Annual Report 2014 - BAUER · Sales revenues 1,219.6 1,344.4 1,402.2 1,375.7 -1.9 % ... new misunderstanding between Russia and the Western world. The events in eastern Ukraine, sanctions

Annual Report 2014

The BAUER Group is an international construction and machinery manufacturing

concern based in Schrobenhausen, Bavaria. The stock market-listed holding

company BAUER Aktiengesellschaft is the parent of more than 110 subsidiary

businesses across its Construction, Equipment and Resources segments. Bauer

is a leader in the execution of complex excavation pits, foundation and vertical

seals, as well as in the development and manufacture of related machinery for

this dynamic market. The Group also deploys its expertise in the exploration,

mining and safeguarding of valuable natural resources. In 2014 the companies

of the BAUER Group employed some 10,400 people in around 70 countries and

achieved total Group revenues of EUR 1.56 billion.

Passion for progress –

The origins of Bauer date back as far as 1790, and still today the company's

success is founded on highly flexible application of the specialist know-how it

has built up over those many years. As an innovator and technology leader,

Bauer has played a major role in the advancement of the international specialist

foundation engineering industry and related busniess fields. Indeed, today Bauer

is also the world market leader in the manufacture of the relevant machinery. It is

with just such innovative strength and a keen focus on the challenges of the future

that the Group is also developing its recently established Resources segment.

The Group at a glance

GROUP KEY FIGURES 2011 – 2014

IFRS in EUR million 2011 2012 2013 ** 2014 Change

2013/2014

Total Group revenues 1,371.8 1,435.8 1,504.2 1,560.2 3.7 %

of which Germany 370.3 378.6 410.4 440.2 7.3 %

International 1,001.5 1,057.2 1,093.8 1,120.0 2.4 %

International in % 73.0 73.6 72.7 71.8 n/a

of which Construction 606.6 655.2 741.7 713.0 -3.9 %

Equipment 636.5 589.1 628.6 651.8 3.7 %

Resources 211.5 262.8 188.9 252.8 33.9 %

Other/Consolidation -82.8 -71.3 -55.0 -57.4 n/a

Consolidated revenues 1,327.1 1,376.1 1,447.5 1,506.0 4.0 %

Sales revenues 1,219.6 1,344.4 1,402.2 1,375.7 -1.9 %

Orders received 1,506.9 1,470.8 1,484.5 1,557.7 4.9 %

Orders in hand 750.0 785.0 765.2 762.7 -0.3 %

EBITDA 164.5 163.8 124.0 171.0 37.9 %

EBITDA margin in % (of sales revenues) 13.5 12.2 8.8 12.4 n/a

EBIT 82.3 72.0 30.1 76.4 n/a

EBIT margin in % (of sales revenues) 6.7 5.4 2.1 5.6 n/a

Net profit or loss 34.1 25.8 -19.4 15.7 n/a

Capital investment in property, plant and equipment 96.6 96.4 91,9 64.1 -30.3 %

Shareholders’ equity 461.0 462.5 419.8 418.9 -0.2 %

Equity ratio in % 30.9 30.2 26.5 26.6 n/a

Net assets 1,491.1 1,529.4 1,585.8 1,575.1 -0.7 %

Earnings per share 1.86 1.44 -0.99 0.85 n/a

Distribution 8.57 5.14 0.00 2.57* n/a

Dividend per share in EUR 0.50 0.30 0.00 0.15* n/a

Return on equity after tax in % 7.7 5.6 -4.2 3.7 n/a

Employees (on average over the year) 9,646 10,253 10,264 10,405 1.4 %

of which Germany 4,065 4,090 4,144 4,158 0.3 %

International 5,581 6,163 6,120 6,247 2.1 %

At variance with the consolidated revenues presented in the Group income statement, the total Group revenues

presented here include portions of revenues from associated companies as well as revenues of non-consolidated

subsidiaries and joint ventures.

* Proposed; subject to the consent of the Annual General Meeting to be held on June 25, 2015

** Previous year adjusted; see notes on page 106

DEVELOPMENT OF TOTAL GROUP REVENUES BY SEGMENT

in EUR million

2011 1,372

2012 1,436

2013 1,504

2014 1,560

Construction Equipment Resources

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CONSTRUCTION SEGMENT KEY FIGURES

in EUR '000 2013 * 2014 Change

Total Group revenues 741,673 713,005 -3.9 %

Sales revenues 657,456 634,096 -3.6 %

Orders received 727,287 665,244 -8.5 %

Orders in hand 498,701 450,940 -9.6 %

EBIT 21,209 25,068 18.2 %

Net profit or loss 5,472 1,858 -66.0 %

Employees (on average over the year) 5,531 5,675 2.6 %

EQUIPMENT SEGMENT KEY FIGURES

in EUR '000 2013 * 2014 Change

Total Group revenues 628,612 651,772 3.7 %

Sales revenues 561,615 545,223 -2.9 %

Orders received 632,053 693,967 9.8 %

Orders in hand 116,525 158,720 36.2 %

EBIT 32,223 36,917 14.6 %

Net profit or loss 5,055 9,513 88.2 %


RESOURCES SEGMENT KEY FIGURES

in EUR '000 2013 * 2014 Change


Sales revenues 182,579 195,860 7.3 %

Orders received 180,054 255,837 42.1 %

Orders in hand 150,020 153,027 2.0 %

EBIT -23,965 15,932 n/a

Net profit or loss -31,444 4,347 n/a

Employees (on average over the year) 1,449 1,400 -3.4 %

* Previous year adjusted; see notes on page 106

BAUER Aktiengesellschaft Annual Report 2014

2 Management Board of the Company

4 Foreword

6 Milestones in the Company's History

8 The World is our Market

10 Highlights 2014

12 Mission and Strategy

15 Combined Management Report

82 The Bauer Share

84 Corporate Governance Report

88 Report of the Supervisory Board

91 Balance Sheet and Income Statement

of BAUER Aktiengesellschaft

in accordance with HGB

95 Consolidated Financial Statements

in accordance with IFRS

180 Assurance by the legal representatives

181 Auditors' Report

182 Glossary

184 Imprint

2

Management Board of the Company

PROF. DR.-ING. E.H. DIPL.-KFM. THOMAS BAUER

(CHAIRMAN)

Prof. Thomas Bauer (born 1955) heads the Participations in

Subsidiaries, Financial Reporting, Planning and Controlling

functions on the Management Board of BAUER Aktien gesell-

schaft.

After studying business economics at the Ludwig Maximilian

University in Munich, he worked in the USA. He joined the

family company in 1982. In 1986 he became sole managing

director of BAUER Spezialtiefbau GmbH and since 1994 he

has been Chairman of the Management Board of BAUER

Aktiengesellschaft.

Prof. Thomas Bauer is President of the German Construction

Industry Confederation, Vice-President of the Confederation

of German Industry (BDI) and Vice-President of the Confed-

eration of Bavarian Industry (vbw) − the Bavarian business

association. He is an honorary professor of the Technical

University in Munich.

Supervisory Board mandates:

• BAUER Spezialtiefbau GmbH, Schrobenhausen

(chairman) ¹

• BAUER Maschinen GmbH, Schrobenhausen

(chairman) ¹

• BAUER Resources GmbH, Schrobenhausen ¹

• SCHACHTBAU NORDHAUSEN GmbH, Nordhausen

(chairman) ¹

• BAUER EGYPT S.A.E., Cairo (chairman) ¹

¹ Supervisory Board mandate within the Group

² Membership of Supervisory Boards or comparable controlling committees of businesses in Germany and abroad according to Section 285 No. 10

of the German Commercial Code (HGB)

3MANAGEMENT BOARD OF THE COMPANY

DIPL.-BETRIEBSWIRT (FH) HARTMUT BEUTLER

Hartmut Beutler (born 1957) is responsible for the Finance,

Legal Affairs and Insurance, and Facility Management functions

on the Management Board of BAUER Aktien gesellschaft.

He studied business economics (specializing in the construction

industry) at Biberach University of Applied Sciences and joined

BAUER Spezialtiefbau GmbH as a trainee in 1983. He later

became deputy head of the company's Accounting depart-

ment and assistant to the Management Board. After working

as head of IT, Facility Management, Legal Affairs and Insurance

at BAUER Spezialtiefbau GmbH, as well as being a company

"Prokurist" (holder of power of attorney), Hartmut Beutler was

appointed to the Management Board of BAUER Aktiengesell-

schaft in 2001.


• BAUER Resources GmbH, Schrobenhausen ¹

• Schrobenhausener Bank e.G. (chairman) ²

DIPL.-ING. HEINZ KALTENECKER

Heinz Kaltenecker (born 1951) is responsible for Partici-

pations in Subsidiaries as well as the Human Resources

and Information Technology functions on the Management

Board of BAUER Aktiengesellschaft. He is also the Labor

Relations Director.

After studying civil engineering at the Technical University

of Karlsruhe, he joined BAUER Spezialtiefbau GmbH in 1978.

He has held a number of senior management posts, including

being managing director of BAUER Spezialtiefbau GmbH

from 2001 to 2007. Heinz Kaltenecker was managing director

of BAUER Resources GmbH from 2007 to 2010. He has

been a member of the Management Board of BAUER Aktien-

gesellschaft since 1997. Heinz Kaltenecker is a board mem-

ber of the German Geotechnical Society and a member of

the Large Construction Companies subcommittee of the

German Construction Industry Confederation.


• BAUER Spezialtiefbau GmbH, Schrobenhausen ¹

• BAUER Maschinen GmbH, Schrobenhausen ¹

• BAUER Resources GmbH, Schrobenhausen (chairman) ¹

• SCHACHTBAU NORDHAUSEN GmbH, Nordhausen ¹

4

Foreword

Dear Shareholders, Partners and Friends of our company,

Ladies and Gentlemen,

In 2014 despite a great deal of turbulence in our markets, we succeeded in achieving our revenue targets. With total Group

revenues of EUR 1.56 billion, we exceeded the previous year's value by 3.7 %. This was not an easy matter, given the numerous

disturbances to our business. We are all the more grateful to our employees for their magnificent work which enabled us to meet

this target.

Over the past decades, our Group has pursued a strategy of increasing internationalization, thereby creating a significant

advantage for itself: we are at home throughout the world. In this way, we can compensate for fluctuations in construction

markets, which are frequently volatile, and develop the Group in a steady manner. Unfortunately, it is sometimes the case that

problems concentrate in different regions to such an extent that we are excessively impacted for a period of time. In that case,

our broad base may also have a detrimental effect temporarily. Nevertheless, we remain totally convinced that our international

presence represents a major advantage in the medium and long terms.

What were the turbulent influences last year? First and foremost, we should identify the conflict in Ukraine that has triggered a

new misunderstanding between Russia and the Western world. The events in eastern Ukraine, sanctions and counter-sanctions

have imposed significant restrictions on business relationships. For our company, that means a severe decline in demand for

our machines especially in Russia.

In Syria and Iraq the Islamic State terrorist group has expanded. For a time, it seemed that the Western world would not be

able to overcome this threat. This situation triggered uncertainty in the neighboring countries, placing further obstacles in the

path of their development. There is no prospect for improvement anytime soon, as a result of which individual markets have

been lost as far as our construction activities are concerned.

From mid-2014 onwards, the oil price came under significant pressure. This will pose problems to Germany as an industrial

location. Although people will be able to fill their fuel tanks for less money, the growth in consumption thus triggered is unlikely

to be able to compensate for expected sales problems to the oil-producing states which are affected by the price drop. The

business prospects for German industrial companies such as ours would worsen if fewer investments were made in these

countries.

In China, the market for construction machinery has slipped totally out of kilter in recent years. As a result of exaggerated

growth expectations for the construction market there, local manufacturers of construction machinery built up enormous

surplus capacity. The equipment produced was then dumped on the markets by means of questionable financing solutions.

Many construction companies could no longer afford the payments, as a result of which large stocks of returned machines

have built up. On the other hand, we were satisfied with our production and sales in China, as we concentrated on large and

special machinery.

It is pleasing to see that many markets are still positive, such as the Far East, or have come back again, such as in the Middle

East. As a result, we succeeded in increasing our revenues in spite of the difficulties.

However, we were unable to achieve the targets for profit after tax that we set in April 2014. In the USA, we did not succeed

in achieving the expected improvement in the major Center Hill Dam project. We had to report significant losses again as a

result of further delays. In the Resources segment, we reorganized the structures and some subsidiaries, as well as closing

5FOREWORD

sites and terminating business. This had an additional detrimental effect on our results. In addition to these factors, one of our

large subsidiaries was fined by the Federal Cartel Office. All in all, this produced a significantly negative result. By means of a

non-operative one-time income, the last predicted profit after tax was able to be achieved nevertheless, with EUR 15.7 million.

The one-time income derives from the sale of shares in our subsidiary in Oman that was built up over recent years and is active

with long-term projects in the environmental area.

In addition to making significant efforts to deal with all these topics, we also devoted a great deal of work during the past year

to preparing the company to face the future even more effectively. A cost-cutting program was implemented in all parts of the

company, which will continue to have positive effects in the future as well. All major investments in our plants were able to be

completed, as a result of which the full attention of our management team is concentrated on markets, products and commercial

processes. This will give us stability for the future in a continuing volatile environment.

The successes of the past year mean that we are looking to the future with confidence. In the area of deep drilling rigs, the

engineering contract agreed in May 2014 with Saxon Energy Services Inc. resulted in the order of two 375 ton rigs in December.

This will present great opportunities in the future as well. Additionally, a sales contract was signed for two already completed

rigs. In the Construction segment, we successfully completed some unique reference projects in the form of the foundation

work for what will be the tallest buildings in the world and Europe, as well as a section of the bridge between Hong Kong and

Macau. In Equipment, many new and continuing developments are improving our chances of selling machines.

Without doubt, years such as 2013 and 2014 are by no means simple for a company and its workforce. Nevertheless, we are

aware of our strengths that will allow us to make significant progress in future. The successes we were able to achieve last

year in spite of great turbulence have confirmed our confidence in our plans for the future. Our company is firmly embedded

in the market of more than 70 countries in the world. The construction processes, equipment and many other activities are

excellently developed, and our company infrastructure has been expanded to a very high level. All stores and service centers

worldwide are networked with one another, and with their functions and flexibility they can meet the complex demands of our

construction operations and our machine customers with outstanding effectiveness.

The current significant fluctuations in markets are not very pleasant for us. However, we can compensate for them well with

our worldwide presence, giving us the opportunity to carry out interesting projects time and time again in diverse regions.

Overall, we see many opportunities in the market, as a result we are planning further growth for 2015.

It is important for us to express our thanks to all our employees, shareholders, customers and partners for the loyalty and

support they provided during the past year. 2014 was characterized not only by successes but also many disappointments,

specifically the development in our share price. We are making intensive efforts to grow the value of the company again. Our

employees in about 80 countries of the world and the entire management team are working with total commitment on bringing

the full strength of the company to bear again.

Sincerely,

Prof. Thomas Bauer

6

Milestones in the Company's History

1958

- Invention of the injection anchor on the construction site of

the Bayrischer Rundfunk building in Munich

1969

- First anchor drilling rig UBW 01

1972

- Construction of the new head office administration block

1975

- First contracts in Libya, Saudi Arabia and the United Arab

Emirates

1976

- First heavy-duty rotary drilling rig BG 7

1984

- Work complex West begins operations; manufacture and

deployment of the first trench cutter

1902

- Drilling of an artesian well for Schrobenhausen railway

station

1928

- Dipl.-Ing. Karl Bauer constructs the Schrobenhausen water

supply system; construction of wells and water pipes

throughout Bavaria

1948

- First works on Wittelsbacherstrasse

1840

- Copper cladding for the steeple roof of St. Jakob's church

in Schrobenhausen

1900

- Start of well drilling by Andreas Bauer

1790

- Sebastian Bauer acquires a coppersmith's shop in the

center of Schrobenhausen; in the 19th century, subse-

quent Bauer generations were engaged in copper work-

ing, primarily for breweries and domestic households

1956

- Dr.-Ing. Karlheinz Bauer, a shareholder in the company

since 1952, becomes sole managing director; construction

of a first office building in Wittelsbacherstrasse

Dipl.-Ing. Karl Bauer (left) turned the company into

an industrial well builder known throughout Bavaria.

Dr.-Ing. Karlheinz Bauer (center) led the company onto

the international stage, taking it into the field of specialist

foundation engineering and launching equipment manu-

facturing operations. Prof. Dr. Dipl.-Kfm. Thomas Bauer

shaped the current global Group, with a network of

operations on every continent.

1790 – 1948 1956 – 1984

7MILESTONES IN THE COMPANY'S HISTORY

1986

- Prof. Thomas Bauer becomes sole managing director

of BAUER Spezialtiefbau GmbH and drives forward the

international growth of the Group

1990

- Founding of BAUER und MOURIK Umwelttechnik GmbH

and of SPESA Spezialbau und Sanierung GmbH

1992

- Takeover of SCHACHTBAU NORDHAUSEN GmbH

2007

- Founding of BAUER Resources GmbH, entailing a

restructuring of the mining and environmental business;

market launch of the three new segments: Construction,

Equipment and Resources

2008

- Expansion of machinery manufacturing capacities in

Aresing and Nordhausen as well as in Tianjin and

Shanghai, China

2009

- The BAUER Group completed the largest investment

program in the company's history: new administration

building in Schrobenhausen, Edelshausen plant,

machinery manufacturing plant in Conroe, Texas, USA

2011

- The first deep drilling rig is sold to South America;

construction of an underwater drilling rig and successful

deployment of it for a tidal turbine off the coast of Scotland

2012

- During the year, the Group's global workforce topped the

10,000 mark for the first time

2013

- Bauma Innovation Prize for an underwater drilling technique

2014

- Execution of the Schwarzkopf Tunnel bypass railway

project in Lower Franconia, the largest project signed in

Germany to date

1986 – 2006 2007 – 2014

1994

- Founding of BAUER Aktiengesellschaft

1998

- Takeover of KLEMM Bohrtechnik GmbH

2001

- BAUER Maschinen GmbH becomes independent company

2002

- Purchase of large machinery manufacturing facility in Aresing

2003 – 2005

- Specialist companies in a variety of fields are acquired

and integrated into the BAUER Group: FWS Filter- und

Wassertechnik GmbH; PRAKLA Bohrtechnik GmbH;

TracMec Srl, Imola, Italy; Pileco, Inc., Houston, Texas, USA

2006

- BAUER AG is listed on the stock market

8

The World is our Market

OVER 110 GROUP COMPANIES

IN MORE THAN 70

COUNTRIES

EUR 1.56 BILLION TOTAL

GROUP REVENUES

10,405 EMPLOYEES FROM 76 NATIONS

9THE WORLD IS OUR MARKET

Construction

Equipment sales

Resources

Equipment production locations

28 PRODUCTION FACILITIES

and many other service centers and construction yards

10

Schwarzkopf Tunnel bypass

Heigenbrücken/Hain i. Spessart,

Germany – In the middle of the

Spessart hills, BAUER Spezialtiefbau

GmbH worked on its biggest ever con-

struction site in Germany from January

to December 2014. In a joint venture,

it carried out the special foundation

work for a new section of the railway

line between Würzburg and Frankfurt.

As part of this, the existing passage

through the Schwarzkopf Tunnel is to

be replaced.

This Schwarzkopf Tunnel is 160 years

old, and is showing its age. ICE trains

can only pass through it at a maximum

speed of 70 km/h. Freight traffic even

requires a second locomotive due to

the steep gradient. As a result, the line

is now being leveled, and this requires

construction of four new tunnels.

The work by Bauer Spezialtiefbau on

the order worth about EUR 43 million

includes the portion of the tunneling

that is not done by mining methods,

but using the open construction

method in several sections over a

length of 2,800 m. In order to prepare

for the mining tunnel work, Bauer

excavated portal pits and shotcrete

walls with a height of up to 30 meters

for a total of ten tunnel entrances and

exits. In addition, there is work such

as soil nailing along the existing tracks

or pile foundations for railway embank-

ments. Several BG 28 and BG 40 rigs,

as well as anchor drilling rigs are being

employed. The main part of Bauer

Spezialtiefbau's work will be completed

in fall 2015.

Longest sea bridge in the world

Hong Kong, China – The special

foundation work subsidiary BAUER

Hong Kong Ltd. was involved in con-

struction of the Hong Kong-Zhuhai-

Macau bridge from April 2013 to

December 2014. It is the world's

longest bridge over open water, and is

currently being built in the Pearl Delta.

The 50 km long connection between

the cities of Hong Kong, Macau and

Zhuhai completes the southern ring

section of a gigantic infrastructure

measure.

Bauer Hong Kong was contracted

by the joint venture, Dragages-China

Harbour-VSL, to manufacture offshore

bored piles for the Hong Kong Link

Road, a ten km long section from the

border between China and Hong Kong

as far as Hong Kong International

Airport. The piles with 2,300 and

2,500 mm diameter are up to 115 m

long, and have been embedded into the

rock to a depth of two to five meters.

Bauer Hong Kong had to undertake all

the work for the EUR 72 million project

from the water – a particular challenge.

Five BG 40 rotary drilling rigs were used

– four of them were custom-built with an

extended mast and larger main winches.

They were transported by ship to steel

platforms, each of which is just large

enough for one rig. In addition, there

were pontoons for four bentonite plants,

300 ton cranes and accessories.

Replacement bore in Coswig

Coswig, Germany – BAUER Umwelt

GmbH carried out a replacement

bore for a customer in Coswig near

to Dresden, from November 2013

to May 2014. Severe contamination

of the ground and groundwater had

been identified on the site of a former

tarpaper factory.

The contaminated soil excavated using

the large bore hole method was placed

in gas-tight containers for transport

to the Hirschfeld soil treatment center

and to disposal sites. A total of about

45,000 tons of soil material were

disposed of. In addition, the water

pumped out was treated in a specially

installed water treatment plant.

Highlights 2014

11HIGHLIGHTS 2014

A BG 40 rig with a large bore diameter

of 2,000 mm was used. More than 400

bores were drilled down to a drilling

depth of 17 m.

The large bore hole method is practically

vibration-free, which means it can be

employed in the immediate vicinity of

sensitive buildings. This fact, combined

with the short construction period,

offered the advantage that production

by the company on site as well as

at neighboring companies was only

inconvenienced to a minor extent.

In-house exhibition 2014

Schrobenhausen, Germany – The

in-house exhibition held from 10 to

13 May in Schrobenhausen proved to

be a veritable highlight. Over four days,

more than 1,700 guests from over

70 countries visited the event to find

out about the innovations and equip-

ment from BAUER Maschinen GmbH

and its subsidiaries.

The large machines were presented

in the courtyard of the head office: the

PremiumLine of the heavy-duty rotary

drilling rigs was represented by three

BG's and the ValueLine by the bestsell-

er BG 26 as well as by a new BG 11 H.

With its compact dimensions and low

weight, it permits easy transport which

makes it particularly appealing for the

oil and gas industry. Bauer Maschinen

presented its 100th MC duty-cycle

crane in the form of the MC 96 – in

combination with a massive Leffer

VRM 3000 casing oscillator. The sub-

sidiaries were also represented by

many interesting innovations.

In the "Old Welding Shop", visitors

were able to find out about further

offers and services. The live presenta-

tions on the plant premises in Aresing

proved to be a particular draw. It was

possible to observe tried-and-tested

machine technology and new develop-

ments in application. Once again on

this occasion, the Bavarian evening

proved to be a highlight and has been

appreciated by customers from far-off

countries for several years now.

Deep drilling rigs sold

Edelshausen, Germany – BAUER Deep

Drilling GmbH, the subsidiary of the

BAUER Group that is specialized in

deep drilling, signed an agreement with

Saxon Energy Services Inc. in Decem-

ber 2014 for the manufacture and sale

of two ATD 750 deep drilling rigs.

Saxon Energy Services Inc. is an

international drilling company and is a

fully owned subsidiary of Schlumberger,

the world's largest oilfield service com-

pany. The rigs are the result of a joint

development process for a new series

of deep drilling rigs, which began in May

2014 on the basis of an engineering

contract signed at the time.

Additionally, a sales contract was signed

for the two already completed TBA

300/440 M1 and TBA 440 M2 deep

drilling rigs. Already in 2009, BAUER

Maschinen GmbH decided to open

up a new business area with the deep

drilling division. In 2011, the first TBA

300 deep drilling rig was delivered to a

customer in Venezuela. This product

range has already been expanded with

several developments.

More information:

http://www.bauer.de/

en/bauer_group/world

12

>>> Target: ~ 40 percent of total Group revenues

>>> Market leader in specialist foundation engineering

machinery and equipment

>>> New products for mining, deep drilling and offshore

drilling

>>> 80 percent of sales generated outside of Germany

>>> Multi-branding strategy

Mission and Strategy

OUR MISSION

SERVICES, EQUIPMENT AND PRODUCTS DEALING

WITH GROUND AND GROUNDWATER

>>>

13MISSION AND STRATEGY

>>> The world is our market

>>> World market leadership in specialist foundation

technologies

>>> Powerful development of drilling techniques

and applications for related markets such as

environment, water and natural resources


>>> Activities in environmental technology, mining,

deep drilling, well construction, materials


>>> Global provider of specialist foundation engineering services

>>> Specialist construction services

>>> Focus on complex international projects

>>> Optimization of worldwide organizational structures

and of the Group's self-managed business units

>>> Annual growth from 3 to 8 percent

OUR STRATEGY

15

In Abu Dhabi, BAUER Spezialtiefbau GmbH carried out the foundation work for an offi ce and commercial building. A 1 m thick

diaphragm wall was built and piles with diameters of 750 mm and 900 mm were drilled.

The Group

Group structure

Corporate Governance and control system

Business Report

Macro-economic trend

Course of business

Trend by Segment

Construction segment

Equipment segment

Resources segment

Other/Consolidation segments

Earnings, financial and net asset position

Trend in orders

Group earnings position

Group financial and net asset position

Financial Statements of BAUER Aktiengesellschaft

Sustainability

Sustainability within the BAUER Group

Employees

Capital Investments

Research and Development

Health Safety Environment (HSE)

Quality

Legal disclosures

Remuneration Report

Statutory disclosures regarding takeovers

Follow-up Report

Risk and Opportunity Report

Risk Report

Opportunity Report

Forecast Report

Combined Management Report

17

17

17

19

19

23

29

29

33

37

40

45

45

46

49

54

55

55

55

57

58

60

60

61

61

63

65

67

67

74

77

I.

II.

III.

IV.

V.

VI.

VII.

VIII.

IX.

X.

17

GROUP STRUCTURE

The products and services of the BAUER Group, based

in the Bavarian town of Schrobenhausen, are focused on

the ground and groundwater fields. The Group’s three seg-

ments – Construction, Equipment and Resources – operate

more than 110 subsidiary companies in some 70 countries

worldwide.

The Construction segment carries out all the established

methods and techniques of specialist foundation engineering

all over the world. These include creating complex excavation

pits, foundations for large infrastructure projects and buildings,

cut-off walls and ground improvements. It also carries out

other specialist construction activities, including civil engi-

neering and remediation works.

The Equipment segment develops and produces equipment,

tools and machines for specialist foundation engineering and

other underground drilling operations, such as mines, wells,

geothermal energy, oil and gas. In addition to its headquarters

in Schrobenhausen, the Equipment segment operates a global

distribution network, as well as additional production facilities

in Germany, China (Shanghai and Tianjin), Malaysia, Russia

(at two locations), Italy, Turkey and the USA, among other

locations. With exports accounting for around 80 percent of

its total sales, BAUER Maschinen GmbH is the world market

leader in specialist foundation engineering equipment.

The Resources segment is focused on products and services

in the areas of water, environment and natural resources.

BAUER Resources GmbH is the holding company of the

business segment, under the umbrella of which the subsidiaries

operate as full-service providers with their focus on environ-

mental technology, water and natural resources for industrial

customers.

BAUER Aktiengesellschaft is the holding company of the

Group, and is listed on the Frankfurt Stock Exchange.

BAUER AG provides central management and service

functions for its affiliates. These specifically include human

resources, accounting, finance, legal and tax affairs, IT, facility

management, and health, safety and environment (HSE).

CORPORATE GOVERNANCE AND CONTROL SYSTEM

The principal task of the Management Board of BAUER AG

is the strategic management of a global group of companies.

As part of central strategies, goals and regulations, the main

companies in the three operating segments – Construction,

Equipment and Resources – develop their own detailed

strategies which are converged at holding company level and

integrated into the strategic corporate planning process.

The development and implementation of a self-managing

organizational structure with decentralized business units

unburdened by complex decision-making hierarchies is the

primary characteristic of corporate governance within the

BAUER Group. The managers of those Group companies

operate under their own responsibility, and are provided with

a large degree of independence within the framework of the

corporate strategy in determining how their business units

progress.

The autonomous management of the individual operating

business units is constrained by framework guidelines and

standards laid down in the Group and subsidiary Corporate

Management Manuals. The principles of proper conduct,

including adherence to our ethical and moral standards,

are defined by an ethics management and values program

covering all the companies of the BAUER Group, backed by

corporate management guidelines and a code of conduct

imposed on our employees, among other measures.

Systems and departments handling central functions assist

in implementing standard processes and support the work

of the operating units by providing the necessary backup

services. The self-managing structure is linked to a central-

ized system of risk management and control, and to a central

Group accounting function. Internal auditing systems monitor

compliance with laws and standards across the Group.

Statements regarding the role of the Management Board and

Supervisory Board and in relation to other issues of corporate

governance are set out in the Declaration on Corporate Gover-

nance on pages 84 to 87 of this Annual Report, which is

published on the Internet at http://www.bauer.de/en/inves-

Combined Management ReportI. THE GROUP

In the middle of the Spessart region, BAUER Spezialtiefbau GmbH will be working on its largest German construction site

so far – the Schwarzkopf Tunnel bypass – until autumn 2015. Several BG 28 and BG 40 rigs, as well as anchor drilling rigs are

being employed.

18COMBINED MANAGEMENT REPORTThe Group

integrated within the scope of internal Group management

activities. They primarily comprise balance sheet and income

statement figures and indicators of capital structure, profitability

and liquidity derived from them.

Non-financial performance indicators

As part of a comprehensive reporting system, many non-

financial indicators are measured in assessing the performance

of the Group which individually, in terms of internal controls and

beyond that scope, have no material significance. The reporting

on trends in those performance indicators in the “Sustainability”

section is primarily intended to convey an overall picture of the

operations of the BAUER Group.

The indicators included originate, among other sources,

from the Human Resources function, such as workforce

numbers – categorized by segment, employment type and

region. Furthermore, continuing and further education indica-

tors are included in the reporting, such as the budget applied,

the number of employees attending the seminars offered,

and the number of seminars and conferences held. Reporting

also covers performance indicators from the Research and

Development function. They include the number of registered

patents, expenditure on research and development, and the

number of staff employed in those areas.

tor_relations/reports in the Investor Relations section under

Reports & Accounts.

Financial performance indicators

The trend in total Group revenues is used as the fundamental

and significant key financial performance indicator for the

management of the Group. The total Group revenues

represent the revenues of all the companies forming part of

our Group. The difference between the consolidated revenues

and the total Group revenues is derived from the revenues

of the associated companies, from our subcontractor shares

in joint ventures, and from the revenues of non-consolidated

companies. The trend in total Group revenues and the

contributions to them by the various segments are depicted in

the Business Report and in the “Trend by Segment” section.

Alongside total Group revenues, earnings before interest and

taxes (EBIT) and the net profit or loss for the period are used as

key financial performance indicators for internal management.

The Business Report and the “Trend by Segment” section

detail the trends in EBIT and net profit or loss for the period

and trends in the various segments.

A wide range of other financial performance indicators,

which are of comparatively minor significance to the medium-

and long-term development of the Group, are collated and

19COMBINED MANAGEMENT REPORT

Business Report

II. BUSINESS REPORT

of the countries in the region are sticking to their construction

projects, something which represents a positive sign.

• At first sight, it appears logical to draw the conclusion that

the drop in the oil price will have a positive effect on the

German economy. Thanks to the lower price of fuel, the

general public will have more money to spend on other

consumer goods. However, this upside will by no means

compensate for the drop in orders placed with German

companies. Although the order books of construction

firms in the Arab world are currently full, it remains unclear

which projects might be delayed as a result of the low oil

price. And it is not only Arab countries that are affected.

Malaysia, Mexico, Brazil, Russia, Angola, Venezuela

and Azerbaijan are dependent on oil. This also affects

conglomerates that earn their money with oil. As a result,

the situation cannot be said to be positive.

• Over recent years, China has acted as a powerhouse for

the global economy, but is now displaying some weak-

nesses. Many companies nowadays are heavily dependent

on the market there. These include the major German car

companies as well as their components suppliers and

many capital goods manufacturers. In the engineering

business, we can already see what problems can arise in

this country. The construction equipment business in China

grew many times over, on the back of the building boom.

It was clear that the bubble in the sector would burst

once the construction market had normalized. Chinese

machinery manufacturers did not see this coming, as a

result of which the factories’ production is going straight to

stock, and the majority of the equipment is being dumped

on the market through reckless financing models. Now,

however, these machines are being returned because

many construction companies overextended themselves

with these investments. Our strategy of concentrating on

large and special machines in China does add up, on the

other hand. We are satisfied with our success.

• The countries in the eurozone are making strenuous efforts

to get a grip on their economic problems, but there is

not yet any prospect of achieving stability any time soon.

Many companies are no longer able to compensate for

volatility in the foreign exchange markets. What is needed

is a reliable policy in order to return to a steady course of

MACRO-ECONOMIC TREND

Germany is doing well – to judge from the raw data. Tax

revenues are booming, the economy is growing and the

government is not planning to assume any new borrowing.

However, a less cursory glance at the situation reveals that

there are many problems in the world, the dark clouds of

which are casting their shadow over Germany as well.

The repercussions of the financial crisis and the credit crunch

suffered by many European countries mean that the overall

system still cannot settle on an even keel. Germany is part of

this system, and due to its presumed strength has to bear a

considerable share of the burden.

In addition to the familiar problem areas, new crisis hot-spots

have also arisen; these will also have significant effects on the

economic development of countries and regions in the world.

• Russia and Ukraine are not regarded as the most impor-

tant countries for Germany’s export business. This fact

perhaps made it easier for the politicians to impose sanc-

tions on Russia in the wake of the events in the Crimea –

in the hope of inducing a change of policy. Unfortunately,

past experience shows that punitive measures such as

these take a long time to bear fruit, and can even lead to

a hardening of attitudes and tit-for-tat countermeasures.

The conflict is lodged in a spiral of this kind, while hopes

for a rapid resolution are evanescent. This will have a

greater impact on the German economy than many people

appreciate. Russia is highly important for Germany – more

so than is indicated by the raw data.

• Scarcely anyone would have imagined that a group of

extremists could have taken over and terrorized large

areas of Iraq and Syria within a matter of weeks. For some

months, it seemed that the western world was incapable

of reversing the advance of the Islamic State, at least to

a certain extent. At present, it appears that the threat

posed to the Arab world will continue for some time yet.

Economically, it is spreading great uncertainty. Neighbor-

ing countries such as Jordan, Lebanon and Turkey will

thus have more limited opportunities to develop their

economies on a stable basis. This fragile situation could

deteriorate at any time, and this is noticeably curtailing the

opportunities offered to western companies. At least many

20COMBINED MANAGEMENT REPORTBusiness Report

to major problems. A business such as the BAUER Group,

however, which operates on a very large number of markets,

must expect to face a multitude of problems in volatile times.

Nevertheless, a global presence does mean that there will

always be rising markets available. We regard our strategy

as the biggest advantage in terms of our ongoing develop-

ment in that respect. As well as confronting country-specific

problems, this also means that strategic options regularly

open up, providing us with the opportunity to grow.

Against the background of this economic situation in the

construction sector, we are convinced that the BAUER

Group will again be able to achieve increasing orders so as

to sustain healthy growth in the years ahead, in spite of the

disruptions.

Sales of construction machinery are linked directly to the

situation on construction markets, so healthy selling oppor-

tunities are also to be expected in that sector over the years

ahead. Deep drilling markets will also grow again, as future

oil and gas exploration drilling will need to be carried out at

ever shorter intervals, so entailing a rise in drilling capacity.

In parallel with the general trends, future trends on construc-

tion markets in the various regions around the world will vary

in some cases:

Germany

The German construction market will continue to see positive

growth over the coming years. Residential construction is

being buoyed up, above all because of the low interest rates.

Public-sector construction is benefiting from an enormous

backlog of infrastructure work, something which governments

now have much more money at their disposal to pay for.

The development of commercial construction will depend

on industry’s future prospects.

The widely anticipated positive effects of the reversal of

energy policy in Germany to favor renewable energies have

not been realized, however. Only the onshore wind power

sector is still generating strong order flow. The necessary

north-to-south power transfer lines are not currently being

implemented, and the development of offshore wind power

has largely come to a standstill. Even the urgently required

growth in conventional power station capacity is not yet

development. However, there is no sign of this happening

at the moment.

The considerable number of crises and problematic areas

will represent threats for years to come. Rarely has there

been such an accumulation of issues facing the world as

is the case today. Fortunately, there have also been some

very positive developments. The most important of these is,

without doubt, the upswing in the US economy. The United

States has once again assumed its role as the driving force

in the global economy. Many countries of the Far East are

also enjoying highly dynamic growth, such as Indonesia,

Malaysia and the Philippines. What is more, many markets

are highly stable and are well placed to face the future.

The construction sector in Germany is one such market that

is developing very well. Sustained low interest rates and the

positive economic situation are inducing people to invest in

real estate. Also, the government is finally setting about making

good the huge deficiencies in Germany’s infrastructure. For

this reason, the favorable situation is set to continue for a

few years more.

There is also a very pressing necessity and demand for

construction activities internationally. Everywhere, there

are huge deficiencies when it comes to refurbishing infra-

structure and constructing new transport arteries and supply

systems. Also, commercial companies and residential building

operations have a great demand for construction services.

Once again, the crises and problems existing in the world

represent the greatest stumbling block, however.

Under such circumstances, it may be better for construction

companies to operate on only a small number of markets

as and when they are on an upswing. As soon as those

markets decline again, such a strategy can very quickly lead

in % Germany

overall

West

Germany

East

Germany

Sales 4.4 5.0 2.1

Hours worked 4.6 5.2 2.8

Employees 1.1 1.5 -0.1

Orders received -0.5 -0.6 -0.1

Source: Central Federation of the German Construction Industry

Construction statistics Germany – Change 2014/2013


Business Report

sector to a halt. The neighboring states such as Jordan and

Lebanon are also hamstrung by the situation, as a result of

which economic development has significantly abated there.

Further developments in the Arab countries, which were

characterized by revolutionary political upheavals in the

past years, remain uncertain. Many clashes are still taking

place in Libya and Egypt, with repeated incidents of rioting.

Nevertheless, the construction sector in Egypt is currently

experiencing an astonishing upturn. The expansion to the

Suez Canal that got underway within an extremely short time

will require considerable building activities. In Cairo, work will

get underway within the next few years to expand the metro

network. Our local subsidiary has already landed considerable

orders, and will be able to increase its sales significantly

given this market situation.

Asia-Pacific, Far East & Australia

Construction markets in the Far East remain pleasingly

stable. Almost every country in the region is undertaking

major infrastructure projects. In Hong Kong, construction

sector capacities are being well utilized by extensive rail and

road construction works. The same is true in Singapore and

Malaysia. For example, new underground railway lines and

urban motorways are being constructed in Singapore. The

port – one of the most important and biggest in the world –

is being relocated. Economies such as Indonesia and the

Philippines are also seeing healthy growth. By contrast,

the Australian economy is no longer developing quite so

positively. Trends in this construction market are somewhat

slower.

Americas

The USA’s economy is returning to its role as the driver

of global growth. A very high level of backlog demand

has arisen in many infrastructure areas, due to a lack of

adequate investment over recent decades. Major efforts will

be made over the coming years to make good this deficit,

and a positive side effect of this commitment will be a further

boost to the economy. Overall, we regard the situation as

stable, and offering good opportunities for further growth

in both our Construction and Equipment segments. Trends

in the Canadian construction market are likewise favorable.

Interesting projects are regularly seen in Central America.

happening due to a lack of clear policy framing. Those

statements do contain a positive aspect: once the works

start, they will have to be completed rapidly.

Europe

We predict that growth on construction markets in Western

Europe will be modest over the coming years. Many countries

have had to impose strict budget constraints which will

hamper the further development of their infrastructure. There

are nonetheless a number of opportunities for us in Europe,

especially in Switzerland. In France, a new circular metro

line is being built around Paris, and is requiring extensive

construction activities. Other cities are also planning to

upgrade their infrastructure.

Smaller markets in Eastern Europe largely collapsed as a

result of the financial crisis. There have recently been signs

of a slight upturn, though at a very low level.

The crisis embroiling Russia and Ukraine is currently imposing

an enormous burden on these countries’ development.

Ukraine is practically no longer capable of maintaining a

construction sector – due to lack of funds. Although Russia

is attempting to keep finance flowing into its building sector,

the financial deficits brought about by sanctions and the low

oil price are forcing the country to pursue a policy of extreme

frugality. Commercial construction has almost shut down

entirely. It can be assumed that Russia will suffer from the

consequences of the crisis for years to come – even if the

conflict were to be resolved rapidly. As a result, the equip-

ment sales business will also decline significantly.

Middle East & Central Asia

The oil-rich and gas-rich countries of the Middle East,

such as Abu Dhabi, Saudi Arabia and Qatar, have lots of

large-scale construction projects in the pipeline and being

carried out. Metro systems are being constructed in Doha

and in Riyadh, while intensive extensions to railway lines

are in progress throughout the entire region. The football

World Cup in Qatar will trigger additional building volumes.

Construction has also bounced back in Dubai in a big way.

Conditions are highly problematic in Iraq and in Syria, however.

Armed conflict with the Islamic State has almost brought

economic development and specifically the construction


same commitment as they were just a few years ago, when

environmental issues were seen as the major risk to global

economic development. Dialog with major polluters, such as

China, must be intensified. The financial burdens we face in

dealing with this over the years ahead will be substantial. On

the other hand, it does of course offer major opportunities for

companies operating in the relevant fields.

These issues are opening up wide-ranging new opportunities

for us too. In operation for several years now, our Resources

segment is focused on matters relating to the environment,

water and natural resources. We have already achieved

success in many countries around the world, and we believe

that demand for these products and services will continue

to grow strongly.

Africa

In Africa, it will be worthwhile actively pursuing new business,

even though the economic weakness of the countries con-

cerned means the business generated will not make a major

contribution to our total Group revenues. Some countries

have very good chances of improving their prosperity based

on their enormous raw material resources.

As a result of the described political risks and economic

issues, a number of vitally important challenges which also

need to be met have been pushed into the background. In

Germany and many other countries, demographic trends are

posing major economic challenges. Environmental problems,

particularly air pollution, are rising. In this context, too, neces-

sary policies are currently no longer being pursued with the

The north of Munich will be getting a significantly new look with the “Schwabinger Tor” project. BAUER Spezialtiefbau GmbH excavated the up to 12 m deep pit, which has an area of 35,000 m².

>>>


Business Report

excellent lines; consequently, in early 2014, we assumed it

would be possible to conduct the remainder of the project

on a much better basis. Unfortunately, this expectation

turned out to be over-optimistic. During the second cutting

of the wall in the dam area, drilling progress returned to a

lower level. The concrete mixture used proved to be exces-

sively hard for the planned progress to be achieved. Also,

many other procedures on the site, such as permanent

monitoring of quality, took longer than planned, as a

result of which the construction time and thus the costs

significantly exceeded the expected amounts. This meant

the project delivered a loss in 2014, which reached the low

double digit million range. The project will be completed in

the second quarter of 2015 with an outstanding technical

achievement.

Business in Russia, Egypt, Indonesia, Hong Kong and

Thailand was very pleasing. In Hong Kong, the major project

involving foundation works for a section of the new bridge

between Hong Kong and Macau was completed in early

2015.

The Equipment segment had to cope with significant market

upheavals once again during the reporting period. The

greatest problems were the behavior of Chinese manufacturers

which continued to produce with significant overcapacity,

and the methods they employed of dumping their equipment

onto the market via risky financing schemes. Our European

competitors were also affected by the situation. Our strategy

of concentrating on special equipment of the highest quality

and providing perfect customer support meant that we were

able to expand our sales further in spite of the significant

competition. In 2014, we succeeded in selling more large

machines once again.

Developments in Russia and Ukraine proved problematical

for us. In Russia, orders tailed off almost entirely as a result

of the sanctions and the economic problems these triggered

towards the end of the year. This represents the loss of

an important market for our companies. In 2014, we had

planned sales of about EUR 80 million for the Group in

Russia and Ukraine, but we were only able to achieve about

half of this figure. We are expecting even lower sales in future.

As a result, we need to look to compensate for this, a task

which will not be easy.

Global economic trends will stabilize again in the medium

term. The current causes of destabilization will fall away

again over coming years. The currently still enormous cost

differences and imbalances in many countries will likewise

reduce significantly. After all, people in China are also aware

of the value of professional work in other countries, and

will demand the same standards for themselves. There are

already several signs of this happening: good equipment

operators in most countries now have similar pay levels

to those in the old-established industrial nations for example.

This will impact on all businesses, including our competitors.

The outcome of the global changes will be much larger

markets, on which orders will again need to be fought for

against a background of similar conditions. German companies

will be able to focus on their specialties and enjoy healthy

revenues on the larger market. The BAUER Group, too, will

maintain that focus.

COURSE OF BUSINESS

In 2014, the BAUER Group was hit by some problems with

a major financial impact and also faced some difficult market

conditions. On the other hand, we have also achieved some

pleasing successes. Overall, however, we were only able to

post a positive profit after tax by means of a one-time income

item.

In the Construction segment, we are well established in all

international markets. Specifically in Germany, our specialist

foundation engineering business was able to contribute with

a positive development. The numerous disturbances in the

world meant it was necessary to respond to changes quickly.

Nevertheless, our business was effectively distributed over the

regions of the world. Revenues declined slightly compared

to the previous year because a relatively large number of

very large projects were carried out the year before. During

the year under review, it was rather the small and medium

projects which characterized our revenues.

The factor which affected us most was the development in

our dam remediation project at Center Hill dam in the USA.

We had already been obliged to post a loss in the previous

year. Significant problems arose during the site mobilization

and the technical preparation work for the project, leading

to a considerable delay. However, from the end of 2013

onwards, the diaphragm walling works proceeded along


generated by selling 21 percent of the shares in this

company.

The companies in the segment which manufacture well

engineering materials were reorganized following a difficult

previous year. Once again, a loss was reported in 2014.

We are confident that business will now develop better.

The year was highly unsatisfactory for our exploration

companies. Following the end of the major project in Jordan,

we had hoped it would be possible to relocate the capacity

becoming available to other regions without interruption.

However, weakness in the mining market during the previous

year meant that exploration drilling ceased almost entirely.

As a result of political upheavals in the region, it also proved

impossible to attract an adequate number of orders for other

work. Consequently, we had to accept significant losses

resulting from the overcapacities.

Many re-organizational measures were undertaken in the

Resources segment. Activities were merged or, in some cases,

terminated. We have withdrawn from many regions. All of

these issues led to a financial cost. Consequently, a loss in

the segment could only be avoided by one-time income from

the sale of shares mentioned previously.

2014 was an extremely challenging year. We had to deal

with markets changing at breakneck pace, at the same

time as correcting our own mistakes and aligning internal

structures better to face the future again. The cost reduction

program amounting to about EUR 20 million was implemented

successfully in order to safeguard overall profits, and will be

continued in the coming year as well. The positive effects will

bear fruit for years to come.

Another important goal for the year was to comply with

the financial covenants of our financing agreements with

Our deep drilling business achieved very satisfactory

development in 2014. In May, the agreement was signed to

develop a new deep drilling rig for Saxon Energy Services

Inc. Following joint development work, we received the order

to manufacture two rigs at the end of the year. Additionally,

a sales contract was signed in December for two already

completed deep drilling rigs.

In the Resources segment, the environmental business

continued to develop very well. There were many attrac-

tive projects, especially in Germany. Our subsidiary in

Oman enjoyed a successful year, with many appealing

new opportunities for the future. One-time income was

Geographical breakdown of total Group revenues

in EUR million

Total 1.560

Germany 440 (28 %)

Africa 62 (4 %)

Americas 172 (11 %)

Asia-Pacific,

Far East &

Australia

377 (24 %)


232 (15 %)

Europe (other)

125 (8 %)

EU (excl. Germany)

152 (10 %)

in EUR million ForecastsActual 2014

11.04.2014 14.08.2014 14.11.2014

Total Group revenues ~ 1,550 ~ 1,550 ~ 1,550 1,560

EBIT ~ 75 ~ 75 ~ 75 76.4

Net profit or loss ~ 20 - 25 ~ 15 - 20 ~ 15 - 20 15.7

Forecast/actual comparison 2014


Business Report

regard to total Group revenues and EBIT. At the 2014

year-end, this is expected to be towards the bottom end of

the range from about EUR 15 to 20 million.

The final results for 2014 are now as follows: total Group

revenues rose by 3.7 percent to EUR 1.56 billion. Sales

revenues fell slightly by 1.9 percent to EUR 1.38 billion.

EBIT came to EUR 76.4 million (previous year: EUR

30.1 million). The net profit for the period was EUR

15.7 million (previous year: EUR -19.4 million).

Summary

All in all, we cannot be satisfied with our results for 2014.

We were only able to achieve a positive result due to the

one-time income from the sale of shares in Oman. We regard

the business trend as continuing positive, because even in

tricky circumstances we once again succeeded in increasing

total Group revenues slightly. The financial year 2015 will

build on that foundation.

slightly increased revenue. Furthermore, we aim to achieve a

long-term improvement in key financial figures. Although we

still have some work to do to achieve this, we were able to

meet the target. The net debt to EBITDA ratio has returned

below 4.0. The EBITDA to net interest coverage ratio was

also improved.

As a result of the aforementioned problems, we were regret-

tably forced to adjust our forecast downwards once in the

course of 2014. In our 2013 Annual Report we predicted total

Group revenues of about EUR 1.55 billion, EBIT around EUR

75 million, and profit after tax of about EUR 20 to 25 million.

As a result of special effects, including above all our dam

project in USA which burdened us with a significant loss, we

were obliged to adjust our forecast for profit after tax in the

half-year report to about EUR 15 to 20 million.

In the nine-month interim report, the forecast for the profit

after tax was concretized, with an unchanged outlook with


in EUR million (segments after deducting Other/Consolidation)

1,600

1,400

1,200

1,000

800

600

400

200

0

Resources

249

Equipment

612

Construction

international

510

Construction

Germany

189

Total 1,560

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

27

Our customer Ammico Contracting Co. W.L.L. was involved in the construction of a large commercial complex on the artifi cial

island “The Pearl”, which is just off the east coast of Qatar. A cut-off wall up to 700 m long and 8 m deep was built using the cutter-

soil-mixing-method. They used a BG 28 with a BCM 5 mixing head.

in EUR million 2013

Revenues *

2014

Revenues

Share

Year 2014

Change against

previous year

Orders

in hand

Co

nstr

uc

tio

n

BAUER Spezialtiefbau GmbH (BST)

BST, Germany 119.4 133.2 8.6 % 11.6 % +

Subsidiaries, Germany 24.0 16.7 1.1 % -30.4 % +

BST, international 67.3 98.9 6.3 % 47.0 % •

Subsidiaries, international 547.3 502.5 32.2 % -8.2 % •

BST Group total 758.0 751.3 48.2 % -0.9 % •

SCHACHTBAU NORDHAUSEN GmbH Subsidiaries (SBN) 73.9 66.1 4.2 % -10.6 % •

less intra-Group revenues and IFRS adjustments -90.2 -104.4 -6.7 %

Construction total 741.7 713.0 45.7 % -3.9 % •

Eq

uip

me

nt

BAUER Maschinen GmbH (BMA) 391.7 383.3 24.6 % -2.1 % •

Equipment subsidiaries 453.3 468.7 30.0 % 3.4 % •

BMA Group total 845.0 852.0 54.6 % 0.8 % •

SBN 62.3 62.0 4.0 % -0.5 % •


Equipment total 628.6 651.8 41.8 % 3.7 % •

Re

so

urc

es

BAUER Resources GmbH (BRE) 9.6 29.5 1.9 % n/a

Resources subsidiaries 193.2 231.1 14.8 % 19.6 % -

BRE Group total 202.8 260.6 16.7 % 28.5 % -

SBN 19.8 33.9 2.2 % 71.2 % ++


Resources total 188.9 252.8 16.2 % 33.9 % •

Oth

er

BAUER Aktiengesellschaft (BAG) 37.0 37.1 2.4 % 0.3 %

Other subsidiaries 2.3 2.3 0.1 %

Total Other/services 39.3 39.4 2.5 % 0.3 %


Group total (including non-controlling interests) 1,504.2 1,560.2 100.0 % 3.7 % •

of which: Germany 410,4 440,2 28.2 % 7.3 %

International 1,093.8 1,120.0 71.8 % 2.4 %

Notes on the table: List also includes non-consolidated holdings Evaluation of orders in hand in relation to planned revenues:

-- weak; - slightly weak; • adequate; + well adequate; ++ very well adequate; Percentages and totals are calculated on the basis of unrounded starting values

Breakdown Germany/international according to country in

which accounting figures were allocated. For reasons of

complexity the figures are not absolutely precise.

Breakdown of total Group revenues by subsegment

COMBINED MANAGEMENT REPORTBusiness Report



Trend by Segment

In Jeddah, Saudi Arabia, what will soon be the tallest building in the world is under construction – the Kingdom Tower. Bauer

drilled 70 piles – with up to 109 m they are extremely long – with diameters of 1,500 and 1,800 mm. Another 200 piles with

lengths up to 90 m were also installed.

III. TREND BY SEGMENT

CONSTRUCTION SEGMENT

West Region, however, failed to achieve its targets, attracting

only a few orders. However, the planned earnings and the

planned revenues were well surpassed.

The major project at the Schwarzkopf Tunnel should be

highlighted in particular. This involves extensive special

foundation engineering for the bypass rail link between Hanau

and Nantenbach, with a total volume of above EUR 40 million.

We still have significant work to accomplish on the project

until autumn 2015. In addition to this, the major project at the

Zerben lock was completed successfully in November.

Next year, we are expecting a decline in revenues for the

German specialist foundation engineering business, because

there are fewer major projects on the market overall.

SCHACHTBAU NORDHAUSEN GmbH, which operates

primarily in Germany, works on behalf of all three of the

Group’s segments. The company and its subsidiaries

increased total revenues against the previous year’s

figure, but earnings were down against planned levels.

An improvement is expected in 2015. As the company

operates in all three segments, the effects of the individual

divisions are detailed in the respective segment reports. The

Construction division achieved revenues on the same level

as the previous year. The Environmental Technology division,

operating primarily in the biogas field and in the construction

of treatment plants, is likewise assigned to the Construction

segment. Although it was able to increase revenues, the

negative result remained at the previous year’s level. SPESA

Spezialbau und Sanierung GmbH, which is allocated to

In the 2014 business year, the Construction segment earned

total Group revenues of EUR 713.0 million, down slightly on

the previous year’s value of EUR 741.7 million by -3.9 percent.

The reason for this is that more major projects were handled

in the year before than in 2014 itself. Segment EBIT of EUR

25.1 million was slightly up on the previous year’s level of

EUR 21.2 million. The net profit for the period decreased

markedly from EUR 5.5 million to EUR 1.9 million. The decline

in the net profit for the period is chiefly due to economic

problems with our dam project at Center Hill in Tennessee,

USA. It was not possible to offset the loss incurred in the

project against any deferred tax assets, as a result of which

the income tax expense increased significantly compared to

the previous year.

2014 was characterized by good conditions overall in the

world construction market, which proved to have a positive

effect on our companies in Germany and the Far East above

all. Furthermore, the markets in the Middle East once again

showed significant signs of life. The business situation was

good on the whole, but was negatively affected by the

problems with the Center Hill dam project to such an extent

that we failed to achieve our earnings targets markedly.

Germany

As in the previous years, our German construction business

performed better than expected once again. Revenues and

results were significantly above expectations. The contracts

procured were spread very unevenly around the various

regions however. Capacities in the South region were very

well utilized, and well utilized in the North East region. The

in EUR '000 2013 * 2014 Change

Total Group revenues 741,673 713,005 -3.9 %

Sales revenues 657,456 634,096 -3.6 %

Orders received 727,287 665,244 -8.5 %

Orders in hand 498,701 450,940 -9.6 %

EBIT 21,209 25,068 18.2 %

Net profit or loss 5,472 1.858 -66.0 %


Construction key figures


30COMBINED MANAGEMENT REPORTTrend by Segment

We are expecting the business situation to be significantly

less favorable in 2015 because of sanctions.

The situation in the markets of Western Europe was also highly

differentiated. Our subsidiary in the Netherlands failed to meet

expectations in terms of revenues and earnings. Last year

was very poor in the UK. Following major underground railway

orders in previous years, there were scarcely any projects on

the market in the business year just finished. Consequently, the

planned revenue target was missed by a wide mark, and the

result is negative. There are signs of an improvement in 2015.

In Switzerland, revenues increased thanks to a good market

position. Our subsidiary in Austria failed to meet its targets

because of a dearth of projects in the summer months. On the

whole, markets in Southern Europe remain weak.


Following political unrest in the markets of the Middle East

over recent years, the construction sector once again

enjoyed a significant upswing in the course of 2014. Our

companies in the United Arab Emirates, above all Abu Dhabi

and Dubai, are once again operating at full capacity and

were able to increase revenues and earnings significantly;

the situation is similar in Qatar where work started on several

orders particularly in the second half of 2014. Our subsidiary

in Lebanon was also largely on target in terms of revenues

and earnings.

Revenues declined in Saudi Arabia, above all because of

the completion of the major project at the Kingdom Tower,

involving the foundation work for what will be in future the

tallest building in the world. Order books remain buoyant

here, and upcoming major projects – especially for the metro

system in the capital city Riyadh – mean that prospects are

bright. Overall, we believe the region is once again on an

upward trend.


The construction sector in the markets of the Far East

continues to deliver pleasing performance. Our subsidiaries in

Indonesia and Thailand benefited from very full order books

with pleasing results. Prospects remain highly positive. Hong

Kong was characterized by the foundation works for a section

of the Hong Kong-Zhuhai-Macau bridge that were completed

in early 2015. The project was able to be concluded suc-

cessfully.

Schachtbau in the organizational structure, succeeded in

improving its result during the reporting year although with a

slight decline in revenues.

The holding Wöhr + Bauer GmbH, which develops and

builds urban real estate such as office buildings and parking

garages, was able to complete a large number of relatively

large projects during the reporting year, as well as starting

new ones.

Europe

Trends on European construction markets remain regionally

very variable. In Eastern Europe, revenues in Hungary,

Georgia and Bulgaria increased, while Romania underper-

formed slightly. Overall, perspectives have improved again

somewhat following a few weak years. Azerbaijan is also

offering us good opportunities for new projects. In Russia,

work was completed on the Lakhta Tower in St. Petersburg,

which is set to be Europe’s tallest building; subsequent

to this, we carried out some add-on and follow-up order.

Revenues and earnings were on a good level overall.


Construction segment

in EUR million (after deduction of Consolidation)

Total 699

Germany 189 (27 %)

Africa 49 (7 %)

Americas 68 (10 %)

Asia-Pacific,

Far East &

Australia

199 (29 %)


94 (13 %)

Europe (other)

64 (9 %)

EU (excl. Germany)

36 (5 %)


Trend by Segment

the Dominican Republic. We are expecting the situation to

improve in the region during the current year.

Africa

Once again in 2014, the performance of our holding in Egypt

was more than pleasing. In the difficult prevailing conditions,

it succeeded in closing the financial year with revenues up on

the previous year and healthy earnings. Order levels continue

to be very high, because numerous construction projects

are being carried out. For example, extensive work is being

conducted on the metro system in Cairo. We assume that

we will be able to increase our revenues further in the current

year. There are individual project opportunities available from

time to time in other countries as well.

Outlook

Revenues in the Construction segment declined slightly during

the completed business year. Above all, this was because

some major projects were processed and concluded during

the previous year. In some regions, we merged capacities to

a greater extent and ceased our activities in some countries

– such as Algeria. The trend in the segment was positive,

apart from the losses incurred by the major project at Center

Hill dam, representing a significant negative influence.

Overall, the regions of the world continue to perform positively,

in spite of all the existing political and economic disruptions.

Our global presence provides us with an excellent opportunity

to exploit opportunities in regions with a favorable trend in

their construction sectors, thereby making up for weaker

markets. Overall, orders in hand have declined in relation

to the previous year, this being due to the situation that there

are currently more small and medium projects available on the

market. The major projects have been completed during the

past two years.

We are expecting our revenues to be slightly higher than those

of the previous year in 2015. As far as EBIT is concerned,

we are expecting a slight improvement, while the improvement

in profit after tax should be considerable.

In Malaysia, there were somewhat fewer orders than

expected, as a result of which revenues were somewhat

lower than planned even though they attained a very high

level in total. In the Philippines, project delays represented

somewhat of a hindrance to revenues, although the situation

with orders in hand is good on the whole. The market in

Vietnam is displaying the first signs of a recovery following

weakness during previous years.

In 2014, extensive diaphragm walling works were constructed

for several dams in Bhutan as well as on Mauritius. The work

will continue into the current business year as well. The

projects are proceeding very pleasingly. The market in

Australia in 2014 was very slow. We expect this to continue

in 2015 as well.

Overall, we are expecting continued good development for

the region in the current business year.

Americas

Our subsidiary in the USA was kept busy through 2014

primarily by the large-scale Center Hill dam project. The

difficulties getting the project off the ground led to a backlog

of work. At the start of the year, we had expected to make

good this deficit, at least in part, by increasing performance.

Unfortunately, this proved to be impossible because of

further delays and problems that arose during the course

of the year, as a result of which a significant loss was once

again incurred. From a technical perspective, the project has

been carried out to an excellent standard. The work will be

concluded in the second quarter of 2015. As well as this, a

larger number of different specialist foundation engineering

orders were handled in the USA. There were only a few

orders available on the Canadian market during the year, as

a result of which revenues declined here. The prospects are

looking brighter again for the current year.

In Latin America, we are focusing our activities on Panama

above all else. Our subsidiary’s performance was somewhat

below expectations during the past business year. Individual

orders are being carried out in the other markets – such as

33

A highlight was the in-house exhibition, which took place in Schrobenhausen in May 2014. Over four days, more than

1,700 guests from over 70 countries visited the event to fi nd out about the innovations and equipment from

BAUER Maschinen GmbH and its subsidiaries.

COMBINED MANAGEMENT REPORTTrend by Segment

Paris. We were also able to achieve good sales in the Baltic

states, although the markets in Eastern Europe continue to

be at a low level. There is a lack of funding for major invest-

ments. Spain and Portugal continued to perform weakly.

In Russia, sales up to the middle of 2014 were completely ac-

cording to plan. During the second half of the year, however,

first sanctions and then the significant decline in the value

of the ruble exerted an influence on the market. At the start

of the embargo, it was questionable whether we would be

able to deliver several items of machinery to Russia, although

the situation was resolved within a few weeks. However,

demand collapsed markedly in the second half of the year. In

the current business year, we are expecting to see a further

noticeable decline in sales volume compared to 2014.


The markets of the Middle East developed significantly better

than in the year before. In spite of continuing uncertainties

in the region, demand increased noticeably because of a

greater number of infrastructure projects being implemented.

Our sales were significantly above the planned targets,

delivering a pleasing contribution to earnings. In the United

Arab Emirates, including Dubai, there was a reinvigoration

of the construction market. Numerous infrastructure

projects got under way in Qatar. In Saudi Arabia, additional

machinery was required in particular for the expansion of the

Holy Mosque in Mecca. Sales in Iraq, however, were weak.

Overall, the perspectives for the markets in the region are

once again good.

In the past business year, total Group revenues in the

Equipment segment increased slightly by 3.7 percent, from

EUR 628.6 million to EUR 651.8 million. Sales revenues, on

the other hand, fell back by 2.9 percent from EUR 561.6 mil-

lion to EUR 545.2 million. Segment EBIT increased sharply

by 14.6 percent from EUR 32.2 million to EUR 36.9 million.

The net profit for the period increased markedly from

EUR 5.1 million to EUR 9.5 million.

In 2014, in spite of fierce competition, we succeeded in

maintaining sales volume at approximately the same level as

the previous year. The markets of the Middle and Far East

enjoyed particularly positive development, as did sales of

large machinery and cutters. This led to an increased result,

and further benefited from the trend in the US dollar. The

still too low capacity utilization of the plants and losses at

individual subsidiaries hampered a greater increase.

Germany & Europe

Sales in Germany were slightly below the previous year, in

line with our expectations. In 2014, like in the previous year,

the plants at our headquarters in Schrobenhausen had

adequate capacity utilization. We are expecting an improve-

ment during the current year because of production of two

deep drilling rigs for Saxon Energy Services Inc.

Sales volumes in Western and Southern Europe were above

planned values. Alongside good market conditions in Italy,

we were above all able to sell some machinery to France,

including several cutters for the expansion of the metro in

EQUIPMENT SEGMENT

in EUR '000 2013 2014 Change

Total Group revenues 628,612 651.772 3.7 %

Sales revenues 561,615 545,223 -2.9 %

Orders received 632,053 693,967 9.8 %

Orders in hand 116,525 158,720 36.2 %

EBIT 32,223 36.917 14.6 %

Net profit or loss 5,055 9,513 88.2 %


Equipment key figures


relocation to the new plant in Tianjin contributed to this, and

was completed by October 2013. The new plant’s capacity

was already utilized to a significant extent in 2014, with

scope for further growth.

The market in Japan was satisfactory overall. There are once

again major infrastructure projects in the pipeline, which

represent interesting opportunities. Australia proved to be

rather weak, this being a corollary of the weak demand from

the mining industry.

Americas

Although the market situation in the USA improved in 2014,

we were unable to meet our targets entirely despite achiev-

ing slight improvements in sales and earnings compared to

the previous year. In the USA, the business is predominantly

characterized by renting equipment to customers. We

took an important step in setting the course for the future

by merging locations of BAUER-Pileco Inc. and BAUER

Manufacturing Inc. at our site in Conroe, near to Houston.

We are expecting this to deliver synergy effects which will

lead to significant cost savings. We were also able to reduce

our rental fleet by selling equipment. Production capacity in

Conroe was not yet adequately utilized in 2014, as a result of

which we still recorded a relatively small loss.

In South America, our sales volumes were at a similar level to

those of the previous year. The market in Brazil continued to

perform weakly. Many projects have been postponed here.

Africa

In Africa, we were not quite able to match our sales in the

previous year. Egypt enjoyed positive development because

of the growth in the construction market. The remaining

countries of Africa, however, were weak. There was signifi-

cant reluctance to invest in West Africa, as a result of Ebola,

and the mining industry displayed hardly any demand for

equipment. Production in Botswana, where our joint venture

manufactures blast-hole drilling rigs and well drilling rigs for

Southern Africa, failed to meet our expectations in 2014

because of weak markets.

Parts & Service

The Parts & Service business has continued to develop

steadily over recent years, delivering a good contribution to

revenues and earnings in the past business year. The spare

As a result of delays in major projects, we suffered a decline in

sales compared to the previous year in Turkey and Azerbaijan.

The other countries of Central Asia such as Kazakhstan were

influenced by the uncertainty generated by the Russia/Ukraine

crisis. Here, our sales were below the expected levels. As in

the previous years, the Indian market was weak.


Markets in the Far East continued to be very positive. We

were able to increase our sales volumes somewhat once

again, achieving a good contribution to earnings. Hong Kong

has become an excellent market for our duty-cycle crane

series. We were also able to achieve good sales volumes in

Malaysia, as in Singapore. Here, we were able to sell some

machines in particular which will be used in the extensive

expansion of Changi Airport. The Philippines and Indonesia

continue to develop along positive lines.

As before, the Chinese market is characterized by significant

overcapacity, meaning that the competitive situation remains

tight. In spite of these difficult conditions, we succeeded in

achieving a satisfactory contribution to earnings. The smooth


Equipment segment


Total 612

Germany 118 (19 %)

Africa 9 (1 %)

Americas 96 (16 %)

Asia-Pacific,

Far East &

Australia

177 (29 %)


60 (10 %)

Europe (other)

56 (9 %)

EU (excl. Germany)

96 (16 %)

35

applications. During 2014, an increasing volume of large

machine sales was achieved, as well as better sales of

cutters, leading to increased earnings for the segment.

Some subsidiaries delivered unsatisfactory performance

in the past financial year. PRAKLA Bohrtechnik GmbH, a

specialist for well drilling rigs, was confronted by very weak

demand, leading to a significant decline in revenues and a

negative result. MAT Mischanlagentechnik GmbH, a manu-

facturer of products for mixing and separating technology,

also recorded a negative result due to poor demand.

In contrast, a good business year with very positive results

was experienced by RTG Rammtechnik GmbH, with its pile-

drivers and piling leaders, SPANTEC Spann- & Ankertechnik

GmbH, which makes anchor products for foundation engi-

neering applications and EURODRILL GmbH, which makes

rotary drives and hydraulic hammers. KLEMM Bohrtechnik

GmbH, a manufacturer of anchor drilling technology, once

again slightly increased its revenues in 2014.

Outlook

Overall, the Equipment segment was able to perform

positively in 2014 amongst conditions characterized by

fierce competition and some difficult markets. The nearly

stable sales volume with an increase in earnings as well as

the trends in Deep Drilling were very pleasing. On the other

hand, the results recorded by some subsidiaries as well

as capacity utilization at the plants, which is still too low,

imposed a burden.

The business remains significantly affected by short-term

customer orders, representing a major challenge for produc-

tion planning which has to look many months ahead as a

result of delivery lead times for purchasing. The markets in

the Middle East should post a continued rising trend and

increased demand, whereas the Russian market will tail off

markedly. For 2015, we are expecting that revenues, EBIT

and profit after tax will be slightly up on the previous year.

parts business continues to be positive, whereas demand

for drilling tools and add-on units was somewhat weaker.

Consequently, revenues and earnings were somewhat down

on the previous year.

Deep drilling

In May 2014, BAUER Deep Drilling GmbH and Saxon

Energy Services Inc. concluded an engineering contract for

development and manufacturing of onshore deep drilling

rigs with a hook load of 375 metric tons. Saxon Energy

Services Inc. is a subsidiary of Schlumberger, the worlds's

largest oilfield service company. Following joint develop-

ment work, the order for production and sale of two rigs,

designation ATD 750, was signed in December. These will

be manufactured in the BAUER Maschinen GmbH plants

in Germany and also partially assembled in the US plant

in Conroe, near Houston. As a result, we are expecting

that capacity utilization, in particular of the plants at our

Schrobenhausen headquarters, will be increased during

the current year.

Additionally, a sales contract was signed at the end of

2014 for the two already completed TBA 300/440 M1 and

TBA 440 M2 rigs. A 100 metric ton rig will also be delivered

to China in 2015.

As a result, the Deep Drilling business has taken a major

step forward. Work is in progress towards certification by

the American Petroleum Institute (API), and is expected

to be completed in 2015. This would open up new sales

opportunities.

Products & subsidiaries

BAUER Maschinen GmbH manufactures rotary drilling

rigs (the BG series), duty-cycle cranes (the MC series) and

cutters (the BC series) at a number of plants. The BG series

is the most important and extensive machine range, and is

divided in two product lines: the ValueLine rigs are optimized

for kelly drilling, while the PremiumLine rigs are multifunction

units for a wide variety of specialist foundation engineering


37

BAUER Umwelt GmbH conducted replacement drilling for a customer in Coswig, near Dresden. A total of about 45,000 t of

soil material were disposed of. A BG 40 rig with a large bore diameter of 2,000 mm was used. More than 400 bores were drilled

down to a drilling depth of 17 m.


levels in the areas of environment and water treatment.

Reorganization of the Resources segment proceeded

intensively in 2014. The previous split into the business areas

Materials, Exploration & Mining Services and Environment

has been replaced by a regional sales organization which is

functionally supported by competence centers. In the regions

of America, Europe and Africa as well as the Middle East &

Asia, the subsidiaries now operate as full-line providers of all

products and services offered by the Resources segment.

The competence centers of Water Treatment, Process and

Biotechnology, Environmental Rehabilitation and Waste

Management, Drilling Technologies as well as Well Drilling and

Geothermal pool their expertise and support the subsidiaries

in carrying out projects.

Germany & Europe

The GWE Group offers solutions for well-drilling and geother-

mal, for which purpose it manufactures products for devel-

opment, delivery and distribution of water and geothermal

energy. Following weak performance in the previous year,

some restructuring measures were initiated and are still in

progress. These measures, as well as stagnating markets in

Europe, had an impact on results which remained negative.

Above all because of growth in Germany, Austria, Swit-

zerland and new customers in the energy sector, it proved

possible to increase revenues slightly. Business improved on

the whole, but work is continuing on optimizing costs.

The Polish subsidiary, which produces and sells well

construction materials, was able to increase revenues slightly

year-on-year despite operating in a stagnating market

Total Group revenues in the Resources segment grew

significantly by 33.9 percent from EUR 188.9 million to

EUR 252.8 million. Sales revenues grew by 7.3 percent

from EUR 182.6 million to EUR 195.9 million. Segment

EBIT was once again significantly positive following the

loss made during the previous year (EUR -24.0 million),

at EUR 15.9 million. The net profit for the period was

EUR 4.3 million (previous year: EUR -31.4 million).

The key results of the segment were significantly influenced

by a one-time income. The increase in total Group revenues

contains an income item from sale and consolidation

amounting to EUR 36.5 million resulting from the sale of

21 percent of the shares in our subsidiary BAUER Nimr LLC

in Oman. The shareholding up to that point was 70 percent.

The company’s principal activity involves operating the large-

scale reed-bed treatment plant under an operating contract

set to last a further 15 years. Without sale of these shares,

the EBIT and the net profit for the period would have been

in the red as a result of negative earnings contributions –

specifically from the subsidiaries in the area of exploration

and mining services – and as a result of expenditure for the

reorganization of the segment.

The Resources segment is undergoing reorganization and

adjustment to the changed market situation following the

loss it suffered in 2013. The loss was above all due to a

major project in Jordan, as well as weak demand for well

construction materials and from the mining area. The signifi-

cant increase in revenues during 2014, even without taking

account of the sale of shares, is above all due to good order

RESOURCES SEGMENT

in EUR '000 2013 * 2014 Change


Sales revenues 182,579 195,860 7.3 %

Orders received 180,054 255,837 42.1 %

Orders in hand 150,020 153,027 2.0 %

EBIT -23,965 15,932 n/a

Net profit or loss -31,444 4,347 n/a

Employees (on average over the year) 1,449 1,400 -3.4 %

Resources key figures



recent years, it has been possible to expand projects with

customers from the automotive industry in particular, which

were handled successfully. There are still good prospects for

the future here.

In 2014, Esau & Hueber GmbH, a specialist for brewery,

beverage and biotechnology, achieved revenues which were

both above target and higher than the previous year thanks

to good demand for brewery technology and systems for the

pharmaceuticals industry. The result was also significantly

improved. An expansion to capacity has already been com-

pleted, and will result in further improvements in production.

The order books of our foreign subsidiaries reveal a highly

diverse situation. In Italy, revenues were at the level of the

previous year in spite of project delays. The result improved.

Two Resources companies in Spain were merged. There has

been a slight uptick in the market for environment and water

there. Some activities, including those in Hungary, will not be

continued as a result of unsatisfactory developments.

FORALITH Drilling Support AG, a specialist for deep and

extended-reach exploration drilling based in Switzerland,

was able to carry out some projects successfully in Europe

during the past business year; as a result, it improved its

revenues and earnings. BAUER Foralith GmbH had to

absorb significant burdens due to drilling rigs with underused

capacity. In future, the activities of both companies will be

more closely meshed, so that synergy and cost effects can

be leveraged more effectively.

The Resources segment also incorporates the Mining division

of SCHACHTBAU NORDHAUSEN GmbH. It proved possible

to increase revenues once again as a result of the very vigorous

market. Alongside many projects in Germany, a considerable

order is being handled in Kazakhstan. In spite of a fine that

imposed a significant burden on the area, it was possible to

report a positive result.

Middle East & Asia

The Site Group for Services and Well Drilling Ltd. Co. in

Jordan is still undergoing reorganization following the loss

incurred during the major Disi-Amman project in 2013.

Following completion of this project, it did not prove possible

to find another use for the drilling rigs used there because

the decisions on some very interesting projects were post-

environment, and consequently also improved its result. In

Hungary, revenues and earnings were on target, at the level

of the previous year. The sales company in France increased

its revenues and earnings despite a difficult market situation,

but nevertheless failed to meet its targets.

BAUER Umwelt GmbH is a central provider of products and

services for environmental technology in Germany. In 2014,

it was able to increase its revenues significantly, thereby

exceeding the planned goals. The result was also improved,

with a healthy positive performance. It was possible to carry

out numerous projects, above all in the areas of remediation

of polluted sites and waste mangement. Orders in hand

continued to be at a high level, as a result of which further

positive development is expected.

BAUER Water GmbH plans, builds and installs water treat-

ment plants for customers all over the world. Following a

weak first half of 2014, revenues were significantly increased

in the second half. The result improved markedly following a

loss in the previous year, and is now showing a surplus. Over


Resources segment


Total 249

Germany 133 (54 %)

Africa 4 (2 %)

Americas 8 (3 %)

Asia-Pacific,

Far East &

Australia

1 (0 %)Middle East &

Central Asia

78 (31 %)

Europe (other)

5 (2 %)

EU (excl. Germany)

20 (8 %)

39

subsidiary in Ghana was able to increase its revenues

year-on-year; it also improved its result.

Americas

Our subsidiary, which produces and sells well construction

materials in Chile, suffered from weak demand from the

mining sector. Revenues were down on the previous year,

and the result was slightly negative.

Activities in Peru were terminated and the subsidiaries in

Canada closed.

Reorganization

The reorganization of the segment that was started in 2014

entailed some fundamental changes. In future, we will

pursue the strategy of concentrating even more on core

competences at the same time as focusing on the greatest

potential markets. This goes hand-in-hand with a consolida-

tion and cessation of some businesses and subsidiaries.

The restructured regional sales organization – supported by

competence centers described above – is intended to push

ahead with this strategy rapidly.

By the time the reorganization is finished, Resources

should have become a full-service provider focusing on

environmental technology, water and natural resources for

industrial customers, predominantly from the oil, gas and

mining industries.

Outlook

The extensive reorganization of the segment will continue

until the end of 2015. We are expecting the situation to

improve for our drilling companies during the current year.

We continue to see significant opportunities in the environ-

mental field, as well as in water treatment. For 2015, we are

assuming that revenues will be well above the level of the

previous year. The absence of the one-off income for 2014

deriving from the sale of shares as well as charges incurred

during the reorganization mean that the EBIT should be

slightly in the positive area, whereas it is currently expected

that the profit after tax will be slightly negative.

poned due to the political situation in the region. As a result,

revenues and earnings were significantly below the planned

targets. We are expecting new projects and better capacity

utilization for the current year.

The subsidiary in the United Arab Emirates is active above

all in the environmental sector. It developed pleasingly and

is handling an increased number of projects for the oil and

gas industries. Revenues were up on the previous year. In

Saudi-Arabia, activities are still at the beginning, but this

market does offer good opportunities. Drilling activities in

Australia have been brought to a close.

The operative business of BAUER Nimr LLC in Oman

focused primarily on operation of the large-scale reed-bed

treatment plant which processes water contaminated with

oil for the local oil company. Following an expansion last

year, 115,000 m3 of water is being purified there every day.

At the end of 2014, 21 percent of the shares in the BAUER

Nimr LLC subsidiary in Oman were sold. This led to a high

one-off income for the Resources segment in the Group's

consolidated financial statements.

Africa

The mining markets have been weak for quite a long time,

and there has been little demand for exploration work;

as a result of this, 2014 was unsatisfactory for our drilling

companies. A slight upturn only became apparent at the

end of the year. In Africa, as a result, our activities were

restructured and a new strategy was initiated for operating

in the markets.

In Morocco, our subsidiary has specialized in undertaking

irrigation projects which allowed it to improve its revenues

year-on-year. Further opportunities are apparent in this area.

Earnings failed to meet expectations.

In South Africa, revenues were significantly down on the

previous year, and earnings were negative as a result. In

future, activities in Senegal will be looked after from Ghana.

As a result of favorable orders at the end of the year, our



OTHER/CONSOLIDATION SEGMENTS

profit for the period of EUR 4.9 million (previous year:

EUR 6.0 million) includes EUR 1.6 million comprising the

net profit of BAUER AG disregarding the aforementioned

payments. The segment’s revenues are especially generated

by intra-Group charges.

The Consolidation segment reflects the consolidation

within the Group. The negative EBIT of EUR -4.8 million

(previous year: EUR -4.5 million) largely matches the

EUR 5.0 million of dividend payments by Group sub-

sidiaries to BAUER AG. The net loss for the period was

EUR -4.9 million (previous year: EUR -4.5 million).

The Other and Consolidation segments bundle the revenues

and earnings of the Group which cannot be allocated to the

operating segments. The Other segment essentially comprises

the revenues of the parent company BAUER AG itself,

generated from a wide variety of administrative services

provided to Group subsidiaries.

The Other segment reports EBIT of EUR 3.3 million (pre-

vious year: EUR 5.1 million). This includes EUR 5.0 million

of dividend payments by Group subsidiaries to the parent

company. Part of the fine resulting from proceedings against

one of our companies has also been posted here. The net

SPESA Spezialbau und Sanierung GmbH did remediation work on a ski jump in Oberhof in Thuringia for the first time. To secure the slope of the main jump against sliding, a shotcrete plate was installed at an inclination of approximately 37 degrees and deep-anchored with 36 soil nails.

>>>


Trend by Segment

Breakdown of total Group revenues across the companies of the BAUER GroupShareholdings < 50 % are listed with their revenue share

in EUR million 2013 * 2014

BAUER Spezialtiefbau GmbH - Group

BAUER Spezialtiefbau GmbH, Schrobenhausen, Germany (BST) 186.7 232.1

Wöhr + Bauer GmbH, Munich, Germany (33 % share) – (sub-group consolidated financial statements) 17.5 14.5

BAUER Funderingstechniek B.V., Mijdrecht, Netherlands 4.8 4.7

BAUER Technologies Limited, Bishops Stortford, UK 43.2 2.6

BAUER Spezialtiefbau Schweiz AG, Baden-Dättwil, Switzerland 15.2 28.6

TERRABAUER, S.L., Madrid, Spain (30 % share) 1.0 0.4

BAUER Magyarország Speciális Mélyépítö Kft., Budapest, Hungary 6.0 7.7

BAUER ROMANIA S.R.L., Bucarest, Rumania 1.9 2.1

BAUER BULGARIA EOOD, Sofia, Bulgaria 1.8 4.5

BAUER SPEZIALTIEFBAU Gesellschaft m.b.H., Vienna, Austria 15.0 14.4

OOO BAUER Technologie, Moscow, Russian Federation 36.7 31.3

BAUER EGYPT S.A.E. Specialised Foundation Contractors, Cairo, Egypt 20.8 22.9

BAUER LEBANON FOUNDATION SPECIALIST S.a.r.l., Beirut, Lebanon 11.3 16.5

BAUER Georgia Foundation Specialists LCC, Batumi, Georgia 3.0 3.3

BAUER International FZE, Dubai, United Arab Emirates 35.5 37.0

BAUER Geotechnical Specialized Foundation LLC, Abu Dhabi, United Arab Emirates 8.3 20.7

BAUER International Qatar LLC, Doha, Qatar 8.0 13.8

Saudi BAUER Foundation Contractors Ltd., Jeddah, Saudi Arabia 25.3 10.8

BAUER (MALAYSIA) SDN. BHD., Petaling Jaya, Malaysia - (sub-group consolidated financial statements) 95.4 84.7

BAUER Hong Kong Limited, Hong Kong, People’s Republic of China 41.6 45.3

BAUER Vietnam Ltd., Ho Chi Minh City, Vietnam 3.1 2.9

BAUER Foundations Philippines, Inc., Quezon City, Philippines 15.9 10.2

P.T. BAUER Pratama Indonesia, Jakarta, Indonesia 26.0 30.2

Thai BAUER Co. Ltd., Bangkok, Thailand 17.6 21.2

BAUER Foundation Australia Pty Ltd., Brisbane, Australia 13.8 6.7

BAUER FOUNDATION CORP., Odessa, Florida, USA 48.9 42.2

BAUER Foundations Canada Inc., Calgary, Canada 19.1 9.1

BAUER FUNDACIONES PANAMÁ S.A., Panama City, Panama 11.9 11.7

Other BST shareholdings 16.3 17.2

Joint ventures, Germany - (BST share only) 6.4 2.0

Intra-Group sales -84.3 -93.9

BST Group total 673.7 657.4

SCHACHTBAU NORDHAUSEN GmbH - Group

SCHACHTBAU NORDHAUSEN GmbH, Nordhausen, Germany (SBN) 102.1 107.3

SBN participations 30.1 33.8

Joint ventures SCHACHTBAU NORDHAUSEN GmbH - (SBN share only) 1.7 0.0

SPESA Spezialbau und Sanierung GmbH, Schrobenhausen, Germany 17.0 14.2

Joint ventures SPESA - (SPESA share only) 5.1 6.7


SBN Group total 94.7 103.0

BAUER Maschinen GmbH - Group

BAUER Maschinen GmbH, Schrobenhausen, Germany (BMA) 391.7 383.3

KLEMM Bohrtechnik GmbH, Drolshagen, Germany 39.9 42.9

EURODRILL GmbH, Drolshagen, Germany 13.1 12.4

RTG Rammtechnik GmbH, Schrobenhausen, Germany 28.4 26.4

Compared to the breakdown of total Group revenues by segment, in the breakdown of total Group revenues by company the total of the individual groups is shown

after consolidation.



Trend by Segment

The Magdeburg Waterway Construction Authority is conducting remediation work on the Zerben lock on the Mittelland Canal.

Since March 2013, Bauer has carried out 10,000 m² of diaphragm wall, 20,000 m² of sheet pile walls, 930 buoyancy piles and

505 ground anchors as part of a joint venture. The work was concluded in November 2014.

Continued: Breakdown of total Group revenues across the companies of the BAUER GroupShareholdings < 50 % are listed with their revenue share

in EUR million 2013 * 2014

BAUER Maschinen GmbH - Group

MAT Mischanlagentechnik GmbH, Immenstadt, Germany 12.3 11.8

PRAKLA Bohrtechnik GmbH, Peine, Germany 27.9 13.0

Olbersdorfer Guß GmbH, Olbersdorf, Germany 7.4 7.9

SPANTEC Spann- & Ankertechnik GmbH, Schrobenhausen, Germany 18.5 21.5

BAUER Deep Drilling GmbH, Schrobenhausen, Germany 0.0 1.3

TracMec Srl, Mordano, Italy 12.1 11.4

BAUER EQUIPMENT UK LIMITED Rotherham, UK 7.9 7.4

BAUER Macchine Italia Srl, Mordano, Italy 8.3 13.1

OOO BAUER Maschinen Russland, Moscow, Russian Federation 15.5 7.8

OOO BAUER Maschinen - Kurgan, Kurgan, Russian Federation 7.8 5.6

OOO BG-TOOLS-MSI, Lyubertsy, Russian Federation 2.9 1.6

BAUER Equipment Gulf FZE, Dubai, United Arab Emirates 5.5 8.4

BAUER Casings Makina Sanayi ve Ticaret Limited Sirketi, Ankara, Turkey 5.5 3.9

BAUER-DE WET EQUIPMENT (PROPRIETARY) LIMITED, Rasesa, Botswana 2.6 2.1

BAUER Technologies Far East Pte. Ltd., Singapore, Singapore - (sub-group consolidated financial statements) 120.9 152.9

NIPPON BAUER Y.K., Tokyo, Japan 7.9 7.3

BAUER-Pileco Inc., Conroe, Texas, United States of America 68.9 76.3

BAUER Manufacturing Inc., Conroe, United States of America 22.9 22.2

Other BMA participations 17.1 11.5


BMA Group total 615.8 631.5

BAUER Resources GmbH - Group

BAUER Resources GmbH, Schrobenhausen, Germany (BRE) 9.6 29.6

GWE pumpenboese GmbH, Peine, Germany 51.0 56.0

GWE Prakla Services GmbH - merged with GWE pumpenboese GmbH 2.2 0,0

BAUER Umwelt GmbH, Schrobenhausen, Germany (BMU) 42.7 54.8

BAUER Water GmbH, Dunningen, Germany 13.5 13.5

Esau & Hueber GmbH, Schrobenhausen, Germany 11.5 15.4

BAUER Foralith GmbH, Schrobenhausen, Germany 5.9 5.1

GWE POL-Bud Sp.z.o.o, Lodz, Poland 2.9 3.1

FORALITH Drilling Support AG, St. Gallen, Switzerland 2.9 5.1

BAUER Ambiente S.r.l., Milan, Italy 1.4 1.4

GWE Budafilter Kft., Mezöfalva, Hungary 3.1 3.2

BAUER Resources GmbH / Jordan Ltd. Co., Amman, Jordan - (sub-group consolidated financial statements) 20.7 29.9

BAUER Nimr LLC, Maskat-Al Mina, Sultanate of Oman 11.8 17.4

BAUER Emirates Environment Technologies & Services LLC, Abu Dhabi, United Arab Emirates 3.3 4.8

BAUER Technologies South Africa (PTY) Ltd., Johannesburg, South Africa -

(sub-group consolidated financial statements)4.2 2.4

BAUER RESOURCES GHANA LIMITED, Accra, Ghana 1.4 2.5

GWE Tubomin S.A., City of Santiago, Chile 3.5 3.3

BAUER Resources Canada Ltd., Edmonton, Canada - (sub-group financial statements) 3.1 1.2

Other participations of BRE 8.1 7.3

Joint ventures BAUER Umwelt GmbH - (BMU share only) 0.0 4.6


BRE Group total 174.9 225.7

BAUER Aktiengesellschaft, Schrobenhausen, Germany (BAG) 37.0 37.1

Other participations of BAG 2.3 2.3


GROUP TOTAL 1,504.2 1,560.2


45

Our customer Bachy Soletanche sunk piles with a diameter of 1,050 mm to a depth of over 20 m using a BG 46 in double-head

mode for the Puddington Mill London train station.

COMBINED MANAGEMENT REPORTEarnings, fi nancial and net asset position

IV. EARNINGS, FINANCIAL AND NET ASSET POSITION

Orders in hand in the international specialist foundation

engineering business fell by 24.8 percent to EUR 271.0

million owing to the completion of large-scale projects. The

foundations of the bridge between Hong Kong and Macau,

and further work on the building complexes adjoining what

will soon be Europe’s tallest building, the Lakhta Tower in

St. Petersburg, Russia, have been completed successfully.

The diaphragm walling works on the Center Hill dam in

the USA will be completed in the second quarter of 2015.

A major diaphragm walling project on Mauritius has reached

a very advanced stage, and it will be possible to complete

it towards the middle of 2015. A particularly positive aspect

is the situation of our subsidiary in Egypt which, despite

the difficult situation in the country, has been able to attract

some very interesting, large-scale projects, enabling us to

predict an increase in its revenues.

The Construction and Environmental Technology divisions of

SCHACHTBAU NORDHAUSEN GmbH have orders in hand

totaling EUR 47.5 million, 10.5 percent up on the previous

year’s level. Business operations are currently benefiting from

the generally favorable development in the construction market

in Germany.

Orders in hand in the Equipment segment of EUR 158.7 mil-

lion are 36.2 percent up on the previous year’s level of EUR

116.5 million. BAUER Maschinen GmbH itself produces and

sells large machines, and delivered a large proportion of its

orders by the end of the year; orders in hand fell from EUR

50.1 million to EUR 37.2 million in consequence of this. The

business remains very short-term in nature. The majority of

TREND IN ORDERS

At the end of 2014, the BAUER Group held orders in hand

totaling EUR 762.7 million, which is approximately at the

previous year’s level of EUR 765.2 million. On the whole,

orders in hand remain at a good level overall but some

events in 2014 have also had a negative effect on this. There

would have been more orders in hand by the end of the year

had it not been for the crisis involving Russia and Ukraine,

uncertainties in Iraq resulting from the Islamic State terror

organization and the drop in the oil price.

The Construction segment had orders of big projects on

its books last year. These have now been finished. Conse-

quently, orders in hand declined significantly by 9.6 percent

from EUR 498.7 million to EUR 450.9 million. In 2014, there

were hardly any major orders on the market, whereas many

small and medium projects were picked up in all regions of

the world. The homogeneous regional distribution over the

world is positive, and so this represents a good basis for

reaching the objectives for 2015.

In Germany, specialist foundation engineering business

has experienced a significant decline in its orders in hand

following processing of the major project for the bypass rail

link between Hanau and Nantenbach. At present, there are

hardly any major projects on the market even in Germany.

Nevertheless, the overall environment continues to be

positive, as a result of which it has been possible to occupy

capacity with a large number of small and medium projects.

Total orders in hand in this area have fallen by 34.5 percent

to EUR 62.2 million.

in EUR '000 2013 2014 Backlog of orders in hand in

months in relation to total

Group revenues 2014In hand Received In hand Received

Construction 498,701 727,287 450,940 665,244 7.6

Equipment 116,525 632,053 158,720 693,967 2.9

Resources 150,020 180,054 153,027 255,837 7.3

Intra-Group revenues and

IFRS adjustments 0 -54,915 0 -57,387 ---

Total 765,246 1,484,479 762,687 1,557,661 5.9

Orders in hand/orders received by segment

46COMBINED MANAGEMENT REPORTEarnings, fi nancial and net asset position

With regard to the Group as a whole, orders in hand are in

line with our forecast for slight growth in the current year.

GROUP EARNINGS POSITION

The Group earnings position in 2014 was influenced by

contradictory developments compared to the previous year.

Our construction subsidiary, BAUER Foundation Corp. in the

USA, recorded significant losses amounting to EUR 19.0 mil-

lion. These arose from the major Center Hill dam project

and due to the lack of capacity utilization, because that

project meant it was not possible to process sufficient other

orders. Furthermore, weak order levels in the UK as well as

inadequate utilization of our drilling capacity in the Resources

segment – especially in Jordan – negatively influenced the

earnings position. Furthermore, our worldwide activities were

burdened by restructuring measures in many areas. How-

ever, there were also many positive developments, especially

the construction business in Germany, Russia, the United

Arab Emirates, Saudi Arabia, Indonesia and Thailand. In the

Equipment segment, we were able to achieve better margins

once again due to increased sales of large and special rigs.

The Environment area was also highly positive.

Overall, the positive overall result could only be posted

because we compensated for special losses during the

year by means of a one-off income item amounting to EUR

36.5 million. The one-off income item was derived from the

sale of 21 percent of the shares in our subsidiary in Oman.

As a result of the sale, our holding fell to 49 percent; this

triggered de-consolidation and the investment therefore had

to be posted at the year end at-equity in relation to the fair

value. The company had undergone excellent development

in recent years, and its future prospects are very bright.

The reduction to a 49 percent shareholding is a sensible

measure, because majority locally owned companies in

Oman have better chances of winning orders.

As a result of the one-off income item, it was possible to im-

prove the results figures compared to 2013. In consequence,

the net profit for the period increased compared to the

previous year from EUR -19.4 million to EUR 15.7 million.

EBIT increased from EUR 30.1 million to EUR 76.4 million.

EBITDA increased by 37.9 percent from EUR 124.0 million

machines are delivered within one month of being ordered.

As a result, it is necessary to keep a stock of machines

available, so as to meet customers’ expectations for rapid

delivery.

However, the subsidiaries in the segment recorded significant

growth. BAUER Deep Drilling GmbH sells deep drilling rigs

and succeeded in growing its orders in hand by EUR 53.7 mil-

lion thanks to orders received in December. It is very pleasing

that we have managed to make a significant breakthrough

here. In spite of turbulence in the oil markets, we are assuming

that we will be able to build on this success in coming years.

Overall, the many efforts by our company to improve and

specialize products and services are being welcomed by our

customers, so we are confident of achieving the necessary

order intake for the current year.

In the Resources segment, orders in hand increased

slightly, by 2.0 percent, from EUR 150.0 million to EUR

153.0 million. Of that total, a significant proportion – worth

EUR 40.9 million – was held by the Mining division of

SCHACHTBAU NORDHAUSEN GmbH. We have interesting

projects, in both Kazakhstan and Germany, which can

provide us with work for years to come.

The orders in hand of the BAUER Resources Group itself

have increased by 7.3 percent to EUR 112.1 million. In

Environmental Technology, in particular, our levels of orders

in hand are very healthy. We are still involved in our large-

scale project of operating the reed-bed treatment plant in

Oman, and it will provide us with plenty of work for years to

come. Our capacities are also being well utilized in Germany.

Conversely, the well-engineering materials business is very

short-term in nature, so there are never high levels of orders

in hand. We expect these levels to remain consistent. The

exploration and mining business for our customers remains

problematic in many different countries around the world.

Mine operators are faced with economic problems, as a

result of which very few contracts are being awarded. That

business accounts for only a very small proportion of our

total revenues however. Major projects are continually arising

around the world for the Resources segment to target. We

therefore remain convinced that this business especially will

continue to provide us with interesting opportunities in future.


Earnings, fi nancial and net asset position

Other income rose very significantly against the previous

year, from EUR 30.6 million to EUR 89.0 million. The main

change in other income is due to the overall effect of selling

21 percent of the shares in BAUER Nimr LLC amounting to

EUR 36.5 million and the associated fair-value reporting of

the remaining shares. Other key changes to this item related

to realized and unrealized foreign currency gains as well as

gains from foreign exchange forward contracts, which overall

increased by EUR 23.1 million to EUR 34.6 million compared

to the previous year. Realized and unrealized foreign

currency gains and losses as well as gains and losses from

foreign exchange forward contracts result from our currency

hedge management activities. Fluctuations in hedged and

unhedged currencies can cause the corresponding income

statement items to vary widely over the years depending on

trends. The unbalanced statement of exchange rate shifts

results from the situation that exchange rate hedging cannot

always be set exactly against the underlying transactions,

even though in operational reality they are aligned as closely

as possible to each other. The Group’s objective is to under-

take exchange rate hedging which rules out the possibility

of foreign currency gains or losses as far as possible. The

countering item in an amount of EUR 29.8 million (realized

and unrealized foreign currency losses and losses from

foreign exchange forward contracts) is entered under “Other

operating expenses”. The difference between the gains and

losses shows that we experienced overall foreign currency

gains of EUR 4.8 million in the year under review. The

considerable fluctuations in exchange rates towards the end

of the year were the main cause of this positive result. The

other major items under “Other income” are income from

insurance refunds (EUR 1.8 million), book profits on asset

disposals (EUR 5.4 million) and other operating income

distributed amongst the companies.

to EUR 171.0 million, representing 11.4 percent (previous

year: 8.6 percent) of consolidated revenues.

The pre-tax return on equity as the ratio of pre-tax profit

to shareholders’ equity (equity at the start of the period)

improved against the previous year from -1.3 percent to

9.0 percent. The return on equity after tax was 3.7 percent

(previous year: -4.2 percent). The return on sales after tax

(relative to the consolidated income statement revenues)

improved from -1.3 percent to 1.0 percent year-on-year.

We expect to be able to improve our returns further in the

coming years.

There have been substantial changes to some income

statement items in the year under review. This is largely a

consequence of the negative result in the previous year and

the special influences in the financial year.

The individual income statement items are summarized in

the following.

Consolidated revenues rose by 4.0 percent against the

previous year (EUR 1,447.5 million) to EUR 1,506.0 million.

This includes a sale and consolidation income from the at-

equity balancing of BAUER Nimr LLC in Oman with EUR 36.5

million. Without this special effect, consolidated revenues

would have grown by 1.5 percent.

Sales revenues were down slightly by 1.9 percent

compared to the previous year (EUR 1,402.2 million) at

EUR 1,375.7 million.

The other capitalized goods and services for own

account item decreased by 23.4 percent from EUR

19.2 million to EUR 14.7 million. The reduction is due to

our restrained investment policy in 2014.

in EUR million Q1 2014 Q2 2014 Q3 2014 Q4 2014 Full year 2014

BAUER Group 378.076 371.139 413.948 397.057 1,560.220

Construction 176.504 174.944 181.805 179.752 713.005

Equipment 165.806 155.534 186.148 144.284 651.772

Resources 48.409 52.547 59.615 92.259 252.830

Other/Consolidation -12.643 -11.886 -13.620 -19.238 -57.387

Trend in total Group revenues by quarter

48

described under “Other income”, which contributed to an

increase in the item at EUR 8.6 million.

Financial income fell by 8.2 percent from EUR 7.7 million

to EUR 7.1 million. Financial expenses fell by 0.9 percent

from EUR 45.5 million to EUR 45.1 million. The slightly higher

conditions from the syndicated loan concluded in April 2014

were able to be compensated by slightly lower utilization of

the other lines during the course of the year, as well as by

some interest rate reductions.

The share of the profit or loss of associated companies

accounted for using the equity method is EUR 2.3 mil-

lion below the previous year at EUR -0.6 million, largely due

to a write-down of the investment in Spain (EUR -2.3 million).

Income tax expense of EUR 22.1 million was EUR 8.6 mil-

lion above the previous year’s level. The main reason for

the significant rise is a consequence of the loss incurred on

the Center Hill dam project in the USA. In this case, it was

not possible to report corresponding deferred tax assets,

because from the current perspective there is no reason to

expect that the loss can be compensated within a reason-

able period of time by profits earned locally. Negative result

contributions from subsidiaries in individual countries only

have the effect of reducing the tax burden on the Group if

it has been possible to establish deferred tax assets on the

basis of positive tax-related earnings planning. In future, we

once again expect an income tax burden of between 30 and

40 percent.

The non-controlling interests in profit/loss item was EUR

1.2 million (previous year: EUR -2.5 million). The companies in

Oman and Egypt contributed significantly.

The profit attributable to BAUER AG shareholders was

EUR 14.5 million.

Costs of materials hardly changed during the year under

review at EUR 749.2 million. Costs of materials on projects

in the Construction segment vary widely, so comparisons

between individual years are only possible to a very limited

extent.

Personnel expenses increased by 3.6 percent to EUR

355.3 million – a slightly lower rate than the consolidated

revenues. The rise is largely explained by higher personnel

expenses for our major projects in Hong Kong, the USA and

Switzerland.

The decline in depreciation of fixed assets by 1.2 percent

to EUR 78.8 million is due to the absence of write-downs of

goodwill and a slight increase in write-downs of development

costs and properties and buildings.

Write-downs of inventories due to use reflect the use of

rental equipment made available to our customers. This equip-

ment does not form part of the fixed assets, but is recognized

under inventories. The reason for this approach is that most of

this equipment remains within the company only for a relatively

short time. The aim of the rental operation is to subsequently

sell the equipment under a rental-purchase agreement. As

the equipment has to be financed correspondingly on the

Equity and Liabilities side of the balance sheet, its depreciation

forms part of the company’s EBITDA. As a consequence of

the changes in the market following the financial crisis, our

customers are increasingly entering into these rental transac-

tions. The write-downs due to use increased by 11.2 percent

to EUR 15.8 million during the year under review.

Other operating expenses rose by 2.5 percent to EUR

230.5 million. The many individual components of this item

develop in very different ways depending on the course

of business and the mix of the order portfolio. This item

includes the realized and unrealized foreign currency losses

in EUR million Q1 2014 Q2 2014 Q3 2014 Q4 2014 Full year 2014

BAUER Group 4.919 8.684 24.689 38.134 76.426

Construction 1.418 6.000 12.900 4.750 25.068

Equipment 5.647 7.527 12.720 11.023 36.917

Resources -2.118 -1.163 -2.378 21.591 15.932

Other/Consolidation -0.028 -3.680 1.447 0.770 -1.491

EBIT trend by quarter


49

require financing across the Group’s many construction

sites corresponding to roughly three months’ sales of

the Construction segment. So we are always billing after

carrying out the works. Moreover, we also have to finance

retentions of payment as safety.

The situation in the Equipment segment is similar. Produc-

tion lead times for our specialist machinery are around

12 months. Since customers usually only order equipment

once they have an actual contract to fulfil, and so expect

short delivery lead times from us, we are forced to hold

stocks of finished machinery. And since we also offer a

very wide product range – as is likewise demanded by the

market – our financing needs are increased correspondingly.

The working capital also covers the machines we rent out

to customers, or which are only bought by customers after

a certain rental period based on a rental-purchase agree-

ment. With worldwide inventories now extending to several

thousand Bauer machines, many of our locations have to

hold considerable stocks of spare parts in order to provide

customers with the necessary service backup.

Nevertheless, we judge that the working capital of the

BAUER Group is currently too high in relation to our busi-

ness volumes. Our levels of inventories, finished goods and

receivables have increased beyond the normal bounds.

This is not good, but on the other hand is explainable,

because we are aware of the reasons why it is so: they

reflect market trends as well as a number of special effects.

Furthermore, substantial amounts are imposing a burden,

as claims in respect of supplementary work on completed

international construction projects are having to be asserted

by legal action. Even though the amounts are recognized

with due commercial caution in the accounts, they are

nevertheless imposing a burden in terms of the indebted-

ness of the business.

GROUP FINANCIAL AND NET ASSET POSITION

With consolidated revenues up 4.0 percent on the previous

year, the Group’s net assets fell 0.7 percent from EUR

1,585.8 million to EUR 1,575.1 million. The equity ratio of

26.6 percent was slightly up on the previous year (25.5 per-

cent). The loss in 2013 meant that the equity ratio fell below

30 percent in the previous year. The significant effects from

the interest-related increase in defined benefit plans impacted

equity and meant we were unable to increase our equity

ratio further in 2014. We are aiming to achieve a value in

excess of 30 percent in coming years. All investment and

growth plans of the business are aligned to this target.

The net debt of our business decreased by 3.9 percent in

the year under review. In the coming years, we will continue

to work intensively on reducing net debt in relation to net

assets. We must stress, however, that in view of the nature

of our business and the current economic climate, that

is only possible to a certain extent. The reasons for the

considerable rise over recent years following the financial

crisis are detailed below:

The level of net debt within the Group depends essentially

on the working capital, as the intangible assets as well

as the property, plant and equipment and the investment

property are very largely covered by the shareholders’

equity and defined benefit plans. The working capital

of our businesses is inevitably relatively high due to the

nature of our business model and the special market in

which we operate. Our construction projects run for only

comparatively short periods of time. As opposed to build-

ing construction contractors, who work on longer-running

projects, we only sometimes receive advance payments for

the construction project in question to generate a positive

cash flow over the term of the project. Short-running

construction contracts – such as we mostly carry out –

1 EUR corresponds to Average rate

2013

Q1 2014 Q2 2014 Q3 2014 Q4 2014 Average rate

2014

USD 1.3301 1.3782 1.3692 1.2632 1.2166 1.3219

GBP 0.8497 0.8266 0.8008 0.7792 0.7818 0.8028

RUB 42.5912 48.4270 46.5654 50.0110 67.5895 51.5000

CNY 8.1686 8.5735 8.4918 7.7596 7.5550 8.1575

Exchange rate trend 2014


50

On the Assets side:

• Intangible assets declined by EUR 0.9 million. At the

same time, concessions and industrial property rights fell

by EUR 0.9 million.

• Land, land rights and buildings declined by EUR

5.0 million to EUR 206.6 million. Only small building

projects were undertaken during the financial year. In

the USA, the premises of BAUER-Pileco Inc. were sold

and the company relocated to the works of BAUER

Manufacturing Inc. in Conroe near Houston. A hall and an

office were set up there for this purpose.

• Payments on account and assets in course of

construction increased by EUR 2.9 million. The increase

should be seen in connection with the land, land rights

and buildings item, because some of the structures had

not been finished at the year-end.

• Technical equipment and machinery decreased

by EUR 8.3 million to EUR 206.2 million. This is a

consequence of the cautious investment strategy we are

currently pursuing. Basically, however, the shift in demand

on international construction markets means that our

construction works require increasingly large machinery

and equipment. Consequently, small equipment is

increasingly being replaced by much larger machinery,

leading to a general increase in fixed assets. They were

nevertheless reduced in the past financial year.

• Other equipment, factory and office equipment

decreased by EUR 2.2 million to EUR 25.1 million.

Property, plant and equipment and investment

property were reduced overall by EUR 12.6 million to

EUR 446.9 million.

• Investments accounted for using the equity method

increased by EUR 29.7 million to EUR 42.9 million. The

main changes involved the increase in investments in

joint ventures by EUR 0.9 million, the write-down on a

Spanish investment amounting to EUR 2.3 million and the

new at-equity balancing of BAUER Nimr LLC in Oman at

EUR 31.1 million.

We are aware that the Group’s higher financing requirements

place greater weight on the question of our in-house financing

capabilities. Following the loss made in 2013, the equity ratio

has fallen too low, so it will have to be increased again in the

years ahead. It would be much higher if the hidden reserves

were included. Since changing over to IFRS we have used

the historical cost model to value land and buildings. With a

carrying amount for the land and buildings of EUR 206.6 million,

there is a considerable reserve here.

The net debt to EBITDA and EBITDA to net interest coverage

ratios agreed with lenders as covenants have worsened

since the financial crisis, and especially as a result of the loss

made in the 2013 financial year. In 2014, it was possible to

move the net debt to EBITDA ratio to an acceptable level

at 3.78, representing a significant improvement compared

to the previous year (5.42). The two other agreed covenant

ratios – EBITDA to net interest coverage and equity ratio –

are adequately within the agreed thresholds. The Group has

entered into covenants in respect of a number of long-term

loans, which were valued as per the 2014 year-end at EUR

156.0 million. The covenants on them stipulate net debt to

EBITDA ratio thresholds between 4.0 and 5.0.

In April 2014, we agreed a three-year syndicated loan with a

consortium of the company's main banks providing a EUR

450 million credit facility. This also includes threshold values

for the net debt to EBITDA and the EBITDA to net interest

coverage ratios and for the equity ratio. This provided the

firm a new financing structure which will form the basis for

planning going forward. The syndicated loan also replaced

loans affected by the breaking of covenants in the previous

year. The new financing structure imposes slightly higher

financing costs on the Group.

With regard to the individual items on the balance sheet, the

following material changes should be noted:

2013 2014

Net debt/EBITDA 5.42 3.78

EBITDA/net interest coverage 3.28 4.49

Equity ratio in % 26.5 26.6

Covenants trend


51

• Deferred tax assets increased by EUR 4.7 million to

EUR 31.0 million. The greatest change in this context

arose from the interest-related revaluation of defined

benefit plans, leading to additional deferred tax assets

amounting to EUR 9.0 million.

• Receivables from concession arrangements have

been omitted due to the explained sale of shares in

BAUER Nimr LLC as at 31 December 2014.

• Other non-current financial assets increased by EUR

23.0 million to EUR 28.4 million. The main change here

concerns a loan by BAUER Resources GmbH to BAUER

Nimr LLC amounting to EUR 9.4 million for financing the

water treatment plant in Oman as well as the outstanding

purchase price receivable from the sale of the shares in

BAUER Nimr LLC amounting to EUR 13.3 million.

• Raw materials and supplies increased 5.9 percent

compared to the previous year, by EUR 8.7 million to

EUR 155.3 million. Around 40 percent of this item relates

to the Construction and Resources segments.

• Work in progress and finished goods and merchan-

dise increased 4.1 percent from EUR 272.7 million to

EUR 283.9 million. During the financial year, it was not

possible to reduce inventories further in the Equipment

segment, due among other factors to a somewhat weaker

year-end business in the Equipment segment. However,

we will continue to work diligently on reducing this item.

• Receivables from construction contracts (PoC) de-

creased by EUR 11.0 million to EUR 132.2 million. Changes

in this item result from the percentage of completion of our

projects at the year-end closing date.

• Trade receivables increased by EUR 8.9 million to

EUR 311.4 million.

• Other current assets decreased by EUR 2.1 million to

EUR 28.6 million.

• Other current financial assets increased by EUR

0.5 million to EUR 20.1 million.

• Cash and cash equivalents decreased by EUR 15.4 mil-

lion to EUR 41.8 million. Attempts are made to minimize

this figure at the year-end by appropriate liquidity manage-

ment.

In assessing the Assets side of the consolidated balance

sheet, it is important to note that this is composed of a

Construction element (relating to the Construction and

Resources segments) and an Equipment element (relating to


Assets Equity and liabilities

Non-current assets

EUR 594.8 million (37.8 %)

(2013: EUR 587.8 million (37.1 %))

Current assets

EUR 938.5 million (59.6 %)

(2013: EUR 940.8 million (59.3 %))

Liquid funds

EUR 41.8 million (2.6 %)

(2013: EUR 57.2 million (3.6 %))

EUR 1,575.1 million EUR 1,575.1 million

Shareholders’ equity

EUR 418.9 million (26.6 %)

(2013: EUR 419.8 million (26.5 %))

Non-current liabilities

EUR 523.3 million (33.2 %)

(2013: EUR 382.5 million (24.1 %))

Current liabilities

EUR 632.9 million (40.2 %)

(2013: EUR 783.5 million (49.4 %))

52

netted against the associated deferred tax assets (EUR

-23.2 million).

• Non-controlling interests decreased by EUR 3.2 million

to EUR 19.6 million, chiefly due to the de-consolidation of

BAUER Nimr LLC.

• The non-current portion of liabilities to banks in-

creased from EUR 247.8 million to EUR 364.8 million.

The increase is largely due to drawings on the agreed

syndicated loan.

• Non-current defined benefit plans increased by EUR

34.7 million to EUR 116.4 million. The increase is largely

due to the lower discount rate, which is now 2.0 percent.

The annual injection from ongoing pension commitments

only contributed to the increase to a small extent. Overall,

this has a negative effect on the equity ratio.

• Deferred tax liabilities decreased by EUR 1.8 million.

• The current portion of liabilities to banks declined

from EUR 427.6 million to EUR 266.5 million as a result

of the increase in non-current financing and the lower

utilization of financing overall. Financing decreased

by EUR 44.1 million overall in terms of current and

non-current liabilities to banks. Taking into account the

decrease in the “Cash and cash equivalents” item (EUR

15.4 million), the decrease was EUR 28.7 million. It was

possible to reduce indebtedness in spite of the difficult

market environment.

• Liabilities from construction contracts relate primarily

to construction projects on which the payments received

surpass the work carried out. They increased by EUR

15.6 million to EUR 48.5 million.

• Trade payables decreased by EUR 25.5 million to EUR

169.0 million. By this practice we are able to make use of

all discounting opportunities.

• Other current liabilities decreased by EUR 1.2 million to

EUR 68.6 million.

machinery manufacturing operations). Some specific items

relate primarily to the Construction element, while others, in

contrast, relate to the Equipment element. The main items of

such kinds are listed in the following:

• Within property, plant and equipment, well over two

thirds of the land, land rights and buildings item relates to

the Equipment segment. On the other hand, about three

quarters of the technical equipment and machinery item is

attributable to the Construction segment.

• Some 60 percent of the raw materials and supplies

item is linked to the machinery manufacturing operations

of the Equipment segment.

• Some 90 percent of the work in progress and finished

goods and merchandise item relates to the Equipment

segment, with a small percentage attributable to the

Construction and Resources segments. In the Equipment

segment, it is essential to successful selling operations

to maintain stocks of rental equipment as part of current

assets, so that customers can try out the machinery

before making their final purchasing decision. Equipment

can also be drawn from the pool to cover short-term

capacity bottlenecks on construction sites. The machinery

in production at the balance sheet date also represents a

very substantial capital tie-up.

• Receivables from construction contracts (PoC) are

attributable to the Construction and Resources segments.

The trade receivables item is broken down according to

the respective segments’ shares of total Group revenues.

These different weightings are barely relevant to inter-period

balance sheet comparisons when the rate of growth – either

positive or negative – of the business areas is roughly the

same.

On the Equity and Liabilities side:

• Shareholders’ equity decreased slightly by EUR

0.9 million to EUR 418.9 million. Factors contributing

to this change were the net profit for the period (EUR

15.7 million), currency fluctuations (EUR 10.5 million) and

the interest-related adaptation in defined benefit plans


53

• The decrease in trade receivables and in receivables

from construction contracts resulted in a release of funds

totaling EUR 44.9 million in contrast to a capital tie-up of

EUR 87.3 million in total in the previous year.

• The increase in inventories impacted on operating cash

flow in the amount of EUR 37.3 million.

Cash flow from investment activities totaled EUR -47.5 mil-

lion, decreasing by EUR 19.7 million below last year’s figure,

especially due to the reduced investment activity.

The outflow of funds from financing activities was EUR

-86.9 million. The main factors influencing this were loan

repayments amounting to EUR 237.8 million and interest

payments of EUR 43.0 as well as new indebtedness to

banks in the amount of EUR 202.3 million.

• Other current financial liabilities increased by EUR

13.6 million to EUR 25.7 million. This is chiefly due to

liabilities from forward exchange transactions, an increas-

ing number of which were concluded at the year-end as a

result of currency fluctuations.

The ratio of net assets to consolidated revenues decreased

from 109.6 percent to 104.6 percent.

Net cash from operating activities shown in the cash flow

statement increased substantially from EUR 38.4 million to

EUR 115.4 million. The following factors contributed to this

change:

• Owing to the effects set out under “Earnings”, a pre-tax

profit of EUR 37.8 million was made compared to a loss of

EUR 6.0 million in the previous year.

• Depreciation on fixed assets decreased slightly by EUR

0.9 million, and contributed EUR 78.8 million to the inflow

of funds from ongoing business activity.


54

V. FINANCIAL STATEMENTS OF BAUER AKTIENGESELLSCHAFT

COMBINED MANAGEMENT REPORTFinancial Statements of BAUER Aktiengesellschaft

• The operating result improved by EUR 0.5 million to

EUR -0.2 million.

• The net profit for the year is EUR 5.9 million, EUR

0.8 million up on the previous year. No dividend was paid

in the 2014 financial year, as a result of which the net

earnings available for distribution increased significantly

from EUR 27.4 million to EUR 33.3 million.

The payment of dividends to shareholders is based on the

net earnings of BAUER AG as the parent company, taking

into account the Group’s consolidated earnings. The divi-

dend policy of BAUER AG is one of continuity, meaning that

in principle a dividend should be paid even in difficult years,

where financially justifiable. As the Group’s holding company,

BAUER AG is dependent on the earnings of its subsidiaries,

and additionally provides financing to them.

Following a difficult financial year, the planned after-tax result

in the Group could only be achieved by means of a one-off

income. We believe it is appropriate to allow our sharehold-

ers to participate in this, so we intend to pay a small dividend

again. At the same time, we are still intensively pursuing the

objective of improving the equity ratio. The Management

Board will therefore recommend to the Supervisory Board

that it propose to the Annual General Meeting that a dividend

of EUR 0.15 be paid to shareholders on the net earnings

available for distribution totaling EUR 33,349,700.22.

An amount of EUR 30,780,050.22 should therefore be

carried forward.

As the Group’s holding company, BAUER AG receives

earnings in particular from its subsidiaries. In 2015, dividend

payments from the subsidiaries will be somewhat lower

than in the year under review. The intention is to reduce the

burden on the subsidiaries’ capital base. For this reason,

the result in the financial statements for BAUER AG will be

somewhat decreased.

The annual report combines the Group management report

and the management report of BAUER AG as the parent

company. Consequently, notes on the balance sheet and

income statement of BAUER AG (acc. to German Commer-

cial Code, HGB) are presented at this point. They changed

materially in the following items in the past financial year

relative to the previous year.

Main changes to the balance sheet:

• Receivables and other assets increased by EUR

31.9 million. This is primarily down to the EUR 32.0 million

increase in receivables from affiliated companies, which

results from the issue of more loans to subsidiaries.

• Shareholders’ equity increased from EUR 155.3 million

to EUR 161.2 million. The reason for this was the net

earnings available for distribution, being EUR 5.9 million

higher than in the previous year.

• Liabilities increased from EUR 137.1 million to EUR

161.9 million. The main factor responsible for this was the

growth in liabilities to banks by EUR 43.5 million, which

chiefly resulted from the new syndicated loan. On the

other hand, liabilities to affiliated companies declined by

EUR 18.9 million.

Main changes to the income statement:

• Sales revenues, primarily related to charging of adminis-

trative services to subsidiaries, decreased slightly by EUR

0.5 million. On the other hand, other income increased

markedly by EUR 3.6 million, chiefly due to income from

forward exchange transactions.

• Other operating expenses rose by EUR 2.9 million.

Significantly higher expenses were incurred during the

financial year in currency management. In addition, there

were special expenses as a result of the syndicated loan.


Sustainability

VI. SUSTAINABILITY

of the holding companies have the main responsibility for the

long-term development of the company as well as its direc-

tion with regard to quality, safety, health and environmental

protection. These topics are also discussed during monthly

group meetings.

At the meeting of the Corporate Social Responsibility (CSR)

Committee, the Executive Board and representatives of

Human Resources, HSE, Training and Corporate Commu-

nications departments of BAUER AG come together once a

year to discuss current developments and define actions and

goals. The annually published Sustainability Report, which

since 2011 meets the requirements of the Global Reporting

Initiative (GRI), provides in-depth information about these

actions and goals.

EMPLOYEES

Every single employee is extremely important in reaching

the common goals of the BAUER Group. Thanks to their

commitment and experience, in 2015 we can look back on

a successful history that spans 225 years. That’s precisely

why developing and supporting our staff is our top priority.

Employee-related data

The companies of the BAUER Group worldwide employed

10,405 people (previous year: 10,264) on average over the

year. They are broken down as follows:

SUSTAINABILITY WITHIN THE BAUER GROUP

The BAUER Group has combined its most important action

areas under the maxim “BAUER’s Triple A”. The slogan is

based on the highest grade given by rating agencies when

evaluating the strength of a company. It is used to reflect

the areas of utmost concern with the Group. The first of

these is Health, Safety and Environment, which has grown

significantly in recent years through various measures and

should continue to be expanded. The second area is Quality

and Ethics. We want to offer our customers the highest

quality possible and treat our stakeholders with fairness. The

third A stands for performance thus the company’s financial

success. The goal is to earn the highest grades – all A’s –

in each area.

The actions areas defined under BAUER’s Triple A also

represent the core aspects of sustainability management.

The Group Management Board and the Managing Directors

Value added 2014

in EUR million Value added

439

Other expenses

231

Depreciation and amortization

95

Cost of materials

749

Profit

(in the

company)

14

Share-

holders

2

Interest

expenses

45

Employees

355

Minority interests

1

Public purse

22

HealthSafety

Environment

Performance

56COMBINED MANAGEMENT REPORTSustainability

workforce of the companies in Germany decreased slightly.

One of our key goals is to retain the loyalty of our core

permanent workforce, which we again succeeded in doing in

the past year.

The workforce of the Resources segment was reduced

due to some restructuring measures, the reorganization and

as a result of weakness in the mining sector. The subsidiaries

in Jordan (35 employees) and South Africa (30 employees)

played a significant part in the reduction during the year

under review.

Education

At Bauer, we care about inspiring young people to work

for our company and maximize their potential. That’s why

we offer a variety of opportunities for getting to know the

company better as a potential employer and gaining insight

into our business activities. In 2014, Bauer employed 248

apprentices in Germany. Most of them were learning to

become industrial mechanics, construction machinery

operators, or clerical staff.

For higher education students, we offer dual-study courses

in engineering and information technology in cooperation

with the Hochschule Ingolstadt technical college. Students

can also establish initial links with our business through

internships or by undertaking their Bachelor’s or Master’s

thesis with us.

Construction segment: 5,675 (previous year: 5,531)

Equipment segment: 3,038 (previous year: 2,998)

Resources segment: 1,400 (previous year: 1,449)

BAUER AG and subsidiaries: 292 (previous year: 286)

The trend in workforce numbers within the Group was in line

with our expectations. Changes to subsidiaries’ workforce

numbers were primarily recorded outside of Germany, linked

to international construction projects. Individual contracts

often facilitate major changes.

By the nature of its operations, the workforce of the Con-

struction segment is subject to the greatest fluctuation

dependent on the number of major projects being handled

in specific countries. Consequently, the biggest growth was

achieved by the subsidiaries in Egypt (124 employees),

Indonesia (104 employees) and the United Arab Emirates

(44 employees). In some countries, such as Malaysia or

Algeria, fewer people were employed in the year under

review than in the previous year owing to the weaker state

of the market. The good overall level of orders in hand

led to a slight increase in workforce in Construction, while

the growth above all related to staff recruited for specific

projects.

Workforce numbers in the Equipment segment increased

only slightly. Most of the small rise was attributable to recruit-

ment of new staff at the production facilities in the Far East

(17 employees) and Botswana (12 employees). In total, the

Industrial Salaried staff Apprentices

3,371

2489,646

6,027

3,664

23910,253

6,350

3,835 3,948

240 24810,264 10,405

6,189 6,209

12,000

10,000

8,000

6,000

4,000

2,000

02011 2012 2013 2014

Construction Equipment Resources Others

12,000

10,000

8,000

6,000

4,000

2,000

02011 2012 2013 2014

2,915

1,367

2519,646

5,113

2,952

1,578

26910,253

5,454

2,998 3,038

1,449 1,400

286 29210,264 10,405

5,531 5,675

Employees by employment typeEmployees by segment


Sustainability

personality and skills-based assessment. With this in mind,

we work specifically to attract more young women and girls

to technical professions and promote their advancement in

this area.

In 2014, approximately 11 percent of the Group’s workforce

were women – a figure which essentially reflects the techni-

cal nature of our business and the small numbers of women

who apply for such careers.

CAPITAL INVESTMENTS

In view of the general economic climate, we reduced our

capital investments compared to previous years in 2014.

For the first time in years, they were once again below

the level of amortizations. This was possible thanks to

extensive investments made in our plants over previous

years. The pace of technological progress in our business

has become faster, however, so it will only be possible to

improve performance in the future by increasing invest-

ments again.

For Equipment, our US plant in Conroe near Houston was

expanded in 2014 to allow our subsidiary BAUER-Pileco Inc.

to move there with all its activities in the areas of service,

sales and spare parts supply. The old site in Houston was

sold, thereby allowing the new construction to be financed

from the proceeds of the sale. Furthermore, the production

capacity for our anchor production in Edelshausen was

expanded in response to the urgent need for greater capac-

ity as a result of very good development in the business. All

further investments were chiefly channeled into modernizing

the equipment available to the production sites.

Investments in the Resources segment in 2014 were also

at a low level. A small hall was built in Schrobenhausen for

stainless steel production to be used in water treatment

and brewery systems. Further investments went into the

modernization of existing production systems.

Further investments were made in equipment, specifically

in the Construction segment, in order to meet the market

demand for ever more powerful machinery to handle special-

ist projects. We have for years now been seeing a trend

towards ever larger volumes in international infrastructure

projects, and we are increasingly needing ever larger

Training and development

The BAUER Training Center GmbH is the Group’s in-house

training facility, providing specially tailored courses both for

our own staff and for external target groups. Its extensive

program of seminars and courses in a wide variety of fields

covers many different subjects. In 2014 the BAUER Training

Center GmbH had a budget of around EUR 2.1 million

(previous year: EUR 2.3 million) for employee training and

development. Almost 2,717 in-house staff (previous year:

2,948) attended the seminars. A total of 475 (previous year:

599) internal and external seminars and external conferences

were attended.

We support our employees’ career development through a

system of reviews, coaching sessions and various mentoring

programs. We also conduct international training courses.

Diversity

In 2014, the BAUER Group employed people from 76 dif-

ferent nations. Our presence on worldwide markets has

brought together people from a wide variety of cultures as

part of our company. Our cooperation is characterized by

mutual respect. Discrimination, particularly on grounds of

religion, age, gender, race or sexual orientation, has no place

in our company. That’s why promoting diversity is an integral

part of our corporate culture.

We offer all our employees the same opportunities. In

both hiring and development, we place great emphasis on

Employees by region

12,000

10,000

8,000

6,000

4,000

2,000

02011 2012 2013 2014

1,891

1,658

630

478

924

9,646

4,065

2,061

542

965

10,253

4,090

726

1,869

2,212 2,290

612 586

950 1,018

10,264 10,405

4,144 4,158

762 752

1,584 1,601

Germany Europe (other) Middle East & Central Asia

Far East & Australia Americas Africa


effects are derived with regard to their further development.

These central components include the hydraulics and drive

technology, electronics and machine software as well as

gearboxes. Basic research work is also situated in the

central development department.

Development work at the subsidiaries of BAUER Maschinen

GmbH comes under the described system, in which case

each subsidiary is individually responsible for its specific

product group. Our international production sites also have

development areas which concentrate on the needs of our

customers locally, as well as on special machines that are

manufactured in that location. A development office in India

provides support for all development groups if required.

Our construction areas also have their own development

capacities. Specifically, BAUER Spezialtiefbau GmbH

operates a department for construction technology which

develops new methods and conducts fundamental research.

With regard to research activities that might be of Group-

wide importance, internal and external orders are placed

for research work via the BAUER Forschungsgemeinschaft

(research community). This gives a chance for blue-skies

thinking to be investigated with regard to its practical

applicability. Sometimes, this gives rise to outstanding new

techniques that help our companies to achieve technological

advances.

This type of overall organization for research and develop-

ment work has proven highly effective. Rapid decisions and

great flexibility allow all products to be kept at the cutting

edge, while new ideas and market requirements can be

implemented quickly.

There were some outstanding development projects in 2014

as well. For example, Deep Drilling developed a completely

new deep drilling rig in the 375 metric ton class together with

our client, Saxon Energy Services Inc. Two rigs were ordered

at the end of the year. Our underwater drilling machines for

the foundations of wind turbines and underwater turbines

also underwent intensive further development. Unfortunately,

we are still waiting for orders to be placed for equipment of

this kind because of sluggish development in the projects

in question. However, we are convinced that the significant

machinery to carry out the associated specialist foundation

engineering works. This demands higher levels of individual

investment, but also opens up new market opportunities for

us.

In financial 2014 the BAUER Group invested a total of EUR

72.7 million (previous year: EUR 103.4 million) in intangible

assets and property, plant and equipment. Depreciation of

fixed assets across the Group totaled EUR 78.8 million

(previous year: EUR 79.7 million). Write-downs of inventories

due to use Group-wide totaled EUR 15.8 million (previous

year: EUR 14.2 million).

Additions to the property, plant and equipment assets of

BAUER AG in the 2014 financial year totaled EUR 2.3 million

(previous year: EUR 3.5 million), against depreciation of EUR

2.9 million (previous year: EUR 3.3 million).

Ongoing capital investments were funded primarily by cash

and cash equivalents from business operations and from

financing. In 2015 too, we will keep investments in balance

with amortizations.

RESEARCH AND DEVELOPMENT

The BAUER Group invested substantial sums in developing

new construction methods and machinery in financial 2014.

Key areas of focus were heavy-duty rotary drilling rigs, cranes

for specialist foundation engineering applications, drilling tool

technology, small boring equipment in the field of anchoring

and high-pressure injection, diaphragm wall technology,

deep drilling, underwater drilling, and measuring technology

for quality control purposes. Many electronic applications

and techniques have been created or enhanced in order

to optimize on-site processes.

Research and development work in the BAUER Group is

organized on a decentralized basis. In the companies that

belong to BAUER Maschinen GmbH, there is a separate

development area in each major product group which

concentrates entirely on the corresponding equipment such

as rotary drilling rigs or cranes. The central development

department develops the technologies and components of

a machine that are used in several product groups. Thus, on

the one hand, the greatest level of standardization amongst

components is achieved, while on the other hand synergy


Sustainability

variety of methods, and to produce modern materials for use

in geotechnical applications. A state-of-the-art system of

innovation management is practiced with great intensity by

all Group units.

In the Equipment segment we invest a good 3.8 percent

(including internal and project-related expenditure) of the

corresponding portion of total Group revenues in research

and development. A staff of 183 people are involved in this

field, as well as outside consulting engineers and interns.

Research and development activities are routinely reviewed

and maintained at a high level to keep pace with the ever

increasing rate of change in market demands. We are also

continuing to expand our development departments outside

of Germany, such as in India and China. This will enable us

to benefit from the large numbers of highly trained engineers

available on local labor markets.

Research and development expenditure in the Construction

segment is 0.4 percent of total Group revenues, and in the

Resources segment 0.8 percent. We invest further significant

resources in the preparation and design of construction sites.

Profitable construction contracts are very often obtained

on the basis of special proposals on the market. Drawing

up such special proposals is development work, and also

provides a competitive edge for future projects on which

the costs cannot be recorded separately from the general

construction works.

Of the total research and development costs for 2014 of EUR

27.9 million, an amount of EUR 6.2 million was capitalized

(capitalization rate: 22.2 percent). Depreciation of capitalized

development costs and patents totaled EUR 6.5 million.

advantages offered by our machines, particularly with regard

to noise emissions and their ability to work under the influence

of powerful currents, mean they have excellent chances.

In the area of Premium and ValueLine drilling rigs, parts of the

equipment range have been relaunched and a new uppercar-

riage platform developed. Consistent modularization of the

products meant that significant advantages were achieved

with regard to production, scheduling and streamlined global

spare parts stocking.

Insights gained from a research project bore fruit during the

previous year in an optional energy efficiency package for

our rotary drilling rigs which reached market readiness. This

is highly appreciated by customers all over the world.

Further developments during the year concerned new well

drilling rigs, components for deep drilling rigs, improvements

to diaphragm wall machines, machines and processes

for soil remediation work with restricted overhead height,

improvements to the duty-cycle cranes to reduce noise levels

and a hydraulic hammer for ramming in piles with increased

frequency.

For many years now, our products and services have

extended well beyond the bounds of specialist foundation

engineering. The BAUER Group today is a machinery manu-

facturer and service provider in all fields dealing with ground

and groundwater. Pursuing that strategy, many units within the

Group have been undertaking additional development work,

such as to design new pipes for underground engineering

installations, to advance water purification based on a wide

2013 2014

Construction Equipment Resources BAUER

Group

Construction Equipment Resources BAUER

Group

Total Group Revenues (in EUR million) 717.3 590.5 196.4 1,504.2 699.0 612.6 248.6 1,560.2

Expenses for R&D (in EUR million) 3.1 26.0 3.7 32.8 2.9 23.1 1.9 27.9

as % of total Group revenues 0.4 4.4 1.9 2.2 0.4 3.8 0.8 1.8

Group employees 5,531 2,998 1,449 10,264 5,675 3,038 1,400 10,405

R&D employees 45 190 33 268 41 183 22 246

Patent series - - - 259 - - - 260

Patent applications, registered patents, etc. - - - 1,473 - - - 1,480

Research and development in the BAUER Group


BAUER Spezialtiefbau GmbH was the first member of the

BAUER Group to participate in the “Umweltpakt Bayern”

eco-pact, an environmental initiative between the Bavarian

state government and businesses in the state.

QUALITY

Quality is one of the fundamental concerns of top management

in our companies. We must do everything in our power to

maintain and, where possible, further develop our customers’

trust in our companies and the quality of our products, services

and equipment, earned over many years. We work hard to

understand the needs and expectations of our customers so

we can then meet them quickly, reliably and cost-effectively.

Ethics, health and safety, environmental friendliness, efficiency

and sustainability are all very important factors in meeting these

needs.

Bauer has had a traditional staff suggestion system in place

for decades. Recently, an intensively expanded system in the

Continuous Improvement Process (CIP) has also been a

source of new ideas.

Our quality management system is based on ISO 9001 as

well other applicable government and industry standards.

We conduct regular audits and benchmark reviews to

make sure we are meeting our planned quality goals. The

findings from these audits and reviews are incorporated

into our regular training programs. We motivate our staff by

demonstrating our own commitment to quality, setting chal-

lenging goals for them, giving them adequate responsibility

and recognizing good performance. Active cooperation is

essential to meeting our goals in a timely manner.

Our policy is to implement other management systems in the

various Group companies alongside quality management to

ISO 9001. We aim to assure customer satisfaction, in new

business fields especially, by implementing industry-specific

management systems, such as in conformance to API stan-

dards for companies with customers operating in the gas and

oil sector.

Our expenditure on research and development is reflected

in 244 (previous year: 259) current patent series, including

1,392 (previous year: 1,473) patent applications, registered

patents and utility models worldwide.

HEALTH SAFETY ENVIRONMENT (HSE)

For the BAUER Group, HSE is an integral element of

everything we do in creating and developing all our products,

specialist services, and business processes. In 2011, we

introduced global standards in the area of Health, Safety &

Environment (HSE), thus creating a uniform HSE management

system for all companies of the BAUER Group. By constantly

reviewing our performance and comparing it against our set

goals and parameters, we seek to continuously improve our

HSE system and thus consistently minimize our accident and

damage rates. The managerial staff is primarily responsible for

compliance and execution of the guidelines.

We take great care to educate our staff on the topic of

workplace safety. That’s why we conduct regular training on

HSE. Weekly safety meetings are held at our construction

sites and all our production facilities. This ensures a better

understanding and greater acceptance of safety guidelines

among our staff.

Regular reviews and audits confirm the consistent implemen-

tation of our safety standards. Through certifications such

as OHRIS, OHSAS, AMS-Bau and SCC, we ensure that our

safety policies meet the requirements of the International

Labour Organization (ILO). We are working on obtaining

certification for other companies in the Group.

Environmental management is integrated within the overarching

HSE policy. Here, standards and guidelines have been defined

which apply to all companies in the Group; we continuously

check that they are being implemented and complied with.

Some Group locations and companies – including the home

base Schrobenhausen – already operate environmental

management systems certified to standards such as EMAS.


Legal disclosures

VII. LEGAL DISCLOSURES

performance is exceptionally good, the said levels may be

surpassed by up to 1.8 times.

The short-term criteria applied in setting the variable

remuneration elements are the performance of the respective

Management Board members in the past financial year and

the economic position of the Group in respect of attainment

of budget targets in the year under review, particularly the

attainment of profit and revenue targets, taking into account

general economic trends.

The long-term criteria applied in setting the variable

remuneration elements are the success and future prospects

of the Group and the performance of the Management

Board in respect of these criteria. This assessment judges

the decision-making of the Management Board in terms

of sustainable business development over the past three

financial years and the effects of this decision-making in

achieving long-term stability for the business. Criteria applied

here are long-term profit and revenue prospects, sustainable

personnel development in accordance with the future

prospects of the Group, the development of the corporate

culture, the development of intra-Group collaboration, the

safeguarding of corporate harmony, strategic market and

product development, risk and security management,

long-term financial stability, and the quality of key financial

indicators relative to the prevailing economic conditions.

In assessing the appropriateness of the remuneration paid to

the Management Board, the variable remuneration is set and

compared in proportion to the fixed basic salary. Further-

more, the fixed and variable portions respectively, and the

overall remuneration paid, are compared against the normal

levels of remuneration received by management board

members of other stock market quoted companies, and

other companies operating in the same sector, or companies

similar in other ways, in Germany (horizontal comparison).

A vertical comparison is carried out on two levels: firstly, the

salaries of the Management Board members are compared

against those of the directors of the major BAUER Group

subsidiaries; secondly, they are assessed relative to salary

grade A VIII stipulated in the collective pay agreement ap-

plicable within the Group within the industry-wide framework

of salary and training remuneration to salaried staff and

foremen in the construction sector.

REMUNERATION REPORT

The Remuneration Report sets forth the system of remuner-

ation paid to the members of the Management Board and

the total amounts paid to them, and explains the underlying

principles and amount with regard to the remuneration paid

to the Supervisory Board.

Remuneration of the Management Board

The Management Board of BAUER AG, as previously,

comprised three members in the year under review. The

Supervisory Board sets the overall levels of remuneration paid

to the individual members of the Management Board based

on proposals submitted by the Presidial and Personnel Com-

mittee. The plenary Supervisory Board reviews and approves

the remuneration system for the members of the Management

Board following prior consultations in the Presidial and Person-

nel Committee.

The system of remuneration paid to the members of the

Management Board did not change from the previous year.

The overall levels of remuneration paid to the individual

members are set on the basis of a performance assessment.

This process assures that the overall remuneration is appropri-

ate to the duties and performance of the Management Board

member concerned and to the situation of the company. The

remuneration paid to each Management Board member is

composed of non-performance-related components, chiefly

a fixed basic salary, paid in equal monthly installments, and

a performance-related component in the form of a variable

annual bonus. This is set by the Supervisory Board on the

basis of short and long-term evaluation criteria, in which case

the short-term evaluation criteria are equally weighted with the

long-term ones when setting the variable remuneration.

The criteria for setting the fixed remuneration to members

of the Management Board are the assignment of duties, the

performance of the respective Management Board member,

the economic position of the Group and its profitability and

ongoing future prospects.

Maximum limits are imposed on the total remuneration

paid. The variable remuneration paid to each member of

the Management Board is limited by an individually defined

maximum bonus level. This maximum is the upper limit of

potential bonus payment in the normal course of business,

and is paid in full if all set goals are attained. If business

62COMBINED MANAGEMENT REPORTLegal disclosures

Remuneration of the Supervisory Board

The Supervisory Board of BAUER AG comprises 12 mem-

bers. Calculation of the remuneration paid to the members of

the Supervisory Board is specified in detail in the Articles of

Association of BAUER AG. Each member of the Supervisory

Board receives a basic annual fee of EUR 18 thousand, pay-

able in December of each financial year, plus reimbursement

of out-of-pocket expenses and any sales tax (VAT) liability

incurred in performing the duties of a Supervisory Board

member. The Chairman of the Supervisory Board receives

twice that amount of remuneration, and the Deputy Chair-

man 1.5 times the amount. The basic remuneration amounts

are increased by 10 percent for each membership of a

Supervisory Board committee, provided that the committee

in question was convened at least twice in the financial year.

Membership of the Mediation Committee is excluded from

these remuneration provisions. Changes to the Supervisory

Board and/or its committees are taken into account in the

remuneration proportionate to the respective member’s time

in office, and rounded up or down to full months based on

the standard commercial rule. The members of the Supervi-

sory Board receive no performance-related pay.

The net remuneration paid to all the members of the

Supervisory Board in the 2014 financial year totaled EUR

254 thousand (previous year: EUR 254 thousand).

Other

No loans or advances were paid to members of executive

bodies of the company in the year under review, nor were

any liabilities entered into in their favor. As a matter of

principle, no securities-oriented incentive systems exist for

members of the Management Board or Supervisory Board

of BAUER AG, or for Group employees in Germany. BAUER

AG provides D&O (Directors and Officers) group insurance

cover in respect of liability for economic loss to the members

of executive bodies of BAUER AG and of all affiliates in

Germany and internationally in which a majority share is

held. The D&O policy includes an appropriate excess for

the insured parties. For the members of the Management

Board, the minimum excess stipulated by law of 10 percent

of the loss up to at least an amount representing one and a

half times the fixed annual remuneration of the Management

Board member concerned was agreed in the D&O insurance

policy in the year under review.

The remuneration is further set so as to remain competitive

with that generally paid to highly qualified management staff

on the market as a whole.

The Annual General Meeting held on June 30, 2011 resolved

that the BAUER AG financial statements and the Group

consolidated financial statements for the financial years 2011

to 2015 would contain no disclosures of the remuneration

paid to individual Management Board members, thereby

applying the legal authority assigned to it by section 286,

subsection 5 and section 314, subsection 2 of the German

Commercial Code (HGB).

The total remuneration paid to members of the Management

Board in the year under review, excluding allocations to

provisions for defined benefit plans, was EUR 1,150 thousand

(previous year: EUR 1,361 thousand). Of that total, EUR

1,090 thousand (previous year: 1,056 thousand) was not

performance-related and EUR 60 thousand (previous year:

305 thousand) was performance-related. The total remunera-

tion includes benefits in kind arising from the private use of

a company car and reimbursement of expenses for each

member of the Management Board, as well as group accident

insurance premiums and employer’s liability insurance associa-

tion contributions.

The company pension scheme for Management Board

members incurred pension service costs totaling EUR

159 thousand (previous year: EUR 118 thousand). The

baseline salary defined for calculating retirement benefits

is significantly lower in all contracts than the basic salary.

Calculated in accordance with IAS 19, the defined benefit

obligation entailed by all pension commitments to members

of the Management Board at the year-end was EUR 5,531

thousand (previous year: EUR 3,868 thousand).

The contracts of Management Board members include

individual severance clauses regulating the specific terms

of premature termination, with settlements oriented to

the length of service of the Management Board member

concerned and gauged so as not to exceed an amount of

two years’ remuneration for any one Management Board

member. No provisions for compensation in the event of

a takeover offer being made have been agreed with the

members of the Management Board.


Legal disclosures

Composition of subscribed capital

The subscribed capital (share capital) of BAUER AG remains

unchanged at EUR 73,001,420.45 and is divided into

17,131,000 no-nominal-value bearer shares, representing

a pro rata amount of approximately EUR 4.26 per share

of the total share capital. Each share entails equal rights,

and entitles the holder to one vote at the Annual General

Meeting, with the exception of share categories precluded

from voting by law pursuant to section 136 of the German

Stock Corporation Act (AktG) and section 28 of the German

Securities Trading Act (WpHG).

As in the previous year, 51.81 percent of the shares were

in free float. The members of the Bauer family and the

BAUER Stiftung, Schrobenhausen, own a total of 8,256,246

no-nominal-value shares in BAUER AG on the basis of a

pool agreement, representing a 48.19 percent share in the

company. The pool agreement provisions include binding

voting commitments as well as restrictions on the transfer-

ability of pool members’ shares. No other direct or indirect

holdings of BAUER AG share capital exceeding 10 percent

The members of the Management Board are required to

limit the extent to which they take on Supervisory Board

mandates and other administrative or voluntary functions

outside of the company. The members of the Management

Board may not, without the consent of the Supervisory

Board, carry out any trade or business or conduct, on their

own or a third-party’s account, any dealings in the sector

in which the company operates. Further, they may not,

without the consent of the Supervisory Board, become a

management board member, director or personally liable

shareholder of any other trading company. This ensures that

no conflict arises with the assigned duties of the Manage-

ment Board member either in relation to time commitment or

to remuneration received. No separate remuneration is paid

for the assumption of executive or supervisory mandates on

the boards of Group companies.

STATUTORY DISCLOSURES REGARDING TAKEOVERS

The following disclosures are made pursuant to section 315,

subsection 4 and section 289, subsection 4 of the German

Commercial Code (HGB) as per December 31, 2014.

in EUR '000 2013 2014

Chairman

Dr. Klaus Reinhardt 38 38

Deputy chairman

Robert Feiger 27 27

Employer representatives

Dr.-Ing. Johannes Bauer 20 20

Dipl.-Ing. (FH) Rainer Schuster 18 18

Dipl.-Ing. (FH) Elisabeth Teschemacher 18 18

Gerardus N. G. Wirken 20 20

Prof. Dr. Manfred Nussbaumer 20 20

Employee representatives

Dipl.-Volkswirt Norbert Ewald 20 20

Dipl.-Kfm. (FH) Stefan Reindl 9 18

Regina Andel 18 18

Dipl.-Ing. Gerold Schwab 20 20

Dipl.-Ing. (FH) Walter Sigl 9 0

Reinhard Irrenhauser 18 18

Total * 254 254

* As a result of rounding to EUR thousands, there was a rounding difference of EUR thousand in 2013 and 2014.

Remuneration Supervisory Board (not including sales tax proportion and reimbursement of expenses)

64COMBINED MANAGEMENT REPORTLegal disclosures

stock market, the acquisition price (excluding ancillary costs)

may be no more than 10 percent above or 20 percent below

the price determined by the opening auction on the trading

day for shares in the company in Xetra trading (or a compa-

rable successor system) on the Frankfurt Stock Exchange.

If the acquisition is effected by means of a public tender

offer, the purchase price or the limits of the purchase price

span per share (excluding ancillary costs) may be no more

than 10 percent above or 20 percent below the average of

the closing prices per share in the company in Xetra trading

(or a comparable successor system) on the three trading

days prior to the day of issue of the public tender offer. If not

insignificant variations of the decisive share price occur after

the day of issue of the public tender offer, the purchase price

may be adjusted.

The Management Board shall be authorized to appropriate

shares in the company acquired pursuant to the above au-

thorizations for all legally admissible purposes. Consequently,

the acquired shares may also in particular be sold by means

other than by way of the stock market or by means of an

offer to the shareholders, if the shares are sold for cash at a

price (excluding ancillary costs) not materially below the stock

market price of shares of the company carrying the same

rights at the time of the sale in Xetra trading (or a comparable

successor system). The shares may also be sold in return for

non-cash payment, provided this is done for the purpose of

effecting company mergers or acquiring companies, parts

of companies, shareholdings in companies or other assets.

The aforementioned shares may be redeemed without need

of a further Annual General Meeting in order to approve the

redemption or its execution. With regard to use of the bought-

back shares, the authorization provides, in specific cases, for

legal rights of subscription of shareholders to be excluded. The

facility to acquire treasury stock has not been utilized to date.

Appointment and termination of appointment of

Management Board members, amendments of the

Articles of Association

The appointment and termination of appointment of

members of the Management Board of BAUER AG is

regulated by sections 84 and 85 of the German Stock

Corporation Act (AktG) and sections 30 ff. of the German

Co-determination Act (MitbestG) in conjunction with Articles

5 and 6 of the company’s Articles of Association. Pursuant

to the company’s Articles of Association, the Management

of the voting rights are known to the company. None of the

shareholders have special rights entailing controlling powers.

Nor does any voting rights control exist on the part of the

employees holding shares in the capital.

Authority of the Management Board to issue or buy

back shares

Article 4, paragraph 4 of the company’s Articles of Association

Board states that the Man-agement Board is authorized, with

the consent of the Supervisory Board, to increase the share

capital once or more than once up to June 27, 2017 by up

to a total of EUR 7.3 million by the issue of new no-nominal-

value bearer shares against cash and/or non-cash contribu-

tions. To that end, the Management Board is authorized,

with the consent of the Supervisory Board, to exclude the

legal subscription rights of shareholders in the following

cases:

• in the event of capital increases against non-cash contri-

butions,

• in the event of capital increases against cash contributions

where the issue amount of the new shares issued is not

materially below the market price of the already quoted

shares at the time of definitive setting of the issue price

and the shares issued excluding shareholders’ subscrip-

tion rights pursuant to section 186, subsection 3, clause

4 AktG do not in total exceed 10 percent of the existing

share capital either at the time this authority takes effect or

at the time of exercising this authority. Shares which have

been or are to be sold or issued in direct or corresponding

application of section 186, subsection 3, clause 4 AktG

while this authority is in place until such time as it is exer-

cised, pursuant to other authorities, excluding subscription

rights, are to be set off against the said 10 percent limit,

• to balance out fractional amounts.

By resolution of the Ordinary Annual General Meeting held

on June 26, 2014, the company was authorized to acquire

treasury stock, over a limited period up to June 25, 2019,

representing up to a total of 10 percent of the company’s

share capital at the time the resolution was passed. The

shares shall be acquired at the discretion of the Manage-

ment Board by means of a public tender offer or by way of

the stock market. If the acquisition is effected by way of the


Follow-up Report

lender to terminate its loan commitments in the event of a

change of control or if control is gained by a third party. As

defined by this syndicated loan agreement, a change of

control is defined as a situation in which the total sharehold-

ing held by the pooled members of the Bauer family directly

amounts to less than 40 percent of the capital shares or

voting rights in BAUER AG. A third party gains control if,

overall, more than 50 percent of the capital shares or voting

rights in BAUER AG is held directly or indirectly by one or

more persons acting jointly (with the exception of the pooled

members of the Bauer family).

Furthermore, several long-term loans with balances totaling

EUR 146.0 million as per the balance sheet date, agreed

by BAUER AG together with other Group companies as the

borrower and guarantor, provide for a right of termination

for cause by the lender in the event of a change of control

in BAUER AG. A change of control is considered to have

taken place where a third party, not forming part of the circle

of existing main shareholders, directly or indirectly acquires

control of at least 30 percent or the majority of voting shares

in BAUER AG. Any loaned amounts would have to be repaid

in the event of termination. The terminated credit line would

no longer be available for new borrowing.

Additional short- and long-term loan agreements also exist

within the Group which provide for a right of termination for

cause, at market terms, in the event of a change of control.

VIII. FOLLOW-UP REPORT

No matters of special note occurred after the end of the

financial year.

Board comprises at least two persons, who are appointed

by the Supervisory Board for a maximum term of office of

five years. At present the Management Board comprises

three members appointed by the Supervisory Board and

a Chairman of the Management Board, as well as a Labor

Director. It is permissible to re-appoint or extend the appoint-

ment of a member of the Management Board for a further

maximum term of office of five years. Any appointment

or re-appointment requires a decision by the Supervisory

Board, which may be taken no earlier than one year prior to

the end of the relevant term of office. The Supervisory Board

may rescind an appointment to the Management Board or

an appointment as Chairman for good cause. The Presidial

and Personnel Committee of the Supervisory Board prepares

the Supervisory Board’s decisions on the appointment and

termination of appointment of Management Board members

and concerns itself with the long-term planning of successor

members for appointment to the Management Board.

In accordance with section 119, subsection 1 clause 5 and

with section 179 AktG, the amendment of the Articles of

Association is passed by the Annual General Meeting with

a majority of at least three quarters of the share capital

represented at the vote. Pursuant to Article 12 of the Articles

of Association, the Supervisory Board is authorized to pass

amendments to the Articles of Association which relate only

to its wording. The Supervisory Board is further authorized to

adapt the wording of Article 4 of the Articles of Association

(amount and division of the share capital) following full or

partial execution of the increase in share capital or on expira-

tion of the authorization period according to the respective

utilization of the authorized capital.

Change of control

BAUER AG, together with other Group companies, has

concluded a syndicated loan agreement providing a credit

line of up to EUR 450 million; this contains provision for the

67

Our customer Jafec – Japan Foundation Engineering Co., Ltd. – produced 120 piles for the construction of a 14-story hospital with

two basement levels. A BG 28 and a BG 30 were used for the work.

improve its efficacy. Moreover, our auditors review on an

annual basis the extent to which our existential risk early-

warning system is fit for purpose. Their suggestions are

incorporated in order to improve the system. The process

steps involved in risk management are: identification, as-

sessment, control of measures and monitoring.

For the identification of risk, risk categories are defined

and assigned to specific areas of risk. This defines areas of

focus. Risk categories defined by the BAUER Group are:

strategic risks; market risks; financial market risks; political

and legal risks; organizational and governance risks; risks

arising from the value creation chain; and risks of the sup-

porting processes. These risks are grouped as latent risks

and managed in a unified process within the framework of

our risk management system. Conversely, project risks are

managed according to their nature and significance by an

additional, independent process.

The process of identifying and assessing latent risks is

reviewed once yearly at management meetings within the

relevant Group companies, and is implemented jointly by

departmental and central function heads as well as through

individual specialists. This process ensures that potential

new risks and opportunities are submitted for review at

management level, and are included in follow-up reporting if

considered relevant. Structured risk identification is followed

by risk assessment based on a scale of relevance.

Relevant risks above a certain threshold value are quantified

based on scenarios. Planning risks are estimated on the

basis of empirical values, applying standard deviations. Risks

from within the subgroups are consolidated at Group level.

BASIC PRINCIPLE OF RISK MANAGEMENT

As part of our business activities, we are exposed to risks

inherent to our operations. Running a business requires

taking risks. True risks result from unforeseeable events

that can bring both hazards and opportunities along

with them. Therefore, at Bauer, risk management means

not just reducing the hazards but also knowing how to

take advantage of the opportunities. The purpose of risk

management is to protect our business objectives, increase

the value of our company and reduce the costs of risk. Risk

management involves identifying, analyzing, evaluation and

monitoring existing and anticipated risks along the entire

value chain and devising actions to deal with them. This

involves assessing external risks potentially impacting on our

businesses, as well as risks arising internally. Our system of

risk management is based on a fundamentally risk-averse

approach, meaning that we aim primarily to safeguard

against impending risks rather than to exploit opportunities

for short-term gain. As a general rule, we do not take risks

that threaten the existence of the company.

Risk management system

Our risk management system is based on the risk policy

defined by the Management Board, and regulates the

handling of risks within the BAUER Group. It defines a unified

methodology applicable to all segments and their member

companies. It is continually reviewed and adjusted as

required.

Our risk management system is an integral element of our

overall management system and, like all our management

systems, serves as an instrument of value- and success-

oriented corporate governance. Audits routinely verify its

implementation, and management reviews continuously

COMBINED MANAGEMENT REPORTRisk and Opportunity Report

IX. RISK AND OPPORTUNITY REPORT

RISK REPORT

Relevance Extent of losses

(in EUR '000)

Definition Identified risks

1 up to 8,000 Insignificant to low risk Risks with this relevance are identified

in our business2 up to 20,000 Medium risk

3 up to 50,000 Significant risk

We do not see risks with this relevance

in our business4 up to 100,000 Serious risk

5 above 100,000 Critical risk

Relevance scale of the BAUER Group

68COMBINED MANAGEMENT REPORTRisk and Opportunity Report

class. Secondly, it is based on potential harm identified in

relation to the project, with the worst-case outcome serving as

the decisive factor. The risk classes defined by this process

are taken into account at fixed cost surcharges to cover the

identified risks.

The system has been developed over a number of years

across the corporate units faced by the relevant project risks

and expanded to apply to the relevant operations.

Risks

In the following we set forth risks which may have a significant

impact on our financial and earnings position and on our

reputation, and assess the relevance to our business. The

breakdown follows the same risk categories as we apply

in our risk management system. The areas of risk are

aggregated. Unless otherwise specified, all risks set out

in the following relate to all our segments.

STRATEGIC RISKS

Segmental structure

We counter the strategic risks arising from the segmental

structure of the Group by dividing it into separate Construc-

tion, Equipment and Resources segments, thereby pursuing

the aim of greater independence from the economic cycles

of the construction industry.

Frequent acquisitions and new company start-ups in

the Resources segment entail the risk of misjudgment of

partners as well as difficulties in integrating the companies

concerned into the BAUER Group. We counter this risk by

employing thorough due diligence and intensive monitoring

during the integration phase.

The Equipment segment’s move into deep drilling and the

manufacture of machinery for mining applications will also

further reduce its dependence on the Construction segment.

We class the risks associated with the structure of our

business as medium.

Strategy development and implementation

The goals for the various strategic areas of action and the

implementation of the resultant measures are reviewed at

regular intervals. Consequently, we regard the risks relating

to strategy development and implementation as low.

Following assessment, risk-specific management measures

are defined. Where possible and useful, we have taken out

appropriate insurance cover in respect of potential damage

and liability risk, in order to reduce our risk exposure and

avoid, or at least minimize, potential losses. Responsibility

for monitoring risk lies with the risk managers.

The effects of individual risks are aggregated in the context

of corporate planning by means of risk simulation. This

means that the income statement for a given financial

year is played through several thousand times in indepen-

dent simulations based on random figures (Monte Carlo

simulation).

Risk analysis is conducted on at least a yearly basis. Yearly

reports are submitted to the Management Board and

Supervisory Board. The system is continually being updated

and continuously improved both qualitatively and structurally

in terms of the integration of more Group companies. To

communicate acute risks, the routine risk analysis is supple-

mented by immediate reporting. Our risk management

system covers both risks and opportunities.

Handling of project risks

Project risks are the principal performance risks, and thus

are an integral element in the work of the Construction and

Resources segments, wherever construction work or plant

assembly is carried out on the customer’s premises. Associ-

ated risks, such as in relation to the ground and resulting

from the individual character of each individual project –

including contract, timetable and damage risks – can thus

accumulate detrimentally in specific cases in such a way

that they may threaten the existence, if not of the Group as

a whole, at least potentially of smaller subsidiary companies.

In respect of all relevant projects above low threshold

values, prior to submission of quotes all conceivable risks

and opportunities are systematically identified, analyzed

and assessed, and appropriate measures are defined to

minimize risks and track opportunities.

Each project is assigned to a risk class and organizationally

escalated according to its risk class, and is thus subject to

a strict approval process. Risk classification is based, firstly,

on defined checklists applying the K.O. principle, in order to

prevent inadvertent assignment to an inappropriately low risk


Risk and Opportunity Report

Despite the overcapacity and associated pressure on

margins in China, we have been able to maintain our

market position based on the recognized high quality and

still clear technical edge of our machinery. The lack of

market experience of Chinese manufacturers, combined

with the facts that the quality of their products remains

significantly lower and their after-sales service is generally

of a less developed nature, has to date impeded exports

of Chinese construction machinery on a grand scale to the

markets of relevance to us. A number of smaller Chinese

competitors have already been forced out of market as

a result. This risk is rated as low in the short term, but

medium in the medium term.

Macro-economic risks

High levels of public sector debt in the USA, as well as in

some EU member-states, significant interventions by some

central banks as well as uncertainty as to the stability of

markets in specific countries and the phases of significant

downturn on the market in China and the other BRIC nations

influence our appraisals of the macro-economic situation.

Ongoing political unrest in the Middle East is impeding

willingness to invest in the countries immediately affected,

and often beyond.

The significant drop in the oil price may well be easing

pressure on importing countries’ balances of trade, but

in the long term it will restrict the purchasing power and

investment appetite of the oil producing countries in the

Middle East and Russia. If the oil price remains low for a long

period, this could have a negative effect on demand for deep

drilling rigs and services for the oil industry. As a result of the

significantly reduced oil price and the tense situation in the

east of Ukraine, leading to sanctions against Russia, there

was a significant drop in value of the Russian ruble against

the euro towards the end of 2014. This creates obstacles

for our equipment sales business to Russia, and is currently

regarded as a medium risk.

These issues entail both exchange rate risks and demand-

related risks in the markets concerned. By contrast, the

overall positive macro-economic situation in the Far East is

creating a structurally greater dependence of the Group on

that region.

MARKET RISKS

Selling market risks

It has always been one of our key strategic principles

to counter risks on our selling markets by means of a

multi-segment organization. Whereas our machinery

manufacturing business is still heavily influenced – if at a

delay – by economic trends in the construction sector, the

establishment of the Resources segment has enabled us to

isolate part of our business from the effects of construction

cycles much more effectively. Our strategy of spreading

business in each segment across a large number of mar-

kets worldwide further reduces the overall risk, so that no

serious risk is posed to the Group as a whole in the event

of any weakening or collapse of individual regional markets.

Moreover, in the event of a regional market downturn our

network strategy in the Construction segment enables us

to relocate our capacities rapidly to another country and

continue operations at the new location. This strategy has

proven effective during various regional crisis situations in

the past, in which it compensated for or cushioned nega-

tive impacts on the overall result. Our Resources segment

has also already expanded on a broad international scale.

We rate risks associated with our selling markets as

medium.

Competitive environment

In the Equipment segment especially, we operate in highly

competitive, price-sensitive markets. The Chinese construc-

tion market – and to an even greater extent in its wake, the

Chinese construction machinery market – have seen highly

dynamic growth in the past as a result of government policy.

As a consequence, major production capacities for construc-

tion machinery were created. The repeated stagnation of the

Chinese construction market since 2012 has seen demand for

new machinery decline, in some cases disproportionately dra-

matically. The resultant overcapacity in the country has placed

prices and margins under heavy pressure at times. We have

implemented intensive cost-cutting measures in order to

lastingly improve our competitiveness in China. For example,

production above all as well as sourcing has been localized to

a significant extent, and the level of professionalism increased

while retaining the familiar high quality standards. Furthermore,

the after-sales service has been expanded further in all

markets as a stabilizing factor for new business.

70

Interest rate risks

We reduce the risks arising from fluctuations in interest rates

to a low level by fixing rates and rate derivatives for as long

as possible.

Foreign exchange risks

Where possible and available, we counter foreign exchange

risks by financing our international holdings in their respective

local currency. Transaction risks (foreign currency risks arising

from the current cash flow) are minimized in all business

divisions by means of suitable rate hedging instruments. The

remaining currency risks are evaluated as low.

POLITICAL AND LEGAL RISKS

Compliance

For the BAUER Group, acting responsibly and in keeping

with the law is a fundamental principle underpinning our

commercial success, the quality of our products and services

and our sustainable ongoing development. We place the

utmost value in upholding social conventions and in comply-

ing with applicable laws and business standards, so as to

minimize the risk of non-compliance. For us, compliance

means observing all applicable laws, rules and regulations.

Legally compliant, ethical and socially sustainable action is

the cornerstone of our values management system. This

will be applied to ensure staff are aware of our fundamental

values as soon as they are hired. Special training courses

enable them to extend their knowledge. A special software

program ensures that we do not do business with any

companies cited on an EU or US sanctions list.

In summary, we are of the opinion that our existing values

management system provides us with an efficient means of

keeping our compliance risk to a low level.

Political and legal environment

However, owing to the broad spread of the Group’s opera-

tions, and its restraint in investing in potentially unstable

countries, the political risks in individual countries pose little

risk to the Group as a whole. We therefore rate the risk as

low.

The Group Management Board and the directors of the three

operating segments routinely consider projections based

on specific scenarios of the impact of any given risks on

the company in question and on the Group as a whole. Any

necessary and relevant measures are derived from these

analyses and implemented in full. However, we rate the

overall macro-economic risks as low.

Procurement market risks

We counter fluctuations on the procurement market by enter-

ing into long-term contracts. This risk is rated as insignificant.

FINANCIAL MARKET RISKS

Covenant risks

Several long-term loans are covered by covenants linked to

pre-determined financial variables. These are primarily the

ratio of net debt to EBITDA, the ratio of EBITDA to net inter-

est coverage, and the equity ratio. The key figures agreed for

the promissory notes and the syndicated loan concluded in

2014 were met by the year end.

In addition to the earnings situation of the Group as a whole,

higher financing requirements in particular may pose an

increased covenant risk. This applies, for example, to changes

in inventories in the Equipment segment. In order to reduce

that risk, active selling of surplus stocks is initiated and

production volumes are reduced as necessary. A high level of

outstanding receivables can likewise result in the inability to

meet agreed covenants.

Based on forward-thinking planning and sound financial

controlling, we are making every effort to keep within the

agreed limits. This risk is classed as medium.

Financial stability and liquidity

The risk of financial instability and supply shortages on

international financial markets was countered last year by

concluding a syndicated loan agreement. This agreement,

with a three-year term, ensures the medium-term liquidity

supply for the Group of companies, and is an important tool

for alleviating major risks on the financial markets.


71

Production and order fulfillment

Technical failures arising from design errors or miscalcula-

tions of statics in the project business can result in significant

delays, both on the company’s own construction projects

and on our customers’ projects. In the BAUER Group, the

risks resulting from this represent an inherent component

of our project business. Consequently, designs and statics

are predominantly produced in our own design bureaus by

experienced employees. Consequently, we can assess the

risks resulting from this as low.

A further risk in order fulfillment is entailed by the selection

and application of drilling techniques. Misjudging ground

conditions can likewise result in increased risk costs.

Disturbances to the project timetable must be identified

by the project manager and communicated at an early

stage. The management is aware of these risks, and relies

on experienced project and production managers in all

segments. All the listed risks are subjected to a threat and

opportunity analysis at project level in the Construction and

Resources segments.

A further risk in relation to production and order fulfillment is

the rising cost of production in China, resulting among other

factors from increasing rates of pay. The new plant in Tianjin

is intended to generate synergies in production and optimize

machine capacity utilization in future. The risks in production

and order fulfillment are rated as medium.

Project risks

Project risks are essentially the principal performance risks

in the Construction and Resources segments, especially as

each project has its own individual characteristics. Although

we work on the assumption that our projects are costed

with due diligence, the possibility cannot be definitively ruled

out that, on finally billing the customer, lower earnings will

ultimately be generated. As a result of the trend for projects

to increase in size and complexity, the resulting risks must be

evaluated as of a medium level.

Supplements and claims management

Especially in respect of complex construction works, we

are increasingly seeing parties resort to legal action when

disputes arise in relation to contract interpretation as well as

Contract risks

Our Construction and Resources segments primarily provide

construction, drilling and environmental services. The under-

lying projects are almost always prototypes executed in each

case on the basis of customized contracts. The resultant

risks are subject to stringent management routines, and

so can be rated as low.

Current legal cases

Legal disputes arise almost exclusively from our provision

of services, in particular in the project business. Judicial

disputes exist with regard to clients, suppliers and business

partners, and in the majority of cases relate to remuneration,

claimed deficiencies in performance or delays in completing

a project. By their very nature, it is impossible to say for

certain how the court or arbitration proceedings we are

involved in will turn out. Nevertheless, following careful

examination, we assume that adequate provision has been

made in the balance sheet for all legal disputes.

VALUE CREATION RISKS

Research and development risks

As a technology leader, particularly in our Equipment segment,

we counter any possible weakening of our market position by

means of continuous research and development. Although

the booming markets in the Far East and the resultant new

competitors are sharpening the innovative pressures, we have

to date succeeded in maintaining the necessary edge as a

technology leader.

Nevertheless, we are well aware that these pressures will

continue to grow. That is one reason why we are also

increasingly utilizing low-cost local development resources

in India and China to provide a rapid, cost-effective boost

to our rate of innovation.

Moreover, there is a risk of incurring additional costs in this

context due to development and design mistakes necessitating

modifications. This risk is minimized by a structured, multi-

stage product creation process.

Thanks to our great innovative strength and transparent

product creation process, we rate the risks in relation to

research and development as being currently medium.


72

Personnel development and structure; key personnel

Our procedures for providing assistance and support

to our employees, from the selection and recruitment

stage, through induction, qualification and training, and

incorporating ongoing support in personal development,

have been continuously improved. Fluctuation rates have

been very low for many years, and represent an affirmation

of our personnel policy. We rate risks relating to personnel

as insignificant.

IT

Security to prevent data loss or unauthorized access, as

well as to safeguard system and data availability, is ensured

by means of state-of-the-art hardware and software and

building services technology, so IT risks are classed as

insignificant.

Accounting-related system of internal controls and

risk management

Consolidated accounting risks comprise risks in respect of

accounting, valuation and recognition. To counteract them,

the accounting functions for the major subsidiaries in Ger-

many are mainly managed centrally at Group headquarters

in Schrobenhausen. This permits specialization in certain

kinds of business operations, such as joint ventures, and

means that transactions are all treated uniformly.

The accounting functions for the other subsidiaries –

practically all international subsidiary companies outside of

Germany and the main German subsidiaries – are usually

managed by decentralized in-house commercial depart-

ments. In this, our international subsidiaries are assisted

by external accountants and auditors as well as by our

investment controllers, so as to ensure properly qualified

financial reporting in accordance with local laws or conform-

ing to International Financial Reporting Standards (IFRS).

The financial statements of the major Group companies are

additionally audited in accordance with IFRS. Audits are

conducted in accordance with the International Standards

on Auditing (ISA).

The procedures for monthly Group reporting, preparation of

quarterly and annual financial statements and consolidation

additional works and supplements. Clients’ representatives

are increasingly rarely authorized to resolve conflicts by

mutual consent. As a result, final project settlement is

increasingly being delayed by legal action, and additional

costs are being incurred. We manage this risk by profes-

sional management of supplemental requirements in the

course of the construction project, and based on full

documentation of the work carried out. Despite all efforts,

the outcomes of some negotiations on supplemental require-

ments pose a residual risk to the company. The risks arising

from supplemental requirements are rated as medium.

Acquisition, sales and contract negotiations

The risks of miscalculating quotations and of warranting

technical characteristics which cannot be fulfilled are mini-

mized by the strict application of the dual-control principle,

and can basically be regarded as low.

Materials management and procurement

Thanks to our long-standing and successful policy in our

machinery manufacturing operations of planning well ahead

to safeguard supplies of components which may be subject

to bottlenecks, and based on additional measures we have

taken and on our ability to have time-critical components

made within the Group in the event of a bottleneck, the risks

in terms of procurement currently remain classed as low.

RISKS OF SUPPORTING PROCESSES

Debtor management

To limit our exposure to risk of payment default, in Germany

we have at our disposal a tried and tested system compris-

ing credit insurance, payment default guarantees, advance

payments and – in special cases – also guarantees as security

in respect of contracted works, so we rate this risk as low.

Quality risks

Great attention is paid to the quality of work done in all

areas of the business. This is safeguarded by employing

well-trained staff and by means of a long-established

quality management system, which has been in place for

many years. All major Group companies are certified, and

are audited on a regular basis. We therefore rate quality

risks as low.


73

of the individual financial statements in accordance with

IFRS are implemented using a Group-wide accounting

guideline on the basis of a unified schedule of accounts by

the subsidiaries, and by the Group Accounting function for the

consolidated financial statements. Appropriate adjustments

are made to adapt local accounts to IFRS.

At the major Group companies, the success of each individual

department is mapped as a central management instrument

by means of an expense distribution sheet. This reveals

any non-conformance to annual budgets. At project level,

a monthly reconciliation is carried out to cross-check the

actual figures against the cost accounting and site manage-

ment budgets. Our judgment and experience tells us that

self-monitoring allied to mutual monitoring are the effective

elements of our system of internal controls.

The individual Group companies and departments are

monitored and controlled on a monthly basis by the central

commercial departments in the respective segments and

are then reviewed by Group Accounting further reducing the

accounting, valuation and reporting risks.

The consolidated figures are in turn checked on a monthly

basis against the figures from the annual Group-wide

planning process and analyzed on the basis of Group key

performance indicators (KPIs). Any necessary correction of

non-conformance to plan is implemented promptly by the

managers of the units concerned.

The major Group company annual financial statements and

the year-end consolidated financial statements are audited

by auditors in accordance with the applicable legal require-

ments and standards, and are reviewed by the Supervisory

Boards established in the various business units as part

of their duty of supervision. The key figures and related

information reports are submitted to the Management Board

and the Supervisory Board of BAUER AG from the central

accounting function on a monthly basis.

The IT systems employed in these procedures are protected

by appropriate security systems against unauthorized

access and data loss. Based on the systematic multi-

segment structuring of the Group’s accounting process, with

its redundant control instances, we are able to classify the

resultant risks as low.

OVERALL RISK

At present, no individual or aggregated risks can be detected

that could threaten the existence of the BAUER Group in the

2015 financial year. The management sees no change in the

overall risk situation, in view of future business prospects

among other factors.


74

expanded its portfolio with deep drilling rigs capable of

operating down to depths of 6,000 meters for geothermal

energy, oil and gas exploration and for production drilling.

Opportunities in Deep Drilling have improved further with the

signature of the contract between our subsidiary BAUER

Deep Drilling GmbH and Saxon Energy Services Inc. for

delivery of two 375 metric ton rigs. There is an opportunity

for Deep Drilling to make an important overall positive contri-

bution to our results in future. We are capable of successfully

carrying out exploration and production drilling for water,

oil and gas, as well as for coal-gas and geothermal energy.

Extensive areas across Australia, Africa and Indonesia are

being staked out as claims for the extraction of coal-gas.

Their seriousness in terms of mass extraction is being

reinforced by the planning and construction of large gas

liquefaction plants.

The nuclear accident in Fukushima sparked a new debate

on energy production which is bringing about far-reaching

changes to energy policy. The most suitable future-proof

alternatives to nuclear power are currently being sought.

The BAUER Group has been contributing to this search by

developing underwater drilling rigs that can be operated from

on-board a ship, to sink foundations for tidal or wind tur-

bines. This opens up an entirely new product area, with great

prospects for long-term success, for both our Construction

and Equipment segments.

By establishing new subsidiaries in the Resources segment,

our environmental business has succeeded in moving out

of its traditional, and limited, sphere of pollution remediation

into industrial process water treatment, and thus into the oil

and gas industry. The large quantities of industrial process

waters occurring in oil production, against a background of

ever more stringent environmental standards, offer additional

outstanding market opportunities for our environmental

business.

Dam remediations are much in demand worldwide, due to

the fact that dam structures have been neglected for years.

Our depth of experience in this area, which we have been

able to acquire in various dam remediation projects, means

that we regard this as an outstanding market opportunity for

our Construction segment.

The opportunities arising are classified in parallel with the

detailing of risks. In this context, too, the areas of opportunity

have been aggregated. Unless otherwise specified, all op-

portunities set out in the following relate to all our segments.

STRATEGIC OPPORTUNITIES

Over the years, our Group has repeatedly worked on single

projects in marginal markets. This has led to the establishment

of independently operating business units. One example of

this is in our activities relating to environmental technology

which, having begun over 20 years ago, have grown to

become an international business area forming part of our

Resources segment.

A similar development grew out of the first deployment of

specialist foundation engineering equipment for diamond

exploration, which has since become the competence center

Drilling Technologies within the Resources segment.

Together with the 2007 acquisition of the GWE Group,

specializing in the development, manufacture and sale

of high-grade well engineering products and in close-to-

the-surface geothermal energy extraction, we were able

to merge the three businesses to create the Resources

segment. This core business unit, established in 2007, is

focused on areas relating to water, environment and natural

resources – some of the major issues of the 21st century.

Moreover, the Resources segment is less dependent on

the economic cycles of our traditional Construction and

Equipment segments.

In order to bring about a rapid internationalization of the

Resources segment, we are utilizing the experience of our

long-standing organizational units in the other two segments.

MARKET OPPORTUNITIES

Thanks to the rapid growth being seen in some emerging

economies, and the expected increase in oil and gas extraction

based on new techniques such as fracking, a trend can be

observed for even difficult-to-access deposits, demanding

intensive drilling operations, to be exploited. This is a trend

that will continue, even if it is exposed to the influences of oil

price fluctuations over and over again. Demand for modern

deep drilling rigs will thus continue to rise in the medium

and long-term. Consequently, the Equipment segment has


OPPORTUNITY REPORT

75

VALUE CREATION OPPORTUNITIES

Development and innovation

Development and innovation are systematically integrated

into many standard processes within the Group. Their

efficiency is monitored as part of the quality management

system and by way of the corporate controlling function. It is

also ensured that customers’ wishes are understood as be-

ing opportunities, and are translated into innovations for our

products and services in a timely manner. The capacities of

our engineering offices are systematically being strengthened

by resources from countries with high levels of education

allied to low labor costs, such as India.

Innovation is possible at practically every point within our

business processes. Our employees are best placed to

know where improvements are achievable in their particular

sphere of work. In order to collate and make use of the

many good suggestions which our employees submit, we

have devised a system for the unbureaucratic recording,

evaluation, implementation and rewarding of suggested

improvements, which has been in turn rewarded by a

number of good ideas.

Project opportunities

Regardless of national and global market cycles, projects

often arise in otherwise weak markets which we as a

corporation are extremely well equipped to handle thanks to

the mix of our products and services portfolio. Examples of

this are processes for retrofitting of core seals in earthwork

dams, or for the long-term, environmentally compatible

treatment and disposal of industrial process water from the

oil industry.

The resultant projects in some cases entail very large lot units.

When contracted, we are able to manage them successfully

by converging our global resources and based on our many

years of experience in handling large-scale projects.

Supplements and claims management

The assertion of requirements and supplements does not

only entails risks, but also the opportunity to achieve better

earnings than originally specified in the contract based on

changes to the ordered construction services or supple-

mental work ordered by the client. On projects involving high

potential for changes, this can result in a substantial improve-

ment in earnings. We attempt to exploit such opportunities

by professional management of supplemental requirements

in the course of the construction project.

OPPORTUNITIES BASED ON SUPPORTING PROCESSES

The Group has initiated a worldwide cost-cutting program

in response to the displeasing loss recorded at the end

of 2013. As well as abandoning some smaller, financially

problematical businesses in 2014, this included in particular

the sustained implementation of numerous individual projects

such as reducing personnel costs by process optimization,

reducing material costs by specific negotiations with A-sup-

pliers, reducing wear costs by technical improvements and

cost reductions through changes of rules and behavior. The

projects are defined in the course of planning and subjected

to monthly checks. The object of the cost-cutting program is

to lastingly improve the cost structures of the BAUER Group

and so improve the contribution margin.

OVERALL OPPORTUNITIES

We are seeing a steady improvement in our opportunities

on global markets as our Resources segment becomes

increasingly well established. This is also being boosted

by new, innovative products. Our strategy of systematically

interlinking our mainly small and medium-sized globally operat-

ing units to create efficient networks is enabling us more and

more effectively to generate speed and cost benefits from

the associated economies of scale. All in all, we see the

opportunities for our Group’s worldwide business increasing

further in 2015.


77

Bauer drilled 252 diaphragm panels over a stretch of 1.6 km to a depth of 19.5 m for the port's 26.5 km² cargo handling facilities

in Doha, Qatar. A MC 64 was used for this purpose.

COMBINED MANAGEMENT REPORTForecast Report

X. FORECAST REPORT

A number of factors are of key importance to our companies

and their future development, as detailed in the following.

Markets

As set out at the beginning in the Business Report, the

markets for specialist foundation engineering services and

the associated machinery can generally be rated as positive.

There is substantial backlog demand for construction works

all over the world. The infrastructure, especially, must be

updated to meet the new needs of people and the demands

of a globalized industrial society. Increasing urbanization in

many countries is necessitating major efforts to upgrade city

transport infrastructures. Underground construction, especially,

provides a solution to the challenges we face. Many inquiries

from all markets, and our healthy levels of orders in hand in the

Construction segment in the regions of the world, affirm that

judgment.

The work of our Resources segment meets the essential

needs of our world, for which issues surrounding the environ-

ment and water will become key over the decades ahead.

The availability of resources essential to industry will likewise

remain a permanent and pressing challenge.

Competition

Competition in the construction industry has changed little

overall in recent years. The construction market is, and will

remain, a market with very large numbers of players. Our

worldwide companies have established themselves firmly

within that competitive environment, and on some markets –

such as in Egypt – we have attained an outstanding position.

On some markets, conversely, other construction companies

play a predominant role. We regard this mix as positive,

because it provides us with the opportunity to respond stra-

tegically to changes. Very many companies – including in the

specialist foundation engineering sector – have withdrawn from

the German market over the last two decades. As a result,

there are today relatively few specialist foundation engineering

contractors capable of handling large-scale projects. This

opens up additional opportunities for our business in Germany.

The competitive situation in the machinery business has

changed significantly over the past ten years. The enormous

growth in construction in China made that country’s market

more important than all the others in the world put together

for a number of years. Many Chinese companies started

manufacturing specialist foundation engineering equipment,

creating capacities to fully serve the needs of the Chinese

market. Once the growth of the Chinese construction market

had come to an end, machinery markets fell back dramati-

cally too. As a consequence, competition has intensified

markedly. Other European manufacturers of construction

machinery are now also coming under pressure in their

standard equipment sales, and so are trying to make up for

them in the specialist foundation engineering business. This is

not feasible, because the market is not big enough. However,

the trend will additionally impact on the competitive situation

to which our business is subject for some time to come.

In this new competitive situation, our business will only be

able to maintain its leading position by providing high-quality

products and outstanding services. Concerted efforts have

enabled us to build further on our competitive edge in that

respect over recent years, as the increased revenues for

2014 demonstrate. We are convinced that we will continue

in future to achieve success and growth. We will also be in

a position to improve our margins again, which will also be

based on improved capacity utilization.

Bauer has to date played only a minor role on markets for

deep drilling rigs. We have nevertheless succeeded in arous-

ing customers’ interest with our fully hydraulic rigs featuring

state-of-the-art electronic control. The successes achieved

in 2014 deliver precisely the confirmation we are looking for

with regard to the efforts we have made.

In the Resources segment, we have numerous competitors

on the various markets. We regard it as a major advantage

that we are the only company offering a full portfolio relating

to water and other resources bundled within one business

segment, meaning that we are able to offer our customers a

very wide range of products and services. This will pay off in

future.

78

the dynamic process of product development. We have

intensively utilized the possibilities of state-of-the-art elec-

tronic control to make our equipment even more versatile

and reliable. Specifically, we have made great efforts to

provide comprehensive performance verification based on

the acquisition and evaluation of large volumes of data.

The product of machinery business is not just the machine

itself. For our customers, supplies of replacement and

wearing parts, and service backup for their equipment, are of

increasing importance. We have greatly expanded our offer in

those areas through wide-ranging measures. All our worldwide

warehouse facilities are electronically linked, allowing us to

achieve a high level of parts availability. We have established

service centers in all regions of the world. The rapid-response

backup they ensure is much appreciated by our customers.

Products

By concentrating on products and services relating to ground

and groundwater, we have the capability to be a technology

leader in both our Construction and Equipment segments.

The interaction between construction and machinery manu-

facture – the application of high-tech construction engineering

techniques on the one hand, and the design and manufacture

of high-grade machinery with state-of-the-art technology on

the other – allows us to exploit wide-ranging synergies in our

development work. This enables us to assume a pioneering

role with our methods and techniques.

We have had to commit major efforts to our Equipment seg-

ment in recent years in response to changes on the market.

The decentralized organization of our development activities

close to the plant floor has enabled us to considerably boost


Demler Spezialtiefbau located in Netphen in North Rhine-Westphalia sunk 158 foundation piles and a piled wall in Halle with three different drilling rigs in an extremely restricted space.

>>>

79

detailed preliminary ground surveys, some factors which

were not detectable will occur on a regular basis. They can

impede construction works in a wide variety of ways, and

in some cases also cause significant financial losses. We

are working hard to optimize even further our behavior with

regard to risk, in order to avoid issues such as we have

encountered in the last two years in future.

Of course, an opportunity can also arise if the ground has

been assessed too negatively prior to starting construction

works. Our construction sites can then also generate ad-

ditional profit.

Achieving success within a major corporation is also heavily

linked to its basic organizational structure. We have been

working hard on that aspect in recent years, and we are

convinced that we are now very well positioned. We have

focused closely on international networking, so that today

almost all subsidiaries worldwide are interconnected via a

centralized IT network and share software platforms. This

provides us with close control, delivering massive benefits

in terms of logistics and parts supply especially. All major

locations are equipped with state-of-the-art videoconferencing

systems, saving on travel expenses. We have also made

great progress with regard to our management systems.

Lots of positive changes have been made in relation to HSE

(Health, Safety & Environment), and thanks to the global IT

network, our efforts to internationalize the company have

been successful.

All in all, we therefore believe that we are well set to meet the

challenges of the future. We are continuing to work hard on

our cost-cutting program, and cost ratios will also improve

as our capacity utilization grows. Although we still have some

overcapacity, we need it in order to drive the new business

fields in deep drilling and underwater drilling forward. In those

areas especially, we will soon be in a position to provide a

good contribution to future growth.

We see no need to change our strategic objectives at

present. The strategy comprising the Construction, Equip-

ment and Resources segments will continue to dictate

the direction of the Group over the coming years. We are

not planning any major acquisitions at present, as we are

intending to strengthen our capital base especially over the

years ahead.

The excellent sales successes we have recorded despite

difficult market conditions are strongly linked to these efforts.

We are convinced that we have an outstanding product offer,

and that it provides us with a sound basis for future success

on the market.

In our Resources segment, we have repeatedly demonstrat-

ed over recent years that we offer a portfolio which attracts

great interest on the market. Our environmental technology

solutions especially, such as the reed-bed treatment plant

for the treatment of oil-contaminated water in Oman, have

attracted widespread public acclaim.

Once again, 2015 will be a year with many challenges. The

world’s construction markets are fundamentally on course

for growth. We are also expecting the Chinese competitors

of our Equipment segment to behave more reasonably than

in the past, since they will also be obliged to fall in line with

the rules of the market.

In spite of the overall positive expectations, the risks posed

in the markets should not be overlooked. They can influence

our companies to differing extents, depending on how the

issues pan out. This includes the current problems in Russia

and Ukraine as well as the Islamic State terror organization

in Syria and in Iraq. It is also very difficult to predict whether

the efforts made to achieve political stability in the countries

of North Africa will bear fruit, or if new unrest will confront

the markets with further challenges. The economic problems

facing some countries, such as Greece, are by no means

resolved either.

In view of the general conditions, it is our opinion that our

business model will prove robust in 2015 as well. In our

planning, we have attempted to evaluate all known threats

and opportunities, thinking through both positive and nega-

tive scenarios as effectively as possible. Ultimately, we are

convinced that our planning for 2015 is realistic. This applies

to all segments and to the Group overall.

Nevertheless, we are obliged to point out that specialist

foundation engineering and our other businesses are exposed

to greater risk than the business activities undertaken by most

other companies. Our activity always contains a factor that

cannot be perfectly analyzed in advance – the subsoil or the

ground itself. Even after conducting the most extensive and


80

following quarters. The trend over the full year will thus be in

line with patterns in our business seen in earlier times. The

reason for this is that fewer machines can be invoiced at

the start of the year, because customers do not start buying

equipment until the construction season gets underway.

In the Construction segment, despite the good weather

conditions in some countries, the winter period has a heavy

impact on a number of our markets.

Our balance sheet ratios have changed markedly over recent

years. This is illustrated most clearly by the increase in working

capital, which also resulted in a substantial increase in net

debt. This trend was largely attributable to the normalization

of our machinery business, in which inventories increased

significantly due to the return of shorter lead times. No

significant change to the balance sheet structure is to be

Based on the information available to us at the time of

completing this report, we forecast that total Group

revenues for the 2015 financial year will be around EUR

1.6 billion. We forecast profit after tax of around EUR

18 to 23 million. In accounting terms, this will mean EBIT

of around EUR 75 million.

We still expect to make a loss in the first quarter, in line with

seasonal norms, though it will be balanced out over the

in EUR million Actual 2014 Forecast 2015

Total Group revenues 1,560 ~ 1,600

EBIT 76.4 ~ 75

Net profit or loss 15.7 ~ 18 - 23

Comparison: 2014 actual/2015 forecast


In the Kingdom of Bhutan, approximately 80 km east of the capital city Thimphu, a 1.200 MW diversion hydroelectric power plant, the “Punatsangchhu-I” is being built. To lower the water level, Bauer is sealing the upstream cofferdam with a cut diaphragm wall that is up to 90 m deep.

>>>

81

could only be achieved by means of a one-time income, we

nevertheless intend for our shareholders to participate in this.

As a result, we would like to pay a dividend again – although

admittedly at a low level. In the medium term, the dividend

quota should be about 25 to 30 percent of the reported

profit after tax.

We do not see any existential risk or relevant risk to future

progress in our trading environment. The global economy

remains marked by great change, however, which may also

have a negative impact on our situation again. We should

point out that future forecasts are based on assumptions

and estimates of the company management. Such assump-

tions and estimates always entail a degree of uncertainty and

risk, which may mean that actual performance differs from

that forecast.

expected in the coming year, as our business model is tied

to high levels of up-front financing. With stronger demand for

machinery, however, the ratios will improve again. Over the

coming years, we will be making great efforts to increase our

equity ratio back to more than 30 percent.

We expect the Group to enjoy positive development through

2015 and 2016. We are planning for growth of between

3 and 8 percent, in line with our long-term plans. We also

predict that we can achieve an increase in earnings. The

Group has largely adjusted to the changed market condi-

tions, meaning it is able to return to a positive trend overall.

The Management Board will recommend to the Supervisory

Board that it propose to the Annual General Meeting that

a dividend of EUR 0.15 per share should be paid for the

2014 financial year. Despite the fact that the result in 2014


Schrobenhausen, 31 March 2015

BAUER Aktiengesellschaft

Prof. Thomas Bauer

Chairman of the Management Board Dipl.-Betriebswirt (FH) Hartmut Beutler Dipl.-Ing. Heinz Kaltenecker

82

Falling interests rates and new crisis areas

Although many problems remain in 2014 – the situation

in Spain, Portugal or Greece has hardly changed – the

Eurozone economy did return to slight growth with 0.8 %.

The European Central Bank cut its key interest rate, first in

June 2014 from 0.25 % to 0.15 % and then again in Septem-

ber to a mere 0.05 %, in an effort to stave off deflation. The

ECB introduced penalty interest rates on bank deposits in

order to motivate the banks to increase lending. This policy

boosted in particular the stock markets in 2014. In January

2015, the ECB decided to purchase government bonds

(quantitative easing) as a further measure against the low

inflation rate.

Overall, the global economy improved in 2014. The gross

domestic product of the USA grew by 2.2 %. China, on the

other hand, missed its own growth target with 7.4 %.

The German economy managed growth of 1.4 %. The good

level of employment, growth in incomes and low inflation

meant that economic growth was promoted by domestic

demand in particular.

However, problematic areas also developed in 2014 again.

In spring, the Russia/Ukraine conflict intensified. Europe

introduced sanctions which had an effect on the European

and the Russian economies. The ruble lost one third of its

value against the euro over the course of the year. In addition,

the oil price collapsed by about 50 % during the year. It is

probable that the definitive outcomes of these developments

will only come to light in 2015.

The Bauer Share lost significantly in value

The Bauer share underwent a marked drop in value in 2014.

Whereas the benchmark indexes, the DAX (+5.1 %) and

SDAX (+4.3 %), grew, the Bauer share lost 28.8 % of its

value by the end of the year.

The first days of trading in 2014 were positive, and saw the

share increase from its opening price of EUR 18.81 to its

high-point for the year in mid-January, at EUR 20.04. As the

first quarter continued, the share price continued relatively

unchanged in line with the German indexes, with slight

upward and downward movements.

Following publication of the annual report on April 11 as well

as the interim report on the first quarter on May 14, the share

price dropped to EUR 18.12, while the markets recorded

modest growth.

The Bauer share was able to recover slightly by the end

of June before dropping markedly in relation to the slightly

downward trend of the stock markets. An initial interim low

point was reached on August 8, at EUR 14.44.

The Bauer share came under significant pressure following

publication of the first half-year’s figures on August 14 with

the associated slight downgrade to the earnings forecast

for the complete year, combined with further stock market

The Bauer Share

Performance of the Bauer Share 2014

in % Bauer DAX MDAX SDAX

40

30

20

10

0

(10)

(20)

(30)

(40)

01.01.2014 01.04.2014 01.07.2014 01.10.2014 31.12.2014 31.03.2015

83

weakness; by October 16, it had reached the low for the year

at EUR 11.75.

As the markets recovered, the price rose slightly and topped

the EUR 14 mark for a period in November. On the last

trading day of the year, the share price was EUR 13.35.

During the first quarter of 2015, the share price increased

significantly, reaching EUR 17.91 by the end of March.

Continuous dialog with shareholders

It is the objective of the Management Board and Investor Rela-

tions to keep shareholders comprehensively and continuously

informed about the course of business. In addition to the

financial reports, the BAUERcompact newsletter offers news

and topics relating to the BAUER Group. With the BAUER

app, it is possible to call up all messages, the share price and

much else besides on a mobile device.

The Management Board uses roadshows in Scandinavia,

the USA or Germany as well as participating in capital

market conferences to inform German and international

investors alike about the position of the business.

Furthermore, there is an intensive exchange with analysts.

Overall, seven analysts reported on BAUER AG in 2014 with

their research. At the end of the year, there were six neutral

and one negative share recommendations. The average

target share price quoted was EUR 14.36.

The Annual General Meeting in June was attended by about

450 shareholders and guests who came to the headquarters

in Schrobenhausen to be informed by Prof. Bauer about the

course of business.

Dividend policy

Our dividend strategy is fundamentally oriented to the

goals of providing shareholders with an appropriate and fair

participation in the success of the business, maintaining

continuity, and safeguarding the equity ratio.

Following a difficult financial year, the planned after-tax

result could only be achieved by means of a one-off gain.

We believe it is appropriate to allow our shareholders to

participate in this, so we intend to pay a small dividend

again. At the same time, we are still intensively pursuing

the objective of improving the equity ratio.

Consequently, the Management Board and Supervisory

Board will propose to the Annual General Meeting on

June 25, 2015 that a dividend of EUR 0.15 should be

paid per share.

THE BAUER SHARE

KEY FIGURES 2011 2012 2013 2014

Earnings per share (in EUR) 1.86 1.44 -0.99 0.85

Dividend per share (in EUR) 0.50 0.30 0 0.15 *

Dividend total (in EUR ’000) 8,566 5,139 0 2,570 *

Year-end price (in EUR) 21.10 19.32 18.81 13.35

Annual high (in EUR) 38.49 26.50 23.05 20.04

Annual low (in EUR) 16.04 16.13 17.33 11.75

Market capitalization at year-end (in EUR ’000) 361,464 330,971 322,234 228,699

Average daily trading volume (units) 65,885 48,584 39,017 26,984

ISIN / WKN DE0005168108 / 516810

Trading symbol B5A

Trading segment Frankfurt, Prime Standard

Share indexes

SDAX, CDAX, GEX, DAXPlus Family

Classic All Share, Prime All Share

Class of share No-nominal-value individual bearer shares

Share capital EUR 73,001,420.45

Number of shares 17,131,000

Shareholder structure Bauer family 48.19 %, free float 51.81 %

* Proposed; subject to the consent of the Annual General Meeting to be held on June 25, 2015

Share information

More information:

http://ir.bauer.de

84

The Management Board, also on behalf of the Supervisory

Board, submits the following report on the company’s

Corporate Governance in accordance with Article 3.10 of

the German Corporate Governance Code. The Corporate

Governance Report also includes the Declaration on

Corporate Governance pursuant to Article 289a of the

German Commercial Code (HGB), which forms part of

the Management Report for the 2014 financial year.

Declaration of Conformity 2014

In the year under review, based on preliminary work by the

Presidial and Personnel Committee, the Management Board

and Supervisory Board reviewed the company’s compliance

with the German Corporate Governance Code. On Decem-

ber 5, 2014 the Management Board and Supervisory Board

passed the following declaration of conformity:

“Since the last declaration in December 2013 the company

has complied with, and currently complies with, each of

the recommendations of the “Government Commission of

the German Corporate Governance Code” as published by

the German Federal Ministry of Justice in the official section

of the electronic version of the German Federal Gazette

(“Bundesanzeiger”), with the following exceptions:

1. Contrary to Article 3.8 an excess of at least 10 percent of

the loss up to at least an amount representing one and a half

times the fixed annual remuneration of Supervisory Board

members is not agreed for D&O insurance for the Supervisory

Board. As a result of the moderate remuneration provisions

for the Supervisory Board in the Articles of Association,

a corresponding excess for the Supervisory Board is not

approved. Even without a corresponding excess, the Super-

visory Board members will perform their duties responsibly.

2. Contrary to Article 4.1.5, Article 5.1.2 and Article 5.4.1

there is no appropriate inclusion or participation of women

arranged for in the filling of management positions or

in the composition of the Management Board and the

Supervisory Board. In particular, the introduction of a

quota for women is not supported in order to ensure

equal opportunities. These positions should be filled

regardless of gender so that neither the female gender

nor the male gender is favored or discriminated against. In

addition, a candidate should not suffer any disadvantage

on the grounds of racial or ethnic origin, religion or belief.

3. The individualized disclosures of the benefits, the remuner-

ation and the pension benefits awarded to each member

of the Management Board are not individualized for each

member of the Management Board in the remuneration

report as the General Meeting dated June 30, 2011

resolved on the omission of the disclosures according to

section 285, no. 9, letter a, sentences 5 to 8, section 315a

subsection 1 and section 314, subsection 1, no. 6, letter a,

sentences 5 to 8 of the German Commercial Code (HGB)

and therefore the disclosures required under Article 4.2.5

would contradict such Shareholder resolution.

4. Contrary to Articles 5.1.2 and 5.4.1, no age limit is specified

for members of the Management Board or Supervisory

Board. Expertise and performance cannot be determined

on the basis of rigid age limits. Upon the appointment of

new Management Board and Supervisory Board members,

the persons who bear responsibility for selecting suitable

members will take account of the age of the chosen person

when reaching their decision, alongside assessing their

skills. If a Management Board or Supervisory Board member

should become no longer sufficiently capable of holding

office on the grounds of age during their term of office, the

common sense of the persons involved is to be trusted.

5. Contrary to Article 7.1.2, the consolidated financial

statements at December 31, 2013 were made public within

101 days rather than 90 days of the end of the financial

year. As a result of the international structure of the Group,

the completion and consolidation of the separate financial

statements takes a considerable amount of time. In the

interests of conscientious accounting processes, efforts to

improve the accounting procedures continue.

BAUER AG already conforms largely to the suggestions of the

German Corporate Governance Code Commission.”

Roles of the Management Board and Supervisory Board

German company law prescribes a dual system of manage-

ment for BAUER AG, characterized by a strict separation of

personnel between the Management Board as the executive

management body and the Supervisory Board as the super -

vising body. Moreover, the company’s Articles of Association

and the rules of procedure governing the work of the Super-

visory Board and of the Management Board also lay down

the basic structures of their collaboration.

Corporate Governance ReportAND DECLARATION ON CORPORATE GOVERNANCE

85

appropriation of net earnings available for distribution. The

Chairman of the Supervisory Board coordinates the work of

the Supervisory Board, chairs its meetings and represents the

Supervisory Board externally. The Supervisory Board regularly

reviews the efficacy of its activities.

Composition of the Supervisory Board

The Supervisory Board of BAUER AG comprises a total

of 12 members. Six of its members are elected by the

employees at the Group’s locations in Germany, with the

other six members being elected by the Annual General

Meeting to represent the shareholders. The Supervisory

Board includes a sufficient number of independent members

who have no business or personal links to the company, to

its executive bodies, to any controlling shareholder or to any

company associated with any such shareholder which may

give grounds for a material and not merely temporary conflict

of interests. Moreover, all members of the Supervisory Board

are obligated to immediately disclose to the Supervisory

Board any conflicts of interest as and when they arise. No

conflicts of interest were disclosed to the Supervisory Board

by any of its members during the year under review.

Objectives of the Supervisory Board with regard to its

composition

The following objectives must be taken into account by the

Nominations Committee and by the Supervisory Board when

proposing candidates for election to the Supervisory Board

at the Annual General Meeting:

• The Supervisory Board shall be composed such that

its members collectively possess the necessary skills,

knowledge and professional experience to carry out its

assigned role in a correct and proper manner.

• The appointment of shareholders’ representatives to the

Supervisory Board shall take due account of the Group’s

fundamental character as a family business, giving due

consideration to the implications of that character in terms

of the corporate culture, whereby two members shall be

appointed from the Bauer family, provided the candidates

are suitable.

• At least two of the shareholders’ representatives on the

Supervisory Board shall have substantial experience in

The Management Board of BAUER AG currently comprises

three members. They are assigned independent responsibility

for managing the company. The members of the Management

Board work together on a collegiate basis. Notwithstanding

the joint overall responsibility of the Management Board, each

member of the Board Management acts on his or her own

responsibility within his or her assigned portfolio of functions.

Measures and transactions of a division of the Management

Board that are of extraordinary importance for the company or

a business unit, or which are associated with an extraordinary

financial risk, require the prior approval of the entire Manage-

ment Board. The Chairman of the Management Board

coordinates the work of the Management Board. The Man-

agement Board members report on a regular basis to the

Chairman of the Management Board in respect of all material

matters and on the course of business within their assigned

functions. A member of the Management Board has been

appointed Labor Director, and is responsible to an increased

extent for human resources and social policy topics in the

company. The Management Board defines the corporate

strategy, agrees it in consultation with the Supervisory Board,

and ensures that it is implemented. The Management Board

provides the Supervisory Board and its subcommittees with

regular, detailed information, in written form by way of monthly

reports, by conference calls and at routine meetings, as well

as at extraordinary meetings held as and when required, in

respect of all matters of planning, business development,

finance and earnings, risk, risk management, internal auditing

and compliance of relevance to the company.

The Supervisory Board appoints the Management Board.

In doing so, it considers not only the relevant professional

qualification of its members but also – given the international

nature of the business – the diversity of its composition. The

Supervisory Board also sets the overall level of remuneration

paid to the Management Board, regularly reviews remuner-

ation levels, and specifies the remuneration paid to individual

members of the Management Board. It appoints, supervises

and advises the Management Board, and participates in

decisions of fundamental significance to the company. The

company’s Articles of Association stipulate relevant trans-

actions and undertakings which require the consent of the

Supervisory Board. Duties of the Supervisory Board include

reviewing the annual financial statements of the company, the

consolidated financial statements and the parent company

and Group Management Report, as well as proposals for the

CORPORATE GOVERNANCE REPORT

86 CORPORATE GOVERNANCE REPORT

system for the Management Board in general, as well as

responsibility for establishing, amending and terminating

service contracts with the members of the Management

Board. Furthermore, it deals with questions of corporate

governance and is authorized to pass amendments to the

Articles of Association which relate only to its wording.

The Audit Committee comprises three members elected by

the Supervisory Board by a majority of the votes cast, with two

members proposed by the Supervisory Board members of the

shareholders and one member proposed by the Supervisory

Board member of the employees. The Chairman of the Audit

Committee is elected by the Supervisory Board at the sug-

gestion of the shareholders’ representatives. The Chairman of

this committee possesses specific knowledge and experience

in the application of accounting policies and internal control

procedures, and is neither a former member of the company’s

Management Board nor the Chairman of the Supervisory Board.

The role of the Audit Committee is in particular to monitor

accounting procedures and to review the efficiency of the

system of internal controls, the risk management system and

the internal auditing system including compliance. The Audit

Committee prepares the proposal of the Supervisory Board to

the Annual General Meeting concerning the appointment of

auditors, obtaining an Independence Confirmation from the au-

ditors in advance of each Annual General Meeting. It undertakes

a preliminary review of the annual financial statements of the

parent company and the consolidated financial statements of

the Group together with the Combined Management Report, as

well as preparing the proposal on appropriation of net earnings

available for distribution and consulting on the audit reports with

the auditors. It also reviews the quarterly financial reports.

The Nominations Committee comprises three shareholder

representative members of the Supervisory Board. The Chair-

man and the Deputy Chairman of the Nominations Committee

are proposed and elected by the Supervisory Board members

of the shareholders. The task of the Nominations Committee

is to submit to the Supervisory Board proposals of suitable

candidates to be put forward to the Annual General Meeting

for election to the Supervisory Board.

The Mediation Committee, constituted pursuant to the

German Co-determination Act, comprises two shareholder

representative and two employee representative members

the management of construction and/or construction

machinery manufacturing companies.

• At least one of the shareholders’ representatives on the

Supervisory Board shall possess specialist skills and ex-

perience in the application of financial reporting standards

and the implementation of internal control procedures.

• The employees’ representatives on the Supervisory Board

will be elected in accordance with the provisions of the

German Employees’ Co-determination Act.

• The Supervisory Board shall include not more than four

members in total who have business or personal links

to BAUER AG, to its executive bodies, to any controlling

shareholder or to any company associated with any such

shareholder which may give grounds for a material and not

merely temporary conflict of interests.

• Supervisory Board posts shall be filled on merit, regardless

of gender so that neither men nor women are preferred or

disadvantaged. Moreover, when appointments are made to

the Supervisory Board, a candidate shall not be disadvan-

taged for reason of race, ethnic origin, religion or world view.

The objectives are fully embodied in the current composition

of the Supervisory Board.

Composition and roles of the subcommittees

The Supervisory Board has established four standing

committees constituted from among its members in order to

support its plenary work. The Supervisory Board subcom-

mittees and their roles and procedures are laid down in the

rules of procedure governing the Supervisory Board. The

committee chairmen report to the plenary Supervisory Board

on a regular basis with regard to the work of their respective

committees, and prepare the way for plenary Supervisory

Board decisions within their specific remits.

The Presidial and Personnel Committee comprises the

Chairman of the Supervisory Board as well as one Supervisory

Board member elected by the shareholder representatives

and one by the employee representatives respectively. Its role

includes preparing the way for Supervisory Board decisions

relating to the setting of overall remuneration to individual

Management Board members and to the remuneration

87CORPORATE GOVERNANCE REPORT

SHAREHOLDERS AND TRANSPARENCY

All documents and information resources relating to the

Annual General Meeting are made available to shareholders

on the company’s website well in advance. The shareholders

were assisted in exercising their voting rights by the facility to

assign power of attorney to nominees and by the appointment

of a company proxy to vote in accordance with the sharehold-

ers’ instructions. An electronic transfer facility is also provided

for the submission of powers of attorney. No company share

option schemes or similar stock incentive programs existed

during the past financial year.

The company provides regular and timely information relating

to the position of the company and in respect of material

changes to the business. Extensive documentation and infor-

mation resources are provided on the company’s website.

In addition, electronic distribution systems and the electronic

version of the German Federal Gazette (“Bundesanzeiger”) are

used to ensure timely communication with our shareholders

and with the public at large.

Four times a year, BAUER AG publishes updates on the

course of its business in the form of quarterly interim financial

reports, the half-year interim financial report and the annual

financial statements. Notifications relating to voting rights

as well as items of insider information relating directly to

the company are disclosed by the Management Board

immediately. The Annual General Meeting passed a resolution,

with the necessary three-quarters majority, stipulating that

the remuneration paid to members of the Management

Board shall not be disclosed individually. Consequently, as

has been the policy to date, only the remuneration paid

to the Management Board in total and the structure of the

remuneration system are disclosed in the Remuneration

Report on pages 61 to 63 of the company’s Annual Report.

SHAREHOLDINGS OF THE MANAGEMENT BOARD

AND SUPERVISORY BOARD

Members of the Management Board at the year-end held

a total of 1,742,022 (previous year: 1,741,022) shares in the

company as per December 31, 2014. This corresponded

to 10.17 % (previous year: 10.16 %) of the share capital of

BAUER AG. At the same date members of the Supervisory

Board held a total of 1,310,531 (previous year: 1,310,431)

Bauer shares, corresponding to 7.65 % (previous year:

7.65 %) of the company’s share capital.

respectively. The Mediation Committee is only convened

if a proposed candidate for appointment as a member of

the Management Board has not obtained the majority vote

required by the German Co-determination Act.

In his report to the Annual General Meeting, the Chairman

of the Supervisory Board summarizes the work of the

Supervisory Board and its subcommittees over the past

financial year. The Report of the Supervisory Board for the

2014 financial year is published in the company’s Annual

Report on pages 88 to 89. This report is thereby quoted by

way of reference.

Corporate Governance and Compliance

The company’s system of corporate governance is based

on German law, specifically on legislation governing public

limited companies, corporate co-determination and capital

markets, as well as on the company’s Articles of Associa-

tion. The company’s Articles of Association are published

on the company website at www.bauer.de, in the “Investor

Relations” section under “Corporate Governance”. The Man-

agement Board employs the Corporate Management Manual

implemented throughout the Group as its central instrument of

management. The Corporate Management Manual also sets

out framework policy guidelines covering the entire Group,

and lays down the principles of corporate governance and

the program of basic values which dictate the ethical and

moral conduct of the company’s employees in carrying out

the business of the company. A Code of Conduct defining

correct behavior of employees in the BAUER Group, dealing

in particular with the topics of anti-corruption, competition

and cartel law, health, safety & environment (HSE) as well

as dealing with business partners, has additionally been

published on the company’s website.

An appropriate system of risk management and of internal

controls is established within the company. The essential

features of the risk management and control system are set

out in the Risk Report forming part of the Combined Man-

agement Report. The established risk management system

supports Group-wide control and monitoring procedures.

Internal auditing systems monitor compliance with laws

and standards across the Group. The Management Board

regularly updates the Supervisory Board on existing risks

and risk trends, as well as on internal auditing procedures.

88

The Supervisory Board regularly monitored the work of the

Management Board during the 2014 financial year on the

basis of the detailed reports provided by the Management

Board in written and verbal form, and provided support

in the form of advice. The Management Board discharged

its duties to provide the Supervisory Board with regular,

prompt and comprehensive information about all questions of

strategy, planning, company development, risk development

and compliance that are relevant to the company and the

Group. Between the meetings, the Management Board

submitted monthly written reports on all important business

transactions and financial indicators of the Group and the

company. The Chairman of the Supervisory Board was

also in regular contact with the Management Board, and

gathered information as appropriate relating to the course

of business and key transactions.

In their subcommittees and plenary sessions, the Supervisory

Board members always had the opportunity to scrutinize

the reports and proposals submitted by the Management

Board and to set forth their own suggestions. In particular,

the Supervisory Board intensively discussed all business

transactions important for the company on the basis of

written and verbal reports from the Management Board,

and examined them with regard to plausibility.

There were no indications of conflicts of interest among

members of the Management Board or Supervisory Board

requiring immediate notification of the Supervisory Board and

disclosure to the Annual General Meeting. There were no

changes of personnel on the Supervisory Board in the past

financial year.

Main focus of consultations in Supervisory Board

meetings

Four regular plenary meetings were held during the reporting

year. Apart from two meetings at which one member was

absent in each instance, the meetings of the Supervisory

Board were attended by all members.

The Supervisory Board reviewed performance trends on

large-scale projects on several occasions in the course of

the past year, and also gave consideration to the status of a

cost-cutting program and assessed the liquidity planning. The

Supervisory Board reviewed the actions of the Management

Board in dealing with the aforementioned issues as well

as the strategy being pursued by the Group, providing the

Management Board with advice and support to ensure that an

appropriate approach was employed. The current business

development in the Construction, Equipment and Resources

segments was discussed in all Supervisory Board meetings.

At the annual accounts review meeting in April relating to

the annual parent company and Group consolidated finan-

cial statements for the 2013 financial year, also attended

by the auditors, a detailed review was undertaken of the

respective financial statements and associated management

and audit reports, taking into due consideration the report

from the Audit Committee, and the proposal of the Manage-

ment Board with regard to the appropriation of earnings.

Furthermore, the Supervisory Board dealt with compliance

with the financing covenants in this meeting, as well as the

preparations for a syndicated loan. Current legal cases,

the remuneration of the Management Board and extension

of the term in office for the member of Management Board

Heinz Kaltenecker were discussed

In the second meeting of the financial year, the Supervisory

Board dealt with, amongst other matters, the interim report

for the first quarter of 2014, the Group’s financing situation

including the cost-cutting program and the segments’ order

situation.

In conjunction with the September meeting, the Super-

visory Board obtained information about the handling of a

construction site at a major project. The meeting focused on

the expected development of earnings, the liquidity required

in major projects, the debt situation in the Group as well as

compliance topics. It also approved the medium-term plan

with regard to the consolidated balance sheet.

In the last meeting of the Supervisory Board in December

of the year under review, the expected development of

earnings and planning for the 2015 financial year were

discussed in particular. An updated declaration of conformity

to the German Corporate Governance Code was passed,

and approval was given to the employee bonus framework.

Report of the Supervisory Board 2014

89REPORT OF THE SUPERVISORY BOARD

Work carried out by the subcommittees

In the 2014 financial year there were four committees of

the Supervisory Board. The Mediation Committee and the

Nominations Committee were not required to convene. The

chairpersons submitted regular reports on the main content

of the subcommittee meetings to the plenary Supervisory

Board meetings. The meetings of the various subcommittees

of the Supervisory Board in the financial year were attended

by all the respective members.

Two meetings of the Presidial and Personnel Committee

were convened. At those meetings, preparations were

made for the decision of the Supervisory Board relating to

the setting of the salaries and performance bonuses of the

members of the Management Board and to the structuring of

its remuneration system, as well as to the performance bonus

framework. Consideration was also given to the declaration

of conformity to the German Corporate Governance Code,

as well as to the extension of the contract of service of

Management Board member Heinz Kaltenecker.

The Audit Committee held one conference call and four

meetings in the financial year. The committee reviewed

the audit of the interim reports and, in the presence of the

auditors, the audit of the annual financial statements of the

parent company and the consolidated financial statements

of the Group. It also prepared the appointment of the auditor,

taking account of the examination into the latter’s impartiality.

Furthermore, the forecast reporting, liquidity commitment

and enforcement of supplements in major projects were

examined, as were the financing of the Group of companies

and the sale of a participation. A dedicated meeting

reviewed the risk management system’s compliance with

applicable laws and standards, as well as the audit activities

of the Internal Auditing function.

Auditing of 2014 annual and consolidated financial

statements

The annual financial statements of BAUER AG to December 31,

2014 and the consolidated financial statements of the Group,

as well as the Combined Management Report, including

the Group accounts, were audited by the auditors elected

by the Annual General Meeting and duly appointed by

the Supervisory Board, PricewaterhouseCoopers AG und

Wirtschaftsprüfungsgesellschaft, Stuttgart. The accounts

were certified by the auditors without reservation. The Audit

Committee subjected the audit documentation and reports

to thorough scrutiny. The Committee reported on its review

to the Supervisory Board. The auditors attended the relevant

meetings of the Audit Committee as well as the annual

financial review meeting of the plenary Supervisory Board.

The audit documentation and reports from the auditors

were provided to all members of the Supervisory Board in

good time for scrutiny. The Supervisory Board duly noted

and concurred with the findings of the auditors’ review

of the parent company and Group consolidated financial

statements and the Combined Management Report. On

conclusion of the Supervisory Board’s review, no objections

were raised. The financial statements of BAUER AG and the

consolidated financial statements of the Group were approved

by the Supervisory Board at its annual review meeting on

April 8, 2015. The annual financial statements of BAUER AG

were thereby confirmed. Following prior consultations by the

Audit Committee, the Supervisory Board concurred with the

proposal of the Management Board regarding the appropria-

tion of net profit available for distribution.

On behalf of the Supervisory Board, I would like to thank

the members of the Management Board, all the Group’s

employees and the employee representatives within all

Group companies for their great commitment throughout

the past financial year.

Schrobenhausen, April 2015

The Supervisory Board

Dr. Klaus Reinhardt

Chairman of the Supervisory Board

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Our customer Stefanutti Stocks Geotechnical employed a BG 28 in the construction work on the Simon Vermooten Bridge in

Pretoria, South Africa. Drilling cased piles with a diameter of 1,250 mm were produced in depths of up to 30 m, including 3 m

rock socketing.

Income Statement of BAUER Aktiengesellschaft

Balance sheet of BAUER Aktiengesellschaft as at December 31, 2014

92

93

Balance Sheet and Income Statement of BAUER Aktiengesellschaft in accordance with HGB

92

Income Statement of BAUER Aktiengesellschaft

in EUR '000 01.01. - 31.12.2013 01.01. - 31.12.2014

1. Sales revenues 30,495 30,046

2. Other capitalized goods and services for own account 0 8

3. Other operating income 2,124 5,749

32,619 35,803

4. Cost of materials -1,733 -1,052

5. Staff costs -14,613 -15,450

6. Amortization of intangible assets and depreciation of property, plant and equipment -3,191 -2,874

7. Other operating expenses -13,776 -16,667

-33,313 -36,043

Operating result -694 -240

8. Income from participations 4,356 4,950

9. Other interest and similar income 7,029 7,950

10. Interest and similar expenses -4,804 -5,914

Financial result 6,581 6,986

Result from operating activities 5,887 6,746

11. Extraordinary expenses -141 -141

12. Income tax expense -609 -666

13. Other taxes -17 -18

14. Net profit for the year 5,120 5,921

15. Profit carryforward 22,309 27,429

16. Net earnings available for distribution 27,429 33,350

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Balance sheet of BAUER Aktiengesellschaft as at December 31, 2014

Assets

in EUR '000 31.12.2013 31.12.2014

A. Fixed assets

I. Intangible assets 2,982 2,616

II. Property, plant and equipment 3,822 3,557

III. Financial assets 115,696 116,646

122,500 122,819

B. Current assets

I. Inventories

Raw materials and supplies 74 71

II. Receivables and other assets

(of which receivables from affiliated companies)

174,049

(172,622)

205,920

(204,598)

III. Cash at banks 1,517 960

175,640 206,951

C. Prepayments and deferred charges 586 641

D. Deferred tax assets 352 603

299,078 331,014

Equity and liabilities

in EUR '000 31.12.2013 31.12.2014

A. Shareholders’ equity

I. Subscribed capital 73,001 73,001

II. Capital reserve 39,781 39,781

III. Revenue reserves 15,100 15,100

IV. Net earnings available for distribution

(off which profit carryforward EUR 27,429 thousand; previous year EUR 22,309 thousand) 27,429 33,350

155,311 161,232

B. Provisions

(of which provisions for defined benefit plans)

6,716

(5,575)

7,841

(6,600)

C. Liabilities

(of which liabilities payable to affiliated companies)

137,051

(53,830)

161,941

(34,942)

299,078 331,014

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Consolidated statement of profit or loss

Consolidated statement of comprehensive income

Consolidated cash flow statement

Consolidated balance sheet as at December 31, 2014

Consolidated statement of chances in equity

Notes of the consolidated financial statement

Assurance by the Legal Representatives

Auditor’s Report

96

96

97

98

100

101

180

181

Consolidated Financial Statements in accordance with IFRS

After over 375 years, the Paulaner Brauerei in Munich left its brewery facility at Nockherberg and dug new wells on the outskirts

of the city near Langwied. GWE Pumpenboese GmbH supplied materials for this.

96

Consolidated statement of profit or loss and Consolidated statement of comprehensive income

Income Statement

in EUR '000 Appendix 01.01. - 31.12.2013 * 01.01. - 31.12.2014

1. Sales revenues (6) 1,402,173 1,375,679

2. Changes in inventories -4,423 26,622

3. Other capitalized goods and services for own account (7) 19,196 14,696

4. Other income (8) 30,579 89,022

CONSOLIDATED REVENUES 1,447,525 1,506,019

5. Cost of materials (9) -755,906 -749,247

6. Staff costs (10) -342,815 -355,250

7. Depreciation and amortization

a) Depreciation of fixed assets (11) -79,696 -78,781

b) Write-downs of inventories due to use (12) -14,196 -15,789

8. Other operating expenses (13) -224,827 -230,526

OPERATING RESULT 30,085 76,426

9. Financial income (14) 7,729 7,096

10. Financial expenses (15) -45,541 -45,149

11. Share of the profit or loss of associated companies accounted for using the equity method 1,770 -572

PROFIT BEFORE TAX -5,957 37,801

12. Income tax expense (16) -13,474 -22,075

NET PROFIT OR LOSS -19,431 15,726

of which attributable to shareholders of BAUER AG -16,927 14,481

of which attributable to non-controlling interests -2,504 1,245

in EUR 01.01. - 31.12.2013 01.01. - 31.12.2014

Basic earnings per share (17) -0.99 0.85

Diluted earnings per share (17) -0.99 0.85

Average number of shares in circulation (basic) 17,131,000 17,131,000

Average number of shares in circulation (diluted) 17,131,000 17,131,000

Statement of Comprehensive Income

in EUR '000 01.01. - 31.12.2013 01.01. - 31.12.2014

Net profit or loss -19,431 15,726

Income and expenses which will not be subsequently reclassified to profit and loss

Revaluation of commitments arising from employee benefits after termination of employment970 -32,264

Deferred taxes on that revaluation with no effect on profit and loss -226 9,046

Income and expenses which will not be subsequently reclassified to profit and loss

Market valuation of derivative financial instruments 2,094 -5,323

Included in profit and loss -310 6,497

Deferred taxes on financial instruments with no effect on profit and loss -642 54

Differences from currency translation -15,678 10,545

Other result after tax -13,792 -11,445

Total Comprehensive income for the year -33,223 4,281

of which attributable to shareholders of BAUER AG -28,924 2,360

of which attributable to non-controlling interests -4,299 1,921


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Consolidated cash flow statement

in EUR '000 01.01. - 31.12.2013 * 01.01. - 31.12.2014

Cash flows from operational activities:

Profit before tax -5,957 37,801

Depreciation of fixed assets 79,696 78,781

Write-downs of inventories due to use 14,196 15,789

Financial income received -4,610 -4,463

Financial expenses paid 39,358 40,567

Other non-cash transactions 6,088 -49,476

Dividends received 2,951 450

Result from the disposal of fixed assets -3,175 -4,773

Change in provisions -3,029 314

Change in trade receivables -55,342 20,634

Change in receivables from construction contracts -31,950 24,309

Change in receivables from concession arrangements 2,279 2,309

Change in other assets and in prepayments and deferred charges 7,717 -10,506

Change in inventories -22,687 -37,316

Change in trade payables 20,451 -21,114

Change in liabilities from construction contracts 4,424 18,551

Change in other current and non-current liabilities -4,968 22,776

Cash and cash equivalents generated from day-to-day business operations 45,442 134,633

Income tax paid -7,026 -19,235

Net cash from operating activities 38,416 115,398

Cash flows from investment activities:

Acquisition of property, plant and equipment and intangible assets -89,240 -69,119

Proceeds from sale of fixed assets 22,053 26,854

Consolidation scope-related change in financial resources 34 -5,187

Net cash used in investing activities -67,153 -47,452

Cash flows from financing activities:

Raising of loans and liabilities to banks 111,650 202,306

Repayment of loans and liabilities to banks -17,317 -237,761

Repayment of liabilities from finance lease agreements -11,012 -11,074

Dividends paid -6,589 -2,872

Interest paid -39,342 -42,952

Interest received 6,186 5,462

Net cash used in financing activities 43,576 -86,891

Changes in liquid funds affecting payments 14,839 -18,945

Influence of exchange rate movements on cash -2,854 3,563

Total change in liquid funds 11,985 -15,382

Cash and cash equivalents at beginning of reporting period 45,232 57,217

Cash and cash equivalents at end of reporting period 57,217 41,835

Change in cash and cash equivalents 11,985 -15,382


98

Consolidated balance sheet as at December 31, 2014

Assets

in EUR '000 Appendix 31.12.2013 * 31.12.2014

A. NON-CURRENT ASSETS

I. Intangible assets (18)

1. Concessions, industrial property rights and similar rights and values as well

as licenses to such rights and values 11,038 10,156

2. Capitalized software costs 90 39

3. Capitalized development costs 24,260 24,245

35,388 34,440

II. Property, plant and equipment and investment property (18)

1. Land, land rights and buildings 211,577 206,576

2. Investment property 863 804

3. Technical equipment and machinery 214,496 206,209

4. Other equipment, factory and office equipment 27,319 25,107

5. Payments on account and assets in course of construction 5,282 8,213

459,537 446,909

III. Investments accounted for using the equity method 13,249 42,906

IV. Participations 3,613 3,613

V. Deferred tax assets (19) 26,299 30,973

VI. Receivables from concession arrangements (20) 36,762 0

VII. Other non-current assets (21) 7,564 7,492

VIII. Other non-current financial assets (22) 5,420 28,420

587,832 594,753

B. CURRENT ASSETS

I. Inventories (23)

1. Raw materials and supplies 146,666 155,334

2. Finished goods and work in progress and stock for trade 272,686 283,850

419,352 439,184

II. Receivables and other assets (24)

1. Receivables from construction contracts (PoC) 143,234 132,159

2. Trade receivables 320,301 311,417

3. Receivables from enterprises in which the company has participating interests 444 67

4. Payments on account 3,725 4,304

5. Other current assets 30,695 28,603

6. Other current financial assets 19,551 20,100

517,950 496,650

III. Effective income tax refund claims 3,437 2,661

IV. Cash and cash equivalents (25) 57,217 41,835

997,956 980,330

1,585,788 1,575,083

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Equity and liabilities

in EUR '000 Appendix 31.12.2013 * 31.12.2014

A. SHAREHOLDERS’ EQUITY (26)

I. Subscribed capital 73,001 73,001

II. Capital reserve 38,404 38,404

III. Other revenue reserves and net earnings available for distribution 285,601 287,903

Equity of BAUER AG shareholders 397,006 399,308

IV. Non-controlling interests 22,809 19,617

419,815 418,925

B. NON-CURRENT LIABILITIES (27)

I. Liabilities to banks 247,775 364,771

II. Liabilities from finance lease agreements 17,265 13,032

III. Defined benefit plans (28) 81,637 116,358

IV. Other non-current liabilities 6,483 5,959

V. Other non-current financial liabilities 14,397 10,013

VI. Deferred tax liabilities (19) 14,954 13,123

382,511 523,256

C. CURRENT LIABILITIES (29)

I. Liabilities

1. Liabilities to banks 427,589 266,533

2. Liabilities from finance lease agreements 10,185 7,453

3. Advances received for orders 9,801 19,579

4. Liabilities from construction contracts (PoC) 32,839 48,471

5. Trade payables 194,471 168,974

6. Receivables from enterprises in which the company has participating interests 219 205

7. Other current liabilities 69,873 68,632

8. Other current financial liabilities 12,102 25,712

757,079 605,559

II. Provisions

1. Effective income tax obligations 9,606 9,317

2. Provisions (30) 14,809 15,880

3. Current portion of defined benefit plans (28) 1,968 2,146

26,383 27,343

783,462 632,902

1,585,788 1,575,083


100

Consolidated statement of chances in equity

in EUR '000Other revenue reserves and net earnings

available for distribution

Subscribed

capital

Capital

reserve

Revenue

reserves

Currency

translation

reserve

Reconciling

item,

IFRS

Hedging

transactions

reserve

Non-

controlling

interests Total

As at 01.01.2013 73,001 38,404 303,892 7,373 10,387 -3,722 33,205 462,540

Net profit or loss 0 0 -16,927 0 0 0 -2,504 -19,431

Differences from currency

translation 0 0 0 -13,865 0 0 -1,813 -15,678

Revaluation of commitments

arising from employee benefits

after termination of employ-

ment 0 0 964 0 0 0 6 970

Market valuation of derivative

financial instruments 0 0 0 0 0 1,767 17 1,784

Deferred taxes with no effect

on profit and loss 0 0 -225 0 0 -638 -5 -868

Total Comprehensive income

for the year 0 0 -16,188 -13,865 0 1,129 -4,299 -33,223

Changes in scope of consolidation 0 0 -2,887 0 0 0 0 -2,887

Dividend payments 0 0 -5,139 0 0 0 -1,450 -6,589

Other changes * 0 0 4,621 0 0 0 -4,647 -26

As at 31.12.2013 73,001 38,404 284,299 -6,492 10,387 -2,593 22,809 419,815

As at 01.01.2014 73,001 38,404 284,299 -6,492 10,387 -2,593 22,809 419,815

Net profit or loss 0 0 14,481 0 0 0 1,245 15,726

Differences from currency

translation 0 0 0 9,641 0 0 904 10,545

Revaluation of commitments

arising from employee benefits

after termination of employ-

ment 0 0 -31,956 0 0 0 -308 -32,264

Market valuation of derivative

financial instruments 0 0 0 0 0 1,184 -10 1,174

Deferred taxes with no effect

on profit and loss 0 0 8,959 0 0 51 90 9,100

Total Comprehensive income

for the year 0 0 -8,516 9,641 0 1,235 1,921 4,281

Changes in scope of consolidation 0 0 0 0 0 0 -3,199 -3,199

Dividend payments 0 0 0 0 0 0 -2,872 -2,872

Other changes 0 0 -58 0 0 0 958 900

As at 31.12.2014 73,001 38,404 275,725 3,149 10,387 -1,358 19,617 418,925

* Previous year adjusted; there was a non-signifi cant change in value in the course of calculating the share of joint ventures according to IFRS 11 and the retrospectively

changed balance sheet disclosure (see page 106)

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Notes of the consolidated financial statementGENERAL NOTES

GENERAL INFORMATION ABOUT THE GROUP

BAUER Aktiengesellschaft, Schrobenhausen (referred to in the following as BAUER AG) is a stock corporation under German law.

Its registered office is at BAUER-Strasse in Schrobenhausen, and the company is entered in the Register of Companies of

Ingolstadt under file reference (HRB 101375).

The BAUER Group is a provider of services, equipment and products dealing with ground and groundwater. The Group

markets its products and services all over the world. The operations of the Group are divided into three segments:

Construction, Equipment and Resources.

BAUER AG has been listed on the SDAX stock market index since September 2006. Between September 2008 and

September 2010, BAUER AG was also listed on the MDAX index.

1. BASES FOR COMPILING THE CONSOLIDATED FINANCIAL STATEMENTS

The consolidated financial statements of BAUER AG were prepared applying section 315a of the German Commercial Code

(HGB) in accordance with International Financial Reporting Standards (IFRS), as applicable in the EU. The consolidated

financial statements were prepared on the basis of historical cost, limited by the market-value valuation of available-for-sale

financial assets and by the fair-value valuation of financial assets and liabilities (including derivative financial instruments)

affecting net income. The previous year’s figures have been determined according to the same principles.

The BAUER Group’s financial year is the calendar year.

The consolidated financial statements were prepared in euros. Unless otherwise specified, all amounts are quoted in thousands

of euros (EUR '000).

The income statement was prepared according to the nature of expenses method.

2. SCOPE OF CONSOLIDATION AND CONSOLIDATION PRINCIPLES

Scope of consolidation

The scope of consolidation includes BAUER AG and all major subsidiaries. Subsidiaries are all companies over which the parent

has control in terms of financial and corporate policy. This is routinely accompanied by a voting share of over 50 %. When

assessing whether control is exerted, the existence and effect of potential voting rights currently exercisable or convertible

are considered.

The consolidated financial statements 2014 include 120 companies (previous year: 122). Of these, 0 (previous year: 3)

were included in the scope of consolidation for the first time. Since the start of 2014, 4 (previous year: 2) companies have

been removed from the scope of consolidation due to merger and sale. Consortia have not been included in the number of

companies included in the scope of consolidation, because of the short-term nature of the projects involved. Also, non-significant

joint ventures have not been considered in the stated number of included companies.

102 NOTES OF THE CONSOLIDATED FINANCIAL STATEMENT 2014

The following overview shows the number of subsidiaries broken down by segment:

Subsidiary companies are not included in the consolidated financial statements if they are not material from the viewpoint of

an operating segment or of the Group based on the following assessment:

If the sum of all subsidiaries not included in the consolidated financial statements accounts for more than 1 % of the Group’s

total net assets, consolidated revenues or net profit for the period, an assessment is undertaken as to which company should

be included in the consolidated financial statements taking into account sustainability and consolidation effects. The as-

sessment criteria for materiality in respect of associated companies are restricted to annual earnings. Alongside quantitative

criteria, qualitative criteria are also applied in assessing the materiality of a company with regard to its inclusion in the scope of

consolidation. Consequently, the non-inclusion of any one company must not result in material changes to segment or Group

annual earnings, nor must it mask any other materially relevant trends.

In a small number of cases, companies are fully consolidated into the financial statements of BAUER AG even though that

company holds less than 50 % of their voting rights. This is the result of state restrictions which stipulate that foreign investors

may not hold more than 50 % of the voting rights in domestic companies. In such cases BAUER AG makes use of so-called

agency constructions, whereby more than 50 % of the voting rights are commercially held in the company concerned, thus

allowing for full consolidation.

Subsidiaries are included in the consolidated financial statements (fully consolidated) from the point at which control is

transferred to the Group. They are de-consolidated at the point when control ends. Companies of which BAUER AG is

able, directly or indirectly, to exercise a significant influence on the said companies’ financial and operating policy decisions

(associated companies) are consolidated according to the equity method. 16 (previous year: 15) companies were affected by

this as at 31 December. The consolidated subgroup of Wöhr + Bauer GmbH was disclosed as one company in the previous

year. All companies of the subgroup were listed in the financial year. The previous year’s figure was changed accordingly.

Joint ventures were also consolidated according to the equity method.

The main subgroups and companies included in the consolidated financial statements are listed in the Major Participations

section. The disclosures in accordance with Section 313, Subsection 2 HGB are grouped in a separate list of holdings. This

will be published as part of the Notes to the financial statements of BAUER Aktiengesellschaft in the electronic version of

the official Gazette (“Bundesanzeiger”) of the Federal Republic of Germany. Subsidiaries with differing balance sheet dates

compile interim financial statements as per the consolidated balance sheet date. NuBa Equipment Ltd., Canada, prepares its

annual financial statements as at 30 September, because Nuna Logistics Limited, Edmonton, Canada, as another share-

holder, also prepares its annual financial statements as at 30 September. BAUER Corporate Services Private Limited, India,

prepares its financial statements as at 31 March due to local statutory requirements.

Main businessHead-

quartersNumber of

wholly-owned

subsidiaries

Number of

non-wholly-owned

subsidiaries

Number of

associated

companies

Total

31.12.

2013

31.12.

2014

31.12.

2013

31.12.

2014

31.12.

2013

31.12.

2014

31.12.

2013

31.12.

2014

Construction

segment

Special foundation engineering,

mining, project developmentWorldwide 30 30 5 5 11 12 46 47

Equipment

segment

Machine manufacturing

and saleWorldwide 26 25 8 9 1 1 35 35

Resources

segment

Environment and

environmental technologyWorldwide 28 26 9 7 1 2 38 35

‘Other’

segmentCentral services Worldwide 3 3 0 0 0 0 3 3

Total 87 84 22 21 13 15 122 120

103NOTES OF THE CONSOLIDATED FINANCIAL STATEMENT 2014

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Changes at subsidiaries

Equipment segment

Purchases

With effect from April 30, 2014, Celler Brunnenbau Holding GmbH, Celle, contributed assets with a fair value of

EUR 900 thousand to PRAKLA Bohrtechnik GmbH as part of an asset deal. The fair value was certified by an external auditor.

In return, linked to a capital increase by PRAKLA Bohrtechnik GmbH, Peine, a capital share (10 %, or EUR 114 thousand)

determined by the DCF method was allotted. The asset deal also entailed a premium of EUR 786 thousand.

The assets contributed are linked to the business unit involved in the production of drilling rigs, casing oscillators and grip

heads, as well as spare parts in particular for water extraction, subgrade and constructional engineering works, and geologi-

cal drilling and exploration.

Amounts recorded at time of acquisition:

in EUR '000

Cash and cash equivalents 0

Equity portions 900

Total acquisition cost 900

Non-current assets 900

Current assets 0

Assets 900

Non-current liabilities 0

Current liabilities 0

Equity and liabilities 0

Net worth 900

Non-controlling interests 900

As this is a change in equity at a subsidiary as a result of which the Group’s share in equity is reduced or increased without

loss of control, the change is recognized as a transaction between equity investors not affecting profit and loss.

No goodwill was created by the asset deal.

Resources segment

Mergers

On August 25, 2014, GWE Prakla Services GmbH, Peine, Germany and on August 29, 2014, GWE GF-Tec GmbH, Rödermark,

Germany were merged into GWE pumpenboese GmbH, Peine, Germany retrospectively with effect from January 1, 2014.

On October 30, 2014, PESA ENGINEERING S.A., Madrid, Spain and BAUER Ingeneria Medioambiental S.A., Madrid, Spain

were merged and the company name changed to BAUER RESOURCES SPAIN S.A., Madrid, Spain.


Divestments

BAUER Resources GmbH sold 21 % of its shares in BAUER Nimr LLC on November 19, 2014.

The effects of the divestment are presented below:

a) Consideration received

in EUR '000 19.11.2014

Consideration received 13,324

in EUR '000 19.11.2014

Considerations received 13,324

Relinquished net assets −11,081

Non-controlling interests 3,199

Fair value of retained at-equity interest of 49 % 31,089

Overall effect of the proportional sale 36,531

in EUR '000 19.11.2014

Non-current assets

Intangible assets 11

Property, plant and equipment and investment property 2,042

Receivables from concession arrangements 38,290

Other non-current assets 11

Current assets

Receivables and other assets 7.997

Cash and cash equivalents 5,187

Non-current liabilities

Liabilities to banks −24,103

Other non-current liabilities −435

Other non-current financial liabilities −12,290

Deferred tax liabilities −200

Current liabilities

Liabilities to banks 0

Liabilities from construction contracts (PoC) −2,046

Trade payables −2,937

Other current liabilities −265

Effective income tax obligations −181

Divested net assets 11,081

b) Assets and liabilities disposed of due to the loss of control

c) Overall effect of the proportional sale of BAUER Nimr LLC

The overall effect is included in Other income and is stated separately in item 8.


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in EUR '000 19.11.2014

Selling price settled with cash and cash equivalents 0

Net of cash or cash equivalents divested as part of the transaction -5,187

The net cash outflow from the sale -5,187

d) Net cash outflow from the proportional sale of BAUER Nimr LLC

The retained at-equity interest was valued at its fair value as a result of the proportional sale of BAUER Nimr LLC. The fair

value was calculated from the discounted transaction price for the sold shares at the time of the divestment. This procedure

falls within Level 3 of the IFRS 13 measurement hierarchy. The complete effect of this measurement is explained on page 104.

Consolidation principles

The assets and liabilities of the German and foreign companies included in the consolidated financial statements are stated

according to the uniform accounting and valuation methods applicable throughout the BAUER Group. Mutual receivables

and liabilities as well as expenses and income between consolidated companies are eliminated. Consolidated inventories and

fixed assets are adjusted by existing intra-Group balances. Consolidation affecting net income is subject to deferral of taxes,

with deferred tax assets and liabilities being offset against each other provided the payment period and tax creditor are the

same. In respect of subsidiaries consolidated for the first time, the identifiable assets, liabilities and contingent liabilities of

the acquired companies were recorded at their applicable fair values at the time of acquisition. Goodwill occurring on initial

consolidation is capitalized and subjected to a yearly impairment test; an excess of the net fair value of the acquired net

assets over cost is recognized in the income statement immediately at the time of initial consolidation in accordance with

IFRS 3. Consolidation according to the equity method is subject to the same principles. If the pro rata loss in an associated

company is equal to or greater than the carrying amount of the participating interest, no further losses are recognized, unless

a consolidated Group company has entered into obligations or made payments on behalf of the associated company.

Non-controlling interests represent the proportion of the result and the net worth which is not to be attributed to the Group.

The result attributable to these interests is stated in the income statement as follows, separately from the proportion of the

result to be allocated to the shareholders of the parent company. It is stated in the balance sheet within shareholders’ equity,

separately from the shareholders’ equity attributable to shareholders of the parent company. The purchase of non-controlling

investments and changes in the investment quota of the parent company in a subsidiary which do not lead to a loss of control

are stated in the balance sheet as equity transactions.

3. KEY ASSUMPTIONS AND ESTIMATES

In the consolidated financial statements, assumptions and estimates must be made which influence the amounts and

recognition of assets and liabilities, income and expenses recorded, as well as contingent liabilities. The main areas of

application of assumptions and estimates are in specifying the useful lives of fixed assets, determining discounted cash flows

within the framework of impairment tests, assessing the realizability of deferred tax assets and the collectability of receivables,

estimating the percentage of completion of construction contracts, establishing the fair value of some financial instruments

and in creating provisions for legal actions, pensions and other benefit commitments, taxes, warranties and guarantees.

The actual values may differ from the estimates made.


4. GENERAL ACCOUNTING AND VALUATION METHODS

4.1. General changes to accounting and valuation methods

Application of the following standards and interpretations was mandatory for the first time in the financial year:

• IFRS 10 – Consolidated Financial Statements

IFRS 10 modifies the term “control” such that the same criteria are applied to all entities in assessing a control relationship.

This definition is backed by wide-ranging application examples illustrating various kinds of control.

The effects of IFRS 10 do not have any significant influence on the consolidated financial statements of BAUER AG.

• IFRS 11 – Joint Arrangements

As a result of the changes to definitions in IFRS 11, there are now two kinds of joint arrangement: joint operation and joint

venture. Moreover, the option of proportionate consolidation of jointly controlled entities has been abolished. Parties to a

joint venture are obligated to recognize their share on the balance sheet applying the equity method in accordance with

IAS 28, “Investments in Associates and Joint Ventures”. Parties to a joint operation recognize their shares proportionate to

their share of the assets and liabilities of the joint operation. Consequently, a party to a joint operation includes the following

items in its consolidated financial statements:

- Its assets, including its share in jointly held assets

- Its liabilities, including its share in jointly incurred liabilities

- Its income from the sale of its share in the products of the joint operation

- Its share in income from the sale of products by the joint operation

- Its expenses, including its share in any jointly incurred expenses

The Accounting and Auditing Board of the Institute of German Certified Public Accountants (IDW) takes the view that the

typical German construction consortium meets the preconditions for classification as a joint venture.

As previously mentioned, IFRS 11 stipulates that shares in joint ventures are to be valued according to the equity method.

In the BAUER Group, the changes relate to the statement in the balance sheet and the income statement.

Proportionate results are no longer stated under receivables from joint ventures and sales revenues with consortia as used

to be the case, but under investments accounted for using the equity method as well as in the result from investments

accounted for using the equity method. The previous year’s figures have been adjusted for greater comparability.

The effects of IFRS 11 do not have any significant influence on the consolidated financial statements of BAUER AG, with the

exception of changes in recognition of items.

• IFRS 12 – Disclosure of Interests in Other Entities

IFRS 12 requires disclosures which enable readers of financial statements to assess the nature, risks and financial effects

linked to interests in subsidiaries, associated companies, joint arrangements and non-consolidated structured entities

(special-purpose entities).

The effects of IFRS 12 are presented in the notes to the consolidated financial statements of BAUER AG.

• IAS 27 – financial statements (revised 2011)

The new regulations included in IFRS 10, consolidated financial statements, have replaced the consolidation guidelines

contained in the former IAS 27, consolidated and financial statements, as well as SIC-12, consolidation – special purpose


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vehicles. Now, IAS 27 only contains the regulations that are to be applied to separate financial statements, as a result of

which the standard has been renamed as IAS 27, financial statements (revised 2011).

The effects of IAS 27 (revised 2011) do not have any significant influence on the consolidated financial statements of

BAUER AG.

• IAS 28 – Investments in Associates and Joint Ventures

This amendment replaces IAS 28 - Investments in Associates - and stipulates the preconditions for application of the equity

method by associates and joint ventures.

• IAS 32 – Financial Instruments: Representation

The amendment essentially involves clarification of a number of rules for the offsetting of financial assets and liabilities.

A financial asset may only be set off against a financial liability if the claim is current - that is to say, it must not be depend-

ent on a future event. Additionally, the amendments clarify that gross offsetting mechanisms (such as through clearing),

which both eliminate credit and liquidity risks and process receivables and liabilities in a single accounting process, must

be treated as equivalent to net offsetting.

The effects of IAS 32 do not have any significant influence on the consolidated financial statements of BAUER AG.

• IAS 36 – Impairment of Assets

Pursuant to the amendment to IFRS 13 Fair Value Measurement, a number of disclosure rules in IAS 36 Impairment of

Assets regarding measurement of the achievable amount of asset impairment have been changed.


• IFRS 39 – Financial Instruments: Recognition and Measurement

With the amendment to IAS 39, it is possible to retain hedge accounting for derivatives if the contract party changes.

This possibility is only allowable under certain preconditions.


• Amendments to IFRS 10, IFRS 12 and IAS 27

The IASB project resulting in the amendments to IFRS 10, IFRS 12 and IAS 27 emerged from the consultation process

relating to the publication of IFRS 10 Consolidated Financial Statements.

The effects of this do not have any significant influence on the consolidated financial statements of BAUER AG.

• Amendments to IFRS 10, IFRS 11 and IFRS 12

The collective amendment to IFRS 10, IFRS 11 and IFRS 12 clarifies their transitional provisions. Early adoption is allowable

only in respect of all standards together.

• IFRIC 21 – Levies

IFRIC 21 regulates accounting for government levies not covered by IAS 12. It stipulates when such an obligation is to be

recognized as a liability.

The effects of IFRIC 21 do not have any significant influence on the consolidated financial statements of BAUER AG.

Moreover, the IASB and the IFRIC have adopted further standards, interpretations and amendments, as listed below, which

were not yet bindingly applicable, or had not yet been recognized by the EU, in financial 2014. The BAUER Group had not

implemented early application of these standards by December 31, 2014.


Initial application of the standards is planned as from the point they are recognized and adopted by the EU.

Standard/interpretation/amendments Applicable

from the

financial year

Adoption

by EU

Amendment to IAS 19, defined benefit plans: employee contributions 2015 Yes

Annual improvements in IFRS (cycle 2010 - 2012) 2015 Yes

Annual improvements in IFRS (cycle 2011 - 2013) 2015 Yes

Amendment to IFRS 11, purchase of interests in a joint activity 2016 No

Amendment to IAS 16 and IAS 38, clarification of acceptable depreciation methods 2016 No

Amendment to IAS 16 and IAS 41, agriculture: producing plants 2016 No

IFRS 15, sales revenues from customer contracts 2017 No

Amendment to IAS 27, financial statements (equity method) 2016 No

Amendment to IFRS 10 and IAS 28, disposal of an investor’s assets in or application

to the investor’s associated company or joint venture 2016 No

Annual improvements in IFRS (cycle 2012-2014) - No

Amendment to IFRS 10, IFRS 12 and IAS 28, investment companies −

application of the consolidation exception 2016 No

Amendment to IAS 1, disclosure initiative 2016 No

IFRS 14, regulatory deferrals and accruals 2016 No

IFRS 9, financial instruments 2018 No

Possible effects of the first use of IFRS 15, sales revenues from customer contracts, cannot be ultimately assessed at the

present time. BAUER AG does not expect any significant effect on the consolidated financial statements to result from any of

the other standards.

4.2. Accounting and valuation methods within the Group

Currency translation reserve

Currency translation reserve are translated in the financial statements of BAUER AG and the consolidated subsidiaries at the

rates applying on the dates of the transactions. The financial statements of the foreign companies belonging to the BAUER

Group are translated into euros according to the functional currency concept. Accordingly, assets and liabilities are translated

at the rate applying on the balance sheet date and the income statement items at the average rate. The differences arising

from currency translation are recognized in the currency translation reserve as part of the shareholders’ equity, without

affecting net income.


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The rates used for translation are based on the following table:

1 EUR corresponds to Yearly average value Balance sheet date

2013 2014 2013 2014

Singapore SGD 1.6661 1.6778 1.7392 1.6074

Thailand THB 41.0558 42.9860 45.2177 40.0245

Mexico MXP 17.1181 17.6560 18.0282 17.9234

Chile CLP 664.3491 757.8911 724.4884 736.1344

Argentina ARS 7.3833 10.8648 8.9744 10.4039

Peru PEN 3.6211 3.7598 3.8506 3.6351

Japan JPY 130.3063 140.5059 144.5122 145,2439

United States of America USD 1.3301 1.3219 1.3767 1.2166

South Africa ZAR 12.9709 14.3577 14.5035 14.0575

UK GBP 0.8497 0.8028 0.8331 0.7818

Malaysia MYR 4.2178 4.3329 4.5204 4.2622

Saudi Arabia SAR 4.9982 4.9585 5.1632 4.5653

Lebanon LBP 2,005.2622 1,995.3273 2,068.4917 1,838.8153

Egypt EGP 9.1766 9.3713 9.5661 8.6984

Indonesia IDR 14,047.7904 15,669.6389 16,754.4389 15,139.9647

Hungary HUF 298.0405 309.9893 297.0230 314.9587

Romania RON 4.4164 4.4386 4.4739 4.4845

United Arab Emirates AED 4.8855 4.8553 5.0565 4.4685

Philippines PHP 56.7348 58.7377 61.1186 54.4041

New Zealand NZD 1.6295 1.6001 1.6747 1.5506

Taiwan TWD 39.6265 40.1344 41.0539 38.5999

Hong Kong HKD 10.3173 10.2525 10.6753 9.4373

China CNY 8.1686 8.1575 8.3314 7.5550

Switzerland CHF 1.2288 1.2124 1.2267 1.2024

Australia AUD 1.3937 1.4708 1.5396 1.4841

Canada CAD 1.3759 1.4634 1.4636 1.4117

Russia RUB 42.5912 51.5000 45.2582 67.5895

India INR 78.5205 80.7777 85.2246 77.4729

Bulgaria BGL 1.9558 1.9559 1.9560 1.9559

Sweden SEK 8.6664 9.1184 8.8263 9.4275

Poland PLN 4.2159 4.1955 4.1508 4.2902

Panama PAB 1.3301 1.3219 1.3767 1.2166

Qatar QAR 4.8418 4.8133 5.0133 4.4307

Turkey TRY 2.5646 2.8937 2.9450 2.8327

Vietnam VND 27,999.3993 28,039.4804 29,062.1368 26,031.7369

Jordan JOD 0.9421 0.9357 0.9753 0.8611

Oman OMR 0.5121 0.5090 0.5301 0.4684

Ghana GHS 2.7791 4.0594 3.2559 3.9112

Georgia GEL 2.2134 2.3352 2.3887 2.2604


Intangible assets

Intangible assets are capitalized at cost and amortized according to the straight-line method over the projected useful life of

3 to 10 years.

Assets which have an indefinite useful life, such as goodwill, are not subjected to scheduled amortization but are impairment-

tested each year, or when relevant indications arise. The goodwill is the amount by which the acquisition cost of the acquisi-

tion exceeds the fair value of the Group’s shares in the net assets of the acquired entity at the date of acquisition. Goodwill

created by acquisition is recognized under “Intangible assets”. Goodwill resulting from the acquisition of an associated

company is included in the carrying amount of investments in associated companies and consequently is not impairment-

tested separately, but within the overall carrying amount. The recognized goodwill is subjected to an annual value retention

test and valued at its original acquisition cost less cumulative impairment. Value recovery adjustments are not permitted.

Gains and losses from the disposal of an entity include the carrying amount of the goodwill assigned to the entity being sold.

Assets which are subject to scheduled amortization are impairment-tested if relevant events or changes in circumstances

indicate that the carrying amount may no longer be attainable.

Impairment in the amount of the carrying amount exceeding the attainable amount is recognized. The attainable amount is the

higher amount of the applicable fair value of the asset less selling costs and the value in use. For the impairment test, assets

are grouped at the lowest level for which cash flows can be separately identified (cash-generating units). With the exception

of goodwill, a test is performed on each balance sheet date in respect of non-cash assets for which in the past an impairment

was recognized as to whether a value recovery adjustment is required.

Research and development costs are generally charged as expenditure in the financial year in which they occurred, in accord-

ance with IAS 38. Exceptions to this are certain development costs which are capitalized where it is probable that a future

economic benefit will be drawn from the development project and the costs incurred can be measured reliably. In addition,

the following criteria in accordance with IAS 38.57 must be met:

• Technical feasibility of completion of the intangible asset so that it will be available for use or sale

• Intention to complete the intangible asset and to use or sell it

• Ability to use or sell the intangible asset

• Evidence of how the intangible asset will generate probable future economic benefits

• The availability of adequate technical, financial and other resources to complete the development and to use or sell the

intangible asset

• The ability to measure reliably the expenditure attributable to the intangible asset during its development

The cost of manufacture includes all costs directly attributable to the development process as well as appropriate portions of

development-related overheads. The assets in development are subjected to an annual impairment test and valued at their

original cost less cumulative depreciation. Amortization is undertaken according to the straight-line method as from start of

production over the intended term of the developed models. The projected useful life is between 3 and 6 years. Impairment

losses on intangible assets are recognized to the higher of the value in use or net realizable value. If the preconditions for an

impairment no longer exist, reversals of impairment – except for goodwill – are undertaken.


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Property, plant and equipment

According to IAS 16, property, plant and equipment is valued at cost, less scheduled straight-line depreciation based on the

pro rata temporis method, unless in exceptional cases some other method of depreciation more effectively reflects the usage.

The following table provides an overview of the useful lives:

Impairment losses on property, plant and equipment are recognized in accordance with IAS 36 where the value in use or

fair value less cost to sell of the asset concerned has fallen below the carrying amount. If the reasons for an impairment

recognized in previous years no longer exist, a corresponding reversal of impairment is applied.

Both impairment losses and scheduled depreciation are recognized under the “Depreciation of fixed assets” item. The level of

impairment losses is explained in accordance with IAS 36 under “Non-current assets”.

Leasing

The BAUER Group acts as both a lessee and a lessor. Leasing relationships are classified according to IAS 17 based on the

distribution of opportunity and risk between the lessor and lessee.

Leasing relationships in which most of the opportunity and risk linked to ownership of the leased item remains with the lessor

are classified as operating leases. Where the lessee has most of the opportunity and risk, the agreement is classified as a

finance lease.

a) Accounting for lessee transactions

Payments made in connection with an operating lease (net after taking into account incentive payments by the lessor) are

recognized in the income statement by straight-line depreciation over the term of the lease.

Assets from finance leases are capitalized at the start of the lease term at the lower of the fair value of the leased item and the

present value of the minimum lease payments. A leasing liability is recognized under “Current and non-current liabilities”. Each

lease installment is split into an interest and a repayment portion, so that the leasing liability is subject to a consistent interest

rate. The interest portion of the lease installment is recognized as affecting expenditure in the income statement. The property,

plant and equipment asset held under a finance lease is written down over the shorter of the economic life of the asset or the

lease term.

b) Accounting for lessor transactions

A lease is an agreement whereby the lessor assigns to the lessee the right to use an asset for a specific period of time against

a payment or series of payments.

Assets leased by the customer in the form of operating leases are assigned on the balance sheet according to their nature.

Income from leases is recognized by the straight-line method over the term of the agreement.

In the BAUER Group, mainly operating leases are entered into as the lessor.

Asset object Economic life

Buildings and other structures 3 to 60 years

Technical equipment and machinery 3 to 21 years

Other equipment, factory and office equipment 2 to 21 years


Government grants

Government grants for assets including non-monetary benefits at fair value are recognized on the balance sheet as accruals

on the Equity and Liabilities side (Investment allowance) or, on determining the carrying amount of the asset, are deducted

from the Assets side (Invest subsidy).

Business combinations

Acquisitions of subsidiaries are accounted for in accordance with IFRS 3 based on the acquisition method. The cost of the

acquisition corresponds to the fair value of the assets contributed, the equity instruments issued and the liabilities created

and/or transferred at the transaction date. Assets, liabilities and contingent liabilities identifiable in the course of a business

combination are measured on initial consolidation at their fair values at the acquisition date. The amount by which the acquisi-

tion cost exceeds the Group’s share of the net assets measured at their fair value is stated as goodwill. The non-controlling

interests are valued either at cost (Partial Goodwill method) or at fair value (Full Goodwill method). The available option can be

exercised on a case-by-case basis. BAUER Group policy is to apply the Partial Goodwill method. If the acquisition cost is less

than the net assets of the acquired subsidiary measured at their fair value, the difference is recognized directly in the income

statement. Transaction costs directly linked to a business combination are recognized in the income statement. In the event

of successive acquisitions, the differences between the carrying amount and the applicable fair value of the shares previously

held are recognized as affecting net income at the time of acquisition. Existing contracts with the acquired entity at the time of

acquisition, except those under the terms of IAS 17 and IFRIC 4, are analyzed and reclassified where appropriate.

Borrowing costs

Borrowing costs linked directly to the acquisition, construction or production of qualifying assets in accordance with IAS

23 are included in the cost of the asset in question for the period until start of use of the asset. No borrowing costs were

capitalized in the financial year. The finance cost rate in the previous year was between 6.76 and 8.0 percent. Testing as to

whether an asset is a qualifying asset is carried out according to internally stipulated materiality limits for projects and installations.

If the said materiality limits are exceeded, borrowing costs for qualified assets are capitalized. Other financing costs are recognized

as ongoing expenditure under “Financial expenses”.

Investment property

Land and buildings maintained in order to generate rental income are accounted for at amortized cost in accordance with

IAS 40, with the useful lives applied for depreciation (straight-line according to the pro rata temporis method) corresponding to

those of the property, plant and equipment used by the company itself. The valuation takes place by deriving current market

prices of comparable real estate. This procedure falls within Level 2 of the IFRS 13 measurement hierarchy.

Investments accounted for using the equity method

Associated companies

According to IAS 28, an associated company is any entity over which the investor has significant influence, though not

control. This routinely means voting shares of between 20 and 50 percent.

Shares in associated companies are valued at-equity and recognized initially at cost. The Group’s shares in associated

companies include the goodwill created by the acquisition (less cumulative impairment).

The Group’s share in the profits and losses of associated companies is reported in the income statement as from the time of

acquisition. The share in changes in reserves is recorded in the Group reserves. The cumulative changes after acquisition are

set off against the carrying amount of the investment. If the Group’s share in the losses of an associated company is equal

to or more than the Group’s shareholding in the said associate, including other unsecured claims, the Group recognizes no

additional losses, unless it has entered into obligations or made payments on behalf of the associated company.


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Non-realized gains from transactions between Group companies and associated companies are eliminated according to

the Group’s share in the associated company. Non-realized losses are likewise eliminated, unless the transaction implies an

impairment of the transferred asset.

Joint ventures

Joint ventures are joint arrangements in which the parties with shared controlling interests hold rights to the net assets of the

agreement. Joint control is the contractually agreed, jointly exercised management of the agreement. This is only provided if

decisions relating to significant activities require the unanimous approval of the parties involved in the joint control.

Joint ventures stated in the balance sheet using the at-equity method also include the consortia which are typical features of

the German economy, in which case provision consortia should be distinguished from umbrella consortia.

In provision consortia, assets are provided to the consortium in the form of personnel, material or equipment, and are

invoiced. Results earned by the consortium are stated according to the equity method in accordance with IAS 28.

Accordingly, this is disclosed in the balance sheet under investments accounted for using the equity method and in the

income statement under the share of the profit or loss of associated companies accounted for using the equity method.

The BAUER Group accounts for consortia in compliance with IFRS 11 as follows: BAUER as a partner in a consortium

accounts for the assets at its disposal and the liabilities it itself incurs, as well as its own expenditures, and recognizes the

income from such activities on a pro rata basis in its sales revenues. The umbrella consortium, on the other hand, always

operates without effect on net income. The remuneration claims between the umbrella consortium and the client are identical

to the remuneration claims of the individual lots towards the umbrella consortium. All payments received from the client are

passed onto the individual lots in full by the umbrella consortium.

Current settlements of and towards consortia are stated under the receivable from or liabilities to consortia.

Joint operations

Joint operations are joint arrangements in which the parties exercising joint control possess rights to the assets and liabilities

for the debts of the arrangement. Joint control is the contractually agreed, jointly exercised control of the arrangement. This

is only provided if decisions relating to significant activities require the unanimous approval of the parties involved in the joint

control.

If the BAUER Group carries out activities in the course of a joint operation, the Group discloses the following items as a joint

operator in conjunction with its share of the joint operation:

- Its assets, including its share in jointly held assets

- Its liabilities, including its share in jointly incurred liabilities

- Its income from the sale of its share in the products or services of the joint operation

- Its share of the income from the sale of the products or services of the joint operation and

- Its expenses, including its share in any expenses jointly entered into

In transactions such as the purchase of assets by a Group company, profits and losses are stated to the extent of the Group’s

share in the joint operation only when assets are sold on to third parties.


Financial instruments

a) Primary financial instruments

In the BAUER Group, primary financial instruments are assigned as financial assets to the following categories:

• Loans and Receivables (LaR)

• Available-for-Sale (AfS)

The “Loans and Receivables” category includes current and non-current financial assets.

The “Available-for-Sale” category includes marketable securities as well as equity portions which are not consolidated or

not recognized by the equity method. For those equity portions there is no active market, and no fair value can be reliably

determined for them, so the shares are valued at cost. We have no intention of selling them.

Available-for-sale financial assets are non-derivative financial assets which are classified as available for sale and are not al-

located to one of the other categories of financial asset specified. They are recognized at fair value both when initially entered

and in the subsequent periods.

Assets classified as held for sale are impairment-tested at each balance sheet date in relation to objective criteria (such as

significant financial difficulties of the debtor, high probability of insolvency proceedings being initiated against the debtor, loss

of an active market in the financial assets). Any impairment expenditure incurred because a fair value is less than the carrying

amount is recognized affecting net income. Where impairment of the fair values of assets held for sale was previously stated

not affecting net profit in the shareholders’ equity, it must be eliminated from the shareholders’ equity up to the amount of

the measured impairment and recognized in the income statement. If subsequent valuation reveals that the fair value has

objectively increased due to events occurring after entry, the impairment is reversed in the corresponding amount. Recovery in

the value of debt instruments is recognized in the income statement. Impairment affecting equity instruments held for sale and

recognized at cost must not be reversed.

Primary financial instruments as financial liabilities are assigned to the following category:

• Financial Liabilities Measured at Amortized Cost (FLAC) or Other Financial Liabilities

The “Financial Liabilities Measured at Amortized Cost” category includes liabilities to banks, trade payables as well as other

current and non-current liabilities and current and non-current financial liabilities.

Receivables and liabilities in the “Financial Liabilities Measured at Amortized Cost” and “Loans and Receivables” categories

are initially recognized at the applicable fair value, including transaction costs directly attributable to acquisition of the financial

asset or incurring of the financial liability, and subsequently measured at amortized cost, applying the effective interest rate

method. The amortized cost of a financial asset or liability is calculated, applying the effective interest rate method, from the

historical cost less the repayments made, plus or less the cumulative amortization of any difference between the original

amount and the amount repayable at the final due date, and also less depreciation and impairment or plus appreciation and

value recovery adjustment.


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In the case of current receivables and liabilities, the amortized cost always corresponds to the nominal amount, or the amount

repayable. Cash and cash equivalents comprise credit balances with banks as well as petty cash stocks, and are valued at

amortized cost.

In the case of financial assets or liabilities recognized in the income statement at fair value, the initial fair value valuation ex-

cludes the transaction costs. Financial liabilities are derecognized when they are repaid or if the obligation has expired. Items

are initially recorded on the performance date. In the case of financial assets, derecognition of potential default risks is effected

by value adjustments in separate value adjustment accounts. Financial assets are derecognized if the rights to payments from

the financial assets have expired or been transferred, and the Group has essentially transferred all risks and opportunities

associated with ownership, or the essential opportunities and risks have neither been transferred nor retained, but right of

disposal has been transferred. If there are doubts as to the collectability of receivables, they are valued at amortized cost less

appropriate single valuation allowances or a flat-rate allowance. Impairment of trade receivables is recognized when there

are objective signs (such as disputed contract variations, missed payments or insolvencies) indicating that the amounts due

will not be collectable in full. The impairment is recognized in the income statement by way of a value adjustment account.

All other impairments are written off directly and likewise recognized in the income statement. Group directives stipulate that

impairment of receivables must always be recorded in separate value adjustment accounts. They are derecognized at the

same time as the corresponding impaired receivable. The fair value option provided by IAS 39 was not exercised.

b) Derivative financial instruments

A derivative is a financial instrument or a contract in the area of application of IAS 39 which cumulatively fulfills the following

three criteria:

• which varies in value based on changes in a specific interest rate, price of a financial instrument, commodity price,

exchange rate, price or interest rate index, credit rating or credit index, or some similar variable, provided in the case of a

non-financial variable the variable is not specific to one party to the contract;

• which requires no payment in return for acquisition, or one which, compared to other forms of contract expected to react

similarly to changes in market conditions, is lower;

• or which is settled at a later date.

In the BAUER Group, free-standing derivative financial instruments are assigned as financial assets to the following category:

• Financial Assets Held for Trading (FAHfT)

Free-standing derivative financial instruments as financial liabilities are assigned to the following category:

• Financial Liabilities Held for Trading (FLHfT)

Changes in value of derivatives not forming part of a cash flow hedge are stated under other operating income or expenses in

the case of foreign exchange forward contracts or options or, in the case of interest rate swaps, are recognized in the income

statement under financial expenses or income. The applicable fair values of the level 2 financial instruments are calculated on

the basis of the conditions prevailing at the balance sheet date, such as interest or exchange rates, and applying recognized

models, such as discount cash flow or option price models.


The free-standing derivative financial instruments of the “Financial Assets Held for Trading” and “Financial Liabilities Held for

Trading” categories include fair values of interest rate swaps, foreign exchange options, cross-currency swaps and foreign

exchange forward contracts not included in hedge accounting or not meeting the hedge accounting conditions.

In the BAUER Group, derivative financial instruments (interest rate swaps, foreign exchange options, cross-currency swaps

and foreign exchange forward contracts) are entered into solely to hedge against interest rate and currency risks. No deals are

made without an underlying transaction.

In the case of derivatives included in hedge accounting, when hedging expected future transactions (cash flow hedges) the

effective portion of the gain or loss from a hedging instrument is initially recognized in the shareholders’ equity, taking into

account deferred taxes, and is only recognized in the income statement when the underlying hedged transaction is realized.

The ineffective portion of the hedge transaction is recognized in the income statement immediately. The derivative financial

instruments are stated at their fair values as assets or liabilities. The fair values of the foreign exchange forward contracts

are defined on the basis of current reference prices, taking into account forward premiums and discounts. The fair values of

the interest rate swaps are determined on the basis of discounted future payment flows, applying the market interest rates ap-

plicable to the respective residual terms of the derivatives. Items are initially recorded on the trading date. Hedge accounting

was applied in financial 2014.

Inventories

Inventories of finished goods and work in progress as well as merchandise and raw materials and supplies, are measured

at acquisition cost or cost of manufacture or at the lower net realizable value on the balance sheet date, in accordance

with IAS 2.

The net realizable value is the estimated achievable selling price in the ordinary course of business less the estimated costs

through to completion and the estimated necessary selling costs.

Raw materials and supplies are valued mainly at floating average cost.

Where the machinery and accessories classified as finished goods and stock for trade and primarily held for sale, are hired

out for a short period as a secondary sales promotion measure, the following factors are considered in determining their net

realizable values:

• Hire period

• Useful life of the machines

• Damage and inoperability

Where the net realizable value of previously written-down inventories has increased, corresponding value recovery adjust-

ments are made. The cost of manufacture includes all direct costs of the manufacturing process. The level of impairment

losses on inventories is explained in accordance with IAS 2 under “Inventories”.

Construction contracts

Construction contracts are accounted for by the percentage of completion method in accordance with IAS 11. The sales are

recognized according to the progress of work based on the percentage of completion method. The applicable percentage

of completion is determined according to the costs incurred (cost-to-cost method). Where the cumulative return (contract

costs and pro rata result) exceeds the payments on account in individual cases, the construction contracts are recognized as

assets under “Receivables from construction contracts (PoC)”. If a negative balance remains after deduction of the payments

on account, it is recognized as a liability under “Liabilities from construction contracts (PoC)”. Expected losses on a contract

are accounted for in full at the time they are identified, by adjustments to the valuation of any existing receivables or by

the creation of a provision. Construction contracts undertaken in joint ventures are valued according to the percentage of

completion method.


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Receivables from joint ventures also include the pro rata result from the contract. Expected losses are covered by write-

downs or liabilities as appropriate, and are taken into account in the contract result.

Service concession arrangements

Service concession arrangements entailing an unconditional contractual right to receive a payment in accordance with

IFRIC 12 are recognized separately under “Receivables from concession arrangements”. The short-term portions of the

receivables from concession arrangements are stated under “Other current financial assets”. The receivables are allocated to

the “Loans and Receivables” category and recognized at the present value of the remuneration payable. The annual interest

due according to the effective interest rate method is recorded in the financial income.

Cash and cash equivalents

Cash and cash equivalents comprise cash and sight deposits with an original term of no more than three months.

Deferred taxes

In accordance with IAS 12, deferred taxes are taken into account in respect of variations between the valuations of assets

and liabilities according to IFRS and their corresponding tax bases in the amount of the projected future tax charge or relief.

In addition, deferred tax assets are recognized for future advantages arising from tax losses carryforward, provided it is

probable that they will be realized.

Deferred taxes arising from temporary differences in connection with investments in subsidiaries and associated companies

are recognized, unless the date of reversal of the temporary differences can be determined by the Group and it is likely that

the temporary differences will not be reversed again in the foreseeable future because of this effect.

According to IAS 12.74, deferred tax assets and liabilities are to be offset if a legally enforceable right to set off current tax

assets against current tax liabilities exists. Offsetting should also be carried out if the deferred tax assets and liabilities relate to

income taxes levied by the same tax authority in respect of:

• either the same taxable entity or

• different taxable entities which intend either to settle current tax liabilities and assets on a net basis, or to realize the assets

and settle the liabilities simultaneously, in each future period in which significant amounts of deferred tax liabilities or assets

are expected to be settled or recovered.

The tax expenditure for the period comprises current and deferred taxes. Taxes are reported in the income statement, unless

they relate to items recognized directly in the shareholders’ equity or in the other result. In this case; the taxes are likewise

recognized in the shareholders’ equity or in the other result.

In Germany, deferred taxes are stated on the basis of corporation tax, the “solidarity surcharge” and trade tax, in a range of

27.82 to 30.92 % (previous year: 27.82 % and 30.92 %). Outside Germany, tax rates of between 0.00 % and 38.15 % are

applied (previous year: 0.00 % and 39.00 %).

Provisions

a) Defined benefit plans

The BAUER Group operates a number of defined benefit plans in Germany and internationally.

Typically, such plans define an amount of pension benefit which employees will receive on retirement and which is normally

dependent on one or more factors (such as age, years of service and salary).


The provision for defined benefit plans on the balance sheet corresponds to the cash value of the defined benefit obligation

(DBO) at the balance sheet date, less the fair value of the plan assets. The DBO is calculated annually by an independent

actuary applying the projected unit credit method. The cash value of the DBO is calculated by discounting the expected future

inflow of funds at the interest rate of industrial bonds of the highest credit rating. The industrial bonds are denominated in the

currency of the disbursements and allocate corresponding terms to the pension commitments. In countries where the market

in such bonds is insufficiently developed, government bonds are applied.

Actuarial gains and losses based on experience-related adjustments to actuarial assumptions are recognized in the “Other

result” in the shareholders’ equity in the period in which they occur. Post-employment expenditure is recognized in the staff

costs, and the interest expenses of the allocation to provisions in the financial expenses.

Under the contribution-based defined benefit plans, the entity concerned makes payments to pension institutions which are

stated in the staff costs.

b) Provisions for tax purposes

Tax provisions include liabilities from current income taxes. Income tax provisions are balanced against corresponding tax

refund claims, provided they arise in the same tax territory and are identical in nature and in terms of due date.

c) Other provisions

The other provisions are created in accordance with IAS 37 where a present obligation arises from a past event, a relevant

claim is more likely than unlikely, and the amount of the claim can be reliably estimated. The provisions are stated at their

performance amount, and are not netted against profit contributions. Long-term provisions are recognized at present value.

Provisions are created only for legal or constructive obligations to third parties.

Income and expenses

Sales revenues and other incomes are realized in accordance with IAS 18 on performance of the supply or service or on

transfer of risk to the customer, as appropriate.

Dividend income is recognized at the date on which the right to receipt of payment is created. Dividends received are

recognized as income from operating investments under “Financial income”. Operating expenses are recognized as affecting

net income when the supply or service is claimed or at the time they are caused, as appropriate. Financial income and

expenses are recognized when incurred.

Income from service contracts is recognized according to the degree of completion.

5. CONSOLIDATED SEGMENT REPORTING

Reporting on the segments of the BAUER Group was implemented in accordance with IFRS 8, as in the previous year.

The internal organizational and management structure and the internal system of reporting to the Management Board and

Supervisory Board dictate the segmentation employed by the BAUER Group.

The BAUER Group comprises the Construction, Equipment and Resources segments. Transactions between the segments

are conducted at market prices.

SCHACHTBAU NORDHAUSEN GmbH is the only Group company to operate in all three segments. The assets and liabilities

and income statement items of SCHACHTBAU NORDHAUSEN GmbH are assigned to the relevant segments.


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Construction

The core business of the Construction segment is specialist foundation engineering. Complete excavation pits and foundation

works, often in difficult subgrade conditions, are carried out for major infrastructure projects and buildings. In order to offer

customers a full range of services, the companies of the BAUER Group additionally offer other construction services, often involving

a major specialist foundation engineering element. Examples of this include bridges, environmental engineering, remediation and

building renovation projects. The Construction segment is founded on the close interlinking of all construction activities.

Equipment

In the Equipment segment, machinery for all specialist foundation engineering processes and for deep drilling is developed

and manufactured for worldwide distribution. The specialist foundation engineering equipment can be employed to produce

large-diameter and small-diameter bores for piles, diaphragm walls, anchors, injections and wells. The deep drilling equipment

can be employed to drill for geothermal energy, oil and gas. Equipment for ramming and ground improvement is also

manufactured. The range is supplemented by a wide selection of add-on units and ancillary equipment, covering all the

processes involved in specialist foundation engineering.

Resources

The Resources segment brings together all the Group companies providing products and services relating to the remediation

and extraction of natural resources essential to human life. They include environmental technology companies involved in the

treatment of ground and groundwater as well as companies involved in exploratory drilling and mining of raw materials and

drilling of wells and geothermal energy sources. This segment also includes companies which manufacture and sell materials

for the engineering of bore holes, specifically for wells and geothermal energy sources.

Other

The Other segment comprises the central services (accounting, human resources, IT etc.) provided by BAUER AG to the

Group companies as well as other units not assignable to the separately listed segments, providing services such as in-house

and external education and training and centralized research and development.

Consolidation

The intersegmental consolidation effects are grouped here under Consolidation. This includes offsetting of intra-Group sales

between the segments as well as income and expenses and interim results. The intersegmental consolidation effects are

adjusted within the respective segments.

The segment result for the period reflects the financial income and expenses as well as the net earnings of shares valued at-

equity and the income tax expenditure. The segments’ assets and liabilities incorporate all the assets and liabilities of the Group.

The non-current assets stated in the segment report by region comprise intangible assets, property, plant and equipment and

investment property.

Total Group revenues, consolidated revenues and sales revenues with third parties

The consolidated revenues reflect the performance of all the companies included in the scope of consolidation. The total

Group revenues represent the revenues of all the companies forming part of our Group. The difference between the

consolidated revenues and the total Group revenues is derived from the revenues of the associated companies, from our

subcontractor shares in joint ventures, and from the revenues of non-consolidated companies.

The sales revenues with third parties are allocated to the business segments according to the customer’s location.

No one customer accounts for more than 10 % of total sales.

No breakdown of sales revenues by product and service, or by groups of comparable products and services, was available as

per the balance sheet date.

120

SEGMENT REPORT BY BUSINESS SEGMENTS

in EUR '000

Construction Equipment

2013 * 2014 2013 2014

Total revenues (Group) 741,673 713,005 628,612 651,772

Sales revenues with third parties 657,456 634,096 561,615 545,223

Sales revenues between business segments 15,660 16,327 47,928 42,831

Changes in inventories -172 -105 -4,184 27,898

Other capitalized goods and services for own account 486 407 6,955 6,234

Other income 16,809 24,861 10,117 21.724

CONSOLIDATED REVENUES 690,239 675,586 622,431 643,910

OPERATING RESULT 21,209 25,068 32,223 36,917

Financial income 2,989 2,993 2,562 1,882

Financial expenses -13,389 -15,875 -22,196 -21,153

Share of the profit or loss of associated companies accounted

for using the equity method 1,132 -1,330 1 -57

Income tax expense -6,469 -8,998 -7,535 -8,076

NET PROFIT OR LOSS 5,472 1,858 5,055 9,513

ADDITIONAL INFORMATION ON THE INCOME STATEMENT

Depreciation and amortization

Depreciation of fixed assets -47,504 -46,098 -17,266 -19,259

of which impairment losses on fixed assets -526 0 -996 -1,768

Write-downs of inventories due to use 0 0 -14,196 -15,789

Major non-cash segment items

Impairment losses on financial assets -40 -631 0 -9

Impairment losses on inventories -112 -282 -3,808 -8,052

Allocation of impairment of receivables -26,876 -10,597 -4,671 -4,611

Reversal of impairment of receivables 31,227 14,726 3,396 3,881

SEGMENT REPORT BY REGIONS

in EUR '000

Germany Europe (other) Europe excluding EU

2013 * 2014 2013 * 2014 2013 2014

Total revenues (Group) 410,390 440,205 167,830 151,958 155,028 124,886

Sales revenues with third parties 355,289 367,779 163,143 140,534 145,381 127,782

Non-current assets 31.12. 255,613 244,151 21,414 18,132 19,578 16,383

Consolidated segment reporting

ADDITIONAL INFORMATION ON THE BALANCE SHEET

SEGMENT ASSETS 31.12. 566,816 577,401 803,467 768,487

of which shares in associated companies

accounted for using the equity method 10,898 10,687 99 42

of which investments in fixed assets 48,168 40,837 40,166 20,904

SEGMENT LIABILITIES 31.12. 444,775 450,582 579,077 551,054



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Resources Other Consolidation Group

2013 * 2014 2013 2014 2013 2014 2013 * 2014

188,861 252,830 39,319 39,407 -94,234 -96,794 1,504,231 1,560,220

182,579 195,860 523 500 0 0 1,402,173 1,375,679

2,413 3,141 31,146 30,729 -97,147 -93,028 0 0

-67 -1,171 0 0 0 0 -4,423 26,622

1,548 1,606 0 9 10,207 6,440 19,196 14,696

2,910 41,968 6,624 7,028 -5,881 -6,559 30,579 89,022

189,383 241,404 38,293 38,266 -92,821 -93,147 1,447,525 1,506,019

-23,965 15,932 5,117 3,326 -4,499 -4,817 30,085 76,426

2,268 2,159 7,044 13,702 -7,134 -13,640 7,729 7,096

-11,885 -10,518 -5,205 -11,243 7,134 13,640 -45,541 -45,149

637 815 0 0 0 0 1,770 -572

1,501 -4,041 -961 -886 -10 -74 -13,474 -22,075

-31,444 4,347 5,995 4,899 -4,509 -4,891 -19,431 15,726

-11,940 -10,885 -3,371 -3,023 385 484 -79,696 -78,781

-2,191 -7 0 0 0 0 -3,713 -1,775

0 0 0 0 0 0 -14,196 -15,789

-2,546 -65 0 0 0 0 -2,586 -705

-4,329 -263 0 0 0 0 -8,249 -8,597

-6,651 -5,360 0 0 0 0 -38,198 -20,568

495 950 0 0 0 0 35,118 19,557

Middle East

and Central Asia

Asia-Pacific

Far East and Australia

America Africa Group

2013 2014 2013 2014 2013 2014 2013 2014 2013 * 2014

163,036 232,037 363,305 376,645 186,392 172,288 58,250 62,201 1,504,231 1,560,220

158,749 180,313 356,877 337,587 170,648 158,411 52,086 63,273 1,402,173 1,375,679

52,630 56,025 82,364 86,106 56,751 53,259 6,575 7,293 494,925 481,349

265,633 264,276 303,121 338,993 -353,249 -374,074 1,585,788 1,575,083

2,252 32,177 0 0 0 0 13,249 42,906

11,539 8,885 13,552 2,555 -10,000 -485 103,425 72,696

226,675 226,217 149,980 182,939 -234,700 -254,634 1,165,807 1,156,158


6. SALES REVENUES

The sales revenue totaling EUR 1,375,679 thousand (previous year: 1,402,173 thousand) include revenues based on applica-

tion of the percentage of completion method, trade revenues from consortia, as well as pro rata earnings from consortia and

revenues from the sale and hire of equipment and accessories

Sales revenues based on application of the percentage of completion method in the financial year totaled EUR 649,625 thousand

(previous year: 680,963 thousand).

Sales revenues from the hire of equipment and accessories in the financial year totaled EUR 29,428 thousand (previous year:

26,031 thousand).

With regard to the presentation and breakdown of sales revenues by operating segment and region, please refer to the notes

on segment reporting (see item 5).

The sales revenues include a net value adjustment of EUR 5,381 thousand (previous year: 7,393 thousand). The net value

adjustment is attributable to the Construction segment, where final invoices, for example, may include supplementary items

which have not yet been finally negotiated with the customer and ordered. These may prove uncertain. Value adjustments

(reductions for impairment) are made in respect of uncertain receivables and recorded under “Sales revenues”. If the uncertain

receivable is realized, the reduction for impairment is reversed. The reversal is likewise recorded under “Sales revenues”.

The net balance of the application and reversal of reductions for impairment in respect of uncertain receivables produces the

aforementioned net value adjustment.

The application and reversal of reductions for impairment by the other segments is stated under “Other operating expenses”.

7. OTHER CAPITALIZED GOODS AND SERVICES FOR OWN ACCOUNT

NOTES ON THE CONSOLIDATED STATEMENT OF PROFIT OR LOSS

in EUR '000 2013 2014

Income from other capitalized goods and services for own account 19,196 14,696

in EUR '000 2013 2014

Income from disposal of property, plant and equipment 4,435 5,447

Realized and unrealized foreign currency gains 8,682 32,097

Income from insurance refunds 2,958 1,849

Other income from rentals 373 272

Income from changes in fair values of foreign exchange forward contracts 2,818 2,548

Overall effect of the proportional sale 0 36,531

Other operating income 11,313 10,278

Total 30,579 89,022

8. OTHER INCOME

The realized and unrealized foreign currency gains as well as gains from foreign exchange forward contracts stated under

“Other income” totaling EUR 34,645 thousand (previous year: 11,500 thousand) arose in connection with the global currency

hedging strategy and the underlying currency postings. In this context, the income is countered by realized and unrealized

foreign currency losses as well as losses from foreign exchange forward contracts totaling EUR 29,767 thousand (previous

year: 21,194 thousand), stated under “Other operating expenses”.

Additionally, the other operating income mainly comprises income from benefits in money’s worth, other reimbursements of

expenditure as well as other income spread across the consolidated companies which is of minor importance in the individual

instances.


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9. COST OF MATERIALS

The employer’s pension contributions in the financial year totaled EUR 20,653 thousand (previous year: 18,926 thousand).

These are contribution-based schemes, as explained under 4.2 Accounting and valuation methods in the consolidated

financial statements. Of that total, EUR 17,411 thousand (previous year: 16,801 thousand) relate to Germany and

EUR 3,242 thousand (previous year: 2,125 thousand) to Group companies outside of Germany. The wages and salaries

include severance payments in the amount of EUR 735 thousand (previous year: 1,019 thousand).

11. DEPRECIATION OF FIXED ASSETS

The depreciation is broken down as follows:

The impairment losses on fixed assets are explained under item 18.2, Property, plant and equipment and investment property.

12. WRITE-DOWNS OF INVENTORIES DUE TO USE

Write-downs of inventories due to use Group-wide totaled EUR 15,789 thousand in the financial year (previous year:

14,196 thousand). This related to write-downs of used machinery temporarily hired out to customers as sales promotion

measures. Write-downs of used machinery disposed of in the 2014 financial year are included in these figures.

in EUR '000 2013 2014

Expenses for raw materials and supplies and purchased goods 511,419 504,877

Expenses for purchased services 244,487 244,370

Total 755,906 749,247

in EUR '000 2013 2014

Depreciation of intangible assets 11,290 9,956

Depreciation of property, plant and equipment 68,406 68,825

Total 79,696 78,781

in EUR '000 2013 2014

Wages and salaries 289,944 299,785

Social security contributions 47,654 49,632

Expenses for retirement benefits 5,217 5,833

Total 342,815 355,250

10. STAFF COSTS

The expenses for retirement benefits include the expenditure on benefits as well as the allocations to provisions for defined

benefit plans excluding the interest portion, which is stated under “Interest and similar expenses”.


13. OTHER OPERATING EXPENSES

The “Additional other operating expenses” mainly comprise allocations to and reversal of provisions affecting net income,

losses from foreign exchange forward contracts as well as additional other operating expenses spread across the consoli-

dated companies which are of minor importance in the individual instances. The other employee-related expenses include

education and training costs, grants and gifts, travel and relocation expenses, and other project-specific personnel costs.

FINANCIAL RESULT

14. FINANCIAL INCOME

The financial income is broken down as follows:

in EUR '000 2013 2014

Losses from disposal of property, plant and equipment 1,260 675

Rents and leases 18,187 21,360

Energy, heating, water 8,295 6,291

Vehicle costs 6,360 6,755

Property, motor and transport insurance 9,658 10,096

Other operating expenses 34,675 35,766

Administrative expenses 40,991 41,513

Distribution costs 37,221 33,304

Other employee-related expenses 17,396 17,208

Realized and unrealized foreign currency losses 18,941 19,948

Impairment of receivables -794 6,392

Bank charges 2,827 3,284

Duties 3,930 3,411

Additional other operating expenses 25,880 24,523

Total 224,827 230,526

in EUR '000 2013 2014

Income from operating investments 26 14

Other interest and similar income 5,418 5,287

Income from changes in fair values of interest rate swaps 2,285 1,795

Total 7,729 7,096


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15. FINANCIAL EXPENSES

The financial expenses are broken down as follows:

in EUR '000 2013 2014

Interest and similar expenses 41,944 41,273

Losses from changes in fair values of interest rate swaps 656 796

Interest portions of allocations to provisions for defined benefit plans and similar obligations 2,941 3,080

Total 45,541 45,149

The interest from finance leases included under “Interest and similar expenses” in the financial year totaled EUR 988 thousand

(previous year: 1,122 thousand). The financial result includes interest income from financial assets in an amount of

EUR 5,278 thousand (previous year: 5,410 thousand) and interest expenses from financial liabilities in an amount of

EUR 40,285 thousand (previous year: 40,822 thousand) which were not measured at fair value affecting profit and loss.

The interest and similar expenses include impairment losses on financial assets held for sale in an amount of EUR 705 thousand

(previous year: 2,586 thousand). Of that total, EUR 631 thousand (previous year: 40 thousand) is attributable to the

Construction segment, EUR 9 thousand (previous year: 0) to the Equipment segment and EUR 65 thousand (previous year:

2,546 thousand) to the Resources segment.

16. INCOME TAX EXPENSE

The income tax expense is broken down as follows:

The theoretical tax rate is 28.08 % (previous year: 28.08 %).

Reconciliation from expected to actual income tax expenditure

The expected tax expenditure is below (previous year: below) the recorded tax expenditure. The reasons for the difference

between the expected and recorded tax expenditure are as follows:

in EUR '000 2013 2014

Actual taxes 15,705 19,721

Deferred taxes -2,231 2,354

Total 13,474 22,075

in EUR '000 2013 2014

Profit before income tax -5,957 37,801

Theoretical tax expenditure 28.08 % (previous year: 28.08 %) -1,673 10,615

Differences in tax rate 714 -1,534

Taxation effects of non-deductible expenses and tax-free income 10,022 -4,869

Effects of variations in the tax calculation base 2,054 2,000

At-equity valuation of associated companies -63 160

Out-of-period tax payments/refunds for previous years -273 -68

Effects of deferred tax assets in respect of losses carryforward and temporary differences 2,675 15,701

Other 18 70

Income tax expense 13,474 22,075


17. EARNINGS PER SHARE

The earnings per share are calculated by dividing the profit attributable to the shareholders of BAUER AG by the weighted

average number of ordinary shares outstanding. The earnings per share amount to the following values:

2013 2014

Profit attributable to the shareholders of BAUER AG, in EUR '000 -16,927 14,481

Number of shares from 01.01. to 31.12. 17,131,000 17,131,000

Weighted average number of shares in circulation in financial year (basic) 17,131,000 17,131,000

Weighted average number of shares in circulation in financial year (diluted) 17,131,000 17,131,000

Basic earnings per share in EUR -0.99 0.85

Diluted earnings per share in EUR -0.99 0.85

Internal disbursements result in taxation effects after December 31, 2014 totaling EUR 39 thousand (previous year: 34 thousand).


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The breakdown of the fixed asset items summarized on the balance sheet and their development is presented in the fixed

asset movement schedule on the following pages.

NON-CURRENT ASSETS

18. FIXED ASSETS

18.1 Intangible assets

NOTES ON THE CONSOLIDATED BALANCE SHEET

in EUR '000

Licenses, software

and similar rights

and values Goodwill

Internally generated

intangible assets

TotalCost of purchase/cost of manufacturingCapitalized

software costs

Capitalized

development costs

01.01.2013 * 30,725 2,203 589 30,148 63,665

Change in scope of consolidation 220 0 0 377 597

Additions 3,124 0 0 8,395 11,519

Disposals 453 0 232 72 757

Transfers -9 0 0 516 507

Currency adjustment -529 -17 0 -10 -556

31.12.2013 33,078 2,186 357 39,354 74,975

in EUR '000

Licenses, software

and similar rights

and values Goodwill


intangible assets

TotalCost of purchase/cost of manufacturingCapitalized

software costs

Capitalized

development costs

01.01.2014 33,078 2,186 357 39,354 74,975

Change in scope of consolidation -17 0 0 0 -17

Additions 2,422 0 0 6,186 8,608

Disposals 2,392 0 68 0 2,460

Transfers -6 0 0 22 16

Currency adjustment 452 0 0 6 458

31.12.2014 33,537 2,186 289 45,568 81,580

in EUR '000

Licenses, software

and similar rights

and values Goodwill


intangible assets

TotalAccumulated depreciationCapitalized

software costs

Capitalized

development costs

01.01.2013 * 18,474 0 415 10,209 29,098

Change in scope of consolidation 100 0 0 14 114

Additions 4,046 2,186 84 4,974 11,290

Disposals 442 0 232 72 746

Transfers 21 0 0 -21 0

Currency adjustment -159 0 0 -10 -169

31.12.2013 22,040 2,186 267 15,094 39,587

Carrying amount 31.12.2013 11,038 0 90 24,260 35,388

* Previous year’s fi gures changed; this involves a correction to the balances carryforward due to the system


Of the total research and development costs and patent costs incurred in 2014, EUR 6,247 thousand (previous year:

8,594 thousand) met the IFRS capitalization criteria. The following amounts were recognized in net income:

in EUR '000

Licenses, software

and similar rights

and values Goodwill


intangible assets

TotalAccumulated depreciationCapitalized

software costs

Capitalized

development costs

01.01.2014 22,040 2,186 267 15,094 39,587

Change in scope of consolidation -6 0 0 0 -6

Additions 3,681 0 51 6,224 9,956

Disposals 2,619 0 68 0 2,687

Transfers 4 0 0 0 4

Currency adjustment 281 0 0 5 286

31.12.2014 23,381 2,186 250 21,323 47,140

Carrying amount 31.12.2014 10,156 0 39 24,245 34,440

in EUR '000 2013 2014

Research costs and uncapitalized development costs 20,900 18,567

Amortization of development costs and patents 5,212 6,473

Research and development costs recognized in net income 26,202 25,040


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18.2 Property, plant and equipment and investment property

in EUR '000

Land and

buildings

Investment

property

Technical

equipment and

machinery

Other

equipment,

factory and

office equipment

Payments on

account and

assets in course

of construction Total

Cost of purchase/

cost of manufacturing

01.01.2013 * 287,311 1,882 468,428 68,995 23,014 849,630

Change in scope of consolidation 0 0 9,689 376 42 10,107

Additions 3,179 13 65,050 10,565 13,099 91,906

Disposals 2,853 118 41,512 5,248 557 50,288

Transfers 17,692 0 11,319 142 -29,661 -508

Currency adjustment -3,045 -14 -24,119 -1,798 -655 -29,631

31.12.2013 302,284 1,763 488,855 73,032 5,282 871,216

in EUR '000

Land and

buildings

Investment

property

Technical

equipment and

machinery

Other

equipment,

factory and

office equipment

Payments on

account and

assets in course

of construction Total

Cost of purchase/

cost of manufacturing

01.01.2014 302,284 1,763 488,855 73,032 5,282 871,216

Change in scope of consolidation -563 0 -2,063 -678 0 -3,304

Additions 3,926 6 43,524 7,310 9,322 64,088

Disposals 6,022 0 49,712 6,374 193 62,301

Transfers 765 -35 5,255 -112 -5,889 -16

Currency adjustment 5,802 0 27,331 2,119 -309 34,943

31.12.2014 306,192 1,734 513,190 75,297 8,213 904,626

in EUR '000

Land and

buildings

Investment

property

Technical

equipment and

machinery

Other

equipment,

factory and

office equipment

Payments on

account and

assets in course

of construction TotalAccumulated depreciation

01.01.2013 * 84,396 921 257,736 41,261 0 384,314

Change in scope of consolidation 0 0 4,235 225 0 4,460

Additions 9,080 40 49,440 9,846 0 68,406

Disposals 2,399 54 22,491 4,372 0 29,316

Transfers 0 0 -11 11 0 0

Currency adjustment -370 -7 -14,550 -1,258 0 -16,185

31.12.2013 90,707 900 274,359 45,713 0 411,679

Carrying amount 31.12.2013 211,577 863 214,496 27,319 5,282 459,537

of which financing leasing

Carrying amount 31.12.2013 3,194 0 22,574 5,246 0 31,014

* Previous year’s fi gures changed; this involves a correction to the balances carryforward due to the system


The changes to the scope of consolidation comprise assets arising from the deconsolidation of BAUER Nimr LLC, Muscat –

Al Mina. Of these, EUR −2,041 thousand relate exclusively to property, plant and equipment.

In respect of buildings and equipment leased by way of finance lease agreements purchase options exist for the most part,

which will be exercised. The interest rates applied to the leases vary, according to the market and date of signing, between

2.38 % and 7.89 % (previous year: 2.31 % and 8.13 %). The future lease payments due at their present values are shown in

the following table:

The investment property has a fair value of EUR 804 thousand (previous year: 1,143 thousand) and in 2014 were all rented

out. This relates to a hotel owned by SCHACHTBAU NORDHAUSEN GmbH which is rented out to third parties and is being

written down over a period of 48 years. SCHACHTBAU NORDHAUSEN GmbH is also committed to a maintenance contract

in respect of the property. The valuation was derived from current market prices. This procedure falls within Level 2 of the

IFRS 13 measurement hierarchy.

In the period under review rental income in the amount of EUR 60 thousand (previous year: 62 thousand) was generated, to

which direct operating expenses totaling EUR 23 thousand (previous year: 19 thousand) are attributable.

Property, plant and equipment with a carrying amount of EUR 105,811 thousand (previous year: 133,191 thousand) is subject

to charges in the form of land charges and assignment. In addition, the usual commercial restrictions on right of disposal

existing respect of leased assets, attributable to the Group in accordance with IAS 17 (finance lease agreements), totaling

EUR 27,207 thousand (previous year: 31,014 thousand).

In the financial year, investment grants for the extension of manufacturing facilities were awarded to Olbersdorfer Guß GmbH

in an amount of EUR 13 thousand (previous year: 42 thousand). All conditions necessary for allocation of the investment

subsidies were met on the balance sheet date.

No borrowing costs were capitalized in the financial year (previous year: 520). The finance cost rate in the previous year was

between 6.76 and 8.0 %.

in EUR '000

Land and

buildings

Investment

property

Technical

equipment and

machinery

Other

equipment,

factory and

office equipment

Payments on

account and

assets in course

of construction TotalAccumulated depreciation

01.01.2014 90,707 900 274,359 45,713 0 411,679

Change in scope of consolidation -5 0 -773 -485 0 -1,263

Additions 10,042 36 49,829 8,918 0 68,825

Disposals 2,000 0 32,386 5,366 0 39,752

Transfers 6 -6 168 -172 0 -4

Currency adjustment 866 0 15,784 1,582 0 18,232

31.12.2014 99,616 930 306,981 50,190 0 457,717

Carrying amount 31.12.2014 206,576 804 206,209 25,107 8,213 446,909

of which financing leasing

Carrying amount 31.12.2014 2,935 0 19,150 5,122 0 27,207

in EUR '000 Remaining term 2013 Remaining term 2014

under 1 year 1 to 5 years over 5 years Total under 1 year 1 to 5 years over 5 years Total

Minimum lease payments 11,182 18,779 0 29,961 8,470 13,707 0 22,177

Interest portions 997 1,514 0 2,511 1,017 675 0 1,692

Present value 10,185 17,265 0 27,450 7,453 13,032 0 20,485


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Total impairment losses on fixed assets in the financial year were EUR 1,775 thousand (previous year: 3,713 thousand).

Of that figure, EUR 0 thousand (previous year: 526 thousand) was attributable to the Construction segment, EUR 1,768 thou-

sand (previous year: 996 thousand) to the Equipment segment and EUR 7 thousand (previous year: 2,191 thousand) to

the Resources segment. Of the total, intangible assets accounted for EUR 942 thousand (previous year: 3,184 thousand)

and property, plant and equipment accounted for EUR 833 thousand (previous year: 529 thousand). Most of the impair-

ment losses on intangible assets relate to capitalized development costs amounting to EUR 520 thousand at Klemm

Bohrtechnik GmbH in the Equipment segment. Future expected market development for various machines developed

in-house was decisive in this respect. Also in the Equipment segment, the carrying amounts of BAUER Pileco Inc., Houston,

Texas in land and buildings amounting to EUR 794 thousand were written down to their fair value. Impairment losses were

realized on the basis of the achievable amount. In the regular way, these corresponded to the fair value less costs of sale. This

procedure falls within Level 1 of the IFRS 13 measurement hierarchy.

18.3 Investments accounted for using the equity method and participations

The balance sheet valuations of the joint ventures and associated companies have developed as follows:

in EUR '000 31.12.2013 31.12.2014

Shares in joint ventures measured at equity * 3,302 4,175

Shares in associated companies measured at equity 9,947 38,731

Total 13,249 42,906

in EUR '000 Associated companies Joint ventures

Cost of purchase/cost of manufacturing 2013 2014 2013 * 2014

01.01. 13,133 9,947 3,277 3,302

Additions 0 31,089 17 662

Disposals 1 0 0 479

Profit share −234 330 8 690

Dividend payments −2,951 −450 0 0

Transfers 0 0 0 0

Currency adjustment 0 0 0 0

31.12. 9,947 40,916 3,302 4,175

in EUR '000 Associated companies Joint ventures

Accumulated depreciation 2013 2014 2013 2014

01.01. 0 0 0 0

Additions 0 2,185 0 0

Disposals 0 0 0 0

Transfers 0 0 0 0

Currency adjustment 0 0 0 0

31.12. 0 2,185 0 0

Carrying amount 31.12. 9,947 38,731 3,302 4,175

The following table provides an overview of the change in the shares measured at equity:

* Previous year adjusted, see notes on page 106


a) Joint ventures

The financial information presented for the joint ventures are amounts that are derived from financial statements prepared

according to local legislation, corrected to take account of any adaptations to IFRS.

Combined financial information about the immaterial joint ventures (before consolidations):

The non-current and current financial liabilities do not contain any trade liabilities and provisions.

Reconciliation of the combined financial information for joint ventures

The pro rata carrying value of the joint ventures can be reconciled as follows:

BALANCE SHEET

in EUR '000

Joint ventures

31.12.2013 31.12.2014

Non-current assets 180 317

Current assets 65,022 63,796

of which cash and cash equivalents 3.089 2,445

Total assets 65,202 64,113

Non-current liabilities 0 0

of which non-current financial liabilities 0 0

Current liabilities 58,758 55,646

of which current financial liabilities 33,782 43,607

Total liabilities 58,758 55,646

INCOME STATEMENT

in EUR '000

Joint ventures

31.12.2013 31.12.2014

Sales revenues 48,996 41,008

Scheduled depreciation -234 -373

Operating result 2,700 3,529

Interest income 40 1

Interest expenditure -3 -4

Income tax expense 0 0

Net profit or loss 2,737 3,526

Dividends paid to the BAUER Group 10 0

in EUR '000 31.12.2013 31.12.2014

Net assets of joint ventures 6,444 8,467

Interest in joint venture according to investment quota 3,302 4,175

Goodwill and other adaptations 0 0

Carrying value disclosed within the balance sheet 3,302 4,175

The fair value has not been stated, because there is no quoted market price available for our joint ventures (generally construction

consortia).


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The risk arising from joint and several liability on failure of a partner is hedged within the joint venture by mutual guarantees.

There are no further obligations and significant restrictions beyond that.

b) Associated companies

The financial information presented for the associated companies are amounts that are derived from financial statements

prepared according to local legislation, corrected to take account of any adaptations to IFRS.

The main associated companies are as follows:

2013 financial year:

Name Activity

of the company

Headquarters Capital share in %

Wöhr + Bauer GmbH Project development Munich, Germany 33.33 %

NDH Entsorgungsbetreibergesellschaft mbH Disposal Bleicherode, Germany 25.00 %

TERRABAUER S. L. Specialist foundation engineering Madrid, Spain 30.00 %


Name Activity

of the company

Headquarters Capital share in %

Wöhr + Bauer GmbH Project development Munich, Germany 33.33 %

NDH Entsorgungsbetreibergesellschaft mbH Disposal Bleicherode, Germany 25.00 %

TERRABAUER S. L. Specialist foundation engineering Madrid, Spain 30.00 %

BAUER Nimr LLCWater treatment and

soil remediation

Muscat – Al Mina,

Sultanate of Oman49.00 %

Combined financial information for each significant associated company (amounts before consolidations):

BALANCE SHEET

in EUR '000

Wöhr + Bauer GmbH NDH Entsorgungsbetreiber-

gesellschaft mbH

TERRABAUER S. L. BAUER Nimr LLC

31.12.2013 31.12.2014 31.12.2013 31.12.2014 31.12.2013 31.12.2014 31.12.2013 31.12.2014

Non-current assets 60,472 60,132 19,090 18,288 5,338 - 0 41,102

Current assets 43,209 48,073 25,869 26,857 7,357 - 0 13,187

of which cash and

cash equivalents8,309 526 21,936 23,060 125 - 0 5,019

Total assets 103,681 108,205 44,959 45,145 12,695 - 0 54,289

Non-current liabilities 10,816 22,279 0 0 1,800 - 0 35,421

of which non-current

financial liabilities 10,685 21,897 0 0 665 - 0 34,968

Current liabilities 74,556 66,775 40,065 40,225 3,327 - 0 7,299

of which current

financial liabilities 8,803 0 3,375 3,225 1,390 - 0 2,327

Total liabilities 85,372 89,054 40,065 40,225 5,127 - 0 42,720

* These are extrapolated values; fi nancial information was not available at the balance sheet date


Combined financial information for associated companies that are, taken individually, non-significant (amounts before consolidations):

BALANCE SHEET

in EUR '000


31.12.2013 31.12.2014

Non-current assets 90 67

Current assets 245 239

of which cash and cash equivalents 47 33

Total assets 335 306

Non-current liabilities 26 22

of which non-current financial liabilities 26 22

Current liabilities 135 132

of which current financial liabilities 0 0

Total liabilities 161 154

INCOME STATEMENT

in EUR '000


31.12.2013 31.12.2014

Sales revenues 853 825

Scheduled depreciation -33 -29

Operating result 6 -22

Interest income 0 0

Interest expenditure -1 -1

Income tax expense -2 0

Net profit or loss 3 -23

Net profit or loss according to interest 1 -7

Dividends paid to the BAUER Group 10 0

INCOME STATEMENT

in EUR '000

Wöhr + Bauer GmbH NDH Entsorgungsbetreiber-

gesellschaft mbH

TERRABAUER S. L. BAUER Nimr LLC

2013 2014 2013 2014 2013 2014 * 2013 2014

Sales revenues 50,865 21,531 22,952 22,736 3,452 - 0 1,528

Scheduled depreciation -1,170 -1,774 -2,744 -2,956 -676 - 0 -367

Operating result 1,330 2,550 1,624 1,522 -1,832 - 0 281

Interest income 261 15 98 238 0 - 0 6

Interest expenditure -503 -414 -287 -262 -310 - 0 -244

Income tax expense -587 -667 -474 -509 0 - 0 0

Net profit or loss 501 1,484 961 989 -2,142 -1,090 0 43

Net profit or loss

according to interest 167 494 240 247 -643 -327 0 21

Dividends paid

to the BAUER Group 2,640 210 135 240 166 0 0 4,598

* These are extrapolated values; fi nancial information was not available at the balance sheet date


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in EUR '000 31.12.2013 31.12.2014

Net assets of associated companies 30,945 35,792

Interest in associated companies according to investment quota 9,651 13,331

Goodwill and other adaptations 296 16,908

Cash value of the concession agreement 0 8,709

Currency adjustment 0 -217

Carrying value disclosed within the balance sheet 9,947 38,731

Reconciliation of the combined financial information for associated companies

The pro rata carrying value of the associated companies can be reconciled as follows:

The other adaptations relate to temporary posting differences.

The market value of BAUER Nimr LLC as at December 31, 2014 is EUR 63,447 thousand. The market values of the other

significant associated companies were not available as at the balance sheet date.

There were no obligations, significant restrictions or risks relating to the shares in associated companies as at the balance

sheet date.


c) Participations

19. DEFERRED TAXES

The deferred tax assets and liabilities are distributed across the following balance sheet items:

in EUR '000 Participations

Cost of purchase/cost of manufacturing 2013 2014

01.01. 4,454 4,429

Additions 0 0

Disposals 25 0

Profit share 0 0

Dividend payments 0 0

Transfers 0 0

Currency adjustment 0 0

31.12. 4,429 4,429

in EUR '000 Participations

Accumulated depreciation 2013 2014

01.01. 816 816

Additions 0 0

Disposals 0 0

Transfers 0 0

Currency adjustment 0 0

31.12. 816 816

Carrying amount 31.12. 3,613 3,613

in EUR '000 31.12.2013 31.12.2014 31.12.2013 * 31.12.2014

Deferred tax assets Deferred tax liabilities

Intangible assets 33 401 6,437 7,202

Property, plant and equipment 324 119 9,468 13,926

Inventories 2,509 3,763 2,424 2,498

Receivables and other assets 1,228 1,474 2,093 1,410

Defined benefit plans 10,275 19,652 4 208

Liabilities 9,811 10,201 5,937 4,800

Tax losses carryforward 14,560 12,559 0 0

Consolidation 4,841 3,999 5,873 4,274

Offsetting -17,282 -21,195 -17,282 -21,195

Net amount 26,299 30,973 14,954 13,123

In the above table, the liabilities include deferred tax assets totaling EUR 2,025 thousand (previous year: 835 thousand) and

deferred tax liabilities totaling EUR 1,708 thousand (previous year: 8 thousand) which are part of the hedge accounting.

Also, the provisions for defined benefit plans include deferred tax assets totaling EUR 16,772 thousand (previous year:

7,889 thousand) and deferred tax liabilities totaling EUR 4 thousand (previous year: 4) in respect of the actuarial gains and

losses recognized in the shareholders’ equity.



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Current deferred tax assets excluding losses carryforward totaled EUR 10,039 thousand (previous year: 9,080 thousand);

deferred tax liabilities totaled EUR 7,280 thousand (previous year: 9,585 thousand).

The tax losses carryforward at the year-end are broken down as follows:

in EUR '000 31.12.2013 31.12.2014

Domestic losses (corporation tax) 76,262 75,553

Foreign losses 31,758 46,953

Total 108,020 122,506

Of which losses carryforward deductible for limited periods 21,069 25,461

Based on our medium-term earnings planning, losses carryforward totaling EUR 78,059 thousand (previous year:

47,672 thousand) were not usable for tax purposes.

Current deferred tax assets against losses carryforward in the financial year totaled EUR 1,028 thousand (previous year: 1,708

thousand).

In connection with interests in subsidiaries, temporary differences totaling EUR 1,170 thousand (previous year:

1,172 thousand) exist for which no deferred tax liabilities were recognized.

20. RECEIVABLES FROM CONCESSION ARRANGEMENTS

BAUER Nimr LLC (“Bauer”) signed a contract with Petroleum Development Oman LLC (“the customer”) on November 28,

2008 relating to water treatment (“the service”). In performance of the service, Bauer is constructing a plant which it will

subsequently operate. Bauer will receive a fixed agreed unit price per cbm for operation of the plant. This price includes a

variable component to compensate for price rises during the contract term. According to the agreement, Bauer is obligated

to comply with the general standards applicable in the oil and gas industry in constructing and operating the plant, unless

otherwise stipulated in the contract.

Bauer is further obligated to allow the customer to conduct any necessary inspection and testing. The costs of this are to be

borne by the customer.

At the end of the service performance period, Bauer is required by the customer to dismantle the plant and recultivate the site

(for a fee). The agreement also provides the customer with a purchase option at a price yet to be agreed.

The contract runs for a term of 20 years, with an option to extend by a further 5 years. Bauer is entitled to cancel the contract

at any time by means of written notice to the customer. If the contract is canceled by the customer before the agreed term ex-

pires – provided the cancellation is not as a result of bad or failed performance, or insolvency of the operator – the customer

is obligated to pay compensation.

The customer undertakes to supply Bauer with a daily minimum of 45,000 m³ of water for treatment. If the customer supplies

less water, Bauer receives a compensation payment, which may be offset by over-supply quantities in the subsequent

months.

On May 10, 2011, Bauer signed a contract extension with the customer providing for an increase in the customer’s supplies

of water for treatment by 45,000 m³.


The receivables from concession arrangements developed as follows:

21 % of the shares in BAUER Nimr LLC were sold on November 19, 2014. Refer to page 104 in this regard.

The short-term portion of the receivables from concession arrangements is EUR 0 (previous year: 2,280 thousand) following

the divestment. The short-term portion was previously stated under “Other current financial assets”.

The financial income from concession arrangements in the financial year totaled EUR 1,721 thousand (previous year:

1,931 thousand). The discount rate in the past financial year was 4.26 % (previous year: 4.67 %).

The financial income is included in the interest income from financial assets.

21. OTHER NON-CURRENT ASSETS

The other non-current assets comprise the following items:

in EUR '000 31.12.2013 31.12.2014

As at 01.01. 40,770 36,762

Interest income from financial assets 1,931 1,721

Currency adjustment -1,581 3,886

Payment of contract costs -4,358 -4,079

Disposal 0 -38,290

As at 31.12. 36,762 0

of which with a remaining term of 1 to 5 years 9,122 0

of which with a remaining term of over 5 years 27,640 0

in EUR '000 31.12.2013 31.12.2014

Claims from backup insurance 4,743 4,787

Sundry other non-current assets 2,821 2,705

Total 7,564 7,492

The sundry other non-current assets were not subject to interest in the past financial year, as in the previous year. The previous

year’s figure has been adapted.

They also include assets arising from continuing involvements totaling EUR 1,068 thousand (previous year: 1,170 thousand).

As in the previous year, the other non-current assets were neither impaired nor overdue in the year under review.

The BAUER Group sold trade receivables as well as services totaling EUR 18,425 thousand (previous year: 17,378 thousand)

to third parties as part of receivables sale agreements. It comprises the maximum amount of the remaining risks which the

BAUER Group would have to pay to the buyer.

The corresponding liability amounts to EUR 1,175 thousand (previous year: 1,287), and is stated under “Other non-current

liabilities”. The difference reflects the fair value of the guarantees resulting from the remaining risk and the servicing, and is

recognized in net income.


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22. OTHER NON-CURRENT FINANCIAL ASSETS

The other non-current financial assets comprise the following:

in EUR '000 Remaining term 31.12.2013 Remaining term 31.12.2014

1 to 5 years over 5 years 1 to 5 years over 5 years

Sundry other non-current financial assets 5,420 0 28,420 0

Total 5,420 0 28,420 0

in EUR '000 31.12.2013 31.12.2014

Raw materials and supplies 146,666 155,334

Finished goods and work in progress and stock for trade 272,866 283,850

Total 419,352 439,184

in EUR '000 31.12.2013 31.12.2014

Write-downs of inventories due to use 14,196 15,789

Impairment losses on inventories 8,249 8,597

Total 22,445 24.386

The sundry other non-current assets contain receivables from derivatives as well as other non-current financial assets.

The derivatives are presented in item 36 under “Other disclosures”. Financial 2014 also includes a receivable item from the

purchase price payment and loan to BAUER Nimr LLC amounting to EUR 20,059 thousand (previous year: 0). As in the

previous year, the other non-current financial assets were neither impaired nor overdue in the year under review.

CURRENT ASSETS

23. INVENTORIES

The inventories comprise the following items:

Of the inventories, EUR 121,319 thousand (previous year: 116,787 thousand) are stated at net realizable value.

The impairment losses on inventories against the net realizable value affecting net expenditure in the financial year totaled

EUR 24,386 thousand (previous year: 22,445 thousand).

They are broken down as follows:

The rate of hire was higher than last year, above all at BAUER Maschinen GmbH. Write-downs of used machinery due to use

therefore increased from EUR 14,196 thousand to EUR 15,789 thousand.

The impairment losses on inventories include both impairment losses on new and used machinery (stated under “Changes

in inventories”) and on warehouse inventories (stated under “Cost of materials”). Most of the impairment losses relate to the

machinery which was not hired out, and are attributable to the Equipment segment. Impairment losses were realized on the

basis of the achievable amount. In the regular way, these corresponded to the fair value less costs of sale.

The finished goods and merchandise include machinery and accessories produced internally by the Equipment segment and

intended primarily for sale.


We differentiate essentially between two forms of machinery and accessories (referred to in the following as “machinery”):

New machines

These are machines manufactured in the financial year or in earlier years which are available for sale but have not yet been

hired out. These machines are valued at manufacturing cost or at the lower net realizable value on the balance sheet date.

Used machines

Used machines are machines which are primarily up for sale and which have been temporarily hired out as a secondary sales

promotion measure during the financial year or in earlier years. New machines automatically become used machines the first

time they are hired out.

When hiring out machinery, the net realizable value is determined from the manufacturing cost less the write-downs due to

use and impairment losses on inventories.

In the case of a new machine, or a used machine which has not been hired out, the reduction in value against the net

realizable value is recognized by means of an impairment loss.

The sale and hire of machinery relates solely to the Equipment segment.

The following chart sets out the carrying amount before impairment of the used machinery and accessories along with the

rate of hire status on the balance sheet date:

In the financial year, apart from the usual retentions of title, inventories totaling EUR 119 thousand (previous year: 2,507 thou-

sand) were provided as security for loans with a term until 2016. The securities provided can only be claimed by the lending

banks in the event of definitive failure to fulfill contractual obligations, such as defaulting on interest and loan payments or

failure to meet agreed financial targets. No claims on securities provided are foreseeable.

24. RECEIVABLES AND OTHER ASSETS

Construction contracts

The construction contracts measured according to the percentage of completion method developed as follows:

in EUR '000 31.12.2013 31.12.2014

Carrying value of the used machine 94,392 86,744

of which hired out 33,588 32,236

of which not hired out 60,804 54,508

in EUR '000 31.12.2013 31.12.2014

Contract costs incurred (plus profits, less losses) for projects not yet completed 493,944 674,169

less down-payments 383,549 590,481

Balance 110,395 83,688

of which: Receivables from construction contracts (PoC) 143,234 132,159

of which: Liabilities from construction contracts (PoC) 32,839 48,471


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Development of receivables and other assets

The receivables and other assets comprise the following:

The “Trade receivables” balance sheet item includes long-term receivables totaling EUR 10,504 thousand (previous year:

15,077 thousand).

The following table presents the changes in value adjustments to current receivables:

in EUR '000 31.12.2013 31.12.2014

Receivables from construction contracts (PoC) 143,234 132,159

Trade receivables * 320,301 311,417

Receivables from enterprises in which the company has participating interests 444 67

Payments on account 3,725 4,304

Other current assets 30,695 28,603

Other current financial assets 19,551 20,100

Total * 517,950 496,650

The value adjustment for foreseeably uncollectable trade receivables of EUR 53,976 thousand (previous year: 59,938 thou-

sand) was calculated taking into account individual risks and on the basis of past experience in relation to payment default.

Value adjustments were applied in respect of individual claims as well as on a portfolio flat-rate basis. The individual value

adjustments were translated into flat-rate percentages spread across the age structure of the receivables. Within the individual

value adjustments, 100 % of the claim receivable was usually adjusted. The calculation of value adjustments in respect of

uncertain receivables is based to a large extent on estimates and assessments of individual claims, incorporating considera-

tions of the creditworthiness and late-payment record of the customer concerned as well as current economic trends and

historical experience in relation to default.

In the financial year, receivables from construction contracts totaling EUR 3,993 thousand (previous year: 2,998 thousand)

and other current assets totaling EUR 0 thousand (previous year: 2,993) were subject to impairment.

in EUR '000 31.12.2013 31.12.2014

Value adjustments at start of financial year 63,504 59,938

Change in scope of consolidation 14 0

Currency adjustment −353 842

Allocation 32,207 20,568

Reversal 34,003 19,557

Consumption 1,431 7,815

Value adjustments at end of financial year 59,938 53,976



The following table presents an analysis of the due dates of gross carrying amounts of trade receivables:

in EUR '000 Carrying

amount

31.12.2013 *

Carrying

amount

31.12.2014

Trade receivables (gross carrying amount) 382,946 365,393

Value adjustments in respect of trade receivables 59,938 53,976

Trade receivables (net carrying amount)

of which neither impaired nor overdue at closing date

of which not impaired at closing date and overdue in the following time bands:

320,301

114,938

205,363

311,417

110,640

200,777

- less than 30 days 68,462 75,046

- between 30 and 60 days 27,881 13,599

- between 60 and 90 days 10,627 10,886

- more than 90 days 98,393 101,246

The above table includes trade receivables as well as receivables from joint ventures. With regard to the trade receivables

which were neither impaired nor delayed in payment, there were no indications at the balance sheet date that the debtors

concerned will not fulfill their payment obligations. Credit ratings are derived from an active system of claims management

with reference to the relevant credit history and from continuous monitoring of the creditworthiness of our customers based

on information obtained from both internal and external sources.

As in the previous year, the other current assets were neither impaired nor overdue in the year under review (previous

year: EUR 2,993 thousand). The other current assets mainly comprise miscellaneous tax refund claims and claims against

employees and against welfare benefit funds as well as accrued interest and insurance premiums and other prepayments and

deferred charges.

A total of EUR 6,846 thousand (previous year: 15,400 thousand) in monetary assets were pledged as securities for potential

future guarantees during the financial year. The current portion of the receivables from foreign exchange forward contracts

included in the current financial assets in the financial year totaled EUR 141 thousand (previous year: 3,169 thousand).

The payments on account for intangible assets shown under “Other current assets” totaled EUR 0 (previous year: 4 thousand)

in the year under review. In the 2014 financial year, impairment totaled EUR 20,568 thousand (previous year: 38,198 thousand).

* Previous year adapted; part of the overdue receivables of SCHACHTBAU NORDHAUSEN GmbH has not been included


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in EUR '000 31.12.2013 31.12.2014

% EUR '000 % EUR '000

Bauer family 48.19 35,182 48.19 35,182

Free float 51.81 37,819 51.81 37,819

Total 100.00 73,001 100.00 73,001

25. CASH AND CASH EQUIVALENTS

The cash and cash equivalents totaling EUR 41,835 thousand (previous year: 57,217 thousand) include credit balances at

banks and petty cash stocks.

26. SHAREHOLDERS’ EQUITY

The shareholder structure of BAUER AG is as follows:

With regard to the disclosures relating to shares held in BAUER AG, refer to the Notes to the annual financial statements of

BAUER AG as per December 31, 2014 published in the German Federal Gazette (“Bundesanzeiger”).

Composition of subscribed capital

The subscribed and fully paid-up capital (share capital) of BAUER AG remains unchanged at EUR 73,001,420.45 and is

divided into 17,131,000 no-nominal-value bearer shares, representing a pro rata amount of approximately EUR 4.26 per share

of the total share capital. The shares have no nominal value. Each share entails equal rights, and entitles the holder to one

vote at the Annual General Meeting, with the exception of share categories precluded from voting by law pursuant to section

136 of the German Stock Corporation Act (AktG) and section 28 of the German Securities Trading Act (WpHG).

As in the previous year, 51.81 % of the shares were in free float. The members of the Bauer family and a charitable foundation

own a total of 8,256,246 no-nominal-value shares in BAUER AG on the basis of a pool agreement, representing a 48.19 %

share in the company. The pool agreement provisions include binding voting commitments as well as a right of pre-emption

of pool participants if any member of the pool sells shares to third parties. No other direct or indirect holdings of BAUER AG

share capital exceeding 10 % of the voting rights are known to the company.

None of the shareholders have special rights entailing controlling powers. Nor does any voting rights control exist on the part

of the employees holding shares in the capital.

Authority of the Management Board to issue or buy back shares

Article 4, paragraph 4 of the company’s Articles of Association Board states that the Management Board is authorized, with

the consent of the Supervisory Board, to increase the share capital once or more than once up to June 27, 2017 by up to

a total of EUR 7.3 million by the issue of new no-nominal-value bearer shares against cash and/or non-cash contributions

(2012 authorized capital). To that end, the Management Board is authorized, with the consent of the Supervisory Board, to

exclude the legal subscription rights of shareholders in the following cases:

• in the event of capital increases against non-cash contributions;

• in the event of capital increases against cash contributions where the issue amount of the new shares issued is not

materially below the market price of the already quoted shares at the time of definitive setting of the issue price and the

shares issued excluding shareholders’ subscription rights pursuant to section 186, subsection 3, clause 4 AktG do not

in total exceed 10 % of the existing share capital either at the time this authority takes effect or at the time of exercising


this authority. Shares which have been or are to be sold or issued in direct or corresponding application of section 186,

subsection 3, clause 4 AktG while this authority is in place until such time as it is exercised, pursuant to other authorities,

excluding subscription rights, are to be set off against the said 10 % limit;

• to balance out fractional amounts.

By resolution of the Ordinary Annual General Meeting held on June 26, 2014, the company was authorized to acquire treasury

stock, over a limited period up to June 25, 2019, representing up to a total of 10 % of the company’s share capital at the time

the resolution was passed. The shares shall be acquired at the discretion of the Management Board by means of a public

tender offer or by way of the stock market. If the acquisition is effected by way of the stock market, the acquisition price

(excluding ancillary costs) may be no more than 10 % above or 20 % below the price determined by the opening auction

on the trading day for shares in the company in Xetra trading (or a comparable successor system) on the Frankfurt Stock

Exchange. that if the acquisition is effected by means of a public tender offer, the purchase price or the limits of the purchase

price span per share (excluding ancillary costs) may be no more than 10 % above or 20 % below the average of the closing

prices per share in the company in Xetra trading (or a comparable successor system) on the Frankfurt Stock Exchange on the

three trading days prior to the day of issue of the public tender offer. If not insignificant variations of the decisive share price

occur after the day of issue of the public tender offer, the purchase price may be adjusted.

The Management Board shall be authorized to appropriate shares in the company acquired pursuant to the above authoriza-

tions for all legally admissible purposes. Consequently, the acquired shares may also in particular be sold by means other than

by way of the stock market or by means of an offer to the shareholders, if the shares are sold for cash at a price (excluding

ancillary costs) not materially below the stock market price of shares of the company carrying the same rights at the time

of the sale in Xetra trading (or a comparable successor system) on the Frankfurt Stock Exchange. The shares may also be

sold to third parties, provided this is done for the purpose of effecting company mergers or acquiring companies, parts of

companies, shareholdings in companies or other assets. The aforementioned shares may be redeemed without need of a

further Annual General Meeting. With regard to use of the bought-back shares, the authorization provides, in specific cases,

for legal rights of subscription of shareholders to be excluded. The facility to acquire treasury stock has not been utilized to

date.


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The Supervisory Board is authorized to amend Article 4 of the Articles of Association accordingly following complete or partial

execution of the increase in share capital or on expiration of the period of authority.

The remaining shareholders’ equity of the BAUER Group developed as follows:

in EUR '000 31.12.2013 31.12.2014

I. Capital reserve 38,404 38,404

II. Other revenue reserves and net earnings available for distribution 285,601 287,903

324,005 326,307

III. Non-controlling interests 22,809 19,617

Total 346,814 345,924

In the financial year, a dividend amounting to EUR 0.00 (previous year: EUR 0.30) per share was paid to the shareholders.


26.1 Non-controlling interests

a) Details of the non-wholly-owned subsidiaries in which significant non-controlling interests exist

The non-controlling interests which are significant in the BAUER Group are as follows:

in EUR '000

Non-controlling

interests

31.12.2013 31.12.2014

Group company

Capital

share

in

%

Capital

share

in

EUR '000

Profit

share

in

EUR '000

Capital

share

in

%

Capital

share

in

EUR '000

Profit

share

in

EUR '000

BAUER Maschinen GmbH, Schrobenhausen,

GermanyBAUER Anteilspool GbR 1.00 1,855 74 1.00 2,014 122

BAUER EGYPT S.A.E, Cairo, Egypt Various natural persons 44.25 9,827 671 44.25 11,268 939

OOO BAUER Maschinen – Kurgan,

Russian Federation

Paryscheva Valentina,

Kokota Ivan35.00 1,556 37 35.00 841 -372

BAUER Casings Makina Sanayi ve Ticaret

Limited Sirketi, Ankara, TurkeyEmiroglu Makina 40.00 1,102 359 40.00 1,185 184

BAUER Nimr LLC, Muscat – Al Mina,

Sultanate of Oman *

Synergy Petroleum

International LLC, Merit

International LLC

30.00 4,201 852 - - 939

Site Group for Services and Well Drilling Ltd.

Co., Amman, JordanOweis family 16.70 -558 -4,048 16.70 -183 104

Individual non-significant subsidiaries with

non-controlling interests4,826 -449 4,492 -671

Total 22,809 -2,504 19,617 1,245

BALANCE SHEET

in EUR '000

BAUER Maschinen GmbH BAUER EGYPT S.A.E OOO BAUER Maschinen –

Kurgan

31.12.2013 31.12.2014 31.12.2013 31.12.2014 31.12.2013 31.12.2014

Non-current assets 144,774 156,332 2,776 4,339 1,961 3,089

Current assets 290,197 317,141 23,673 26,326 7,636 5,732

Non-current liabilities 118,848 198,527 144 0 3,314 4,967

Current liabilities 172,740 133,321 6,192 6,827 2,549 2,164

BALANCE SHEET

in EUR '000

BAUER Casings BAUER Nimr LLC Site Group

31.12.2013 31.12.2014 31.12.2013 31.12.2014 31.12.2013 31.12.2014

Non-current assets 598 579 38,396 0 35,238 38,003

Current assets 3,306 3,052 15,783 0 48,737 50,833

Non-current liabilities 19 4 33,460 0 0 0

Current liabilities 1,115 649 6,585 0 86,022 90,767

* up to November 19, 2014; see notes on page 104

Combined financial information is presented below for each Group company with significant non-controlling interests, and

corresponds to the amounts before intra-Group eliminations:


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INCOME STATEMENT

in EUR '000


Kurgan

31.12.2013 31.12.2014 31.12.2013 31.12.2014 31.12.2013 31.12.2014

Sales revenues 393,011 357,925 20,084 22,758 6,663 7,567

Operating result 19,129 23,788 2,468 3,064 564 -818

Profit before tax 9,759 15,819 2,773 3,559 161 -1,316

Net profit or loss 7,426 12,165 1,696 2,122 105 -1,063

Profit share of non-controlling interests 74 122 671 939 37 372

Profit share of shareholders of BAUER AG 7,352 12,043 1,025 1,183 68 -691

Dividends paid to minority shareholders -40 -50 -69 -227 0 0

CASH FLOW STATEMENT

in EUR '000


Kurgan

2013 2014 2013 2014 2013 2014

Cash flows from operational activities 5,614 15,001 3,007 4,636 3,354 1,968

Cash flows from investment activities -9,398 -16,205 -406 -2,929 -1,097 -1,607

Cash flows from financing activities 6,995 -1,631 144 -19 -2,396 -478

Influence of exchange rate movements on cash 0 0 -993 1,117 -61 155

Net change in liquid funds 3,211 -2,835 1,752 2,805 -200 38

INCOME STATEMENT

in EUR '000


31.12.2013 31.12.2014 31.12.2013 31.12.2014 31.12.2013 31.12.2014

Sales revenues 5,250 3,687 11,745 16,616 20,750 11,224

Operating result 1,122 575 3,514 3,819 -20,314 5,027

Profit before tax 1,123 575 2,840 3,131 -23,908 503

Net profit or loss 898 460 2,840 3,131 -24,007 355

Profit share of non-controlling interests 359 184 852 939 -4,048 104

Profit share of shareholders of BAUER AG 539 276 1,988 2,192 -19,959 251

Dividends paid to minority shareholders 0 -146 -1,182 -2,364 0 0

CASH FLOW STATEMENT

in EUR '000


2013 2014 2013 2014 * 2013 2014

Cash flows from operational activities 438 537 11,114 10,352 -8,890 11,519

Cash flows from investment activities -242 -74 -376 -607 8,878 -4,191

Cash flows from financing activities 33 -375 -6,373 -9,735 -2,349 -7,791

Influence of exchange rate movements on cash -145 12 49 26 443 516

Net change in liquid funds 84 100 4,414 36 -1,918 53

* up to November 19, 2014; see notes on page 104


b) Changes to the investment quota of subsidiaries of the Group

In financial 2013, BAUER Resources GmbH/Jordan Ltd. Co. purchased 23.3 % of the shares in Site Group for Services and

Well Drilling Ltd. Co., Amman, Jordan for a purchase price of USD 1. As a result, the proportion increased to 83.30 %. In this,

proportions totaling EUR 4,647 thousand in value (proportion of the carrying value of the net assets of the Site Group) have

been transferred to BAUER Resources GmbH/Jordan Ltd. Co. The transferred proportions have been reported under revenue

reserves.

With effect from April 30, 2014, Celler Brunnenbau Holding GmbH, Celle, contributed assets with a fair value of

EUR 900 thousand to PRAKLA Bohrtechnik GmbH as part of an asset deal. The fair value was certified by an external auditor.

In return, linked to a capital increase by PRAKLA Bohrtechnik GmbH, Peine, a capital share (10 %, or EUR 114 thousand)

determined by the DCF method was allotted. The asset deal also entailed a premium of EUR 786 thousand.

The asset deal reduced the investment in PRAKLA Bohrtechnik GmbH to 90 %, while the proportion of the minority share-

holders increased by EUR 900 thousand due to the asset deal.


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ADDITIONAL INFORMATION ABOUT CAPITAL MANAGEMENT

The object of Bauer’s capital management is to safeguard a strong financial profile. In particular, capital servicing is to be as-

sured for suitable dividend payments for the shareholders as well as for the external capital providers. We also aim to provide

ourselves with adequate financial resources to sustain our growth strategy. The risk profile is actively managed and monitored.

This is focused primarily on key indicators such as the equity ratio, net debt and net profit or loss for the period.

The key indicators are presented below:

in EUR '000 Remaining term 31.12.2013 Remaining term 31.12.2014

1 to 5 years over 5 years 1 to 5 years over 5 years

Liabilities to banks 247,775 0 364,771 0

Liabilities from finance lease agreements 17,265 0 13,032 0

Other non-current liabilities 6,483 0 5,959 0

Other non-current financial liabilities 14,397 0 10,013 0

Total 285,920 0 393,775 0

in EUR '000 Fair value Interest rate margin

31.12.2013 31.12.2014 31.12.2013 31.12.2014

Liabilities to banks 256,361 378,016 0.50 - 9.12 % 0.50 - 11.2 %

Liabilities from finance lease agreements 17,265 13,032 2.38 - 7.75 % 2.38 - 7.89 %

Other non-current financial liabilities 15,396 9,904 1.59 - 9.21 % 0.85 - 12.5 %

Total 289,022 400,952 - -

As part of the capital management strategy covering the subsidiaries of the BAUER Group, it is ensured that member

companies are provided with an equity base in line with local requirements. Our aim in doing this is to provide the necessary

flexibility in terms of finance and liquidity. All externally imposed capital requirements (covenants) were complied with during

the year under review.

NON-CURRENT LIABILITIES

27. NON-CURRENT LIABILITIES

The non-current portions of the liabilities comprise the following:

in EUR '000 31.12.2013 31.12.2014

Shareholders’ equity * 419,815 418,925

Equity ratio 26.5 % 26.6 %

Net profit or loss -19,431 15,726

Net debt 672,096 645,679

Financial indebtedness 729,313 687,514

Liquid funds 57,217 41,835

Net debt / EBITDA * 5.42 3.78

EBITDA / net interest coverage * 3.28 4.49

* Previous year adjusted; there was a non-signifi cant change in value in the course of calculating the share of joint ventures according to IFRS 11 and the retrospectively

changed balance sheet disclosure (see page 106)


The other non-current liabilities include non-current portions of liabilities from obligations in respect of part-time retirement and

service anniversary payments, trade payables, and liabilities from continuing involvements.

The other non-current financial liabilities mainly comprise the fair values of the derivatives as well as other liabilities to finance

companies and convertible bonds (see the Notes to the financial instruments in section 36).

28. PROVISIONS FOR DEFINED BENEFIT PLANS

The BAUER Group operates a number of defined benefit plans in Germany and internationally. The provisions for defined

benefit plans of the companies in Schrobenhausen recognized on the consolidated balance sheet cover most (96 %) of the

balance sheet value. Those companies are governed by the occupational pension scheme of BAUER Spezialtiefbau GmbH

constituted on July 1, 1992 as amended by the in-company agreement dated November 18, 1998. In it, the company grants

all employees who joined by March 31, 1998 and their surviving dependents a retirement pension and invalidity benefit as well

as a widow’s/widower’s pension. Employees qualify for the retirement pension on reaching the standard retirement age, or on

prior qualification for a pension from the statutory pension fund. The pension payable amounts to 0.225 % of the employee’s

pensionable earnings for each pensionable year of service, plus 0.075 % of pensionable earnings for each pensionable year

of service completed before January 1, 1999; plus, for the portion of pensionable earnings above the contribution assess-

ment limit in the statutory pension fund, 0.375 % plus 0.125 % for each pensionable year of service completed before

January 1, 1999. In the case of scheme members who are not members of the Zusatzversorgungskasse des Baugewerbes

(construction industry ancillary benefits fund): The pension payable amounts to 0.3 % of the employee’s pensionable earnings

for each pensionable year of service, plus 0.1 % of pensionable earnings for each pensionable year of service completed

before January 1, 1999; plus, for the portion of pensionable earnings above the contribution assessment limit in the statutory

pension fund, 0.3 % plus 0.1 % for each pensionable year of service completed before January 1, 1999.

The widow’s/widower’s pension amounts to 50 % of the attained entitlement. Benefits are also promised to surviving depend-

ent children in various forms.

Vesting and transitional arrangements are also in place.

The risks entailed by the pension schemes are mainly those commonly associated with defined benefit plans in terms of

potential variations in the discount interest rate and, to a lesser extent, inflation trends as well as longevity.

The calculations are based on the following actuarial assumptions:

in % 31.12.2013

Germany Indonesia Philippines Taiwan

Interest rate 3.7 8.8 4.7 2.0

Future salary increases 3.0 10.0 3.0 3.0

Future pension increases 2.0 - - -

in % 31.12.2014

Germany Indonesia Philippines Taiwan

Interest rate 2.0 8.0 7.8 2.0

Future salary increases 3.0 10.0 3.0 3.0

Future pension increases 2.0 - - -


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Defined benefit plans in Germany are calculated biometrically applying the 2005 G Graduated Life Tables compiled by Klaus

Heubeck. The discount interest rate applied to future pension payment commitments by most Group companies is derived

from the Mercer Yield Curve.

Outside of Germany, the underlying biometric probability of death is based on published national statistics and empirical data.

The amount of the provisions recognized on the balance sheet for pensions and similar obligations was determined as follows:

in EUR '000 31.12.2013 31.12.2014

Present value of commitments financed by a fund 2,688 3,801

Fair value of plan assets -504 -657

Plan deficit 2,184 3,144

Present value of commitments not financed by a fund 81.421 115,360

Total deficit of define benefit pension plans 83,605 118,504

Effect of asset ceiling - -

Recognized provision 83,605 118,504


The defined benefit obligation and the plan assets developed as follows during the previous year:

in EUR '000 Present value

of commitment

Fair value

of plan assets Total

Effect

of asset ceiling Total

As at: January 1, 2013 82,825 -502 82,323 - 82,323

Current service costs 1,850 - 1,850 - 1,850

Interest expense/income 2,933 -21 2,912 - 2,912

Post-employment expenditure, gains

and losses from payment in lieu - - - - -

Total 87,608 -523 87,085 - 87,085

Revaluation:

Return on plan assets excluding amounts included

in the above interest - 35 35 - 35

Actuarial gains and losses arising from adjustments

to demographic assumptions - - - - -


to financial assumptions -1,410 - -1,410 - -1,410

Empirical value-based adjustments 405 - 405 - 405

Changes in asset ceiling, excluding amounts

included in the interest - - - - -

Total -1,005 35 -970 - -970

Exchange rate movements -272 61 -211 - -211

Contributions:

Employer - -88 -88 - -88

Beneficiary employee - - - - -

Payments from the plan:

Ongoing payments - 11 11 - 11

Benefits (not fund-financed) -2,222 - -2,222 - -2,222

Other effects - - - - -

As at: December 31, 2013 84,109 -504 83,605 - 83,605


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The defined benefit obligation and the plan assets developed as follows during the financial year:

in EUR '000 Present value

of commitment

Fair value

of plan assets Total

Effect

of asset ceiling Total

As at: January 1, 2014 84,109 -504 83,605 - 83,605

Current service costs 1,817 - 1,817 - 1,817

Interest expense/income 3,080 -32 3,048 - 3,048

Post-employment expenditure, gains

and losses from payment in lieu - - - - -

Total 89,006 -536 88,470 - 88,470

Revaluation:

Return on plan assets excluding amounts included

in the above interest - 18 18 - 18


to demographic assumptions - - - - -


to financial assumptions 32,274 - 32,274 - 32,274

Empirical value-based adjustments -6 - -6 - -6

Changes in asset ceiling, excluding amounts

included in the interest - - - - -

Total 32,268 18 32,286 - 32,286

Exchange rate movements 140 -52 88 - 88

Contributions:

Employer - -89 -89 - -89

Beneficiary employee - - - - -

Payments from the plan:

Ongoing payments - 2 2 - 2

Benefits (not fund-financed) -2,253 - -2,253 - -2,253

Other effects - - - - -

As at: December 31, 2014 119,161 -657 118,504 - 118,504


The fair value of the plan assets can be allocated to the following categories:

No market price quotations exist for the qualifying insurance contracts.

The key actuarial assumptions applied in determining the defined benefit plan commitment are the discount interest rate,

expected salary increases and expected pension increases.

The sensitivity of the overall pension commitment to variations in the weighted primary assumptions is:

in EUR '000 31.12.2013 31.12.2014

Qualifying insurance contracts 223 235

Money market fund and pension fund 252 390

Cash and cash equivalents 29 32

Total 504 657

The above sensitivity analysis is based on a variation in one assumption while all other assumptions remain constant. It is

unlikely that this will occur in reality, and variations in some assumptions may correlate. In calculating the sensitivity of the

defined benefit plan obligation to variations in actuarial assumptions, the same method was applied as that used to measure

the provisions for defined benefit plans on the balance sheet. The present value of the defined benefit plan obligations was

calculated by the projected unit credit method as at the end of the reporting period.

The methods and categories of assumption applied in preparing the sensitivity analysis have not changed relative to the prior

period except for the probability of death.

in EUR '000 Effect on obligation

Variation

in assumption

Increase

in assumption

Decrease

in assumption

Discount interest rate +/- 0.5 % 107,354 131,121

Future salary increases +/- 0.5 % 122,313 114,726

Future pension increase +/- 0.5 % 125,835 110,971

Increase

in assumption

by 1 year

Decrease

in assumption

by 1 year

Probability of death 124,321 114,007


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The defined benefit plan commitments and plan assets by country are as follows:

in EUR '000 31.12.2013

Germany Indonesia Philippines Taiwan Total

Present value of commitments 83,062 708 175 164 84,109

Fair value of plan assets -223 -252 0 -29 -504

Total 82,839 456 175 135 83,605

Effect of asset ceiling - - - - -

Total 82,839 456 175 135 83,605

in EUR '000 31.12.2014

Germany Indonesia Philippines Taiwan Total

Present value of commitments 117,773 1,027 223 138 119,161

Fair value of plan assets -235 -390 0 -32 -657

Total 117,538 637 223 106 118,504

Effect of asset ceiling - - - - -

Total 117,538 637 223 106 118,504

in EUR '000 Under

1 year

1 to 5 years 6 to 10 years 31.12.2014

Total

Pension payments 2,314 11,736 26,181 40,231

in EUR '000 31.12.2013 31.12.2014

Active scheme members 49,949 75,169

Deferred beneficiaries 4,630 6,522

Pensioners 29,530 37,470

Total 84,109 119,161

The present value of the defined benefit plan commitment is distributed as follows among the plan members:

The weighted average term of the defined benefit plans is 20.2 years.

For the 2015 financial year, pension payments totaling EUR 2,314 thousand (previous year: 2,242 thousand) are expected.

Of that total, EUR 2,314 thousand (previous year: 2,242 thousand) is projected to be contributed by the employer. Contribu-

tions to the external plan assets totaling EUR 89 thousand (previous year: 84 thousand) are expected for 2015.

The following table provides an overview of the due dates of the undiscounted pension payments:


CURRENT LIABILITIES

29. CURRENT LIABILITIES

The “Trade liabilities” balance sheet item includes long-term liabilities totaling EUR 979 thousand (previous year: 949 thousand).

The other current liabilities mainly comprise obligations in respect of outstanding invoices, flexitime and holiday credits,

employer’s liability insurance associations, the compensation levy for the shortfall in handicapped employees, performance

bonuses as well as other tax liabilities and liabilities in respect of social security.

The other current financial liabilities mainly comprise obligations to leasing and finance companies. The fair values virtually

match the carrying amounts. The interest rate margin on current liabilities to banks is 0.75 to 11.20 % (previous year:

1.10 to 9.60 %).

30. OTHER PROVISIONS

The other provisions have developed as follows in the financial year:

in EUR '000 31.12.2013 31.12.2014

Liabilities to banks 427,589 266,533

Liabilities from finance lease agreements 10,185 7,453

Advances received for orders 9,801 19,579

Liabilities from construction contracts (PoC) 32,839 48,471

Trade payables 194,471 168,974

Liabilities to enterprises in which the company has participating interests 219 205

Other current liabilities 69,873 68,632

Other current financial liabilities 12,102 25,712

Total 757,079 605,559

in EUR '000 31.12.2013 31.12.2014

As at 01.01. 14,893 14,809

Change in scope of consolidation 0 0

Currency adjustment -33 153

Allocation 6,461 6,633

Reversal 3,454 3,432

Consumption 3,058 2,283

As at 31.12. 14,809 15,880

The other provisions comprise the following:

in EUR '000 31.12.2013 31.12.2014

Risk from contract processing and warranties 14,605 14,670

Litigation 204 1,210

Total 14,809 15,880


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in EUR '000 31.12.2013 31.12.2014

Liabilities from guarantees 4,386 5,112

in EUR '000 Remaining term

under 1 year 1 to 5 years over 5 years

31.12.2013 31.12.2014 31.12.2013 31.12.2014 31.12.2013 31.12.2014

Minimum lease payments from operating leases 15,139 9,663 15,688 22,048 89 77

Other financial obligations 8,616 6,715 4,893 3,677 5,724 6,749

The provisions for risk from contract processing and warranties include all risks arising from carrying out specialist founda-

tion engineering work and from the sale of machinery, equipment and tools for specialist foundation engineering, with the

associated services. These primarily relate to warranty obligations and to other uncertain commitments. The risk from contract

processing and warranties is determined specific to project/construction site.

The majority of the provisions for risks arising from contract processing and warranties and provisions for litigation are

predicted to be used up during 2015. Provisions for litigation amounting to EUR 427 thousand (previous year: 0) is predicted

to be used up during 2017.

31. CONTINGENT LIABILITIES

Contingent liabilities are liabilities not yet recognized in the financial statements, which are recognized in the amount of the

maximum possible exposure on the balance sheet date.

In the construction industry, it is common and essential practice to issue various guarantees to secure obligations arising

from construction contracts. These guarantees are usually issued by banks or credit insurance companies (guarantors), and

essentially guarantee quotations, contract performance, prepayments and warranty commitments. In the event of a guarantee

being given, the guarantors have a right of recourse against the Group. A risk of a guarantee being implemented exists only

when the underlying contractual obligations are not duly met.

The contingent liabilities were mainly in relation to the securing of contract performance, to warranty obligations and to

advance payments. Liabilities from guarantees exist to third parties. In addition, we are subject to joint and several liability in

respect of all joint ventures in which we participate.

For reasons of practicality, no information has been provided about the due dates of outflows from contingent liabilities.

32. OTHER FINANCIAL OBLIGATIONS

The operating leases relate mainly to mutual agreements about factory and office equipment, as well as to technical equip-

ment and machinery which were added in the financial year and are classified as operating leases. The BAUER Group is

committed to rental agreements of unlimited term totaling monthly EUR 685 thousand (previous year: 1,686 thousand).

The other financial obligations mainly include limited-term property rentals and leases.

33. DISCONTINUED OPERATIONS

There no plans to discontinue business operations under the terms of IFRS 5.

34. EVENTS AFTER THE BALANCE SHEET DATE

No events subject to mandatory reporting in accordance with IAS 10 occurred after December 31, 2014.


35. CASH FLOW STATEMENT

The funds shown in the cash flow statement comprise only the cash and cash equivalents stated on the balance sheet.

The cash flow statement details payment flows, broken down by inflow and outflow of funds from operating activities and

from investing and financing activities.

The cash flow from operating activities is derived indirectly from the pre-tax profit. The pre-tax profit is adjusted by non-cash

transactions. The cash flow from operating activities is produced taking account of the changes in working capital.

Investing activities include additions to property, plant and equipment and to financial assets and intangible assets, as well

as income from the sale of assets. Financing activities include outflows of cash and cash equivalents arising from dividend

payments as well as the change in other financial indebtedness.

The changes in balance sheet items applied for the preparation of the cash flow statement are not directly derivable from the

balance sheet, as the effects of currency translation and changes in the scope of consolidation, as well as the allocation and

elimination of value adjustments on trade receivables, do not affect payments and are stripped out.

36. FINANCIAL INSTRUMENTS

In its business operations and financing activities the BAUER Group is subject in particular to fluctuations in exchange rates

and interest rates. It is the company’s policy to exclude, or at least limit, these risks by entering into hedge transactions.

All hedging measures are managed centrally by BAUER AG.

Application of the segregation-of-duties approach ensures that there is an adequate split between the trading and execution

functions. The segregation-of-duties approach is implemented by spreading functions across the Management Board

(financial reporting) and the corporate departments (operational handling). All derivatives transactions are entered into only

with banks of the highest credit rating.

MARKET RISKS

Foreign exchange rate risks

Foreign exchange rate risks under the terms of IFRS 7 are created by financial instruments which are denominated in a

currency different to the functional currency and are of a monetary nature. Exchange rate-related differences when converting

financial statements into the Group currency are ignored. All non-functional currencies in which the BAUER Group enters into

financial instruments are classed, as a matter of principle, as relevant risk variables.

The existing foreign exchange forward contracts, foreign exchange options and cross-currency swaps safeguard our currency

hedging strategy. Within the BAUER Group, the primary monetary financial instruments are either denominated directly in

functional currency or are largely transferred into the functional currency by means of derivatives. In view of the usually short-

term maturity of the instruments too, possible changes in exchange rates have only very minor effects on earnings or equity.

For the purposes of sensitivity analysis, foreign exchange rate risks arising from monetary financial instruments which were not

concluded in the functional currencies of the individual member companies of the BAUER Group are included in the analysis.

OTHER DISCLOSURES


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Quantification of foreign exchange risk in case of exchange rate shifts of +/- 10 %:

In EUR '000 As at 31.12.2013 USD RUB CAD

Overall effect of +10 % on OCI 5,572 255 0

Overall effect of −10 % on OCI -6,838 -309 0

Overall effect of +10 % on income statement 2,713 49 -367

Overall effect of −10 % on income statement -2,654 -58 449

In EUR '000 As at 31.12.2014 USD RUB CAD

Overall effect of +10 % on OCI 10,653 137 0

Overall effect of −10 % on OCI -13,021 -167 0

Overall effect of +10 % on income statement 8,055 64 -99

Overall effect of −10 % on income statement -6,181 -78 122

in EUR '000 31.12.2013 31.12.2014

Overall effect of +100 base points on OCI 2,076 732

Overall effect of −100 base points on OCI -1,806 -393

Overall effect of +100 base points on income statement 2,494 4,080

Overall effect of −100 base points on income statement -2,298 -3,474

In 2014, the sensitivity effects mainly related to the US Dollar, Russian Ruble and Canadian Dollar. No concentrations of risk

exist.

Interest rate risks

The existing interest rate swaps serve to safeguard our financing and interest rate hedging strategy. Agreements exist in

respect of swaps from variable to fixed interest rates in order to exclude the risk of fluctuation in market interest rates.

Changes in market interest rates affect the interest results of variable-rate primary financial instruments of which the interest

payments are not hedged by derivatives, and consequently are included in the calculation of earnings-related sensitivity.

Changes in market interest rates of interest rate derivatives (interest rate swaps, interest rate/currency swaps) which are not

embedded in a hedging relationship pursuant to IAS 39 have effects on financial income and expenses (net valuation based

on adjustment of financial assets to applicable fair value) and so are included in the calculation of earnings-related sensitivity.

The effects of changes in market interest rates of interest rate derivatives to which hedge accounting is applied are recognized

in the OCI.

Quantification of risk of change in interest rate in case of interest rate shifts of +/- 100 base points:

A drop in the variable interest rate below 0 % was ruled out when calculating the interest sensitivity.

Raw material risks

Raw material risks to which the BAUER Group is exposed in respect of availability and potential fluctuations in price on the

market are excluded, or limited, by means of supply promises and fixed pricing agreements entered into with suppliers prior to

execution of contracts. The raw material risk relates mainly to steel.


Liquidity risks

The liquidity risk is managed by means of business planning, which ensures that the necessary funds to finance operating

activities and current and future capital investments are made available at the appropriate time, in the required currency, and at

optimum cost, in all Group companies. In liquidity risk management, the liquidity requirement arising from operating activities,

from investment activities and from other

financial measures is determined in the form of a banking report and a liquidity plan.

Liquidity is guaranteed at all times by means of a liquidity forecast focused on a fixed planning horizon and by unused lines of

credit and guarantee facilities.

The following tables present the contractually agreed and discounted interest payments and capital repayments in respect of

primary financial liabilities and derivative financial instruments of the BAUER Group:

in EUR '000 Carrying amount

31.12.2013

Cash flows

2014

Cash flows

2015 to 2018

Cash flows

2019 ff.

Liabilities to banks 675,364 443,095 239,939 30,423

Liabilities from finance lease agreements 27,450 11,070 18,324 0

Other liabilities 76,356 69,873 6,483 0

Other financial liabilities (without derivatives) 18,968 11,088 6,416 3,537

Liabilities from construction contracts (PoC) 32,839 32,839 0 0

Trade payables 194,471 193,522 949 0

Liabilities to enterprises in which the company has participating interests 219 219 0 0

in EUR '000 Carrying amount

31.12.2014

Cash flows

2015

Cash flows

2016 to 2019

Cash flows

2020 ff.

Liabilities to banks 631,304 276,146 393,705 10,816

Liabilities from finance lease agreements 20,485 8,201 13,712 20

Other liabilities 74,591 68,632 2,898 3,062

Other financial liabilities (without derivatives) 17,623 11,981 5,997 0

Liabilities from construction contracts (PoC) 48,471 48,471 0 0

Trade payables 168,974 167,995 979 0

Liabilities to enterprises in which the company has participating interests 205 205 0 0

There were no instances of defaulting on interest payments or capital repayments in the period under review. Furthermore,

all externally imposed capital requirements (covenants) for the loan agreements were met, see also page 148 “Additional

information about capital management”. No concentrations of risk exist. It is not to be expected that liabilities arising from

sureties (contingent liabilities) will result in significant actual liabilities, and thus in significant cash flows, for which no provisions

have yet been made.


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The due dates of derivative financial instruments based on outflow and inflow of cash and cash equivalents are as follows:

In EUR '000 As at 31.12.2013 Carrying amount 2014 2015 to 2018 from 2019

Liabilities from foreign exchange forward contracts 491 -382 -150 0

Outflow of cash and cash equivalents * - -41,399 -9.159 0

Inflow of cash and cash equivalents * - 41,017 9,009 0

Liabilities from interest rate swaps 6,846 -3,132 -4,513 -190

Outflow of cash and cash equivalents - -3,132 -4,513 -190

Inflow of cash and cash equivalents - 0 0 0

Liabilities from cross currency swaps 194 -122 -95 0

Outflow of cash and cash equivalents - -239 -186 0


In EUR '000 As at 31.12.2014 Carrying amount 2015 2016 to 2019 from 2020

Liabilities from foreign exchange forward contracts 12,926 -12,804 -279 0

Outflow of cash and cash equivalents - -228,410 -8,220 0

Inflow of cash and cash equivalents - 215,606 7,941 0

Liabilities from interest rate swaps 5,176 -2,598 -2,341 -29

Outflow of cash and cash equivalents - -2,598 -2,341 -29


Liabilities from cross currency swaps 0 0 0 0

Outflow of cash and cash equivalents - 0 0 0


To calculate the cash inflows from interest rate swaps the conditions as per December 31, 2014 were applied.

Risk of default

The risk of default is managed at Group level. Default risks arise from cash and cash equivalents, derivative financial instru-

ments and deposits at banks and financial service companies. Only banks and financial services companies with high credit

ratings are selected as partners. No credit limit was exceeded in the reporting period. The management expects no defaults

on the part of these business partners.

The risk of default on financial assets exists in terms of the risk of failure of a contract party and thus to a maximum in the

amount of the carrying amount of the exposure to the said party. A presentation of the carrying amounts and the resultant

maximum risk of default per category is given in the table starting on page 166. The risk arising from primary financial instru-

ments is countered by means of value adjustments for bad debt, and in Germany also by means of credit insurance cover.

As derivative financial instruments are entered into only with banks with high credit ratings, and the risk management system

sets limits for each party, the actual risk of default is negligible. No concentrations of risk exist.

* Previous year’s fi gure adapted


Other disclosures relating to financial instruments

On October 2, 2001, BAUER EGYPT S.A.E. issued an 11 % convertible bond with a face value of EGP 10,000,000. The term

of the convertible bond was originally 6 years, and was again extended for a further 3 years in 2010. On expiry of the

convertible bond, the holder did not exercise the option to exchange it for 200,000 shares at EGP 50 each. Repayment of

the convertible bond was agreed in three installments. The first two installments were paid in 2013, in the amount of EGP

3,000,000, and in 2014, in the amount of EGP 4,000,000; the remaining installment of EGP 3,000,000 will be paid in 2015.

The applicable fair value of the liability component and of the equity conversion component was set as per the issue date of

the convertible bond. The applicable fair value of the debt component recognized in the non-current financial liabilities as at

December 31, 2014 amounts to EUR 0 (previous year: 144 thousand).

The applicable fair value of the equity component recognized in the non-controlling interests as at December 31, 2014

EUR 116 thousand (previous year: 324 thousand).

The Group has taken up loans with variable interest rates and hedged against its interest rate-related cash flow risk by means

of swaps. Such interest rate swaps have the commercial effect of converting variable-interest loans into fixed-interest loans.

In these interest rate swaps, the Group agrees with other parties to swap the difference between the fixed and variable

interest rates derived from the agreed nominal amounts at regular intervals.

The nominal volumes and market values of the derivative financial instruments are as follows:

Net result by valuation category

The following table sets out the net profits and losses (before tax) on financial instruments stated in the income statement,

broken down by valuation category as per IAS 39:

in EUR '000 31.12.2013 31.12.2014

Loans and receivables 8,471 982

Financial liabilities measured at amortized cost -38,691 -39,075

Available-for-sale financial assets -2,586 -705

Held for Trading 2,465 -7,875

Total -30,341 -46,673

in EUR '000 Nominal volume Fair value

31.12.2013 31.12.2014 31.12.2013 31.12.2014

Positive Negative Positive Negative

Interest rate swaps

of which in hedge accounting 125,464 64,571 0 −2,765 0 −1,354

of which not in hedge accounting 45,550 67,350 0 −4,081 0 −3,822

Foreign exchange forward contracts

of which in hedge accounting 74,931 119,546 1,980 −133 988 −7,640

of which not in hedge accounting 84,712 145,022 1,211 −358 426 −5,286

Foreign exchange forward options

of which in hedge accounting 0 0 0 0 0 0

of which not in hedge accounting 6,556 0 115 0 0 0

Cross-currency swaps

of which in hedge accounting 1,605 1,419 0 −42 69 0

of which not in hedge accounting 3,314 2,578 0 −152 60 0


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The net result of the “Loans and Receivables” category includes results from the creation and reversal of value adjustments in

respect of trade receivables as well as interest income. Furthermore, the valuation category of “Loans and Receivables” was

extended in 2014 to include the results from bank fees amounting to EUR −3,284 thousand (previous year: −2,827 thousand)

and value reductions on irrecoverable receivables in the amount of EUR −411 thousand (previous year: −72 thousand).

The net result of the “Financial Liabilities Measured at Amortized Cost” category includes the result from interest expenditure

to third parties, for current and non-current loans as well as guaranty commissions.

The net result of the “Available-for-Sale Financial Assets” category includes impairment of financial assets. Equity shares in

companies are valued at cost and are not included.

The net result of the “Financial Assets and Liabilities Held for Trading” category includes results from foreign exchange forward

contracts and options, as well as results from changes to the fair values of interest rate swaps.

Carrying amounts and fair values

The fair value of a financial instrument is the consideration for which an asset might be exchanged, or a debt paid, between

informed, willing and mutually independent parties. Where financial instruments are quoted on an active market – such as

in particular shares held and bonds issued – the price quoted on the market in question is the fair value. If no active market

exists, the fair value is determined by financial valuation methods. For securities (AfS) the BAUER Group has at its disposal the

prices quoted on an active market.

The fair values of foreign exchange forward contracts and cross-currency swaps are measured separately at their respective

forward prices and discounted to the reference date based on the corresponding interest rate curve. The market prices of

foreign exchange forward options are determined by recognized option models.

The fair values of the interest rate swaps correspond to the respective market value as determined by appropriate financial

valuation methods, such as by discounting expected future cash flows.

For cash and cash equivalents, current trade receivables and other current assets, current trade payables and other current

liabilities, owing to their short remaining terms the carrying amount should be adopted as a realistic estimate of the fair value.

The fair values of non-current financial assets and of other non-current financial liabilities correspond to the cash values of the

payment flows linked to the assets, taking into account the applicable interest rate parameters, which reflect changes in the

terms and expectations of the market and of the respective parties.

The fair values of financial instruments are determined on the basis of one of the methods set out on the three following levels:

• Level 1: Quoted prices (adopted unchanged) on active markets for identical assets and liabilities

• Level 2: Directly or indirectly observable input data for the asset or liability other than quoted prices as per level 1

• Level 3: Applied input data which does not originate from observable market data for measurement of the asset and liability

(non-observable input data)

There were no transfers between the levels during the year. If circumstances arise necessitating a reclassification, it is

undertaken at the end of the reporting period.


Other disclosures relating to hedging transactions

In the 2014 financial year, changes in shareholders’ equity from cash flow hedges in an amount of EUR 1,184 thousand (previous

year: 1,767 thousand) before tax and EUR 1,235 thousand (previous year: 1,129 thousand) after tax were recognized in the

shareholders’ equity as a hedge reserve with no effect on profit and loss. An amount of EUR 6,497 thousand (previous

year: 310) was recognized as affecting expenditure from the hedge reserve created with no effect on net income in the

shareholders’ equity. Fair value changes in the shareholders’ equity (reducing equity) amounting to EUR -5,313 thousand were

reported from the derivative financial instruments held as at December 31, 2014. Moreover, the changes in deferred taxes in

the amount of EUR 51 thousand were reported in the shareholders’ equity with no effect on net income. Future transactions

in foreign currencies secured by hedging and hedged changes in market interest rates are expected to be realized by 2020

at the latest. Gains and losses on future contracts in foreign currency and interest rates at December 31, 2014 included in

the hedge reserve in the OCI are recognized in the income statement in the period in which the hedged planned transaction

impacts on the income statement.

The prospective effectiveness is measured according to the Critical Term Match method and the retrospective effectiveness

according to the Dollar Offset method based on the Hypothetical Derivatives method.

Offsetting Financial Assets and Financial Liabilities

a) Financial assets

The following financial assets are subject to offsetting, enforceable master-netting arrangements or similar arrangements.

in EUR '000 Related amounts not offset

on the balance sheet

Gross amount

of recognized

financial liabilities

Gross amount

of recognized

financial assets

offset on the

balance sheet

Net amount of


recognized on the

financial

balance sheet

Financial

instruments

Cash

securities paid Net amount

Status: December 31, 2013

Derivative financial assets 3,306 0 3,306 -859 - 2,447

Cash and cash equivalents 57,217 0 57,217 -3,400 - 53,817

Total 60,523 0 60,523 -4,259 - 56,264

Status: December 31, 2014

Derivative financial assets 1,543 0 1,543 -1,484 - 59

Cash and cash equivalents 41,835 0 41,835 -4,402 - 37,433

Total 43,378 0 43,378 -5,886 - 37,492


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b) Financial liabilities

The following financial liabilities are subject to offsetting, enforceable master-netting arrangements or similar arrangements.

in EUR '000 Related amounts not offset

on the balance sheet

Gross amount

of recognized


Gross amount

of recognized

financial assets

offset on the

balance sheet

Net amount of


recognized on the

financial

balance sheet

Financial

instruments

Cash

securities paid Net amount

As at: December 31, 2013

Derivative financial liabilities 7,531 0 7,531 -859 - 6,672

Current-account overdrafts 255,605 0 255,605 -3,400 - 252,205

Total 263,136 0 263,136 -4,259 - 258,877

As at: December 31, 2014

Derivative financial liabilities 18,102 0 18,102 -1,484 - 16,618

Current-account overdrafts 188,709 0 188,709 -4,402 - 184,307

Total 206,811 0 206,811 -5,886 - 200,925

The “Financial instruments” column lists the amounts which are subject to master-netting arrangements but are not netted

on the balance sheet because the preconditions for offsetting are not met. The “Cash securities received” column lists the

amounts of cash and financial instrument securities received relative to the sum total of assets and liabilities which do not

meet the criteria for netting on the balance sheet.


Within the Group, financial instruments are classified in the same way as the respective balance sheet items. No fair value is

stated for current financial instruments or financial instruments reported at acquisition cost in the balance sheet, according to

IFRS 7.29. The following table presents a progression of the classes to the categories of IAS 39 and the respective market

values:

in EUR '000

Valuation standard Carrying amount Loans and receivables/

other financial liabilities

31.12.2013 31.12.2014 31.12.2013 31.12.2014

NON-CURRENT ASSETS

Participations at cost 3,613 3,613 0 0

Receivables from concession arrangements at amortized cost 36,762 0 36,762 0

Other non-current financial assets 5,420 28,420

at fair value 137 1,402 0 0

at amortized cost 1,325 22,671 1,325 22,671

at cost 3,958 4,347 0 0

CURRENT ASSETS

Receivables from construction contracts at amortized cost 143,234 132,159 143,234 132,159

Trade receivables at amortized cost 320,301 311,417 320,301 311,417

Receivables from enterprises

in which the company has participating interests at amortized cost 444 67 444 67

Other current financial assets 19,551 20,100

at fair value 3,169 141 0 0


Cash and cash equivalents 57,217 41,835 57,217 41,835

Total financial assets 586,542 537,611 575,665 528,108


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Balance sheet valuation as per IAS 39 Not assigned to any IAS 39 category

Valuation

level

according to

IFRS 13

Available for sale Financial assets and

liabilities held for trading

Derivatives in

hedge accounting

Balance sheet valuation

as per IAS 17

Fair Value as per IFRS 7

and IFRS 13

31.12.2013 31.12.2014 31.12.2013 31.12.2014 31.12.2013 31.12.2014 31.12.2013 31.12.2014 31.12.2013 31.12.2014

3,613 3,613 0 0 0 0 0 0 n/a n/a

0 0 0 0 0 0 0 0 40,449 0 2

0 0 127 349 10 1,053 0 0 137 1,402 2

0 0 0 0 0 0 0 0 1,214 22,224 2

3,958 4,347 0 0 0 0 0 0 n/a n/a n/a

0 0 0 0 0 0 0 0 n/a n/a n/a

0 0 0 0 0 0 0 0 319,454 310,972 2

0 0 0 0 0 0 0 0 n/a n/a n/a

0 0 1,199 136 1,970 5 0 0 3,169 141 2

0 0 0 0 0 0 0 0 n/a n/a n/a

0 0 0 0 0 0 0 0 n/a n/a n/a

7,571 7,960 1,326 485 1,980 1,058 0 0 364,423 334,739


in EUR '000

Valuation standard Carrying amount Loans and receivables/

other financial liabilities

31.12.2013 31.12.2014 31.12.2013 31.12.2014


Liabilities to banks at amortized cost 247,775 364,771 247,775 364,771

Liabilities from finance lease agreements at fair value 17,265 13,032 0 0

Other non-current financial liabilities 14,397 10,013

at fair value 6,516 4,371 0 0


CURRENT LIABILITIES

Liabilities to banks at amortized cost 427,589 266,533 427,589 266,533

Liabilities from finance lease agreements at fair value 10,185 7,453 0 0

Liabilities from construction contracts at amortized cost 32,839 48,471 32,839 48,471

Trade payables at amortized cost 194,471 168,974 194,471 168,974

Liabilities to enterprises

in which the company has participating interests at amortized cost 219 205 219 205

Other current financial liabilities 12,102 25,712

at fair value 1,015 13,731 0 0


Total financial liabilities 956,842 905,164 921,861 866,577


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Balance sheet valuation as per IAS 39 Not allocated to any IAS 39 category

Valuation

level

according to

IFRS 13

Available for Sale Financial assets and

liabilities held for trading

Derivatives in

hedge accounting

Balance sheet valuation

as per IAS 17

Fair Value as per IFRS 7

and IFRS 13

31.12.2013 31.12.2014 31.12.2013 31.12.2014 31.12.2013 31.12.2014 31.12.2013 31.12.2014 31.12.2013 31.12.2014

0 0 0 0 0 0 0 0 256,361 378,016 2

0 0 0 0 0 0 17,265 13,032 17,265 13,032 n/a

0 0 4,270 3,648 2,246 723 0 0 6,516 4,371 2

0 0 0 0 0 0 0 0 8,880 5,533 2

0 0 0 0 0 0 0 0 n/a n/a n/a

0 0 0 0 0 0 10,185 7,453 10,185 7,453 n/a

0 0 0 0 0 0 0 0 n/a n/a n/a

0 0 0 0 0 0 0 0 n/a n/a n/a

0 0 0 0 0 0 0 0 n/a n/a n/a

0 0 321 5,460 694 8,271 0 0 1,015 13,731 2

0 0 0 0 0 0 0 0 n/a n/a n/a

0 0 4,591 9,108 2,940 8,994 27,450 20,485 300,222 422,136


37. EXECUTIVE BODIES

In the year under review the Supervisory Board comprised the following members:

Chairman

• Dr. Klaus Reinhardt, General (retd.), Starnberg

Deputy Chairman

• Robert Feiger, Neusäss

Chairman of the Federal Executive Committee of the IG Bauen-Agrar-Umwelt trade union, Frankfurt am Main

Supervisory Board, HeidelbergCement AG, Heidelberg, Member (up to May 7, 2014)

Supervisory Board, Zusatzversorgungskasse des Baugewerbes AG, Wiesbaden, Member

Supervisory Board, Zusatzversorgungskasse Gerüstbaugewerbe VVaG, Wiesbaden, Chairman


• Dr.-Ing. Johannes Bauer, Schrobenhausen

Construction engineer with BAUER Designware GmbH, Schrobenhausen

• Dipl.-Ing. (FH) Rainer Schuster

Retired construction engineer

• Dipl.-Ing. (FH) Elisabeth Teschemacher, née Bauer, Schrobenhausen

1st Chair of Caritasverband Neuburg-Schrobenhausen e.V.

• Gerardus N. G. Wirken, Breda, Netherlands

Freelance consultant on strategy, controlling and accounting

Supervisory Board, Vendor Beheer B.V., Tilburg/Netherlands, Chairman

Supervisory Board, Winters Bouw- en Ontwikkeling B.V., Breda/Netherlands, Chairman

Supervisory Board, Rabobank Breda, Breda/Netherlands, Chairman (to July 1, 2014)

Supervisory Board, Egeria Investments B.V., Amsterdam/Netherlands, Chairman (to July 1, 2014)

Member of the Board of Rabobank Pensioenfonds, Utrecht/Netherlands (to 1 July 1, 2014)

• Prof. Dr.-Ing. E.h. Manfred Nußbaumer M.Sc, Munich

Retired construction engineer

Supervisory Board, Leonhardt, Andrä und Partner Beratende Ingenieure VBI AG, Stuttgart, Member


• Regina Andel, Ellrich

Chair of the Works Council, SCHACHTBAU NORDHAUSEN GmbH, Nordhausen

• Dipl.-Volkswirt Norbert Ewald, Bad Vilbel

Member of the Management Board, Zusatzversorgungskasse des Steinmetz- und Steinbildhauerhandwerks VVaG,

Wiesbaden

• Reinhard Irrenhauser, Schrobenhausen

Chairman of the Works Council, BAUER Maschinen GmbH, Schrobenhausen

• Dipl.-Kfm. (FH) Stefan Reindl, Schrobenhausen

Human Resources Director of BAUER Aktiengesellschaft, Schrobenhausen

Advisory Board, BAUER Training Center GmbH, Schrobenhausen, Chairman

• Dipl.-Ing. Gerold Schwab, Kernen

Construction Engineer in the Technical Division of BAUER Spezialtiefbau GmbH, Schrobenhausen


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Management Board

• Prof. Dr.-Ing. E.h. Dipl.-Kfm. Thomas Bauer, Schrobenhausen, Chairman, Functions: Participations in Subsidiaries,

Accounting, Planning, Advertising, Controlling

Supervisory Board, BAUER Spezialtiefbau GmbH, Schrobenhausen, Chairman

Supervisory Board, BAUER Maschinen GmbH, Schrobenhausen, Chairman

Supervisory Board, BAUER Resources GmbH, Schrobenhausen, Deputy Chairman

Supervisory Board, SCHACHTBAU NORDHAUSEN GmbH, Nordhausen, Chairman

Supervisory Board BAUER EGYPT S.A.E., Cairo, Chairman

• Dipl.-Betriebswirt (FH) Hartmut Beutler, Schrobenhausen, Functions: Finance, Legal Affairs and Insurance, Investor Relations,

Facility management

Supervisory Board, BAUER Resources GmbH, Schrobenhausen, Member

Supervisory Board, Schrobenhausener Bank e.G., Schrobenhausen, Chairman

• Dipl.-Ing. Heinz Kaltenecker, Schrobenhausen, Functions: Participations in Subsidiaries, Information Technology,

Human Resources, Quality

Management, Risk Management, Health Safety Environment

Supervisory Board, BAUER Spezialtiefbau GmbH, Schrobenhausen, Deputy Chairman

Supervisory Board, BAUER Maschinen GmbH, Schrobenhausen, Deputy Chairman

Supervisory Board, BAUER Resources GmbH, Schrobenhausen, Chairman

Supervisory Board, SCHACHTBAU NORDHAUSEN GmbH, Nordhausen, Deputy Chairman

The total remuneration paid to members of the Management Board in the year under review, excluding allocations to provi-

sions for defined benefit plans, was EUR 1,150 thousand (previous year: EUR 1,361 thousand). Of that total, EUR 1,090 thou-

sand (previous year: 1,056 thousand) was not performance-related and EUR 60 thousand (previous year: 305 thousand)

was performance-related. The total remuneration includes benefits in kind arising from the private use of a company car and

reimbursement of travel expenses for each member of the Management Board, as well as pro rata group accident insurance

premiums and employer’s liability insurance association contributions. The company pension scheme for Management Board

members incurred pension service costs totaling EUR 159 thousand (previous year: 118 thousand). The pensionable earnings

serving as the basis for calculating pension levels are significantly lower than the basic salary in all contracts. Calculated in

accordance with IAS 19, the defined benefit obligation entailed by all pension commitments to members of the Management

Board at the year-end was EUR 5,531 thousand (previous year: EUR 3,868 thousand). Former members of the management

bodies of the parent company received total remuneration of EUR 0 thousand (previous year: 0) in return for duties performed

on behalf of the parent company.


The remuneration paid to the Supervisory Board for the 2014 financial year totaled EUR 254 thousand (previous year:

254 thousand) and was distributed as follows:

38. RELATED PARTY DISCLOSURES

Related parties under the terms of IAS 24 are parties that the reporting enterprise has the ability to control or exercise signifi-

cant influence over, or parties that have the ability to control or exercise significant influence over the reporting enterprise.

Transactions with related parties are defined as the transfer of resources, services or obligations between the reporting entity

and a related party, regardless of whether an invoice is issued in respect of the transaction or not.

Members of the Management Board of BAUER AG are members of Supervisory Boards and Management Boards of other

companies with which BAUER AG maintains relations in the course of its ordinary business operations. Supervisory Board

received pensions totaling EUR 55 thousand (previous year: 54 thousand) in respect of former employment within the BAUER

Group. The members of the Supervisory Board, by virtue of their role as employees, received remuneration totaling EUR 468

thousand (previous year: 503 thousand). Lease and service contracts and contracts of employment (except for the remunera-

tion to members of the Management Board disclosed) exist with members of the Management Board, including close family,

in respect of which remuneration to an amount of EUR 879 thousand (previous year: 945 thousand) was paid.

in EUR '000 2013 2014

Chairman

Dr. Klaus Reinhardt 38 38

Deputy CEO

Robert Feiger 27 27


Dr.-Ing. Johannes Bauer 20 20

Dipl.-Ing. (FH) Rainer Schuster 18 18

Dipl.-Ing. (FH) Elisabeth Teschemacher 18 18

Gerardus N. G. Wirken 20 20

Prof. Dr. Manfred Nußbaumer 20 20


Dipl.-Volkswirt Norbert Ewald 20 20

Dipl.-Kfm. (FH) Stefan Reindl 9 18

Regina Andel 18 18

Dipl.-Ing. Gerold Schwab 20 20

Dipl.-Ing. (FH) Walter Sigl 9 0

Reinhard Irrenhauser 18 18

Total * 254 254

* As a result of rounding to the nearest thousand euros, there was a rounding difference of EUR 1,000 in 2013 and 2014


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Loan commitments to the BAUER Foundation existed totaling EUR 1,000 thousand (previous year: 1,000 thousand), for

which interest amounting to EUR 55 thousand (previous year: 55 thousand) was paid.

At the end of the financial year no loan commitments existed to shareholders of BAUER AG.

The key relationships between fully consolidated Group companies and related parties are set out in the following table:

in EUR '000 Associated companies Non-consolidated companies Joint ventures

2013 2014 2013 2014 2013 2014

Income 2,063 1,990 16,457 14,651 9,965 11,812

Purchased services 312 172 6,915 2,875 0 0

Receivables and other assets (31.12.) 444 0 25,893 18,863 31,661 24,738

Liabilities (31.12.) 133 125 1,775 2,538 0 0

Impairment of receivables 0 0 4,035 891 21,802 16,790

Project Activity

of the companyHeadquarters Shareholding

Bangaroo ProjectSpecialist foundation

engineeringSydney, Australia 60 %

Sebuku IslandSpecialist foundation

engineeringSouth Kalimantan, Indonesia 35 %

Deep-Bauer Foundation Inc.Specialist foundation

engineeringCalgary, Canada 50 %

Project Activity

of the companyHeadquarters Shareholding

Bangaroo ProjectSpecialist foundation

engineeringSydney, Australia 60 %

Sebuku IslandSpecialist foundation

engineeringSouth Kalimantan, Indonesia 35 %

Deep-Bauer Foundation Inc.Specialist foundation

engineeringCalgary, Canada 50 %

The purchased services essentially comprise all expenses incurred with related parties during the financial year.

Transactions with related parties are conducted at standard market terms.

The receivables and other assets include uncollectable receivables as well as financial assets in respect of related parties.

39. JOINT OPERATIONS

The main joint operations are listed below:




40. FEES AND SERVICES OF THE AUDITORS

The fee paid to the auditors and recorded as expenditure in the financial year is broken down as follows:

PricewaterhouseCoopers AG:

In addition, Roland Jehle GmbH Wirtschaftsprüfungsgesellschaft Steuerberatungsgesellschaft was engaged to audit the

major German capital corporations included in the Group’s consolidated financial statements.

The fees for this recognized in the financial year are broken down in accordance with Section 285, Paragraph 17 and Section 314,

Subsection 1, Paragraph 9 HGB as follows:

41. DECLARATION OF CONFORMITY TO THE GERMAN CORPORATE GOVERNANCE CODE

The Management Board and Supervisory Board of BAUER AG issued their declaration in accordance with Section 161 of the

German Stock Corporation Act (AktG) on December 5, 2014 and published it in a form permanently accessible to sharehold-

ers on the company’s website at www.bauer.de.

42. AVERAGE NUMBER OF EMPLOYEES

43. AUTHORIZATION FOR ISSUE OF THE CONSOLIDATED FINANCIAL STATEMENTS

The Management Board has submitted the consolidated financial statements to the Supervisory Board for authorization for

issue (the Supervisory Board meeting is scheduled for April 8, 2015).

in EUR '000 2013 2014

Fees for auditing services 593 668

Fees for other certification 2 5

Fees for tax advice 74 21

Fees for other services 76 45

Total 745 739

in EUR '000 2013 2014

Auditing fees 34 37

Fees for other certification 0 0

Fees for tax advice 7 7

Fees for other services 0 0

Total 41 44

2013 2014

Salaried staff 3,835 3,948

Germany 1,957 1,984

International 1,878 1,964

Industrial & trades 6,189 6,209

Germany 1,947 1,926

International 4,242 4,283

Apprentices 240 248

Total number of employees 10,264 10,405


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44. PROPOSAL ON APPROPRIATION OF NET EARNINGS AVAILABLE FOR DISTRIBUTION

The Management Board and Supervisory Board submit the proposal for decision that a dividend should be paid from the net

earnings available for distribution of BAUER Aktiengesellschaft for the 2014 financial year, amounting to EUR 33,349,700.22 EUR;

it is proposed that the dividend should be EUR 0.15 per bearer share entitled to participate in the dividend, which given

17,131,000 bearer shares entitled to the dividend, represents an amount of EUR 2,569,650, leaving the remaining net earnings

available for distribution, namely EUR 30,780,050.22, to be carryforward as profit. Any apportionment to bearer shares not

entitled to participate in the dividend will also be carryforward to the next accounting period.

Schrobenhausen, March 31, 2015

The Management Board

Prof. Thomas Bauer Dipl.-Betriebswirt (FH) Hartmut Beutler Dipl.-Ing. Heinz Kaltenecker

Chairman of the Management Board

176

Principal investments of the BAUER Group as at December 31, 2014

NAME OF COMPANY AND REGISTERED PLACE OF BUSINESS Currency Capital share

in %

1. Fully consolidated companies

BAUER Aktiengesellschaft EUR

A. Germany

BAUER Spezialtiefbau GmbH, Schrobenhausen, Germany EUR 99.00

BAUER Maschinen GmbH, Schrobenhausen, Germany EUR 99.00

SCHACHTBAU NORDHAUSEN GmbH, Nordhausen, Germany EUR 99.00

SPESA Spezialbau und Sanierung GmbH, Schrobenhausen, Germany EUR 99.00

BAUER Resources GmbH, Schrobenhausen, Germany EUR 99.00

BAUER Training Center GmbH, Schrobenhausen, Germany EUR 100.00

BAUER Designware GmbH, Schrobenhausen, Germany EUR 100.00

BAUER Umwelt GmbH, Schrobenhausen, Germany EUR 100.00

KLEMM Bohrtechnik GmbH, Drolshagen, Germany EUR 100.00

EURODRILL GmbH, Drolshagen, Germany EUR 100.00

BAUER Mietpool GmbH, Schrobenhausen, Germany EUR 100.00

RTG Rammtechnik GmbH, Schrobenhausen, Germany EUR 100.00

MAT Mischanlagentechnik GmbH, Immenstadt, Germany EUR 90.00

PRAKLA Bohrtechnik GmbH, Peine, Germany EUR 90.00

Olbersdorfer Guß GmbH, Olbersdorf, Germany EUR 75.00

SPANTEC Spann- & Ankertechnik GmbH, Schrobenhausen, Germany EUR 90.00

SCHACHTBAU NORDHAUSEN Bau GmbH, Nordhausen, Germany EUR 100.00

MMG Mitteldeutsche MONTAN GmbH, Nordhausen, Germany EUR 100.00

HGC Hydro-Geo-Consult GmbH, Freiberg, Germany EUR 100.00

BAUER Water GmbH, Dunningen, Germany EUR 100.00

PURE Umwelttechnik GmbH, Schrobenhausen, Germany EUR 100.00

BAUER Foralith GmbH, Schrobenhausen, Germany EUR 100.00

GWE pumpenboese GmbH, Peine, Germany EUR 100.00

Esau & Hueber GmbH, Schrobenhausen, Germany EUR 75.50

hydesco24 GmbH, Hamburg, Germany EUR 60.00

BAUER Deep Drilling GmbH, Schrobenhausen, Germany EUR 100.00


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in %

B. EU excluding Germany

BAUER Resources Hungary Kft., Budapest, Hungary HUF 100.00

GWE Budafilter Kft., Mezöfalva, Hungary HUF 100.00

BAUER Ambiente S.r.l., Milan, Italy EUR 100.00

BAUER SPEZIALTIEFBAU Gesellschaft m.b.H., Vienna, Austria EUR 100.00

BAUER Technologies Limited, Bishops Stortford, UK GBP 100.00

BAUER RENEWABLES LIMITED, Bishops Stortford, UK GBP 100.00

BAUER EQUIPMENT UK LIMITED, Rotherham, Great Britain GBP 100.00

BAUER Magyarország Speciális Mélyépítö Kft., Budapest, Hungary HUF 100.00

BAUER ROMANIA S.R.L., Bucarest, Rumania RON 100.00

BAUER BULGARIA EOOD, Sofia, Bulgaria BGN 100.00

BAUER Funderingstechniek B.V., Mijdrecht, Netherlands EUR 100.00

BAUER Foundations (IRL) Ltd., Dublin, Ireland EUR 100.00

GWE France S.A.S., Aspiran, France EUR 100.00

BAUER Cimentaciones Y Equipos S.A., Madrid, Spain EUR 100.00

TracMec Srl, Mordano, Italy EUR 100.00

BAUER Macchine Italia Srl, Mordano, Italy EUR 100.00

FAMBO Sweden AB, Eslöv, Sweden SEK 100.00

GWE Pol-Bud Sp.z.o.o, Łódz, Poland PLN 100.00

BAUER RESOURCES SPAIN S.A., Leganes, Spain EUR 100.00

BAUER Resources UK Ltd., Wigan, Great Britain GBP 100.00

C. Europe (other)

BAUER Spezialtiefbau Schweiz AG, Baden-Dättwil, Switzerland CHF 100.00

FORALITH Drilling Support AG, St. Gallen, Switzerland CHF 100.00

OOO BAUER Maschinen - Kurgan, Kurgan, Russian Federation RUB 65.00

OOO BAUER Maschinen SPb, St. Petersburg, Russian Federation RUB 100.00

OOO BG-TOOLS-MSI, Ljuberzy, Russian Federation RUB 55.00

OOO BAUER Maschinen Russia, Moscow, Russian Federation RUB 100.00

OOO BAUER Technologie, Moscow, Russian Federation RUB 100.00

BAUER Georgia Foundation Specialists LCC, Batumi, Georgia GEL 100.00

D. Middle East & Central Asia

Saudi BAUER Foundation Contractors Ltd., Jeddah, Saudi Arabia SAR 100.00

BAUER LEBANON FOUNDATION SPECIALISTS S.a.r.L., Beirut, Lebanon USD 100.00

BAUER International FZE, Dubai, United Arab Emirates AED 100.00

BAUER International Qatar LLC, Doha, Qatar QAR 49.00 *

BAUER Equipment Gulf FZE, Dubai, United Arab Emirates AED 100.00

BAUER Emirates Environment Technologies & Services LLC,

Abu Dhabi, United Arab Emirates AED 49.00 *

178


in %

Middle East & Central Asia (continued)

BAUER Resources GmbH / Jordan Ltd. Co. – (sub-group consolidated financial statements),

Amman, Jordan USD 100.00

Site Group for Services and Well Drilling Ltd. Co., Amman, Jordan USD 83.30

Site Group for Services and Well Drilling Ltd. Co., Ramallah, Palestine USD 100.00

Site Drilling Ltd. Co., Limassol, Cyprus USD 100.00

BAUER Casings Makina Sanayi ve Ticaret Limited Sirketi, Ankara, Turkey TRY 60.00

BAUER Corporate Services Private Limited, Mumbai, India INR 100.00

BAUER Geotechnical Specialized Foundation LLC, Abu Dhabi, United Arab Emirates AED 100.00

E. Asia-Pacific, Far East and Australia

BAUER (MALAYSIA) SDN. BHD. – (sub-group consolidated financial statements),

Petaling Jaya, Malaysia MYR 100.00

BAUER Foundations Australia Pty Ltd, Brisbane, Australia AUD 100.00

BAUER (NEW ZEALAND) LIMITED, Auckland, New Zealand NZD 100.00

BAUER Resources Australia Pty Ltd., Sydney, Australia AUD 100.00

P.T. BAUER Pratama Indonesia, Jakarta, Indonesia IDR 100.00

BAUER Services Singapore Pte Ltd, Singapore, Singapore EUR 100.00

BAUER Hong Kong Limited, Hong Kong, People’s Republic of China HKD 100.00

BAUER Vietnam Ltd., Ho Chi Minh City, Vietnam VND 100.00

BAUER Foundations Philippines, Inc., Quezon City, Philippines PHP 100.00

BAUER Technologies Far East Pte. Ltd. – (sub-group financial statements), Singapore,

Singapore EUR 100.00

BAUER EQUIPMENT SOUTH ASIA PTE. LTD., Singapore EUR 100.00

BAUER Technologies Taiwan Ltd., Taipei, Taiwan TWD 99.88

BAUER Tianjin Technologies Co. Ltd., Tianjin, People’s Republic of China CNY 100.00

BAUER Equipment Hong Kong Ltd., Hong Kong, People’s Republic of China HKD 100.00

BAUER Equipment (Malaysia) Sdn. Bhd., Shah Alam, Malaysia MYR 100.00

Shanghai BAUER Technologies Co. Ltd., Shanghai, People’s Republic of China CNY 100.00

BAUER Equipment (Shanghai) Co. Ltd., Shanghai, People’s Republic of China CNY 100.00

NIPPON BAUER Y.K., Tokyo, Japan JPY 100.00

Inner City (Thailand) Company Limited, Bangkok, Thailand THB 49.00 %

Thai BAUER Co. Ltd., Bangkok, Thailand THB 73.99

F. Americas

BAUER FUNDACIONES PANAMÁ S.A., Panama City, Panama USD 100.00

BAUER MEXICO, S.A. DE C.V., Mexico City, Mexico MXP 100.00

BAUER Resources Canada Ltd., Edmonton, Canada CAD 100.00

BAUER Foundations Canada Inc., Calgary, Canada CAD 100.00

BAUER-Pileco Inc., Conroe, Texas, USA USD 100.00

BAUER Manufacturing Inc., Conroe, United States of America USD 100.00

BAUER FOUNDATION CORP., Odessa, Florida, USA USD 100.00

BAUER Resources Chile Limitada – (sub-group financial statements), Santiago de Chile, Chile CLP 100.00

GWE Tubomin S.A., Santiago de Chile, Chile CLP 60.00

CONSOLIDATED NOTES 2014


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in %

G. Africa

BAUER EGYPT S.A.E. Specialised Foundation Contractors, Cairo, Egypt EGP 55.75

BAUER Technologies South Africa (PTY) Ltd – (sub-group financial statements),

Johannesburg, South Africa ZAR 100.00

MINERAL BULK SAMPLING NAMIBIA (PTY) LTD, Windhoek, Namibia NAD 100.00

MINERAL BULK SAMPLING SOUTH AFRICA (PTY) LTD, Cape Town, South Africa ZAR 100.00

BAUER RESOURCES GHANA LIMITED, Accra, Ghana GHS 100.00

BAUER-DE WET EQUIPMENT (PROPRIETARY) LIMITED, Rasesa, Botswana BWP 51.00

2. Associates and joint ventures

A. Germany

Wöhr + Bauer GmbH – (sub-group financial statements), Munich, Germany EUR 33.33

Wöhr + Bauer Angerhof GmbH & Co. KG, Munich, Germany EUR 100.00

Wöhr + Bauer Angerhof Verwaltungs GmbH, Munich, Germany EUR 100.00

WÖHR + BAUER PARKING GmbH, Munich, Germany EUR 100.00

Wöhr + Bauer H2O Verwaltungs GmbH, Munich, Germany EUR 100.00

Wöhr + Bauer H2O GmbH & Co. KG, Munich, Germany EUR 100.00

Wöhr + Bauer Projekt HTW Verwaltungs GmbH, Munich, Germany EUR 100.00

Wöhr + Bauer Projekt HTW GmbH & Co. KG, Munich, Germany EUR 100.00

WÖHR + BAUER Tower Riem Verwaltungs GmbH,

Munich, Germany EUR 100.00

WÖHR + BAUER Tower Riem GmbH & Co. KG, Munich, Germany EUR 100.00

Riem Vermietungs GmbH, Munich, Germany EUR 100.00

NDH Entsorgungsbetreibergesellschaft mbH, Bleicherode, Germany EUR 25.00

Grunau und Schröder Maschinentechnik GmbH, Drolshagen, Germany EUR 30.00

B. International

TERRABAUER S. L., Madrid, Spain EUR 30.00

NuBa Equipment Ltd., Edmonton, Canada CAD 50.00

Bauer + Moosleitner Entsorgungstechnik GmbH, Salzburg, Austria EUR 50.00

BAUER Nimr LLC, Muscat – Al Mina, Sultanate of Oman OMR 49.00

3. Enterprises in which the company has participating interests

A. Germany

TMG Tiefbaumaterial GmbH, Emmering, Germany EUR 33.33

Nordhäuser Bauprüfinstitut GmbH, Nordhausen, Germany EUR 20.00

Harz Hotel Grimmelallee Nordhausen Beteiligungsgesellschaft mbH,

Nordhausen, Germany EUR 20.00

Harz Hotel Grimmelallee Nordhausen GmbH & Co. KG,

Nordhausen, Germany EUR 20.00

Stadtmarketing Schrobenhausen e.G., Schrobenhausen, Germany EUR 4.18

B. International

OAO Mostostrojindustria, Moscow, Russian Federation RUB 15.00

* Benefi cial ownership is 100 %

180

We hereby assure that, to the best of our knowledge, the consolidated financial statements give a true and fair view of the net

assets, financial position and earnings of the company in accordance with the accounting principles applicable to financial

reporting, and that the Combined Management Report depicts the course of business, including the earnings and overall

situation of the Group, in such a way that a true and fair view is conveyed and the material opportunities and risks of the

foreseeable development of the Group are set out.

Schrobenhausen, March 31, 2015

The Management Board

Prof. Thomas Bauer Dipl.-Betriebswirt (FH) Hartmut Beutler Dipl.-Ing. Heinz Kaltenecker

Chairman of the Management Board

Assurance by the Legal Representatives

181

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“We have audited the consolidated financial statements prepared by BAUER Aktiengesellschaft, Schrobenhausen, comprising

the balance sheet, the income statement and statement of comprehensive income, statement of changes in equity, cash

flow statement and the notes to the consolidated financial statements, together with the Group management report, which is

combined with the company management report, for the business year from January 1 to December 31, 2014. The prepara-

tion of the consolidated financial statements and the combined management report in accordance with the IFRS, as adopted

by the EU, and the additional requirements of German commercial law pursuant to § (Article) 315a, Abs. (paragraph) 1 HGB

(“Handelsgesetzbuch” – German Commercial Code) are the responsibility of the parent company’s Management Board.

Our responsibility is to express an opinion on the consolidated financial statements and the combined management report,

based on our audit.

We conducted our audit of the consolidated financial statements in accordance with § 317 HGB and the generally accepted

German standards for the audit of financial statements promulgated by the Institut der Wirtschaftsprüfer (Institute of Public

Auditors in Germany) (IDW). Those standards require that we plan and perform the audit such that misstatements materially

affecting the presentation of the net assets, financial position and results of operations in the consolidated financial statements

in accordance with the applicable financial reporting framework and in the combined management report are detected with

reasonable assurance. Knowledge of the business activities and the economic and legal environment of the Group and

expectations as to possible misstatements are taken into account in the determination of audit procedures. The effectiveness

of the accounting-related internal control system and the evidence supporting the disclosures in the consolidated financial

statements and the combined management report are examined primarily on a test basis within the framework of the audit.

The audit includes assessing the annual financial statements of those entities included in consolidation, the determination of

the entities to be included in consolidation, the accounting and consolidation principles used and significant estimates made

by the company’s Management Board, as well as evaluating the overall presentation of the consolidated financial statements

and the combined management report. We believe that our audit provides a reasonable basis for our opinion.

Our audit has not led to any reservations.

In our opinion, based on the findings of our audit, the consolidated financial statements comply with the IFRS as adopted by

the EU and the additional requirements of German commercial law pursuant to § 315a, Section 1 HGB, and give a true and

fair view of the net assets, financial position and results of operations of the Group in accordance with these requirements.

The combined management report is consistent with the consolidated financial statements, and as a whole provides a

suitable view of the Group’s position, and suitably presents the opportunities and risks of future development.”

Stuttgart, March 31, 2015

Klaus Neubarth ppa. Dagmar Liphardt

Auditor Auditor

Auditor’s Report

182

A

ASSOCIATED COMPANIES | Associated companies are

those over which a major but not controlling influence can be

exerted. The shareholding is usually between 20 and 50 %.

Such holdings are valued at equity.

AT EQUITY | “At equity” is the method by which shares in

associated companies are valued in the Group’s financial

statements. The carrying amount of the investment is

adjusted according to the trend of the percentage equity

held in the entity concerned.

C

CASH FLOW | This figure indicates the amount of money

which a business entity generates by its own efforts and is

able to use for its own purposes. It essentially comprises

profit, depreciation and amortization and increases in

provisions.

CONSOLIDATED REVENUES | Consolidated revenues

are disclosed in the income statement. They comprise the

output of the companies fully consolidated into the Group’s

consolidated annual financial statements.

D

DEEP DRILLING RIG (TBA) | This equipment series was

developed specially to drill for particularly deep-lying raw

material resources. The rigs can drill down to depths of more

than 5,000 meters, and are used to extract oil, gas, water

and geothermal energy.

E

EBITDA | Earnings before interest, taxes, depreciation

and amortization (on property, plant and equipment and

intangible assets).

EBIT MARGIN | The EBIT margin is a profitability indicator,

describing the ratio of EBIT to the entity’s sales revenues.

EBIT | Earnings before interest and taxes.

F

FINANCIAL COVENANTS | Some loan agreements

include clauses stipulating adherence to threshold values for

predefined key financial performance indicators.

FINANCIAL INSTRUMENT | Any transaction which results

in a financial asset for one entity and a financial liability (or an

equity instrument) for the other.

G

GROSS DOMESTIC PRODUCT (GDP) | Gross domestic

product corresponds to the total value of all goods and

services for consumption produced by an economy in one

year. GDP is a measure of the performance (output) of an

economy.

H

HGB FINANCIAL STATEMENTS | The German Com-

mercial Code (Handelsgesetzbuch; HGB) imposes financial

reporting rules on incorporated entities in Germany.

I

IFRS FINANCIAL STATEMENTS | International Financial

Reporting Standards (IFRS) are applicable to stock market

listed companies. The standards are issued by the Interna-

tional Accounting Standards Board (IASB). Their aim is to

ensure the international comparability of corporate financial

reporting. The BAUER Group has been preparing financial

statements in accordance with IFRS since 2004.

N

NET PROFIT OR LOSS FOR THE PERIOD | The net profit

or loss for the period – also referred to as the profit after

tax – is the profit earned or loss made in a given period.

Glossary

183

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O

ORDERS IN HAND | Indicates the volume of orders held by

a business entity at the reporting date.

ORDERS RECEIVED | Corresponds to the sum of all orders

received in a specific reporting period. Orders received are

an indicator of future order volumes.

P

PERCENTAGE OF COMPLETION METHOD (POC) |

This method is applied to measure and report the profit

realized on contracts extending over a protracted period of

time according to their degree of completion based on the

associated costs and revenues (actual and forecast).

PREMIUMLINE | The PremiumLine comprises the

multifunction rotary drilling rigs of the BG series designed to

handle a wide variety of foundation engineering applications.

Deep vibrators or trench cutters can also be mounted on

them.

R

ROTARY DRILLING RIG (BG) | BAUER Maschinen GmbH

specializes in the development and manufacture of rotary

drilling rigs. The machines are produced and marketed in

two product lines: Premium and Value. They are able to carry

out a wide variety of foundation engineering tasks.

S

SALES REVENUES | As opposed to the output, which

comprises the value of all goods produced, the sales

revenues disclosed in the income statement relate to all

products and services definitively sold and billed within a

period. The difference between the two values essentially

stems from changes in work in progress, inventories and

other income.

SEGMENTS | The BAUER Group’s segments are its operat-

ing divisions: Construction, Equipment and Resources. Each

segment comprises a holding company with subsidiaries

beneath it, all of which have the same portfolio of products

and services. Within the Group, only SCHACHTBAU

NORDHAUSEN GmbH operates in all three segments.

SINKING | The term describes the execution of shafts or

bore holes to mine mineral deposits or to extract resources.

STAKEHOLDERS | The term refers to individuals or groups

who have a justified interest in the fortunes of a business

entity. The interests of the various stakeholders may vary

widely.

T

TOTAL GROUP REVENUES | In addition to the output of

the consolidated companies, total Group revenues include

the proportionate outputs of associated companies as well

as the outputs of non-consolidated subsidiaries and joint

ventures.

V

VALUE ADDED | Value added is the contribution made by

a business entity to the wider society at large. Value added

reflects how the output of a business is distributed across

the wide variety of stakeholder groups.

VALUELINE | The ValueLine includes the rotary drilling rigs

of the BG series which are optimized for the kelly drilling

process.

W

WORKING CAPITAL | The working capital is the portion

of the current assets which is tied up by the operational

production process and by the process of selling products

and services (such as receivables).

GLOSSARY

IMPRINT

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BAUER-Strasse 1

86529 Schrobenhausen, Germany

www.bauer.de

Photos

BAUER Group

HOW TO CONTACT US

Contact

Investor Relations


BAUER-Strasse 1


Tel.: +49 8252 97-1215

Fax: +49 8252 97-2900

[email protected]

Registered place of business


Registered at the District Court of

Ingolstadt under HRB 101375

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http://ir.bauer.de

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BAUERGroup

This Annual Report is published in German and English.

The 2014 Annual Report is printed on environmentally friendly paper

conforming to the standards of the Forest Stewardship Council (FSC).

184

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Construction Equipment Resources

The Resources segment is focused on

products and services in the areas of

water, environment and natural resources.

BAUER Resources GmbH is the holding

company, under the umbrella of which the

subsidiaries operate as full-service providers.

The competence centers of Water Treatment,

Process and Biotechnology, Environmental

Rehabilitation and Waste Management, Drilling

Technologies as well as Well Drilling and Geo-

thermal pool their expertise and support the

subsidiaries in carrying out projects.

BAUER Spezialtiefbau GmbH, the original

parent company of the BAUER Group, has

been a major driving force in the development

of specialist foundation engineering, and

carries out projects all over the world. Bauer

Spezialtiefbau is organized on a regional basis

in Germany, and operates on all the world's

continents with over 50 subsidiaries and

branch offices. Market trends have meant that

most of the company’s revenues are now gen-

erated outside of Germany. Bauer has major

subsidiaries and branch offices in the United

Arab Emirates, Malaysia, Egypt and the USA

among other locations. Bauer Spezialtiefbau

has built up networks in numerous regions

across the world, enabling it to acquire and

execute contracts both in the countries in

which it is represented and in neighbouring

countries, using its own machinery and in-

house engineering consultancy. In addition to

the predominant field of specialist foundation

engineering, Group companies SCHACHTBAU

NORDHAUSEN GmbH, SPESA Spezialbau

und Sanierung GmbH and Wöhr + Bauer

GmbH also carry out general construction ac-

tivities such as civil engineering, environmental

engineering and project development.

The BAUER Maschinen Group is the world

market leader in the development and man-

ufacture of specialist foundation engineering

equipment. BAUER Maschinen GmbH – the

holding company for a number of subsidiaries

– designs and builds heavy-duty drilling rigs,

trench cutters, grab systems, vibrators and

deep drilling rigs, as well as the related tool-

ing, at its plants in Schrobenhausen, Aresing

and Edelshausen. The company also operates

manufacturing facilities in the USA, Russia,

China, Malaysia, Italy, Singapore and Turkey.

It is supplied with components from within the

BAUER Group by Schachtbau Nordhausen

and Olbersdorfer Guß. The BAUER Maschinen

Group operates a global sales and service

network.

Income statement of the BAUER Group

in EUR '000 2013 * 2014 Change

SALES REVENUES 1,402,173 1,375,679 -1.89 %

Changes in inventories -4,423 26,622 n/a

Other capitalized goods and services for own account 19,196 14,696 -23.44 %

Other income 30,579 89,022 n/a

CONSOLIDATED REVENUES 1,447,525 1,506,019 4.04 %

Cost of materials -755,906 -749,247 -0.88 %

Staff costs -342,815 -355,250 3.63 %

Depreciation of fixed assets -79,696 -78,781 -1.15 %

Write-downs of inventories due to use -14,196 -15,789 11.22 %

Other operating expenses -224,827 -230,526 2.53 %

OPERATING RESULT 30,085 76,426 n/a

Financial income 7,729 7,096 -8.19 %

Financial expenses -45,541 -45,149 -0.86 %

Share of the profit or loss of associated companies accounted for

using the equity method 1,770 -572 n/a

PROFIT BEFORE TAX -5,957 37.801 n/a

Income tax expense -13,474 -22,075 63.84 %

NET PROFIT OR LOSS -19,431 15,726 n/a

Balance Sheet of the BAUER Group

ASSETS in EUR '000 31.12.2013 * 31.12.2014 Change

NON-CURRENT ASSETS

Intangible assets 35,388 34,440 -2.68 %

Property, plant and equipment and investment property 459,537 446,909 -2.75 %

Investments accounted for using the equity method 13,249 42,906 n/a

Participations 3,613 3,613 0.00 %

Deferred tax assets 26,299 30,973 17.77 %

Receivables from concession arrangements 36,762 0 -100.00 %

Other non-current assets 7,564 7,492 -0.95 %

Other non-current financial assets 5,420 28,420 n/a

587,832 594,753 1.18 %

CURRENT ASSETS

Inventories 419,352 439,184 4.73 %

Receivables and other assets 517,950 496,650 -4.11 %

Effective income tax refund claims 3,437 2,661 -22.58 %

Cash and cash equivalents 57,217 41,835 -26.88 %

997,956 980,330 -1.77 %

1,585,788 1,575,083 -0.68 %

EQUITY AND LIABILITIES in EUR '000 31.12.2013 * 31.12.2014 Change

SHAREHOLDERS’ EQUITY

Group shares 397,006 399,308 0.58 %

Minority interests 22,809 19,617 -13.99 %

419,815 418,925 -0.21 %


Defined benefit plans 81,637 116,358 42.53 %

Financial liabilities 279,437 387,816 38.78 %

Other liabilities 6,483 5,959 -8.08 %

Deferred tax liabilities 14,954 13,123 -12.24 %

382,511 523,256 36.80 %

CURRENT LIABILITIES

Financial liabilities 449,876 299,698 -33.38 %

Other liabilities 307,203 305,861 -0.44 %

Effective income tax obligations 9,606 9,317 -3.01 %

Provisions 16,777 18,026 7.44 %

783,462 632,902 -19.22 %

1,585,788 1,575,083 -0.68 %

In the “Change” column, there may be differences from the Group key figures as a result of roundings and a different representation between

thousands of EUR and millions of EUR.


April 10, 2015 Publication of Annual Report 2014

Annual Press Conference

Analysts' Conference

May 13, 2015 Interim Report March 31, 2015

June 25, 2015 Annual General Meeting

August 14, 2015 Half-Year Interim Report June 30, 2015

November 13, 2015 Interim Report September 30, 2015

Financial calendar 2015

BAUER AktiengesellschaftBAUER-Strasse 1

86529 Schrobenhausen, Germanywww.bauer.de

Documents

Annual Report 2014 - BAUER · Sales revenues 1,219.6 1,344.4 1,402.2 1,375.7 -1.9 % ... new misunderstanding between Russia and the Western world. The events in eastern Ukraine, sanctions