ANDRITZ AG Key financial figures at a glance
ANDRITZ GROUP 02
Business areas 03
Management report incl.
consolidated non-financial statement 04
Consolidated
Report of the Supervisory Board60
Consolidated financial statements 2020 of the ANDRITZ GROUP
Consolidated income statement 63
Consolidated statement of comprehensive income 64
Consolidated statement of financial position 65
Consolidated statement of cash flows 66
Consolidated statement of changes in equity 67
Notes to the consolidated financial statements 68
Statement by the Executive Board, pursuant to section 124 (1) of the (Austrian) Stock Exchange Act 154
Glossary 155
Auditor's report 157
GRI index 163
CSR data overview 168
Key financial figures of the ANDRITZ GROUP
KEY FINANCIAL FIGURES OF THE ANDRITZ GROUP
Unit | 2020 | 2019 | 2018 | 2017 | 2016 | |
Order intake | MEUR | 6,108.0 | 7,282.0 | 6,646.2 | 5,579.5 | 5,568.8 |
Order backlog (as of end of period) | MEUR | 6,774.0 | 7,777.6 | 7,084.3 | 6,383.0 | 6,789.2 |
Revenue | MEUR | 6,699.6 | 6,673.9 | 6,031.5 | 5,889.1 | 6,039.0 |
Return on sales | % | 4.7 | 3.6 | 5.3 | 6.8 | 6.4 |
EBITDA | MEUR | 571.1 | 537.6 | 498.0 | 541.7 | 542.4 |
EBITA1) | MEUR | 391.7 | 343.2 | 394.3 | 444.0 | 442.1 |
Earnings Before Interest and Taxes (EBIT) | MEUR | 315.0 | 237.9 | 321.6 | 399.3 | 385.8 |
Earnings Before Taxes (EBT) | MEUR | 280.9 | 180.9 | 304.2 | 400.6 | 398.4 |
Net income (including non-controlling interests) | MEUR | 203.7 | 122.8 | 219.7 | 265.6 | 274.8 |
Net income (without non-controlling interests) | MEUR | 207.1 | 127.8 | 222.0 | 263.0 | 274.6 |
Cash flow from operating activities | MEUR | 461.5 | 821.6 | 7.8 | 246.5 | 366.6 |
Capital expenditure | MEUR | 131.8 | 157.1 | 137.0 | 116.8 | 119.5 |
Free cash flow | MEUR | 329.7 | 664.5 | -129.2 | 129.7 | 263.7 |
Free cash flow per share | EUR | 3.3 | 6.4 | -1.2 | 1.2 | 2.5 |
Employees (as of end of period; without apprentices) | - | 27,232 | 29,513 | 29,096 | 25,566 | 25,162 |
Non-current assets | MEUR | 2,497.5 | 2,705.5 | 2,629.5 | 1,860.8 | 1,913.7 |
Current assets | MEUR | 4,559.2 | 4,528.6 | 4,289.1 | 4,404.5 | 4,284.9 |
Total equity | MEUR | 1,255.7 | 1,219.6 | 1,330.8 | 1,325.4 | 1,344.2 |
Provisions | MEUR | 691.0 | 1,083.1 | 1,017.7 | 1,066.1 | 1,118.9 |
Liabilities | MEUR | 5,110.0 | 4,931.4 | 4,570.1 | 3,873.8 | 3,735.5 |
Total assets | MEUR | 7,056.7 | 7,234.1 | 6,918.6 | 6,265.3 | 6,198.6 |
Equity ratio | % | 17.8 | 16.9 | 19.2 | 21.2 | 21.7 |
Return on equity | % | 22.4 | 14.8 | 22.9 | 30.2 | 29.6 |
Return on investment | % | 4.5 | 3.3 | 4.6 | 6.4 | 6.2 |
Liquid funds | MEUR | 1,719.3 | 1,609.8 | 1,279.7 | 1,772.3 | 1,507.1 |
Net liquidity | MEUR | 420.9 | 244.9 | -99.6 | 908.0 | 945.3 |
Net debt | MEUR | 35.1 | 205.7 | 568.1 | -530.6 | -550.2 |
Net working capital | MEUR | -48.8 | -134.0 | 160.5 | -121.0 | -215.8 |
Capital employed | MEUR | 1,345.1 | 1,470.4 | 1,665.6 | 801.9 | 772.2 |
Gearing | % | 2.8 | 16.9 | 42.7 | -40.0 | -40.9 |
EBITDA margin | % | 8.5 | 8.1 | 8.3 | 9.2 | 9.0 |
EBITA margin | % | 5.8 | 5.1 | 6.5 | 7.5 | 7.3 |
EBIT margin | % | 4.7 | 3.6 | 5.3 | 6.8 | 6.4 |
Net income/sales | % | 3.0 | 1.8 | 3.6 | 4.5 | 4.6 |
ROE | % | 16.2 | 10.1 | 16.5 | 20.0 | 20.4 |
EV/EBITDA | - | 6.1 | 7.0 | 8.6 | 7.4 | 7.4 |
Depreciation and amortization/sales | % | 3.8 | 4.1 | 2.7 | 2.3 | 2.4 |
1) Amortization and impairment of identifiable assets acquired in a business combination and recognized separately from goodwill amount to of 72.0 MEUR (2019: 76.2 MEUR); impairment of goodwill amounts to 4.7 MEUR (2019: 29.1 MEUR).
All figures according to IFRS. Due to the utilization of automatic calculation programs, differences can arise in the addition of rounded totals and percentages.
Key financial figures of the business areas
KEY FINANCIAL FIGURES OF THE BUSINESS AREAS
Pulp & Paper
Unit 2020 2019 2018 2017 | 2016 |
Order intake MEUR 2,961.1 3,632.5 2,571.9 2,033.4 | 1,919.5 |
Order backlog (as of end of period) MEUR 2,591.0 3,164.3 2,421.1 1,787.0 | 1,803.3 |
Revenue MEUR 3,339.0 2,869.5 2,233.2 2,059.7 | 2,094.4 |
EBITDA MEUR 399.6 351.4 258.4 221.5 | 207.7 |
EBITDA margin % 12.0 12.2 11.6 10.8 | 9.9 |
EBITA MEUR 322.7 271.0 222.1 194.9 | 182.2 |
EBITA margin % 9.7 9.4 9.9 9.5 | 8.7 |
Capital expenditure MEUR 64.1 63.3 33.8 42.1 | 34.1 |
Employees (as of end of period; without apprentices) - 11,127 11,984 11,435 8,002 | 7,522 |
2016
9.9
8.7 34.1
Metals
Unit 2020 2019 2018 2017 | 2016 |
Order intake MEUR 1,143.6 1,582.2 1,931.8 1,606.5 | 1,551.5 |
Order backlog (as of end of period) MEUR 1,181.6 1,532.7 1,591.6 1,309.7 | 1,369.0 |
Revenue MEUR 1,420.5 1,636.9 1,635.1 1,643.5 | 1,598.4 |
EBITDA MEUR 5.5 -1.5 57.8 129.7 | 141.7 |
EBITDA margin % 0.4 -0.1 3.5 7.9 | 8.9 |
EBITA MEUR -46.7 -73.8 27.3 98.6 | 115.2 |
EBITA margin % -3.3 -4.5 1.7 6.0 | 7.2 |
Capital expenditure MEUR 26.5 30.8 36.1 29.7 | 49.1 |
Employees (as of end of period; without apprentices) - 6,513 7,485 7,818 7,573 | 7,608 |
2016
8.9
7.2 49.1
Hydro
Unit 2020 2019 2018 2017 | 2016 |
Order intake MEUR 1,335.4 1,350.2 1,445.8 1,317.2 | 1,500.3 |
Order backlog (as of end of period) MEUR 2,587.9 2,661.0 2,667.9 2,921.8 | 3,269.6 |
Revenue MEUR 1,296.0 1,470.7 1,517.5 1,583.1 | 1,752.4 |
EBITDA MEUR 98.5 134.1 142.4 154.1 | 167.2 |
EBITDA margin % 7.6 9.1 9.4 9.7 | 9.5 |
EBITA MEUR 62.0 105.9 113.8 123.0 | 127.6 |
EBITA margin % 4.8 7.2 7.5 7.8 | 7.3 |
Capital expenditure MEUR 29.7 51.8 57.9 36.3 | 26.1 |
Employees (as of end of period; without apprentices) - 6,941 7,202 7,002 7,237 | 7,260 |
2016
Separation
Order intake
Order backlog (as of end of period) Revenue
EBITDA EBITDA margin EBITA
EBITA margin Capital expenditure
Employees (as of end of period; without apprentices)
9.5
7.3 26.1
Unit
2020
2019
2018
2017
2016
MEURMEURMEURMEUR%MEUR%MEUR-
667.9
717.1
696.7
622.4
597.5
413.5
419.6
403.7
364.5
347.3
644.1
696.8
645.7
602.8
593.8
67.5
53.6
39.4
36.4
25.8
10.5
7.7
6.1
6.0
4.3
53.7
40.1
31.1
27.5
17.1
8.3
5.8
4.8
4.6
2.9
11.5
11.2
9.2
8.7
10.2
2,651
2,842
2,841
2,754
2,772
MANAGEMENT REPORT
GENERAL ECONOMIC CONDITIONS
The global Covid-19 pandemic and the resulting restrictions on large areas of public and economic life led to a significant downturn in the global economy in 2020. There was a substantial increase in unemployment and a considerable decline in economic performance in all of the world's larger economic regions. Both Western industrialized countries and also emerging countries like Brazil and India were and still are being affected - some of them quite severely. The economic recovery and rescue packages (e.g. tax cuts, short working hours, direct subsidies towards overhead costs, etc.) implemented by many governments were able to cushion the downturn in the economy to a certain extent, but market researchers still expect a drop of at least 4% in the global GDP in 2020 compared to the previous year. China was also initially severely impacted by the pandemic, however the economy recovered again slightly - particularly in the second half of 2020 - and achieved slight growth during the reporting period compared to 2019.
Source: Research reports by various banks, OECD
MARKET DEVELOPMENT
The markets served by ANDRITZ were negatively impacted by the Covid-19 crisis and the resulting economic weakness in 2020 - albeit to different extents. Some medium-sized and larger investment projects and sales contracts have been delayed by the customer or postponed until further notice. This applied to the capital business in particular, but the service business was also affected by global travel restrictions imposed due to Covid-19 and by access restrictions to individual customer and project locations in some areas.
Pulp & Paper
The Pulp & Paper business area saw satisfactory project activity overall for pulping equipment during the reporting period - both for modernization of existing pulp mills and for construction of new mills (especially in South America). In the power boiler sector, the good project and investment activity of the previous years continued, particularly in Asia (Japan, China). The Nonwoven business (plants for the production of nonwovens, face masks, face mask raw materials, etc.) saw very strong investment and project activity during the reporting period as a result of the global Covid-19 pandemic.
Metals
In the Metals Forming sector for the automotive and automotive supplying industry, project and investment activity during the reporting period remained at the low level of the previous year due to the global economic downturn and the structural weakness of the international automotive market. There were only a few larger investments (from the electromobility sector) by automotive manufacturers and suppliers.
Project activity in the Metals Processing sector (equipment for the production and processing of stainless strip, carbon steel strip, and of aluminum strip) declined significantly during the reporting year due to the low demand in the global steel and stainless steel industry as a result of the economic environment.
Hydro
Global investment and project activity for electromechanical equipment for hydropower plants was unchanged during the 2020 business year. As a result of the continuing moderate investment activities by energy utilities - due to the low electricity prices - many modernization and rehabilitation projects for hydropower stations are still postponed or on hold until further notice, particularly in Europe. However, some larger orders to supply equipment for hydropower plants were awarded selectively during the reporting period, particularly in Asia and North America. Satisfactory project activity was noted in the pumps sector.
Separation
The global markets for solid/liquid separation equipment developed satisfactorily overall during the 2020 business year. The environmental (municipal and industrial sewage sludge dewatering and drying) and food sectors saw solid project activity. Satisfactory project activity was noted in the feed & biofuels technologies sector.
BUSINESS DEVELOPMENT
Change in the Consolidation Group
Information on the consolidation scope can be found in the notes to the consolidated financial statements, chapter B) 4. Consolidation scope.
Order intake
The order intake of the Group reached a solid level of 6,108.0 MEUR in the 2020 business year in spite of the global economic downturn and was thus only 16.1% below the record figure for the previous year (2019: 7,282.0 MEUR), which included some major orders in the Pulp & Paper business area.
The business areas' development in detail:
▪ Pulp & Paper: Order intake amounted to 2,961.1 MEUR and was thus 18.5% below the record level of the previous year (2019: 3,632.5 MEUR), which included some large-scale pulp mill orders from South America (Brazil). As a result of the worldwide travel restrictions and partial production constraints at customers due to the Covid-19 pandemic, service business also saw a decline in order intake in the 2020 business year.
▪ Metals: At 1,143.6 MEUR the order intake was significantly below the level of the previous year (-27.7% versus 2019: 1,582.2 MEUR). Both the Metals Forming (Schuler) and the Metals Processing sectors were confronted with very low investment activity by automotive and steel producers due to the economic environment. Additionally, in the Metals Forming sector, the continued structural weakness of the global automotive market had a negative impact on the development of order intake.
▪ Hydro: In a market environment characterized by unchanged moderate investment activity, the order intake at 1,335.4 MEUR reached practically the same level as the previous year (-1.1% versus 2019: 1,350.2 MEUR). Some larger orders were awarded selectively in Asia and North America during the reporting period.
▪ Separation: Order intake amounted to 667.9 MEUR and was thus 6.9% below the level for the previous year (2019: 717.1 MEUR). While the feed & biofuels technologies sector reached a solid level, development of order intake in the solid/liquid separation sector declined.
Order intake by business area 2020 (2019) in %
UMSATZ
UMSATZ
Order intake by region 2020 (2019) in %
A Pulp & Paper
48 (50)
A Europe
29 (33)
B Metals
19 (22)
B North America
22 (21)
C Hydro
22 (18)
C China
16 (11)
D Separation
11 (10)
D South America
15 (20)
E Asia (without China) 15 (12)
F Africa, Australia
3 (3)
Revenue
Revenue of the ANDRITZ GROUP amounted to 6,699.6 MEUR in the 2020 business year, reaching a new record level (+0.4% versus 2019: 6,673.9 MEUR) in spite of the difficult economic conditions. This record figure is attributable to the Pulp & Paper business area, which was able to increase revenue significantly (+16.4%) compared to the previous year - particularly due to processing of large-scale capital orders received in the preceding quarters. Revenue in the Metals (-13.2%) and Hydro (-11.9%) business areas declined significantly compared to the previous year due to the sharp decline in order intake in the past few quarters and years, respectively. Revenue in the Separation business area also declined (-7.6%).
The business areas' sales development at a glance:
Unit 2020 | 2019 +/- | |
Pulp & Paper | MEUR 3,339.0 | 2,869.5 +16.4% |
Metals | MEUR 1,420.5 | 1,636.9 -13.2% |
Hydro | MEUR 1,296.0 | 1,470.7 -11.9% |
Separation | MEUR 644.1 | 696.8 -7.6% |
-
+16.4% 13.2% 11.9% 7.6%
UMSATZ
Revenue by business area 2020 (2019) in %
UMSATZ
Revenue by region 2020 (2019) in %
A Pulp & Paper
B Metals
C Hydro
D Separation
50 (43)
A
Europe 34 (35)
21 (25)
B North America
19 (22)
C South America
10 (10)
D Asia (without China)
E China
F
19 (21)
19 (12)
13 (13)
12 (15)
Africa, Australia 3 (4)
Share of service sales of Group and business area sales in %
2019 | ||
ANDRITZ GROUP | 36 | 40 |
Pulp & Paper | 41 | 51 |
Metals | 24 | 27 |
Hydro | 34 | 32 |
Separation | 48 | 45 |
2020
Order backlog
As of December 31, 2020, the order backlog of the ANDRITZ GROUP amounted to 6,774.0 MEUR (-12.9% versus December 31, 2019: 7,777.6 MEUR).
AUFTRAGSS
Order backlog by business area
as of 31.12.2020 (31.12.2019) in %
TAND SBA
Order backlog by business area as of 31.12.2020 (31.12.2019) in %
A Pulp & Paper
38 (41)
A Europe
26 (30)
B Metals
18 (20)
B Asia (without China)
22 (18)
C Hydro
38 (34)
C China
18 (14)
D Separation
6 (5)
D North America
15 (19)
E South America
14 (14)
F Africa, Australia
5 (5)
Earnings
The operating result (EBITA) reached a favorable level due to good revenue development in combination with strict cost discipline and rose to 391.7 MEUR (+14.1% versus 2019: 343.2 MEUR). Profitability (EBITA margin) increased to 5.8% (2019: 5.1%). This result includes provisions of around 79 MEUR for capacity adjustments, especially for the Metals Forming and Hydro business areas and, to a lesser extent, for the other business areas. Excluding these extraordinary effects, the EBITA of the Group amounted to 471.1 MEUR and was thus slightly higher than the reference figure for the previous year excluding extraordinary effects (2019: 456.0 MEUR). The adjusted EBITA margin increased to 7.0% (2019: 6.8%).
Development of profitability by business area:
▪ In the Pulp & Paper business area, profitability reached a very favorable level once again at 9.7% (2019: 9.4%), with very positive developments in both capital and service business. The adjusted EBITA margin amounted to 9.9% (2019: 9.8%).
▪ The EBITA margin in the Metals business area remained negative at -3.3% (2019: -4.5%), mainly due to the above-mentioned measures in Metals Forming. In addition, execution of low-margin orders as a result of the unchanged, strong competition had a negative impact on the development of earnings and profitability. Excluding the restructuring expenses, the EBITA margin amounted to -0.8% (2019: 0.5%).
▪ The EBITA margin in the Hydro business area declined significantly to 4.8% (2019: 7.2%). The main reasons for the drop in profitability compared to the previous year were provisions for capacity adjustments - as in the Metals business area - and execution of some low-margin orders. The adjusted EBITA margin amounted to 7.0% (2019: 8.1%).
▪ In the Separation business area, the EBITA margin continued to develop very favorably and increased to 8.3% (2019: 5.8%). The adjusted EBITA margin increased significantly to 9.4% (2019: 6.6%).
Consolidated income statement
(in MEUR) | 2020 | 2019 | +/- |
Revenue | 6,699.6 | 6,673.9 | +0.4% |
Changes in inventories of finished goods, work in progress and capitalized cost of | |||
self-constructed assets | -26.4 | -28.2 | +6.4% |
Other income | 85.9 | 96.2 | -10.7% |
Cost of materials | -3,632.4 | -3,305.2 | -9.9% |
Personnel expenses | -1,790.3 | -2,015.2 | +11.2% |
Other expenses | -765.3 | -883.9 | +13.4% |
EBITDA | 571.1 | 537.6 | +6.2% |
Depreciation, amortization, and impairment of intangible assets and of property, | |||
plant, and equipment | -251.4 | -270.6 | +7.1% |
Impairment of goodwill | -4.7 | -29.1 | +83.8% |
EBIT | 315.0 | 237.9 | +32.4% |
Financial result | -34.1 | -57.0 | +40.2% |
EBT | 280.9 | 180.9 | +55.3% |
Income taxes | -77.1 | -58.2 | -32.5% |
NET INCOME | 203.7 | 122.8 | +65.9% |
Net income attributable to owners of the parent | 207.1 | 127.8 | +62.1% |
Net income allocated to non-controlling interests | -3.4 | -5.0 | +32.0% |
Basic earnings per no-par value share (in EUR) | 2.08 | 1.27 | +63.8% |
Allocation of expenses in %
Distribution of total expenses 2020 (2019) in %
D C
A | Cost of materials | 56 | (51) |
B | Personnel expenses | 28 | (31) |
C | Other expenses | 12 | (14) |
D | Depreciation | 4 | (4) |
56.4% of total expenses were attributable to material expenses in 2020 (2019: 51.0%). The material expenses to sales ratio increased to 54.2% (2019: 49.5%). The share of personnel expenses, at 27.8%, was thus below the level of the previous year (2019: 31.1%), the personnel expenses to sales ratio declined to 26.7% (2019: 30.2%).
Other expenses amounted to 765.3 MEUR in the reporting period (2019: 883.9 MEUR) and mainly include sales expenses, repairs and maintenance, travel expenses as well as legal, consulting, and audit expenses. Other income, at 85.9 MEUR, was below the level for the previous year (2019: 96.2 MEUR) and mainly includes government grants, rental income, and profits on disposal of intangible assets and property, plant, and equipment.
The depreciation and amortization of intangible assets and of property, plant, and equipment amounted to 251.4 MEUR in 2020 (2019: 270.6 MEUR). Thereof 69.1 MEUR (2019: 82.5 MEUR) are attributable to depreciation and amortization of intangible assets and 161.9 MEUR (2019: 168.7 MEUR) to depreciation and amortization of property, plant, and equipment.
In 2020, the Group's goodwill impairment amounted to 4.7 MEUR (2019: 29.1 MEUR), and the impairment charges for intangible and tangible assets were 20.9 MEUR (2019: 19.4 MEUR). The goodwill impairment relates to the Metals business area, where the business did not develop as expected. Impairment of intangible and tangible assets mainly relates to technologies, customer relationship, and plant.
The financial result increased significantly to -34.1 MEUR (2019: -57.0 MEUR). This is mainly due to a decrease in interest expenses in connection with the repayment of financial liabilities and to an increase in other financial result (i.a. valuation of intercompany loans and bank balances in foreign currencies (FX) on the balance sheet date).
The tax rate decreased due to consequent management of tax groups and the associated recognition of loss carryforwards to 27.5% (2019: 32.1%); see also notes to the consolidated financial statements, chapter C) 16. Income taxes.
The net income (including non-controlling interests) amounted to 203.7 MEUR (+65.9% versus 2019: 122.8 MEUR). Thereof 207.1 MEUR (2019: 127.8 MEUR) are attributable to the shareholders of the parent company and -3.4 MEUR (2019: -5.0 MEUR) to non-controlling interests (see also notes to the consolidated financial statements, chapter F) 32. Equity.
The earnings per share increased significantly to 2.08 EUR (2019: 1.27 EUR). At the Annual General Meeting on March 24, 2021, the Executive Board will propose a dividend of 1.00 EUR per share (2019: 0.50 EUR) for the 2020 business year. This is equal to a payout ratio of around 48.1% (2019: around 39.4%). The payout ratio, which is somewhat lower than in previous years, results from the goal of strengthening the equity ratio and net liquidity of the Group.
Earnings and dividend per share/payout ratio
2.69
2016
2017
2018
2019
2020
Earnings per share (EUR)Dividend per share (EUR)
Payout ratio
Dividend for 2020: Proposal to the Annual General Meeting.
Treasury shares
As of December 31, 2020, the company held 4,744,104 treasury shares, i.e. 4.6% of the share capital, with a market value of 177.8 MEUR - mainly for servicing stock option programs and issuing shares to employees.
More information on treasury shares is available in the notes to the consolidated financial statements, chapter F) 32. Equity.
Net worth position and capital structure
Total assets amounted to 7,056.7 MEUR (December 31, 2019: 7,234.1 MEUR). The equity ratio amounted to 17.8% (December 31, 2019: 16.9%).
Assets
A | B | C |
A Long-term assets: 35%
A
B
C
D
2,497.5 MEUR
2,914.9 MEUR
1,644.3 MEUR
A
Shareholders' equity incl. non-controlling interests: 18%
1,255.7 MEUR
B
Financial liabilities: 22%
1,533.0 MEUR
C
Other long-term liabilities: 11%
780.4 MEUR
D
Other short-term liabilities: 49%
3,487.6 MEUR
Shareholders' equity and liabilities
B Short-term assets: 42%
C Cash and cash equivalents and marketable securities: 23%
On the asset side, property, plant, and equipment (1,170.1 MEUR), goodwill (760.0 MEUR), and intangible assets other than goodwill (223.8 MEUR) were the most important items in non-current assets (2,497.5 MEUR). The most important items in the other current assets, amounting to 2,914.9 MEUR, are trade accounts receivable and contract assets in the amount of 1,613.9 MEUR as well as inventories (761.2 MEUR).
On the liabilities side, the other current liabilities (3,487.6 MEUR) mainly include contract liabilities from sales recognized over time in the amount of 895.7 MEUR, provisions (537.9 MEUR), and trade accounts payable (749.7 MEUR). The most important items in other liabilities (982.5 MEUR) are accruals and outstanding order- related costs (498.4 MEUR), as well as unused vacation and other personnel-related accruals (245.6 MEUR). Non-current liabilities, at 780.4 MEUR, largely contain provisions for employee benefits (453.9 MEUR), other provisions (153.1 MEUR), and deferred tax liabilities (145.0 MEUR).
Further information on provisions is shown in the notes to the consolidated financial statements, chapter D) 23. Provisions.
Development of liquid funds and net liquidity
Liquid funds amounted to 1,719.3 MEUR (December 31, 2019: 1,609.8 MEUR), while net liquidity increased significantly to 420.9 MEUR (December 31, 2019: 244.9 MEUR).
1,772.3
1,719.3
1,609.8
1,507.1
1,279.7
945.3
908.0
2016
2017
2018
2019
2020
Liquid funds (MEUR)Net liquidity (MEUR)
In addition to the high liquid funds, the ANDRITZ GROUP also had the following credit and surety lines for performance of contracts, down payments, guarantees, and so on, at its disposal:
▪ Credit lines: 324 MEUR, thereof 225 MEUR utilized
▪ Surety lines: 5,715 MEUR, thereof 2,692 MEUR utilized
Capital expenditure
Investments in tangible and intangible assets amounted to 131.8 MEUR in 2020 and were thus significantly below the previous year's level (2019: 157.1 MEUR). Investments breakdown by business area as follows:
INVESTITION
Capital expenditure by business area 2020 (2019) in %
EN SBA
Capital expenditure by category 2020 (2019) in %
A Pulp & Paper
49 (40)
A Manufacturing
50 (50)
B Metals
19 (20)
B IT
9 (14)
C Hydro
23 (33)
C Research and Development
4 (2)
D Separation
9 (7)
D Others
37 (34)
As in previous years, investments mainly focused on workshop modernizations and selected extension projects.
Cash flow
The cash flow from operating activities, at 461.5 MEUR, was significantly below the very high reference figure of the previous year (2019: 821.6 MEUR). The change is mainly due to project related changes in net working capital (-79,0 MEUR in 2020 versus 330.7 MEUR in 2019). Net working capital decreased due to processing of large- scale projects, whereas advance and progress payments have been received in 2019.
The cash flow from investing activities amounted to -236.1 MEUR (2019: -107.9 MEUR). The change compared to the previous year is mainly due to different amounts for payments received and payments made for financial assets.
The cash flow from financing activities amounted to -187.0 MEUR (2019: -365.5 MEUR). The change mainly resulted from lower paid dividends (-49.9 MEUR in 2020 versus -157.1 MEUR in 2019).
In addition, payments were made due to the acquisition of non-controlling interests and payments to former shareholders in the amount of 20.4 MEUR, mainly due to the acquisition of shares in Schuler AG (see paragraph regarding squeeze-out below). In 2019, 79.8 MEUR of payments were made, mainly for contingent consideration paid for the Chinese press and machine tool manufacturer Yangzhou Metal Forming Machine Tool Co., Ltd. (Yadon). In 2020, own shares of 18.1 MEUR were bought back (2019: 39.8 MEUR).
Further important key figures at a glance
Unit | 2020 | 2019 | 2018 | 2017 | 2016 | |
Return on sales | % | 4.7 | 3.6 | 5.3 | 6.8 | 6.4 |
EBITDA | MEUR | 571.1 | 537.6 | 498.0 | 541.7 | 542.4 |
Earnings Before Interest and Taxes (EBIT) | MEUR | 315.0 | 237.9 | 321.6 | 399.3 | 385.8 |
Earnings Before Taxes (EBT) | MEUR | 280.9 | 180.9 | 304.2 | 400.6 | 398.4 |
Net income (including non-controlling interests) | MEUR | 203.7 | 122.8 | 219.7 | 265.6 | 274.8 |
Free cash flow | MEUR | 329.7 | 664.5 | -129.2 | 129.7 | 263.7 |
Free cash flow per share | EUR | 3.3 | 6.4 | -1.2 | 1.2 | 2.5 |
Return on equity | % | 22.4 | 14.8 | 22.9 | 30.2 | 29.6 |
Return on investment | % | 4.5 | 3.3 | 4.6 | 6.4 | 6.2 |
Net debt | MEUR | 35.1 | 205.7 | 568.1 | -530.6 | -550.2 |
Net working capital | MEUR | -48.8 | -134.0 | 160.5 | -121.0 | -215.8 |
Capital employed | MEUR | 1,345.1 | 1,470.4 | 1,665.6 | 801.9 | 772.2 |
Gearing | % | 2.8 | 16.9 | 42.7 | -40.0 | -40.9 |
Squeeze-out/Acquisitions |
ANDRITZ Beteiligungsgesellschaft IV GmbH, a wholly-owned subsidiary of ANDRITZ AG and the main shareholder of Schuler AG, took over the shares of the minority shareholders of Schuler AG in November 2020 in a squeeze-out according to the German Stock Corporation Act against cash compensation of 18.32 EUR (18.30 EUR per no-par value share plus interest of 0.02 EUR per no-par value share - total cash compensation: 18.32 EUR per no-par value share) for each no-par value share of Schuler AG issued to a bearer. The transfer resolution was entered in the Commercial Register at the District Court of Ulm on November 18, 2020. Upon entry of the transfer resolution in the Commercial Register, all shares belonging to minority shareholders of Schuler AG legally became the property of ANDRITZ Beteiligungsgesellschaft IV GmbH.
In December 2020, ANDRITZ signed an agreement with Laroche, France, to acquire LM Industries - consisting of Laroche SA and Miltec SA, France. Laroche is a leading supplier of fiber processing technologies such as opening, blending and dosing, airlay web forming, textile waste recycling and decortication of bast fibers. The acquisition complements the existing product portfolio of ANDRITZ Nonwoven in the Pulp & Paper business area.
The closing of the transaction is expected in the first half of 2021.
Further information on acquisitions is provided in the notes to the consolidated financial statements, chapter B) 5. Acquisitions.
RISK MANAGEMENT
The ANDRITZ GROUP is a globally operating company serving a large variety of industrial markets and customers. As such, the Group is subject to a series of risks. The main, higher-level risks pursuant to Section 243 (1) of the Austrian Commercial Code (Unternehmensgesetzbuch UGB) include:
▪ Risks relating to financial instruments
▪ Strategic risks
▪ Operational risks
The active risk management practiced by the ANDRITZ GROUP for many years now serves both to safeguard the company's existence in the long term as well as to increase its value and is thus an essential success factor for the entire Group. For the purposes of value-oriented company management, risk management is an integral part of the business processes and extends over all strategic and operative levels.
The planning and controlling process within the entire ANDRITZ GROUP is an integral part of risk monitoring and control. Continuous controlling and regular reporting are intended to increase the likelihood of identifying major risks at an early stage and to allow countermeasures to be implemented if necessary. Nevertheless, there is no guarantee that all risks are identified in time by the monitoring and risk control systems currently in use.
The Covid-19 crisis and its effects on the global economy as well as on the markets served by ANDRITZ present considerable and substantial risks for the business development of the ANDRITZ GROUP. Since neither the further development of the pandemic nor its end can be estimated from today's perspective, it cannot be ruled out that global economic weakness will continue in 2021 and beyond or perhaps even worsen. This could result in further negative effects on the development of order intake, revenue, and earnings of the ANDRITZ GROUP.
In addition to the Covid-19 crisis, there are other risks that could have a negative impact on economic development if they materialize. These include escalating trade disputes between economically relevant nations and increasing political instability. The high national debt of many countries also poses a risk in the medium to long term.
Furthermore, the long-term economic impact of the United Kingdom (UK) leaving the European Union also cannot be estimated yet from today's perspective. However, the ANDRITZ GROUP's direct business volume in the UK can be classified as very small.
The ANDRITZ GROUP's risks described below are monitored continuously. ANDRITZ is prepared to react to and to counteract these risks.
Risks relating to financial instruments
The principal financial risks include payment default, liquidity risks, and market risks, such as exchange rate risks, interest rate risks, and raw material price risks.
A detailed description of all financial risks of the ANDRITZ GROUP is provided in section F) 34. Risk management - Risks relating to financial instruments - of the Notes to the Consolidated Financial Statements.
Strategic risks
Political risks
The countries in which the Group is active include some that are classified as politically risky or very risky. Terrorist activities or political changes could result in orders being suspended. Political developments are monitored continuously in all countries and regions in which the Group operates, and substantial political risks are reviewed before entering new countries. Risks related to deliveries to countries with medium to high political risks are typically covered by insurance. However, the prerequisites for full hedging of these risks are not always available. The measures and procedures in this respect are specified in the credit risk policy applying throughout the Group.
Regulatory risks
Regulatory risks include both tax risks and compliance risks.
The ANDRITZ group companies are subject to local tax laws in the respective countries and have to pay income taxes as well as import duties and other taxes. Changes in legislation or other regulations, also including regulations on import duties and so on, and different interpretations of the regulations applying in each case can result in subsequent tax and duty assessments. As a result, the tax rate can be exposed to either positive or negative fluctuations.
The ANDRITZ GROUP is subject to a variety of legal compliance risks, including compliance with anti-trust and anti-bribery laws, or compliance risks in its supply chain in Austria and other countries where the Group conducts business. The Group has established a Compliance Committee to monitor compliance rules and adopted a number of compliance policies, including policies prohibiting insider trading and violation of the applicable anti- trust and anti-bribery laws, for protection of personal data as well as a global Code of Business Conduct & Ethics and a Supplier Code of Conduct. While the Group attempts to make sure that such policies are observed, there can be no assurance that no violations occur. Any such violation could have a lasting, adverse impact on the financial position and reputation of the Group and may also lead to the cancellation of existing orders.
Competitive position
The ANDRITZ GROUP does business in highly competitive markets in which only a few large suppliers bid for only a few large orders. In addition, there are many small companies competing locally that have a comparatively low- cost base. The competitive situation or a possible change in the competition structure can have a negative effect on order intake and on sales margins of the Group. The Group counteracts this risk with continuous research and development work, product innovations and constant cost optimizations. However, there is no guarantee that the Group can also maintain its current market position in the future.
As the Group's competitive position is also based on proprietary technologies, the increase in product piracy, cyber attacks and industrial espionage facilitated by the digital era and the resulting theft of intellectual property can also have an adverse effect on the Group's competitive position. The Group protects its intellectual property wherever possible, but there can be no assurance that these efforts will always be successful.
Customer concentration
In many of the industries served by the ANDRITZ GROUP, there is a trend towards consolidations and mergers. This applies above all to the pulp and paper industry and also to the steel industry. Such consolidations may result in the Group having to negotiate in the future with fewer customers, but which have greater purchasing power. Dependence on individual key customers may increase, and this could also have direct consequences for the Group's business activities.
Volatility of order intake
Some customers and industries served by ANDRITZ are directly dependent on general economic developments and thus subject to frequent fluctuations in the demand for their products. This applies above all to the Pulp & Paper and the Metals business areas, but all business areas may be affected. The prices for equipment and products supplied by ANDRITZ in these segments are, in part, directly dependent on the prevailing relationship between supply and demand for the goods produced by such equipment and products of ANDRITZ. Possible price fluctuations can, therefore, have a direct influence on each customer's capital investment decisions, with subsequent impact on the Group's order intake. This may lead to some volatility in the development of the Group's order intake.
The continuing weakness of the international automotive market could have a further negative impact on business development in Metals Forming (Schuler) because around three-quarters of Schuler's revenue comes from the automotive industry. Although capacitive restructuring measures have already been implemented in recent years and a further capacity adjustment program was agreed in 2020, the need for additional adjustments that will have a negative effect on the ANDRITZ GROUP's earnings development cannot be ruled out if the market for presses for the automotive industry continues to weaken in future.
Among other things, the Group's future performance depends on whether new contracts can be secured to a sufficient extent. It can be difficult to predict when an order for which the ANDRITZ GROUP has provided a quotation will actually be awarded. Contract awards are often affected by events outside the control of the Group, such as prices, demand, general economic conditions, the granting of governmental approvals, and the securing of project financing. This uncertainty can cause difficulties in aligning the Group's fixed costs with the expected order volume.
In addition, natural disasters or pandemics (such as the Covid-19 pandemic) or epidemics can also have a negative effect on development of the order intake, the liquidity, and the financial structure of the Group.
Acquisition and integration of complementary business segments
One of the ANDRITZ GROUP's main strategic goals is to become a full-line supplier in all of its business areas through organic growth and complementary acquisitions. In the course of implementing this strategy, the Group has acquired and integrated a number of companies with worldwide operations since 1990.
However, there is no guarantee that the Group will be successful in identifying and acquiring appropriate acquisition candidates in the future, or that suitable candidates and sufficient funding will be available for acquisitions. In the past, ANDRITZ was largely successful in integrating newly acquired companies. However, there is no guarantee that planned objectives and synergies can be realized for all acquisitions in the future (including the ongoing integration of the most recently acquired companies), or that the Group will not be confronted with new or legacy risks that have not been identified or accurately evaluated.
Procurement and manufacturing
The Procurement department regularly checks important suppliers for the ANDRITZ GROUP in order to identify risk potentials (ability to deliver, quality management, financial situation, etc.) and risks at an early stage. This also applies in particular to purchase orders beyond a defined amount. In addition, the capacity utilization of suppliers is reviewed at regular intervals, and possible alternative supply options are checked.
In manufacturing, ANDRITZ relies on a targeted make-or-buy strategy in order to better balance the fluctuations in capacity utilization that are typical of project-related business and make best possible use of the company's own manufacturing capacities. Process-relevant key components for ANDRITZ plants and products are mainly manufactured and assembled in the Group's own workshops, whereas simple components are largely purchased from qualified suppliers, who are subjected to regular checks on quality, on-time delivery, and compliance.
Essential success factors to ensure short lead times and on-time production in manufacturing are precise planning as well as high commitment and flexibility on the part of employees. Internally, ANDRITZ uses flexitime contracts and, especially in Europe, a flexible contingent of temporary workers to better cope with fluctuations in workload. ANDRITZ tries to balance out fluctuations in capacity utilization as flexibly as possible. However, there is no guarantee that ANDRITZ will always be able to compensate immediately for larger fluctuations in capacity utilization, and failure to do so could in turn have a negative impact on the earnings development of the Group. The Covid-19 crisis and other pandemics or epidemics may impact our suppliers ability to manufacture and deliv- er supplies ordered by ANDRITZ in a timely fashion causing ANDRITZ to fail to meet its obligations to its custom- ers. Such a failure could adversely impact not only the project in question, but ANDRITZ's ability to win new orders in the future.
Human resources
The ANDRITZ GROUP seeks to be an attractive employer for its employees and also tie them to the company in the long-term. High quality standards in the selection process guarantee that the most suitable candidates are recruited for the positions becoming vacant. However, there is no guarantee that employees will not leave the company again after a short time. This could not only result in considerable costs, but also lead to a deterioration in customer and service orientation. ANDRITZ tries to keep fluctuations to a minimum by offering interesting international career opportunities, incentive plans and focused training programs.
Digitalization
Based on extensive and long-term experience as a supplier of technologies and systems for various branches of industry, ANDRITZ offers a broad portfolio of intelligent, digital solutions that provide significant help to customers in achieving their production and corporate goals. These innovative digitization solutions that have been tested worldwide in many reference plants are combined under the technology brand Metris. Metris is based on three strategic pillars: Industrial IIoT with focus on smart sensors, big data and augmented reality, Smart services, and Ventures. Metris technologies are the very latest state of the art, and they are subject to constant further development and can be fully tailored to individual customer requirements. ANDRITZ considers digitalization to be a vital growth sector for the future and hence will continue to focus strongly on development of digital products and solutions, including data security, in the coming years. However, the speed at which digitalization is progressing also presents a risk if ANDRITZ does not succeed in mastering the challenges relating both to development of products and solutions and to implementation of the necessary internal processes and structures with the appropriate speed. In addition, these digitization solutions may expose ANDRITZ to increased risk of cyberattacks.
Capital market risks
Apart from company-related factors, development of the ANDRITZ share price is also dependent on price fluctuations on the international financial markets. Economic and political crises can shake the capital markets and trigger severe price fluctuations and high volatility on the main stock markets, thus having a negative impact directly or indirectly on the ANDRITZ share price.
As a publicly listed company, ANDRITZ is regularly assessed by financial analysts and institutional investors. Analysts' recommendations to buy or sell ANDRITZ shares and subsequent investment decisions by shareholders may cause considerable fluctuations in the share price. ANDRITZ has consistently followed a policy of open and transparent information exchange with shareholders and the financial community to avoid unfounded fluctuations in its share price.
The high level (just under 70%) of public free float of ANDRITZ's total outstanding shares and its intensive investor relations activities have led to active trading in ANDRITZ shares on the Vienna Stock Exchange. There is no assurance, however, that active trading will be maintained in the future.
If active trading was not maintained, the liquidity and market price of ANDRITZ shares would suffer adverse effects, and investors may not be able to sell their shares at what they perceive to be an acceptable price. In the absence of active trading or in the event of a major change in market capitalization, the ANDRITZ share could be removed from various international industrial and stock exchange indices, for example the ATX, the leading index of the Vienna Stock Exchange, or other indices. This could result in major changes in the price of the ANDRITZ share.
Operational risks
Project risks
In conjunction with the delivery of equipment and services, the ANDRITZ GROUP is under contractual obligation in many cases to provide performance guarantees and to meet certain deadlines. If the performance data stated are not achieved or if deadlines are not met, the Group may have to pay damages or perform remedial work at its own expense. If a guaranteed performance level is missed by a wide margin, deadlines are significantly exceeded, or the customer does not accept the plant for other reasons, the customer may have the right to terminate the agreement and return the subject of the contract to ANDRITZ for a full refund and recover damages. Such action could have a negative effect on the Group's financial development. The continuation of the Covid-19 pandemic may impact the Group's ability to meet its contractual deadlines.
Many of ANDRITZ's projects are based on long-term, fixed price contracts. The sales and operating margins realized in a fixed price contract may vary from original estimates as a result of changes in costs (especially fluctuating material costs), particularly on projects that include engineering and/or construction of complete plants, and where labor services have to be bought from third parties.
As certain parts of its supplies are outsourced, the Group may be forced to quote at a fixed price to customers without knowing the exact cost of the parts purchased. While ANDRITZ makes estimates using empirical data and quotes from potential suppliers, these estimates may not always be completely accurate. As a result, the Group has experienced considerable losses on some projects in the past. Problems and losses of this kind may also occur in future and adversely affect the Group's financial development.
In individual projects, ANDRITZ also has responsibility for plant-wide engineering and/or installation and construction in addition to the supply of ANDRITZ equipment and systems. These contracts bear the risks discussed above, but also entail certain risks relating to greater on-site responsibilities, including environmental matters, local labor conditions as well as risks relating to geology, construction, and installation. Additionally, the Group is exposed to the risks inherent in managing the third parties providing construction, installation, and engineering services on these projects (such as strikes and other labor disruptions, which can lead to delays in start-up or failure to meet deadlines). The Group has put risk management procedures in place, including insurance programs, contract policies, and project management discipline, to reduce these EPC-related risks (EPC: Engineering, Procurement, Construction) as far as contracts allow. Nevertheless, there is no guarantee that these procedures are sufficient to prevent negative financial consequences. The Group has experienced significant losses on certain past projects in this regard, and similar difficulties and losses may occur in the future in a way that would adversely affect the Group's financial condition.
In many EPC and other projects, the ANDRITZ GROUP participates a number of risks together with third parties. While the Group attempts to make sure that risks in such projects are properly allocated, there can be no assurance that this will always be successful. Moreover, the inability of one of the Group's consortium partners to fulfill its obligations on the project, including indemnity obligations to the Group, may have an adverse material impact on the financial results and the liquidity of the Group.
Limitations of liability
Liabilities arising out of the Group's contracts may include liabilities for customers' loss of profits and other liabilities that can vastly exceed the value of the contract in question. While the ANDRITZ GROUP endeavors to include appropriate limitations of liability in its contracts, there can be no assurance that sufficient limitations will in fact be in place in all contracts or that such limitations will be enforceable under the applicable law.
Government contracts
A certain amount of the orders are placed by government entities. These projects can involve the performance, liability, and EPC/turnkey contract risks described above. Due to public bid requirements and local laws, it may not always be possible for the Group to obtain its desired contractual safeguards, and thus it may remain more exposed to such risks in connection with these projects.
Legal proceedings
In the course of its business, the ANDRITZ GROUP is party to numerous legal proceedings before both administrative and judicial courts and bodies as well as before arbitration tribunals. The substantial majority of such proceedings (such as contract and project disputes, product liability claims, and intellectual property litigation) can be considered typical of the Group's business. Where appropriate, provisions are made to cover the expected outcome of proceedings to the extent that negative outcomes are likely and reliable estimates can be made. There is no guarantee, however, that these provisions will be sufficient. Given the amounts at stake in some of these disputes, a negative decision for ANDRITZ in one or several of these legal disputes may have a significant, adverse effect on the earnings and liquidity position of the Group.
In product liability, there are a number of cases alleging injuries and/or death resulting from exposure to asbestos. Details are available in the Notes to the Consolidated Financial Statements, chapter G) 37. Contingent Liabilities.
Currencies
A substantial number of the ANDRITZ GROUP's subsidiaries are located outside the euro zone. Since the parent company ANDRITZ AG reports in euros, the company converts the financial statements of these companies into euros in the consolidated financial statement. In order to address translation-related foreign exchange risks, it is generally assumed for the purposes of risk management that investments in foreign companies are made in the long term and the results are reinvested continuously. The effects of fluctuations in exchange rate when converting net asset items into euros are included in currency translation adjustments in Group equity.
A significant portion of the Group's revenue and costs from orders placed by group companies are not settled in the respective functional currency, but in other currencies, above all in US dollars. The currencies in these countries are subject to fluctuations in exchange rates. Currency risks in connection with orders that are not invoiced in euros are minimized by derivatives, in particular forward contracts and swaps.
Although the Group attempts to hedge the net currency exposure of those orders not invoiced in the respective functional currency of the group company by forward contracts, currency fluctuations can result in the recognition of exchange rate losses in the Group's financial statements. Development of exchange rates may also have translation effects on the Group's revenue and earnings whose values are converted into euros. In addition, shifts in exchange rates may affect ANDRITZ's position relative to its competitors, although many competitors of ANDRITZ are also based in the euro zone. As some of ANDRITZ's major customers are based outside of the euro zone, changes in exchange rates could lead to delays in project decisions by those customers. Also, the shareholders' equity of the ANDRITZ GROUP is not hedged and thus could be affected by changes in the exchange rate.
A change in the exchange rate of the euro against many other currencies could also have both a positive and a negative impact on the shareholders' equity as well as on the revenue and earnings development of the ANDRITZ GROUP (translation effect).
Insurance
While the ANDRITZ GROUP maintains insurance programs to cover typical insurable risks related to its business, there can be no guarantee that this insurance can fully cover potential losses, that the insurers will be liable to pay damages, nor that the amount of the Group's insurance will be adequate. Moreover, the Group is involved in certain industries (for example the space and nuclear industries) for which risks are uninsurable or cannot be insured against in full, or where it is not always possible to comply with all of the conditions required to contract insurance. Any material liability not covered by insurance could thus have a substantial, adverse effect on the Group's financial situation.
Cyber risks, hacker attacks
The increasing digitalization and networking of plants and machinery requires highly effective and efficient solutions to maintain data security. Unauthorized access to or copying of sensitive company data as well as insufficient system availability as a result of hacker attacks are substantial risks to which ANDRITZ is increasingly exposed. This may not only affect ANDRITZ's own systems, but also IIoT solutions installed by ANDRITZ at customers' premises. ANDRITZ counters cyber risks and potential hacker attacks by using the latest IT security technologies (for example firewall systems) and by stricter control of access rights. One focus lies on continuous further development of security measures. Cyber attacks should be detected at an early stage with the aid of an optimized IT infrastructure so that they can be repelled successfully. However, unauthorized access to and loss of sensitive and confidential data both at ANDRITZ and at its customers' premises as a result of cyber attacks cannot be ruled out, nor can any resulting enormous financial losses for which ANDRITZ may suffer or be held responsible.
Internal control and risk management system
ANDRITZ has a group-wide internal control and steering system (ICS) whose main task is to identify nascent risks at an early stage and - if possible - to implement countermeasures promptly. This system is an important element of active corporate management. However, there is no guarantee that these monitoring and control systems are effective enough.
The Executive Board is responsible for implementing and monitoring the ICS for the accounting process and financial reporting. For this purpose, binding group-wide regulations and guidelines/policies have been adopted for the major business risks and also for the financial reporting process.
The accounting department, which includes financial accounting, reports directly to the Executive Board. Various organizational measures have been implemented to ensure that the legal requirements are met. In particular, appropriate regulations ensure that complete, timely, and orderly entries in the books and other records are made. The entire process from procurement to payment is subject to standard group-wide guidelines/policies that are intended to minimize any essential risks these processes may entail. These measures and rules include segregation of functions, signature authorization matrices, and signatory powers for authorizing payments applying on a collective basis only and restricted to a small number of employees (four-eyes principle). Control measures relating to IT security play an important role in this context. For example, segregation of duties is enhanced by the generally restrictive assignment of IT authorization by the financial software used (SAP). The safety standards in this financial software are also guaranteed by automated business process controls installed directly within the system.
Standard group-wide accounting and evaluation principles to record, book and balance business transactions are provided by the ANDRITZ GROUP IFRS Accounting Policy and are binding on all group companies. Automatic controls in the consolidation and reporting system are in use in order to avoid misrepresentation as best as possible, as are numerous manual checks. The control measures range from review and discussion of interim results by the management to specific reconciliation of accounts.
By using a standardized, group-wide financial reporting system, together with ad-hoc reporting on major events, the Group endeavors to ensure that the Executive Board is properly and promptly informed on all relevant issues. The Supervisory Board is informed in Supervisory Board meetings held at least once every quarter on the current business development, including operative planning and the medium-term strategy of the Group. In special cases - for example in the event of acquisitions or restructuring - information is provided directly to the Supervisory Board. In addition, the Chairman and Deputy Chairman of the Supervisory Board receive a monthly report, including the key financial figures with comments. Internal control and risk management are among the topics dealt with during audit committee meetings.
Internal Auditing, set up as an executive department reporting to the Executive Board, audits individual processes or group companies according to an audit schedule defined for each year as well as conducting audits in special cases (ad hoc audits). In addition, Internal Auditing monitors compliance with legal provisions and internal directives. It is active in reporting and assessing the audit results as an independent, internal department that is not bound by instructions from outside bodies. Internal Auditing reports to the Executive Board and Audit Committee at regular intervals on the audits conducted and the results thereof as well as on the current implementation status of report findings.
The auditor of the Group's financial statements assesses risk management functionality in the ANDRITZ GROUP and reports on it to the Supervisory and the Executive Boards. Risk management functionality was checked in 2020 by the auditor of the Group's financial statements.
Consolidated Corporate Governance report
The consolidated Corporate Governance report is available in the section "Consolidated Corporate Governance report" or on the ANDRITZ website andritz.com.
Significant events after the balance sheet date
There were no important or extraordinary events after the balance sheet date.
CONSOLIDATED NON-FINANCIAL STATEMENT
The following section describes the non-financial performance indicators on social, employee, and environmental matters and in respect of human rights. Information on measures to combat bribery and corruption is available in the consolidated Corporate Governance report.
Materiality analysis
The ANDRITZ GROUP publishes information relating to sustainability in accordance with the criteria of the Global Reporting Initiative (GRI Standards, Option: Core). A list of all Key Performance Indicators (KPIs) reported, including comments, is provided in the "GRI Index" chapter after the Notes to the Consolidated Financial Statement.
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Influenceonstakeholderdecisions
2
1
Labor and S | Com & et Corp working conditions upplier relationship / relations with | pliance with legal hical standards / orate Compliance |
Gov eth busine | business partners ernance, ics and ss practices SuDigitalization | stainable production & projects |
& innovation | ||
0
1
2
3
Long-term social impact
0 = not relevant / no impact
1 = rather relevant / low impact
2 = relevant / medium impact
3 = very relevant / high impact
Stakeholder surveys and interviews with relevant stakeholders have already been conducted several times in order to establish the main reporting topics and relevant fields of activity for the ANDRITZ GROUP. The results of the analyses conducted in previous years were evaluated once again and discussed with relevant stakeholders in the autumn of 2020. The review showed that the topics that were considered relevant so far continue to be so and are categorized as still equally important.
Hence, the topics that continue to have the greatest influence on the social impact of ANDRITZ's business activities and the decisions that stakeholders make with respect to their business relations with ANDRITZ are:
▪ Compliance with legal and ethical standards - internal compliance
▪ Fair dealings with suppliers and business partners
▪ Sustainable production and projects as well as product safety
▪ Responsible working conditions
▪ Occupational health and safety
▪ Digitalization and innovation
The different weighting of the topics is illustrated in the graphic above. These topics are also dealt with in the following non-financial statement.
Sustainability strategy
In the past year, a comprehensive, group-wide sustainability strategy was developed, including specific goals derived from this strategy that were approved by the Executive Board and Supervisory Board. ANDRITZ takes a multi-dimensional, comprehensive and practically oriented approach towards sustainability.
The strategy is divided into important basic and focus topics in the areas "Environment", "Social", and "Governance". The focus topics are selected on the basis of their relevance for ANDRITZ and its stakeholders. In this process, climate protection, sustainable solutions in the product sector, ANDRITZ as a responsible employer, occupational health and safety, risk management, and compliance, including supplier compliance, among other things, were identified as important sustainability topics. Operative and measurable goals were then derived from these topics.
The ecological goals relate to the reduction of greenhouse gases (Scopes 1 and 2), water consumption and waste volumes at the ANDRITZ locations. In addition, the proportion of "green" products contributing directly or indirectly towards environmental protection and sustainability is to be increased to more than 50%. The social goals focus on preventing accidents at work, reducing workforce turnover and increasing diversity, particularly with a larger proportion of female employees. The governance topic relates particularly to best possible management and minimizing of corporate risks as well as improving compliance within the Group and by suppliers.
Non-financial risks
Risk management is an integral part of all business processes and extends over all strategic and operative levels at ANDRITZ. The non-financial risks described below (pursuant to § 267a (3) line 5 UGB - the Austrian Commercial Code) deal with possible risks relating to environmental, employee and social affairs, the fight against bribery and corruption, and respect for human rights.
Non-financial risks for the company as well as for the company's environment can result from the company's own business activities or from business relationships. The focus on non-financial risks was increased in the past not only as a result of rising demands by all stakeholders, but also increasingly due to statutory regulations. The possible consequences of this type of risk are not only of a financial nature, but above all a qualitative nature, such as risks to reputation or the company being less attractive as an employer.
Human resources
The ANDRITZ GROUP seeks to be an attractive employer for its employees and also tie them to the company in the long-term. Thus, the company considers it important to provide a safe and healthy working environment for employees, applying the principle of equal treatment without any form of discrimination, harassment or retaliation. ANDRITZ respects the values and cultures of other nations and appreciates the differences in their way of thinking and backgrounds. However, it is impossible to exclude the possibility of some employees feeling that they have not been treated equally or have been treated unfairly. There are different means of lodging a complaint in such cases, for example to the respective local HR organization, the Works Council, or using the online group -wide whistleblower system.
Working conditions that are perceived to be unsatisfactory can lower the motivation and enthusiasm of employees and subsequently have a negative impact on productivity. Increasing sick leave or workforce turnover rates caused by this can result in additional costs for ANDRITZ. Hence, professional promotion and qualification of employees are an important concern at ANDRITZ but can only be achieved when the employees are willing to take on these challenges personally. A lack of willingness to undertake further training can result in employees not being adequately qualified.
ANDRITZ could become less attractive as an employer if there are insufficient opportunities for further professional and personal training for employees, and this may deter potential young employees from applying. As a result, the company has increasingly addressed the topic of changes in the professional world and the new demands by employees for some time now. This also includes more flexible working hours.
Supply chain management
Adherence to internationally applicable environmental and social standards is very important to ANDRITZ, especially when working with suppliers from emerging economies. Possible breaches (e.g. child labor, disregarding safety regulations, underpayment, disposal of hazardous substances, etc.) not only harm ANDRITZ's own image, but also jeopardize its existing or future business relationships with customers. Payment of fines or penalties may be a possible consequence of such breach.
This could have a negative effect on order intake and/or on the Group's order backlog. Thus, ANDRITZ endeavors to forge ahead with the implementation of internationally recognized environmental and social standards at suppliers' premises and also to check whether these standards are obeyed. An important step was taken in developing a specific policy for suppliers on the basis of the general code of conduct. In China and India, two auditors monitor local suppliers' adherence to these standards and arrange corrective measures in the event of any deviations. Serious infringements can lead ultimately to termination of the business relationship with a supplier.
Environmental protection inside and outside the company
The systems and plants supplied by ANDRITZ comply with the highest environmental and safety standards and fulfill the respective legal requirements of the countries in which they are installed. Nevertheless, maintenance errors or other unforeseen and uncontrollable occurrences could lead to serious injury or death - also involving a larger number of people - or to significant property damage if plants are not operated correctly, and ANDRITZ may ultimately be held liable for this.
The ANDRITZ GROUP uses or generates hazardous substances at its manufacturing facilities in some cases. Many manufacturing facilities have waste management plans that have been drawn up and are controlled by professionally qualified waste managers. They are also responsible for fulfillment of the general obligations relating to collection, transport, storage and treatment of waste. The hazardous waste generated during operations is stored in lockable rooms until it is collected by the disposal company. Appropriate records are kept on quantities of hazardous and non-hazardous waste as well as waste oil. Nevertheless, there can be no guarantee that hazardous waste is disposed of according to the regulations and that environmental remediation is possible as a result. Sometimes hazardous chemicals and materials are also used during installation and other work on job sites. In the event of an accident, for example spillage of hazardous materials, a fire, or an explosion, the Group could be held liable for property damage, personal or fatal injury, and environmental remediation.
Risks due to climate change
Natural physical impacts of climate change relate to the growing frequency and intensity of extreme weather phenomena, such as heat, storms, flooding or forest fires. These phenomena can have a negative impact on company locations or job sites as well as on suppliers' infrastructure, causing a shortfall in manufacturing capacities and possibly also leading to other consequential damages. Extreme weather phenomena could also result in damage to the transport infrastructure and thus have a severe impact on the logistics sector, which is handled by external service providers for ANDRITZ. Delays and shortfalls in freight transport could have a substantial negative effect on the production process and on progress of projects. As a result, the freight transport process must be adapted if necessary to the new general conditions caused by climate change.
Furthermore, we expect that certain measures to adjust to changing climatic conditions will be necessary in the medium term.
The climate changes in evidence worldwide in the past few years have resulted in significant price increases or extreme price volatility for individual raw materials in some cases. Other changes in climate could lead to rising input prices for production, energy, transport and insurance. Efforts are also underway at individual ANDRITZ locations to enhance energy efficiency and increase the proportion of renewable energy sources. The environmental goals adopted as part of the sustainability strategy are also focused on these efforts. The proportion of energy costs in the overall amount is relatively small. However, climate change could increase energy consumption by the ANDRITZ GROUP in the longer term due to a need for more heating or air conditioning.
Higher taxation on fossil fuels or CO2 emissions could also result in additional costs. Hence, several ANDRITZ locations have introduced an environmental management system or already have ISO 14001 certification. As a result of the measures that were implemented last year to increase energy efficiency in manufacturing, cost savings were achieved.
On the product side, climate change causes a risk of certain products possibly no longer being sold successfully or even becoming unsaleable. ANDRITZ addresses these risks with a broad product portfolio in the "green technologies" sector.
Today, the company generates around 45% of its total revenue from plants, technologies, and processes with which energy is generated from renewable resources and which contribute towards protecting the environment and conserving resources. This percentage is to be increased in the future.
The regulatory risk relates to government measures implemented due to climate change. This can take many forms. It is often difficult for companies to take long-term investment and operational decisions because climate policy at national, EU, and international level changes frequently.
Work and travel safety
The safety of ANDRITZ employees has highest priority at all times, particularly as work in manufacturing shops and on job sites involves a number of safety risks. Under certain circumstances, the Group can also be held liable in the event of industrial accidents suffered by ANDRITZ employees or persons working on behalf of ANDRITZ or if third parties are hurt in accidents. Even if there are strict regulations in the internal rules and standards, it is impossible to prevent all accidents. That is why accident prevention has top priority. A lack of planning and coordination of safety measures, no clearly defined responsibilities, non-compliance with site regulations, inadequate identification and analysis of risks, missing work permits and a lack of preparatory meetings are among the most frequent causes of accidents. It is the managers' task to instruct their staff properly, while the employees for their part must apply the mandatory measures in their everyday work. They must report risks in the workplace, note safety-critical incidents and attend regular training.
The cause of accidents is often a combination of different factors and human influences. Incidents that could easily have led to an accident - so-called safety-critical incidents - should be taken as a warning sign, and it is important to determine and eliminate the causes quickly. Risk analyses are compiled for all work areas. Here, not only static processes must be considered, but also dynamic ones (manipulation and moving of parts, e.g. on job sites).
A global Travel Risk Management Policy defines the key points of the travel safety program. In order to make foreign assignments by ANDRITZ employees as safe as possible, the Corporate Security group function continuously monitors the situation in risk countries to which employees are deployed and provides information on current developments to travelers and project managers. A country portal that can also be accessed via a smartphone app offers country-specific information, risk analyses, and practical tips on the topics of travel health care and safety as well as updates and analyses on current developments in a specific country. These include political unrest or crises, for example, but also pandemics like Covid-19. Travelers are also informed at short notice of any sudden or imminent events (demonstrations, strikes, difficult weather conditions, airport closures, outbreaks of disease, etc.) that may have an impact on smooth travel conditions.
In addition, a separate, multi-lingual Covid-19 pandemic web site was provided in the group-wide intranet last year. This web site can be used to find the latest information on the spread of the virus, preventive measures, travel restrictions, tests, development of vaccines, and so on. Project managers, site staff and business travelers should be able to prepare their trips as best possible on the basis of the information provided. This contributes in turn towards smooth project execution and customer satisfaction.
The ANDRITZ Medical Helpline and Security Travel Helpline are available to employees around the clock for briefings before departure. In addition, travel medicine specialists, safety experts and situation analysts can answer general queries on the topic of safety when traveling as well as specific questions relating to the destination. In 2020, there were four times as many briefings than in the previous year. The majority dealt with questions relating to Covid-19. The helplines also liaise with medical and local service providers at the traveler's destination or organize classic emergency support and even evacuation in extreme cases. The primary objective is to offer employees comprehensive support to guarantee their safe return home.
Compliance
Premeditated or negligent breach of laws and internal rules and regulations by members of staff or managers bears substantial risks for ANDRITZ. That is why a comprehensive, group-wide compliance management system was implemented many years ago and is certified according to ISO 19600 (Compliance Management System). A second certification (ISO 37001) concerns the Group's anti-corruption management.
An important basis of the compliance management system is systematic detection of compliance risks. In the past few years, ANDRITZ has conducted a comprehensive risk analysis in order to implement measures to minimize risks in the future. In addition, regular training is conducted on the basis of the Code of Business Conduct and Ethics that applies throughout the Group and on the basis of other policies.
Compliance violations can result in fines, loss of profit, and loss of revenue that is secured by unfair means or dubious business partners, also in claims for damages from contract partners or third parties, additional tax payments, exclusion from public tenders, loss of image, fewer business opportunities, government sanctions, and jeopardizing of company assets. The consequences for employees may be disciplinary measures or even dismissal and possibly also criminal prosecution. Detailed information on all measures and activities in the compliance sector are available in the consolidated Corporate Governance Report.
Innovation
The business success of ANDRITZ depends to a large extent on the company's technical know-how and the resulting development of new products and technologies. ANDRITZ has launched a global innovation management scheme (ANDRITZ Innovation Management - AIM) that enables employees to contribute innovative ideas for new products. In addition, there are internal start-up contests from which several projects have already reached the implementation stage. The large number of ideas and projects submitted reflects the wealth of know- how, innovative power and commitment of our employees. However, innovation projects are often time-consuming and cost intensive. Some projects fail to establish themselves on the market and have to be discontinued even though a substantial amount of financial and human resources has been invested in their development. The competitive pressure to produce new products and technologies all the time also bears the risk of quality deficiencies or of products being developed that do not succeed on the market.
Data protection
ANDRITZ endeavors to protect its intellectual property and technical knowledge as best possible, for example by means of patents. However, a large part of the company's knowledge and know-how cannot be safeguarded at all by means of intellectual property rights. In this case, there is a risk of third parties exploiting this situation and copying ANDRITZ products or technologies, thus jeopardizing ANDRITZ's ability to compete.
On the other hand, data protection also involves protecting the data of third parties. Appropriate protection of the personal data of customers, suppliers, employees, and other ANDRITZ stakeholders keeps the risk of data protection breaches, which not only damage the company's reputation but could also result in expensive penalties, to a minimum. In order to comply with the statutory requirements and also define specific instructions and precise internal regulations, a group-wide guideline on the subject of data protection was published in December 2020 dealing in particular with the collection, processing, storage, and maintenance of personal data. Data protection officers were nominated and trained group-wide. In addition, a data base was set up to document and handle the processes containing personal data. Nevertheless, the risk of infringing this law cannot be excluded. Penalties can be up to four percent of the Group's turnover, which again creates a substantial risk for ANDRITZ.
As a result of the increasing number of incidents in the business world, ANDRITZ is addressing the matter of attacks on computer systems too. System users are manipulated by criminals using tricks like phishing mails in order to access internal and sensitive data and information or trigger unwarranted payments. In this context, a group-wide safe payments policy has been implemented. Furthermore, the instructions for secure payment transactions have been tightened and employees are constantly alerted to this topic by means of reminders and more information being provided in the intranet and employee magazine.
Responsible human resources management
The Human Resources Management (HR) group function is responsible for developing and implementing the global human resources strategy. The aim is to provide the best possible support on human resources issues to all areas of the ANDRITZ GROUP and hence contribute towards achieving the primary corporate goals. The tasks involved focus on change management, human resources marketing, succession planning and talent management, organizational and performance management, education and vocational training, global mobility, remuneration strategy, and digitalization.
The global HR team is composed of employees from very different cultures, with diverse work experience and perspectives, thus utilizing all the benefits of ANDRITZ's international orientation. The core team of the group function consists of HR competence centers in Graz, Vienna, Helsinki, and Atlanta. In addition, there are global HR business partners working at different locations worldwide.
The team members at the competence centers develop strategies as well as processes, systems and tools with which to implement them in their respective special fields together with HR specialists. In this way, they can provide services for the entire organization, especially for the local HR organizations.
The global HR business partners advise and provide support to the respective business areas in strategic and tactical HR matters. Their job is to manage relevant HR activities in the respective business area, to communicate important information relating to human resources and to exchange relevant information with the local HR managers.
Human resources management at times of crisis
In the past year, the main focus of the global and local HR departments was directed towards managing the Covid- 19 pandemic, especially towards maintaining operations as best possible while at the same time guaranteeing employees' safety. This extended from intensive involvement in the emergency committees of the ANDRITZ group companies, including actively contributing to and implementing internal guidelines and safety measures and on to ensuring payroll accounting with split teams.
#1ANDRITZway - core behavior principles
The #1ANDRITZway initiative is a further development of the identity-building ONE ANDRITZ campaign that has been running within the group for some years. With the participation of around 700 employees from all over the world, #1ANDRITZway defined the basic behavior principles applying to collaboration. It sets behavior standards for all employees, regardless of the department, function or region to which they belong. The behavior principles should ultimately be integrated into all employee processes, such as recruiting, annual appraisals, and so on, and provide an orientation for managers and staff alike.
Other major topics in HR are digitalization of global core processes and creating a master data management system (#APeople) for uniform mapping and documenting of all HR data groupwide. This employee master data is needed in many IT systems and is necessary in various process, also as a basis for management decisions. The data are updated on a daily basis and can be viewed on desktop computers and mobile devices.
In addition to master data management, #APeople contains modules for the main processes in HR management. The modules for recruiting and onboarding as well as performance management, including agreed targets, will be introduced at the beginning of March 2021. Modules for succession management, education and vocational training as well as remuneration and benefits will follow by the end of July 2021.
Recruiting has now been established group-wide as a standardized process that takes account of certain basic principles such as prioritizing internal applications and follows a pre-defined procedure. The HR teams can identify potential internal candidates more easily and also access the ANDRITZ talent pools as needed. The subsequent onboarding process, which has also been standardized, is considered an opportunity to welcome new employees to the company and to convey the company's goals and strategies as well as the ANDRITZ values and core behavior principles.
Diversity
Employees by region as of 31.12.2020 (31.12.2019) in %
E
D
A
A | Europe | 54 | (54) |
B | North America | 13 | (14) |
C | South America | 13 | (12) |
D | China | 12 | (12) |
E | Asia (without China, Australia, Africa) | 8 | (8) |
32 |
At the end of December 2020, the company had employees from more than 33 different countries. At the moment, 23 different languages are spoken at ANDRITZ. The Group uses this diversity and is committed to a multi-cultural work environment with international career perspectives. This creates positive effects because employees of different origins, religions, cultures, and of different ages can exchange information and practical experience.
The proportion of female employees in 2020 was 16.4% (2019: 16.2%). One of the Group's sustainability goals is to increase the proportion of female employees in the long term. Detailed measures to achieve this are currently being developed.
Employees by gender
Absolute 2020 Absolute 2019 | Percentage 2020 Percentage 2019 | |
Men | 22,755 24,733 | 83.6% 83.8% |
Women | 4,477 4,780 | 16.4% 16.2% |
TOTAL | 27,232 29,513 | 100.0% 100.0% |
Percentage 2019 83.8% 16.2% 100.0%
Education and vocational training
The success of the company is linked directly to the ANDRITZ employees, who are offered a sound education and vocational training as well as international career opportunities. The development programs are intended to encourage all employees to acquire new or extend existing skills, knowledge and perspectives, and they offer training and learning opportunities for different target groups.
The most important tool to enhance personal development and good collaboration at the company locations is the performance review that is usually conducted once a year. This meeting is used to discuss work content and goals, and future development is one of the central themes. Employees receive feedback on their current status in their job and also perspectives for the future. At the same time, they have the opportunity to ask questions or make requests. In 2020, annual appraisals to review performance were conducted with 73.7% of the employees (2019: 72.0%).
Talent management and succession planning also plays an important role at ANDRITZ in this context. Talent management is a continuous process that enables managers to gain a better overview of the potential and skills of internal succession candidates and their willingness to take over responsibility. As a result, the company has used different programs to develop future managers within the company for many years now - for example, the ANDRITZ Global Talent Program or the ANDRITZ Global Leadership Program.
The goal of succession planning is to ensure smooth succession for all key positions and provide sufficient management capacities for new business opportunities. That is why 300 key positions were defined worldwide two years ago and potential successors were named. This process is proceeding on an ongoing basis, and an additional priority to increase the proportion of female successors has been set for 2021.
Training of apprentices and collaboration with universities
Training young, skilled workers within the company itself has a long tradition at ANDRITZ - for example, apprentices have been trained at the Graz location ever since 1922. The young people receive both theoretical and also practical training, and they are also better prepared for their future careers by means of English courses, safety, and quality training as well as team-building training. As of the end of 2020, 739 apprentices were being trained at ANDRITZ locations worldwide (2019: 900 apprentices).
In addition, ANDRITZ has the opportunity to address highly qualified young talents through collaboration with universities and other educational institutions. Efforts are made to attract and secure them for the company in the long term. Students also receive support for their final theses and are employed in various forms during their courses of study.
Employer branding - ANDRITZ as an attractive employer
The goals of employer branding activities are convincing communication of the added value of ANDRITZ as an employer, building up an appealing employer brand, and thus making the company as attractive as possible in the recruiting market.
These activities center around ANDRITZ employer value positioning ("ANDRITZ - where passion meets career"), which replies to the question of what the company stands for as an employer and what the central claim is towards potential and existing employees. It sets the agenda for all employer branding measures. These are various internal and external measures (including the careers page on the company web site and LinkedIn).
There is a strong focus on incorporating employees into the company in the so-called onboarding process. Shortly after starting work for the company, new employees are asked via the internal net promoter score whether they would recommend ANDRITZ to others as an employer. This score has risen constantly in the past three years due to a large number of measures implemented.
In 2020, 3,026 new employees were recruited, 12% of which were over 50, 61% between 30 and 50, and 27% under 30 years old. Age distribution in the company has been very well balanced for many years. More than half of the employees (58%) are between 30 and 50 years old (2019: 57%), while the proportion of under -thirties is 12% (2019: 14%). 30% of the employees are over 50 years of age (2019: 29%).
ANDRITZ believes it is important to tie its employees to the company in the long term. This is also reflected in the figures: Within the Group, employees stay with the company for an average of 11.6 years. The labor turnover rate amounted to 15.8% or 4,306 employees in 2020 (2019: 11.7% or 3,444 employees). The increase compared to the previous year is primarily due to restructuring and cost-reduction measures that became necessary as a result of the Covid-19 pandemic.
Fluctuation by gender and age group
Contracts terminated 2020 Contracts terminated 2019 | Fluctuation rate 2020 Fluctuation rate 2019* | |
Men | 3,678 2,920 | 16.0% 11.8% |
Women | 628 524 | 14.0% 11.0% |
< 30 years old | 769 752 | 23.0% 18.2% |
30-50 years | 2,184 1,816 | 14.0% 10.9% |
> 50 years old | 1,353 876 | 17.0% 10.2% |
TOTAL | 4,306 3,444 | 15.8% 11.7% |
Fluctuation rate
2019*
11.8% 11.0%
18.2% 10.9% 10.2% 11.7%
* Calculation of fluctuation rate: contracts terminated in relation to the average number of employees. Contracts terminated include dismissals by the employer and resignation of employees.
Equal treatment and fairness towards all employees
ANDRITZ's goal is to provide its workforce with a working environment offering equal opportunities, attractive means of further personal development, and fair pay for all, regardless of the location worldwide. These basic rights apply to all employees throughout the Group.
They include the legal right of employees to co-determination and compliance with the principles and standards of the International Labour Organization (ILO) concerning the freedom of association, abolition of forced labor, child labor, and discrimination, as well as fair and performance-based pay.
Regular and also event-driven meetings are held by the ANDRITZ AG Executive Board and the members of the Works Council to ensure and support an open and transparent exchange of information between both bodies. The company supports the formation of internal committees representing employees' interests. Freedom of assembly applies at all locations in accordance with the respective local legislation.
ANDRITZ does not condone or tolerate any form of employee harassment or discrimination by other employees due to gender, age, origin, religion, nationality, and so on. The working environment should be free of intimidating and offensive behavior for every employee. This is clearly documented in the group-wide Code of Business Conduct and Ethics and in the HR policy applying throughout the Group. Possible ways of lodging a complaint have also been defined. The notification periods for communication of significant changes in operations (closure of company locations, layoffs, etc.) are defined in a policy applying group-wide.
HR expenses and social benefits
Human resources expenses amounted to 1,790.3 MEUR in the past year (2019: 2,015.2 MEUR). ANDRITZ remunerates its employees fairly and in line with the respective collective agreement regulations applying. In countries where there are no collective agreements, remuneration is oriented towards the respective national salary average.
Salaries for women averaged approximately 87% of salaries for men during the reporting period. ANDRITZ also provides child-care support to employees, for example by entering into part-time employment contracts. Several locations have company-run kindergarten facilities, some of which also focus on technical skills. The company is also not averse to providing part-time contracts for fathers or other forms of support with child care.
In countries where the social welfare system is less well-developed than in Europe, employees receive voluntary social benefits ranging from accident insurance to contributions to pension funds as well as life insurance policies and support for dependents.
Respecting human rights in the execution of projects
ANDRITZ respects and supports internationally recognized human rights and maintains the principle of equal opportunities regardless of gender, religion, origin, nationality, age, sexual orientation, or disability.
ANDRITZ considers it a duty to use every opportunity to promote compliance with human rights - both inside and outside the company.
The ANDRITZ business activities contribute towards economic, ecological and social progress. But sometimes these activities also have a negative effect on individuals. The company endeavors in collaboration with the respective customers to draw up and implement compensatory measures or to help the customer implement them.
Before participating in large-scale projects, due diligence audits are conducted in order to determine their potential effects on man and his environment. The resulting data and findings are evaluated and analyzed. Participation in projects is then decided on this basis. Furthermore, ANDRITZ is a sustainability partner of the IHA (International Hydropower Association) and supports global acknowledgment of the Hydropower Sustainability Assessment Protocol.
Group supply chain management
The Supply Chain Management group function (GSC) defines the strategy and general conditions for collaboration with around 35,000 suppliers worldwide. Approximately 3,000 of these suppliers cover almost 80% of the external purchasing volume. GSC - together with all relevant stakeholders - supports the entire purchasing and distribution process. The goal is to be incorporated into the business areas' sales and order execution processes at an early stage in order to provide them with the best possible support. In future, GSC will concentrate more on project supply chain management and supplier management in collaboration with team members from the business areas. Global Key Account Management for suppliers simplifies bundling activities, for example. In addition, one of the focuses will lie on drawing up a purchasing strategy for selected projects and suppliers.
In addition to strategic alignment, the department is also responsible for group-wide training and supplier compliance and sustainability. Other tasks are promoting digitalization, innovation and process development, management of materials not required directly in manufacturing operations, and logistics.
The newly introduced Supply Chain Executive Team, made up of the respective purchasing and supply chain managers from the business areas and regions, acts as a decision and implementation committee for the business areas and regions. The committee not only determines the basic processes and minimum standards in the procurement process, but also the consequences and actions to be taken if a supplier departs from the minimum standards agreed.
Project and supplier management
ANDRITZ relies on long-term partnerships and remains in close contact with suppliers at all times, also during the entire execution of a project. In the event of critical components or new suppliers, ANDRITZ also monitors the production process on site in many cases.
In order to collaborate with ANDRITZ as a supplier, it is necessary to comply with strict criteria in terms of quality, costs and on-time performance as well as having an appropriate stance towards occupational health and safety, compliance and sustainability. Strict adherence to the ANDRITZ Supplier Code of Conduct and Ethics is also a basic criterion.
In 2020, the total procurement volume amounted to 4,271.0 MEUR (2019: 4,586.9 MEUR). In execution of its orders, ANDRITZ tries to source its materials near the manufacturing facilities wherever possible.
The proportion of services sourced locally and products procured externally in 2020 was 72.6% / 2,170.1 MEUR (2019: 69.3% / 2,266.1 MEUR). 62.4% of the external purchasing volume was generated in Europe, 14.0% in China, and 10.4% in North America.
Purchasing volume by region as of 31.12.2020 (31.12.2019) in %Manufacturing capacity by region as of 31.12.2020 (31.12.2019) in %
F
F
A Europe
63 (63)
A Europe
51 (53)
B China
14 (14)
B China
20 (18)
C North America
10 (10)
C North America
14 (14)
D South America
8 (7)
D South America
7 (6)
E Asia (without China)
5 (5)
E Asia (without China)
7 (8)
F Rest of the world
0 (1)
F Rest of the world
1 (1)
Consumption of materials
The largest share of material costs is spent on manufacturing materials such as sheet metal, screens, rods, profiles, or cast and forged parts (40.5%). 38.5% relates to project material and services. This includes mechanical parts, electrical components, structural steel and conveying technology, mechanical structures, installation work, and start-up/commissioning. 21.0% relates to overheads for material, services, and investments.
Logistics
The Logistics team - as a part of Global Procurement - assists the business areas with the logistical implementation of customer projects. Other important tasks in the logistics department are definition of transport standards and guidelines, calling for tenders, negotiating framework agreements with logistics service providers, and conducting internal training courses. As ANDRITZ does not have its own vehicle fleet, transport services are purchased from third parties on a project-specific basis. As a result, CO2 emissions are generated externally so these figures cannot be reported in any detail.
Sustainability in the supply chain
Suppliers who wish to work closely together with ANDRITZ must deal with the topic of compliance and sustainability during the qualifying process. Collaboration with ANDRITZ is only possible after the supplier has agreed to the content of the ANDRITZ Supplier Code of Conduct, which was compiled in 2015 on the basis of the general Code of Business Conduct and Ethics. As of the end of 2020, such agreement had been provided by existing suppliers covering 63.0 percent of the purchasing volume. The goal is to achieve a further increase by 2025.
Implementation and review of this process is one of the tasks assigned to the Compliance and Sustainability Officer. In addition, the local purchasing organization provides support in terms of supplier compliance and sustainability, monitors the compliance watchlist and blacklisting process, initiates training courses, and coordinates the activities of regional auditors.
Training of suppliers and employees in the ANDRITZ purchasing organization improves their understanding of the content of the Supplier Code of Conduct and the processes in the qualification procedure in supplier relations management (SRM). Webinars and lectures on this topic have also been held regularly for several years.
At the beginning of the year, the process for regional audits was reviewed and then adapted and extended based on the experience gathered during previous years. All audit tools, presentations, and templates were adapted to the Supplier Code of Conduct revised in 2019. On the basis of these revisions, a detailed manual was compiled for performance of the audits.
The past year was also used to develop two eLearning programs. One of these is intended for external business partners. It provides support in preparation of the audits and can be rolled out in the course of so-called "Engagement Meetings", where the suppliers learn more about the audit process and what is expected. The second eLearning program explains the supplier compliance and sustainability audit program to employees or refreshes their knowledge on this topic.
Due to the special circumstances, these audits were only possible to a very limited extent. The auditors in China and India are thus concentrating on improving supplier compliance on the basis of the corrective actions proposed. The goal is to provide support to suppliers to the extent that they are able to build up and implement their own compliance management system and to live compliance and sustainability ("From audit to compliance"). Collaboration within the team and coordination takes place online only due to the current situation.
Since the regional auditors began their work, 103 audits have been conducted in India, including follow-ups with 79 suppliers (start: December 2016) and 97 audits including follow-ups with 81 suppliers have been conducted in China (start: December 2017).
Quality management
Quality management in the ANDRITZ GROUP covers products and applications, business processes, and safety and environmental topics. Harmonized standards worldwide improve the general understanding of processes and functions, encourage collaboration, and assign clear areas of responsibility. The organizational structure aims to make this topic a part of everyday business by means of harmonized quality and safety strategies for all business areas.
The most important instrument in the ANDRITZ quality organization is the business process manual, which defines the structure of the management system for the entire group. It states the processes and responsibilities for process management and provides guidelines for implementation of the individual steps.
All of the measures described in the manual are intended to increase transparency, minimize risks, enable continuous improvement, increase the efficiency of collaboration, assist employees with their everyday work, and, above all, build trust. The quality requirements for everyday work have been structured specifically for the respective business areas and at local level. Employees can access these requirements easily in the company intranet.
Quality management accompanies a project from its award to its completion. There are also guidelines for support tasks such as IT or communications. External verifications confirm consistent and effective implementation of the standards. In the meantime, there are 79 locations that have been certified under OHSAS 18001 (occupational health and safety) and ISO 45001 (safety at work) and 74 locations certified according to ISO 14001 (environmental management systems).
As part of the ESG strategy rollout, which also targeted the reduction of emissions, water consumption and waste volumes, more ANDRITZ locations are to be certified under ISO 14001 in the near future.
Furthermore, all products are certified internally and externally (Machinery Directive, ASME, NR 12, GB 150, ISO, ANSI, EN, and DIN). Hence, they meet the highest standards and are reviewed regularly for possible impacts on health and safety.
In 2020, a new tool was developed for easy and uniform documenting and processing of non-conformities. This tool was developed and tested in the Pulp & Paper business area and will also be available to other business areas as from 2021. The aim of this initiative is to report and analyze erosions of gross margin via the non- conformity reporting process in order to learn lessons for new projects. In addition, a large part of the non- conformities are identified on site, with the result that remedial measures can be implemented immediately.
As in previous years, plants were started up successfully with the aid of Metris Remote Assistance (RAS) and using HoloLenses. All audits that do not require the auditors to be physically present are to be conducted with this technology in future.
Occupational health and safety and preventive health care
Occupational health and safety have top priority at ANDRITZ. The company's goal is to increase employees' awareness of good health and safety practices. ANDRITZ pursues a zero-accidents target and a pro-active safety culture in order to prevent accidents. All employees have the right to refuse to perform or to stop performing work that they consider unsafe without having to fear disciplinary measures.
The Quality and Safety Management group function defines the strategy and measures to be implemented by the health, safety, and environmental officers together with the business areas' safety officers. In addition, the regional safety officers push this topic forward in the regions. The management is responsible for safety at each company and location.
In addition to the legal requirements, the ANDRITZ health and safety guideline is the minimum standard for all ANDRITZ locations. Additional guidelines can be defined at each location in order to improve safety. ANDRITZ also undertakes to obey all conventions of the International Labour Organization (ILO) in connection with occupational health and safety.
Safety in day-to-day work
Safety not only comprises regulations, guidelines, and goals, but should also be lived on a daily basis in the company. This is why managers and executives are personally responsible for safety at their respective locations. Safety begins by building up a local network of experts on safety at work, who define and promote a safety culture. As from a certain location size, it is mandatory to appoint a safety expert. This also applies to larger job sites. The local safety team is responsible for issuing an emergency plan. The central tasks of the local safety team also include the development and implementation of an annual occupational health and safety program. Implementation of the defined goals is intended to lead to continuous improvement in the safety culture. The respective measures and projects are registered and undergo a regular auditing process. Ideally, they lead to a safety management system according to international standards (e.g. ISO 45001). The measures applied and targets achieved are documented as part of a quarterly or annual safety report.
All incidents and accidents are recorded, investigated, and analyzed - irrespective of their severity. Furthermore, injuries that result in absences from work must be documented in a group accident data base, and a "lessons learned" report must be issued and published in the intranet. Lessons learned from actual incidents and near- accidents as well as good/best practices should be collected and used to improve the safety culture.
The accident figures from the past few years are evidence that the initiatives by the ANDRITZ GROUP on the topic of safety are yielding positive results. Accident figures are falling although there is still potential for improvement in individual sectors. There were no fatal accidents in the past year.
Industrial accidents
2020 2019 | |
Accidents at work (with more than three days of absence) | 152 223 |
Accident frequency (accidents with more than three days of absence per 1 million working hours) | 2.8 3.8 |
Accident frequency (accidents causing one or more days absence per 1 million working hours) | 4.8 6.1 |
Fatal accidents at work | 0 0 |
Severity of accidents (absence periods in hours per accident) | 162 166 |
Number of medical treatment injuries at work | 1,189 1,180 |
2019
223
3.8
6.1
0
166
A regular check on the efficacy of the safety programs, accident analyses and appropriate handling of accidents and faults as well as controlled communication thereof at all management levels is obligatory. The exact intervals for audits and inspections are defined in the Group Health and Safety Management Policy. The management must ensure that all employees are aware of the guidelines and safety processes applying at the respective locations.
The safety instructions (regulations), which must be strictly observed, should be handed over personally if possible. A safety inspection should be conducted at least quarterly in order to remind employees how important this topic is. This safety inspection must also be documented.
Regular training is provided in order to meet technical and legal requirements and guarantee that the possible risks and suitable protective measures are well understood. Each location must compile a qualification matrix and an annual safety training schedule.
Subcontractors are also involved in the health and safety measures. They are selected on the basis of certain criteria and assessed to establish whether they can perform the work contracted safely. External companies and third parties who enter ANDRITZ locations must have sufficient information and training on the topic of safety and also be suitably euipped to perform their work safely. Performance by third parties, including their management, is monitored and assessed, feedback is provided, and deficiencies are corrected.
Manufacturing
ANDRITZ produces custom-tailored machines, key components, plants, systems as well as spare and wear parts at around 150 service and manufacturing locations worldwide. Around two-thirds of these locations are in Europe and North America and one third in Asia and South America. Each location manufactures very flexibly for individual projects and orders, usually for one but sometimes also for several business areas. The manufacturing facilities make a substantial contribution towards the success of the Group and concentrate primarily on offering a broad and flexible product portfolio, highly qualified skilled workers, effective capacity management, and deployment of specialists for product design and quality management.
The manufacturing strategy aims to produce critical key components in terms of technology and quality in ANDRITZ's own production shops. Everything else is purchased from qualified suppliers. With this procedure, it is possible to compensate effectively for any fluctuations in workload and thus make optimum use of manufacturing capacities. Precise planning, high commitment, and very flexible employees are essential factors to guarantee short lead times and on-time production.
Investments are concentrated on the one hand on building up and expanding manufacturing capacities in the emerging markets of Asia and South America as well as in Eastern Europe and on modernizing existing locations in Central Europe and North America on the other hand.
Optimization and improvement projects in manufacturing also focus on careful handling of available resources and automation of processes in addition to adapting process management to the exact scheduling. ANDRITZ uses the Manufacturing Execution System (MES) here, which aims to steer, control, and monitor manufacturing in real time. With this system, it is possible to link all important information on planning, lead time, and costs as well as machinery and operating data on one platform, and the system can also be adapted to local requirements if necessary. MES was implemented as a pilot project at the Manufacturing department in Graz and is also to be used at other manufacturing locations in the ANDRITZ GROUP.
The ANDRITZ Production System (APS) plays a key role in continuous improvement of the production processes. It defines the basic principles applying group-wide to manufacturing and provides tools and processes for achieving a lean and effective production process. The overriding goal is to anchor a culture of continuous improvement firmly within the company in order to achieve sustainably excellent results in manufacture of the company's products.
Group Manufacturing Management has provided a comprehensive training program on the topic of APS. Around 270 employees and 50 manufacturing locations have taken part in various APS training courses since 2017 and developed their skills further for the purpose of process improvement. APS lighthouse projects are currently running at a large number of the Group's manufacturing facilities. The locations that implemented such projects achieved very good results, with output increases of 20 to 40% and cost reductions of 10 to 15%. The Celonis data mining software is also used and provides valuable indications of additional improvement potential.
In the past year, there was increased use of the in-house development Metris Remote Assistance (RAS) due to the Covid-19 pandemic and ensuing travel restrictions. RAS offers everything you need for remote communication: audio, video, chat, document sharing, as well as a means of directly posting any files needed, such as drawings, into the field of vision or inserting virtual markings. Furthermore, a Factory Acceptance Test was conducted online for the very first time with RAS. This was for acceptance of a product at the ANDRITZ manufacturing location in Slovakia, for which representatives of customers from Germany and China joined us online. RAS has provided a new opportunity to conduct factory acceptance tests very flexibly if necessary and without making costly travel arrangements.
Environmental management and key energy figures
The environmental data from the largest ANDRITZ manufacturing locations (covering around 94% of the overall annual manufacturing capacity) is collected and checked on a regular basis. Data from the largest office locations have also been collected since 2019. The key consumption figures for 2020 are based on projected, approximate values as the figures for the fourth quarter of 2020 were not all available at the copy deadline. As a result, there may also be some subsequent changes to the figures from the preceding quarters.
Most of the key figures for the reporting year increased significantly compared to the previous year. This is largely due to ANDRITZ Fabrics & Rolls (formerly Xerium) being included for the first time.
49% of all the manufacturing facilities surveyed are located in Europe, 26% in North America, 11% in South America, 6% in China, and 8% in India and Indonesia. Accordingly, the most electricity is consumed at the locations surveyed in Europe, followed by North America, China, India, and South America.
The Group's overall electricity consumption increased compared to the previous year and amounted to 276,300,564 kWh (2019: 211,554,774 kWh). Around 85% of the electricity consumption by the manufacturing locations is attributable to manufacturing operations, mostly for the production processes. The remaining electricity consumption is for lighting, IT equipment, and for electric heating.
All six main groups of manufacturing processes are used at all ANDRITZ locations worldwide: forming and casting mainly uses electrical equipment, particularly induction furnaces. The other processes, such as rolling, pressing, machining, welding, weaving, soldering, and gluing are also performed with the aid of electrically powered machines. Only hardening and annealing processes use gas-powered machinery. As a general principle, the production processes in the ANDRITZ GROUP are not energy-intensive (except for locations in North America and China that have foundries attached).
The sustainability goals recently adopted by the Executive Board and Supervisory Board include a considerable reduction in emissions in the medium term as well as savings in water consumption and waste volumes. Work is currently ongoing to implement a detailed plan of action.
Energy consumption within the organization
The bulk of energy and fuel consumption (heating oil, natural gas, district heating) is used to heat company premises. In addition, a few production processes require oil, for example to heat the presses. Natural gas is needed in production primarily to operate hardening and annealing furnaces. Gasoline and diesel fuel are needed for company vehicles, while liquefied gas is required to operate stacker trucks and, in some countries, also for company vehicles.
Energy consumption within the organization*
Unit | 2020 2019 |
Externally procured heating kWh | 38,249,792 34,235,862 |
District heating kWh | 38,249,792 34,235,862 |
Non-renewable energy carriers for heating MJ | 504,485,712 437,918,825 |
Light fuel oil MJ | 5,347,826 5,110,838 |
Natural gas MJ | 499,137,886 437,918,825 |
Non-renewable energy carriers for process heating MJ | 361,583,010 313,264,271 |
Oil MJ | 0 827,408 |
Gasoline MJ | 2,725,783 2,331,046 |
Diesel MJ | 12,069,935 17,520,565 |
Diesel for emergency generator** MJ | 2,675,958 3,609,452 |
Natural gas MJ | 333,725,834 278,580,346 |
Liquid (petrol) gas MJ | 10,385,500 10,395,454 |
2019
* The key consumption figures are based on projected approximate values to maintain comparability as the complete figures for the 4th quarter of 2020 were not all available before the copy deadline. Due to adjustments made to the consumption figures, the retrospective changes have resulted.
** At two Indian locations for electricity supplys at shortages.
ANDRITZ strives to reduce energy and fuel consumption in the production process. Annual fluctuations in consumption are largely due to the varying workload and make very detailed comparisons with previous years difficult.
The direct emissions (Scope 1, primarily from the manufacturing sector) amounted to 25,698 tons of CO2 equivalents in 2020 (2019: 23,160 tons CO2e), while indirect emissions (Scope 2, from the consumption of purchased electricity, heat or steam) amounted to 108,149 tons of CO2 equivalents (2019: 75,798 tons CO2e).
ANDRITZ focuses great attention on the conservation and re-use of materials and raw materials in the course of its business. The efficient use of materials, keeping rejects and waste to a minimum, and economical energy consumption in material processing play all an important role here.
The largest share of waste comes from steel used in the manufacturing process. Metal waste is separated into different types and then recycled. Other recyclable materials like plastic from packaging, waste from wooden crates, cardboard packaging, and waste paper are collected and recycled. Non-hazardous residual waste and hazardous waste are collected according to the legal provisions and taken away by disposal companies. Special attention is paid to observing all official regulations and record-keeping obligations, particularly when disposing of hazardous substances.
Product development strives to optimize the production and installation processes through the product design. The goal is to make better use of the materials used in production and thus produce less waste.
Water consumption
Total water consumption in the past year was 951,660 m3 (2019: 660,932 m3). The water supply comes primarily from the public water system, but a few locations also recycle service water or take water from their own wells. Water consumption consists of process water for production plants (including cooling water) as well as water for drinking and for hygiene purposes. A small amount is also needed for hydraulic test stands. Some industrial water is used to generate steam or cool annealing furnaces, or it evaporates in air-conditioning systems.
Digitalization
The ANDRITZ Ventures (AV) department assists the business areas with their innovation and digitalization activities. AV reviews and initiates collaborations, strategic partnerships or investments in startups that further strengthen or extend ANDRITZ's technology portfolio.
The focus here lies primarily on technologies in the area of the Industrial Internet of Things (IIoT): From wireless sensors to collection of machine data via artificial intelligence (AI) for data analysis and error detection to communication with the machine/plant operator via chatbot. Thanks to the experience and capacities of the ANDRITZ GROUP, AV is able to offer both solid industry know-how as well as global positioning to support startups and develop market-changing solutions together.
In addition, there are several internal initiatives to promote and support innovations and other undertakings. For example, two ANDRITZ Ventures startup competitions have been held with a total of over 120 entries, and several of the projects are already in the implementation phase. The competition is a structured program inviting all employees to submit innovative suggestions for products, services and business models, to develop them and finally, to launch them on the market. ANDRITZ Ventures also organizes and stages formats like "hackathons", "makerthons", technology talks and innovation workshops in order to facilitate the development of new business models and push forward the exchange of knowledge on high-tech trends.
Research & development
Sustainable ANDRITZ products and technologies help customers to achieve their sustainability goals and to use resources as economically and efficiently as possible.
The ANDRITZ research and development activities concentrate on launching products and technologies on the market that protect the environment and are economical with resources. In the meantime, a significant share of the company's revenue is achieved with technologies and systems to generate energy from renewable resources and waste products, thus making a contribution towards sustainability. Another important focus of research and development work is digitalization.
In the past few years, the environmental impact that some products or plants generate throughout their entire life cycle was calculated in so-called life cycle analyses (LCAs). Life cycle is understood as being the process of converting resources over the entire lifetime of the product, beginning with the procurement of raw materials, through production, all transport processes, and actual use up to the end of the product life cycle. By considering the entire life cycle, it is impossible to move possible negative impacts to other life cycle phases. These analyses are to be extended in the future and also considered in any product development phase. On the other hand, product development can also influence the production and installation processes through design of the products. In addition, better use is to be made of materials during production in order to produce less waste.
The ANDRITZ GROUP spent 101.0 MEUR (2019: 115.0 MEUR) on research and development activities during the reporting period. Research and development expenses, including order-related development work, amounted to around 3% of revenue.
The ANDRITZ GROUP holds approximately 3,300 patent rights. 77% of these patent rights have already been granted, and the remainder is under review. In addition, the Group owns around 2,650 trademarks.
The following selected projects from the business areas represent a part of the diverse research and development spectrum of the past business year:
Pulp & Paper
The operators of pulp mills are confronted with ever stricter environmental regulations, relating primarily to emissions and unused by-products. In order to meet these growing challenges, a development team was formed in the Recovery and Power division with the task of evaluating existing technologies and developing new ones in order to operate pulp mills in an even more sustainable way.
The strategy is to recycle all chemicals and convert all unused by-products into value-adding products so that pulp can be produced entirely without waste and emissions. In this way, it should be possible to operate highly efficient pulp mills in future with zero emissions and zero waste.
In the fiber technologies sector, the first autonomously operated woodyard cranes worldwide were developed and sold to customers. They feature artificial intelligence, thus optimizing log handling, minimizing wood losses and securing environmentally friendly and cost-effective operation compared to traditional log-handling solutions.
In the recycling sector, a test and research center for the recycling industry was opened in St. Michael, Austria. The ANDRITZ Recycling Technology Center -ART-Center - has been equipped with the latest shredder technology from the ANDRITZ ADuro product line and enables customers to conduct recycling tests under real plant conditions with industrial-scale equipment. As a result, tests are possible with very different waste streams and complete recycling processes can be replicated. The new technology center covers a total area of 3,600 m2 and is available to recycling customers from different industries as well as to research and development organizations. The same site also accommodates the newly opened Digital Waste Research Lab of the University of Leoben - a research center for waste processing and waste management.
The Nonwoven division developed a fully automatic, high-speed face mask production line that can produce disposable face masks very quickly. The new ANDRITZ D-TECH Face Mask line produces and laminates three or more fabric layers - depending on the type of mask - maintaining the highest quality and hygiene standards. It can produce up to 750,000 face masks per day.
Metals
For many years, reducing CO2 emissions from motor vehicles has been one of the most important targets for car manufacturers and can be achieved above all by using lightweight materials to reduce the weight of the bodywork. At the same time, efforts are being made to improve crash performance in accident situations. Making motor vehicles lighter and safer also continues to be a strong trend in e-mobility. Thus, one of the main pillars of R&D activities by ANDRITZ Metals is the development of innovative technologies - for example laser welding - to process car body steel and hence, also future generations of high-strength steel and highest aluminum grades.
Other important driving forces in research and development work are sustainable production and the circular economy. In the carbon and stainless steel industries, ANDRITZ offers solutions for recycling of pickling acid and flushing water waste. By using the ECOmode technology for HCl acid regeneration plants, energy consumption, and CO2 emissions can be reduced by up to 25%. A reduction in NOx emissions is the main goal of the ultra-low NOx burners and DeNOx plants for the stainless steel industry.
The use of hexavalent chromium has been banned by the EU chemicals directive REACH in order to protect human health and the environment. ANDRITZ has developed a new chromium-plating plant that complies with the new EU directives. The process used in the new plant (known as TCCT - trivalent chromium coating technology) for chromium-plating of packaging steel uses trivalent chromium for surface treatment, thus meeting the REACH requirements. The processes used hitherto use hexavalent chromium.
The "Schuler Connect" app developed by the ANDRITZ subsidiary Schuler can create secure video and audio transmissions for the first time to smartphones and also industrial-standard smart glasses from a customer's plant to the Schuler service experts. Information is superimposed systematically over the image with the aid of augmented reality technologies. Great importance was attached to security during this development work. With the aid of this app, fewer time-consuming and expensive service assignments are needed, thus there is less undesirable downtime. This service will be available to all service customers as from the second quarter of 2021.
Hydro
In order to raise the current test technology for turbine models to a new level, ANDRITZ Hydro has initiated an extensive research and development program centered around a new high-performance test stand. The new test stand will be installed as a sixth test line at the turbine test center in Linz, Austria, and is scheduled to go into operation at the end of 2021.
The head currently possible during tests at ANDRITZ will be doubled to 250 m in the future. In this way, the new high-performance test stand provides the optimum basis for testing any turbine type even more extensively in terms of market requirements. At the same time, it provides a means of securely verifying the guaranteed, project- specific efficiencies during true-scale model tests.
In the development of high-pressure Francis and pump turbines, the test stand provides important results for the design and detailed insights into critical operating ranges for Kaplan turbines.
Construction of the new test stand is being accompanied by an automation initiative leading to an extensive upgrade of the testing facilities for ANDRITZ turbine models. In this process, all test stands are profiting from full integration of the Metris DiOMera operating and maintenance system.
Separation
The Separation business area is focusing its research and development activities above all on the implementation of automation and digitalization technologies in new and existing products.
The Metris addIQ control system, which enables any company with solid-liquid separation processes to optimize performance, is now also available for filter centrifuges. Metris addIQ Connect, with a secure, remote maintenance feature, has proved a vital application in times of travel restrictions.
ANDRITZ Separation bundles comprehensive solutions for its customers under so-called "Service Level Agreements". Customers have the benefits of increased machine availability and production time, sustainable asset management and calculable maintenance costs. A simple purchase process using the Metris online spare part catalog, reports with pre-defined KPIs, performance checks on the control system, and a hotline all support the internal work flow and the flow of information.
The second version of the C-Press screw press developed by ANDRITZ has become the status quo in the meantime for all applications in municipal and industrial sludge treatment. The overhead filter press A4F was launched and has already been sold to the mining and mineral industry in South Africa. This filter press is designed for heavy-load applications with maximum discharge speed and guarantees efficient filtration, even under the most rugged conditions. The CORES™ vacuum drum filter for highly corrosive applications was also launched on the market successfully. Long-term mechanical tests are producing excellent results.
Automation
ANDRITZ Automation has been operating successfully on the market for plant automation for more than 35 years.
In the meantime, the digital solutions from ANDRITZ - sold under the umbrella brand Metris - are among the leading solutions in industry. ANDRITZ operates Metris performance centers worldwide that provide remote services for plant operators and production managers as well as for local engineering and maintenance staff. With the aid of ANDRITZ remote support, even very challenging start-ups of complex plants and machinery were completed successfully during the reporting year.
In 2020, Metris Risk-Based Management (RBM) was launched on the market. Building on the functionalities of a classic condition monitoring system, Metris RB calculates the risk of unstable control processes and possible omissions during maintenance work. In addition to considering technical risks and risks relating to production, the Metris RBM system evaluates existing and potential risks in production. The use of artificial intelligence in automation products was another focus of research during the reporting year.
OUTLOOK
After a significant decline in the world economy in 2020 as a result of the Covid-19 pandemic, leading economic researchers and forecasting institutes expect from today's perspective that the global economy will recover in 2021. By far the largest share of global economic growth is expected to take place in China, which was able to escape from the pandemic sooner than all other relevant economic regions. According to economic researchers the extent and speed of economic recovery is difficult to predict at the present time and depends on the availability and effectiveness of vaccines to contain the pandemic. As a result, the outlook and expectations for the ANDRITZ business areas in 2021 are subject to some uncertainty.
From today's perspective, unchanged good project and investment activity is expected in the Pulp & Paper business area. Depending on how the pandemic develops, there could be a certain catch-up effect and hence slightly increased business activity in the course of the year compared to 2020, particularly in the service sector, however this will continue to be strongly dependent on any limitations applying, such as travel and access restrictions to customers' facilities as well as production limitations at customers. Selective award of individual large-scale projects in the pulp industry is also possible.
A continued difficult market environment is expected overall for the Metals business area again in 2021, however leading sector experts expect a slight increase in investment activity for both Metals Processing and Metals Forming (Schuler) in the second half of 2021.
In the Hydro business area, the unchanged moderate project and investment activity is expected to continue.
Selective award of individual large-scale projects is likely. In the Separation business area, the satisfactory project and investment activity is also expected to continue in 2021.
Optimization of the organizational and cost structures, particularly in the Metals and Hydro business areas, will be an important focus of the ANDRITZ GROUP in 2021. This is intended to secure the Group's ability to compete in the long term and lay the foundations for a long-range increase in profitability.
From today's perspective, the ANDRITZ GROUP expects - due to a reduced order intake in 2020 - a slight decline in revenue (2020: 6,700 MEUR) compared to 2020 and an increase in EBITA reported (2020: 392 MEUR).
EBITA adjusted by extraordinary items is expected to be stable compared to 2020 (EBITA adjusted for 2020: 471 MEUR).
If the global economic recovery expected by market researchers for 2021 does not take place or the pandemic intensifies again, this may result in negative effects on the processing of orders and on order intake and hence, a negative impact on ANDRITZ's financial development. This could lead to capacity adjustments - financial provisions for additional adjustment measures in individual business areas - which could have a negative impact on the ANDRITZ GROUP's earnings.
SHARES AND SHAREHOLDER STRUCTURE
Disclosure according to Article 243a of the Austrian Commercial Code (Unternehmensgesetzbuch - UGB)
The capital stock of ANDRITZ AG as of December 31, 2020 amounted to 104,000,000 EUR. The proportionate amount of the capital is 1.00 EUR per no-par value share. There are no limitations concerning the voting rights or the transfer of shares.
ANDRITZ has a stable and well-balanced shareholder structure. Around 31.5% of the ANDRITZ AG share capital is partly held directly and partly indirectly by Custos Privatstiftung and by Wolfgang Leitner, President and CEO of ANDRITZ AG, respectively. On the date of the balance sheet, Custos Vermögensverwaltungs GmbH held 25% plus one share, Cerberus Vermögensverwaltung GmbH 0.77% and Certus Beteiligungs-GmbH 5.72%. With a free float of just under 70%, national and international institutional investors and private investors comprise the majority of shareholders. The majority of institutional investors come from the UK, Austria, and Germany, while most private investors are from Austria and Germany.
Shareholder structure as of 31.12.2020 in %
D
C
B
A
A | Free float | 68.51% |
B | Custos Vermögensverwaltungs GmbH | 25.00% + 1 Share |
C | Certus | 5.72% |
D | Cerberus | 0.77% |
At present, there is no authorized capital. The Annual General Meeting held on March 23, 2018, authorized the Executive Board to purchase treasury shares up to the maximum amount permitted by law for a period of 30 months as from October 1, 2018, and to cancel these company shares where appropriate with the approval of the Supervisory Board without having to consult the Annual General Meeting. There is no authorization of the members of the Executive Board - especially regarding the possibility of issuing or buying back shares - that does not result directly from legal stipulations.
On July 1, 2019, the Executive Board and Supervisory Board of ANDRITZ AG adopted a resolution to make use of the authorization from the Annual General Meeting to buy back shares. The resolution states that up to 1,000,000 ANDRITZ shares (equal to 0.96% of the share capital) shall be purchased through the Vienna Stock Exchange between August 2, 2019 and February 3, 2020. On February 3, 2020, the Executive Board of ANDRITZ AG announced that the buy-back program had been concluded as planned as of February 3, 2020. A total of 160,000 ANDRITZ shares (equal to 0.15% of the share capital) were purchased through the Vienna Stock Exchange.
On February 13, 2020, the Executive Board and Supervisory Board of ANDRITZ AG adopted a resolution to make use of the authorization from the Annual General Meeting once again to buy back shares. Up to 1,000,000
ANDRITZ shares (equaling 0.96% of the share capital) are to be repurchased through the Vienna Stock Exchange between March 4, 2020 and October 5, 2020. On October 5, 2020, the Executive Board of ANDRITZ AG announced that the buy-back program had been concluded as planned as of October 5, 2020. A total of 661,500
ANDRITZ shares (equal to 0.64% of the share capital) were purchased through the Vienna Stock Exchange.
On October 16, 2020, the Executive Board and Supervisory Board of ANDRITZ AG adopted a resolution to make use of the authorization from the Annual General Meeting once again to buy back shares. Up to 1,000,000
ANDRITZ shares (equaling 0.96% of the share capital) are to be repurchased through the Vienna Stock Exchange between November 5, 2020 and February 1, 2021. On February 1, 2021, the Executive Board of ANDRITZ AG announced that the buy-back program had been concluded as planned as of February 1, 2021. No ANDRITZ- shares have been bought back between November 5, 2020 and February 1, 2021.
As far as is known to the company, there are no holders of shares with special controlling rights. Employees exercise their voting rights directly. Furthermore, there are no stipulations regarding the appointment and recall of the members of the Executive Board and the Supervisory Board, nor regarding modifications to the company's Articles of Association that do not result directly from legal stipulations.
There are no significant agreements in which the company participates that would become effective, change, or end in the event of a change in the control of the company following a takeover bid.
According to the terms of the "Schuldscheindarlehen" issued in June 2017, August 2018 and May 2019, each lender is entitled to accelerate maturity of the amount corresponding to his contribution to the "Schuldscheindarlehen" and to require immediate repayment of this principal amount plus the interest accumulating up to the day of repayment in the event of a change of control. Acceleration of maturity shall only apply if the corresponding notice of termination is given within 30 days after the change of control is announced.
Compensation agreements exist between the company and members of its Executive Board in the event of a change of control. No such compensation agreements exist for the members of the Supervisory Board or any employees.
Graz, February 19, 2021
The Executive Board of ANDRITZ AG
Wolfgang Leitner President and CEO
Humbert Köfler Pulp & Paper
Norbert Nettesheim
Joachim Schönbeck
CFO
(Service), Separation
Pulp & Paper (Capital Systems), Metals Processing
Hydro
Disclaimer:
Certain statements contained in the annual financial report 2020 and in the annual report 2020 constitute "forward-looking statements." These statements, which contain the words "believe," "intend," "expect," and words of a similar meaning, reflect the Executive Board's beliefs and expectations and are subject to risks and uncertainties that may cause actual results to differ materially. As a result, readers are cautioned not to place undue reliance on such forward -looking statements. The company disclaims any obligation to publicly announce the result of any revisions to the forward-looking statements made herein, except where it would be required to do so under applicable law.
The annual financial report 2020 and the annual report 2020 contain assumptions and forecasts which were based on the information available up to the copy deadline on February 19, 2021. If the premises for these assumptions and forecasts do not occur, or risks indicated in the chapter "corporate risks" and in the management report in the annual financial report 2020 do arise, actual results may vary from the forecasts made in the annual financial report 2020 and the annual report 2020. Although the greatest caution was exercised in preparing data, all information related to the future is provided without guarantee.
CONSOLIDATED CORPORATE GOVERNANCE REPORT
The present report explains the structures, processes, and rules implemented with respect to financial management and towards shareholders, and which ANDRITZ follows in the corporate governance sector. As a publicly listed company with headquarters in Austria, the formal framework for corporate governance is derived from Austrian law, the articles of association, and the rules of procedure for the company boards, as well as the Austrian Code of Corporate Governance. The present report also contains the consolidated Corporate Governance report.
Commitment to the Austrian Code of Corporate Governance
ANDRITZ has adopted the rules of conduct laid down in the Austrian Code of Corporate Governance without restriction and regards the Code as an essential requirement for implementation of responsible company management, which is directed towards creating sustainable and long-term added value and a high degree of transparency for shareholders and other stakeholders. The Executive Board and the Supervisory Board as well as the entire staff of the ANDRITZ GROUP have committed to complying with the Code.
The Austrian Code of Corporate Governance applicable to the business year (January 2021 edition) is publicly accessible and available on the website of the ANDRITZ GROUP at andritz.com as well as on the website of the Austrian Working Group for Corporate Governance at corporate-governance.at.
The Austrian Code of Corporate Governance is based on a voluntary commitment and goes beyond the legal requirements for corporations.
Composition of the Executive Board
The Executive Board of ANDRITZ AG was composed of five members as of December 31, 2020.
Name (date of birth)
Wolfgang Leitner (March 27, 1953)
Humbert Köfler (January 11, 1961) Norbert Nettesheim (November 17, 1962) Joachim Schönbeck (January 30, 1964) Wolfgang Semper ((March 9, 1958)
End of current | Supervisory Board mandates in other | |
mandate | companies in Austria and abroad | |
President & CEOOctober 1, 1987 (CFO) | June 28, 2023 | Schuler AG; ETI Elektroelement d.d. |
June 29, 1994 (President | ||
& CEO) | ||
March 31, 2025 | None |
Date of first appointment to Executive Board
Function
Member of the Executive BoardApril 1, 2007
Chief Financial Officer (CFO)December 6, 2019
September 30, 2022
Groz-Beckert KGMember of the Executive BoardOctober 1, 2014
September 30, 2022
Schuler AGMember of the Executive BoardApril 1, 2011
March 31, 2024
None
Wolfgang Leitner
Areas of responsibility
Central group functions such as Human Resources Management, Corporate Communications, Investor Relations, Internal Auditing, Information Technology, Manufacturing Management, and Metals Forming
Professional career
Member of the Managing Board of AGIV AG, founder and President of GENERICON Pharma GmbH, Management Consultant at McKinsey & Company, Research Chemist at Vianova/HOECHST
Humbert Köfler
Areas of responsibility
Pulp & Paper (Service), Separation
Professional career
Head of the Paper Mill Services division at ANDRITZ AG, Head of the Mechanical Pulping Systems division at ANDRITZ AG, Regional Sales Manager at ANDRITZ Sprout-Bauer GmbH, Export Marketing Manager at Biochemie GmbH
Norbert Nettesheim
Areas of responsibility
Central group functions such as Controlling, Accounting, Treasury, Order and Project Financing, Legal, Compliance, and Purchasing
Professional career
Management positions in the Voith Group, including that of Commercial Director of the group's Paper Technology Division and of various operating companies within the group, and latterly as head of Group Controlling, Accounting and Investments at Voith GmbH & Co. KGaA.
Joachim Schönbeck
Areas of responsibility
Pulp & Paper (Capital systems), Metals Processing, as well as group-wide Quality and Safety Management
Professional career
Spokesman of SMS Holding GmbH and Chairman of the Management Board of SMS Meer GmbH, management positions at SMS Group, Siemens, and Mannesmann
Wolfgang Semper
Areas of responsibility
Hydro and group-wide Automation
Professional career
President of ANDRITZ HYDRO GmbH and Head of the Large Hydro division of the Hydro business area, management functions at VA TECH VOEST MCE and Voest-Alpine MCE, Technical Calculations Engineer at Voest- Alpine AG
Composition of the Supervisory Board
The ANDRITZ AG Supervisory Board consists of six appointed members representing the shareholders and three members delegated by the works council.
Name (date of birth)
Function
Date of first appointmentEnd of current mandate
Supervisory Board mandates in other (stock-exchange listed) companies in Austria and abroad
APPOINTED MEMBERS Christian Nowotny
(July 23, 1950) Alexander Leeb (May 16, 1959)
Chairman of the Supervisory BoardDecember 29, 1999Until the Annual GeneralSchuler AG
Meeting in 2022
Deputy Chairman of the Supervisory Board
March 27, 2019
Until the Annual General Meeting in 2023
Mayr-Melnhof Karton AG
Wolfgang Bernhard (September 3, 1960) Jürgen Hermann Fechter (November 30, 1962) Alexander Isola
(July 24, 1957) Monika Kircher (July 8, 1957)
Member of the Supervisory Board Member of the Supervisory Board Member of the Supervisory Board Member of the Supervisory BoardJuly 7, 2020
Until the Annual General Meeting in 2025
AMAG Austria Metall AG
Until the Annual General Meeting in 2021
NoneMarch 30, 2016
Until the Annual General Meeting in 2021
None
Until the Annual General Meeting in 2023
RWE AG
DELEGATED MEMBERS Georg Auer
(October 12, 1974) Andreas Martiner (November 11, 1964) Monika Suppan (January 26, 1974)Member of the Supervisory Board Member of the Supervisory Board Member of the Supervisory BoardJuly 1, 2011
NoneFebruary 14, 2001
None
January 1, 2018
None
Information relating to the independence of the Supervisory Board members
Regarding the independence criteria, the Supervisory Board of ANDRITZ AG follows the guidelines laid down in the Corporate Governance Code. According to these guidelines, it is assumed that members are not independent if they belong to the Supervisory Board for more than 15 years. This applies to Christian Nowotny. Nevertheless, he has confirmed that he performs his duties entirely independently and does not have any legal or economic relationship with the company or its executive bodies that could compromise his independence. The Supervisory Board is independent of the company and its executive bodies. No member of the Supervisory Board of ANDRITZ AG holds more than 10% of the total shares. The requirements of C-rules 53 and 54 of the Austrian
Code of Corporate Governance are thus met.
Working procedures for the Executive Board and the Supervisory Board
Allocation of competencies in the Executive Board
The Executive Board of ANDRITZ AG holds board meetings at regular intervals on essential, group -relevant topics and individual business areas. The competencies and responsibilities of the individual Executive Board members are listed in the notes on the Executive Board members in this Corporate Governance report. The rules of procedure for the Executive Board contain a comprehensive catalog of those business transactions requiring the prior approval of the Supervisory Board in addition to those stated in the mandatory regulations in the Austrian Corporation Act.
The Executive Board and Supervisory Board, particularly their chairmen, maintain ongoing contact to discuss the company's development and strategy beyond the scope of the discussions at the Supervisory Board meetings.
Supervisory Board committees
The Supervisory Board of ANDRITZ AG has established an audit committee that held two meetings to deal with the annual and consolidated financial statements for 2020, prepare the review of the annual and consolidated financial statements for 2020 and of the proposal for distribution of profits, additionally to deal with matters concerning the auditor, and implementation of the internal control and risk management system in the ANDRITZ GROUP. As a financial expert, Monika Kircher chairs the audit committee.
The Supervisory Board has also established a nomination and remuneration committee that held two meetings in 2020 and whose scope of activities includes the remuneration paid to the Executive Board members and the content of their employment contracts, as well as appointments to Executive and Supervisory Board positions that become vacant, and succession planning matters.
The ANDRITZ AG Supervisory Board held five regular meetings (four regular meetings, one constituent meeting) in 2020. All members attended all meetings. Due to the Covid-19 restrictions, some of the meetings were held virtually with the consent of all members. The focus of these meetings were monitoring of the current business development of the ANDRITZ GROUP, including possible deviations from the budget, the development of earnings on major orders, the strategic goals, medium-term planning for the individual business areas, as well as specific topics such as company acquisitions, granting of joint procurations, and other business subject to approval. The chairman and deputy-chairman receive a monthly report on the main developments. One business area is presented at each of the regular Supervisory Board meetings and this business area's strategy is discussed. A comprehensive report on group-wide compliance is provided at one of the Supervisory Board meetings; this meeting also deals with the results of internal audits, and any measures resulting from these audits are presented and discussed.
Pursuant to the requirement of the Austrian Code of Corporate Governance (C-rule 36), the Supervisory Board conducted a self-evaluation in the past business year and discussed the efficiency of its activities, especially its organizational structure and working methods.
Committee | ||
Audit committee | ▪ | Monika Kircher (Chairwoman) |
▪ | Christian Nowotny (Deputy-Chairman) | |
▪ | Alexander Leeb | |
▪ | Andreas Martiner | |
Nomination and remuneration committee | ▪ | Christian Nowotny (Chairman) |
▪ | Alexander Leeb (Deputy-Chairman) | |
▪ | Alexander Isola | |
Auditors |
Members
At the 113th Annual General Meeting of ANDRITZ AG held on July 7, 2020, KPMG Austria GmbH Wirtschaftsprüfungs- und Steuerberatungsgesellschaft, Vienna, was selected as independent auditor for the 2020 financial statements and the consolidated financial statements.
Measures to promote the appointment of women
The main criteria in selecting the members of the Supervisory Board are professional qualifications and personal skills, as well as long-term experience in management positions. However, various diversity aspects, such as the internationality of the members, representation of both men and women, and the age structure, are also taken into account. The Supervisory Board has two female members, thus the proportion of women is approximately 22%.
The members of the Supervisory Board are aged between 46 and 70 on the reporting date. Two members are not Austrian citizens and have knowledge and experience gained as former executive board members of large German corporations operating globally.
The Executive Board has no female members; there are two female members on the Supervisory Board. There are women in management functions at the first and second reporting levels in numerous sectors. The proportion of women in the total workforce was 16.4% (2019: 16.2%) as of December 31, 2020.
The ANDRITZ GROUP supports and encourages the appointment of women, particularly in technical sectors. In many countries however, ANDRITZ is frequently confronted with the situation that there are still far fewer women than men in technical professions or graduating in technical subjects.
Thus, ANDRITZ supports various initiatives to encourage women to opt for a technical profession or take a degree in a technical subject. These initiatives include participating regularly in various events like recruiting and job orientation days for young women at universities. ANDRITZ also takes measures and makes investments to improve employees' work-life balance. The company-run kindergarten set up beside the headquarters of the ANDRITZ GROUP in Graz as well as at the Vienna location and the flexible working hours available to employees with young children are examples of these measures. When creating office space as part of new building projects, establishing child care facilities for the children of employees is always considered as well. In addition, a strict equal opportunities policy is considered very important in the recruitment process. However, in its efforts to promote female employees, ANDRITZ will refrain from any measures that would discriminate against male employees.
Diversity concept
One of the Supervisory Board's most important tasks is to prepare and secure appointments to the Supervisory Board and Executive Board, as corporate bodies, that are appropriate to the company. The Executive Board and Supervisory Board of ANDRITZ AG should be formed by personalities who have the necessary knowledge, abilities, and the individual competences and experience that management and supervision of a globally operating company oriented towards the capital market and working in the mechanical and industrial plant engineering industry require and guarantee.
The Supervisory Board (nominations committee) defines the following goals for composition of the Supervisory Board and the Executive Board:
The members of the Supervisory Board should have the following special knowledge, skills and professional experience relating to the structure and business segment of the company as a whole:
▪ The Supervisory Board should have shareholder representatives as members with international experience or special expertise in one or several of the company's most important markets outside Austria.
▪ The Supervisory Board should contain personalities from the industry sector, science, technology or research who have gained experience in areas of major significance for ANDRITZ.
▪ Furthermore, as representative of the shareholders, the Supervisory Board should contain personalities who have gained experience in management and/or controlling of another publicly listed company.
▪ In seeking out qualified personalities for the Supervisory Board and who strengthen the board as a whole as best possible with professional and management skills, it is also important to ensure there is diversity. In preparing suggestions for possible candidates, consideration should be given to achieving an appropriate distribution of both men and women in the Supervisory Board in addition to mutually complementary professional profiles as well as professional and life experience.
▪ At least one member of the Supervisory Board should have special expertise in the field of accounting or auditing.
▪ None of the members of the Supervisory Board should hold an executive function or a consulting position for the company's main competitors or its suppliers.
The goal is to achieve an appropriate proportion of women in the Supervisory Board independently of any legal obligation in this respect.
The Supervisory Board ensures long-term succession planning for positions on the Executive Board. When screening candidates for position on the Executive Board, the basic suitability criteria from the perspective of the Supervisory Board should be the candidates' professional qualifications for the purview envisaged, convincing management skills, performance so far, as well as knowledge of the company. When weighing up which personality would best complement the Executive Board, diversity is also one of the criteria influencing the Supervisory Board's decision. Diversity means different, mutually complementary profiles, professional and life experience, also in the international field, as well as appropriate representation of men and women alike.
The Supervisory Board takes the following aspects into consideration when taking its decision:
▪ The members of the Executive Board should have many years of management experience as well as experience from different professions if possible.
▪ The members should have experience in international management.
▪ At least one member of the Executive Board should have a technical education or many years of technical, professional experience.
▪ The Executive Board as a whole should have many years of experience in the fields of development, production, sales, finance, and human resources management.
▪ No target number has been defined for the proportion of women in the Executive Board. The Supervisory Board decides who holds the position of Executive Board member in the interests of the company and exclusively in acknowledgment of their professional and personal qualifications in each case. The Executive Board reports at regular intervals to the nominations committee on the percentage and development of female senior management, particularly those reporting to the top executives and at the first management level.
The Supervisory Board will observe an age limit of seventy years for the members of the Executive Board; an adequate mix of age groups should be considered in the composition of the Executive Board.
Compliance at ANDRITZ
Compliance is the basis of responsible company management. ANDRITZ defined the conduct guidelines for ethically correct behavior in business over ten years ago in the Code of Business Conduct and Ethics. The basic reference document is available in 14 languages, and important passages on the topics of human rights and environmental protection were added at regular intervals over the past few years. A training video explains the main content of the code for all of the company's employees in a way that is simple, but effective. In addition, the relevant compliance topics are also conveyed in a booklet available in numerous languages and handed over to each employee when they start working for the Group.
A Group Compliance Committee chaired by the Group Compliance Officer has been set up for the Compliance group function. This committee is responsible for the development and implementation of the Compliance program and reports directly to the Executive Board. Operationally, the Compliance department is divided into experts with special fields of professional expertise (anti-corruption, anti-trust, human rights, export controls, supplier compliance, data protection, and insider trading) and compliance officers with regional competencies. In the business areas, compliance officers are used for specific tasks in efforts to prevent corruption. In addition, the implementation of a regional compliance network directly in the individual ANDRITZ companies and at business area level is currently being prepared.
All processes ensuring that the applicable laws, internal regulations and rules of conduct are obeyed come together in the ANDRITZ Compliance Management System (CMS). It builds trust, transparency and clarity, reduces liability risks and provides a good overview for all employees. Both this and the ANDRITZ anti -corruption management system have ISO certifications (ISO 19600 - Compliance Management System and ISO 37001 - Anti-Corruption Management Systems). The ISO certifications were reviewed last year in a surveillance audit, and recertification is due in 2021. Obeying the compliance regulations is also a regular topic in the audit process when internal audits are performed on Group companies.
Work processes, tools and training
Within the compliance management system, several different work processes have been defined throughout the Group for which there are also tools in use: the whistleblower system that both employees and external stakeholder can use to report compliance-related incidents anonymously, the Global Sales Network that deals with the qualification process and approval of sales agents, the eLearning platform and related databases, databases to examine third parties in connection with sanctions and export controls, an instrument providing information on the ownership structure of companies, and a database in connection with the GDPR (General Data Protection Regulation) that documents the processes and information on personal data.
ANDRITZ offers interactive, mandatory training for all employees in numerous languages on different topics. A training course consists of several modules which create a greater awareness of compliance topics. The number of modules to be completed is defined on the basis of an employee's job description, however all employees must complete the basic training.
In the 2020 business year, training was rolled out on 11 compliance-related topics to a total of 4,770 employees; the completion rate was 74%. Due to the special circumstances caused by the Covid-19 pandemic, no refresher courses were assigned, and face-to-face training was barely possible due to international travel restrictions. In addition, 6,228 non-mandatory training modules (explanatory and instruction videos) were rolled out.
Main topics in 2020
The time of the Covid-19 pandemic was used to explore strategic ideas relating to the compliance organization, among other things, but also to revise parts of the internal standards - four policies were adapted and new versions published (anti-corruption, anti-trust, ANDRITZ sales agents, Russia sanctions) and a fifth - a new policy on the topic of data protection - was also adopted.
In the past year, a great deal of attention was also paid to the general conditions for collaboration with external business partners who provide sales support to ANDRITZ. First of all, the policy defining the basic principles of collaboration was revised. Before external parties are given the opportunity to enter into a business partnership with ANDRITZ, they are scrutinized on the basis of a checklist. Since last year, these checks are repeated automatically after a period of two years. If the requirements are not (or no longer) met or some of the information needed is missing, collaboration with the party concerned can also be terminated. All of the internal ANDRITZ policies relating to compliance certainly also apply to external business partners. All information is documented in a database. Further training on this topic is on the agenda for the internal sales organizations at ANDRITZ. This training is based on a risk-related needs assessment.
Export controls
An automated and software-based process guarantees compliance with all legal provisions for export controls (in particular the terror, goods and embargo lists as well as usage restrictions).
During the reporting year, a risk assessment was conducted throughout the entire Group on general information and information relevant to export controls (e.g. sales figures, number of employees, export quota, delivery countries, etc.) in order to find any potential for improvement in the export control process. As a result, projects on this topic have been conducted at the relevant companies since the autumn of 2018 - starting with the D-A-CH countries (Germany, Austria, Switzerland). As a result of the Covid-19 pandemic, there were some interruptions and delays in the group-wide rollout project that extend the original schedule by around three to six months.
Data protection
In addition to organizational changes, a new data protection policy was drawn up. As a result of the so-called "Schrems II" judgment by the European Court of Justice, the transfer of personal data to the USA by countries in the European Union (by data privacy shield) was declared invalid. As a result, existing data processingagreements had to be changed and the standard processing agreement for new data processors updated. In this context, the cookie banners on the company website were updated, and an appropriate policy was published. In the coming year, there are plans to fine-tune the ANDRITZ data protection process and data processing tasks as well to train data protection coordinators on a continuous basis.
Internal auditing
The Internal Auditing group function conducts comprehensive audits on ANDRITZ subsidiaries and group functions, focusing on financial and operational topics. In suspicious cases, event -driven audits are also conducted without prior notice. The purpose of the audits is to ensure compliance with internal policies and the fundamental principles of profitability and to highlight potential areas for improvement in the operation workflows. Other tasks handled by this group function are identification of risks and dealing with them in an appropriate way.
The department reports directly to the Chairman of the Executive Board, and the audit reports are also presented to the Executive Board and in summarized form to the members of the Supervisory Board. A total of 30 audits were conducted in the 2020 business year, comprising 26 company audits and two partial and compliance audits each (2019: 37 audits). The improvement measures proposed in these audits are aligned directly with the management of the company or group function under audit. As system to track the implementation of agreed improvement measures was implemented.
External evaluation of the corporate governance report
The Austrian Code of Corporate Governance requires regular external evaluation of the company's compliance with this code. The last evaluation of this kind was conducted in 2020 for the 2019 business year by BDO Austria GmbH Wirtschaftsprüfungs- und Steuerberatungsgesellschaft, Vienna. This evaluation was based on the official questionnaire issued by the Austrian Working Group for Corporate Governance. Based on this evaluation, the auditors found that ANDRITZ AG had adhered to the C-rules of the Austrian Code of Corporate Governance. The full report on the external evaluation is available on the ANDRITZ web site andritz.com.
Changes after the reporting date
There were no major changes between the reporting date and the date of issue of the Corporate Governance Report.
Graz, February 2021
The Executive Board of ANDRITZ AG
Wolfgang Leitner m.p. | Humbert Köfler m.p. | Norbert Nettesheim m.p. |
(President and CEO) | (CFO) | |
59 |
Joachim Schönbeck m.p.
Wolfgang Semper m.p.
REPORT OF THE SUPERVISORY BOARD
The Supervisory Board and the Executive Board held five meetings (four regular meetings, one constituent meeting) during the reporting period for in-depth discussions on the economic situation and strategic development of the company as well as on major events, capital expenditures and possible acquisitions. On account of the Covid-19 restrictions, some virtual meetings were held with the consent of all members. Similarly, the Annual General Meeting was held as a virtual meeting The Executive Board and the Supervisory Board chairman always met jointly.
In the course of regular reporting and in all meetings, the Executive Board informed the Supervisory Board extensively in writing and verbally, by means of detailed reports, on the business and financial situation of the Group and its affiliates as well as on topics concerning human resources, medium-term planning, capital expenditure, and acquisition projects. At one meeting, the Supervisory Board discussed safety at work and corresponding measures. The Executive Board reported regularly and in detail on the impact of Covid-19 on the individual business areas and the employees, as well as reporting on the respective measures implemented.
Compliance was one of the main points on the agenda at one meeting.
At individual meetings, the medium-term planning of the individual business areas was also discussed with the Executive Board, mainly focusing on the Metals and Hydro business areas. An important item on the agenda was to review relevant acquisitions and whether the expectations that formed the basis of the purchase decision had been met, and if not, what were the reasons for this and what conclusions can be drawn from this. ANDRITZ has now taken over all minority shares in its subsidiary Schuler AG according to the provisions of the German Stock Corporation Act and thus holds 100 percent of the shares. The resolutions required for this purpose were not contested and were entered in the Companies' Register in November 2020.
In addition, information was provided on special procedures. Furthermore, the Chairman of the Supervisory Board and the Chief Executive Officer were in regular contact to discuss the company's strategy and business development. There are plans for the Supervisory Board to conduct a self-assessment of its activities and discuss the result during its meeting in the first quarter of 2021. The self-assessment for 2019 was presented and analyzed during the meeting on May 27, 2020. In November 2019, an external review was commissioned on compliance with the rules of the Austrian Corporate Governance Code (ÖCKG). The report on this topic submitted by the external auditor confirmed that all regulations in the Code are obeyed.
At the Supervisory Board meeting on May 27, 2020, the Supervisory Board passed a resolution for the first time to adopt a remunerations policy due to the amendment to the Austrian Stock Corporation Act and presented the policy to the Annual General Meeting for approval. The Supervisory Board discussed the comments thereon, some of which voiced criticism, and deliberated on possible amendments.
The Presidium of the Supervisory Board acted on behalf of the company in matters concerning the Executive Board. The nomination and remunerations committee discussed matters relating to the Executive Board during two meetings and several discussions and discussed a successor to a seat on the Supervisory Board.
Fritz Oberlerchner stepped down from the Supervisory Board when his mandate expired. Sincerest thanks to him for his many years on the board and the profound advice he offered with great commitment at all times.
Following deliberations and consultations on potential successors, the nomination committee proposed Wolfgang Bernhard for election to the Supervisory Board. This proposal was made particularly in view of his experience as a former executive board member of a listed German company operating in the automotive sector. The Annual General Meeting elected Wolfgang Bernhard as member of the Supervisory Board for five years on July 7, 2020.
The following resolution was passed as a result of Fritz Oberlerchner stepping down: Alexander Leeb will become deputy chairman. The chairman, his deputy and Alexander Isola are members of the remunerations and nomination committee. The audit committee is chaired by Monika Kircher, and also comprises the Supervisory Board chairman, his deputy, and Andreas Martiner.
All members of the Supervisory Board attended all meetings.
In two meetings, the audit committee dealt in particular with the proposal for appointment of the auditor of the financial statements and consolidated financial statements, the quality of the internal control system relating to accounting work, the risk management program, reporting by the Internal Auditing department, and the measures to safeguard the independence of the annual auditor when providing non-audit services permitted. In addition, individual topics such as risk analysis, IT security to prevent external attacks, and the topics announced by the inspection body for 2020 were discussed and reports thereon were provided to the Supervisory Board. All members of the audit committee attended all committee meetings.
At the audit committee meeting on December 3, 2020, the committee members - with the auditor also present - discussed the organization, scheduling and auditing of the 2020 financial statements and consolidated financial statements (particularly with regard to the circle of subsidiaries to be fully consolidated) as well as a report by the Executive Board on the form and mode operation of the internal control system and Internal Auditing department.
The committee also passed a resolution giving limited permission for the provision of non-audit services up to completion of the audit for the 2020 financial year.
In dealing with the financial statements for 2020, the audit committee called in the annual auditor to attend its meeting on March 2, 2021 in order to review the financial statements, consolidated financial statements, the management report, and the Executive Board's proposal for distribution of profits. The auditor also attended the preparatory meeting in December 2020. In addition, a proposal was prepared for appointment of the auditor of the financial statements and consolidated financial statements for the 2021 business year, the auditor's relationship with the ANDRITZ GROUP and the members of its company bodies was reviewed, and the fee for the company audit was negotiated. Further items on the agenda were the auditor's report on the function of the company's risk management system, a report on the Internal Auditing department, the compliance report and the sustainability report.
The financial statements and management report of ANDRITZ AG and the consolidated financial statements for 2020 drawn up according to IFRS were audited (including the accounts) and certified by KPMG Austria GmbH Wirtschaftsprüfungs- und Steuerberatungsgesellschaft, Vienna, who had been appointed as auditors by the Annual General Meeting. The management report, which is now required by law, was also the subject of the discussions and completeness check. The Supervisory Board examined the documents in accordance with § 96 of the Austrian Stock Corporation Act (AktG) as well as the management report and the corporate governance report and also endorsed the motions submitted to the Annual General Meeting and approved the financial statements, which are hereby approved in accordance with §96 (4) AktG. Similarly, the Supervisory Board reviewed and approved the Executive Board's proposal for distribution of profits. The final results of the audits conducted did not give rise to any objections.
Graz, February 2021
Christian Nowotny m.p.
Chairman of the Supervisory Board
Consolidated financial statements 2020 of the ANDRITZ GROUP
Consolidated income statement 63
Consolidated statement of comprehensive income 64
Consolidated statement of financial position 65
Consolidated statement of cash flows 66
Consolidated statement of changes in equity 67
Notes to the consolidated financial statements 68
Statement by the Executive Board, pursuant to section 124 (1) of the (Austrian) Stock Exchange Act 154
Glossary 155
Auditor's report 157
GRI index 163
CSR data overview 168
Consolidated income statement
CONSOLIDATED INCOME STATEMENT
FOR THE 2020 FINANCIAL YEAR
(in TEUR) | Note | 2020 | 2019 |
Revenue | 9. | 6,699,584 | 6,673,896 |
Changes in inventories of finished goods and work in progress | -30,095 | -34,675 | |
Other own work capitalized | 3,709 | 6,462 | |
Other income | 10. | 85,937 | 96,201 |
Cost of materials | 11. | -3,632,436 | -3,305,190 |
Personnel expenses | 12. | -1,790,253 | -2,015,220 |
Other expenses | 13. | -765,376 | -883,912 |
Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) | 571,070 | 537,562 | |
Depreciation, amortization, and impairment of intangible assets and of property, plant, and | |||
equipment | 14. | -251,354 | -270,554 |
Impairment of goodwill | 20. | -4,674 | -29,122 |
Earnings Before Interest and Taxes (EBIT) | 315,042 | 237,886 | |
Result from investments accounted for using the equity method | 6. | -4,335 | -125 |
Interest income | 17,061 | 21,246 | |
Interest expenses | -46,194 | -69,267 | |
Other financial result | -710 | -8,824 | |
Financial result | 15. | -34,178 | -56,970 |
Earnings Before Taxes (EBT) | 280,864 | 180,916 | |
Income taxes | 16. | -77,146 | -58,163 |
NET INCOME | 203,718 | 122,753 | |
Net income attributable to owners of the parent | 207,120 | 127,804 | |
Net income allocated to non-controlling interests | 31. | -3,402 | -5,051 |
Basic earnings per no-par value share (in EUR) | 17. | 2.08 | 1.27 |
Diluted earnings per no-par value share (in EUR) | 17. | 2.08 | 1.27 |
Proposed or paid dividend per no-par value share (in EUR) | 31. | 1.00 | 0.50 |
Consolidated statement of comprehensive income
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE 2020 FINANCIAL YEAR
(in TEUR) | Note | 2020 | 2019 |
NET INCOME | 203,718 | 122,753 | |
Remeasurement of defined benefit plans | 22. | -1,973 | -21,045 |
Changes in the fair value of equity instruments measured at fair value through other | |||
comprehensive income | 28. | -124 | -3,111 |
Other comprehensive income (after income taxes) that will not be reclassified to the | |||
income statement in subsequent periods | -2,097 | -24,156 | |
Currency translation of foreign operations | -97,516 | -3,670 | |
Cash flow hedges | 32. | 15,359 | -3,651 |
Share of other comprehensive income of investments accounted for using the equity method | 6. | -4 | 0 |
Other comprehensive income (after income taxes) which can be reclassified to the | |||
income statement in subsequent periods | -82,161 | -7,321 | |
OTHER COMPREHENSIVE INCOME (AFTER INCOME TAXES) | -84,258 | -31,477 | |
TOTAL COMPREHENSIVE INCOME | 119,460 | 91,276 | |
Total comprehensive income attributable to owners of the parent | 123,013 | 96,794 | |
Total comprehensive income allocated to non-controlling interests | -3,553 | -5,518 |
Consolidated statement of financial position
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS OF DECEMBER 31, 2020
(in TEUR) | Note | 2020 | 2019 |
ASSETS | |||
Property, plant, and equipment | 18./19. | 1,170,132 | 1,295,238 |
Goodwill | 20. | 760,028 | 776,915 |
Intangible assets other than goodwill | 21. | 223,751 | 309,197 |
Investments accounted for using the equity method | 6. | 5,464 | 4,802 |
Investments and other financial assets | 30. | 84,392 | 109,241 |
Other receivables and assets | 25. | 45,959 | 30,685 |
Deferred tax assets | 16. | 207,750 | 179,457 |
Non-current assets | 2,497,476 | 2,705,535 | |
Inventories | 26. | 761,220 | 842,389 |
Advance payments made | 27. | 143,444 | 137,833 |
Trade accounts receivable | 24. | 818,286 | 931,804 |
Contract assets | 9. | 795,638 | 734,146 |
Current tax assets | 17,509 | 30,293 | |
Other receivables and assets | 25. | 377,238 | 336,017 |
Investments | 30. | 486,290 | 304,045 |
Cash and cash equivalents | 31. | 1,158,027 | 1,200,794 |
Assets held for sale | 36. | 1,596 | 11,238 |
Current assets | 4,559,248 | 4,528,559 | |
TOTAL ASSETS | 7,056,724 | 7,234,094 | |
EQUITY AND LIABILITIES | |||
Share capital | 104,000 | 104,000 | |
Capital reserves | 36,476 | 36,476 | |
Retained earnings and other reserves | 1,117,118 | 1,066,111 | |
Equity attributable to owners of the parent | 1,257,594 | 1,206,587 | |
Non-controlling interests | -1,855 | 12,972 | |
Total equity | 32. | 1,255,739 | 1,219,559 |
Bank loans and other financial liabilities | 35. | 1,205,125 | 1,227,044 |
Lease liabilities | 19. | 184,368 | 213,714 |
Provisions for employee benefits | 22. | 453,941 | 453,425 |
Provisions | 23. | 153,086 | 139,842 |
Other liabilities | 28. | 28,356 | 43,164 |
Deferred tax liabilities | 16. | 145,014 | 159,662 |
Non-current liabilities | 2,169,890 | 2,236,851 | |
Bank loans and other financial liabilities | 35. | 95,159 | 132,437 |
Lease liabilities | 19. | 48,311 | 46,394 |
Trade accounts payable | 749,709 | 668,934 | |
Contract liabilities from sales recognized over time | 9. | 895,700 | 1,230,276 |
Contract liabilities from sales recognized at a point in time | 9. | 256,612 | 231,962 |
Provisions | 23. | 537,921 | 489,847 |
Current tax liabilities | 65,218 | 37,830 | |
Other liabilities | 28. | 982,465 | 935,028 |
Liabilities relating to assets held for sale | 36. | 0 | 4,976 |
Current liabilities | 3,631,095 | 3,777,684 | |
TOTAL EQUITY AND LIABILITIES | 7,056,724 | 7,234,094 |
Consolidated statement of cash flows
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE 2020 FINANCIAL YEAR
(in TEUR) | Note | 2020 | 2019 |
Net income | 203,718 | 122,753 | |
Income taxes | 77,146 | 58,163 | |
Interest result | 15. | 29,133 | 48,021 |
Depreciation, amortization, and impairment of intangible assets, goodwill as well as property, | |||
plant, and equipment | 256,028 | 299,676 | |
Result from investments accounted for using the equity method | 15. | 4,335 | 125 |
Changes in provisions | 71,300 | 28,220 | |
Gains/losses from disposal of fixed and financial assets | -8,435 | -6,241 | |
Other non-cash income/expenses | 23,899 | 36,514 | |
Gross cash flow | 657,124 | 587,231 | |
Change in net working capital | 35. | -79,037 | 330,689 |
Interest received | 15,241 | 20,599 | |
Interest paid | -40,261 | -41,606 | |
Dividends received | 1,583 | 3,092 | |
Income taxes paid | -93,170 | -78,428 | |
CASH FLOW FROM OPERATING ACTIVITIES | 35. | 461,480 | 821,577 |
Payments made for property, plant, and equipment and for intangible assets | -87,893 | -122,036 | |
Payments received for disposals of property, plant, and equipment and intangible assets | 21,391 | 8,708 | |
Payments made for non-current and current financial assets | -372,607 | -259,182 | |
Payments received for disposal of non-current and current financial assets | 207,996 | 276,607 | |
Payments made for investments accounted for using the equity method | -5,000 | -4,898 | |
Net cash flow from company acquisitions | 35. | 0 | -7,091 |
CASH FLOW FROM INVESTING ACTIVITIES | 35. | -236,113 | -107,892 |
Payments made for the redemption of bonds | 35. | 0 | -350,000 |
Payments received from bank loans and other financial liabilities | 35. | 21,715 | 347,581 |
Payments made for bank loans, other financial liabilities, and lease liabilities | 35. | -120,213 | -86,458 |
Dividends paid | 32. | -49,889 | -157,093 |
Purchase of non-controlling interests and payments to former shareholders | 35. | -20,492 | -79,761 |
Purchase of treasury shares | 32. | -18,118 | -39,776 |
CASH FLOW FROM FINANCING ACTIVITIES | 35. | -186,997 | -365,507 |
CHANGES IN CASH AND CASH EQUIVALENTS | 38,370 | 348,178 | |
Currency translation adjustments | -80,943 | -4,975 | |
Changes in consolidation scope | -82 | -1,146 | |
Valuation allowance | -112 | -21 | |
Cash and cash equivalents at the beginning of the period | 31. | 1,200,794 | 858,758 |
Cash and cash equivalents at the end of the period | 31. | 1,158,027 | 1,200,794 |
ANDRITZ financial report 2020
Consolidated statement of changes in equity
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE 2020 FINANCIAL YEAR
Attributable to owners of the parent | Non-controlling interests | Total equity | ||||||||
(in TEUR) | Note | Share capital | Capital reserves | Retained earnings | Fair value reserve | Reserve of remeasurements of defined benefit plans | Reserve of exchange differences on translation | Treasury shares | Total | |
BALANCE AS OF JANUARY 1, 2019 | 104,000 | 36,476 | 1,442,338 | 8,531 | -82,140 | -66,326 | -130,934 | 1,311,945 | 15,504 | 1,327,449 |
Net income | 127,804 | 127,804 | -5,051 | 122,753 | ||||||
Other comprehensive income | -6,761 | -20,435 | -3,814 | -31,010 | -467 | -31,477 | ||||
Total comprehensive income | 127,804 | -6,761 | -20,435 | -3,814 | 96,794 | -5,518 | 91,276 | |||
Dividends | 32. | -156,492 | -156,492 | -601 | -157,093 | |||||
Change in treasury shares | 32. | -184 | -38,049 | -38,233 | -38,233 | |||||
Change from share option programs | 32. | -3,922 | -3,922 | -3,922 | ||||||
Transfers and other changes | 3,907 | -7,026 | -305 | -81 | -3,505 | 3,587 | 82 | |||
BALANCE AS OF DECEMBER 31, 2019 | 104,000 | 36,476 | 1,413,451 | -5,256 | -102,880 | -70,221 | -168,983 | 1,206,587 | 12,972 | 1,219,559 |
BALANCE AS OF JANUARY 1, 2020 | 104,000 | 36,476 | 1,413,451 | -5,256 | -102,880 | -70,221 | -168,983 | 1,206,587 | 12,972 | 1,219,559 |
Net income | 207,120 | 207,120 | -3,402 | 203,718 | ||||||
Other comprehensive income | 15,235 | -1,971 | -97,371 | -84,107 | -151 | -84,258 | ||||
Total comprehensive income | 207,120 | 15,235 | -1,971 | -97,371 | 123,013 | -3,553 | 119,460 | |||
Dividends | 32. | -49,719 | -49,719 | -170 | -49,889 | |||||
Change in treasury shares | 32. | -547 | -16,147 | -16,694 | -16,694 | |||||
Change from share option programs | 32. | 1,748 | 1,748 | 1,748 | ||||||
Changes in ownership interests, without loss of control | 32. | -6,148 | -1,153 | -88 | -7,389 | -11,104 | -18,493 | |||
Transfers and other changes | 48 | 48 | 48 | |||||||
BALANCE AS OF DECEMBER 31, 2020 | 104,000 | 36,476 | 1,565,953 | 9,979 | -106,004 | -167,680 | -185,130 | 1,257,594 | -1,855 | 1,255,739 |
Total equity
82
48
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2020
p.104 | 22. Personnel-related provisions | |
A -General information and legal | (employee benefits) | |
bases | p.110 | 23. Provisions |
E-
p.69 p.69 p.72
1. General information
2. Accounting principles
3. Accounting policies and use of discretionary judgments and estimates
B -Information on the structure of
ANDRITZ
p.74 p.75 p.76 p.77
4. Consolidation scope
5. Acquisitions
6. Investments accounted for using the equity method
7. Related parties
C -Result of the year
p.81
p.83
p.86
p.87
p.87
p.87
p.88
8. Segment reporting
9. Revenue
10. Other income
11. Cost of materials
12. Personnel expenses
13. Other expenses
14. Depreciation, amortization, and impairment of intangible assets and property, plant, and equipment
p.88 p.88 p.92
15. Financial result
16. Income taxes
17. Earnings per share
D -Non-current assets and liabilities
p.111
p.112
p.112
p.113
p.113
24. Trade accounts receivable
25. Other receivables and assets
26. Inventories
27. Advance payments made
28. Other liabilities
F -
p.113 p.119 p.119 p.120 p.126 p.131
29. Financial assets and liabilities
30. Investments and other financial assets
31. Cash and cash equivalents
32. Equity
33. Derivatives
34. Risk management - risks relating to financial instruments
G-
p.141
Net working capitalFinancial and capital structure, financial instruments and risk management
Other information
35. Consolidated statement of cash flows
p.143 p.144 p.145 p.145 p.146 p.147
36. Assets held for sale
37. Contingent assets and liabilities
38. Expenses for services by the group auditor
39. Effects of Covid-19
40. Events after the balance sheet date
41. Group companies
p.93 p.95 p.98 p.102
18. Property, plant, and equipment
19. Right of use assets from lease contracts and lease liabilities
20. Goodwill
21. Intangible assets other than goodwill
A) GENERAL INFORMATION AND LEGAL BASES
1. General information
ANDRITZ AG is an Aktiengesellschaft incorporated under the laws of the Republic of Austria and has been listed on the Vienna Stock Exchange since June 2001. The registered office of ANDRITZ AG, the parent company of the ANDRITZ GROUP, is at Stattegger Strasse 18, 8045 Graz, Austria. The ANDRITZ GROUP (the "Group" or "ANDRITZ") is a leading producer of high-technology industrial machinery and operates through four strategic business areas: Pulp & Paper, Metals, Hydro, and Separation.
The consolidated financial statements are prepared under the responsibility of the Executive Board and are acknow- ledged by the Supervisory Board and the Annual General Meeting. On February 19, 2021, the Executive Board approved the consolidated financial statements for the year ending on December 31, 2020.
Various amounts and percentages set out in these consolidated financial statements have been rounded. As a result, totals may differ from the amounts shown. If not stated otherwise, amounts are given in thousands of euros (TEUR).
2. Accounting principles
The financial statements were prepared in accordance with all International Financial Reporting Standards (IFRS) published by the International Accounting Standards Board (IASB) and endorsed by the European Union, whose application have been mandatory for 2020. All interpretations published by the International Financial Reporting Interpretations Committee (IFRIC), which also have to be observed for 2020, have been applied. The consolidated financial statements meet the requirements of section 245a UGB (Austrian Commercial Code) on exempting consolidated financial statements according to internationally accepted accounting standards. Going concern is the basis for accounting and valuation of the assets and liabilities.
a) Standards and interpretations applicable for the first time
ANDRITZ has applied the following new or changed standards issued by the IASB and the interpretations issued by the IFRIC for the financial year beginning on January 1, 2020:
Standard/Interpretation | TitleEffective for annual financial statements for periods beginning on or after | Endorsement by EU |
IAS 1 and IAS 8 | Amendment: Definition of materiality January 1, 2020 | November 29, 2019 |
Amendments to references to the conceptual framework in IFRS Standards January 1, 2020 | November 29, 2019 | |
IAS 39, IFRS 9, and IFRS 7 | Amendment: Interest rate benchmark reform January 1, 2020 | January 15, 2020 |
IFRS 3 | Amendment: Definition of a business January 1, 2020 | April 21, 2020 |
Endorsement by EU
The amendments to IAS 1 and IAS 8 create a uniform definition of the materiality of financial information.
In changing the references to the conceptual framework, the European Financial Reporting Advisory Group (EFRAG) has made editorial adjustments to the previous references to the framework in various standards. This affects IFRS 2, IFRS 3, IFRS 6, IFRS 14, IAS 1, IAS 8, IAS 34, IAS 37, IAS 38, IFRIC 12, IFRIC 19, IFRIC 20, IFRIC 22, and SIC 32.
With the amendment to IFRS 3, the IASB clarifies that a business comprises a group of activities and assets that contain at least one resource input and a substantial process, which together significantly contribute to the ability to produce output.
These changed standards do not have any or no material effect at ANDRITZ.
The amendment to IAS 39, IFRS 9 and IFRS 7 affects the hedge accounting requirements regarding recognition, valuation, and disclosure. The Group has retrospectively applied the changes from the interest rate benchmark reform to the hedging relationships designated after January 1, 2020, insofar as they are affected by the reform.
These changes shall also apply to the profit or loss accumulated in the cash flow hedge reserve. The amendments aim to ensure that accounted hedging relationships can continue despite the expected replacement of various benchmark interest rates for the period of uncertainty. The details of the accounting policies and related disclosures with regard to risks and the accounting for hedging transactions can be found in chapters 33 - Derivates and 34 - Risk management - Risks relating to financial instruments.
b) Standards and interpretations that have been published but not yet applied
The International Accounting Standards Board (IASB) is working on numerous projects that will only have an impact on business years from 2021 onwards. ANDRITZ has not adopted the following accounting pronouncements that have been issued by the IASB, but are not yet effective:
Effective for annual financial statements for periods beginning on or
Standard/Interpretation | Title | after | Endorsement by EU |
IFRS 16 | Amendment: Covid-19 related rent concessions | June 1, 2020 | October 9, 2020 |
IFRS 4 | Amendment: Deferral of IFRS 9 | January 1, 2021 | December 15, 2020 |
IFRS 9, IAS 39, IFRS 7, | Amendment: Interest rate benchmark reform | ||
IFRS 4 and IFRS 16 | (phase 2) | January 1, 2021 | January 13, 2021 |
IAS 16 | Amendment: Proceeds before intended use | January 1, 2022 | open |
IAS 37 | Amendment: Onerous contracts - Costs of fulfilling a | ||
contract | January 1, 2022 | open | |
IFRS 3 | Amendment: Reference to the framework | January 1, 2022 | open |
IFRS 1, IFRS 9, IFRS 16, | |||
IAS 41 | Annual improvements to IFRS (Cycle 2018-2020) | January 1, 2022 | open |
IAS 1 | Amendment: Change in presentation and | ||
Amendment: Disclosure of accounting principles | January 1, 2023 | open | |
IAS 8 | Amendment: Definition of accounting estimates | January 1, 2023 | open |
IFRS 17 | Insurance contracts incl. amendments of IFRS 17 | January 1, 2023 | open |
The amendment to IFRS 16 relating to Covid-19 rental facilities, grant lessees an exemption from the assessment of whether rental concessions granted under the Covid-19 pandemic constitute a leasing modification. The right to use the amendment is not exercised.
The specified expiry of the temporary exemption from the application of IFRS 9 in IFRS 4 has been postponed.
IFRS 4 is not relevant for ANDRITZ.
The interest rate benchmark reform - phase 2 (amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4, and IFRS 16) deals with issues that could affect financial reporting as a result of the interest rate benchmark reform, including the impact of changes in contractual cash flows or hedging relationships resulting from the replacement of an benchmark interest rate with an alternative benchmark interest rate. The amendments provide practical simplification for the basis of the identification of cash flows and hedge accounting. The amendments require additional information on the risks to which the entity is exposed as a result of the interest rate benchmark reform and on the associated risk management activities. The application will have no effect on values reported in 2020 or in previous years. The Group plans to apply the changes from January 1, 2021 and does not expect any material impact on the consolidated financial statements as of now.
The amendment to IAS 16 clarifies that it is not permitted to deduct income from the cost of property, plant, and equipment that arises from the sale of goods that are produced while an item of property, plant, and equipment is brought into operational condition, with the exception of costs for test runs. Analyses done so far do not indicate a significant impact on the financial statements.
The amendment to IAS 37 stipulates that the costs of contract fulfillment comprise of the costs that directly relate to the contract. This includes additional costs for the fulfillment of this contract and allocations of other costs thatare directly related to the fulfillment of contracts. Analyses done so far do not indicate a significant impact on the financial statements.
The amendment to IFRS 3 implies that the standard no longer refers to the 1989 framework concept but to the 2018 framework concept as well as two additions. Contingent assets acquired in a business combination are not to be recognized and an acquirer has to apply IAS 37 or IFRIC 21 instead of the framework concept on business transactions and similar events within the scope of IAS 37 or IFRIC 21 when identifying debts acquired in a business combination.
The annual improvements to IFRS (Cycle 2018-2020) provide clarifications on IFRS 1 - First-time Adoption, IFRS 9 - Financial Instruments, IFRS 16 - Leases, and IAS 41 - Agriculture.
The change in the presentation with regard to IAS 1 affects the adjustment of the assessment criteria for the classification of debt as short-term or long-term. Analyses done so far do not indicate a significant impact on the financial statements. The change in the disclosure of the accounting principles in relation to IAS 1 is intended to support the decision on which accounting policies must be disclosed in the financial statements.
The amendment to IAS 8 clarifies the difference between accounting policies and accounting estimates. The definition of a change in accounting estimates is replaced by a definition of accounting estimates.
IFRS 17 regulates the recognition, valuation, presentation, and information for insurance contracts.
These new or changed standards do not have any or no material effect at ANDRITZ.
c)Changes in accounting policies
Derivatives and hedge accounting
ANDITZ has accounted for existing hedging relationships in accordance with the regulations of IAS 39. In order to better reflect the economic effects of risk management activities, ANDRITZ decided to apply the rules on the accounting treatment of hedging instruments in accordance with IFRS 9 as of January 1, 2020. With regard to the Group's risk management strategy, reference is made to the information in Chapter F - Financial and capital structure, financial instruments, and risk management. Derivatives that do not meet the criteria for hedge accounting according to IFRS 9 are classified and recognized at fair value through profit or loss in accordance with IFRS 9.
Hedging transactions are accounted for in accordance with IFRS 9.6.4. with regard to the requirements for permitted underlyings and hedging transactions as well as the effectiveness of the hedging relationships. The principles of hedge accounting according to IFRS 9 are applied prospectively from the start of the documentation of the hedging relationship. The existing hedge accounting relationships accounted for in accordance with IAS 39 also meet the requirements for hedge accounting in accordance with IFRS 9. Therefore, these hedging relationships can be seen as ongoing hedging relationships in accordance with IFRS 9.7.2.24.
The principles of hedge accounting within IFRS 9 are also used to hedge individual risk components for non- financial underlyings.
Cash flow hedges
In the ANDRITZ GROUP, cashflows from purchase orders and procurement transactions are hedged through foreign currency forwards or foreign currency swaps. This is to hedge future transactions in foreign currency that are expected and likely to occur as part of the project calculation. ANDRITZ uses cash flow hedge accounting to hedge a transaction that is highly probable and hedges itself against future effects in income statement from cash flow fluctuations. In addition, ANDRITZ hedges the interest rate risk of future cash flows from financial liabilities through interest rate swaps.
In connection with the hedging of future cash flows from a recognized receivable or liability or a transaction which is likely to occur in the future, the effective part of the change in fair values is recognized in other comprehensive income and the ineffective part is immediately recognized in the income statement. The Group only records the change in the fair value of the spot component of foreign currency forwards as a hedging instrument in the cash flow hedge reserve. The change in the fair value of the forward element of forward points is accounted for separately as a cost item of the hedging relationship and recorded in the cost of hedging reserve in equity.
If the cash flow hedge results in an non-financial asset or a non-financial liability, the amounts recognized in other comprehensive income become part of the acquisition costs at the time of acquisition of the non-financial asset or the non-financial liability. In all other cases the amounts accrued in equity are recognized in the income statement at the point in time at which the hedged item affects the income statement.
Government grants
Starting with financial year 2020, the presentation in the income statement for grants related to income varies, whether the grant offsets several expense categories or not. Consequently, grants related to R&D activitites are presented as other income, whereas grants related to a specific expense category are credited directly to this expense category. Until financial year 2019, all grants related to income were presented as other income.
The presentation of the prior year' figures was not adjusted, as it primarily included grants for R&D activities only. This kind of government grants is shown as other income in both, the new and the old presentation option.
Due to the Covid-19 pandemic, subsidies for personnel costs were claimed. These grants are presented as a reduction in personnel expenses. More information is presented in chapter 12. Personnel expenses. The reason for the change in the presentation is the increased informative value of the individual expense categories.
3. Accounting policies and use of discretionary judgments and estimates
ANDRITZ describes the accounting policies as well as the use of discretionary judgments and estimates in the respective chapters.
a) Accounting policies
In the respective chapters, the accounting policies are indicated as follows:
ACCOUNTING POLICIES
With the exception of the amendments resulting from the first-time application of new standards in chapter 2. a) Standards and interpretations applicable for the first time and changes described in chapter 2. c) Changes in accounting policies, ANDRITZ has consistently applied all accounting policies described in these consolidated financial statements in all periods presented. The following section describes the general accounting policies:
Consolidation principles
The basis for the consolidated financial statements are the individual financial statements of all fully consolidated companies drawn up by group-wide standards and in accordance with IFRS regulations. Intercompany receivables, liabilities, and internal service charges, including interim results within the Group, were eliminated. The consolidated financial statements were prepared based on uniform accounting principles for comparable business transactions.
Currency translation
The consolidated financial statements are compiled in euros.
Foreign currency transactions
Foreign currency transactions are recorded in the functional currency by applying the exchange rate between the functional currency and the foreign currency at the date of the transaction. Exchange rate differences arising on the settlement of monetary items at rates different from those at which they were initially recorded are recognized in the income statement in the period in which they arise.
Foreign subsidiaries
Foreign consolidated subsidiaries are regarded as foreign operations because they are financially, economically, and organizationally autonomous. Their functional currencies are generally their respective local currencies. Items of the statement of financial position of foreign subsidiaries are translated at year-end rates to the presentation currency (EUR). Expenses and income are translated using the average exchange rates for the year. All resulting translation differences are included in the item "Reserve of exchange differences on translation" in equity.
The major exchange rates used for foreign currency translation are as follows:
In number of units per 1 EUR | Rate at reporting date | Average rate for year | |||
Currency | December 31, 2020 | December 31, 2019 | 2020 | 2019 | |
BRL | Brazilian real | 6.37 | 4.52 | 5.89 | 4.41 |
CAD | Canadian dollar | 1.56 | 1.46 | 1.53 | 1.49 |
CHF | Swiss franc | 1.08 | 1.09 | 1.07 | 1.11 |
CNY | Chinese renminbi yuan | 8.02 | 7.82 | 7.87 | 7.74 |
DKK | Danish kroner | 7.44 | 7.47 | 7.45 | 7.47 |
GBP | British pound | 0.90 | 0.85 | 0.89 | 0.88 |
INR | Indian rupee | 89.66 | 80.19 | 84.64 | 78.84 |
SEK | Swedish kronor | 10.03 | 10.45 | 10.48 | 10.59 |
USD | US dollar | 1.23 | 1.12 | 1.14 | 1.12 |
Average rate for year
4.41
1.49
1.11
7.74
7.47
0.88
1.12
Effects of hyperinflation
Argentina has to be regarded as a hyper-inflationary economy, as the cumulative three-year increase in the Consumer Price Index exceeded 100%. Consequently, ANDRITZ applied the financial reporting in hyperinflationary economies to its subsidiary in Argentina. The impact on the change in accounting is not material.
b) Use of discretionary judgments and estimates
Preparation of the consolidated financial statements requires the management to make discretionary judgments, estimates, and assumptions that can affect the applied accounting policies and the reported amounts of assets, liabilities, income, and expenses. Actual results may differ from these estimates. These as well as underlying assumptions are reviewed regularly. Revisions of estimates are recognized prospectively. The Group has made key assumptions concerning the future and has identified material sources of estimation uncertainties and discretionary judgments.
In the respective chapters, the use of discretionary judgments and estimates is indicated as follows:
SOURCES OF ESTIMATION UNCERTAINTY
AND CRITICAL JUDGMENTS
B) INFORMATION ON THE STRUCTURE OF ANDRITZ
4. Consolidation scope
ACCOUNTING POLICIES
The consolidated financial statements include ANDRITZ AG and those companies it controls directly or indirectly. The Group controls an entity when it is exposed to or has rights to variable returns from its involvement with the entity and has the ability to affect those returns through its power of disposition over the entity. The financial statements of subsidiaries are included in the consolidated financial statements from the date on which control is obtained until the date on which control is lost. Changes in the Group's share in a subsidiary that do not result in a loss of control are accounted for as equity transactions. When the Group loses control over a subsidiary, it derecognizes the assets and liabilities of the subsidiary, any related non-controlling interests, and other components of equity. Any resulting gain or loss is recognized through profit or loss.
In case the influence on the Group's assets, liabilities, financial position, and profit or loss of companies controlled is of minor importance, the decision on including them into the consolidation scope is made based on quantitative and qualitative considerations. The shares in non-consolidated companies are recorded in item "Investments and other financial assets".
The consolidation scope has changed as follows:
2020 | 2019 | |||
Full consolidation | Equity method | Full consolidation | Equity method | |
Balance as of January 1 | 183 | 4 | 190 | 3 |
New foundations | 1 | 1 | ||
Disposals due to a change in consolidation type | -1 | -5 | ||
Mergers and liquidations | -6 | -3 | ||
Balance as of December 31 | 176 | 4 | 183 | 4 |
Thereof attributable to: | ||||
Domestic companies | 7 | 0 | 7 | 0 |
Foreign companies | 169 | 4 | 176 | 4 |
44 companies (2019: 45) controlled by ANDRITZ were not consolidated; 7 associated companies (2019: 8) were not accounted for at-equity because of quantitative and qualitative considerations.
Disposals due to a change in consolidation type
In the financial year 2020, ANDRITZ no longer consolidated ANDRITZ JohnsonFoils Limited, Thailand, due to non- fulfillment of the materiality criteria. The disposal of this subsidiary resulted in a profit of 85 TEUR and is included in the result before interest, income taxes and depreciation.
In the financial year 2019, ANDRITZ no longer consolidated the following companies because of non-fulfillment of the materiality criteria or because of a loss of control:
▪ ANDRITZ Biax SAS, France
▪ ANDRITZ Ritz Pte. Ltd., Singapore
▪ POWERLASE TECHNOLOGIES HOLDINGS LIMITED, United Kingdom
▪ POWERLASE TECHNOLOGIES LIMITED, United Kingdom
▪ Powerlase Technologies Inc, USA
The disposal of these subsidiaries resulted in a gain of 4,826 TEUR and was included in earnings before interest, taxes, depreciation, and amortization (EBITDA) in 2019. The valuation allowance of a loan due from one of these companies is included in the financial result of 2019 and amounted to 6,530 TEUR.
-Read more in Note 41. Group companies.
5. Acquisitions
ACCOUNTING POLICIES
Business combinations are accounted for by applying the acquisition method if the acquired set of activities and assets meets the definition of a business and the Group has gained control. In determining whether a particular set of activities and assets is a business, the Group assesses whether the set of assets and activities acquired includes at least a resource usage and a substantial process and whether the acquired group is able to provide goods or services.
The Group has the option of using a "concentration test" which provides a simplified assessment of whether an acquired set of activities and assets is not a business. The optional concentration test is met, if the fair value of the gross assets acquired is basically concentrated in a single identifiable asset or a group of similar identifiable assets.
The purchase price is offset against the revalued net assets of the acquired company (capital consolidation). In doing so, the values at the acquisition date, which is the date on which control of the acquiree was obtained, are used as a basis. The acquired identifiable assets, liabilities, and contingent liabilities are generally recognized at their fair values irrespective of the extent attributable to non-controlling interests. Application of the acquisition method requires certain estimates and assumptions to be made, especially concerning the fair values of the intangible assets and property, plant, and equipment acquired, the liabilities assumed at the acquisition date, and the useful lives of the intangible assets and the property, plant, and equipment acquired.
Non-controlling interests can be measured either at cost (partial goodwill method) or at fair value (full goodwill method). The choice of method can be made on a case-by-case basis. It is general practice within the ANDRITZ GROUP to use the partial goodwill method.
In step acquisitions, where a company is acquired in several stages, the fair values of the acquired entity's assets and liabilities are measured in accordance with IFRS 3 - Business Combinations at the date on which control is obtained. Any resulting adjustments to the fair value of the existing interest are recognized in profit or loss. The carrying amount of the assets and liabilities already recognized in the statement of financial position is then adjusted accordingly.
In 2020, ANDRITZ GROUP has acquired a 100% stake in Enviroburners Oy, Finland. Enviroburners engages in design, manufacture, and production of burner solutions, such as waste fuel, biofuel and wood dust burners, and project planning, site supervision, and services related thereto. The acquisition expands the product portfolio in the Pulp & Paper business area. The closing of the transaction took place in September 2020. Due to the minor importance for the assets, liabilities, financial position, and profit or loss the company will not be included in the consolidation scope.
ANDRITZ has signed an agreement with Laroche, based in Cours, France, to acquire LM Industries - consisting of Laroche SA and Miltec SA, France. The signing for the acquisition of all Laroche companies and their global business took place in December 2020. The closing of the transaction is expected in the first half of 2021.
SOURCES OF ESTIMATION UNCERTAINTY
AND CRITICAL JUDGMENTS
The first-time inclusion of individual assets acquired and liabilities assumed is based on preliminary values due to time constraints and not yet final valuations. If, within a year after the acquisition date, new and essential information becomes available about facts and circumstances that existed at the acquisition date and that would have led to corrections of the recognized amounts or to additional provisions, the accounting of the acquisitions will be adjusted.
Depending on the type of asset and the availability of information, intangible assets are determined using a suitable valuation method. The fair values of land and buildings are generally determined by external experts or experts in the Group. In addition to the assumptions about the future development of the estimated cash flows, these valuations are also significantly influenced by the discount rates used. Analogous to the assets acquired and liabilities assumed, all available information about the circumstances at the time of acquisition is also used for the initial accounting of contingent purchase price liabilities.
6. Investments accounted for using the equity method
ACCOUNTING POLICIES
Associated companies are those entities, which the Group has significant influence on, but does not have control or joint control over the financial and operating policies.
Joint ventures are entities over which ANDRITZ and one or more parties exercise joint control and have rights to the net assets of the agreement.
Associated companies and joint ventures are accounted for at equity and are initially recorded at cost.
Business
Company | Main office | area | Category | 2020 | 2019 |
Enmas ANDRITZ Pvt. Ltd. | Chennai, India | PP | Associated company | 40.00% | 40.00% |
Viafin Brazil Oy | Teuva, Finland | PP | Associated company | 40.00% | 40.00% |
Freiburg im Breisgau, | |||||
Psiori GmbH | Germany | HY | Associated company | 25.10% | 25.10% |
Smart Press Shop GmbH & Co KG | Stuttgart, Germany | ME | Joint venture | 50.00% | 50.00% |
The summarized financial information for associated companies and joint ventures is shown in an aggregated form because the individual companies can be considered of minor importance. The following overview shows the items of the statement of financial position and the income statement for companies accounted for using the equity method:
(in TEUR) | 2020 | 2019 | ||
Associated | Associated | |||
companies | Joint ventures | companies | Joint ventures | |
DISCLOSURES ON FINANCIAL POSITION | ||||
Assets | 8,199 | 126,675 | 5,714 | 43,077 |
Liabilities | 5,220 | 118,000 | 4,222 | 42,104 |
DISCLOSURES ON THE INCOME STATEMENT | ||||
Revenue | 4,020 | 0 | 3,441 | 0 |
Result for the year | 1,500 | -2,297 | -407 | -27 |
ANDRITZ has the following share of income of companies accounted for using the equity method:
(in TEUR) | 2020 2019 | ||||
Associated companies | Joint ventures | Total Associated companies | Joint ventures | Total | |
Share of net income | 380 | -1,149 | -769 -104 | -13 | -117 |
Share of other comprehensive income | -4 | 0 | -4 0 | 0 | 0 |
Share of total comprehensive income | 376 | -1,149 | -773 -104 | -13 | -117 |
thereof not recognized in the consolidated financial statements | 2 | 0 | 2 8 | 0 | 8 |
thereof recognized in the consolidated financial statements | 374 | -1,149 | -775 -112 | -13 | -125 |
Elimination of interim profit | 0 | -3,560 | -3,560 0 | 0 | 0 |
Result from investments accounted for using the equity method | 374 | -4,709 | -4,335 -112 | -13 | -125 |
Aggregate carrying amount of the shares in com- panies accounted for using the equity method | 4,686 | 778 | 5,464 4,315 | 487 | 4,802 |
2019
Total
Non-recognized losses of the financial year amount to 0 TEUR (2019: 0 TEUR). The cumulative unrecognized losses amount to -988 TEUR (2019: -989 TEUR). They belong entirely to Enmas ANDRITZ Pvt. Ltd. A loan from a company accounted for using the equity method is guaranteed in the amount of 48,927 TEUR (2019: 20,597 TEUR). The equity of the joint venture was increased by a contribution of 5,000 TEUR each by both shareholders.
7. Related parties
Under IAS 24 - Related Party Disclosures, related party transactions have to be disclosed with persons and with entities, as far as they are not already included as consolidated companies in the consolidated financial statements of ANDRITZ AG. The members of the Executive Board and the Supervisory Board have been defined as key management personnel, making them and the close members of their families related parties. The compensation to be disclosed includes the remuneration of the Executive Board and the Supervisory Board.
a) Related entities
In addition to the companies included in the consolidated financial statements, the Group has direct or indirect relations in the ordinary course of business with non-consolidated subsidiaries, associated companies, and joint ventures that are considered related parties of the Group. As the Group's transfer pricing policy provides transfer prices at arm's length, no transactions are conducted that do not comply with market standards. The non-inclusion of non-consolidated entities in the consolidated financial statements has no significant impact on the Group's net assets, liabilities, financial position, and profit or loss.
The extent of business relations with non-consolidated companies, associated companies, and joint ventures is as follows:
(in TEUR) | 2020 | 2019 |
SALES AND OTHER INCOME | 43,987 | 26,080 |
with non-consolidated companies | 9,668 | 23,410 |
with associated companies and joint ventures | 34,319 | 2,670 |
EXPENSES | -21,186 | -20,519 |
with non-consolidated companies | -21,186 | -20,508 |
with associated companies and joint ventures | 0 | -11 |
TRADE AND OTHER RECEIVABLES | 16,494 | 15,172 |
from non-consolidated companies | 16,224 | 15,136 |
Gross amount | 32,896 | 36,640 |
Valuation allowance | -16,672 | -21,504 |
with associated companies and joint ventures | 270 | 36 |
Gross amount | 710 | 476 |
Valuation allowance | -440 | -440 |
LIABILITIES | 6,171 | 8,296 |
to non-consolidated companies | 6,171 | 3,268 |
with associated companies and joint ventures | 0 | 5,028 |
The related companies are mainly sales companies. The joint venture Smart Press GmbH & Co KG is also categorized as a related company, which was founded jointly by Schuler Aktiengesellschaft and Dr. Ing. H. c. F.
Porsche Aktiengesellschaft. The purpose is the highly flexible production of sophisticated chassis parts with pioneering technologies.
b)Related persons
Executive Board
The Executive Board of ANDRITZ AG was composed of five members as of December 31, 2020:
Date of first appointment to Executive
Name | Function | Board | End of current mandate |
Wolfgang Leitner | President & CEO | October 1, 1987 (CFO) | June 28, 2023 |
June 29, 1994 (President & CEO) | |||
Humbert Köfler | Member of the Executive Board | April 1, 2007 | March 31, 2025 |
Norbert Nettesheim | Chief Financial Officer | December 6, 2019 | September 30, 2022 |
Joachim Schönbeck | Member of the Executive Board | October 1, 2014 | September 30, 2022 |
Wolfgang Semper | Member of the Executive Board | April 1, 2011 | March 31, 2024 |
A company controlled by the President and CEO of ANDRITZ AG has ceded operation of a corporate jet aircraft owned by the company to a professional private aviation firm. The related expenses for business trips by the President and CEO and other members of the Executive Board amounted to 195 TEUR in 2020 (2019: 652 TEUR). As of December 31, 2020, a liability to this company amounting to 0 TEUR (2019: 0 TEUR) was recognized in this regard. These and other business relations with companies in which members of the Supervisory Board or the Executive Board of ANDRITZ AG are involved, are conducted at usual market terms and are of minor importance, both individually and collectively.
The chairman of the Executive Board Wolfgang Leitner waived his remuneration as chairman of the Schuler AG Supervisory Board.
Custos Vermögensverwaltungs GmbH owns 25% plus one share, while Cerberus Vermögensverwaltung GmbH holds 0.77%. Some of the shares in these companies are held directly and some indirectly by Custos Privatstiftung and by Wolfgang Leitner, President and CEO of ANDRITZ AG, respectively. Certus Beteiligungs-GmbH, whose shares are owned indirectly by Manile Privatstiftung, holds 5.72%. The Takeover Commission has decided that, pursuant to section 23 (2), line 1 Takeover Act, the shares of Certus Beteiligungs-GmbH are attributable to Custos Privatstiftung.
At its meeting on May 27, 2020, the Supervisory Board resolved the compensation policy of ANDRITZ AG, which includes the principles of determining the compensation of the Executive Board, the Supervisory Board of ANDRITZ AG as well as the executives. The primary goal of the remuneration policy is to promote long -term and sustainable corporate development, above all in the interests of shareholders.
The remuneration of the Executive Board is composed of a fixed and a variable/success-based portion. The amount of the variable portion depends on the net profit. For contracts with members of the Executive Board, the maximum value for the variable annual remuneration was fixed at three times the fixed annual remuneration. Any amounts in excess of this sum will be carried forward as a variable remuneration to the following three years. If the net income of the Group falls short of a defined minimum amount, this results in a "malus" (negative bonus) that is also carried forward to the following years and is a reduction in future variable salary components. If there is a "negative bonus" at the time of leaving, this reduces the entitlements existing upon leaving. The other remunerations relate primarily to taxable benefits in kind for company cars.
Participation in all share option programs for managerial staff and the Executive Board since the Initial Public Offering (IPO), was contingent on investing at least 20 TEUR in ANDRITZ shares for managerial staff and 40 TEUR for members of the Executive Board no later than the allocation date of the options; for the share option program 2020 also at least 5 TEUR for junior executives. This investment must be maintained continuously until exercise of the options by those persons subscribing to the option program and evidence thereof must be brought when the options are exercised. There is a waiting period of three years before options can be exercised if the contract of employment is still in force (exception: end of employment contract as scheduled according to contract provisions).
No advances or loans were granted to members of the ANDRITZ AG Executive Board.
The members of the Executive Board are entitled to receive pension scheme benefits. In addition to a retirement pension, these include benefits in the event of occupational disability as well as pension payments for dependents following the death of the beneficiary. The retirement pension is normally paid from a certain age provided that the employment contract has already been terminated by this date. The administration work has been outsourced to pension funds. Pension contracts are either defined contribution oriented or defined benefit oriented. If the employment contract is terminated prematurely, contributions made up to this point shall still be vested. The pension amount to which the beneficiary is entitled is not subject to an escalation clause before any benefits become payable; after this, annual adjustments can be made to take account of the development in wages and salaries and of ANDRITZ's economic status.
Some members of the Executive Board shall, upon termination of their function and concurrent termination of employment, be entitled to severance payments in the meaning of section 23 of the Austrian Employees Act unless such termination is the result of justified dismissal. Severance payments in the event of premature termination without good cause of activities as member of the Executive Board are provided for in the Executive Board contracts according to section 27 of the Austrian Salaried Employees Act.
The principles applied in establishing the remuneration of the Executive Board and of senior managers comply almost entirely with the Austrian Code of Corporate Governance.
The following expenses have been recognized for the Executive Board:
(in TEUR) | 2020 | 2019 |
Short-term benefits | 8,205 | 7,153 |
Post-employment benefits | 547 | 506 |
Share-based payments | 325 | -657 |
9,077 | 7,002 |
In 2019, the share-based payments include the release of the 2016 management share option program to the income statement due to the non-achievement of the performance conditions.
A provision of 6,031 TEUR in 2020 (2019: 6,660 TEUR) was recorded for pensions of former members of the Executive Board and their dependents. Expenses for these pensions amounted to 81 TEUR in 2020 (2019: 182 TEUR).
ANDRITZ AG took out Directors' and Officers' liability insurance (D&O insurance) for 2020. The policyholder is ANDRITZ AG. The costs are carried by the company. The D&O insurance covers certain personal liability risks of persons in the ANDRITZ GROUP acting under responsibility. The annual costs amount to approximately 290 TEUR (2019: approximately 290 TEUR).
Supervisory Board
The ANDRITZ AG Supervisory Board consists of six appointed members and three delegated members by the employee representative organizations as of December 31, 2020:
Date of first appointment to Executive
Name | End of current mandate | |
APPOINTED MEMBERS | ||
Christian Nowotny | Until the Annual General Meeting | |
in 2022 | ||
Alexander Leeb | Until the Annual General Meeting | |
in 2023 | ||
Wolfgang Bernhard | July 7, 2020 | Until the Annual General Meeting |
in 2025 | ||
Jürgen Hermann Fechter | March 30, 2016 | Until the Annual General Meeting |
in 2021 | ||
Alexander Isola | March 30, 2016 | Until the Annual General Meeting |
in 2021 | ||
Monika Kircher | March 21, 2014 | Until the Annual General Meeting |
in 2023 | ||
DELEGATED MEMBERS | ||
Georg Auer | July 1, 2011 | |
Andreas Martiner | February 14, 2001 | |
Monika Suppan | January 1, 2018 |
Function
Board
Chairman of the Supervisory Board
December 29, 1999
Deputy-Chairman of the Supervisory BoardMarch 27, 2019
Member of the Supervisory BoardMember of the Supervisory BoardMember of the Supervisory BoardMember of the Supervisory Board
Member of the Supervisory BoardMember of the Supervisory BoardMember of the Supervisory Board
The remuneration scheme of the Supervisory Board is composed of a fixed and an attendance-related portion. The fixed portion is a total sum, which is to be distributed such that the chairman of the Supervisory Board receives double the amount and his deputy one-and-a-half-times the amount paid to the other members. The second portion consists of a lump sum fee paid in respect of each meeting that the member attends. Subject to approval by the Annual General Meeting, the Supervisory Board remunerations for the 2020 business year amount to a total of 315 TEUR (2019: 313 TEUR). No Supervisory Board remuneration was paid to the Supervisory Board members delegated by the employee representative organizations.
The chairman of the Supervisory Board, Christian Nowotny, is also a member of the Schuler AG Supervisory Board and received a remuneration amounting to 25 TEUR (excluding attendance fees) for the 2020 business year.
No advances or loans were granted to members of the ANDRITZ AG Supervisory Board. There were no agreements subject to approval between ANDRITZ AG and individual members of the Supervisory Board or companies closely associated with Supervisory Board members.
The law firm Graf & Pitkowitz Rechtsanwälte GmbH, in which the Supervisory Board member Alexander Isola acts as a partner, provided consultancy services as a legal advisor to ANDRITZ AG in the 2020 financial year. These mandates were settled at the respective applicable hourly rates of the law firm. The total volume of fees incurred in the financial year 2020 was around 800 TEUR (2019: 500 TEUR).
C) RESULT OF THE YEAR
8. Segment reporting
a) Business areas
For management purposes, the Group is divided into four business areas on a worldwide basis:
ANDRITZ Pulp & Paper (PP)
ANDRITZ Pulp & Paper provides equipment, systems, complete plants, and services for the production of all types of pulp, paper, board, and tissue. The technologies and services focus on maximum utilization of raw materials, increased production efficiency, and sustainability as well as lower overall operating costs. Boilers for power generation, flue gas cleaning systems, plants for the production of nonwovens and panelboard (MDF) as well as recycling and shredding solutions for various waste materials also form a part of this business area. State -of-the- art IIoT technologies as part of Metris digitalization solutions complete the comprehensive product offering.
ANDRITZ Metals (ME)
ANDRITZ Metals is - via the Schuler Group - one of the world's leading suppliers of technologies, plants, and digital solutions in metal forming. The product portfolio also includes automation and software solutions, process know-how, and service. In the metals processing segment, the business area offers innovative and market -leading solutions for the production and processing of flat products, for welding systems and furnaces as well as services for the metals processing industry.
ANDRITZ Hydro (HY)
ANDRITZ Hydro is one of the globally leading suppliers of electromechanical equipment and services for hydropower plants. With over 180 years of experience and an installed fleet of more than 470 GW output, the business area provides complete solutions for hydropower plants of all sizes as well as services for plant diagnosis, refurbishment, modernization, and upgrade of existing hydropower assets. Pumps for irrigation, water supply, and flood control as well as turbo generators are also part of this business area's portfolio.
ANDRITZ Separation (SE)
ANDRITZ Separation provides mechanical and thermal technologies as well as services and the related automation solutions for solid/liquid separation, serving the chemical, environmental, food, mining, and minerals industries. The customized, innovative solutions focus on minimizing the use of resources and achieving highest process efficiency, thus making a substantial contribution towards sustainable environmental protection. In addition, the business area offers technologies and services for the production of animal feed and biomass pellets.
These strategic business areas form the basis of the internal reporting structure to the Executive Board as the key decision maker. The accounting and valuation principles of the individual segments are the same as those of the Group. The segment Separation also contains the Feed & Biofuel Technologies business area for which the Executive Board obtains a separate reporting. As the thresholds of the Feed & Biofuel Technologies business area are below the limits, both business areas are condensed to one reportable segment. According to the internal reporting structure, all sales and all direct and indirect expenses (including overhead and administrative costs) are allocated to business areas and reflect the management structure of the organization and the predominantsources of risks and opportunities. The key measure of operating performance for the Group is Earnings Before Interest, Taxes, and Amortization (EBITA). There are no substantial intersegmental transactions. All consolidation effects related to the income statement are included in the respective business area.
Business area information
2020
(in TEUR)
PP
ME
HY
Revenue EBITDA EBITA
3,338,9851,420,5011,295,970
Total 644,1286,699,584
SE
Capital expenditure
399,555322,67764,105
Depreciation, amortization, and impairment of intangible assets and of property, plant, and equipment
Result from investments accounted for using the equity method Carrying amount of investments accounted for using the equity method
112,49930
5,520-46,67226,49386,435
98,49061,99029,72538,469
67,50553,69111,49413,951
-4,709778
3714,686
00
571,070 391,686 131,817 251,354 -4,335 5,464
2019
(in TEUR)
PP
ME
HY
Revenue EBITDA EBITA
2,869,4581,636,8611,470,746
Total 696,8316,673,896
SE
Capital expenditure
Depreciation, amortization, and impairment of intangible assets and of property, plant, and equipment
Result from investments accounted for using the equity method Carrying amount of investments accounted for using the equity method
351,393 | -1,516 | 134,087 | 53,598 | 537,562 |
270,991 | -73,822 | 105,877 | 40,118 | 343,164 |
63,327 | 30,783 | 51,727 | 11,246 | 157,083 |
124,561 | 101,791 | 30,722 | 13,480 | 270,554 |
-12 | -13 | -100 | 0 | -125 |
0 | 487 | 4,315 | 0 | 4,802 |
b) Geographical segmentation
The Group's activities are mainly conducted in Europe, North America, South America, China, and Asia (without China). External revenue allocated by geographical segments is based on the location of the customers. There is no revenue from transactions with a single external customer that amounts to 10% or more of the Group's revenue.
Information according to geographical segments
2020
Rest of the
(in TEUR)
EuropeNorth AmericaSouth AmericaAsia (withoutChina
China)world and consoli- dation
External revenue Non-current assets Capital expenditure
2,279,1911,302,2971,237,104
822,637
831,596
867,78978,223
246,40618,011
74,8426,156
159,68624,906
34,8014,076
Total 226,7596,699,584 816,3462,199,870
445
131,817
2019
(in TEUR)
EuropeNorth AmericaSouth AmericaAsia (withoutChina
China)Rest of the world and consoli- dation
External revenue Non-current assets Capital expenditure
2,327,4191,416,581
770,640
979,297
899,055
879,27781,420
272,76336,504
86,97711,995
162,31217,843
42,5327,122
Total 280,9046,673,896 968,1742,412,035
2,199
157,083
Non-current assets (as reportet internally) consist of property, plant, and equipment, goodwill, intangible assets as well as other non-current receivables and assets. Investments accounted for using the equity method, investments and other financial assets as well as deferred tax assets are not part of the non-current assets, reported above.
External revenue in Europe includes an amount of 152,926 TEUR (2019: 169,800 TEUR) recognized in Austria. Non-current assets of 321,880 TEUR (2019: 319,725 TEUR) are located in Austria.
9. Revenue
ACCOUNTING POLICIES
Revenue includes all income resulting from the typical business activities of the ANDRITZ GROUP and is recognized in accordance with IFRS 15 from contracts with customers. Accordingly, ANDRITZ recognizes revenue when control of a promised product or service is transferred to a customer. The rules of IFRS 15 are implemented as part of the 5-step model: the model starts with the identification of the contract with the customer, followed by the identification of separate performance obligations. According to this, separately identifiable services as well as bundles of products and services are to be separated. In the third step, the transaction price is determined. The transaction price is the amount of the consideration to which the supplying company is entitled as expected in exchange for the goods or services supplied. Subsequently, the transaction price is allocated to the identified performance obligations. In the last step, the revenue is recognized when the performance obligation is satisfied. Revenue is recognized either over time or at a point in time.
The large majority of revenues at ANDRITZ are recognized over time. Revenue is recognized over time in accordance with performance progress using input- or output-oriented methods. Projects that are recognized over time are characterized by individual contract terms with fixed prices. The performance progress is measured mainly by the input-oriented method ("cost-to-cost method"). In applying the cost-to-cost method, revenue and project margins are recorded relative to the ratio of accumulated costs to the estimated total costs to complete. Changes of the total estimated project costs and losses, if any, are recognized in the income statement for the period in which they incur. For technological and financial risks that might occur during the remaining project period, an amount individually assessed for each project is included in the estimated project costs. Impending losses on the valuation of projects not yet completed are recorded when it is probable that the total project costs will exceed the revenue. For expected costs of warranty, provisions are recorded in accordance with the profit realization. Upon completion of a project, the remaining warranty risk is reassessed.
If the criteria set forth in IFRS 15 for revenue recognition over time are not met, the revenue is recognized at a point in time. At ANDRITZ, a customer obtains control over a promised product or service mainly when the asset is accepted or when the risks and rewards of ownership are transferred.
Contract balances
In case advance and progess payments received from customers exceed the performance progress for contracts with the revenues recognized over time, contract liabilities from revenues recognized over time are recorded, otherwise contract assets are recognized. Advance payments received from customers for contracts recognized at a point in time are presented as item "contract liabilities from sales recognized at a point in time" in the statement of financial position.
Contract assets and contract liabilities are within the ordinary business cycle of ANDRITZ and are reported as current assets or liabilities, respectively. Amounts originally recorded as contract assets are reclassified to trade receivables at the time when invoiced to customers. In case several contracts with a customer are to be combined into one package, the contract assets and contract liabilities are netted.
a)
Nature of products and services, timing of satisfaction of performance obligations, and significant payment terms
ANDRITZ is a supplier of plants, equipment, and services for the pulp and paper industry (Pulp & Paper), the metalworking and steel industries (Metals), hydropower stations (Hydro), and for solid/liquid separation in the municipal and industrial sectors as well as for animal feed and biomass pelleting (Separation).
- Read more in Note 8. Segment reporting.
Within capital sytems, ANDRITZ fulfills the performance obligations using the input-oriented method (cost-to-cost method) if the conditions for the revenue recognition over time according to performance progress are met. Within capital systems, the criteria for revenue recognition over time are on the one hand the fact that there is no alternative use and on the other hand, that ANDRITZ has an enforceable right to payment for performance completed to date (costs plus an appropriate margin). If the criteria according to IFRS 15 for revenue recognition over time are not met, the performance obligations are met at a point in time, as soon as a customer obtains control over a promised product or service. This is especially the case when the asset is finally accepted. Payments and down payments of customers are made - depending on the content of the contract - already before the project starts and/or in regular intervals or after reaching certain milestones.
In the service business, ANDRITZ basically fulfills the performance obligations with simultaneous use by the customer while the service is rendered. Revenue is recognized over time. For services on site at the customer's premises, repairs or maintenance with a short runtime or execution time, the revenue is recognized at a point in time. The invoicing of services by ANDRITZ and the payment by the customer are made on a regular basis.
Invoices are issued in accordance with the terms and conditions of the contract, whereby the terms of payment depend, among other things, on the country risk or customer credit risk.
With regard to the satisfaction of the performance obligations, it is evaluated whether two or more contracts with customers are to be combined into one performance obligation or whether one contract with a customer is to be divided into several performance obligations. If a contract is divided into several performance obligations, the total consideration is allocated to the respective performance obligations based on the estimated stand-alone selling prices. Since ANDRITZ's products and services predominantly represent customer-specific solutions, the stand- alone selling prices are mainly the expected costs plus a margin. Contracts with customers may also contain variable components such as bonuses, contractual penalties or other claims from the customer or from ANDRITZ. Variable consideration is taken into account to the extent that they are most likely to occur.
In the financial year 2020, there were neither contracts nor financing commitments implied by terms of payment, which have significant financing components.
For projects with contractually agreed standardized warranty services ("assurance-type-warranty"), ANDRITZ recognizes provisions in accordance with revenue recognition. In exceptional cases where an additional warranty, beyond the standard ("service-type-warranty") is contractually agreed upon, a separate performance obligation arises, to which part of the contingent consideration is attributed.
b) Disaggregation of revenue
The following table shows the external revenue of ANDRITZ by the reported business areas:
Pulp & Paper Metals | Hydro | Separation | Total | ||||||
(in TEUR) | 2020 | 2019 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 |
REGIONS | |||||||||
Europe | 1,012,671 | 936,871 651,028 | 696,408 | 412,176 | 473,267 | 203,316 | 220,873 | 2,279,191 | 2,327,419 |
North America | 541,565 | 613,207 339,117 | 349,860 | 236,017 | 271,769 | 185,598 | 181,745 | 1,302,297 | 1,416,581 |
South America | 1,071,426 | 568,866 24,104 | 47,062 | 80,255 | 91,798 | 61,319 | 62,914 | 1,237,104 | 770,640 |
Asia (without China) | 366,889 | 335,029 56,584 | 91,637 | 324,183 | 374,559 | 83,940 | 97,830 | 831,596 | 899,055 |
China | 288,805 | 314,730 334,125 | 436,928 | 119,768 | 126,963 | 79,939 | 100,676 | 822,637 | 979,297 |
Others | 57,629 | 100,754 15,543 | 14,966 | 123,571 | 132,390 | 30,016 | 32,793 | 226,759 | 280,904 |
3,338,985 | 2,869,458 1,420,501 | 1,636,861 | 1,295,970 | 1,470,746 | 644,128 | 696,831 | 6,699,584 | 6,673,896 | |
TIMING OF REVENUE RECOGNITION | |||||||||
Over time | 2,126,633 | 1,595,905 940,533 | 1,028,403 | 1,042,302 | 1,177,771 | 231,733 | 247,694 | 4,341,201 | 4,049,773 |
At a point in time | 1,212,352 | 1,273,553 479,968 | 608,458 | 253,668 | 292,975 | 412,395 | 449,137 | 2,358,383 | 2,624,123 |
3,338,985 | 2,869,458 1,420,501 | 1,636,861 | 1,295,970 | 1,470,746 | 644,128 | 696,831 | 6,699,584 | 6,673,896 | |
REVENUE CATEGORIES | |||||||||
Capital systems | 1,998,518 | 1,434,293 1,083,900 | 1,197,402 | 837,471 | 994,305 | 336,999 | 381,626 | 4,256,888 | 4,007,626 |
Service | 1,340,467 | 1,435,165 336,601 | 439,459 | 458,499 | 476,441 | 307,129 | 315,205 | 2,442,696 | 2,666,270 |
3,338,985 | 2,869,458 1,420,501 | 1,636,861 | 1,295,970 | 1,470,746 | 644,128 | 696,831 | 6,699,584 | 6,673,896 |
Total 2019
c) Contract balances
ANDRITZ recognizes contract assets in the context of revenue recognition over time in case the performance progress exceeds advance payments received from customers. In the financial year 2020, cumulative impairment on contract assets was reduced by 471 TEUR (2019: was reduced by 617 TEUR). Due to acquisitions, contract assets increased by 0 TEUR (2019: 13,840 TEUR). Amounts originally presented as contract assets are reclassified to trade receivables at the time when rights become unconditional. This usually happens when the invoice is issued to the customer.
Advance payments received from customer contracts with revenue recognition at a point in time are presented as contract liabilities from revenue recognized at a point in time. Advance payments received from customer contracts with revenue recognition at a point in time are generally recognized as sales in the subsequent fiscal year.
If advance payments received from customer contracts with revenue recognition over time exceed the performance progress, contract liabilities from sales recognized over time are recorded.
Revenue recognized in the reporting period that was included in the contract liabilities from sales recognized over time at the beginning of the period amounted to 830,050 TEUR (2019: 724,276 TEUR). Due to acquisitions, contract liabilities increased by 0 TEUR (2019: 26,208 TEUR).
Cumulative catch-up adjustments to revenue, including adjustments arising from a change in the measure of progress, a change in an estimate of the transaction price or a contract modification as well as revenue recognized in the reporting period from performance obligations (partially) satisfied in previous periods amount to less than one percent of the total revenue of a fiscal year.
d) Transaction price assigned to the remaining performance obligations
The following overview shows the order backlog as of December 31, 2020 with expected revenue recognition in the following periods:
(in TEUR) 2021 | 2022 and later Total |
Pulp & Paper 1,933,985 | 657,002 2,590,987 |
Metals 970,503 | 211,057 1,181,560 |
Hydro 1,110,146 | 1,477,842 2,587,988 |
Separation 393,751 | 19,744 413,495 |
4,408,385 | 2,365,645 6,774,030 |
Total
ANDRITZ has not made use of the practical expedient in accordance with IFRS 15.121.
e) Contract costs
ANDRITZ assumes that sales commissions paid to intermediaries as a result of concluding the contract are eligible for reimbursement. At ANDRITZ, all contract costs can be attributed directly to the contract initiation. The capitalized contract costs are included in the item "Other receivables" and amount to 13,726 TEUR as of December 31, 2020 (2019: 11,614 TEUR). According to the project progress, 4,352 TEUR were amortized in the financial year 2020 (2019: 4,532 TEUR). In the fiscal year, no significant impairment losses were recorded.
SOURCES OF ESTIMATION UNCERTAINTY
AND CRITICAL JUDGMENTS
Over time revenue recognition is made in accordance with performance progress using input- or output-oriented methods. The accounting for projects with revenue recognition over time is based on estimations for project costs, expected consideration as well as project risks including technical, political, and financial risks. These estimations are reviewed regularly and adjusted accordingly. Although these estimations are based on all information available on the balance sheet date, substantial changes after the balance sheet date are possible.
The evaluation of whether two or more contracts with customers are to be combined into one performance obligation or whether a contract with a customer must be allocated to several performance obligations requires estimates that may affect the recognition of revenue or profit. Variable consideration is estimated at the most likely amount. Estimates are based primarily on expectations as well as on historical, current, and forecasted information available as of the balance sheet date.
10. Other income
(in TEUR) | 2020 | 2019 |
Government grants | 30,659 | 25,621 |
Profit on disposal of intangible assets and property, plant, and equipment | 10,955 | 8,934 |
Rental income | 9,314 | 8,498 |
Income from scrap material | 5,429 | 5,792 |
Insurance income | 3,903 | 9,452 |
Exchange rate gains | 0 | 3,096 |
Miscellaneous | 25,677 | 34,808 |
85,937 | 96,201 |
The presentation for grants related to income varies, whether the grant offsets several expense categories or not. Consequently, grants related to R&D activitites are presented as other income, whereas grants related to a specific expense category are credited directly to this expense category.
Miscellaneous other income includes, but is not limited to, income from payments of receivables written off.
11. Cost of materials
(in TEUR) | 2020 | 2019 |
Expenses for raw materials, supplies, and goods purchased | 2,974,286 | 2,574,373 |
Expenses for services purchased | 658,150 | 730,817 |
3,632,436 | 3,305,190 | |
12. Personnel expenses | ||
(in TEUR) | 2020 | 2019 |
Wages and salaries | 1,413,532 | 1,601,154 |
Expenses for social security and others | 283,527 | 316,203 |
Termination expenses | 43,267 | 41,390 |
Pension expenses | 41,722 | 48,781 |
Severance expenses | 8,205 | 7,692 |
1,790,253 | 2,015,220 |
In the financial year 2020, government grants for personnel cost of 28,889 TEUR (2019: 0 TEUR) were recorded as a reduction of expenses.
The number of employees within the ANDRITZ GROUP is as follows:
(headcount) | 2020 2019 |
Employees (as of end of period; without apprentices) | 27,232 29,513 |
Employees (average; without apprentices) | 28,026 29,519 |
2019 | ||
13. Other expenses | ||
(in TEUR) | 2020 | 2019 |
Sales expenses | 214,773 | 195,456 |
Administrative and consulting expenses | 133,153 | 154,693 |
Repairs and maintenance | 105,934 | 112,915 |
Travel expenses | 87,674 | 176,345 |
Expenses for energy and water | 43,455 | 46,720 |
Insurance premiums and charges | 38,770 | 41,127 |
Rents and lease expenses | 30,040 | 32,322 |
Other taxes and charges | 23,282 | 22,546 |
Bank charges, guarantees, and similar expenses | 22,079 | 22,331 |
Exchange rate losses | 11,662 | 0 |
Expenses for valuation allowance and bad debt losses for receivables | 11,066 | 9,611 |
Miscellaneous | 43,488 | 69,846 |
765,376 | 883,912 |
Miscellaneous other expenses include, but are not limited to, expenses for further training of employees and expenses for industrial patents, rights, and licenses.
14. Depreciation, amortization, and impairment of intangible assets and property, plant, and equipment
(in TEUR) | 2020 | 2019 |
Intangible assets other than goodwill | ||
Amortization | 69,112 | 82,507 |
Impairment losses | 9,583 | 89 |
Property, plant, and equipment | ||
Depreciation | 161,904 | 168,688 |
Impairment losses | 11,355 | 19,270 |
Reversal of impairment losses | -600 | 0 |
251,354 | 270,554 |
Impairment losses on intangible assets were mainly recorded for customer relationships and technologies in Germany and Chile. The main impairment losses on property, plant, and equipment were recognized for buildings in Germany. These impairment losses are attributable to the Metals and Hydro business areas.
15. Financial result
The financial result comprises the following:
(in TEUR) | 2020 2019 |
Result from investments accounted for using the equity method | -4,335 -125 |
Interest income | 17,061 21,246 |
Interest expense | -46,194 -69,267 |
Other financial result | -710 -8,824 |
-34,178 -56,970 |
2019 125
Interest expense contain 5,854 TEUR (2019: 8,939 TEUR) for interest expense on obligations for pensions, severance payments, and jubilee payments as well as expected return on plan assets and interest expense on leases of 5,096 TEUR (2019: 5,541 TEUR).
The item "Other financial result" includes gains and losses from disposal of securities of -30 TEUR (2019: -186 TEUR), and exchange rate gains and losses on loans and cash accounts of 1,278 TEUR (2019: -3,694 TEUR), as well as dividend income from investments of 1,583 TEUR (2019: 3,092 TEUR). The prior year's figures included an amount of 6,530 TEUR, a one-time effect due to the impairment of a loan from an entity deconsolidated.
16. Income taxes
ACCOUNTING POLICIES
Income taxes include current and deferred taxes. Current and deferred taxes are recognized in profit or loss except to the extent that the taxes are related to a business combination or to items recognized in other comprehensive income. Current taxes comprise the expected tax due (or tax receivable) on the taxable income (or the tax loss) for the financial year based on the income tax rates applicable respectively and all adjustments to the tax debt in respect of previous years. Actual tax liabilities also contain all tax debts arising as a result of dividends being declared. Current tax receivables and liabilities are offset if a legal right exists towards a tax authority to settle on a net basis. In the case of values determined in tax statements that cannot be realized the expected effects of these uncertain tax positions are considered.
Deferred taxes are recognized in respect of temporary differences between the net book value of assets and liabilities in the IFRS consolidated financial statements and their tax bases at the level of the subsidiaries.
Deferred taxes are not recognized for
▪ taxable temporary differences in the initial recognition of goodwill
▪ temporary differences in the initial recognition of assets or liabilities in a business transaction which is not a business combination and affects neither the accounting profit nor the taxable profit
▪ temporary differences in connection with shares in subsidiaries, associated companies, and joint ventures provided that the Group is able to control the timing of the reversal of the temporary difference and it is likely that the temporary difference will not be reversed in the foreseeable future.
Deferred taxes are measured in accordance with the tax rates (and tax regulations) applicable on the balance sheet date or which have essentially been passed as law and are expected to be applicable on the date when the deferred tax credits are realized or deferred tax liabilities are settled. A deferred tax asset is recognized for unused tax losses, unused tax credits, and deductible temporary differences to the extent that it is probable that future taxable profit will be available against which it can be utilized. Deferred tax assets are assessed at every reporting date and reduced to the extent to which it is no longer likely that the related tax advantage will be taken of.
Provided that the deferred taxes relate to the same taxable entity and the same tax authority as well as that there is also a legally enforceable right to offset actual tax receivables against actual tax liabilities, deferred tax assets and liabilities are offset.
Within the ANDRITZ GROUP, a tax group according to section 9 KStG 1988 (Austrian Corporate Tax Act) consists of ANDRITZ AG as head, ANDRITZ HYDRO GmbH as a domestic member as well as OTORIO LTD, Israel, and ANDRITZ DELKOR (Pty) Ltd., South Africa, as foreign members. A tax compensation agreement was concluded.
Furthermore, several fiscal unities between selected affiliated companies availing of profit and loss absorption agreements exist in Germany. In addition, comparable tax groups exist in the USA, United Kingdom, France, Italy, and the Netherlands.
Income taxes comprise the following:
(in TEUR) | 2020 | 2019 |
Current taxes | -133,665 | -85,384 |
Deferred taxes | 56,519 | 27,221 |
-77,146 | -58,163 |
The reconciliation of the calculated income tax expense to the effective tax expense is depicted below. The calculated tax expense in the amount of 70,216 TEUR is determined by multiplying the Earnings Before Taxes in the amount of 280,864 TEUR by the applicable tax rate of 25% for ANDRITZ AG:
(in TEUR) | 2020 | 2019 |
Earnings Before Taxes (EBT) | 280,864 | 180,916 |
Calculated tax expense (25% in 2020 and 25% in 2019) | -70,216 | -45,229 |
Increase (-)/Decrease (+) of tax expense by: | ||
Non-tax-deductible expenses | -21,135 | -11,747 |
Tax allowances and tax-exempted income | 12,924 | 8,715 |
Foreign tax rate differential arising from foreign fiscal jurisdictions | 14,095 | 4,958 |
Effects of changes in tax rates | -1,425 | -1,236 |
Taxes for prior years | 6,404 | 23,513 |
Change in valuation allowance; non-recognition of deferred tax assets | -5,970 | -25,781 |
Non-deductible impairment of goodwill | -1,304 | -7,731 |
Non-allowable withholding taxes; foreign operating site taxes | -11,634 | -9,236 |
Tax-exempted income from changes in consolidation scope | 0 | 1,320 |
Others | 1,115 | 4,291 |
Effective tax expense | -77,146 | -58,163 |
in % of EBT | -27.5% | -32.1% |
The nominal income tax rates applicable for subsidiaries abroad are between 9.0% and 34.0% (2019: 9.0% and 34.0%) in the financial year.
The changes of deferred taxes in the statement of financial position are as follows:
(in TEUR) | 2020 | 2019 |
Deferred tax assets | 179,457 | 167,157 |
Deferred tax liabilities | -159,662 | -184,368 |
Balance as of January 1 | 19,795 | -17,211 |
Deferred taxes recognized in income statement | 56,519 | 27,221 |
Deferred taxes recognized in other comprehensive income | -4,869 | 9,618 |
Changes in consolidation scope | -71 | -667 |
Currency translation adjustments | -8,638 | 834 |
Balance as of December 31 | 62,736 | 19,795 |
Thereof: | ||
Deferred tax assets | 207,750 | 179,457 |
Deferred tax liabilities | -145,014 | -159,662 |
The following deferred tax assets and liabilities are the result of the following temporary valuation differences between the book values of the consolidated statement of financial position according to IFRS and the relevant tax bases as of December 31:
2020 2019 | |||||
(in TEUR) | Germany | USA | Others Germany | USA | Others |
Corporate income tax | 298,523 | 108,853 | 309,761 227,073 | 180,332 | 343,951 |
Trade tax | 288,663 | 0 | 0 212,246 | 0 | 0 |
2020 | ||
Deferred taxes | ||
(in TEUR) | Assets | Liabilities |
Intangible assets other than goodwill | 7,652 | -50,869 |
Property, plant, and equipment | 8,509 | -89,105 |
Financial assets | 8,427 | -3,060 |
Inventories | 228,435 | -3,292 |
Receivables and other assets | 86,995 | -188,409 |
340,018 | -334,735 | |
Provisions | 147,518 | -17,144 |
Liabilities | 142,306 | -251,038 |
289,824 | -268,182 | |
Tax loss carry forwards | 199,197 | 0 |
Deferred taxes before non-recognition and netting | 829,039 | -602,917 |
Non-recognized deferred tax assets | -163,386 | 0 |
665,653 | -602,917 | |
Netting | -457,903 | 457,903 |
Net deferred tax assets and liabilities | 207,750 | -145,014 |
2019 | ||
Deferred taxes | ||
Assets | Liabilities | |
5,525 | -73,990 | |
12,812 | -99,734 | |
6,675 | -4,947 | |
216,822 | -3,009 | |
80,952 | -163,452 | |
322,786 | -345,132 | |
137,052 | -25,442 | |
105,133 | -209,092 | |
242,185 | -234,534 | |
210,204 | 0 | |
775,175 | -579,666 | |
-175,714 | 0 | |
599,461 | -579,666 | |
-420,004 | 420,004 | |
179,457 | -159,662 | |
On the balance sheet date, the loss carry forwards (gross values) are as follows: | ||
2019 | ||
Others | ||
0 | ||
Non-recognition of deferred tax assets apply to the following (gross values): | ||
(in TEUR) | 2020 | 2019 |
Deductible temporary differences | 146,618 | 114,333 |
Tax loss carry forwards | 460,808 | 549,833 |
The unrecognized tax loss carry forwards (gross values) include an amount of 11,376 TEUR (2019: 15,541 TEUR), which are subject to expiration within the next five years. Tax groups in Germany avail of frozen loss carry forwards for corporate income tax of 2,704 TEUR (2019: 10.422 TEUR) and for trade tax of 3,195 TEUR (2019: 7,860 TEUR).
The deductible temporary partial write-downs (amounts for outstanding sevenths from tax write-downs on investments) calculated in accordance with Austrian tax law amounted to 1,826 TEUR (2019: 2,703 TEUR). For this amount, deferred tax assets of 456 TEUR (2019: 676 TEUR) were recognized.
Regarding investments in subsidiaries, branches, and associated companies as well as in interests in joint arrangements no deferred tax liabilities were recognized for temporary differences in the amount of 306,538 TEUR (2019: 266,755 TEUR).
SOURCES OF ESTIMATION UNCERTAINTY
AND CRITICAL JUDGMENTS
Estimates of the future realization of deferred tax assets are decisive in assessing the recognition and recoverability of deferred tax assets. This realization is dependent on the generation of future taxable profits during the periods in which taxable temporary differences reverse and tax loss carryforwards can be utilized. This assessment takes account of the probability of the deferred tax liabilities being reversed as well as the future taxable profits. It could have adverse effects on the assets, financial, and earnings situation, if the actual results deviate from these estimates or if these estimates need to be adjusted in future periods. Effects of uncertain tax positions include the best estimation of the expected tax payment. In the future, new information could be available causing the management to change the assumptions.
17. Earnings per share
Basic earnings per share (as stated subsequently in the consolidated income statement) were calculated by dividing the net income attributable to owners of the parent by the weighted average number of ordinary shares outstanding during the period.
Diluted earnings per share were calculated by dividing the net income attributable to owners of the parent by the weighted average number of ordinary shares outstanding with consideration of share options.
(in TEUR) | 2020 | 2019 |
Net income attributable to owners of the parent | 207,120 | 127,804 |
Weighted average number of no-par value shares | 99,470,414 | 100,411,757 |
Effect of potential dilution of share options | 0 | 0 |
Weighted average number of no-par value shares and share options | 99,470,414 | 100,411,757 |
Basic earnings per no-par value share (in EUR) | 2.08 | 1.27 |
Diluted earnings per no-par value share (in EUR) | 2.08 | 1.27 |
D) NON-CURRENT ASSETS AND LIABILITIES
18. Property, plant, and equipment
ACCOUNTING POLICIES
Property, plant, and equipment are measured at cost less accumulated depreciation and any accumulated impairment losses. When an asset is sold or retired, its cost and accumulated depreciation are removed from the accounts and any resulting gain or loss is included as other income or as other expenses in the income statement. The cost of property, plant, and equipment comprises its purchase price including import duties and non- refundable purchase taxes as well as any directly attributable costs of bringing it to the appropriate location for its intended use and putting the asset into working condition. The production costs of self -constructed assets contain direct material and production costs as well as adequate indirect material and production costs. Expenditure incurred after the fixed assets have been put into operation, such as maintenance and repair, is charged to the income statement in the period in which the costs are incurred.
Assets under construction are items of property, plant, and equipment not yet ready for use and are stated at cost.
Depreciation is calculated on a straight-line basis predominantly using the following estimated useful lives:
Buildings | 20 - 50 years |
Technical equipment and machinery | 4 - 10 years |
Tools, office equipment, and vehicles | 3 - 10 years |
The useful lives and the depreciation method are reviewed periodically to ensure that these are consistent with the expected pattern of economic benefits from items of property, plant, and equipment.
Property, plant, and equipment are reviewed for impairment losses whenever events or changes in circumstances indicate that the net book value of an asset may be higher than the amount recoverable (the higher amount of fair value less costs to sell and value in use of an asset or of a cash generating unit). Whenever the net book value of an asset exceeds its recoverable amount, an impairment loss is recognized. Recoverable amounts are estimated for individual assets or, if this is not possible, for the cash generating unit.
Government grants
Government grants related to assets are deducted from the cost of the asset.
Borrowing costs
Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are generally capitalized as part of the cost of the asset. All other costs of borrowing are expensed in the period in which they are incurred.
Property, plant, and equipment is as follows:
Other | |||||
equipment, | |||||
Technical | factory and | ||||
Land and | equipment and | office | Assets under | ||
(in TEUR) | buildings | machinery | equipment | construction | Total |
COST | |||||
Balance as of December 31, 2018 | 787,921 | 897,810 | 212,488 | 46,364 | 1,944,583 |
Change in accounting policies | 203,140 | 5,942 | 19,619 | 0 | 228,701 |
Additions | 41,351 | 31,793 | 33,662 | 42,791 | 149,597 |
Disposals | -23,437 | -34,375 | -23,269 | -82 | -81,163 |
Reclassification | 18,770 | 22,263 | 4,472 | -45,674 | -169 |
Currency translation adjustments | 7,261 | 2,781 | 574 | 416 | 11,032 |
Changes in consolidation scope | 371 | 812 | -57 | 0 | 1,126 |
Adjustments in the measurement period of IFRS 3 | 718 | -12,323 | -483 | 0 | -12,088 |
Reclassification as held for sale | -2,786 | -20,476 | -1,481 | 0 | -24,743 |
Balance as of December 31, 2019 | 1,033,309 | 894,227 | 245,525 | 43,815 | 2,216,876 |
Additions | 37,324 | 30,207 | 22,593 | 36,426 | 126,550 |
Disposals | -32,049 | -27,777 | -20,160 | -626 | -80,612 |
Reclassification | 9,664 | 23,793 | 3,268 | -37,811 | -1,086 |
Currency translation adjustments | -33,085 | -39,668 | -9,914 | -1,327 | -83,994 |
Reclassification as held for sale | 654 | 779 | -31 | 0 | 1,402 |
Balance as of December 31, 2020 | 1,015,817 | 881,561 | 241,281 | 40,477 | 2,179,136 |
ACCUMULATED DEPRECIATION | |||||
Balance as of December 31, 2018 | -215,688 | -459,430 | -137,331 | 0 | -812,449 |
Depreciation | -58,382 | -74,441 | -35,865 | 0 | -168,688 |
Impairment losses | -5,369 | -13,774 | -128 | 1 | -19,270 |
Disposals | 7,480 | 30,173 | 21,106 | -1 | 58,758 |
Currency translation adjustments | -814 | -812 | -356 | -1 | -1,983 |
Reclassification as held for sale | 0 | 16,229 | 1,087 | 0 | 17,316 |
Changes in consolidation scope | 138 | -176 | 73 | 1 | 36 |
Adjustments in the measurement period of IFRS 3 | -19 | 4,555 | 106 | 0 | 4,642 |
Balance as of December 31, 2019 | -272,654 | -497,676 | -151,308 | 0 | -921,638 |
Depreciation | -58,515 | -69,512 | -33,877 | 0 | -161,904 |
Impairment losses | -6,406 | -4,712 | -237 | 0 | -11,355 |
Reversal of impairment losses | 594 | 6 | 0 | 0 | 600 |
Disposals | 16,258 | 20,352 | 15,171 | 0 | 51,781 |
Currency translation adjustments | 7,317 | 18,837 | 6,346 | 0 | 32,500 |
Reclassification as held for sale | 951 | 30 | 31 | 0 | 1,012 |
Balance as of December 31, 2020 | -312,455 | -532,675 | -163,874 | 0 | -1,009,004 |
NET BOOK VALUE | |||||
Balance as of December 31, 2019 | 760,655 | 396,551 | 94,217 | 43,815 | 1,295,238 |
Balance as of December 31, 2020 | 703,362 | 348,886 | 77,407 | 40,477 | 1,170,132 |
a) Collateral securities |
As of December 31, 2020, property, plant, and equipment amounting to 13,681 TEUR was pledged as collateral security (as of December 31, 2019: 47,846 TEUR).
b) Commitments
The commitments arising from contracts for expenditure on property, plant, and equipment are only within the ordinary scope of business. As of December 31, 2020, these commitments amounted to 19,057 TEUR (as of December 31, 2019: 20,181 TEUR).
c) Borrowing costs
No borrowing costs relating to qualifying assets were capitalized in the financial years 2020 and 2019 as the amounts were immaterial.
d) Government grants
In the 2020 financial year, government grants amounting to 440 TEUR (2019: 334 TEUR) were received for capital expenditure in property, plant, and equipment and were offset against costs.
SOURCES OF ESTIMATION UNCERTAINTY
AND CRITICAL JUDGMENTS
The anticipated useful lives of property, plant, and equipment are subject to critical judgment. If the current estimate of the useful lives differs significantly from the previous ones, these will be adjusted accordingly.
The impairment analyses for property, plant, and equipment are based primarily on estimated future discounted cash flows to be expected from the continued use and disposal of an asset at the end of its useful life. Factors such as lower than anticipated sales and resulting decreases of net cash flows as well as changes in the discount rates used, could lead to an impairment.
19. Right of use assets from lease contracts and lease liabilities
ACCOUNTING POLICIES
A lease is an agreement in which the lessor grants the lessee the right to use an asset for an agreed period in return for one payment or a series of payments. IFRS 16 defines a comprehensive model for the identification of leasing agreements and their treatment in the financial statement of lessees and lessors. Lessees make a distinction between service and leasing. ANDRITZ only records the lease payments on the balance sheet, the service payments are recorded directly as an expense. Lessors distinguish between finance and operating leases.
The lessee records the leases and the associated right of use assets and lease liabilities on the balance sheet. Exceptions for the recognition of leases can be applied. ANDRITZ uses some practical expedients. Leasing contracts that involve an intangible asset are not recorded. This also applies to contracts for assets that are of low value or contracts that have a short term. A uniform discount rate was used for portfolios with similarly structured leasing contracts. Several leasing components and non-leasing components can exist within a contract. ANDRITZ has decided to separate these components and to balance them based on the relative individual selling prices.
Lessee
At inception of a contract, ANDRITZ assesses whether a contract is, or contains, a lease. A lease is a contract, or part of a contract, that conveys the right to control the use of an identified asset for a period of time in exchange for a consideration. The lease term is the non-cancellable period for which a lessee has the right to use an underlying asset plus, if applicable, periods covered by an option to extend the lease if the lessee is reasonably certain to exercise that option and/or periods covered by an option to terminate the lease if the lessee is reasonably certain to not exercise that option.
At initial recognition, ANDRITZ recognizes a lease liability for the obligation to make lease payments in the future and capitalizes a right to use the underlying asset:
▪ The lease liability is measured at present value of the lease payments not paid at the commencement date, discounted by the interest rate implicit in the lease or if not readily determined the incremental borrowing rate. The borrowing rates were determined based on a reference interest rate plus a risk premium.
▪ Lease payments comprise fixed payments, including in-substance fixed payments and variable lease payments that depend on an index or a rate. Variable payments based on the future performance of the asset are not defined as lease payments. Further included are amounts expected to be payable under a residual value guarantee, the exercise price of a purchase option that is reasonably certain to be exercised, lease payments in an optional renewal period if it is reasonably certain to exercise an extension option and penalties for early termination of a lease if it is reasonably certain to terminate early.
▪ The right of use asset is measured at cost and comprises the initial amount of the lease liability adjusted for any advance payments plus initial direct costs incurred and an estimate of costs of dismantling and removing or restoring the underlying asset or the site on which it is located, less any lease incentives received.
At subsequent measurement the right of use asset is depreciated using the straight-line method from the commencement date to the end of the lease term. In case the ownership of the underlying asset is transferred to ANDRITZ at the end of the lease term or the cost of the right of use asset reflects that a purchase option will be exercised, the underlying asset is depreciated until the end of the useful life. The general depreciation rules according to IAS 16 and impairment rules according to IAS 36 are applied.
The lease liability is measured using the effective interest method. A revaluation of the interest rate takes place if the future lease payments change due to an adjustment of the index or the (interest) rate used, the term of the lease or the amounts payable under a residual value guarantee change. When the lease liability is remeasured in this way, the corresponding adjustment is made to the carrying amount of the right of use asset.
Lessor
ANDRITZ only has entered into operating leases as lessor. With operating leasing, the main opportunities and risks associated with the use of the asset remain with the lessor. Leasing income is recorded on a straight -line basis over the term of the respective lease. The initial direct costs involved in negotiating and brokering an operating lease are added to the book value of the leased asset and are recognized on a straight-line basis over the lease term.
a) ANDRITZ as lessee
The Group has entered into various lease agreements for real estate, machinery, vehicles, and other assets as lessee. They are presented in the item property, plant, and equipment shown in the consolidated statement of financial position and comprise the following categories of right of use assets:
(in TEUR) | 2020 2019 |
Land and buildings | 171,064 195,339 |
Cars | 14,617 16,674 |
Technical equipment and machinery | 4,959 5,727 |
Other equipment, factory and office equipment | 2,237 2,382 |
192,877 220,122 |
2019
Additions to the right of use assets amounted to 44,110 TEUR in the financial year 2020 (2019: 47,454 TEUR). Total cash outflow for leases amounted to 53,998 TEUR in the financial year 2020 (2019: 51,524 TEUR).
In the income statement, the following amounts were recorded:
(in TEUR) | 2020 2019 |
Expenses for variable lease payments that were not included in the calculation of the lease liability | 3,598 3,167 |
Expenses for short-term leases that were not included in the calculation of the lease liability | 12,595 14,099 |
Lease expenses on low value assets that were not included in the calculation of the lease liability | 3,552 4,284 |
Interest expenses for lease liabilities | 5,096 5,541 |
Depreciation of right of use assets | 44,407 45,692 |
thereof land and buildings | 32,033 33,604 |
thereof cars | 9,261 8,927 |
thereof technical equipment and machinery | 2,026 1,743 |
thereof other equipment, factory and office equipment | 1,087 1,418 |
2019
The average weighted interest rate on the lease liabilities was at 2.07% during the 2020 financial year (2019: 2.16%) The leasing agreements contain no restrictions on the Group's activities regarding dividends or additional debts. There are no significant subleases under operating and finance leases. Lease payments for leases that the lessee has entered into but have not yet started amount to 176 TEUR in 2020 (2019: 1,963 TEUR).
Information on material leases
Land and Buildings
ANDRITZ leases land and buildings for office space, production, and storage. The leases for land and buildings generally have an average term of 7.4 years in 2020 (2019: 9.1 years). In several cases, leases provide for additional payments based on changes of local price indices.
Some leases for land and buildings contain extension options that the Group can exercise up to one year before the end of the non-cancellable term of the contract. The Group endeavors to include extension options in new leasing contracts if this is practicable to ensure operational flexibility. The extension options held can only be exercised by the Group and not by the lessors. At the start of the lease, the Group assesses whether the exercise of the extension options is reasonably certain. The Group evaluates whether it is possible to exercise the options with sufficient certainty if there is a significant event or change in the circumstances over which it has an influence. The Group estimates that the potential future lease payments, if the extension options are exercised, would lead to a lease liability of 937 TEUR as of December 31, 2020 (2019: 918 TEUR).
Other leases
In the vehicles category, ANDRITZ mainly leases cars for employees with an average leasing period of 4.1 years in the 2020 financial year (2019: 3.6 years). The leased technical equipment includes machinery and other vehicles that are used in factories and warehouses. The usual average contract term for this category of right of use assets is 4.9 years in 2020 (2019: 5.6 years).
In addition, other equipment, factory and office equipment are leased for the use of employees. The usual average contract term for this category of right of use assets is 5.4 years in 2020 (2019: 5.0 years). Many contracts in this category comprise low value items which are expensed immediately.
ANDRITZ monitors the usage of these vehicles and equipment and reviews the estimated amount to be paid as part of the residual value guarantees as of the balance sheet date in order to revaluate the lease liabilities and the right of use assets. As of December 31, 2020 ANDRITZ estimates the expected remaining guarantee amounts are not material.
b) ANDRITZ as lessor
In the financial year 2020, leasing income of 9,314 TEUR (2019: 8,498 TEUR) was recognized. The contracts largely refer to real estate. The future minimum lease payments from the non-cancellable leases are as follows:
(in TEUR) | 2020 2019 |
Not exceeding 1 year | 7,263 6,222 |
1 to 2 years | 3,349 3,381 |
2 to 3 years | 2,874 2,687 |
3 to 4 years | 2,588 2,319 |
4 to 5 years | 2,214 2,319 |
More than 5 years | 8,237 10,141 |
Total undiscounted lease payments | 26,525 27,069 |
2019
SOURCES OF ESTIMATION UNCERTAINTY
AND CRITICAL JUDGMENTS
When applying the appropriate accounting methods for classifying leases, management makes critical judgments.
Impairment tests for right of use assets are mainly based on estimated discounted net future cash flows that can be expected from the continued use of an asset and its disposal at the end of its useful life. Factors such as lower revenue, the resulting lower net cash flows and changes in the discounting factors used can lead to an impairment.
Discretionary decisions are made when interpreting the options and defining the original price of items of low value. The threshold for low value items regading leasing is 5 TEUR.
The determination of the term of the lease is an essential criterion when applying IFRS 16. The useful lives of the right of use assets are usually defined by contract. If not, the expected useful lives of the right of use assets are subject to discretionary decisions and are reviewed periodically. In addition to the usual useful lives of the leased assets, other factors influence the critical judgment. These include extension options, early termination options, additions or extensions to the leased asset and economic effects of contract changes. If the current estimate of the useful lives differs significantly from the previous ones, these are adjusted accordingly.
20. Goodwill
ACCOUNTING POLICIES
Goodwill is measured as the residual of the cost of the business combination after recognizing the acquired identifiable assets, liabilities, and contingent liabilities at fair value. Following a review of the amounts stated, the resulting value from the comparison of cost and fair value of the net assets of the acquired negative goodwill is recognized immediately in the income statement.
Goodwill is not amortized, but tested for impairment. This test is performed at least annually or more frequently if events or changes in circumstances indicate a need for impairment. ANDRITZ performs the annual goodwill impairment test at September 30 of each business year. In determining whether the recognition of an impairment loss is required, goodwill is allocated to the cash generating units that are expected to benefit from the synergies of the business combination. In case the composition of the original cash generating units changes over time due to reorganizations and changes in the reporting structure, the goodwill is reallocated accordingly. If the net book value exceeds the value in use, which is determined by using a discounted cash flow (DCF) calculation, and the fair value less costs of disposal is not higher, an impairment loss is recognized. An impairment loss recognized for goodwill will not be reversed in a subsequent period.
The planning is carried out at the level of each cash generating unit comprising the next three years. Future payment surpluses are based on internal forecasts, which are prepared in detail for the next financial year and with simplifications for the subsequent two years, and reflecting the historical performance and best estimates on future developments. After this detailed planning horizon, a normalized development is assumed.
The discount rate used for the DCF calculation corresponds to that interest rate that represents the current market estimates on the interest rate as well as the specific risks of the asset. A discount rate before tax is applied with consideration of the applicable currency and risk profile.
Goodwill developed as follows:
(in TEUR) | 2020 | 2019 |
COST | ||
Balance as of January 1 | 986,302 | 1,034,378 |
Changes in consolidation scope | 0 | 827 |
Remeasurement from acquisitions | 0 | 16,976 |
Disposals | -4,674 | -71,969 |
Currency translation adjustments | -22,568 | 6,090 |
Balance as of December 31 | 959,060 | 986,302 |
ACCUMULATED IMPAIRMENT | ||
Balance as of January 1 | -209,387 | -249,788 |
Impairment loss | -4,674 | -29,123 |
Disposals | 4,674 | 71,969 |
Currency translation adjustments | 10,355 | -2,445 |
Balance as of December 31 | -199,032 | -209,387 |
NET BOOK VALUE | ||
Balance as of January 1 | 776,915 | 784,590 |
Balance as of December 31 | 760,028 | 776,915 |
Goodwill is allocated to the business areas as follows: | ||
(in TEUR) | 2020 | 2019 |
Pulp & Paper | 356,404 | 366,740 |
Metals | 261,055 | 267,031 |
Hydro | 112,854 | 113,404 |
Separation | 29,715 | 29,740 |
760,028 | 776,915 | |
a) Remeasurement from acquisitions | ||
In the 2020 financial year, no remeasurement in accordance with IFRS 3 was carried out. | ||
b) Impairment loss |
In the 2020 financial year, an impairment loss of goodwill was recorded in the amount of 4,674 TEUR because the business did not develop as expected. The impairment relates to a cash generating unit assigned to the Metals business area. The recoverable amounts of the cash generating units correspond to their values in use. In 2019, impairment losses of 29,123 TEUR were recorded in the Metals business areas.
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Andritz AG published this content on 01 March 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 03 March 2021 08:47:01 UTC.
