

Voith Financial Services GmbH

Heidenheim

Germany

100.0

Voith Industrieverwaltung GmbH

Heidenheim

Germany

100.0

Voith IT Solutions GmbH

Heidenheim

Germany

100.0

Voith IT Solutions Inc.

Wilson (NC)

United States

100.0

Voith Hydro Holding GmbH & Co. KG*

Heidenheim

Germany

65.0

Kössler GmbH & Co. KG

St. Georgen/Stfd.

Austria

100.0

Voith Hydro GmbH & Co KG

St. Pölten

Austria

100.0

Voith Hydro da Amazonia Ltda.

ManausBrazil99.9

Voith Hydro Ltda.

São Paulo (SP)Brazil100.0

Voith Hydro Services Ltda.

São Paulo (SP)Brazil100.0

Voith Hydro Inc.

Brossard (QC)

Canada100.0

Vortex Hydrosystems Inc.

GranbyCanada80.0

Voith Hydro S.A.

Santiago de Chile (Las Condes)

Chile

100.0

Voith Hydro Shanghai Ltd.

Shanghai

China

80.0

Voith Hydro Ltda. – Sucursal Colombia

Medellín-Antioquia

Colombia

100.0

Voith Hydro Ltda.

CuencaEcuador

100.0

VH Auslandsbeteiligungen GmbH

Heidenheim

Germany

100.0

VHG Auslandsbeteiligungen GmbH

Heidenheim

Germany

100.0

Voith Hydro GmbH & Co. KG

Heidenheim

Germany

100.0

Voith Hydro Ocean Current Technologies GmbH & Co. KG

Heidenheim

Germany

80.0

Voith Hydro Private Limited

Noida

India

100.0

Voith Hydro S.P.A.

Cinisello Balsamo (MI)

Italy

100.0

Voith Fuji Hydro K. K.

Kawasaki-shi, Kanagawa

Japan

50.0

Voith Hydro Mexico, S. de R.L. de C.V.

Ciudad de México

Mexico100.0

Voith Hydro AS

OsloNorway100.0

Voith Hydro Sarpsborg AS

Sarpsborg

Norway100.0*The proportionate holding for the Hydro companies relates to Voith Hydro Holding GmbH & Co. KG, Heidenheim / Germany.

200

Voith Annual Report 2013

The Voith Group and its shareholdingsGroup sharein %Voith Hydro Lima S.A.C.

Miraflores—Lima

Peru

99.0

Voith Hydro S.R.L.

Bucharest

Romania

100.0

VolgaHydro LLC

Balakovo

Russian Federation

50.0

Voith Hydro S.L.

Ibarra (Guipúzcoa)

Spain

100.0

Voith Hydro AB

Västerås

Sweden100.0

Voith Hydro Limited Sirketi

Sögütözü Ankara

Turkey100.0

Voith Hydro Inc.

York (PA)

United States

100.0

Voith Industrial Services Holding GmbH & Co. KG

Heidenheim

Germany

100.0

Voith Industrial Services GmbH

Steyr

Austria

100.0

DIW Instandhaltung GmbH

ViennaAustria

100.0

Voith Industrial Services N.V.

Kapellen (Antwerp)

Belgium

100.0

Voith Serviços Industriais do Brasil Ltda.

São Paulo (SP)Brazil

100.0

P3 Voith Aerospace, Ltd.

Saint-Laurent

Canada40.0

Voith Industrial Services (Shanghai) Co., Ltd.

Shanghai

China

100.0

Voith Industrial Services s.r.o.

Kosmonosy

Czech Republic

100.0

Voith Industrial Services A/SRingsted

Denmark

100.0

P3 Voith Aerospace SARL

Toulouse

France40.0

Voith Engineering Personnel Services GmbH & Co. KG

Chemnitz

Germany

100.0

Voith Engineering Services GmbH

Chemnitz

Germany

100.0

P3 Voith Aerospace GmbH

Hamburg

Germany

40.0

P3 Voith Aerospace Holding GmbH

Hamburg

Germany

40.0

Voith Industrial Services GmbH & Co. KG

Kirchseeon

Germany

100.0

Voith Industrial Services GmbH

Mainhausen

Germany

100.0

DIW System Dienstleistungen GmbH & Co. KG

MunichGermany

100.0

Voith Industrial Services GmbH & Co. KG

SpeyerGermany

100.0

DIW Aircraft Services GmbH

Stuttgart

Germany

100.0

DIW Instandhaltung Ltd. & Co. KG

Stuttgart

Germany

100.0

DIW Mechanical Engineering GmbH & Co. KG

Stuttgart

Germany

100.0

Voith Industrial Services Beteiligungen GmbH

Stuttgart

Germany

100.0

Voith Industrial Services Beteiligungsverwaltungs GmbH

Stuttgart

Germany

100.0

Voith Industrial Services GmbH

Stuttgart

Germany

100.0

Voith Industrial Services Grundstücks GmbH & Co. KG

Stuttgart

Germany

100.0

Voith Industrial Services Ltd. & Co. KG

Stuttgart

Germany

100.0

Voith Industrial Services Process GmbH & Co. KG

Stuttgart

Germany

100.0

P3 Voith Aerospace Limited

Bristol

Great Britain

40.0

Voith Annual Report 2013

201

The Voith Group and its shareholdingsGroup sharein %Voith Industrial Services (Coventry) Limited

Warwick

Great Britain

100.0

Voith Industrial Services Holding Ltd.

Warwick

Great Britain

100.0

Voith Industrial Services Limited

Warwick

Great Britain

100.0

Voith Industrial Services Kft.

Györ

Hungary

100.0

P3 India Consulting Engineering Pvt. Ltd.

Bangalore

India

40.0

Voith Engineering Services Private Limited

Bangalore

India

40.0

Voith Industrial Services India Private Limited

Pune

India

100.0

Voith Industrial Services S de RL de CV

Saltillo Coahuila

Mexico100.0

Voith Railservices B.V.

TwelloNetherlands

100.0Voith Industrial Services AS

Mongstad

Norway100.0

Voith Industrial Services Sp. z o.o.

Gliwice

Poland100.0

Voith Industrial Services Qatar LLC

Doha

Qatar

49.0

Voith Industrial Services, s.r.o.

Bratislava

Slovakia

100.0

P3 Voith Aerospace SL

Madrid

Spain

40.0

EnovaPremier of Michigan

Charlotte (MI)United States

40.0

Voith Industrial Services Inc.

Cincinnati (OH)

United States

100.0

EnovaPremier LLC

Louisville (KY)

United States

40.0

EnovaPremier of Alabama

Montgomery (AL)

United States

40.0

EnovaPremier of Kentucky

Paris (KY)

United States

40.0

EnovaPremier of Indiana

Princeton (IN)

United States

40.0

P3 Voith Aerospace Inc.

Wichita (KS)United States

40.0

Voith Paper Holding GmbH & Co. KG

Heidenheim

Germany

100.0

Voith Paper Argentina S.A.

Carapachay—Buenos Aires

Argentina

100.0

Voith Paper Australia and New Zealand Pty. Ltd.

Macquarie Park

Australia

100.0

Voith Paper Fabrics GmbH

Frankenmarkt

Austria

99.8

GAW technologies GmbH

Graz

Austria

35.0

Voith Paper Rolls GmbH & Co KG

Laakirchen-Oberweis

Austria

100.0

Voith Paper GmbH

St. Pölten

Austria

100.0

Voith Paper Rolls GmbH & Co KG

Wimpassing

Austria

100.0

Meri Sistemas e Tecnologia Ltda.

São Paulo (SP)Brazil55.3

Voith Mont Montagens e Serviços Ltda.

São Paulo (SP)Brazil100.0

Voith Paper Máquinas e Equipamentos Ltda.

São Paulo (SP)Brazil100.0

Voith Paper Air Systems Inc.

Saint-Laurent (QC)

Canada100.0Servicios y Suministros Voith Chile Ltda.

Concepción, Coronel

Chile

100.0

Voith Paper Rolls Guangzhou Co., Ltd.

Guangzhou City

China

100.0

202

Voith Annual Report 2013

The Voith Group and its shareholdingsGroup sharein %Voith Paper (China) Co., Ltd.

Kunshan, Jiangsu

China

Voith Paper Integrated Mill Service Co., Ltd.

Sanming

China

70.0

Voith Paper International Trading Co., Ltd.

Shanghai

China

100.0

Voith Paper Oy

VantaaFinland100.0

Voith Paper Air Systems GmbH

BayreuthGermany

100.0

Voith Paper Fabrics Düren GmbH

Düren

Germany

100.0

Voith IHI EcoSolutions GmbH & Co. KG

Heidenheim

Germany

50.0

Voith Paper Fabric & Roll Systems GmbH

Heidenheim

Germany

100.0

Voith Paper Fabrics GmbH & Co. KG

Heidenheim

Germany

100.0

Voith Paper GmbH & Co. KG

Heidenheim

Germany

100.0

Voith Paper Rolls GmbH & Co. KG

Heidenheim

Germany

100.0

VP Auslandsbeteiligungen GmbH

Heidenheim

Germany

100.0

Voith Paper Krieger GmbH & Co. KG

Mönchengladbach

Germany

85.0

MERI Environmental Solutions GmbH

MunichGermany

65.0

Voith Paper Rolls GmbH & Co. KG

Weißenborn

Germany

100.0

Voith Paper Fabrics Holding Ltd.

Bury (Lancashire)

Great Britain

100.0

Voith Paper Fabrics Stubbins, Ltd.

Bury (Lancashire)

Great Britain

100.0

Voith Paper Ltd.

Manchester

Great Britain

100.0

Voith Paper Fabrics India Ltd.

Faridabad (Haryana)

India

74.0

Voith Paper Technology (India) Private Limited

Kolkata

India

100.0

PT. Voith Paper

Karawang—West Java

Indonesia

100.0

PT. Voith Paper Rolls Indonesia

Karawang—West Java

Indonesia

76.0

RIF ROLL COVER SRL

Basaldella (Udine)

Italy

51.0

Voith Paper S.r.L.

Schio (Vicenza)

Italy

100.0

Voith IHI Paper Technology Co., Ltd.

Tokyo

Japan

49.0

Voith Paper Fabrics Asia Pacific Sdn. Bhd.

Chemor, Perak Darul Ridzuan

Malaysia

100.0

Voith Paper Fabrics Ipoh Sdn. Bhd.

Chemor, Perak Darul Ridzuan

Malaysia

100.0

Meri Sistemas Ambientales S.A. de C.V.

Monterrey

Mexico45.5

Voith Paper Fabrics B.V.

Haaksbergen

Netherlands

100.0Voith Paper B.V.

Vaassen

Netherlands

100.0Voith Paper CTC Technology B.V.

Vaassen

Netherlands

100.0Voith Paper AS

TranbyNorway100.0

Voith Paper Technology Russia GmbH

St. Petersburg

Russian Federation

100.0

Voith Paper Fabrics, S.A.

Guissona (Lérida)

Spain

100.0

Voith Paper S.A.

Ibarra (Guipúzcoa)

Spain

100.0

Voith Paper Fabrics Högsjö AB

Högsjö

Sweden100.0

Voith Annual Report 2013

100.0

203

The Voith Group and its shareholdingsGroup sharein %Voith Paper Fabrics Holding AB

Högsjö

Sweden100.0

Voith Paper Walztechnik AG

Zurich

Switzerland

100.0

Voith Meri Environmental Solutions, Inc.

Appleton (WI)

United States

65.0

Voith Paper Inc.

Appleton (WI)

United States

100.0

Syn Strand Inc.

Summerville (SC)

United States

100.0

Voith Paper Fabrics Waycross, LLC

Waycross (GA)

United States

100.0

Voith Paper Fabric & Roll Systems Inc.

Wilson (NC)

United States

100.0

Voith Turbo GmbH & Co. KG

Heidenheim

Germany

100.0

Voith Turbo Pty. Ltd.

Wetherill Park, N.S.W.

Australia

100.0

Voith Turbo GmbH

St. Pölten

Austria

100.0

Voith Turbo Vertriebs GmbH

St. Pölten

Austria

100.0

Voith Turbo S.A./N.V.

Brussels

Belgium

100.0

Voith Turbo Ltda.

São Paulo (SP)Brazil100.0

Voith Turbo S. A.

Santiago

Chile

100.0

Voith Lutong Urban Rail Gearbox Technology (Changchun) Co., Ltd.

Changchun

China

50.0

Voith Turbo Limited

Hong Kong

China

100.0

Shanghai Voith Schaku KTK Coupler Technology Co., Ltd.

Shanghai

China

50.0

Voith Turbo China Co., Ltd.

Shanghai

China

100.0

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

Shanghai

China

100.0

Voith Turbo Colombia Limitada

Bogotá D.C.

Colombia

100.0

Voith Turbo s.r.o.

Brno

Czech Republic

100.0

Voith Turbo A/S

Gadstrup

Denmark

100.0

Voith Turbo SAS

Noisy-le-Grand Cedex

France100.0

Voith Turbo HighFlex GmbH & Co. KG

Essen

Germany

100.0

Voith Turbo Aufladungssysteme GmbH & Co. KG

Gommern

Germany

100.0

LZH Logistic Zollservice Heidenheim GmbH

Heidenheim

Germany

32.6

Voith Turbo Antriebstechnik Beteiligungen GmbH

Heidenheim

Germany

100.0

Voith Turbo Auslandsbeteiligungen GmbH

Heidenheim

Germany

100.0

Voith Turbo Schneider Propulsion GmbH & Co. KG

Heidenheim

Germany

100.0

Voith Turbo SMI Technologies GmbH & Co. KG

Heidenheim

Germany

51.0

Voith Turbo Vertriebsgesellschaft mbH

Heidenheim

Germany

100.0

Voith Turbo Wind GmbH & Co. KG

Heidenheim

Germany

100.0

Voith Turbo Advanced Propeller Technologies GmbH & Co. KG

Rostock

Germany

100.0

Micromat Spannhydraulik GmbH

Rutesheim

Germany

50.0

Voith Turbo H + L Hydraulic GmbH & Co. KG

Rutesheim

Germany

100.0

204

Voith Annual Report 2013

The Voith Group and its shareholdingsGroup sharein %Voith Turbo Scharfenberg GmbH & Co. KG

Salzgitter

Germany

100.0

Voith Turbo BHS Getriebe GmbH

Sonthofen

Germany

100.0

Voith Turbo BHS Getriebe Holding GmbH

Sonthofen

Germany

100.0

Voith Turbo Verdichtersysteme GmbH & Co. KG

Zschopau

Germany

100.0

H + L Hydraulic Ltd.

CroydonGreat Britain

100.0

Voith Turbo Limited

CroydonGreat Britain

100.0

Voith Turbo Rail Systems Ltd.

CroydonGreat Britain

100.0

Voith Turbo Kft.

Biatorbágy

Hungary

100.0

Fluid Logic Systems Private Limited

Ahmadabad (Gujarat)

India

50.0

FlowLink Systems Private Ltd.

Coimbatore

India

50.0

Voith Turbo Private Limited

Hyderabad (A.P.)

India

100.0

Hydronaut s.r.l.

Milan

Italy

100.0

Voith Turbo Drive Systems s.r.l.

Montichiari/BS

Italy

100.0

Voith Turbo s.r.l.

Reggio Emilia

Italy

100.0

Voith Turbo Co., Ltd.

Kawasaki-shi, Kanagawa

Japan

100.0

Voith Turbo Co., Ltd.

Seoul

Korea, Republic of

80.0

Voith Turbo S.A. de C.V.

Mexico (D.F.)

Mexico100.0

Voith Turbo B.V.

TwelloNetherlands

100.0Voith Turbo Marine SteamTrac B.V.

TwelloNetherlands

100.0Voith Turbo AS

Skjetten

Norway100.0

Voith Turbo Sp. z o.o.

Wola Krzysztoporska

Poland100.0

Voith Turbo Kazan GmbH

Kazan

Russian Federation

100.0

Voith Turbo Pte. Ltd.

Singapore

Singapore

100.0

Imfuyo Air Products (Proprietary) Limited

Bedfordview

South Africa

47.0

Imfuyo Projects (Pty) Ltd.

BenoniSouth Africa

47.0

Imfuyo Locomotives (Proprietary) Limited

Parktown

South Africa

47.0

Voith Property Company (Pty) Ltd.

Witfield (Boksburg)

South Africa

100.0Voith Turbo (Pty) Ltd

Witfield (Boksburg)

South Africa

100.0Voith Turbo S.A.

Coslada (Madrid)

Spain

100.0

Voith Turbo Safeset AB

Hudiksvall

Sweden100.0

Voith Turbo AB

Spanga-Stockholm

Sweden100.0

Voith Turbo Co. Limited

Kaohsiung City 81246

Taiwan100.0

Voith Turbo Güç Aktarma Tekniği Ltd. Şti.

Çankaya-Ankara

Turkey100.0

Voith Middle East FZE

Dubai

United Arab Emirates

100.0

Voith Turbo Inc.

York (PA)

United States

100.0

Voith Annual Report 2013

205

Contact

Imprint

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

Publisher
Voith GmbH
St. Pöltener Str. 43
89522 Heidenheim
Germany
Phone: +49 7321 37-0
Telefax: +49 7321 37-7000
E-Mail: info@voith.com
www.voith.com

Corporate Communications
Phone: +49 7321 37-3462
Telefax: +49 7321 37-7107
E-Mail: info@voith.com
Investor Relations
Phone: +49 7321 37-2332
Telefax: +49 7321 37-7010
E-Mail: info@voith.com
Voith Hydro
Phone: +49 7321 37-6848
Telefax: +49 7321 37-7828
E-Mail: info.voithhydro@voith.com
Voith Industrial Services
Phone: +49 711 7841-174
Telefax: +49 711 7841-179
E-Mail: info.industrialservices@voith.com
Voith Paper
Phone: +49 7321 37-2888
Telefax: +49 7321 37-7008
E-Mail: info.voithpaper@voith.com
Voith Turbo
Phone: +49 7321 37-2832
Telefax: +49 7321 37-7110
E-Mail: info.voithturbo@voith.com

Environmentally Friendly
Production
FSC ®
The recycled paper Respecta Silk 60 and the nature paper Maxi Offset are produced in compliance with the international FSC ® standard. The
pulp is partly manufactured from certified, i. e.
responsibly managed, forests. Careful forestry
practice also ensures, among other things, that
biological diversity and ecological processes are
not disturbed when wood products are removed
from the forest.

Magazine Section
Strichpunkt Design
Stuttgart/Berlin, Germany
Editing/Text (Financial Section)
Seipp Kommunikationsberatung,Cologne, Germany
Typography (Financial Section)
G2 Printmedienmanufaktur GmbH,
Munich, Germany
Photo Credits
CasaMedia Filmproduktion: pp. 18, 19,
20, 21
Corbis: pp. 25, 26, 61
Dawin Meckel: pp. 4, 5, 6, 30, 32, 41, 42,
43, 46, 52, 54, 55
Julian Röder: pp. 26, 27, 36
Bernd Schifferdecker: p. 59
Voith: pp. 8, 46, 48, 49, 60
David Wu: p. 34
Printing
Eberl Print GmbH,
Immenstadt, Germany

CO 2 -Compensation
Voith records all CO 2 emissions produced in
the course of printing and processing the annual report. By making a proportionately equal
investment in a Gold Standard climate project,
the corresponding CO 2 emissions will be savedin the future and the carbon footprint left by theVoith annual report compensated for in this way.

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This annual report is also available in German.
Both versions, as well as press releases and otherinformation, can also be downloaded from theinternet at www.voith.com.

Printed in Germany, ©Voith GmbH, 2013-12