Annual Report 2015 - 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

Annual Report 2015

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 2015 the companies

of the BAUER Group employed some 10,738 people in around 70 countries and

achieved total Group revenues of EUR 1.66 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 2012 – 2015

IFRS in EUR million 2012 2013 2014 ** 2015 Change

2014/2015

Total Group revenues 1,435.8 1,504.2 1,560.2 1,656.4 6.2 %

of which Germany 378.6 410.4 440.2 473.7 7.6 %

International 1,057.2 1,093.8 1,120.0 1,182.7 5.6 %

International in % 73.6 72.7 71.8 71.4 n/a

of which Construction 655.2 741.7 725.6 742.9 2.4 %

Equipment 589.1 628.6 639.2 753.1 17.8 %

Resources 262.8 188.9 252.8 221.6 -12.3 %

Other/Consolidation -71.3 -55.0 -57.4 -61.2 n/a

Consolidated revenues 1,376.1 1,447.5 1,506.0 1,587.9 5.4 %

Sales revenues 1,344.4 1,402.2 1,375.7 1,379.0 0.2 %

Order intake 1,470.8 1,484.5 1,521.1 1,811.4 19.1 %

Order backlog 785.0 765.2 762.7 995.6 30.5 %

EBITDA 163.8 124.0 171.0 185.1 8.2 %

EBITDA margin in % (of sales revenues) 12.2 8.8 12.4 13.4 n/a

EBIT 72.0 30.1 76.4 90.7 18.7 %

EBIT margin in % (of sales revenues) 5.4 2.1 5.6 6.6 n/a

Net result for the period 25.8 -19.4 15.7 29.0 84.7 %

Capital investment in property, plant and equipment 96.4 91.9 64.1 83.2 29.8 %

Equity 462.5 419.8 418.9 451.2 7.7 %

Equity ratio in % 30.2 26.5 26.6 27.2 n/a

Net assets 1,529.4 1,585.8 1,575.1 1,656.9 5.2 %

Earnings per share 1.44 -0.99 0.85 1.73 n/a

Distribution 5.14 0.00 2.57 2.57* n/a

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

Return on equity after tax in % 5.6 -4.2 3.7 6.9 n/a

Employees (on average over the year) 10,253 10,264 10,405 10,738 3.2 %

of which Germany 4,090 4,144 4,158 4,166 0.2 %

International 6,163 6,120 6,247 6,572 5.2 %

* Proposed; subject to the consent of the Annual General Meeting to be held on June 23, 2016

** Previous year adjusted; see notes on page 106

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.

DEVELOPMENT OF TOTAL GROUP REVENUES BY SEGMENT

in EUR million

2012 1,436

2013 1,504

2014 1,560

2015 1,656

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CONSTRUCTION SEGMENT KEY FIGURES

in EUR '000 2014 * 2015 Change

Total Group revenues 725,626 742,862 2.4 %

Sales revenues 646,628 650,762 0.6 %

Order intake 682,410 878,436 28.7 %

Order backlog 455,485 591,059 29.8 %

EBIT 26,033 13,916 -46.5 %

Net result for the period 2,524 -7,316 n/a

Employees (on average over the year) 5,777 6,243 8.1 %

EQUIPMENT SEGMENT KEY FIGURES

in EUR '000 2014 * 2015 Change


Sales revenues 532,691 548,039 2.9 %

Order intake 676,801 649.108 -4.1 %

Order backlog 154,175 128,096 -16.9 %

EBIT 35,952 99,441 n/a

Net result for the period 8,847 65,397 n/a

Employees (on average over the year) 2,936 2,919 -0.6 %

RESOURCES SEGMENT KEY FIGURES

in EUR '000 2014 2015 Change

Total Group revenues 252,830 221,609 -12.3 %

Sales revenues 195,860 179,319 -8.4 %

Order intake 219,306 345,045 57.3 %

Order backlog 153,027 276,463 80.7 %

EBIT 15,932 -19,807 n/a



* Previous year adjusted; see notes on page 106

Construction Equipment Resources

BAUER AktiengesellschaftAnnual Report 2015

2 Milestones in the Company's History

4 Pictures of 2015

6 Mission and Strategy

8 The World is our Market

10 Foreword

13 Combined Management Report

62 The Bauer Share

64 Corporate Governance Report

68 Report of the Supervisory Board

71 Balance sheet and income statement

of BAUER Aktiengesellschaft

in accordance with HGB

75 Consolidated financial statements

in accordance with IFRS

164 Assurance by the legal representatives

165 Audit opinion

166 Glossary

168 Imprint

2

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, subsequent

Bauer generations were engaged in copper working,

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

3MILESTONES 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

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

2015

Joint Venture in the field of deep drilling technology with

Schlumberger, the world's leading supplier of technology

and project management for oil and gas industry customers

1986 – 2006 2007 – 2015

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

Major Dam Project on Mauritius

Mauritius – The island nation of Mauritius is getting a new

dam for a water reservoir that will ensure supply of drinking

water for the population. The last panel of the cut-off wall

was constructed on 9 May, almost exactly a year after work

commenced for the EUR 35 million Bagatelle Dam Project.

Reason enough for a small celebration, which Prof. Thomas

Bauer, Chairman of the Management Board of BAUER AG,

also took part in, along with the Chinese ambassador as well

as representatives of the China International Water & Electric

Corp., the project's main contractor.

Bauer Spezialtiefbau constructed a 2.4 km long diaphragm

cut-off wall (56,781 m2), socketed into rock. The soil partially

consists of very hard basalt – about 20,000 m2 of slightly to

moderately weathered basalt had to be penetrated over the

entire structure for the new dam. Furthermore, in the central

dam area, heavy layers of basalt, up to 28 m deep, were re-

moved in order to construct the cut-off wall with the specified

depth. Three duty cycle cranes of the type MC 96 and MC

128 with a BC 40 trench cutter, as well as two grabs were

used.

Despite plenty of rainfall, the country has problems with

ensuring water supply because of lack of storage capacity

on the island. The Bagatelle Dam Project will change that.

The Ministry of Energy and Public Utilities of Mauritius is the

client.

Ground-breaking ceremony for the largest-ever

contract

Schrobenhausen/Grenzach-Wyhlen, Germany – Remediation

of perimeter 1/3 northwest of the former Kesslergrube landfill

started at the end of September. Last July, Roche Pharma AG

awarded Bauer as the general contractor for the remediation.

BAUER Umwelt GmbH will be responsible for tasks such as

site mobilization and operations, all civil engineering activities,

the excavation, removal and thermal disposal of the soil as well

1

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Pictures of 2015

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as the refill of the excavated pit. This is the BAUER Group's

largest single contract to date. According to the motto “Let’s

go”, around 60 guests celebrated the ground-breaking cere-

mony. This event marked the official start of the remediation of

perimeter 1/3 northwest of the former Kesslergrube landfill.

Back to the Canadian polar circle

Yellowknife, Canada – In August, BAUER Foundations Canada

Inc. acquired a major project worth about EUR 65 million to

build a cut-off wall for the Diavik Diamond Mine in Canada.

The Diavik mine is operated by Diavik Diamond Mines (2012)

Inc., a member of the Rio Tinto Group, and is located approxi-

mately 220 km south of the Arctic Circle. From 2000 to 2002,

BAUER Maschinen GmbH – in partnership with other com-

panies and using a range of equipment – was involved in the

construction of the water retention dikes that enabled open-

pit mining of diamonds from the first three kimberlite pipes.

A 26 m deep cut-off wall is required for the 2.2 km dike so

that the fourth kimberlite pipe, located under the waters of

Lac de Gras, can be mined using the openpit method. Bauer

suggested using the Cutter-Soil-Mixing method (CSM), which

combines diaphragm wall technologies and the Mixed-in-Place

method. The project will be completed in two stages in 2016

and 2017.

In-house exhibition 2015

Schrobenhausen, Germany – It has become a tradition that

is especially appreciated by clients and partners of the BAUER

Maschinen Group: the in-house exhibition. In April, BAUER

Maschinen GmbH and its subsidiaries showcased a number

of innovations and further developments as well as proven

technology as part of this exhibition. Nearly 1,700 guests

from more than 70 countries accepted the invitation again

and traveled to the company's headquarters in Schroben-

hausen in Upper Bavaria.

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Mission and Strategy

>>> 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

OUR MISSION

SERVICES, EQUIPMENT AND PRODUCTS DEALING

WITH GROUND AND GROUNDWATER

>>>

7MISSION 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

8

The World is our Market

OVER 110 GROUP COMPANIES

IN MORE THAN 70

COUNTRIES

EUR 1.66 BILLION TOTAL

GROUP REVENUES

10,738 EMPLOYEES FROM 77 NATIONS

9THE WORLD IS OUR MARKET

Construction

Equipment sales

Resources

Equipment production locations

25 PRODUCTION FACILITIES

and many other service centers and construction yards

10

Foreword

Dear Shareholders, Partners and Friends of our company,

Ladies and Gentlemen,

2015 was once again a year with many challenges. Comparing the forecast presented one year ago against the key figures that

have now been achieved – total Group revenues of EUR 1.66 billion and earnings after tax of EUR 29.0 million – it is tempting

to assume that our business figures have exceeded our forecasts. However, this is only one side of the coin. The figures for the

2015 business year are composed of such a large number of positive and negative individual themes that the first impression is

not sufficient for such an assessment.

Basically, it can be observed that we achieved a positive Group result solely in operative terms, without however being able to

meet our forecast in full.

Our Construction segment performed well on the whole. We have successfully processed numerous projects in all regions of

the world. With the exception of only individual weaker markets, we suffered a significant loss in the USA above all. This was

due to delays in acceptance of the Center Hill Dam project extending over several months, and additional follow-on problems

with the local subsidiary. Consequently, the segment was not able to record a positive result.

In the Equipment segment, we were able to give a good account of ourselves in a market environment that remains very difficult –

operatively speaking, the parent company and most of the subsidiaries achieved a solid result. In addition to this, two special

topics delivered significant positive earnings contributions. One contribution to this was the foundation of the joint venture with

Schlumberger, the world's leading oil services provider, to build deep drilling rigs. As part of a capital increase, Schlumberger

has invested in two subsidiaries, resulting in significant exceptional earnings. Moreover, the sale of shares in our subsidiary for

tensioning and anchor technology delivered a further good profit.

The Resources segment experienced two contrasting developments during the past year. The subsidiaries in the environmental

and water business had a good commercial year. On the other hand, companies involved in water and exploration drilling suffered

significantly from the steep decline in raw materials markets. Consequently, it was scarcely possible to achieve capacity utilization.

This, combined with significant restructuring, represented the main reason for the negative result in the segment.

Given the positive exceptional earnings, it was possible for us to undertake extensive restructuring measures in all areas of the

Group that became necessary due to significant market changes. In the Resources segment above all, business activities no

longer offering prospects for success were terminated, capacities reduced and subsidiaries shut down. In the Equipment seg-

ment too, it was necessary for smaller Group companies and their products to be re-orientated.

Taking a look at all these topics, it becomes clear how the significant variations occurred in the revenues and earnings figures

of the individual segments. The business activities relevant for the future also delivered good, positive operational results in the

year under review. Assessing the results without special influences leads to the conclusion that our businesses are on the right

path overall. The numerous measures that have been taken form a good starting point for the years to come.

The very high order backlog that we have been able to achieve in the Construction and Resources segments above all indicates

our strength in the market. In the environmental business, we are working on some long-term orders including the largest individual

order in the company's history with a remediation project in Germany. In Construction, the order backlog is evenly distributed

throughout the world, meaning that all regions have a good workload. Moreover, there are also new, large projects in the market

which represent good opportunities for us.

11

The Equipment business remains highly competitive. Chinese manufacturers have had to post significant drops in sales because

of the weakness in their domestic market and have responded with swingeing cuts in their capacities; we on the other hand have

performed well. We have got to continue the success. Unfortunately, entirely satisfying margins will only be achieved over time –

the competition will return to normal, however.

The joint venture with Schlumberger represents a major opportunity. In recent years, we have worked hard to develop not only

expertise but also innovative and novel techniques for deep drilling rigs. The fact that the largest oil services provider in the world

is now working with us in this field represents a pleasing success and points the way to the future.

In spite of this relatively good starting point, we do however see problems in the world as well. These include the developments

in Russia and China, and events in the Middle East where not only the so-called Islamic State but also the low oil price are sowing

the seeds of great uncertainty. The oil price in particular represents a significant danger for individual states whose budgets are

significantly dependent on oil exports. These include countries in South America and the Far East, as well as the Middle East.

A sustained low oil price will result in reductions in spending by many countries, and without doubt construction companies will

also be victims of this.

On the one hand, we can look to the future with optimism because we are offering products and services that are urgently required

over the coming decades. And additionally, we have re-orientated our companies in many respects. On the other hand, instabilities

in the world will also represent a major challenge in future.

As a result, we are cautiously optimistic for the coming year. For 2016, we are expecting total Group revenues of about EUR 1.65

billion and earnings after tax of about EUR 20 to 25 million.

I would like to express my sincere gratitude to all employees, shareholders, customers and partners for their loyalty and support.

Recent years have been very challenging, and we are faced with new tasks. The management and all the workforce are highly

motivated to build on the experience and the accrued strengths of the company in developing future success. You can follow

us on this path!

Kind regards,

Prof. Thomas Bauer

FOREWORD

Heinz KalteneckerProf. Thomas BauerHartmut Beutler

13

The Group

Group structure

Corporate Governance and control system

Business Report

Macro-economic trend

A general view of our markets

Course of business

Construction segment

Equipment segment

Resources segment

Other / Consolidation segments

Earnings, financial and net asset position

Group earnings position

Group financial and net asset position

Financial statements of BAUER Aktiengesellschaft

Sustainability

Sustainability in 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

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II.

III.

IV.

V.

VI.

VII.

VIII.

IX.

Combined Management Report

Changi Airport in Singapore is being expanded by an area of 1,000 hectares. The entire area must be improved with 480,000 soil

mixing columns. Several Bauer machines are being used there.

15

GROUP STRUCTURE

The BAUER Group is a leading provider of services, equipment

and products related to ground and groundwater. With over

110 subsidiaries, Bauer operates a worldwide network on

all continents. The operations of the Group are divided into

three future-oriented segments with high synergy potential:

Construction, Equipment and Resources.

The Construction segment applies 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. Its specialist con-

struction unit also performs other construction services such

as civil engineering and remediation works.

Bauer is a world market leader in the Equipment segment

and provides a full range of equipment for specialist foun-

dation engineering as well as for the exploration, mining and

extraction of natural resources. Besides its headquarters

in Schrobenhausen, the Equipment segment operates a

worldwide distribution network and additional production

facilities in Germany, China, Malaysia, Russia, Italy, Turkey,

the USA among other locations.

In the Resources segment, Bauer focuses on highly innovative

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 environmental 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, account-

ing, 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 – BAUER Spezial-

tiefbau GmbH, BAUER Maschinen GmbH and BAUER Re-

sources GmbH – 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 is

the primary characteristic of corporate governance within

the BAUER Group. The managers of the various 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 by the Group and the individual subsi-

diaries. The principles of proper conduct, including adherence

to our ethical and moral standards, are defined among other

instances by an ethics management and values program

covering all the companies of the BAUER Group, flanked by

corporate management guidelines and a code of conduct

imposed on our employees. The self-managing structure

is linked to a centralized 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.

The roles of the Management Board and Supervisory Board

and other aspects of corporate governance are set forth in the

Declaration on Corporate Governance on pages 64 to 67

of this Annual Report, which is published on the Internet at

http://www.bauer.de/ 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 rep-

resent the revenues of all the companies forming part of our

Group. The difference between the consolidated revenues

Combined Management ReportI. THE GROUP

The Gut Großlappen sewage treatment plant on the northern outskirts of Munich is being updated to the latest state of the art.

For the connecting lines from the clarifi cation tanks to the biological clarifi cation stage, Bauer built six individual excavation pits

encompassing a total area of about 12,500 m² static Mixed-in-Place cut-off wall.

16COMBINED MANAGEMENT REPORTThe Group

They primarily comprise balance sheet and income statement

figures and the indicators of capital structure, profitability and

liquidity derived from them.

Non-financial performance indicators

Many non-financial indicators of Group performance are

measured as part of a comprehensive reporting system,

although they have no individual material significance in

terms of internal controls and other respects. 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.

Indicators on further and advanced training as well as others

derived from the Research and Development field are also

reported.

and the total Group revenues is derived from the revenues

of the associated companies, from our portion of revenues

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

companies. The trend in total Group revenues and the con-

tributions to them by the various segments are depicted in

the Business Report.

Alongside total Group revenues, earnings before interest and

taxes (EBIT) and the net result for the period are used as key

financial performance indicators for internal management. The

Business Report details the trends in EBIT and net result 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 inte-

grated in the course of internal Group management activities.

Our customer Botte Fondations carried out the diaphragm walling work for an underground garage in Paris. An MC 64 duty-cycle

crane with an MBC 30 trench cutter was used.

>>>

17COMBINED MANAGEMENT REPORT

Business Report

We can therefore basically expect favorable growth during

the next few years.

This fundamentally positive outlook is contrasted by the

negative influences of political, economic and warlike

confusion:

• The after-effects of the financial market crisis seven years

ago can still be felt. The entire financial system of the global

economy was rocked by that shock. Only massive govern-

ment measures managed to avert a collapse of the financial

markets. Many countries slid into recession. The situation

has stabilized somewhat since then, but many countries

have been unable to regain their old strength. Many banks

still suffer today from the massive capital consumption of

that period. A process of adaptation with many ups and

downs still prevents a sustainable economic stabilization.

This trend will accompany us for quite a while to come.

• The financial market crisis has saddled quite a few countries

in Europe with considerable budgetary difficulties. This has

focused more attention on problems which were created

many years ago by incorrect budgetary management. In

addition, countries had to intervene in order to rescue

troubled banks and stabilize their economies. In countries

like Greece, Ireland or Spain, the resulting crises could

only be cushioned by financial aid and extreme austerity.

Greece narrowly avoided national bankruptcy in 2015

because it was no longer able to solve its problems by

its own efforts.

• The Russian-Ukrainian crisis unleashed a continuing

conflict in 2014, resulting in major worldwide economic

consequences. Trade in goods and services with Russia

has declined significantly since then. The construction and

construction machine sectors have slumped even more.

Even if efforts to find a political solution should achieve a

step-by-step rapprochement, it would take quite a few

years to repair the economic damage.

• There are various reasons for the severe deterioration of

oil prices. One of the causes is an over-supply resulting

from new production techniques such as fracking. Another

cause is the result of the conflicts in the Arab world. The

resource-rich countries seek to finance not only their conflicts

but also their extensive construction measures by selling

MACRO-ECONOMIC TREND

There has hardly been any previous year in which the world has

seen so many crises and problem areas as in 2015. Despite the

numerous achievements of society in communications and

mobility, which might have been expected to bring the nations

together, the world has not developed positively – on the

contrary. All the changes also affect economic development,

which is burdened with constantly increasing negative

phenomena. However, they are counteracted by many

positive stimuli from globalization. Overall therefore, the

normally possible expectations could not be fulfilled.

Only a short while ago, all major research institutes anticipated

growth rates ranging from 3.5 to 4 %. These forecasts have

since been continuously adjusted in the direction of 3 % – and

the downtrend continues.

For the construction industry, however, just over 3 % growth

remains a good base for its international business, since the

global economy can only grow if the construction of buildings

and infrastructure creates the necessary preconditions. Even

better growth expectations beckon for companies in the sector

of specialist foundation engineering, since construction is taking

place in increasingly confined urban areas. This demands

progressively higher buildings, which calls for extensive foun-

dation work. In addition, stationary and flowing traffic must

be ever-increasingly transferred below ground, which also

leads to growth in specialist foundation engineering. More-

over, many buildings and infrastructural projects no longer

involve new construction but are converted or expanded

instead. The necessary preparatory earth-moving work is

greatly increasing, since unusual types of construction are

required and the work has to be done in very confined condi-

tions. We can therefore anticipate a basically favorable trend

that is merely slowed down by the negative world events.

The present trend is a mixture of positive and negative influen-

ces. A continuing positive factor is the worldwide need to

catch up with an enormous backlog of infrastructure services,

which is equally strong in developing countries and rising

economic states, but also in the established industrial nations.

A tremendous catching-up process has begun in more than

half of the countries in the world during the past two decades.

The general conditions for this are very favorable, since the

new possibilities of communication and mobility enable market

actors to pursue this catch-up race at increasingly low costs.

II. BUSINESS REPORT

18COMBINED MANAGEMENT REPORTBusiness Report

the refugee crisis imperil European stability, the European

economy could be endangered.

Nobody who seeks to weigh the positive and negative influ-

ences can predict what the total impact may be. However,

solid growth in the global economy can continue to be

expected. For our company, this means that we must react

as flexibly as possible to these changes and seize the resulting

opportunities. Our worldwide presence makes this quite

possible.

A GENERAL VIEW OF OUR MARKETS

The construction markets continue to show good growth:

The construction sector in particular benefits from an enor-

mous need to catch up with backlogs in the rising economic

countries, but also in the established industrial nations. Con-

stantly increasing urbanization and growing infrastructural

needs are leading to increasingly large-scale building schemes,

which offer many interesting project opportunities to the

construction industry. The amount of construction under-

taken in the economically established countries was clearly

inadequate for many years. It is realized today that buildings

too must constantly be adapted to population needs and

economic requirements. This applies not only to traffic

infrastructure but also to residential and public buildings,

dams or flood protection facilities.

ever-increasing volumes of oil and gas. This inevitably glutted

the markets and consequently brought prices down. Few

tangible economic consequences have so far emerged

because the countries involved are still relying on their

financial reserves to pursue their construction goals.

However, this cannot continue for much longer, so that

particularly in the Arab world, major savings efforts and a

commensurate economic decline can be expected soon.

These problems also affect other countries which depend

strongly on oil export revenues: Angola, Malaysia, Mexico,

Brazil and a number of others.

• The many religious and political conflicts in the Middle

East are a major cause for concern. The outcome of

the conflict with the Islamic State remains completely

unresolved. Nobody can predict the future impact of this

today. The agreement with Iran on the use of nuclear

energy is a welcome development. It opens up new

economic opportunities.

• Due to the size of its economy, China has become a

main driver or – if a negative trend sets in – a brakeman

of the global economy. Its economic growth has currently

slowed to little more than 6 %. Compared with the Chinese

construction sector and the associated construction equip-

ment industry, this is still very high. The local construction

machinery industry contracted significantly in the past year.

Radical measures had to be taken to reduce its completely

oversized production capacities. If this proves to be an

example of other overheating symptoms, the Chinese

developments will cause world economic growth to

slow down even further in coming years.

• A few years ago, the BRIC states were still a synonym

for the upcoming economic nations. Very little of these

prospects remains evident today. China is heading towards

normality, India is crippling itself through its own bureau-

cracy, Russia is blocked by its conflicts and a major corrup-

tion scandal is forcing Brazil to cope with a recession.

• A completely new problem which developed in Europe

during the second half of 2015 has no immediately negative

consequences for economic development, and could indeed

even bring it forward: the wave of refugees. But if goods

traffic is impeded by the closure of an increasing number

of national frontiers, and if the political conflicts aroused by

in % Revenues Order intake Employees

Residential construction 7.1 13.3 ---

Commercial construction 0.3 1.1 ---

Public construction -0.8 5.4 ---

Total 1.4 5.2 1.4

Source: Central Federation of the German Construction Industry

Construction statistics Germany – Change 2015/2014

The companies of the BAUER Group can read the general

trend from their very good order backlog, which is evenly

distributed over all regions of the world. Sales of construction

machinery are directly linked to the situation on construction

markets, so that favorable sales opportunities can be expected

in this sector too in coming years.

Besides the general trends, current developments and future

perspectives on construction markets in the various regions

around the world vary considerably:


Business Report

Qatar and the United Arab Emirates. New subway lines,

railroad sections, stadiums and other large-scale projects

are in full swing. If oil prices remain low for much longer,

however, investments will decline and saving measures will

have to be introduced, which would affect the construction

industry as well. Construction companies must prepare for

this eventuality.

The situation in Iraq and Syria remains extremely problem-

atical. The armed conflict with the Islamic State has all but

paralyzed economic development and specifically the con-

struction sector. Neighboring states such as Jordan and

Lebanon are also hampered by the situation, so that their

economic development has significantly abated. In Libya,

last year was overshadowed by civil war. The opposing

forces finally agreed to form a joint government, raising

at least some hope of stabilization.

In Egypt, the government firmly established itself with the

backing of a strong military establishment. The country is

gripped by a regular building boom, which is boosting the

economy. The Suez Canal was widened in record time and

is generating many other construction projects, since tunnels

Germany

The German construction market will continue to see positive

growth over the coming years. Residential construction is being

driven up primarily by low interest rates, but also by govern-

ment subsidies. Public sector construction is benefiting from

a huge backlog of infrastructure work, for which administrative

budgets will now provide considerably increased funds. The

pace of commercial construction will depend on the develop-

ment of the future outlook for the industry.

Germany especially has recognized the need to return to

more construction. The German federal government has

therefore considerably expanded the construction budget

for future years, which will help to increase building activity.

This situation is reinforced by the need generated by the

influx of refugees. The government is reacting here too by

releasing considerable additional funds.

Europe

Construction markets in Western Europe will remain relatively

restrained in coming years. This is largely due to the fact that

the investment budgets of these countries remain low. However,

there are large infrastructure projects in some countries, such

as Switzerland or France with the Metro Ring in Paris. Other

major 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 continues to impose

a serious burden on the development of both countries. Ukraine

is practically incapable of maintaining a construction sector

any longer – due to lack of funds. Although Russia is trying

to continue funding 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. Commer-

cial construction has almost completely shut down. It can be

assumed that Russia will suffer from the consequences of

the crisis for years to come. Equipment sales will therefore

also remain at a low level.

Middle East & Central Asia

Very intensive construction is still taking place in the oil- and

gas-rich countries of the Middle East, such as Saudi Arabia,

Geographical breakdown of total Group revenues

in EUR million

Total 1,656

Germany 474 (29 %)

Africa 77 (4 %)

Americas 297 (18 %)

Asia-Pacific,

Far East & Australia

348 (21 %)


227 (14 %)

Europe (other)

71 (4 %)

EU (excl. Germany)

162 (10 %)


however, these topical fields will regain prominence and

stimulate demand for construction accordingly.

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 handled suc-

cessful projects in some countries around the world and

expect demand for these services to grow considerably.

COURSE OF BUSINESS

The BAUER Group achieved total Group revenues

amounting to EUR 1,656 million during the 2015 financial

year, a 6.2 % increase over the previous year’s value of EUR

1,560 million. The increase includes contributions from the

divestment and revaluation of businesses amounting to EUR

77.8 million. If these and similar effects in the previous year

(EUR 36.5 million) are disregarded, the increase amounted to

3.6 %. EBIT came to EUR 90.7 million (previous year: EUR

76.4 million). The net result for the period was EUR 29.0

million (previous year: EUR 15.7 million).

In 2015, the BAUER Group was influenced by a number of

problems with a major financial impact and by difficult market

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

successes. Overall, we could achieve our earnings after tax

and EBIT largely only by means of non-operative profits. We

are pleased to state that the exceptional results considerably

outstripped expectations. If these exceptional earnings had

not been included, we would not have reached the forecast

of results given in the annual report for 2014. We had predicted

total Group revenues of about EUR 1.6 billion, earnings after

tax of about EUR 18 to 23 million and an EBIT of about EUR

75 million.

Negative business influences were exerted mainly by our

construction subsidiary in the United States and many restruc-

turing measures that primarily affected our Resources segment,

but also the Equipment segment and SCHACHTBAU NORD-

HAUSEN GmbH. In addition, stagnant raw material markets

and low oil prices curbed the utilization of our drilling rigs in

Africa and those of our Jordanian subsidiary. Overall, these

influences considerably increased our financial expenditures.

and harbors must be built in the vicinity. The Cairo subway is

being expanded along with many other building works. It is

not yet clear whether this development is sustainable.

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 prospect of the airport expansion

raises our hopes of major new projects in the years ahead.

The same applies to Singapore and Malaysia. In Singapore

for example, new subway lines and urban motorways are

being built. The port, one of the most important and biggest

in the world, is being relocated. Economies such as Indo-

nesia and the Philippines are also seeing healthy growth.

By contrast, the Australian economy is no longer developing

quite so positively. Construction activity has slowed down

somewhat.

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 ad-

equate building activities over recent decades. We are

expecting major efforts over the coming years to make

good this deficit, providing a new boost to the economy

as a positive side effect. Overall, we regard the situation as

stable and anticipate good opportunities for further growth

in both our Construction and Equipment segments. The

Canadian construction market is similarly firm. Interesting

projects frequently crop up in Central America.

Africa

In Africa, active pursuit of new business is worthwhile even

if the overall economic level of these countries does not

permit a very great contribution to our total Group revenues.

Some countries have a very good chance to improve their

prosperity by virtue of their vast raw material resources.

The current problems in the world have shifted such major

issues of the future as the environment, demography and

energy into the background. As stabilization progresses,


Business Report

Summary

The many positive and negative special influences naturally

complicate consideration of the operative business consid-

erably. Particularly in the segments, the key figures have

undergone very pronounced changes. On the whole, it

remains to be said that the operational results lay within the

positive range when stripped of one-off effects identified by

the company. All in all, the present and future outlook for the

Group is therefore favorable.

However, we cannot be satisfied with our results for 2015.

We were only able to achieve a healthy, positive result due to

exceptional results. We expect the positive business trend to

continue because we managed even in difficult circumstances

to increase total Group revenues. We will be able to build on

that foundation in the financial year 2016.

On the other hand, agreement on our joint venture with

Schlumberger, the world’s leading supplier of technology,

integrated project management and information solutions for

oil and gas industry customers, enabled us to take a major

step forward in the field of deep drilling rigs. This joint venture

and the sale of shares of a subsidiary in the Equipment

segment enabled us to secure the predicted annual result.

Furthermore, the positive exceptional earnings enabled the

Group to fund restructuring expenditures by loss-making

subsidiaries.

The order backlog of the Group also developed extremely

well and grew to EUR 995.6 million by the end of 2015, or

30.5 % above the previous year’s figure of EUR 762.7 million.

Along with the Construction segment, which managed to

acquire several major projects, the order backlog was in-

creased by the largest order so far gained by the Group,

a project won by the Resources segment in Germany.

Development of total Group revenues by segment

in EUR million (segments after deducting Other/Consolidation)

1,800

1,600

1,400

1,200

1,000

800

600

400

200

0

Resources

218

Equipment

705

Construction

international

551

Construction

Germany

182

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Total 1,656


important contribution to the revenues of the segment in

Far Eastern markets in 2015, although the level of orders

has weakened somewhat in comparison to the extremely

good preceding years. The German construction market also

performed well on the whole during the previous financial year,

which enabled us to repeat the high level of the preceding year.

The Austrian subsidiary boosted its revenues significantly with

projects in its home market as well as with a major contract

in Montenegro.

By contrast, we recorded a weak trend and losses in Russia

because local construction activities have been considerably

reduced in the wake of sanctions and the decline of the ruble.

Our subsidiaries in Switzerland, England and the Netherlands

obtained fewer orders and consequently fell short of our

planned levels.

Our subsidiary in the USA was the determinant of the unsa-

tisfactory trend in results for the segment. The approval of

the major Center Hill Dam project was unexpectedly delayed

by several months and as a result, as in the previous year,

added additional considerable financial strains. The difficult

conditions surrounding the project led to considerable pro-

blems in the further business activities and the organization

of the subsidiary. This necessitated restructuring measures

to increase the subsidiary’s ability to compete in the American

market once more. These measures created additional

significant financial burdens.

At SCHACHTBAU NORDHAUSEN GmbH, which operates

mainly in Germany and performs services in all three business

segments of the Group, several restructuring measures were

CONSTRUCTION SEGMENT

in EUR ’000 2014 * 2015 Change


Sales revenues 646,628 650,762 0.6 %

Order intake 682,410 878,436 28.7 %

Order backlog 455,485 591,059 29.8 %

EBIT 26,033 13,916 -46.5 %


Employees (on average over the year) 5,777 6,243 8.1 %


General conditions

Construction markets continued to develop positively in 2015,

allowing us to record good growth. This growth is additionally

propelled by the enormous need for infrastructural works such

as roads, bridges, dams and energy supplies as well as in-

creasing urbanization. Since construction must be carried

out in increasingly complex, troublesome circumstances, the

need for specialist foundation engineering services is also

expanding, so that we are acting here in a market with a

promising future.

The positive trend in the past year was bolstered by construc-

tion markets in the Middle and Far East as well as in the USA

and Germany. The situation in European markets was highly

differentiated. In Russia, building activities were significantly

reduced in response to sanctions. However, we can look back

to a good overall market trend in 2015.

Significant events

The Construction segment achieved total Group revenues

of EUR 742.9 million in the financial year 2015 with 2.4 % be-

yond the previous year’s level of EUR 725.6 million. EBIT fell

back by 46.5 % from EUR 26.0 million in the previous year

to EUR 13.9 million. The net result for the period was

negative, declining to EUR -7.3 million after EUR 2.5 million

in the previous year.

Particularly the Middle Eastern subsidiaries had a positive

business year 2015. Revenues in Saudi Arabia, Qatar and

Egypt improved significantly. We are participating in major

subway construction sites in Doha, Riyadh and Cairo as well

as in projects relating to the Suez Canal. We achieved an


Business Report

If oil prices remain at a persistently low level, this will very

probably have a negative impact on construction markets in

the Arab world. Oil revenues have a determining influence on

the investment budgets of many countries in that region. In

Russia, we anticipate little improvement during the current

year. In other world regions, we are assuming stable or even

better developments than in the past year. With the completion

of the Center Hill Dam project last year, losses from the project

will fall away and in future lead to noticeably improved overall

earnings.

We expect total Group revenues of the segment to end up

slightly above the previous year’s level in 2016. As far as EBIT

is concerned, we are expecting a considerable improvement.

Furthermore, we are expecting good, positive earnings after

tax.

taken in 2015 in response to business developments.

The environmental technology division, which is primarily

responsible for building biogas and sewage treatment

plants, was shut down as a result of changed political

circumstances. The equipment division will be integrated

into the production network of BAUER Maschinen GmbH

in order to exploit synergy potentials.

Order situation

The order intake developed positively during the past

financial year to reach EUR 878.4 million at the end of the

year, 28.7 % above the previous year’s value of EUR 682.4

million. The order backlog rose to EUR 591.1 million, 29.8 %

above the previous year (EUR 455.5 million). We succeeded

in winning new orders in all regions of the world. Along with

many small and medium-sized building sites, we were again

able to add several major projects to our backlog. This includes

orders in Switzerland, England and Australia. In Canada, we

were commissioned to build a cut-off wall for the Diavik Mine

with a value of around EUR 65 million. The project is already

under way and will continue until 2017. In a joint venture in

India, we won a contract with an order volume of about EUR

60 million to build a diaphragm wall for the Polavaram Dam.

The work is scheduled for completion by the end of 2017.

Due to a record-level order backlog, we are entering the

current financial year on a very sound footing. It is gratifying

to find that further opportunities for orders exist around the

world – they once more include a number of major projects,

such as in Hong Kong.

Outlook

The overall performance of the world regions remains positive,

despite all the existing political and economic disturbances.

Our worldwide presence enables us to exploit opportunities

in markets with good business conditions and compensate

for weaker markets. Our worldwide order backlog has grown

considerably in comparison to the previous year, since we

have once again acquired several major projects along with

smaller and medium-sized orders.



in EUR million (after deduction of Consolidation)

Total 733

Germany 182 (25 %)

Africa 47 (6 %)

Americas 113 (16 %)

Asia-Pacific,


191 (26 %)


127 (17 %)

Europe (other)

30 (4 %)

EU (excl. Germany) 43 (6 %)


revaluation of our remaining 40 % stake in SPANTEC Spann-

und Ankertechnik GmbH. Another exceptional result arose

from the joint venture agreement with Schlumberger, the

world’s leading supplier of technology, integrated project

management and information solutions for oil and gas industry

customers. With a cash capital increase Schlumberger con-

tributed 49 % to BAUER Deep Drilling GmbH, Germany, and

BAUER Manufacturing LLC, USA. In total, these transactions

led to an exceptional result after tax amounting to EUR 71.6

million. The effect on revenues and the operating result

amounted to EUR 77.8 million, including a taxation effect

of EUR 6.2 million.

The exceptional earnings resulted from our efforts in recent

years to develop specialized know-how for deep-drilling rigs

and from the very successful development of our business

with anchoring and tensioning technology. As SPANTEC

Spann- und Ankertechnik GmbH gains the major part of

its earnings from the sale of materials to our construction

industry competitors in Germany, surrendering the majority

shareholding to our partner was a necessary strategic step

to give the company more freedom of movement in future.

By contrast, the Equipment segment was burdened during

the past year by restructuring costs as well as by losses from

the subsidiary which manufactures well drilling rigs, which

faced low demand in weak markets in the field of exploration.

The machinery plant in the USA remained underutilized as

well. Additional expenditures also arose in the course of

preparations for the joint venture, owing to legal costs as

well as the need to prepare the two introduced subsidiaries

organizationally and financially. The positive exceptional

earnings enabled further restructuring measures to be taken.

EQUIPMENT SEGMENT

in EUR ’000 2014 * 2015 Change


Sales revenues 532,691 548,039 2.9 %

Order intake 676,801 649,108 -4.1 %

Order backlog 154,175 128,096 -16.9 %

EBIT 35,952 99,441 n/a

Net result for the period 8,847 65,397 n/a



General conditions

Construction equipment markets showed widely disparate

trends in 2015. Whereas demand increased in Europe and the

USA – and even considerably in the Middle East – economic

conditions in Russia, China, Africa and Latin America brought

declines that were considerable in some cases.

The competitive situation in the Chinese market changed

greatly during the course of 2015. The exaggerated market

expectations of local competitors created considerable surplus

production capacities in past years. Consequently, a number

of these companies embarked on substantial capacity cut-

backs in the past year, especially in terms of personnel layoffs.

We therefore expect a market adjustment and a normalization

of the competitive situation in coming years.

The development of raw material prices also influenced our

business. The considerable price declines reduced demand

for well drilling rigs, which are also used for raw material explo-

ration. Sales of our deep drilling rigs were likewise affected by

the market situation.

In this difficult market environment, we succeeded in raising

sales in combination with good operational earnings. Thanks

to our vigorous efforts regarding product quality, worldwide

service and offers of customer-specific solutions, we

successfully asserted ourselves in the market and effectively

compensated for sales declines in poor regions with other

areas.

Significant events

The key figures of the segment – and ultimately the entire

Group – are very strongly influenced by exceptional earnings.

On the one hand was the sale of 50 % of the shares and the


Business Report

sales situation, this resulted in a negative earnings contribution.

In the course of consolidating the locations, the organization

and processes were adapted and the inventory of hired

equipment was reduced. Equipment production in the plant

remains short of an adequate level.

The joint venture with Schlumberger in the field of deep

drilling technology has now positioned this business with

positive future prospects and provides a stable base in

this market, which is dependent on oil prices and therefore

extremely cyclical. In the joint venture, large drilling rigs are

being developed and built for Schlumberger and third parties

for use in oil and gas drilling as well as geothermal boring.

Two drilling rigs have already been produced for Schlum-

berger, and more rigs are planned to be built in 2016.

Order situation

Despite fluctuations during the year, the order intake was

almost exactly in line with the planned level at the end of the

year. The order backlog dropped to EUR 128.1 million,

16.9 % below the previous year (EUR 154.2 million). The

deep drilling rig business was chiefly responsible for reducing

In the past financial year, total Group revenues in the

Equipment segment increased significantly by 17.8 %,

from EUR 639.2 million to EUR 753.1 million. The increase

includes contributions from the divestment and revaluation

of businesses amounting to EUR 77.8 million. If these are

subtracted, the increase amounts to 8.3 %. The sales

revenues grew by 2.9 % from EUR 532.7 million to EUR

548.0 million. EBIT rose considerably from EUR 36.0 million

to EUR 99.4 million. If the exceptional earnings of EUR 77.8

million for 2015 are subtracted, EBIT decreased by 40.0 %

to EUR 21.6 million. The net result for the period rose

significantly from EUR 8.8 million to EUR 65.4 million.

Disregarding the special influences on the key figures of the

segment identified by the company, it should be noted that

a slight increase in equipment sales was achieved in tandem

with good operational earnings. We regard this as a great

success in a difficult market environment.

The main contributions to this success came from the markets

in the Middle East, Africa and the USA. We achieved good

sales in Europe as well. Our subsidiaries recorded particularly

good sales of anchor drilling rigs and rotary drives in the past

financial year. Our new machines, the duty-cycle crane series

and the new developments in pile-driving technology estab-

lished themselves firmly in the market. The service and spare

parts business has continued to develop into an important

area of activity. The production and distribution organization

in the Far East once more provided a good contribution to

the Group’s revenues and earnings. The construction equip-

ment market in China itself shrank considerably, severely

burdening local competitors. We nevertheless managed to

keep our sales stable. As a result, we effectively increased

our market share.

On the other hand, the sanctions against Russia and the

plunging value of the ruble led to an almost complete collapse

of equipment sales here. Our commitment in Russia conse-

quently led to a significant loss. Sales trends in Central Asian

countries such as Azerbaijan and Kazakhstan were very weak.

Project delays considerably reduced sales in South America.

In the USA, the production of specialist foundation engineering

equipment in Conroe and the sales company were combined

in the BAUER-Pileco Inc. subsidiary. Independently of the good


Equipment segment


Total 705

Germany 164 (23 %)

Africa 20 (3 %)

Americas 172 (24 %)

Asia-Pacific,


154 (22 %)


60 (8 %)

Europe (other)

39 (6 %)



business, while the normalization of market conditions can

be expected to continue.

We expect a likewise stable development of Middle Eastern

markets on the strength of the known projects. However, the

low oil prices could trigger a decline in the course of 2016. We

see the Russian market remaining similarly weak as in 2015.

In our opinion, the removal of sanctions against Iran will offer

special opportunities for the equipment business. Through the

joint venture with Schlumberger, we have gained a sound base

for the deep drilling business. It will additionally enable us to

improve the utilization of our plant in the USA, which market

conditions for specialist foundation engineering equipment

did not permit over the last years.

For the year 2016, we expect total Group revenues of this

segment to fall short of the level in 2015 because of the

absence of the previously described special influences. This

also applies to EBIT and earnings after tax. In the operational

business, we expect slightly improved total Group revenues

and markedly higher earnings figures, which points to positive

earnings after tax.

the order backlog. Order intake decreased from EUR 676.8

million to EUR 649.1 million.

Customers for specialist foundation engineering equipment

continue to order at relatively short notice. Only occasional

equipment orders for special projects are placed somewhat

longer ahead of time. This results in very swift deliveries to

customers, so that the order backlog lasts between two and

three months throughout the year. Many machines were again

delivered at the end of 2015, so that the order backlog was

accordingly reduced in December.

In the area of deep drilling rigs, two rigs for Schlumberger were

included in the 2015 order backlog and were delivered at the

beginning of 2016.

Outlook

Economic and political concerns did not make 2015 an easy

year for the equipment business. We nevertheless register

generally good demand from the overall growth of world

construction markets. We see market conditions ranging

from stable to positive in Europe, the USA, Africa and the Far

East. In China, we anticipate a stable development of our

RESOURCES SEGMENT

in EUR ’000 2014 2015 Change

Total Group revenues 252,830 221,609 -12.3 %

Sales revenues 195,860 179,319 -8.4 %

Order intake 219,306 345,045 57.3 %

Order backlog 153,027 276,463 80.7 %

EBIT 15,932 -19,807 n/a



General conditions

The Resources segment focuses on the fields of water,

environment and natural resources. In the field of water,

we were able to register rising demand for brewing and

beverage technology as well as water purification plants in

the past financial year.

The market for deep drilling to exploit oil, gas, water and

natural resources proved to be particularly difficult. Heavy

pressure on raw material prices left hardly any projects for

our companies. This situation burdened us considerably in

the past year. Our subsidiaries in Jordan and South Africa

were particularly affected.

27

2013, the initiated restructuring was largely concluded in

2015. Our drilling companies in Africa also gained hardly

any orders because of the market situation and therefore

reported losses.

A positive trend was shown above all by our subsidiaries in

the environmental and water businesses. BAUER Umwelt

GmbH in Germany outperformed our revenue expectations.

The company scored a decisive success by winning an order

from Roche Pharma AG to remediate two sections of the old

Kesslergrube landfill site in Grenzach-Wyhlen. The order

amounts to more than EUR 100 million and is the largest

individual order yet gained by the BAUER Group. The share-

holding in Oman also provided a positive earnings contribution

once more. The company primarily operates the large-scale

reed-bed treatment plant to clean oil-contaminated water for

the regional oil company.

The Resources segment also includes the mining division of

SCHACHTBAU NORDHAUSEN GmbH, which chiefly performs

restoration and safeguarding of mines. The continuing positive

COMBINED MANAGEMENT REPORTBusiness Report

By contrast, the environmental business presented a very

positive picture. Germany is providing increased orders in

the field of remediation, such as land recycling, groundwater

treatment or the disposal of contaminated soils and surfaces.

In the Middle East, our waste management offers enabled us

to gain new orders.

Significant events

Total Group revenues in the Resources segment decreased

by 12.3 % from EUR 252.8 million in the previous year to EUR

221.6 million. The previous year’s figure included revenues from

the disposal and revaluation of businesses to the value of

EUR 36.5 million, following the sale of a 21 % shareholding

in the Oman subsidiary. Subtracting these figures from the

previous year’s performance leaves an increase of 2.5 %.

EBIT decreased from EUR 15.9 million to EUR -19.8 million.

If the exceptional earnings are subtracted from the previous

year’s figure, a slight improvement of the EBIT remains. The

net result for the period was clearly negative at EUR -29.4

million (previous year: EUR 4.3 million).

The Resources segment demanded a great deal of effort

from us in the past financial year. The reorganization of the

segment, which began in 2014 with its transformation into a

regional distribution unit, has already proved advantageous.

A great deal of further restructuring was carried out in the

past financial year to set up the segment in a strategically

new, future-oriented form. These influence factors and

measures created considerable financial burdens in 2015

and consequently led to a considerable loss.

The target of the restructuring was the GWE Group, which

has stopped producing standard PE pipes and is now con-

centrating on the well drilling and geothermal energy busi-

nesses. This necessitated a consolidation of locations and

a workforce reduction. Other, smaller subsidiaries in the

segment were shut down or are still being liquidated.

The greatest impact from the lack of deep drilling projects was

suffered by the Site Group for Services and Well Drilling Ltd.

Co. in Jordan. The low raw material prices and the plight

of refugees in Jordan caused investments in this market

to collapse. The performance therefore slumped far below

expectations and the burden imposed by idle drilling rigs

produced a significantly negative result. After the loss in


Resources segment


Total 218

Germany 128 (59 %)

Africa 11 (5 %)

Americas 12 (5 %)

Asia-Pacific,


2 (1 %)


40 (18 %)

Europe (other)

2 (1 %)



The environmental business remains very positive, with a very

good overall order situation and capacity utilization. The major

Grenzach-Wyhlen project in Germany is expected to keep us

busy until as late as 2020. The overall order situation in the

field of water is also good and offers us further opportunities

for the future. All these matters will influence the current

financial year.

For 2016, we expect that total Group revenues will be consid-

erably higher than in the previous year. EBIT should be in the

positive area, whereas the current outlook for earnings after

tax is still negative.

OTHER / CONSOLIDATION SEGMENTS

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, gener-

ated from a wide variety of administrative services provided

to Group subsidiaries.

The Other segment reports EBIT of EUR 4.6 million (previous

year: EUR 3.3 million). This includes EUR 4.0 million of dividend

payments by Group subsidiaries to the parent company. The

net result for the period was EUR 6.8 million (previous year:

EUR 4.9 million). 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 -7.4 million (previous

year: EUR -4.8 million) largely matches the aforementioned

dividend payments by Group subsidiaries to BAUER AG. The

net result for the period was EUR -6.5 million (previous year:

EUR -4.9 million).

state of the market allowed revenues to remain at a healthy

level. Along with many projects in Germany, an extensive order

is being handled in Kazakhstan. The division made a good

positive contribution to earnings.

Order situation

The order intake with EUR 345.0 million in 2015 exceeded

the previous year’s level of EUR 219.3 million considerably

by 57.3 %. The order backlog of EUR 276.5 million was

accordingly higher than in the previous year (EUR 153.0

million) by 80.7 %. The main reason for the increase was the

previously mentioned major project in Germany. In addition,

the environmental business won a large order for waste

management from an oil company in Oman. The subsidiaries

which produce water purification plants and brewing and

beverage technology systems also gained new orders and

expanded the backlog with good contributions.

Outlook

In the Resources segment, considerable efforts were again

undertaken in the past financial year towards the reorganization

that was already initiated in 2014. Consistent work was devoted

to cost structures, unprofitable businesses and subsidiaries

were terminated and locations were abandoned or consoli-

dated. The extensive restructuring measures created major

financial burdens.

Raw material markets and prices unfortunately continued

their negative trends too, so that our drilling companies were

particularly affected by scarce orders. The market situation

cannot be expected to improve quickly, even though there

are many planned projects which continue to offer us

opportunities.


Business Report

in EUR million 2014

Revenues *

2015

Revenues

Share

Year 2015

Change against

previous year

Orders

in hand

Co

nstr

uc

tio

n

BAUER Spezialtiefbau GmbH (BST)

BST, Germany 133.2 125.6 7.7 % -5.7 % +

Subsidiaries, Germany 16.7 22.8 1.4 % 36.5 % +

BST, international 98.9 110.7 6.7 % 11.9 % •

Subsidiaries, international 502.5 543.0 32.8 % 8.1 % +

BST Group total 751.3 802.1 48.4 % 6.8 % +

SCHACHTBAU NORDHAUSEN GmbH Subsidiaries (SBN) 78.7 64.0 3.9 % -18.7 % •

less intra-Group revenues and IFRS adjustments -104.4 -123.2 -7.4 %

Construction total 725.6 742.9 44.9 % 2.4 % +

Eq

uip

me

nt

BAUER Maschinen GmbH (BMA) 383.3 465.5 28.1 % 21.4 % •

Equipment subsidiaries 468.7 534.4 32.3 % 14.0 % •

BMA Group total 852.0 999.9 60.4 % 17.4 % •

SBN 49.4 45.7 2.8 % -7.5 % •


Equipment total 639.2 753.1 45.5 % 17.8 % •

Re

so

urc

es

BAUER Resources GmbH (BRE) 29.5 17.4 1.1 % -41.0 % ++

Resources subsidiaries 231.1 196.8 11.9 % -14.8 % •

BRE Group total 260.6 214.2 12.9 % -17.8 % +

SBN 33.9 37.2 2.2 % 9.7 % •


Resources total 252.8 221.6 13.4 % -12.3 % +

Oth

er

BAUER Aktiengesellschaft (BAG) 37.1 38.9 2.3 % 4.9 %

Other subsidiaries 2.3 2.6 0.2 % 13.0 %

Total Other/services 39.4 41.5 2.5 % 5.3 %


Group total (including non-controlling interests) 1,560.2 1,656.4 100.0 % 6.2 % +

of which: Germany 440.2 473.7 28.6 % 7.6 %

International 1,120.0 1,182.7 71.4 % 5.6 %

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



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

in EUR million 2014 * 2015

BAUER Spezialtiefbau GmbH - Group

BAUER Spezialtiefbau GmbH, Schrobenhausen, Germany (BST) 232.1 236.3

Wöhr + Bauer GmbH, Munich, Germany (33 % share) – (sub-group consolidated financial statements) 14.5 19.9

BAUER Funderingstechniek B.V., Mijdrecht, Netherlands 4.7 4.6

BAUER Technologies Limited, Bishops Stortford, Great Britain 2.6 10.3

BAUER Spezialtiefbau Schweiz AG, Baden-Dättwil, Switzerland 28.6 9.2

BAUER Magyarország Speciális Mélyépítö Kft., Budapest, Hungary 7.7 9.7

BAUER ROMANIA S.R.L., Bucarest, Rumania 2.1 1.3

BAUER BULGARIA EOOD, Sofia, Bulgaria 4.5 3.9

BAUER SPEZIALTIEFBAU Gesellschaft m.b.H., Vienna, Austria 14.4 22.7

OOO BAUER Technologie, Moscow, Russian Federation 31.3 9.8

BAUER EGYPT S.A.E. Specialised Foundation Contractors, Cairo, Egypt 22.9 37.4

BAUER LEBANON FOUNDATION SPECIALIST S.a.r.l., Beirut, Lebanon 16.5 12.5

BAUER Georgia Foundation Specialists LCC, Batumi, Georgia 3.3 4.3

BAUER International FZE, Dubai, United Arab Emirates 37.0 34.8

BAUER Geotechnical Specialized Foundation LLC, Abu Dhabi, United Arab Emirates 20.7 34.0

BAUER International Qatar LLC, Doha, Qatar 13.8 34.5

Saudi BAUER Foundation Contractors Ltd., Jeddah, Saudi Arabia 10.8 24.0

BAUER (MALAYSIA) SDN. BHD., Petaling Jaya, Malaysia - (sub-group consolidated financial statements) 84.7 76.9

BAUER Hong Kong Limited, Hong Kong, People’s Republic of China 45.3 28.2

BAUER Vietnam Ltd., Ho Chi Minh City, Vietnam 2.9 6.0

BAUER Foundations Philippines, Inc., Quezon City, Philippines 10.2 22.8

P.T. BAUER Pratama Indonesia, Jakarta, Indonesia 30.2 12.7

Thai BAUER Co. Ltd., Bangkok, Thailand 21.2 18.1

BAUER Foundation Australia Pty Ltd., Brisbane, Australia 6.7 5.8

BAUER FOUNDATION CORP., Odessa, United States of America 42.2 55.3

BAUER Foundations Canada Inc., Calgary, Canada 9.1 26.3

BAUER FUNDACIONES PANAMÁ S.A., Panama City, Panama 11.7 10.5

BAUER FUNDACIONES DOMINICANA, S.R.L, Santo Domingo, Dominican Republic 2.0 7.5

Other BST shareholdings 15.6 20.1

Joint ventures, Germany - (BST share only) 2.0 2.7

Intra-Group sales -93.9 -111.3

BST Group total 657.4 690.8

SCHACHTBAU NORDHAUSEN GmbH - Group

SCHACHTBAU NORDHAUSEN GmbH, Nordhausen, Germany (SBN) 107.3 82.8

SBN participations 33.8 41.8

Joint ventures SCHACHTBAU NORDHAUSEN GmbH - (SBN share only) 0.0 1.9

SPESA Spezialbau und Sanierung GmbH, Schrobenhausen, Germany 14.2 17.3

Joint ventures SPESA - (SPESA share only) 6.7 3.1


SBN Group total 103.0 89.5

BAUER Maschinen GmbH - Group

BAUER Maschinen GmbH, Schrobenhausen, Germany (BMA) 383.3 465.5

KLEMM Bohrtechnik GmbH, Drolshagen, Germany 42.9 46.5

EURODRILL GmbH, Drolshagen, Germany 12.4 13.0

RTG Rammtechnik GmbH, Schrobenhausen, Germany 26.4 33.9

MAT Mischanlagentechnik GmbH, Immenstadt, Germany 11.8 -

PRAKLA Bohrtechnik GmbH, Peine, Germany 13.0 6.3

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.


Business Report

in EUR million 2014 * 2015

BAUER Maschinen GmbH - Group

Olbersdorfer Guß GmbH, Olbersdorf, Germany 7.9 7.0

SPANTEC Spann- & Ankertechnik GmbH, Schrobenhausen, Germany 21.5 16.6

BAUER Deep Drilling GmbH, Schrobenhausen, Germany 1.3 31.3

TracMec Srl, Mordano, Italy 11.4 13.0

BAUER EQUIPMENT UK LIMITED Rotherham, Great Britain 7.4 11.5

BAUER Macchine Italia Srl, Mordano, Italy 13.1 7.2

OOO BAUER Maschinen Russland, Moscow, Russian Federation 7.8 6.0

OOO BAUER Maschinen - Kurgan, Kurgan, Russian Federation 5.6 5.2

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

BAUER Equipment Gulf FZE, Dubai, United Arab Emirates 8.4 9.9

BAUER Casings Makina Sanayi ve Ticaret Limited Sirketi, Ankara, Turkey 3.9 4.4

BAUER-DE WET EQUIPMENT (PROPRIETARY) LIMITED, Rasesa, Botswana 2.1 0.6

BAUER Technologies Far East Pte. Ltd., Singapore, Singapore - (sub-group consolidated financial statements) 152.9 135.2

NIPPON BAUER Y.K., Tokyo, Japan 7.3 5.9

BAUER Equipment Australia Pty. Ltd., Baulkham Hills, Australia 6.4 9.5

BAUER-Pileco Inc., Conroe, Texas, United States of America 76.3 98.0

BAUER Machinery USA Inc., Conroe, United States of America - 45.0

BAUER Manufacturing Inc., Conroe, United States of America 22.2 16.9

Other BMA participations 5.1 9.9


BMA Group total 631.5 748.2

BAUER Resources GmbH - Group

BAUER Resources GmbH, Schrobenhausen, Germany (BRE) 29.6 17.4

GWE pumpenboese GmbH, Peine, Germany 56.0 49.1

BAUER Umwelt GmbH, Schrobenhausen, Germany (BMU) 54.8 56.6

BAUER Water GmbH, Oberndorf a.N., Germany 13.5 11.2

Esau & Hueber GmbH, Schrobenhausen, Germany 15.4 15.4

BAUER Foralith GmbH, Schrobenhausen, Germany 5.1 0.5

GWE POL-Bud Sp.z.o.o, Lodz, Poland 3.1 3.4

FORALITH Drilling Support AG, St. Gallen, Switzerland 5.1 2.1

BAUER Ambiente S.r.l., Milan, Italy 1.4 0.6

GWE Budafilter Kft., Mezöfalva, Hungary 3.2 3.5

BAUER Resources GmbH / Jordan Ltd. Co., Amman, Jordan - (sub-group consolidated financial statements) 29.9 22.7

BAUER Nimr LLC, Maskat-Al Mina, Sultanate of Oman 17.4 7.4

BAUER Emirates Environment Technologies & Services LLC, Abu Dhabi, United Arab Emirates 4.8 4.2

BAUER Technologies South Africa (PTY) Ltd., Cape Town, South Africa -

(sub-group consolidated financial statements) 2.4 3.0

BAUER RESOURCES GHANA LIMITED, Accra, Ghana 2.5 0.8

BAUER Senegal SARL, Dakar, Senegal 0.0 2.5

GWE Tubomin S.A., City of Santiago, Chile 3.3 4.3

BAUER Resources Canada Ltd., Edmonton, Canada - (sub-group financial statements) 1.2 0.1

Other participations of BRE 7.3 7.0

Joint ventures BAUER Umwelt GmbH - (BMU share only) 4.6 2.4


BRE Group total 225.7 189.1

BAUER Aktiengesellschaft, Schrobenhausen, Germany (BAG) 37.1 38.9

Other participations of BAG 2.3 2.6


GROUP TOTAL 1,560.2 1,656.4


III. EARNINGS, FINANCIAL AND NET ASSET POSITION

will not be able to achieve these returns entirely in the coming

year, because similar special effects are not to be expected.

There have been noticeable changes to individual income

statement items. This is chiefly a result of the special influences

described above which are included in the past two business

years.

The individual income statement items are summarized in the

following.

Consolidated revenues rose by 5.4 % against the previous

year (EUR 1,506.0 million) to EUR 1,587.9 million. Without the

described special effects in the previous year and the reporting

year, the increase would have been 2.8 %.

Sales revenues were up slightly by 0.2 % compared to the

previous year (EUR 1,375.7 million) at EUR 1,379.0 million.

Changes in inventories increased by 8.9 % from EUR 26.6

million to EUR 29.0 million.

Other capitalized goods and services for own account

increased by 54.8 % from EUR 14.7 million to EUR 22.7 million

due to higher investments in equipment from own production

in 2015.

Other income rose very significantly against the previous

year, from EUR 89.0 million to EUR 157.2 million. The special

earnings already described provided a further significant

boost for this item in 2014 (Oman) and in the completed

business year (joint venture and Spantec). Moreover, the

book profits on asset disposal (EUR 16.4 million) rose by

EUR 11.0 million. 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

GROUP EARNINGS POSITION

The Group earnings position in 2015 was significantly influ-

enced by contradictory developments. The purely operating

result without restructuring expenditures and negative excep-

tional effects identified by the company was positive, although

significantly below the forecast made for the business year.

Many restructuring activities that were necessary in various

areas led to significant expenditure, and thus a considerable,

negative contribution to earnings. In addition, there were

special losses such as in the USA or in Jordan because of

missing drilling orders. On the other hand, the sale of 50 %

of the shares in SPANTEC Spann- und Ankertechnik GmbH

and the joint venture with Schlumberger in the deep drilling rig

business made it possible to achieve significant special results

(at EBIT level) amounting to EUR 77.8 million overall.

All these effects led to a net result for the period of EUR

29.0 million (previous year: EUR 15.7 million).

Comparing the earnings figures with the previous year indicates

that 2014 includes an income item from sale and consolidation

amounting to EUR 36.5 million resulting from the sale of 21 %

of the shares in our subsidiary BAUER Nimr LLC in Oman.

EBIT increased from EUR 76.4 million to EUR 90.7 million.

EBITDA increased by 8.2 % from EUR 171.0 million to EUR

185.1 million, representing 11.7 % (previous year: 11.4 %) 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

significantly against the previous year from 9.0 % to 13.5 % –

in particular due to the special effects. The return on equity

after tax was 6.9 % (previous year: 3.7 %). The return on

sales after tax (relative to the consolidated income statement

revenues) improved from 1.0 % to 1.8 % year-on-year. We

32COMBINED MANAGEMENT REPORTEarnings, fi nancial and net asset position

in EUR million Q1 2015 Q2 2015 Q3 2015 Q4 2015 Full year 2015

BAUER Group 409.101 371.258 414.498 461.555 1,656.412

Construction 193.470 176.437 194.519 178.436 742.862

Equipment 173.821 159.565 163.205 256.492 753.083

Resources 54.251 47.830 75.118 44.410 221.609

Other/Consolidation -12.441 -12.574 -18.344 -17.783 -61.142

Trend in total Group revenues by quarter


Earnings, fi nancial and net asset position

Write-downs of inventories due to use reflect the use

of rental equipment made available to our customers. This

equipment 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 correspond-

ingly 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 transactions. The write-downs due to use

decreased by 16.4 % to EUR 13.2 million during the year

under review.

Other operating expenses rose by 19.0 % from EUR

230.5 million to EUR 274.2 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 described under “Other income”,

which contributed significantly to an increase in the item

at EUR 29.3 million. Without the cost changes caused

by exchange rate fluctuations, the rise in other operating

expenses would have been 6.2 %.

Financial income declined from EUR 7.1 million to EUR 5.0

million. Financial expenses declined from EUR 45.1 million to

EUR 42.0 million. Overall, this results in a decrease in the

financial result, which is to be explained by the better interest

conditions.

The share of the profit or loss of associated companies

accounted for using the equity method totaling EUR 2.7

million was EUR 3.2 million above the previous year. The

increased by EUR 16.2 million to EUR 50.8 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 undertake exchange

rate hedging which rules out the possibility of foreign curren-

cy gains or losses as far as possible. The countering item in

an amount of EUR 58.5 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 experi-

enced overall foreign currency losses of EUR 7.7 million in the

year under review. The significant exchange rate fluctuations

during 2015 – with considerable positive and negative effects

depending on the currency – were the cause of these earnings.

Cost of materials increased by 0.4 % to EUR 752.5 million

in the year under review. 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 5.9 % to EUR 376.1

million – a higher rate than the consolidated revenues. The

rise is largely explained by higher personnel expenses in our

major projects and social plan expenditure as a result of

restructuring measures.

Depreciation of fixed assets increased slightly by 3.0 % to

EUR 81.1 million. This is chiefly due to the higher number of

equipment in the Construction segment.

in EUR million Q1 2015 Q2 2015 Q3 2015 Q4 2015 Full year 2015

BAUER Group 1.233 14.758 20.390 54.342 90.723

Construction 4.861 5.536 1.997 1.522 13.916

Equipment -0.887 9.313 16.159 74.856 99.441

Resources -2.918 -0.298 2.033 -18.624 -19.807

Other/Consolidation 0.177 0.207 0.201 -3.412 -2.827

EBIT trend by quarter

34COMBINED MANAGEMENT REPORTEarnings, fi nancial and net asset position

extent. The reasons for the considerable rise over recent

years following the financial crisis are detailed below:

The level of the net debt in the Group is largely dependent

on the level of the working capital. 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 building construction

contractors, who work on longer-running projects, we only

sometimes receive advance payments for the construction

project in question meaning that it is very rare for us to

generate a positive cash flow over the term of the project.

Short-running construction contracts – such as we mostly

carry out – require financing across the Group’s many con-

struction sites corresponding to roughly three months’ sales

of the Construction segment. Consequently, settlement always

takes place after the activity has been carried out.

The situation in the Equipment segment is similar. Production

lead times for our specialist machinery are around 12 months.

Since customers usually only order equipment once they have

an actual contract to fulfill, and so expect short delivery lead

times from us, we are forced to hold stocks of finished

machinery. Moreover, we have a very broad product range

and we need to stock spare parts for our customers world-

wide, leading to a corresponding increase in the need for

financing.

Nevertheless, we judge that the working capital of the BAUER

Group is currently too high in relation to our business 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 special effects. Furthermore, substantial amounts are

significant positive contribution to results is due to the partici-

pation in Oman.

Income tax expense of EUR 27.4 million was EUR 5.3 million

above the previous year’s level. This item includes EUR 6.2

million of deferred tax expense on valuations in connection

with the foundation of the joint venture with Schlumberger.

Negative result contributions from subsidiaries in individual

countries only have the effect of reducing the tax burden on

the Group if it is possible to establish deferred tax assets on

the basis of positive tax-related earnings planning. In some

cases, this was not possible last year. In future, we expect

an income tax burden of between 30 % and 40 %.

The result attributable to non-controlling interests was

EUR -0.7 million (previous year: EUR 1.2 million).

The result attributable to BAUER AG shareholders was

EUR 29.7 million (previous year: EUR 14.5 million).

GROUP FINANCIAL AND NET ASSET POSITION

With consolidated revenues up 5.4 % on the previous year, the

Group’s net assets increased by 5.2 % from EUR 1,575.1

million to EUR 1,656.9 million. The equity ratio of 27.2 % was

well up on the previous year (26.6 %). The loss in 2013 meant

that the equity ratio fell below 30 %. We are once again aiming

to achieve a value in excess of 30 % in coming years. All

investment and growth plans of the business are aligned

to this target.

The net debt of our business increased again by 3.0 % in

the year under review after a decrease in the previous year.

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

1 EUR corresponds to Average rate

2014

Q1 2015 Q2 2015 Q3 2015 Q4 2015 Average rate

2015

USD 1.3219 1.0740 1.1141 1.1165 1.0892 1.1039

GBP 0.8028 0.7234 0.7084 0.7371 0.7350 0.7236

RUB 51.5000 62.4155 62.3326 73.2499 80.4168 68.6566

CNY 8.1575 6.6572 6.9100 7.0967 7.0724 6.9434

Exchange rate trend 2015


Earnings, fi nancial and net asset position

turing 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, about two thirds

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

Equipment segment. On the other hand, about two thirds of

the technical equipment and machinery item is attributable

to the Construction segment.

• Some 40 % of the raw materials and supplies item is

linked to the machinery manufacturing operations of the

Equipment segment.

• More than 90 % of the work in progress and finished

goods and stock for trade item relates to the Equipment

segment, with a small percentage attributable to the Con-

struction 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.

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

material changes should be noted:

On the Assets side:

• Intangible assets declined by EUR 7.0 million. The

main reduction concerns development costs which were

transferred to the joint venture with Schlumberger. The

corresponding development costs for large deep drilling

rigs are thus no longer in the basis of consolidation.

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 indebtedness of the business.

We are aware that the Group’s higher financing requirements

place greater weight on the question of our self-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 184.2

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 2015, it was possible to move the

net debt to EBITDA ratio to a somewhat better level at 3.59,

representing an improvement compared to the previous year

(3.78). 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 2015 year-end at EUR 193.5 million. The covenants

on them stipulate net debt to EBITDA ratio thresholds between

3.75 and 5.0.

2014 2015

Net debt/EBITDA 3.78 3.59

EBITDA/net interest coverage 4.49 4.99

Equity ratio in % 26.6 27.2

Covenants trend

The syndicated loan agreed in 2014 amounting to EUR 450

million, to which the named thresholds also apply, will still run

until April 2017. We will carry out the refinancing process in

the current year.

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 machinery manufac-

36

• Receivables from construction contracts (PoC) de-

creased by EUR 2.7 million to EUR 129.5 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 32.5 million to EUR

343.9 million.

• Other current financial assets increased by EUR 8.8

million to EUR 28.9 million. The main reason is the reas-

signment of a receivable from other non-current financial

assets.

• Cash and cash equivalents increased by EUR 5.6 million

to EUR 47.4 million. Attempts are made to minimize this

figure at the year-end by appropriate liquidity management.

On the Equity and Liabilities side:

• Equity increased significantly by EUR 32.3 million to EUR

451.2 million. Factors contributing positively to this change

were the net result for the period (EUR 29.0 million), currency

fluctuations (EUR 7.8 million) and the interest-related

adaptation in provisions for pensions netted against the

associated deferred tax assets (EUR 4.7 million). Changes

in the basis of consolidation (EUR 4.3 million) and dividend

payments (EUR 3.1 million) had a reducing effect.

• Land, land rights and buildings declined by EUR 22.3

million to EUR 184.2 million. The main influencing factor

was the incorporation of BAUER Manufacturing LLC, USA,

and thus the plant in Conroe, into the joint venture. Other-

wise, only relatively small building projects were undertaken

during the financial year or smaller buildings sold.

• Technical equipment and machinery decreased by

EUR 18.9 million to EUR 187.3 million. The reduction is

largely due to disinvestments in Jordan. Basically, 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.

Property, plant and equipment and investment property

were reduced overall by EUR 42.6 million to EUR 404.0 million.

• Investments accounted for using the equity method

increased by EUR 89.6 million to EUR 132.6 million. In this

case, the companies included in the joint venture with

Schlumberger were accounted for at the equity method as

well as our residual share amounting to 40 % in SPANTEC

Spann- und Ankertechnik GmbH both totaling up to EUR

90.9 million. The corresponding market values were derived

from the capital inpayments and purchase prices of our

particular partners.

COMBINED MANAGEMENT REPORTEarnings, fi nancial and net asset position

Assets Equity and liabilities

Non-current assets

EUR 618.2 million (37.3 %)

(2014: EUR 594.8 million (37.8 %))

Current assets

EUR 991.3 million (59.8 %)

(2014: EUR 938.5 million (59.6 %))

Liquid funds

EUR 47.4 million (2.9 %)

(2014: EUR 41.8 million (2.6 %))

EUR 1,656.9 million EUR 1,656.9 million

Equity

EUR 451.2 million (27.2 %)

(2014: EUR 418.9 million (26.6 %))

Non-current debt

EUR 533.9 million (32.2 %)

(2014: EUR 523.3 million (33.2 %))

Current debt

EUR 671.8 million (40.6 %)

(2014: EUR 632.9 million (40.2 %))

37

• Owing to the effects set out under “Group earnings posi-

tion”, earnings before tax of EUR 56.4 million were made

compared to earnings of EUR 37.8 million in the previous

year.

• Depreciation of fixed assets increased slightly by EUR 2.4

million, and contributed EUR 81.1 million to the inflow of

funds from ongoing business activity.

• The other non-cash transactions and results of deconsoli-

dations contain effects from deconsolidations amounting

to EUR 77.9 million (previous year: EUR 36.5 million).

• The increase in trade receivables resulted in a capital tie-up

of EUR 38.8 million.

• The increase in inventories burdened the operating cash

flow to the tune of EUR 38,0 million.

• The other current and non-current liabilities changed by

EUR -34.8 million compared to the previous year.

Cash flow from investment activities totaled EUR -37.5

million, decreasing by EUR 10.0 million below the previous

year’s figure, especially due to higher proceeds from the sale

of fixed assets.

The outflow of funds from financing activities was EUR 9.1

million. The main factors influencing this were repayments

of loans and liabilities to banks amounting to EUR 159.2

million and interest payments of EUR 38.6 as well as new

indebtedness to banks in the amount of EUR 213.4 million.

• Non-controlling interests decreased by EUR 7.2 million

to EUR 12.4 million. The main factors were the changes

caused by the sale of shares in SPANTEC Spann- und

Ankertechnik GmbH and a reassignment to the majority

capital concerning the Site Group for Services and Well

Drilling Ltd. Co.

• The non-current portion of liabilities to banks increased

from EUR 364.8 million to EUR 376.6 million.

• Long-term provisions for pensions decreased by EUR

4.1 million to EUR 112.3 million. The reduction is largely due

to the return to an increase in the discount rate at 2.35 %

(previous year: 2.0 %). The annual injection from ongoing

pension commitments counteracted this reduction.

• Other non-current financial liabilities decreased from

EUR 10.0 million to EUR 4.4 million.

• The current portion of liabilities to banks increased

from EUR 266.5 million to EUR 297.7 million. Financing

increased by EUR 43.0 million overall in terms of current

and non-current liabilities to banks.

• Trade payables increased by EUR 16.0 million to EUR

185.0 million. When it is sensible to do so, we use all

discounting opportunities.

• Other current financial liabilities decreased by EUR

13.6 million to EUR 12.1 million. This is largely due to

liabilities from foreign exchange forward contracts.

The ratio of net assets to consolidated revenues decreased

slightly from 104.6 % to 104.3 %.

Net cash from operating activities shown in the cash flow

statement decreased substantially from EUR 115.4 million

to EUR 32.4 million. The following factors contributed to this

change:

COMBINED MANAGEMENT REPORTEarnings, fi nancial and net asset position

38ZUSAMMENGEFASSTER LAGEBERICHTEinzelabschluss BAUER Aktiengesellschaft

39

• Other operating expenses rose by EUR 31.0 million. The

main reasons for this significant rise are the payments by

BAUER AG for the restructuring measures in the subsidiaries

of BAUER Resources GmbH.

• The operating result deteriorated by EUR 30.9 million to

EUR -31.1 million.

• The net result for the year with EUR -25.2 million is EUR

31.1 million below the previous year. The unappropriated

net profit decreased significantly from EUR 33.3 million to

EUR 5.6 million.

The payment of dividends to shareholders is based on the

unappropriated net profit of BAUER AG as the parent com-

pany, taking into account the Group’s consolidated earnings.

The dividend policy of BAUER AG is one of continuity, mean-

ing 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 the difficult financial year in 2015, the planned

earnings after tax in the Group could only be achieved by

means of exceptional results. We believe it is appropriate to

allow our shareholders to participate in this, so we intend

to pay a small dividend. The Management Board will thus

recommend to the Supervisory Board that it propose a

dividend of EUR 0.15 (previous year: EUR 0.15) to the

shareholders. In order to reduce the burden on the capital

base of BAUER AG which is making the dividend payment,

it has not been possible to increase the dividend in spite

of the fact that higher earnings after tax were achieved in

the Group. Moreover, we are still intensively pursuing the

objective of improving the equity ratio of the Group.

As the Group’s holding company, BAUER AG receives

earnings in particular from its subsidiaries. In 2016, dividend

payments by the subsidiaries will be approximately the same

as in 2015, although no special effects are to be expected.

Consequently, BAUER AG should once again achieve a profit.

The annual report combines the Group management report

and the management report of BAUER AG as the parent

company. The balance sheet and the income statement of

BAUER AG (according to the German Commercial Code,

HGB) will thus be explained at this point.

BAUER AG posted a significant loss in 2015, amounting to

EUR 25.2 million. Extensive restructuring measures in the

Resources segment obliged BAUER AG to undertake share-

holder contributions to subsidiaries amounting to EUR 29.7

million. This measure was taken in order to safeguard the

future business of the segment, and was thus unavoidable.

Furthermore, BAUER AG was burdened by a high injection

into provisions for pensions (EUR 1.6 million). A dividend

payment by BAUER Maschinen GmbH (EUR 4.0 million) and

its own positive contributions to results made it possible to

reduce the loss to EUR 25.2 million.

The following items in the balance sheet and income statement

changed significantly during the completed financial year

compared to the previous year:

Main changes to the balance sheet:

• Receivables and other assets decreased by EUR 7.2

million. This was due to the change in receivables from

affiliated companies amounting to EUR 7.0 million.

• Equity decreased from EUR 161.2 million to EUR 133.5

million. This was caused by the loss for the year amounting

to EUR 25.2 million and the payment of the dividend in 2015

amounting to EUR 2.6 million.

• Liabilities increased from EUR 161.9 million to EUR 184.2

million. The main factor responsible for this was growth in

liabilities to banks by EUR 17.9 million, due to the financing

activity of BAUER AG for the Group. Liabilities to affiliated

companies increased by EUR 3.6 million.

Main changes to the income statement:

• Sales revenues, primarily related to charging of administra-

tive services to subsidiaries, increased by EUR 2.0 million

to EUR 32.1 million.

COMBINED MANAGEMENT REPORTFinancial Statements of BAUER Aktiengesellschaft

IV. FINANCIAL STATEMENTS OF BAUER AKTIENGESELLSCHAFT

It has now become a tradition that customers and partners have come to especially appreciate: In April, the BAUER Maschinen Group

organized its in-house exhibition, presenting all kinds of new and further developments as well as tried-and-tested technology.

40COMBINED MANAGEMENT REPORTSustainability

V. SUSTAINABILITY

SUSTAINABILITY IN THE BAUER GROUP

Taking the slogan “BAUER’s Triple A”, the BAUER Group has

defined its most important action areas: health, safety and

environment, quality and ethics as well as performance. The

slogan is based on the highest grade awarded by rating

agencies when they evaluate the strength of a company.

We have introduced many measures for the benefit of our

employees and customers in the field of health, safety and

environment. Besides this, we seek to do justice to the

expectations of our customers by offering a constantly

perfected product range and top-quality services. In doing

so, we treat each other with respect and communicate on

an open partnership basis with the diverse stakeholder

groups. Performance, meaning the exertion of our corporate

economic power, is the key to the continued future develop-

ment of the company. Our goal is to achieve the highest

grades – the A’s – in all three areas.

EMPLOYEES

Our employees make the company what it is. Every single one

of them jointly contributes to the success of the BAUER Group

with their performance and their commitment. We owe thanks

to our employees in 2015 for being able to look back on 225

years of experience at Bauer.

Employee-related data

The companies of the BAUER Group employed an annual

average of 10,738 employees all over the world (previous year:

10,405). They are divided up as follows:

• Construction segment:

6,243 employees (previous year: 5,777)

• Equipment segment:


• Resources segment:


• BAUER AG and subsidiaries:

300 employees (previous year: 292)

The trend in personnel numbers within the Group was in

line with our expectations. Changes in our subsidiaries were

primarily registered outside of Germany in connection with

international construction projects. Individual contracts often

make major changes possible.

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

struction segment is subject to the greatest fluctuation,

3,664

23910,253

6,350

3,835 3,9484,050

240 24824510,264 10,405

10,738

6,189 6,209 6,443

12,000

10,000

8,000

6,000

4,000

2,000

02012 2013 2014 2015

12,000

10,000

8,000

6,000

4,000

2,000

02012 2013 2014 2015

2,952

1,578

26910,253

5,454

2,998 2,9362,919

1,449 1,4001,276

286 29230010,264 10,405

5,531 5,7776,243

10,738

Employees by employment typeEmployees by segment

Industrial Salaried staff ApprenticesConstruction Equipment Resources Others

The action areas defined under BAUER’s Triple A also

represent the core aspects of sustainability management.


Sustainability

245 apprentices in 2015 (previous year: 248). Most of them

were being trained as industrial or construction mechanics,

electronics technicians, industrial managers or construction

equipment operators. We train young people in some 20

different professions overall.

We offer important opportunities to gain practical experience

even during the years of study. We support Bachelor’s or

Master’s degree students while they prepare their final theses

and offer internships to provide interesting insights into our

business operations. In cooperation with Technische Hoch-

schule (technical college) Ingolstadt, we also offer a dual

study course (i.e. combining theory and industrial practice)

in Mechanical Engineering.

The BAUER Training Center GmbH assists our employees,

customers and partners as well as interested outsiders as a

competent adviser on all questions of further and advanced

training. Its guiding objective is to constantly improve and

professionalize its training and expand its scope in response

to demand. The budget of the BAUER Training Center GmbH

amounted to about EUR 2.5 million in 2015 (previous year:

EUR 2.1 million). A total of 562 (previous year: 475) internal

and external seminars and external conferences were

attended.

Diversity

The employees of the BAUER Group literally come from all

over the world. Our staff included employees from 77 different

nations in 2015 – people from widely varying cultural and

ethnic groups who strive on every continent to achieve our

common goals. They mold our corporate culture with their

different outlooks and viewpoints, experiences and charac-

teristics. The promotion of diversity has therefore been firmly

rooted in our corporate goals for many years. We offer all

persons the same opportunities to contribute to the success

of the company, regardless on their origin, religion, age,

gender or sexual orientation.

In both the hiring and further development of our employees,

we attach great value to an assessment based exclusively on

their personality and qualification. In 2015, approximately 11 %

of the group’s workforce were women – a figure which essen-

tially reflects the technical nature of our business and the small

numbers of women who apply for such careers.

depending on the number of major projects being handled

in specific countries. The greatest increases consequently

occurred in the subsidiaries in Egypt (273 employees), the

United Arab Emirates (273 employees) and the Philippines

(90 employees). In some countries, such as Malaysia and

Indonesia, fewer people were employed during the year under

review than in the previous year because of the weaker state

of the market. The large order backlog led to an overall in-

crease of employees in Construction and primarily involved

personnel recruited for specific projects.

The number of employees in the Equipment segment

decreased slightly. The main share of the decline is attributable

to the Far Eastern plants (9 employees) and our German

subsidiary in Peine (13 employees) One of our key goals is to

retain the loyalty of our core of long-term employees, which

we once more achieved successfully in the past year.

Further personnel reductions were undertaken in the

Resources segment because of restructuring measures,

the reorientation of the segment and the weak market

situation in the mining area. A major share of the decrease

took place in the subsidiaries in Jordan (73 employees) and

the United Arab Emirates (25 employees). Employees in

Germany also had to be reduced.

Training and education

We regard active participation in shaping the future careers of

young people as an important social task. Bauer employed

Employees by region

12,000

10,000

8,000

6,000

4,000

2,000

02012 2013 2014 2015

2,061

542

965

10,253

4,090

726

1,869

2,212 2,290 2,177

612 586 584

950 1,018 1,288

10,264 10,40510,738

4,144 4,158 4,166

762 752 685

1,584 1,601 1,838

Germany Europe (other) Middle East & Central Asia

Far East & Australia Americas Africa

42

RESEARCH AND DEVELOPMENT

The BAUER Group once again invested substantial sums in

developing new construction methods and machinery as well

as for research purposes in financial 2015. The accent here

is on the new and further development of different equipment

for specialist foundation engineering, the matching drilling

tools and add-on units as well as deep drilling technology.

This is flanked by the new development and optimization of

construction site applications and procedures.

Research and development work in the BAUER Group is

organized on a decentralized basis. In companies belonging

to BAUER Maschinen GmbH, each major product group

has its own development unit that concentrates entirely on

the corresponding equipment, such as rotary or anchor

drilling rigs. Within BAUER Maschinen GmbH, the diversified

product range is divided into business areas that constantly

develop their equipment families and ensure innovation in

their area. The central development department develops the

technologies and components of a machine that are used in

several product groups. Basic research work is also located

in the central development department. Development work in

the BAUER Maschinen GmbH subsidiaries is grouped into the

system described above.

Our construction areas also have their own development

capacities. In particular, BAUER Spezialtiefbau GmbH

maintains a department for construction technology which

develops new methods and conducts fundamental research.

To promote research that might be of Group-wide importance,

internal and external orders for research work are placed via

the BAUER Forschungsgemeinschaft (research community).

Simple ideas sometimes give rise to outstanding new tech-

niques that help our companies to achieve technological

advances.

This type of overall organization for research and development

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.

A major focus of equipment development in the past year was

the ValueLine, a range of rotary drilling rigs optimized for kelly

CAPITAL INVESTMENTS

In view of the general economic situation, we kept our capital

investments in 2015 at a relatively low level compared with

previous years, roughly approximating the level of amortiza-

tion. This was made possible by the extensive investments

devoted to our plants in previous years. The pace of techno-

logical progress in our business has accelerated, however, so

that any future increase of our revenues will demand higher

investments once more.

In the Construction segment, further investments were made

in equipment to meet the market demand for ever more power-

ful machinery to handle specialist projects. For years now, we

have seen a trend towards increasingly large-scale international

infrastructure projects which foster growing demand for

specialist foundation engineering works that can only be

carried out by ever-larger machinery. This demands higher

individual investments, but also opens up new market

opportunities for us. We have also concentrated specifically

on investments to equip our construction sites with modern

communications technology.

In the Equipment segment, the investments were chiefly

channeled into modernizing the equipment available to the

production sites.

Investments in the Resources segment in 2015 were also

at a low level. The investments went into the modernization

of existing production systems.

In financial 2015 the BAUER Group invested a total of EUR

91.0 million (previous year: EUR 72.7 million) in intangible assets

and property, plant and equipment. Depreciation of fixed assets

across the Group totaled EUR 81.1 million (previous year: EUR

78.8 million). Write-downs of inventories due to use Group-wide

totaled EUR 13.2 million (previous year: EUR 15.8 million).

Additions to the property, plant and equipment assets of

BAUER AG in the 2015 financial year totaled EUR 6.5 million

(previous year: EUR 2.3 million), against depreciation of EUR

2.9 million (previous year: EUR 2.9 million).

We will again keep investments in balance with amortizations

in 2016.

COMBINED MANAGEMENT REPORTSustainability


Sustainability

the ground while a mixer simultaneously combines

the surrounding soil with cement in the casing’s interior.

This anchors the pile in a stable mixture of sand and cement.

Thanks to its high load-bearing capacity and rapid completion,

the process offers an economical foundation method for

offshore platforms, even when faced with difficult geological

conditions in chalky sand. The noise development in this case

is practically negligible compared to pile-driving technology.

The procedure is therefore particularly suitable for use in

noise-sensitive coastal regions. Bauer offers MIDOS as the

future solution for all types of offshore foundations.

To increase the safety and efficiency of deep geothermal

drilling operations, a concept for the construction of a fully

automated deep drilling rig was worked out in the AUTIG

(Automated Drilling Technique for Deep Geothermal Energy)

research project, which was successfully concluded in 2015.

This enables the number of persons in the working area of the

machine to be reduced in order to improve both the safety

and profitability of the drilling operation. Many concepts and

innovations drawn from the project, such as the ultra-modern

control technology and the high degree of system automation,

also became preconditions for Bauer’s ability to form a joint

venture with Schlumberger to build deep drilling rigs.

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

variety of methods, and to produce modern materials for

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

drilling. A new generation of rotary drilling rigs was introduced.

The middle platform range, which is configured for bored piles

with a diameter of up to 2.5 meters and a drill depth of up to

70 meters, comprises the BG 26 and BG 30. The advantage

of focusing on these two models is that they closely match

each other technically and their components can therefore be

switched between the two.

The core element of the middle platform is the common BT

base carrier, which was entirely designed and constructed by

Bauer. This thoroughly considered modular approach allows

varying equipment sizes to be configured from the machines

of different business areas. The modern and highly functional

base carrier does not just score points for its high safety

standards and very low noise emissions. The large-diameter

hydraulic lines ensure optimal efficiency, which has a direct

effect on the fuel consumption. An integrated service platform

allows for easy, safe access for all types of maintenance work

on the uppercarriage. A grating step, which is integrated into

the door system of the uppercarriage, can be pulled out by

opening the paneling. The lateral paneling then acts as fall

protection. This safety system is the only one of its kind in the

world and sets a new standard in the area of Health, Safety &

Environment. The German sectoral manufacturers’ association

(Verband der Baubranche, Umwelt- und Maschinentechnik

e.V. – VDBUM) has awarded its promotional prize for 2016 to

the system.

In the research area, BAUER Maschinen GmbH was nomi-

nated for the 2016 innovation prize of the annual Bauma

construction equipment fair for its MIDOS technology, which

can be used for various offshore foundations. MIDOS (Mixed

Drilled Offshore Steel) is based on the Mixed-in-Place method,

which is conventionally used for specialist foundation engi-

neering. The method is applied by inserting a steel casing into

2014 2015

Construction Equipment Resources BAUER

Group

Construction Equipment Resources BAUER

Group

Total Group Revenues (in EUR million) 699.0 612.6 248.6 1,560.2 733.8 705.1 217.5 1,656.4

Expenses for R&D (in EUR million) 2.9 23.1 1.9 27.9 2.8 23.0 1.2 27.0

as % of total Group revenues 0.4 3.8 0.8 1.8 0.4 3.3 0.6 1.6

Group employees 5,777 2,936 1,400 10,405 6,243 2,919 1,276 10,738

R&D employees 41 183 22 246 39 186 12 237

Research and development in the BAUER Group

44

As a globally operating company, we bear a special respon-

sibility for our environment. In all aspects of our company,

we therefore place great emphasis on protecting it and

handling natural resources with care. Along with the topics

of health and safety, environmental management at Bauer is

an essential constituent of the Group-wide HSE policy. We

continuously examine the implementation of our environmental

policy in the course of internal audits.

QUALITY

High-quality products, services and equipment are the

precondition for satisfying our customers and the key to our

success. To meet the multi-faceted needs and expectations of

our customers as fully as possible, we place great emphasis

on preserving the high quality standard of our company and

expanding it wherever possible. We focus special attention on

the issues of ethics, safety and health protection, environ-

mental compatibility, profitability and sustainability.

Our quality management system is based on ISO 9001 and

the relevant statutory and industrial 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 challenging goals for them,

giving them sufficient responsibility and recognizing good

performance. Active cooperation is essential to meet our

work targets quickly.

At the beginning of 2015, BAUER Maschinen GmbH submit-

ted to an audit by the American Petroleum Institute (API), the

largest representative body of the oil and gas industry as well

as the petrochemical industry in the USA. For this purpose,

BAUER Maschinen GmbH updated its entire management

documentation and added the API Q1 requirements to the

ISO 9001 standard. This enabled the company to attain API

Q1 certification.

innovation management is practiced with great intensity by all

Group units.

In the Equipment segment we invest a good 3.3 % (including

internal and project-related expenditure) of the corresponding

portion of total Group revenues in research and development.

A staff of 186 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.

Research and development expenditure in the Construction

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

Resources segment 0.6 %. We are investing considerable

further resources to prepare and design construction sites.

HEALTH SAFETY ENVIRONMENT (HSE)

For the BAUER Group, Health, Safety & Environment (HSE)

is an integral element of everything we do in creating and

developing all our products, specialist services, and business

processes. Globally applied HSE standards have enabled us

to create a uniform HSE management system for all compa-

nies in the 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

application of our health, safety and environmental policy is a

central task of the respective managements and is regularly

audited within the Group.

The efficacy of occupational protection measures in our com-

pany is determined to a large extent by the conduct of our

employees. We are consequently committed in many ways to

raise awareness of the occupational safety issue throughout

the Group. We offer regular training courses 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.

COMBINED MANAGEMENT REPORTSustainability


Legal disclosures

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

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 remu-

neration 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 remu-

neration 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 decisi-

on-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 deve-

lopment 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 mem-

bers 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 appli-

cable within the Group within the industry-wide framework

of salary and training remuneration to salaried staff and fore-

men in the construction sector.

REMUNERATION REPORT

The Remuneration Report sets forth the system of remune-

ration 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

Committee. The plenary Supervisory Board approves the

remuneration system for the members of the Management

Board following prior consultations in the Presidial and

Personnel 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 appro-

priate to the duties and performance of the Management

Board member concerned and to the situation of the com-

pany. The remuneration paid to each Management Board

member is composed of non-performance-related com-

ponents, 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 Supervi-

sory 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,

VI. LEGAL DISCLOSURES

46COMBINED MANAGEMENT REPORTLegal disclosures

Remuneration of the Supervisory Board

The Supervisory Board of BAUER AG comprises 12 members.

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,

payable in December of each financial year, plus reimbur-

sement 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

Chairman 1.5 times the amount. The basic remuneration

amounts are increased by 10 % 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 Supervisory

Board receive no performance-related pay.

The net remuneration paid to all the members of the Super-

visory Board in the 2015 financial year totaled EUR 254 thous-

and (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 % 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 con-

solidated 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 pension

provisions, was EUR 1,274 thousand (previous year: EUR

1,150 thousand). Of that total, EUR 1,124 thousand (previous

year: EUR 1,090 thousand) was not performance-related and

EUR 150 thousand (previous year: EUR 60 thousand) was per-

formance-related. The total remuneration includes benefits

in kind arising from the private use of a company car and reim-

bursement of expenses for each member of the Management

Board, as well as 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 155

thousand (previous year: EUR 159 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 5,537

thousand (previous year: EUR 5,531 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 con-

cerned and gauged so as not to exceed the sum of two ye-

ars’ 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 re-

mains 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 % 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 % share in the company.

The pool agreement provisions include binding voting com-

mitments as well as restrictions on the transferability of pool

members’ shares. No other direct or indirect holdings of

BAUER AG share capital exceeding 10 % of the voting

rights are known to the company.

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 manage-

ment board member, director or personally liable sharehol-

der of any other trading company. This ensures that no conflict

arises with the assigned duties of the Management Board

member either in relation to time commitment or to remun-

eration 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, 2015.

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

in EUR ’000 2014 2015

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 18 18

Regina Andel 18 18

Dipl.-Ing. Gerold Schwab 20 20

Reinhard Irrenhauser 18 18

Total * 254 254

* rounded

48COMBINED MANAGEMENT REPORTLegal disclosures

market, the acquisition price (excluding ancillary costs) may

be no more than 10 % above or 20 % below the price de-

termined 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. 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 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 mem-

bers 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-determi-

nation Act (MitbestG) in conjunction with Articles 5 and 6

None of the shareholders have special rights entailing con-

trolling 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

Section 4, subsection 4 of the company’s Articles of Asso-

ciation authorizes the Management Board, 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 ordinary bearer shares

against cash and/or non-cash contributions. 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’ 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 correspon-

ding 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 sub-

scription 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


Follow-up Report

amounts to less than 40 % of the capital shares or voting

rights in BAUER AG. A third party gains control if, overall,

more than 50 % 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 178.5 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 % of voting shares or the majority

of outstanding share capital of 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.

VII. FOLLOW-UP REPORT

No matters of special note occurred after the end of the

financial year.

of the company’s Articles of Association. Pursuant to the

company’s Articles of Association, the Management 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 mem-

bers 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 appointment of a

member of the Management Board for a further maximum

term of office of five years. Any appointment or re-appoint-

ment 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 Associati-

on (amount and division of the share capital) following full or

partial execution of the increase in share capital or on expi-

ration 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

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 sharehol-

ding held by the pooled members of the Bauer family directly

50ZUSAMMENGEFASSTER LAGEBERICHTNachtragsbericht



BASIC PRINCIPLE OF RISK MANAGEMENT

As part of our business activities, we are exposed to risks that

are inseparably linked with our operations. It is impossible to

run a business without taking risks. True risks result from un-

foreseeable events that can bring both hazards and oppor-

tunities along with them. To us therefore, risk management

means not only reducing the hazards but also knowing how

to take advantage of the opportunities. The goals of risk

management are to protect our business objectives, increase

the value of our company and reduce the costs of risk. The

tasks of risk management are to identify, analyze, evaluate

and monitor existing and foreseeable risks along the entire

value chain and devise actions to deal with them. This involves

assessing external risks for our company as well as those

that arise internally. Our risk management is based on a

fundamentally risk-avoiding approach that aims to safeguard

us against impending risks rather than to grasp 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 hand-

ling of risks within the BAUER Group. It defines a uniform

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

improve its efficacy. Furthermore, our auditors annually

review the extent to which our early risk-warning system is

capable of detecting existentially threatening risks in good

time. Their suggestions are incorporated in order to improve

the system. The process steps involved in risk management

are: identification, assessment, 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 supporting

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 by an additional, independent process according

to their nature and significance.

The process of identifying and assessing latent risks is

reviewed biannually at working sessions of the relevant

Group company managements and is implemented jointly

with departmental and central function heads as well as

individual specialists. This process ensures that potential

new and familiar risks and opportunities are submitted for

review at management level. 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.

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 the particular risks lies with the risk managers

of the operative areas.

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 independent simulations

based on random figures (Monte Carlo simulation).

The risk analysis, comprising identification, evaluation and

definition of measures, is carried out at least every six months.

Yearly reports are submitted to the Management Board and

Supervisory Board. The system is continually being updated

and continuously improved both qualitatively and structurally

VIII. RISK AND OPPORTUNITY REPORT

RISK REPORT

Our customer Drill Tech Drilling & Shoring, Inc. decided to use a BG 50 during the demolition of a power plant at Eureka in California.

During work on the site, the gigantic rotary drilling rig achieved a mixing depth of about 52 m – more than has ever before been

achieved with a kelly-guided CSM unit.

52COMBINED MANAGEMENT REPORTRisk and Opportunity Report

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. In ongoing projects, the risks relating to

continuous project controlling and project management are

analyzed; this means they are identified, evaluated and have

measures applied to them.

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

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 potential 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 Construction,

Equipment and Resources segments, thereby pursuing the

aim of greater independence from the economic cycles of the

construction industry.

The Equipment segment’s move into deep drilling and the

manufacture of machinery for mining applications will further

reduce its dependence on the Construction segment. We

class the risks associated with the structure of our business

as medium.

Brands, image, PR

The Bauer brand carries a cachet for purchasers, especially in

the Equipment segment, because it is known for high quality.

Negative influences on our image, whether due to publications

about accidents at work or quality and service defects for

example, can result in falling demand for our machines. We

minimize this risk by, among other measures, our highly

developed quality and HSE management system. We regard

the risk of damage to our image as a moderate one.

Relevance Definition Identified risks

1 Insignificant to low risk Risks with this relevance are identified

in our business2 Medium risk

3 Significant risk

We do not see risks with this relevance

in our business4 Serious risk

5 Critical risk

Relevance scale of the BAUER Group



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. Several of

these enterprises embarked on substantial capacity cutbacks

and layoffs in the course of 2015. A number of Chinese

competitors have already been forced out of market. This

risk is still rated as low in the short term, but medium in the

medium term.

Risks of market development

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 also have

a negative effect on demand for deep drilling rigs and services

for the oil industry, as well as on infrastructure expenditure by

oil-producing countries. 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. All in all, this

hampers equipment sales to Russia.

These issues have created 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.

The Group Management Board and the directors of the three

operating segments routinely consider projections based on

specific scenarios to estimate 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

MARKET RISKS

Selling market risks

It has always been one of our key strategic principles to count-

er 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 markets 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 cushioned negative impacts on the overall

result. Our Resources segment has also already expanded on

an 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 construction

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 construction

machinery were created. The repeated stagnation of the

Chinese construction market since 2012 has seen demand

for new machinery decline, in some cases disproportionately

dramatically. 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.

Despite the overcapacity and associated pressure on margins

in China, we were able to maintain our market position based

on the recognized high quality and still clear technical edge


undertake a write-down. We estimate that the risk of needing

to undertake a write-down on the goodwill is a moderate one.

POLITICAL AND LEGAL RISKS

Compliance

For the BAUER Group, acting responsibly and in keeping with

the law is a fundamental principle underpinning our commer-

cial success, the quality of our products and services and

our sustainable ongoing development. We place the utmost

value in upholding social conventions and in complying 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.

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.

analyses and implemented in full. The risks to the market

development are currently assessed to be moderate.

FINANCIAL MARKET RISKS

Financial stability and liquidity

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 interest

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.

The risk of financial instability and supply shortages on inter-

national financial markets was countered by concluding a

syndicated loan agreement. This agreement ensures the

medium-term liquidity supply for the Group of companies, and

is an important tool for alleviating major risks on the financial

markets.

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 slight.

Participations, acquisitions, financial assets

The valuations of the shares in associated companies contain

goodwill items, the values of which are subject to the risk from

future company developments. If these future expectations do

not come to fruition as expected, it will become necessary to



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. In spite of all the precautions taken

when carrying out orders, there is still a risk of management

errors in major projects. All the listed risks are subjected to a

threat and opportunity analysis at project level in the Con-

struction and Resources segments.

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 dili-

gence, the possibility cannot be definitively ruled out that, on

finally billing the customer, lower earnings will ultimately be gen-

erated. 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 additional

works and supplements. Clients’ representatives are increas-

ingly 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 professional 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 supplemen-

tal requirements pose a residual risk to the company. The risks

arising from supplemental requirements are rated as medium.

RISKS OF SUPPORTING PROCESSES

Information technology (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 low.

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.

Moreover, there is a risk of incurring additional costs in this

context due to development and design mistakes necessi-

tating 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.

Acquisition, sales and contract negotiations

The risks of miscalculating quotations and of warranting

technical characteristics which cannot be fulfilled are minimized

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. We also estimate

the reliance on subcontractors or individual suppliers in the

Construction and Resources segments as a low risk.

Production and order fulfillment

Technical failures arising from design errors or miscalculations

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 em-

ployees. Consequently, we can assess the risks resulting

from this as low.


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 annual financial statements and the year-end consolidated

financial statements are audited by auditors in accordance

with the applicable legal requirements and standards, and are

reviewed by the Supervisory Boards established in the various

business units as part of their duty of supervision. These

figures and information reports are regularly submitted to the

Management Board and the Supervisory Board of BAUER AG

from Group 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 struc-

turing 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

2016 financial year. The management sees no change in the

overall risk situation, in view of future business prospects

among other factors.

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 of the parent company as well as of

BAUER Spezialtiefbau GmbH, BAUER Maschinen GmbH and

BAUER Resources GmbH are managed centrally at headquar-

ters in Schrobenhausen. This allows business transactions to

be handled in a standardized way.

The accounting functions for the other subsidiaries are usually

managed by decentralized in-house commercial departments.

In this, our subsidiaries are assisted by external accountants

and auditors as well as by the investment controllers of BAUER

Spezialtiefbau GmbH, BAUER Maschinen GmbH and BAUER

Resources GmbH, so as to ensure properly qualified financial

reporting in accordance with the relevant national or interna-

tional accounting regulations. Furthermore, statements are

subjected to auditing in accordance with the relevant national

regulations.

In order to draw up the monthly Group reporting as well as

quarterly statements and the consolidated financial statements

according to international accountancy regulations (IFRS), the

subsidiaries use a uniform Group chart of accounts.

The individual financial statements are drawn up either based

on an accounting guideline applicable throughout the Group

or are applied to the regulations of the accounting guideline by

Group Accounting in the course of adjustment entries by the

corresponding accountancy regulations in national law.

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 management budgets.

Our judgment and experience tells us that self-monitoring and

establishing dual control principles are the effective elements

of our system of internal controls.

57

sector in particular benefits from an enormous need to catch

up with backlogs in the rising economic countries, but also

in the established industrial nations. This applies not only to

traffic infrastructure but also to residential and public buildings,

dams or flood protection facilities. Moreover, building is taking

place in urban areas where space is increasingly at a premium.

This demands progressively higher buildings, which calls for

extensive foundation work. In addition, stationary and flowing

traffic must be ever-increasingly transferred below ground,

which also leads to growth in specialist foundation engineering.

Opportunities for deep drilling technology have increased

further through the establishment of a joint venture with

Schlumberger. In the joint venture, a new generation of highly

modern deep drilling rigs for use with oil and gas drilling rigs

in geothermal drilling will be developed and constructed for

Schlumberger and third parties. The partners involved, Bauer

and Schlumberger, anticipate that the joint venture could soon

achieve revenues of more than EUR 100 million and open up

great opportunities for the future. Overall, we are convinced

that deep drilling technology will make an important positive

contribution to our results in future.

In the Resources segment, we have succeeded in expanding

out of our traditional sphere of pollution remediation into indus-

trial process water treatment, and thus attracting customers in

the automotive, chemicals, oil and gas industries. The demand-

ing quality requirements combined with 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

products and services.

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 being 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.

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 oppor-

tunities set out in the following relate to all our segments.

STRATEGIC OPPORTUNITIES

Over the years, the Group has built up expertise through

handling projects in areas associated with its core business,

and has developed synergy effects from this which today

shape the Resources segment.

These include the environmental technology business which

deals with treating contaminated ground and groundwater,

and has taken on an increasingly international character since

its beginnings more than 20 years ago. A similar business

grew out of the first use of specialist foundation engineering

equipment for diamond exploration. Today, bore holes are dug

for all kinds of natural resources. In the water business, we

also develop high-quality products for expanding wells and for

close-to-the-surface geothermal energy applications, as well

as for treating and purifying drinking water, process water and

industrial waste water.

By merging these three areas into the Resources business

segment, we are addressing some of the most important

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 the internationalization of the Re-

sources segment, we are utilizing the experience of our long-

standing organizational units in the other two segments.

In the event of a regional market downturn, our network

strategy in the Construction segment will enable us to relocate

our capacities rapidly to another country and continue ope-

rations at the new location. This leads to speed and cost

advantages in our project business.

MARKET OPPORTUNITIES

Constantly increasing urbanization and growing infrastruc-

tural needs are leading to increasingly large-scale building

schemes, which offer many interesting project opportunities

to the construction industry – and especially the companies in

the specialist foundation engineering sector. The construction

COMBINED MANAGEMENT REPORTRisk and Opportunity Report

OPPORTUNITY REPORT


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 supplemental work

ordered by the client. On projects involving high potential

for changes, this can result in a substantial improvement

in earnings. We attempt to exploit such opportunities by

professional management of supplemental requirements in

the course of the construction project.

OVERALL OPPORTUNITIES

We are seeing a steady improvement in our opportunities on

global markets as our Resources segment becomes increas-

ingly well established. This is also being boosted by new,

innovative products. Our strategy of systematically interlinking

our mainly small and medium-sized globally operating 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 oppor-

tunities for our Group’s worldwide business increasing once

again in 2016.

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, imple-

mentation 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.

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.

In the Kingdom of Bhutan, on the banks of the Mangdechhu River, a new hydro-electric power station is being built. Bauer built

a total of 4,575 m² diaphragm wall so as to control the ingress of groundwater from the diverted river into the excavation pit.

>>>

59

in the future. The losses that have been made in some areas

were all caused by factors which do not represent a long-

lasting burden on the business – as is the case with the

significant amounts invested in the reorientation. In two

projects in particular, some mistakes exacerbated by general

conditions led to significant losses which have imposed a

burden on us for several years. To cope with the financial

crisis, we embarked on numerous relatively small business

operations post-2008 and continued them for some time

despite the fact that, regrettably, they did not prove to be

promising in some cases; and now we have been forced to

terminate them incurring significant costs.

The boom years of 2007 and 2008 obliged us to invest in

expanding our capacities. The new plants were completed

just when the financial crisis broke. Since then, the market

situation and fiercer competition have prevented us from

achieving adequate capacity utilization. However, the deve-

lopment in sales over the past few years has already improved

the situation pleasingly, and the joint venture with Schlum-

berger for manufacturing deep drilling rigs represents a

significant opportunity for us to achieve future success.

Our business operations in Construction as well as in Equip-

ment and in plant engineering offer the advantage in such a

difficult phase that each project represents a new success

opportunity. Individual problems in the past are not carried

forward into the future; in fact, they can even be seen as an

opportunity because the experience is channeled into new

projects. As a result of our significant efforts to keep cost

structures in our companies as lean as possible, our global IT

structure as well as the international experience possessed

by our management team, we believe we are well prepared

to lead the company into the future in combination with a

stable earnings trend. Our efforts in this regard are concen-

trated on our innovative product range and our special

services with their prospects for future success.

In view of the general conditions, it is our opinion that our

business model will prove robust in 2016 as well. In our

planning, we have attempted to evaluate all known threats

and opportunities, thinking through both positive and negative

scenarios as effectively as possible. Overall, we are convinced

that our planning for 2016 is realistic. This applies to all

segments and to the Group overall.

As was already explained in the Business Report, the BAUER

Group operates in markets which display good underlying

growth rates. As a result of the enormous pent-up demand

for construction activities existing in the world, we are of the

opinion that this situation will not change over the coming

years, in spite of the turbulence that is affecting global

markets. Nevertheless, it will be necessary to respond to

shifts in the market focus by displaying great flexibility. For

example, it is to be expected that construction activities

and, as a result, demand for new machinery in the oil and

gas-dependent markets will decrease in the next few years.

Both of these ought to increase in the established industria-

lized nations, however, as a result of the positive effects of

low oil prices. These countries will be able to invest in new

construction projects because their financial position will

have improved again.

Our excellent order backlog at the end of 2015 indicates that

we are successfully exploiting the opportunities presented by

the markets. Furthermore, there are many interesting major

projects all over the world which will enable us to maintain

this high level. In the Construction and Resources segments,

we are able to achieve relatively high order backlogs as a

result of the longer project durations.

The order backlog in the Equipment segment is rather

low, however. This is not set to change in coming years.

Equipment customers interested in special construction

machinery tend only to order machines when they have a

particular project to carry out. In addition, there is still significant

overcapacity in the market – specifically among Chinese manu-

facturers – meaning that finished machines have to be stored

awaiting sale. Given the short order lead times, it is difficult

to accomplish equipment planning in line with future demand –

above all because components and parts have got to be

ordered several months ahead of production. We are respon-

ding to this development with a corresponding platform

strategy and appropriate standardization measures, and in

this way we are attempting to make production more flexible

and reduce the inventory level. We assume that this situation

will be a feature of our business for some time to come – even

though the Chinese manufacturers have now started to correct

their strategy and cut capacities.

One important factor in the forecast is of course whether

failures in past years will influence the prospects of success

COMBINED MANAGEMENT REPORTForecast Report

IX. FORECAST REPORT

60COMBINED MANAGEMENT REPORTForecast Report

in EUR million Actual 2015 Forecast 2016

Total Group revenues 1.656 ~ 1.650

EBIT 90,7 ~ 75

Net profit or loss 29,0 ~ 20 - 25

Comparison: 2015 actual/2016 forecast

any major acquisitions at present, as we are intending to

strengthen our capital base especially over the years ahead.

Based on the information available to us at the time of com-

pleting this report, we forecast that total Group revenues

for the 2016 financial year will be around EUR 1.65 billion.

We forecast earnings after tax of about EUR 20 to 25

million and an EBIT of about EUR 75 million.

We are continuing to plan for growth of between 3 % and 8 %

in total Group revenues for the coming years.

Nevertheless, we are obliged to point out that specialist

foundation engineering and our other businesses are ex-

posed 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 extensive

and 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 financial losses. We are continuously

working hard to optimize our approach to risk, so as to avoid

the issues that have impacted on us over recent years.

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 additional

profit.

We see no need to change our strategic objectives at present.

The strategy comprising the Construction, Equipment and

Resources segments will continue to dictate the direction

of the Group over the coming years. We are not planning

In July 2015, BAUER Umwelt GmbH was appointed general contractor by Roche Pharma AG for the remediation of perimeters 1/3 north-west of the former Kesslergrube landfill. In the course of the remediation, work started on a temporary shipping pier on the River Rhine in autumn 2015.

>>>

We still expect to make a loss in the first quarter, in line with

seasonal norms, though it will be balanced out over the

following quarters. The trend over the full year will thus be

in line with patterns in our business seen in earlier times.

61

exceptional results. We believe it is appropriate to allow our

shareholders to participate in this, so we intend to pay a

small dividend. The Management Board will thus recommend

to the Supervisory Board that it propose a dividend of EUR

0.15 (previous year: EUR 0.15) to the shareholders. In order to

reduce the burden on the capital base of BAUER AG which

is making the dividend payment, it has not been possible to

increase the dividend in spite of the fact that higher earnings

after tax were achieved in the Group. In the medium term,

the dividend quota should be about 25 to 30 % of the

reported earnings 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. These assumptions

and estimates always entail a degree of uncertainty and risk,

which may mean that actual performance differs from that

forecast.

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, 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 sig-

nificant change to the balance sheet structure is to be ex-

pected 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 %.

Following the difficult financial year in 2015, the earnings

after tax in the Group could only be achieved by means of

COMBINED MANAGEMENT REPORTForecast Report

Schrobenhausen, March 31, 2016

BAUER Aktiengesellschaft

Prof. Thomas Bauer

Chairman of the Management Board

Dipl.-Betriebswirt (FH) Hartmut Beutler Dipl.-Ing. Heinz Kaltenecker

62

Global economy stable despite numerous crises

2015 was a crisis-ridden year in many aspects with the

Russia/Ukraine conflict, China's problems, the oil price

situation, Brazil's issues, currency fluctuations, international

terrorism and the wave of refugees, and all of these topics

have a major impact on global developments.

It is almost a miracle that the global economy is withstanding

all of the problems. It grew very steadily by 3.1 % in 2015.

The US market showed positive development as well as

the Eurozone, which grew by 1.6 %. However, there is also

another side: Russia suffered severely under the sanctions

and the depreciation of the ruble and the economy shrank

by 3.7 %. China's weak economy created uncertainty at

stock exchanges around the globe. Growth in this country

dropped to a mere 6.9 %, with forecasts indicating a con-

tinuing downward trend.

The oil price slumped severely by almost 35 % in 2015. The

surplus in the market negatively affected the major oil com-

panies and equipment suppliers alike as well as those coun-

tries depending on oil, especially in South America and the

Middle East.

Despite the stable development in Europe, political tension

has increased in this region. The influx of refugees provoked a

return to national demarcation, which triggered discussions

about open borders and the joint currency.

All that is left are low interest rates. The European Central

Bank is sticking to its low interest policy and even has

extended the bond purchasing program. The US Federal

Reserve increased the Fed Rate by 0.25 % at year-end.

However, this cannot yet be regarded as the start of an

interest rate turnaround, but rather as pressure to have to

deliver on the Federal Reserve's own announcements.

Bauer share rises in a positive stock market environ-

ment

The Bauer share developed relatively positively in 2015, rising

by 30.3 % during the course of the year. This performance is

roughly on par with the SDAX (+26.6 %). The DAX (+9.6 %),

on the other hand, fell behind.

Based on the opening price of EUR 13.35, the share gained

in the first weeks, reaching an interim high at EUR 18.00 in

mid-March. After a short sideward move, the share followed

the general stock market trend as from mid-April and dropped

below the EUR 15 mark by mid-June.

The Bauer share was removed from the SDAX effective June

22. Both market capitalization and liquidity were no longer

sufficient for a listing on this index.

The share recovered quickly from mid-June to mid-July and

reached a second interim high at EUR 17.72. The indices went

through a serious slump in August, which also impacted the

Performance of the Bauer Share 2015

in %

The Bauer Share

01.01.2015 01.04.2015 01.07.2015 01.10.2015 31.12.2015 31.03.2016

50

40

30

20

10

0

(10)

(20)

(30)

BAUER AG DAX MDAX SDAX

63

Bauer share. The share had dropped to a mere EUR 14.29 on

August 24.

During the subsequent recovery, the share made a clear break

from the indices and gained significantly, reaching the annual

high at EUR 19.20 at the end of October.

The share then fell slightly again until year-end. During the

last trading days, it fell below the EUR 18 mark and closed

the year at EUR 17.40.

Continuous exchange with stakeholders

Investor relations primarily focus on continuous communication

with the capital market and shareholders.

In particular, the Management Board participates in road-

shows such as in Scandinavia, USA and Germany. The

members of the Management Board also talk to German

and foreign investors at capital market conferences.

The number of analysts reporting on Bauer dropped to four

by the end of 2015. The reason for this development were

the banks' restructuring measures and the share's exit from

the SDAX. All analysts recommended to hold the share at

year-end, and the average target price was EUR 17.50.

Particularly our private shareholders used the Annual General

Meeting in June to obtain information from Prof. Thomas Bauer.

Around 400 shareholders and guests attended the meeting

in Schrobenhausen.

Dividend policy

Our dividend strategy is fundamentally oriented to the goals

of providing shareholders with an appropriate and fair parti-

cipation in the success of the business, maintaining continuity,

and safeguarding the equity ratio.

2015 was yet another difficult financial year. The budgeted

earnings after tax were only generated through exceptional

results, with numerous expenses on the opposite. We believe

it is appropriate to allow our shareholders to participate

in this, so we intend to pay a small dividend.

The Management Board will thus recommend to the Super-

visory Board that it propose a dividend of EUR 0.15 (previous

year: EUR 0.15) to the shareholders at the Annual General

Meeting on June 23, 2016.

THE BAUER SHARE

KEY FIGURES 2012 2013 2014 2015

Earnings per share (in EUR) 1.44 -0.99 0.85 1.73

Dividend per share (in EUR) 0.30 0 0.15 0.15 *

Dividend total (in EUR ’000) 5,139 0 2,570 2.570 *

Year-end price (in EUR) 19.32 18.81 13.35 17.40

Annual high (in EUR) 26.50 23.05 20.04 19.20

Annual low (in EUR) 16.13 17.33 11.75 13.85

Market capitalization at year-end (in EUR ’000) 330,971 322,234 228,699 298,079

Average daily trading volume (units) 48,584 39,017 26,984 25,570

* Proposed; subject to the consent of the Annual General Meeting to be held on June 23, 2016

ISIN / WKN DE0005168108 / 516810

Trading symbol B5A

Trading segment Frankfurt, Prime Standard

Share indexes CDAX, GEX, DAXPlus Family

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 %

Share information

More information:

http://ir.bauer.de

64

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 2015 financial year.

Declaration of Conformity 2015

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 December

8, 2015 the Management Board and Supervisory Board

passed the following declaration of conformity:

"Since the last declaration in December 2014 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 ("Bun-

desanzeiger"), 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 remunera-

tion 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 Supervisory Board members will perform

their duties responsibly.

2. Contrary to Article 4.1.5, there is no appropriate inclusion

or participation of women arranged for in the filling of

management positions. 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 remune-

ration and the retirement 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 Annual 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 for mem-

bers of the Management Board or Supervisory Board and

no time limit to the length of membership in the Supervisory

Board are specified. Expertise and performance as well as

independence cannot be determined on the basis of rigid

age limits or length of membership. Upon the appoint-

ment of new Management Board and Supervisory Board

members or upon prolongation of their membership at

the end of the statutory term of office, the persons in the

Supervisory Board and the Annual General Meeting who

bear responsibility for selecting suitable members will take

account of the age and the independence of the chosen

person when reaching their decision, alongside assessing

their skills.

5. Contrary to Article 7.1.2, the consolidated financial state-

ments at December 31, 2014 were made public within

100 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.

Furthermore, BAUER Aktiengesellschaft already conforms

largely to the additional suggestions of the German Govern-

ment Commission on the Corporate Governance Code.

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

Corporate Governance ReportAND DECLARATION ON CORPORATE GOVERNANCE

65

consolidated financial statements and the parent company

and Group Management Report, as well as proposals for

the appropriation of net profit 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 12 members,

with half of them being appointed by the employees and the

other half by the Annual General Meeting. 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.

The Supervisory Board of BAUER AG currently comprises two

women and 10 men. In the future, however, the Supervisory

Board of a listed company will have to be comprised of at

least 30 % women and at least 30 % men pursuant to Section

92 (2) of the German Stock Corporation Act (Aktiengesetz;

AktG) The shareholders and employee representatives both

rejected the total fulfillment of this gender quota, so that the

minimum quota for the elections to the Supervisory Board

of BAUER AG due in the first half of 2016 must be fulfilled

separately by the shareholders and the employees.

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.

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.

The Management Board is assigned independent responsibility

for managing the company. Notwithstanding the joint overall

responsibility of the Management Board, each member of

the Management Board 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 Management Board.

The Chairman of the Management Board coordinates the work

of the Management Board. The Management 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 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 remunera-

tion 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 transac-

tions 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

CORPORATE GOVERNANCE REPORT

66

The Presidial and Personnel Committee comprises the

Chairman of the Supervisory Board as well as one Supervi-

sory Board member elected by the shareholder representa-

tives 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 remune-

ration 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. It also discusses corporate governance matters.

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 sugge-

stion of the shareholders' representatives. The Chairman of

this committee is an independent member of the Supervisory

Board possesses specific knowledge and experience in the

application of accounting policies and audit 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, and

assess their independence. 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 profit available

for distribution and consulting on the audit reports with the

auditors. It also reviews the interim 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 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 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 disadvanta-

ged 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 commit-

tees constituted from among its members. The Supervisory

Board subcommittees and their roles and procedures are laid

down in the rules of procedure governing the Supervisory

Board. The chairmen of the various committees submit regular

reports on their work to the plenary Supervisory Board

meetings.


67

An appropriate system of risk management and of internal

controls is established within the company. The essential

features of the control and risk management system are

set out in the Risk Report forming part of the Combined

Management Report. 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.

SHAREHOLDERS AND TRANSPARENCY

The company provides regular and timely information relating

to the position of the company and in respect of material

changes to the business. The company's website contains

comprehensive information (particularly the interim reports and

annual financial statements as well as Annual General Meeting

documentation). In addition, electronic distribution systems

and the German Federal Gazette ("Bundesanzeiger") are

used to ensure timely communication with our shareholders

and with the public at large.

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 45 to 47 of the company's Annual Report.

Members of the Management Board at the year-end held a

total of 1,742,022 (previous year: 1,742,022) shares in the

company as per December 31, 2015. This corresponded

to 10.17 % (previous year: 10.17 %) of the share capital of

BAUER AG. On the same date, members of the Supervisory

Board held a total of 1,310,531 (previous year: 1,310,531)

Bauer shares, corresponding to 7.65 % (previous year: 7.65 %)

of the company's share capital. No company share option

schemes or similar stock incentive programs existed during

the past financial year.

The Mediation Committee, constituted pursuant to the

German Co-determination Act, comprises two shareholder

representative and two employee representative members

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

2015 financial year is published in the company's Annual

Report on pages 68 to 69. This report is thereby quoted by

way of reference.

Determination of the female quota in the Management

Board and executive levels

The Supervisory Board determined a female target quota of 0

% for the Management Board until June 30, 2017. This target

has been met by the current Management Board structure.

The Management Board specified a female target quota

of 22.2 % rounded in the top executive level beneath the

Management Board until June 30, 2017 and 27.3 % rounded

until June 30, 2017 for the second executive level beneath

the Management Board. These targets were also fulfilled at

the end of the reporting year. The statutory provisions on

determining the targets are regarded as critical for reasons

of equal opportunity.

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 Association.

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 Management

Board employs the Corporate Management Manual imple-

mented throughout the Group as its central instrument of

management. This manual also stipulates the framework

guidelines and management principles applicable for the

Group as well as its basic values. A code of conduct has

also been published on the company's website to ensure

that all BAUER Group employees conduct themselves in

compliance with the rules.


68

The Supervisory Board regularly monitored the work of the

Management Board during the 2015 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 Super-

visory 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 and one conference call were

held during the reporting year. Apart from Mr. Feiger, who

attended less than half of the meetings, all members of the

Supervisory Board attended all of the meetings of the Super-

visory Board.

Several times last year, the Supervisory Board discussed the

enforcement of supplementary claims for major projects and

the development of earnings in the segments and individual

subsidiaries. The current business performance, order backlog

development and development in the markets in the Con-

struction, Equipment, and Resources segments as well as

the strategic alignment were discussed at all Supervisory

Board meetings.

At the annual financial review meeting in April relating to the

annual parent company and consolidated financial statements

for the 2014 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 Management Board with

regard to the appropriation of earnings. At the same meeting,

the Supervisory Board also discussed compliance with

financial performance indicators specified in loan agreements,

the year-end forecast, and the invitation to the Annual General

Meeting. The remuneration of the Management Board and

extension of the term of office of Prof. Dr-Ing. E.h. Thomas

Bauer, member of the Management Board, was also on the

agenda, and the efficiency review was performed with a

positive outcome.

At the second meeting in the financial year, the Supervisory

Board focused on business performance, determined a target

percentage of female members of the Management Board

and discussed the gender ratio of the Supervisory Board.

The opportunities and risks related to the conclusion of a joint

venture with Schlumberger Group were discussed during the

conference call. The September meeting dealt with matters

such as various major projects, the deep drilling rig business

performance, and the internal control system. The expected

development of earnings was also discussed. The participants

approved the medium-term plan with regard to the consolida-

ted balance sheet.

At the last Supervisory Board meeting in December of the

reporting year, the members particularly discussed the con-

solidation measures in the Resources segment, the joint

venture with Schlumberger, and the tender for the audit of

financial statements. 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 2015

69

Work carried out by the subcommittees

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 as well as one conference call. 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, the appointment of managing directors

at the subsidiaries, the extension of the contract of service

of Management Board member Prof. Dr.-Ing. E.h. Thomas

Bauer, and the succession plans for the Management Board.

The Audit Committee held two conference calls and three

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 scrutinized the Management Board's

proposal regarding the appropriation of earnings. It also

prepared the appointment of the auditor, taking account of

the examination into the latter's impartiality. The strategy in

the segments was also discussed, the risk management

and Internal Audit reviewed, and improvements to the ethics

management system considered.

Auditing of 2015 annual and consolidated financial

statements

The annual financial statements of BAUER AG to December

31, 2015 and the consolidated financial statements of the

Group, as well as the Combined Management Report, in-

cluding 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 meeting

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

annual financial statements of BAUER AG and the con-

solidated financial statements of the Group were approved

by the Supervisory Board at its financial review meeting on

April 13, 2016. 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

appropriation 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 2016

The Supervisory Board

Dr. Klaus Reinhardt

Chairman of the Supervisory Board

REPORT OF THE SUPERVISORY BOARD

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Income statement of BAUER Aktiengesellschaft

Balance sheet of BAUER Aktiengesellschaft as at december 31, 2015

72

73

Balance sheet and income statement of BAUER Aktiengesellschaft in accordance with HGB (German Commercial Code)

The island nation of Mauritius is getting a new dam for a water storage reservoir, which will safeguard drinking water supplies.

Almost exactly a year to the day after work started on the EUR 35 million Bagatelle dam project, Bauer built the last panel of the

cut-off wall in May 2015.

72

Income statement of BAUER Aktiengesellschaft

in EUR ’000 12M/2014 12M/2015

1. Sales revenues 30,046 32,065

2. Other capitalized goods and services for own account 8 0

3. Other operating income 5,749 5,013

35,803 37,078

4. Cost of materials -1,052 -1,056

5. Personel expenses -15,450 -16,553

6. Amortization of intangible assets and depreciation of property, plant and equipment -2,874 -2,875

7. Other operating expenses -16,667 -47,693

-36,043 -68,177

Operating result -240 -31,099

8. Income from participations 4,950 3,960

9. Other interest and similar income 7,950 9,949

10. Interest and similar expenses -5,914 -6,988

Financial result 6,986 6,921

Result from operating activities 6,746 -24,178

11. Extraordinary expenses -141 -141

12. Income tax expense -666 -826

13. Other taxes -18 -19

14. Net result for the year 5,921 -25,164

15. Profit carried forward 27,429 33,350

16. Dividend payment 0 -2,570

17. Net earnings available for distribution 33,350 5,616

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Balance sheet of BAUER Aktiengesellschaft as at december 31, 2015

Assets

in EUR ’000 Dec. 31, 2014 Dec. 31, 2015

A. Fixed assets

I. Intangible assets 2,616 3,693

II. Property, plant and equipment 3,557 5,808

III. Financial assets 116,646 116,745

122,819 126,246

B. Current assets

I. Inventories

Raw materials and supplies 71 44

II. Receivables and other assets

(of which receivables from affiliated companies)

205,920

(204,598)

198,682

(197,556)

III. Cash at banks 960 273

206,951 198,999

C. Prepayments and deferred charges 641 1,061

D. Deferred tax assets 603 1,080

331,014 327,386

Equity and liabilities

in EUR ’000 Dec. 31, 2014 Dec. 31, 2015

A. Equity

I. Subscribed capital 73,001 73,001

II. Capital reserve 39,781 39,781

III. Revenue reserves 15,100 15,100

IV. Unappropriated net profit

(of which profit carried forward: EUR 33,350 thousand; previous year: EUR 27,429 thousand) 33,350 5,616

161,232 133,498

B. Provisions

(of which provisions for pensions)

7,841

(6,600)

9,662

(8,165)

C. Liabilities

(of which liabilities payable to affiliated companies)

161,941

(34,942)

184,226

(38,543)

331,014 327,386

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Consolidated financial statements in accordance with IFRS

In Schonungen, a town in the Lower Franconia region of Bavaria, BAUER Umwelt GmbH and BAUER Spezialtiefbau GmbH worked

together on the decontamination of a hazardous waste site. The work took place over an area of about 11,500 m² and included soil

remediation work as well as special foundation work with replacement bores.

Consolidated income statement

Consolidated statement of comprehensive income

Consolidated statement of cash flows

Consolidated balance sheet at december 31, 2015

Consolidated statement of changes in equity

Notes to the consolidated financial statements

General notes

Segment reporting

Explanatory notes to the income statement

Explanatory notes to the balance sheet

Other disclosures

Major participations of the Group

Assurance by the legal representatives

Audit opinion

76

76

77

78

80

81

81

106

108

113

142

160

164

165

76

Consolidated income statement and consolidated statement of comprehensive income

Income statement

in EUR ’000 Appendix 12M/2014 12M/2015

1. Sales revenues (7) 1,375,679 1,378,991

2. Changes in inventories 26,622 28,994

3. Other capitalized goods and services for own account (8) 14,696 22,748

4. Other income (9) 89,022 157,213

CONSOLIDATED REVENUES 1,506,019 1,587,946

5. Cost of materials (10) -749,247 -752,532

6. Personel expenses (11) -355,250 -376,118

7. Depreciation and amortization

a) Depreciation of fixed assets (12) -78,781 -81,143

b) Write-downs of inventories due to use (13) -15,789 -13,195

8. Other operating expenses (14) -230,526 -274,235

OPERATING RESULT (EBIT) 76,426 90,723

9. Financial income (15) 7,096 4,972

10. Financial expenses (16) -45,149 -41,982

11. Share of the profit or loss of associated companies accounted for using the equity method -572 2,672

EARNINGS BEFORE TAX 37,801 56,385

12. Income tax expense (17) -22,075 -27,393

NET RESULT FOR THE PERIOD 15,726 28,992

of which attributable to shareholders of BAUER AG 14,481 29,715

of which attributable to non-controlling interests 1,245 -723

in EUR 12M/2014 12M/2015

Basic earnings per share (18) 0.85 1.73

Diluted earnings per share (18) 0.85 1.73

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 12M/2014 12M/2015

Net result for the period 15,726 28,992

Income and expenses which will not be subsequently reclassified to profit and loss

Revaluation of commitments arising from employee benefits after termination

of employment -32,264 6,543

Deferred taxes on that revaluation with no effect on profit and loss 9,046 -1,819

Income and expenses which will be subsequently reclassified to profit and loss

Market valuation of derivative financial instruments -5,323 1,024

Included in profit and loss 6,497 -834

Deferred taxes on financial instruments with no effect on profit and loss 54 -53

Differences from currency translation 10,545 6,733

Other comprehensive income -11,445 11,594

Total comprehensive income 4,281 40,586

of which attributable to shareholders of BAUER AG 2,360 40,891

of which attributable to non-controlling interests 1,921 -305

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Consolidated statement of cash flows

in EUR ’000 12M/2014 12M/2015

Cash flows from operational activity:

Earnings before tax 37,801 56,385

Depreciation of fixed assets 78,781 81,143

Write-downs of inventories due to use 15,789 13,195

Financial income * -7,096 -4,972

Financial expenses * 45,149 41,982

Other non-cash transactions and results of de-consolidations * -50,853 -85,281

Dividends received 450 1,168

Result from the disposal of fixed assets -4,773 -15,371

Result from associated companies accounted for using the equity method * -572 2,672

Change in provisions 314 1,474

Change in trade receivables 20,634 -38,763

Change in receivables from construction contracts 24,309 13,872

Change in receivables from concession arrangements 2,309 0

Change in other assets and in prepayments and deferred charges -10,506 4,648

Change in inventories -37,316 -38,028

Change in trade payables -21,114 13,174

Change in liabilities from construction contracts 18,551 16,874

Change in other current and non-current liabilities 22,776 -12,068

Cash and cash equivalents generated from day-to-day business operations 134,633 52,104

Income tax paid -19,235 -19,679

Net cash from operating activities 115,398 32,425

Cash flows from investment activity:

Acquisition of property, plant and equipment and intangible assets -69,119 -82,027

Proceeds from sale of fixed assets 26,854 53,803

Consolidation scope-related change in financial resources -5,187 -9,268

Net cash used in investing activities -47,452 -37,492

Cash flows from financing activity:

Raising of loans and liabilities to banks 202,306 213,371

Repayment of loans and liabilities to banks -237,761 -159,173

Repayment of liabilities from finance lease agreements -11,074 -7,804

Disbursements for the acquisition of additional shares in subsidiaries 0 610

Dividends paid -2,872 -3,143

Interest paid -42,952 -38,593

Interest received 5,462 3,851

Net cash used in financing activities -86,891 9,119

Changes in liquid funds affecting payments -18,945 4,052

Influence of exchange rate movements on cash 3,563 1,519

Total change in liquid funds -15,382 5,571

Cash and cash equivalents at beginning of reporting period 57,217 41,835

Cash and cash equivalents at end of reporting period 41,835 47,406

Change in cash and cash equivalents -15,382 5,571

* Previous year adjusted

78

Consolidated balance sheet at december 31, 2015

Assets

in EUR ’000 Appendix Dec. 31, 2014 Dec. 31, 2015

A. NON-CURRENT ASSETS

I. Intangible assets (19)

1. Concessions, industrial property rights and similar rights and values and licenses

to such rights and values 10,156 9,350

2. Capitalized software costs 39 11

3. Capitalized development costs 24,245 18,094

34,440 27,455

II. Property, plant and equipment and investment property (19)

1. Land, land rights and buildings 206,576 184,232

2. Investment property 804 784

3. Technical equipment and machinery 206,209 187,313

4. Other equipment, factory and office equipment 25,107 26,365

5. Payments on account and assets in course of construction 8,213 5,662

446,909 404,356

III. Investments accounted for using the equity method (19) 42,906 132,553

IV. Participations (19) 3,613 3,613

V. Deferred tax assets (20) 30,973 27,190

VI. Other non-current assets (21) 7,492 7,722

VII. Other non-current financial assets (22) 28,420 15,355

594,753 618,244

B. CURRENT ASSETS

I. Inventories (23)

1. Raw materials and supplies 155,334 155,718

2. Finished goods and work in progress and stock for trade 283,850 288,911

439,184 444,629

II. Receivables and other assets (24)

1. Receivables from construction contracts (PoC) 132,159 129,478

2. Trade receivables 311,417 343,933

3. Receivables from enterprises in which the company

has participating interests 67 3,272

4. Payments on account 4,304 5,364

5. Other current assets 28,603 33,381

6. Other current financial assets 20,100 28,901

496,650 544,329

III. Effective income tax refund claims 2,661 2,300

IV. Cash and cash equivalents (25) 41,835 47,406

980,330 1,038,664

1,575,083 1,656,908

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Equity and liabilities

in EUR ’000 Appendix Dec. 31, 2014 Dec. 31, 2015

A. EQUITY (26)

I. Subscribed capital 73,001 73,001

II. Capital reserve 38,404 38,404

III. Other revenue reserves and unappropriated net profit 287,903 327,437

Equity of BAUER AG shareholders 399,308 438,842

IV. Non-controlling interests 19,617 12,368

418,925 451,210

B. NON-CURRENT DEBT (27)

I. Liabilities to banks 364,771 376,628

II. Liabilities from finance lease agreements 13,032 12,652

III. Provisions for pensions (28) 116,358 112,284

IV. Other non-current liabilities 5,959 7,262

V. Other non-current financial liabilities 10,013 4,414

VI. Deferred tax liabilities (20) 13,123 20,664

523,256 533,904

C. CURRENT DEBT (29)

I. Liabilities

1. Liabilities to banks 266,533 297,677

2. Liabilities from finance lease agreements 7,453 8,945

3. Advances received for orders 19,579 10,392

4. Liabilities from construction contracts (PoC) 48,471 49,882

5. Trade payables 168,974 184,991

6. Liabilities to enterprises in which the company

has participating interests 205 1,017

7. Other current liabilities 68,632 71,503

8. Other current financial liabilities 25,712 12,078

605,559 636,485

II. Provisions

1. Effective income tax obligations 9,317 16,955

2. Provisions (30) 15,880 16,113

3. Current portion of provisions for pensions (28) 2,146 2,241

27,343 35,309

632,902 671,794

1,575,083 1,656,908

80

Consolidated statement of changes in equity from january 1, 2014 to december 31, 2015

in EUR ’000 Other revenue reserves

and unappropriated net profit

Subscribed

capital

Capital

reserve

Revenue

reserves

Foreign

currency

translation

Hedging

transactions

reserve

Non-

controlling

interests Total

As at Jan 1, 2014 73,001 38,404 294,686 -6,492 -2,593 22,809 419,815

Net result for the period 0 0 14,481 0 0 1,245 15,726

Exchange differences on translation

of foreign subsidiaries 0 0 0 9,641 0 904 10,545

Revaluation of commitments arising

from employee benefits after termina-

tion of employment 0 0 -31,956 0 0 -308 -32,264

Market valuation of derivative financial

instruments 0 0 0 0 1,184 -10 1,174

Deferred taxes with no effect on profit

and loss 0 0 8,959 0 51 90 9,100

Total comprehensive income 0 0 -8,516 9,641 1,235 1,921 4,281

Changes in scope of consolidation 0 0 0 0 0 -3,199 -3,199

Dividend payments 0 0 0 0 0 -2,872 -2,872

Other changes 0 0 -58 0 0 958 900

As at Dec. 31, 2014 73,001 38,404 286,112 3,149 -1,358 19,617 418,925

As at Jan. 1, 2015 73,001 38,404 286,112 3,149 -1,358 19,617 418,925

Net result for the period 0 0 29,715 0 0 -723 28,992

Exchange differences on translation

of foreign subsidiaries 0 0 0 6,359 0 374 6,733

Revaluation of commitments arising

from employee benefits after termina-

tion of employment 0 0 6,487 0 0 56 6,543

Market valuation of derivative financial

instruments 0 0 0 0 186 4 190

Deferred taxes with no effect on profit

and loss 0 0 -1,804 0 -52 -16 -1,872

Total comprehensive income 0 0 34,398 6,359 134 -305 40,586

Changes in scope of consolidation 0 0 -3,253 0 0 -1,079 -4,332

Dividend payments 0 0 -2,570 0 0 -573 -3,143

Other changes * 0 0 3,065 1,401 0 -5,292 -826

As at Dec. 31, 2015 73,001 38,404 317,752 10,909 -1,224 12,368 451,210

* Non-controlling interests were reclassifi ed to revenue reserves in other changes due to system-related matters

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GENERAL INFORMATION

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 (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, Equip-

ment and Resources.

BAUER AG is listed in the Prime Standard of the German stock market.

1. BASIS OF PREPARATION

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. BASIS OF CONSOLIDATION

The basis 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 rights share of over

50 %. When assessing whether control is exerted, the existence and effect of potential voting rights currently exercisable

or convertible are considered.

122 companies were consolidated into the Group’s annual financial statements in 2015 (previous year: 120). In the financial year,

six (previous year: none) companies were included in the basis of consolidation for the first time. Since the beginning of 2015, four

(previous year: four) companies were de-consolidated due to merger, sale and discontinuation of operations. Joint ventures are

not included in the number of consolidated companies due to the short-term nature of these projects.

Notes to the consolidated financial statementsGENERAL NOTES

82 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 2015

The following overview shows the number of subsidiaries by segment (without construction joint ventures):

If the quality assessment of a new subsidiary finds that the company is immaterial in terms of the operative segment or Group,

it may not be included in the consolidated financial statements.

Consequently, the non-inclusion of any one company must not result in material changes to the Group's net asset, financial and

earnings position, 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, or the

option of 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. This related to 15 companies as at

December 31 (in the previous year: 15). Joint ventures were likewise 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 Group balance sheet date. NuBa Equipment Ltd. prepares its annual financial statements for

September 30 as Nuna Logistics Limited another shareholder, also prepares its annual financial statements for this date. BAUER

Corporate Services Private Limited, India, and BAUER Equipment India Private Limited prepare their annual financial statements

for 31 March due to local statutory requirements.

Main business Head-

quarters

Number of com-

panies with 100 %

share

Number of compa-

nies with a share

less than 100 %

Number of

associated

company

Number of joint

ventures

Total

Dec. 31,

2014

Dec. 31,

2015

Dec. 31,

2014

Dec. 31,

2015

Dec. 31,

2014

Dec. 31,

2015

Dec. 31,

2014

Dec. 31,

2015

Dec. 31,

2014

Dec. 31,

2015

Construc-

tion seg-

ment

Specialist Foun-

dation Engi-

neering, Project

Development

Global 27 28 8 8 12 12 0 0 47 48

Equipment

segment

Equipment

Manufacture

and Sales

Global 24 22 10 8 1 1 0 3 35 34

Resources

segment

Environment and

Environmental

Technology

Global 25 25 6 6 2 2 2 3 35 36

'Other'

segment

Central

servicesGlobal 3 4 0 0 0 0 0 0 3 4

Total 79 79 24 22 15 15 2 6 120 122

83NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 2015

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Changes at subsidiaries:


On September 15, 2015, SCHACHTBAU NORDHAUSEN GmbH outsourced the Structural Steel Engineering division to

SCHACHTBAU NORDHAUSEN Stahlbau GmbH. Up to this point, the Structural Steel Engineering division had been reported

under the Equipment segment. This outsourcing had no other effect on the interim consolidated financial statements of

BAUER AG.

On December 17, 2015, BAUER (NEW ZEALAND) LIMITED was discontinued and therefore de-consolidated.

Equipment segment

In the second quarter of financial year 2015, 100 % of the shares in BAUER Mexico S.A. de C.V. were sold to BAUER Resources

GmbH (97.5 %) and PURE Umwelttechnik GmbH (2.5 %). These companies are reported in the Resources segment. This sale

had no effect on the consolidated financial statements of BAUER AG.

On June 30, 2015, BAUER Cimentationes y Equipos S.A. was discontinued and therefore de-consolidated.

In the third quarter of financial year 2015, BAUER Maschinen GmbH acquired the remaining 10 % share in the non-controlling

interests of MAT Mischanlagentechnik GmbH and since then holds 100 % of the shares in MAT Mischanlagentechnik GmbH.

In addition, MAT Mischanlagentechnik GmbH, the transferor entity, was merged with BAUER Maschinen GmbH and discontinued

in the process. The company Immenstadt is continued under the name of MAT Mischanlagentechnik, a branch office of BAUER

Maschinen GmbH.

In the fourth quarter of financial year 2015, BAUER Equipment Australia Pty. Ltd. and BAUER Equipment India Private Limited

were included in the consolidated financial statements for the first time. The company was previously not consolidated owing to its

minor importance.

Also in the fourth quarter of 2015, BAUER Machinery USA Inc. was included in the consolidated financial statements.

Disposals

By agreement dated September 9, 2015, BAUER Maschinen GmbH sold 50 % of its shares in SPANTEC Spann- & Ankertechnik

GmbH to SPANTEC Invest GmbH, effective September 15, 2015.


These are the effects of the sale:

a) Consideration received

in EUR ’000 Sep. 15, 2015

Consideration received 12,509

in EUR ’000 Sep. 15, 2015

Quid pro quo consideration received 12,509

Net assets surrendered -10,666

Non-controlling interests 1,079

Fair value of the 40 % at-equity investment retained 10,200

Total income from the sale of shares 13,122

in EUR ’000 Sep. 15, 2015

Non-current assets

Intangible assets 448

Property, plant and equipment and investment property 425

Other non-current assets 47

Other non-current financial assets 4,592

Current assets

Inventories 1,304

Receivables and other assets 3,960

Cash and cash equivalents 2,143

Non-current debt

Provisions for pensions -253

Deferred tax liabilities -235

Current debt

Trade payables -1,066

Other current liabilities -443

Effective income tax obligations -256

Net assets sold 10,666

b) Disposal of assets and liabilities due to the loss of control

c) Total effects from the sale of the shares in SPANTEC Spann- & Ankertechnik GmbH

The total effect is not included in other income and stated separately in Article 9 as an effect of the de-consolidation and transition

consolidations.


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in EUR ’000 Sep. 15, 2015

Sales price paid for with cash and cash equivalents 0

Less: cash and cash equivalents disposed of as part of the sale -2,143

Total net outflow of cash and cash equivalents disposed of as part of the sale -2,143

in EUR ’000 Dec. 15, 2015

Non-current assets

Intangible assets 4,166

Property, plant and equipment and investment property 97

Other non-current assets 3,536

Current assets

Inventories 217

Receivables and other assets 1,221

Cash and cash equivalents 153

Non-current debt

Provisions for pensions -406

Other non-current financial liabilities -23

Deferred tax liabilities -36

Current debt

Trade payables -233


Other current financial liabilities -510

Net assets disposed 7,792

d) Net outflow of cash and cash equivalents from the sale of the shares in SPANTEC Spann- & Ankertechnik GmbH

The at-equity investment retained was measured at fair value due to the sale of the shares in SPANTEC Spann- & Ankertechnik

GmbH. The fair value was determined from the discounted transaction price for the shares at the time they were sold. This

method is part of level 3 of the fair value hierarchy stated in IFRS 13.

Cash capital increase

By notarization dated December 15, 2015, Schlumberger GmbH, Vechta acquired shares in BAUER Deep Drilling GmbH

as part of a cash capital increase and the share of BAUER Maschinen GmbH in share capital decreased to 51 % as a result.

The joint venture agreement states that all decisions regarding material activities require the approval of the shareholders.

It is therefore a joint venture which is to be accounted for using the at equity method. The net assets of BAUER Deep Drilling

GmbH were derecognized due to the loss of control and the retained shareholding recognized at fair value.

These are the effects:

a) Disposal of assets and liabilities due to the loss of control


The total effect is not included in other income and stated separately in Article 9 as an effect of the deconsolidation and transition

consolidations.

The at-equity investments retained in BAUER Deep Drilling GmbH were recognized at fair value. The fair value was determined

from the payment of the cash capital increase at the time of the transaction. This method is part of level 3 of the fair value

hierarchy stated in IFRS 13.

Cash contribution

By contract dated December 15, 2015, Schlumberger Technology Corporation, Houston, invested cash in BAUER Manufacturing

LLC, to acquire a share of 49 %. As a result, the share of BAUER Machinery USA Inc., in share capital decreased to 51 %. The joint

venture agreement states that all decisions regarding material activities require the approval of the shareholders. It is therefore a

joint venture which is to be accounted for using the at equity method. The net assets of BAUER Manufacturing LLC were

derecognized due to the loss of control and the retained shareholding recognized at fair value.

b) Effect from the loss of control of BAUER Deep Drilling GmbH

in EUR ’000 Dec. 15, 2015

Cash and cash equivalents received 0

Less: cash and cash equivalents disposed of -153

Total net outflow of cash and cash equivalents -153

c) Changes in net cash and cash equivalents due to the cash capital increase

in EUR ’000 Dec. 15, 2015

Net assets disposed -7,792


Total effect 28,272


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5in EUR ’000 Dec. 15, 2015

Cash and cash equivalents received 0

Less: cash and cash equivalents disposed of -7,558

Total net outflow of cash and cash equivalents -7,558

in EUR ’000 Dec. 15, 2015

Net assets disposed -7,593


Foreign currency translation differences -488

Total effect 36,364

in EUR ’000 Dec. 15, 2015

Non-current assets

Property, plant and equipment and investment property 26,630

Current assets

Inventories 14,613

Receivables and other assets 237

Cash and cash equivalents 7,558

Non-current debt

Liabilities to banks -7,629

Other non-current financial liabilities -17

Current debt

Liabilities to banks -10,099

Liabilities from construction contracts (PoC) -17,697

Trade payables -5,470


Net assets disposed 7,593

These are the effects of the cash contribution:

a) Disposal of assets and liabilities due to the loss of control

b) Effect from the loss of control of BAUER Manufacturing LLC

c) Changes in net cash and cash equivalents due to the cash contribution

The total effect is not included in other income and stated separately in Article 9 as an effect of the de-consolidation and transition

consolidations.

The at-equity investments retained in BAUER Manufacturing LLC were recognized at fair value. The fair value was determined

from the payment of the cash contribution at the time of the transaction. This method is part of level 3 of the fair value hierarchy

stated in IFRS 13.


Resources segment

On March 20, 2015, BAUER Resources Australia Pty. Ltd., was discontinued and de-consolidated.

In the first quarter of financial year 2015, BAUER Resources Maroc S.A.R.L, was included in the Group financial statements

for the first time. The company was previously not consolidated owing to its minor importance.

On August 28, 2015, BAUER Resources Hungary Kft. was discontinued and de-consolidated.

In the fourth quarter of financial year 2015, BAUER Resources Senegal S.A.R.L was included in the Group financial state-

ments for the first time. The company was previously not consolidated owing to its minor importance.

'Other' segment

On December 7, 2015, BAUER Maschinen GmbH sold all of its shares in BAUER Mietpool GmbH to BAUER Aktiengesellschaft.

It was also resolved to re-name BAUER Mietpool GmbH to WW Beteiligung GmbH. BAUER Mietpool GmbH had been

reported under the Equipment segment until the date of the sale.

3. CONSOLIDATION POLICIES

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 are a part of earnings and net assets which is not allocable to the Group. Earnings pertaining to

these interests are therefore recognized separately from the share in earnings allocable to the shareholders of the parent

company in the income statement. In the balance sheet, these earnings are recognized in equity, separately from the equity

allocable to the shareholders of the parent company. The acquisition of non-controlling interests and changes to the share-

holding of the parent company in a subsidiary which do not lead to a loss of control are reported as equity transactions in the

balance sheet.

4. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS

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. Assumptions and

estimates are primarily used for determining the useful life of fixed assets, discounted cash flows during impairment tests,

and assessing the feasibility of deferred tax assets, recoverability of receivables and the recognition of provisions for legal

proceedings, pensions and other benefit commitments, taxes, warranties and guaranties. The actual values may differ from

the estimates made.


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5. PRINCIPAL ACCOUNTING POLICIES

5.1. Changes in accounting policies

It was obligatory to apply the following standards and interpretations for the first time in the financial year:

• Annual improvements of IFRS, cycle 2011 - 2013

Within the scope of its process for implementing minor improvements in standards and interpretations

(annual improvement process), the IASB published another amendment. This affects the following standards:

• IFRS 1 – First-time Adoption of International Financial Reporting Standards

• IFRS 3 – Business Combinations

• IFRS 13 – Fair Value Measurement

• IAS 40 – Investment Property

Details of the amendments:

• IFRS 1 – First-time Adoption of International Financial Reporting Standards

The amendment to the “Basis for Conclusions” clarifies the meaning of “effective date” in connection with IFRS 1.

If there are two published versions of a standard at the time of transition to IFRS, one current version and one version only

compulsory in the future but subject to voluntary early application, first-time users of IFRS should be able to choose which

version to apply. However, the selected version of the standard then must be applied to all periods reported on in the

annual financial statements, subject to different provisions in IFRS 1.


The amendment re-words the existing exception of joint ventures from the applicability of IFRS 3. This clarifies that the

exception applies to all joint ventures within the meaning of IFRS 11. It also clarifies that the exception only relates to the

annual financial statements of the joint venture or the joint operation itself and not the accounting policies of the parties

involved in the joint venture. The amendment has to be applied prospectively.


IFRS 13.48 permits companies which control a group of financial assets and liabilitieson the basis of their net market or

default risk to determine the fair value of this group in the same manner as market participants would value the net risk

position on the balance sheet date (so-called portfolio exception). The proposed amendment clarifies that this exception

for the determination of fair values relates to all contracts within the area of applicability of IAS 39 – Financial Instruments:

Recognition and Measurement and IFRS 9 – Financial Instruments, even if they do not fulfill the definition of a financial asset

or liability according to IAS 32 – Financial Instruments: Presentation (such as certain contracts for the acquisition and sale

of non-financial items, which can be fulfilled through cash compensation or other financial instruments). The amendment is

implemented prospectively as from the beginning of the financial year in which IFRS 13 was applied for the first time.

• IAS 40 – Investment Property

The amendment clarifies that the areas of applicability of IAS 40 – Investment property and IFRS 3 – Business Combinations

do not depend on one another, i.e. do not cancel each other out at any time. The amendment is always implemented

prospectively for all acquisitions of investment property carried out as from the beginning of the period in which the amend-

ment is applied for the first time, meaning that the previous year's figures do not have to be adjusted. The amendment may

be applied voluntarily to individual previous acquisitions if the information required for these transactions is available.


The effects of the annual improvements to IFRS, cycle 2011 to 2013, do not have any material impact on the consolidated

financial statements of BAUER AG.

• Amendments to IAS 19 – Employee benefits – Employee Contributions

In November 2013, the IASB published an amendment to IAS 19R (2011) – Employee Contributions. The amendment

adds an option with regard to the accounting of defined benefit obligations in which employees (or third parties) participate by

way of obligatory contributions to the standard.

The effects of the amendment to IAS 19 have no significant influence on the consolidated financial statements of BAUER AG.

• Annual improvements of IFRS, cycle 2010 - 2012

Within the scope of its process for implementing minor improvements in standards and interpretations

(annual improvement process), the IASB published another amendment. This affects the following standards:

• IFRS 2 – Share-based Payment


• IFRS 8 – Operating Segments


• IAS 16 – Property, Plant and Equipment

• IAS 38 – Intangible Assets

• IAS 24 – Related Party Disclosures

Details of the amendments:

• IFRS 2 – Share-based Payment

The amendment contains a clarification of the definition of “vesting conditions” by including separate definitions for

“performance conditions” and “service conditions” in Appendix A of the standard. The amendment applies prospectively

for share-based payments granted on or after July 1, 2014.


IFRS 3.40 stipulates that a “purchaser... has an obligation to pay conditional consideration in the form of a liability or equity

based on the definitions of an equity instrument and financial liability in paragraph 11 of IAS 32... or other applicable IFRS”.

As the question of classing conditional considerations as equity or financial liabilities arises only for conditional consideration

which fulfills the definition of afinancial instrument and the question of which “other applicable IFRS” should actually be

consulted for such classification, the wording of IFRS 3.40 was amended so that it only contains a reference to conditional

consideration incurred during business combinations that fulfills the definition of a financial instrumentand the reference to

“other applicable IFRS” will be deleted. The provision of IFRS 3.58 regarding the subsequent measurement of conditional

consideration was also ambiguous as conditional consideration not classed as equity must be recognized at fair value,

but reference is made at the same time to IFRS 9 (and IAS 39), IAS 37, and IFRS, which may not require any recognition

at fair value. The amendment must be applied prospectively to all business combinations acquired on or after July 1, 2014.

91

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 2015

• IFRS 8 – Operating Segments

The following clarifications are added to IFRS 8:

– When combining business segments into reportable segments, the deliberations made by management with regard

the identification of the reportable segments (short description of the combined business segments, economic factors,

which were used as a basis for determining the “comparable economic characteristics” within the meaning of IFRS 8.12)

must be stated, and

– Segment assets only have to be offset and reconciled with the respective balance sheet figures if information on the

segment assets also forms part of the financial information which is reported regularly to theresponsible instance in the

company (chief operating decision maker).


The amendment of “Basis for Conclusion” of IFRS 13 clarifies that the IASB did not aim to remove the option to not apply a

discount to current receivables and liabilities if the effect achieved from this measure is immaterial through the amendment

to IFRS 9 and IAS 39 resulting from IFRS 13.

• IAS 16 – Property, Plant and Equipment / IAS 38 – Intangible Assets

The amendment clarifies how to determine cumulative depreciation and amortization at the time of measurement when

applying the revaluation model in accordance with IAS 16.35 and IAS 38.80 respectively. The transitional provisions

stipulate that the amendment only has to be applied to new measurements performed for the first time in financial years

starting on or after the time of initial application as well as financial years starting in the immediately preceding period.

• IAS 24 – Related Party Disclosures

The amendment expands the definition of “related parties” by companies which provide management services in key

positions for the reporting entity themselves or through one of their group companies without there being any other relation

within the meaning of IAS 24 between both companies (so-called “management entities”).

The effects of the annual improvements to IFRS, cycle 2010 to 2012, do not have any material impact on the consolidated

financial statements of BAUER AG.

Moreover, the IASB and the IFRIC have adopted further standards, interpretations and amendments, as listed below,

some of which were not yet bindingly applicable, or had not yet been recognized by the EU, in financial year 2015.

The BAUER Group had not implemented early application of these standards by December 31, 2015.


Initial application of the standards is planned as from the point they are recognized and adopted by the EU.

Standard/Interpretation/Amendment Applicable

as from the

financial year

Adopted

by the EU

Amendment to IFRS 11; Acquisitions of Interests in Joint Operations 2016 Yes

Amendment to IAS 16 and IAS 38; Clarification of acceptable methods of depreciation and amortization 2016 Yes

Amendment to IAS 16 and IAS 41; Agriculture: Bearer Plants 2016 Yes

IFRS 15; Revenue from Contracts with Customers 2018 No

Amendment to IAS 27, Separate Financial Statements (Equity Method) 2016 No

Amendment to IFRS 10 and IAS 28; Sale or contribution of assets between an investor and its associate

or joint venture 2016 No

Annual improvement of IFRS (cycle 2012 - 2014) 2016 No

Amendment to IFRS 10, IFRS 12, and IAS 28; Application of the investment entities exceptions 2016 No

Amendment to IAS 1; Disclosure Initiative 2016 No

IFRS 14; Regulatory Deferral Accounts 2016 No

IFRS 9; Financial Instruments 2018 No

IFRS 16; Leasing relationships 2019 No

Potential effects of the initial application of IFRS – 15 Revenue from Contracts with Customers, IFRS 16 – Leasing Relationships

and IFRS 9 – Financial Instruments are currently being analyzed IFRS 15 will replace the contents of the IAS 18 “Sales Revenues”

and of the IAS 11 “Construction Contracts”. The new standard does not differentiate between different order and service types,

but instead puts in place uniform criteria of when sales revenues are to be realized in terms of time and period for a service

provision. This is the case when the client attains the power of disposition over the agreed goods and services and can capitalize

on this.

IFRS 16 will replace IAS 17 “Leasing relationships”, IFRIC 4 “Establishing if an agreement contains a leasing relationship”, SIC 15

“Operating leasing relationships – Incentives” as well as SIC 27 “Assessment of the profitability of transactions in the legal form of

leasing relationships”. The new standard does not undertake any classification in finance and operating leasing relationships

for lessees, instead basically all leasing relationships are included in the balance sheet in the form of usage rights and leasing

liabilities. There will be no major changes to lessor accounting compared to IAS 17. In contrast to IAS 17, IFRS 16 stipulates

more extensive details on the appendices.

IFRS 9 (2014) replaces the previous regulations of the IAS 39 on financial instruments. It includes changed regulations on

evaluation categories for financial assets and smaller changes in respect to the evaluation of financial liabilities. A fair value

evaluation which does not affect profit or loss is planned for certain borrowing instruments on the assets side. Additionally, it

includes regulations for impairments of assets and on hedge accounting. The regulations for impairment are initially tailored

to expected defaults. The new regulations on hedge accounting should also make it easier to illustrate risk management

activities in the consolidated financial statements. In this respect, IFRS 9 (2014), among others, expands the underlying

transactions which qualify for hedge accounting and simplifies the efficiency tests. BAUER AG does not expect any of the

other standards to have any material impact on the consolidated financial statements.

5.2. Significant accounting policies

Foreign currency translation

Foreign currency transactions 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 resulting

differences from currency translation are recognized in the provision for currency translation losses stated under equity without

having any effect on profit or loss.


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1 EUR corresponds to Yearly average value Balance sheet date value

2014 2015 2014 2015

Egypt EGP 9.3713 8.5293 8.6984 8.4192

Argentina ARS 10.8648 10.4092 10.4039 14.1386

Australia AUD 1.4708 1.4787 1.4841 1.4894

Bulgaria BGL 1.9559 1.9558 1.9559 1.9558

Chile CLP 757.8911 727.6212 736.1344 772.0222

China CNY 8.1575 7.0724 7.5550 6.9434

Georgia GEL 2.3352 2.5284 2.2604 2.6140

Ghana GHS 4.0594 4.2281 3.9112 4.1725

Great Britain GBP 0.8028 0.7236 0.7818 0.7350

Hong Kong HKD 10.2525 8.5570 9.4373 8.4422

India INR 80.7777 70.9623 77.4729 72.3087

Indonesia IDR 15,669.6389 14,862.6723 15,139.9647 15,046.6072

Japan JPY 140.5059 133.5525 145.2439 131.1173

Jordan JOD 0.9357 0.7822 0.8611 0.7724

Canada CAD 1.4634 1.4239 1.4117 1.5125

Qatar QAR 1.3219 4.0194 4.4307 3.9659

Lebanon LBP 1,995.3273 1,665.1715 4.5653 1,642.5471

Malaysia MYR 4.3329 4.3409 4.2622 4.6730

Morocco MAD 11.1575 10.8081 10.9957 10.7831

Mexico MXP 17.6560 17.6440 17.9234 18.9240

New Zealand NZD 1.6001 1.5914 1.5506 1.5914

Oman OMR 0.5090 0.4250 0.4684 0.4193

Panama PAB 1.3219 1.1039 1.2166 1.0892

Peru PEN 3.7598 3.5349 3.6351 3.7081

Philippines PHP 58.7377 50.3376 54.4041 51.2554

Poland PLN 4.1955 4.1810 4.2902 4.2636

Romania RON 4.4386 4.4403 4.4845 4.5229

Russia RUB 51.5000 68.6566 67.5895 80.4168

Saudi Arabia SAR 4.9585 4.1416 4.5653 4.0886

Sweden SEK 9.1184 9.3339 9.4275 9.1831

Switzerland CHF 1.2124 1.0631 1.2024 1.0822

Singapore SGD 1.6778 1.5198 1.6074 1.5397

South Africa ZAR 14.3577 14.2607 14.0575 16.9831

Taiwan TWD 40.1344 35.0744 38.5999 35.8330

Thailand THB 42.9860 37.9774 40.0245 39.2530

Turkey TRY 2.8937 3.0361 2.8327 3.1815

Hungary HUF 309.9893 309.4268 314.9587 315.2762

United Arab Emirates AED 4.8553 4.0545 4.4685 4.0004

United States of America USD 1.3219 1.1039 1.2166 1.0892

Vietnam VND 28,039.4804 24,240.1659 26,031.7369 24,498.2509

The following table shows the exchange rates applied for the currency translation:


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 acquisition

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 undergoes an annual impairment test is recognized at cost less

accumulated write-downs. Write-ups are impermissible. Gains and losses from the sale of a company comprise the carrying

amount of goodwill allocated to the company to be disposed of.

Assets subject to scheduled depreciation or amortization are tested for impairment if any events or changes of circumstances

indicate that the carrying amount may no longer be achievable.

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 accordance

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.

AssetEconomic 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 ac-

quisition 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 acquisition 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 and previous year. 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”.

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 measurement is derived from current market

prices for similar property. This method is part of level 2 of the fair value hierarchy stated in IFRS 13.

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).


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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. 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.

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 exercise joint control and have claims to the net assets of the

arrangement. The contractually agreed joint management of the arrangement jointly manages the venture. This is only

the case if decisions regarding the material activities require the unanimous approval of the parties involved in the joint

management.

Joint arrangements recognized at equity include joint ventures as well as the Arbeitsgemeinschaften (“ARGE”) consortia specific

to Germany, with there being a difference between ARGE consortia and umbrella ARGE consortia. Both consortia are subject to

the regulations of IFRS 11.

Assets are provided for and invoiced to ARGE provision consortia in the form of employees, material or equipment. The results

generated by the provision consortia are recognized in the balance sheet using the equity method, in accordance with IAS 28.

They are recognized in the balance sheet as investments accounted for using the equity method and as income from investments

accounted for using the equity method in the income statement.

An umbrella consortium, on the other hand, is always recognized without any effect on profit and loss. The compensation claims

between umbrella consortium and customer are identical to the compensation claims between the individual consortia and the

umbrella consortium. The umbrella consortium transfers all payments received from the customer in full to the individual consortia.

BAUER as a partner in an umbrella 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.

Ongoing settlements from and to consortia are recognized in receivables or liabilities to joint ventures.

Joint operations

Joint operations are joint arrangements in which the parties assume joint control and hold rights in the assets as well as

obligations with regard to the liabilities of the arrangement. The contractually agreed joint control of the arrangement jointly

controls the arrangement. This is only the case if decisions regarding the material operations require the unanimous approval

of the parties involved in the joint control.


Any operations performed by the BAUER Group as part of a joint operation relating to its share in the joint operation are

recognized in the following items:

- 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 or services by the joint operation, and

- Its expenses, including its share in any jointly incurred expenses

For transactions such as the acquisition of assets by a Group company, gains and losses are recognized in the amount

of the Group share of other joint operations only once the assets are sold 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.

Financial assets held for sale are non-derivative financial assets classified as available for sale and those not classified as one

of the other categories of financial assetsstated. 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.


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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.

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 excludes

the transaction costs. Financial liabilities are derecognized when they have been paid or the obligation has been extinguished.

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 contract within the area of applicability of IAS 39, which cumulatively meets

the following 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;

• 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 or “FAHfT”

Free-standing derivative financial instruments as financial liabilities are assigned to the following category:

• Financial Liabilities Held for Trading or “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

applicable to the respective residual terms of the derivatives. Items are initially recorded on the trading date. Hedge accounting

was applied in financial 2015.

Inventories

Inventories of finished goods and work in progress and stock for trade as well as raw materials and supplies are valued

at manufacturing cost 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”.


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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. 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 refund.

In addition, deferred tax assets are recognized for future advantages arising from tax losses carried forward, 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

26.90 to 31.69 percent (previous year: 27.82 percent and 30.92 percent). Outside Germany, tax rates of between 0.00 percent

and 38.15 percent are applied (previous year: 0.00 and 38.15 percent).

Provisions

a) Provisions for pensions

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 have terms corresponding 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

comprehensive income” in the shareholders' equity in the period in which they occur. Post-employment expenditure is recognized

in staff cost and the interest portion of the addition to provisions in financial expenses.

Under the contribution-based defined benefit plans, the entity concerned makes payments to pension institutions which

are stated in the personel expenses.

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.


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6. 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.

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 manu-

factured. 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 remedia-

tion 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 exploration 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.


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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 percent 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.

Enlarging the access to the Port of Hamburg has extended the available tidal windows for large ships to enter and leave the port.

Our customer Demler Spezialtiefbau GmbH + Co KG secured the elevated section by a combined wall comprising supporting and

sheet piles. Two BG 39s with two BV 2000s casing oscillators were used.

106

SEGMENT REPORT BY BUSINESS SEGMENT

in EUR ’000

Construction Equipment

2014* 2015 2014* 2015

Total revenues (Group) 725,626 742,862 639,151 753,083

Sales revenues with third parties 646,628 650,762 532,691 548,039

Sales revenues between business segments 16,352 18,568 42,806 52,458

Changes in inventories -105 105 27,898 30,230

Other capitalized goods and services for own account 471 585 6,170 4,979

Other income 25,088 25,680 21,497 113,164

CONSOLIDATED REVENUES 688,434 695,700 631,062 748,870

OPERATING RESULT 26,033 13,916 35,952 99,441

Financial income 2,993 2,306 1,882 1,768

Financial expenses -16,165 -14,009 -20,863 -20,903

Share of the profit or loss of associated companies accounted for using

the equity method -1,330 171 -57 226

Income tax expense -9,007 -9,700 -8,067 -15,135

NET RESULT FOR THE PERIOD 2,524 -7,316 8,847 65,397

ADDITIONAL INFORMATION ON THE INCOME STATEMENT

Depreciation and amortization

Depreciation of fixed assets -45,945 -48,420 -19,412 -18,717

of which impairment losses on fixed assets 0 -89 -1,768 -765

Write-downs of inventories due to use 0 0 -15,789 -13,195

Major non-cash segment items

Impairment losses on financial assets -631 -13 -1,710 0

Impairment losses on inventories -282 -656 -8,052 -11,295

Allocation of valuation allowance of receivables -10,597 -21,204 -4,611 -8,965

Reversal of valuation allowance of receivables 14,726 14,617 3,881 4,321

SEGMENT REPORT BY REGION

in EUR ’000

Germany Europe (other) Europe excluding EU

2014 2015 2014 2015 2014 2015

Total revenues (Group) 440,205 473,727 151,958 161,910 124,886 70,766

Sales revenues with third parties 367,779 340,407 140,534 155,438 127,782 67,199

Non-current assets Dec. 31 244,151 230,580 18,132 19,627 16,383 12,978

Segment reporting

ADDITIONAL INFORMATION ON THE BALANCE SHEET

SEGMENT ASSET DEC. 31 586,378 616,089 759,510 818,061

of which shares in associated companies accounted for

using the equity method 10,687 9,430 42 90,975

of which capital investments in fixed assets 40,965 58,183 20,776 18,775

SEGMENT LIABILITIES DEC. 31 458,580 483,534 543,056 540,036

* Previous year figures adjusted; the Structural Steel Engineering division of SCHACHTBAU NORDHAUSEN GmbH was reclassified from the Equipment to the Construction segment


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Resources Other Consolidation Group

2014 2015 2014 2015 2014 2015 2014 2015

252,830 221,609 39,407 41,492 -96,794 -102,634 1,560,220 1,656,412

195,860 179,319 500 871 1,375,679 1,378,991

3,141 2,756 30,729 32,425 -93,028 -106,207 0 0

-1,171 -1,341 0 0 0 0 26,622 28,994

1,606 839 9 0 6,440 16,345 14,696 22,748

41,968 18,753 7,028 6,987 -6,559 -7,371 89,022 157,213

241,404 200,326 38,266 40,283 -93,147 -97,233 1,506,019 1,587,946

15,932 -19,807 3,326 4,566 -4,817 -7,393 76,426 90,723

2,159 1,235 13,702 10,287 -13,640 -10,624 7,096 4,972

-10,518 -11,206 -11,243 -6,488 13,640 10,624 -45,149 -41,982

815 2,275 0 0 0 0 -572 2,672

-4,041 -1,895 -886 -1,537 -74 874 -22,075 -27,393

4,347 -29,398 4,899 6,828 -4,891 -6,519 15,726 28,992

-10,885 -11,601 -3,023 -3,011 484 606 -78,781 -81,143

-7 -10 0 0 0 0 -1,775 -864

0 0 0 0 0 0 -15,789 -13,195

-65 -149 0 0 0 0 -2,406 -162

-263 -198 0 0 0 0 -8,597 -12,149

-5,360 -1,899 0 0 0 0 -20,568 -32,068

950 562 0 0 0 0 19,557 19,500

Middle East

and Central Asia

Asia-Pacific,

Far East and Australia

Americas Africa Group

2014 2015 2014 2015 2014 2015 2014 2015 2014 2015

232,037 227,679 376,645 347,788 172,288 297,392 62,201 77,150 1,560,220 1,656,412

180,313 186,019 337,587 337,701 158,411 221,809 63,273 70,418 1,375,679 1,378,991

56,025 47,825 86,106 84,121 53,259 24,217 7,293 12,463 481,349 431,811

264,276 269,254 338,993 362,055 -374,074 -408,551 1,575,083 1,656,908

32,177 32,249 0 0 0 -101 42,906 132,553

8,885 8,823 2,555 6,522 -485 -1,325 72,696 90,978

226,217 237,562 182,939 201,241 -254,634 -256,675 1,156,158 1,205,698


7. SALES REVENUES

The sales revenues generated in the amount of EUR 1,378.991 thousand (previous year: EUR 1,375,679 thousand) include

revenues arising from application of the percentage of completion method and revenues from the sale and hiring-out of

equipment and accessories.

The sales revenues from the application of the percentage of completion method amounted to EUR 697,066 thousand in the

financial year (previous year: EUR 649,625 thousand).

Sales revenues from the sale and hiring-out of equipment and accessories amounted to EUR 20,170 thousand in the financial

year (previous year: EUR 29,428 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 6).

Sales revenues provide only an incomplete picture of the performance in the financial year. Figures are therefore transferred to

total Group revenues in the following sections:

EXPLANATORY NOTES TO THE INCOME STATEMENT

in EUR ’000 2014 2015

Income from other capitalized goods and services for own account 14,696 22,748

in EUR ’000 2014 2015

Sales revenues 1,375,679 1,378,991

Changes in inventories 26,622 28,994

Other capitalized goods and services for own account 14,696 22,748

Other income 89,022 157,213

Consolidated revenues 1,506,019 1,587,946

Subcontractor share ARGEN 13,370 10,158

Revenues of associates and joint ventures 22,188 45,322

Revenues of non-consolidated companies 34,700 34,742

Intra-Group revenues -16,057 -21,756

Total revenues (Group) 1,560,220 1,656,412

The sales revenues include a net valuation allowance of EUR -3,107 thousand (previous year: EUR 5,381 thousand). The net

impairment result 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. Valuation allowances

(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”.

8. OTHER CAPITALIZED GOODS AND SERVICES FOR OWN ACCOUNT


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in EUR ’000 2014 2015

Income from disposal of property, plant and equipment 5,447 16,411

Realized and unrealized foreign currency gains 32,097 45,611

Income from insurance refunds 1,849 1,434

Other income from rentals 272 263

Income from changes in fair values of foreign exchange forward contracts 2,548 5,216

Effects from final and transitional consolidations 36,531 77,896

Other operating income 10,278 10,382

Total 89,022 157,213

9. OTHER INCOME

The realized and unrealized foreign currency gains as well as gains from foreign exchange forward contracts stated under

“Other income” totaling EUR 50,827 thousand (previous year: EUR 34,645 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 58,501 thousand

(previous year: EUR 29,767 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.

10. COST OF MATERIALS

The employer's pension contributions in the financial year totaled EUR 21,758 thousand (previous year: EUR 20,653 thousand).

These are contribution-based schemes, as explained under 5.2 Significant accounting policies. Of that total, EUR 16,995

thousand (previous year: EUR 17,411 thousand) relate to Germany and EUR 4,763 thousand (previous year: EUR 3,242

thousand) to Group companies outside of Germany. The wages and salaries include severance payments in the amount of

EUR 1,560 thousand (previous year: EUR 735 thousand).

in EUR ’000 2014 2015

Expenses for raw materials and supplies and purchased goods 504,877 511,539

Expenses for purchased services 244,370 240,993

Total 749,247 752,532

in EUR ’000 2014 2015

Wages and salaries 299,785 317,893

Social security contributions 49,632 51,608

Expenses for retirement benefits 5,833 6,617

Total 355,250 376,118

11. PERSONEL EXPENSES

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”.


The impairment losses on fixed assets are explained under item 19.2, Property, plant and equipment and investment property.

13. WRITE-DOWNS OF INVENTORIES DUE TO USE

Write-downs of inventories due to use in the financial year totaled EUR 13,195 thousand (previous year: EUR 15,789 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 2015 financial year are included in these figures.

14. OTHER OPERATING EXPENSES

in EUR ’000 2014 2015

Losses from disposal of property, plant and equipment 675 1,042

Rents and leases 21,360 27,152

Energy, heating, water 6,291 6,385

Vehicle costs 6,755 7,646

Property, motor and transport insurance 10,096 10,411

Other operating expenses 35,766 35,604

Administrative expenses 41,513 40,619

Distribution costs 33,304 35,844

Other employee-related expenses 17,208 19,408

Realized and unrealized foreign currency losses 19,948 49,199

Valuation allowance of receivables 6,392 9,424

Bank charges 3,284 2,732

Duties 3,411 2,028

Additional other operating expenses 24,523 26,741

Total 230,526 274,235

12. DEPRECIATION OF FIXED ASSETS

Depreciation is as follows:

in EUR ’000 2014 2015

Amortization of intangible assets 9,956 10,143

Depreciation of property, plant and equipment 68,825 71,000

Total 78,781 81,143

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.


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FINANCIAL RESULT

15. FINANCIAL INCOME

The financial income is broken down as follows:

in EUR ’000 2014 2015

Income from operating investments 14 59

Other interest and similar income 5,287 3,798

Income from changes in fair values of interest rate swaps 1,795 1,115

Total 7,096 4,972

in EUR ’000 2014 2015

Interest and similar expenses 41,273 36,648

Losses from changes in fair values of interest rate swaps 796 2,905

Interest portions of allocations to provisions for defined benefit plans and similar obligations 3,080 2,429

Total 45,149 41,982

16. FINANCIAL EXPENSES

The financial expenses are broken down as follows:

The interest from finance leases included under “Interest and similar expenses” in the financial year totaled EUR 869 thousand

(previous year: EUR 988 thousand). The financial result includes interest income from financial assets in an amount of EUR 3,762

thousand (previous year: EUR 5,278 thousand) and interest expenses from financial liabilities in an amount of EUR 35,779

thousand (previous year: EUR 40,285 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 162 thousand

(previous year: EUR 705 thousand). Of this amount, EUR 14 thousand (previous year: EUR 631 thousand) relates to the

Construction segment, EUR 0 (previous year: EUR 9 thousand) to the Equipment segment and EUR 148 thousand (previous

year: EUR 65 thousand) to the Resources segment.

17. INCOME TAX EXPENSE

The income tax expense is broken down as follows:

in EUR ’000 2014 2015

Actual taxes 19,721 21,438

Deferred taxes 2,354 5,955

Total 22,075 27,393

The theoretical tax rate is 28.08 percent (previous year: 28.08 percent).


The tax effects of the non-deductible expenses and tax-free earnings contain effects from transitional and de-consolidations in

the amount of EUR -12,153 thousand (previous year: EUR -6,548 thousand).

Internal disbursements result in taxation effects after December 31, 2015 totaling EUR 31 thousand (previous year: EUR 39

thousand).

18. EARNINGS PER SHARE

The earnings per share are calculated by dividing the net result 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:

2014 2015

Net result attributable to the shareholders of BAUER AG, in EUR '000 14,481 29,715

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 0.85 1.73

Diluted earnings per share in EUR 0.85 1.73

Reconciliation from expected to actual income tax expenditure

The expected tax expenditure is below the recorded tax expenditure. The reasons for the difference between the expected and

recorded tax expenditure are as follows:

in EUR ’000 2014 2015

Earnings before tax 37,801 56,385

Theoretical tax expenditure 28.08 percent (previous year: 28.08 percent) 10,615 15,833

Differences in tax rate -1,534 1,313

Taxation effects of non-deductible expenses and tax-free income -4,869 -10,481

Effects of variations in the tax calculation base 2,000 1,594

At-equity valuation of associated companies 160 -750

Out-of-period tax payments/refunds for previous years -68 977

Effects of deferred tax assets in respect of losses carried forward and temporary differences 15,701 18,950

Other 70 -43

Income tax expense 22,075 27,393


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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

19. FIXED ASSETS

19.1 Intangible assets

EXPLANATORY NOTES TO THE 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

Jan. 1, 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

Dec. 31, 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

Jan. 1, 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

Dec. 31, 2014 23,381 2,186 250 21,323 47,140

Carrying amount Dec. 31, 2014 10,156 0 39 24,245 34,440

in EUR ’000

Licenses, software

and similar rights

and values Goodwill


intangible assets

TotalCost of purchase/cost of manufacturingCapitalized

software costs

Capitalized

development costs

Jan. 1, 2015 33,537 2,186 289 45,568 81,580

Change in scope of consolidation -443 0 0 -10,514 -10,957

Additions 3,019 0 0 4,792 7,811

Disposals 205 0 207 303 715

Transfers 1 0 0 0 1

Currency adjustment 309 0 0 -9 300

Dec. 31, 2015 36,218 2,186 82 39,534 78,020


The changes to the basis of consolidation mainly comprise intangible assets from the de-consolidation of BAUER Deep

Drilling GmbH, Schrobenhausen, with a carrying amount of EUR 4,165 thousand.

Of the total research and development costs and patent costs incurred in 2015, EUR 4,936 thousand (previous year:

EUR 6,247 thousand) met the capitalization criteria in accordance with IFRS. 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

Jan. 1, 2015 23,381 2,186 250 21,323 47,140

Change in scope of consolidation -305 0 0 -6,038 -6,343

Additions 3,787 0 28 6,328 10,143

Disposals 189 0 207 165 561

Transfers 0 0 0 0 0

Currency adjustment 194 0 0 -8 186

Dec. 31, 2015 26,868 2,186 71 21,440 50,565

Carrying amount Dec. 31, 2015 9,350 0 11 18,094 27,455

in EUR ’000 2014 2015

Research costs and non-capitalized development costs 18,567 19,470

Amortization of development costs and patents 6,473 6,528

Research and development costs recognized in net income 25,040 25,998


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19.2 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

Jan. 1, 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

Dec. 31, 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

Jan. 1, 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

Dec. 31, 2014 99,616 930 306,981 50,190 0 457,717

Carrying amount Dec. 31, 2014 206,576 804 206,209 25,107 8,213 446,909

of which finance lease,

carrying amount Dec. 31, 2014 2,935 0 19,150 5,122 0 27,207

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

Jan. 1, 2015 306,192 1,734 513,190 75,297 8,213 904,626

Change in scope of consolidation -28,058 0 -4,431 -407 -401 -33,297

Additions 4,499 15 59,539 11,083 8,031 83,167

Disposals 4,378 0 66,925 7,318 30 78,651

Transfers 4,794 0 4,766 146 -9,707 1

Currency adjustment 3,994 0 17,562 1,392 -444 22,504

Dec. 31, 2015 287,043 1,749 523,701 80,193 5,662 898,348


The changes to the basis of consolidation comprise disposals of property, plant and equipment from the de-consolidation

of BAUER Manufacturing LLC, Conroe in the amount of EUR 26,271 thousand, SPANTEC Spann- & Ankertechnik GmbH,

Schrobenhausen, in the amount of EUR 425 thousand, and BAUER Deep Drilling GmbH, Schrobenhausen, in the amount of

EUR 97 thousand, as well as the initial consolidation of BAUER Equipment India Private Limited, Delhi, BAUER Equipment

Australien Pty. Ltd., Baulkham Hills, BAUER Resources Maroc S.A.R.L., Kenitra, and BAUER Resources Senegal SARL,

Dakar, with an addition of property, plant and equipment totaling EUR 1,587 thousand.

There are purchase options, which will be executed, for the majority of buildings and equipment subject to finance lease

contracts. The underlying interest rates of the contracts vary between 1.43 % and 7.50 % (previous year: 2.38 % and 7.89 %),

depending on the market and time of the conclusion of the contract. The lease payments due in the future and their present

values are stated in the following table:

The investment property has a market value of EUR 784 thousand (previous year: EUR 804 thousand) and was leased at

all times in 2015. It includes a hotel owned by SCHACHTBAU NORDHAUSEN GmbH, leased to third parties and depreciated

over a period of 48 years. Die SCHACHTBAU NORDHAUSEN GmbH also has a contractual obligation to maintain the property.

The measurement is derived from current market prices for similar property. This method is part of level 2 of the fair value

hierarchy stated in IFRS 13.

Rental income in the amount of EUR 51 thousand (previous year: EUR 60 thousand) was generated in the reporting period,

which are directly offset by operating expenses in the amount of EUR 14 thousand (previous year: 23 thousand).

Items of property, plant and equipment have a carrying amount of EUR 112,090 thousand (previous year: EUR 105,811 thousand)

and are subject to encumbrances such as mortgages and chattel mortgages. There are also common restraints on disposal on

leased assets, which are allocable to the Group (finance lease) in accordance with IAS 17 and amount to EUR 23,858 thousand

(previous year: EUR 27,207 thousand).

Olbersdorfer Guß GmbH was granted investment subsidies for expanding production in the amount of EUR 0 (previous year:

EUR 13 thousand) in the financial year. all of the covenants of the investment subsidies were met as of the balance sheet date.

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

Jan. 1, 2015 99,616 930 306,981 50,190 0 457,717

Change in scope of consolidation -4,209 0 -3,359 -459 -64 -8,091

Additions 9,661 35 52,350 8,954 0 71,000

Disposals 2,745 0 29,002 5,846 0 37,593

Transfers 0 0 0 0 0 0

Currency adjustment 488 0 9,418 989 64 10,959

Dec. 31, 2015 102,811 965 336,388 53,828 0 493,992

Carrying amount Dec. 31, 2015 184,232 784 187,313 26,365 5,662 404,356

of which finance lease, carrying

amount Dec. 31, 2015 1,687 0 16,231 5,940 0 23,858

in EUR ’000 Remaining term 2014 Remaining term 2015

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 8,470 13,707 0 22,177 9,606 13,120 0 22,726

Interest portions 1,017 675 0 1,692 661 468 0 1,129

Present value 7,453 13,032 0 20,485 8,945 12,652 0 21,597


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No borrowing costs were capitalized in the financial year (previous year: none). Fixed assets were impaired by a total of

EUR 864 thousand (previous year: EUR 1,775 thousand) in the financial year. Of these impairments, EUR 89 thousand

(previous year: EUR 0) related to the Construction segment, EUR 765 thousand (previous year: EUR 1,768 thousand) to

the Equipment segment and EUR 10 thousand (previous year: EUR 7 thousand) to the Resources segment. Of the amount,

EUR 768 thousand (previous year: EUR 942 thousand) pertained to intangible assets and EUR 96 thousand (previous year:

EUR 833 thousand) to property, plant and equipment. The majority of impairments on intangible assets relates to capitalized

development costs in the amount of EUR 489 thousand at KLEMM Bohrtechnik GmbH and MAT Mischanlagentechnik,

branch offices of BAUER Maschinen GmbH, in the Equipment segment. The expected market development for various

internally developed devices was the key factor in this respect. Impairment losses on property, plant and equipment pertain to

technical equipment and machinery to the amount of EUR 94 thousand and to company and office equipment to the amount of

EUR 2 thousand. The impairments were applied on the basis of the recoverable amount. For the capitalized development costs,

this corresponded with the value in use. A discount rate of 7.72 % (previous year: 7.83 %) was applied in the financial year. The

recoverable amount of other non-financial assets regularly corresponded with the fair value less cost to sell. This method is part

of level 1 of the fair value hierarchy stated in IFRS 13.

19.3 Shares accounted for using the equity method and participations

The balance sheet approaches of the joint ventures and associated companies developed as follows:

in EUR ’000 Dec. 31, 2014 Dec. 31, 2015

Shares in joint ventures accounted for using the equity method 4,175 94,226

Shares in associated companies accounted for using the equity method 38,731 38,327

Total 42,906 132,553

in EUR ’000 Associated companies Joint ventures

Cost of purchase/cost of manufacturing 2014 2015 2014 2015

Jan. 1 9,947 40,916 3,302 4,175

Additions 31,089 0 662 90,863

Disposals 0 0 479 1,563

Profit/loss attributable 330 764 690 751

Dividend payments -450 -1,168 0 0

Transfers 0 0 0 0

Currency adjustment 0 0 0 0

Dec. 31 40,916 40,512 4,175 94,226

in EUR ’000 Associated companies Joint ventures

Accumulated depreciation 2014 2015 2014 2015

Jan. 1 0 2,185 0 0

Additions 2.185 0 0 0

Disposals 0 0 0 0

Transfers 0 0 0 0

Currency adjustment 0 0 0 0

Dec. 31 2,185 2,185 0 0

Carrying amount Dec. 31 38,731 38,327 4,175 94,226

The following table provides an overview of the changes in shares accounted for using the equity method:


a) Joint ventures

The amounts stated in the financial information for joint ventures are recognized in the annual financial statements prepared in

accordance with local financial reporting standards, corrected by any adjustments to IFRS.

With the basic joint ventures, details on previous year values were no longer required as they were already fully consolidated

at that point in time.

These are the material joint ventures:

Financial year 2014:

There were no material joint ventures in financial year 2014.


Non-current and current financial liabilities do not contain any trade payables and provisions.

Name Company's

activities

Headquarters Capital

share

Valuation method

SPANTEC Spann- & Ankertechnik GmbH Production Schrobenhausen, Germany 40 % At equity

BAUER Manufacturing LLC Production Conroe, USA 51 % At equity

BAUER Deep Drilling GmbH Production Schrobenhausen, Germany 51 % At equity

Summarized financial information on the material joint ventures (before consolidation):

BALANCE SHEET

in EUR ’000

SPANTEC Spann-

& Ankertechnik GmbH

BAUER Manufacturing LLC BAUER Deep Drilling GmbH

2014 2015 2014 2015 2014 2015

Non-current assets 0 5,473 0 26,683 0 15,504

Current assets 0 8,246 0 42,037 0 52,799

of which cash and cash equivalents 0 4,299 0 24,676 0 34,172

Total assets 0 13,719 0 68,720 0 68,303

Non-current debt 0 153 0 16 0 495

of which non-current financial liabilities 0 0 0 16 0 23

Current debt 0 1,325 0 18,671 0 17,887

of which current financial liabilities 0 0 0 0 0 10

Total liabilities 0 1,478 0 18,687 0 18,382


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Non-current and current financial liabilities do not contain any trade payables and provisions.

The amounts stated in the financial information for joint ventures are recognized in the annual financial statements prepared

in accordance with local financial reporting standards, corrected by any adjustments to IFRS.

Summarized financial information on the immaterial joint ventures (before consolidation):

BALANCE SHEET

in EUR ’000

Joint ventures

Dec. 31, 2014 Dec. 31, 2015

Non-current assets 317 986

Current assets 63,796 57,402

of which cash and cash equivalents 2,445 2,150

Total assets 64,113 58,388

Non-current debt 0 0

of which non-current financial liabilities 0 0

Current debt 55,646 52,460

of which current financial liabilities 43,607 29,662

Total debt 55,646 52,460

INCOME STATEMENT

in EUR ’000

Joint ventures

2014 2015

Sales revenues 41,008 64,418

Scheduled depreciation and amortization -373 -2,141

Operating result 3,529 1,884

Interest income 1 9

Interest expense -4 -53

Income tax expense 0 -20


Dividends distributed to the BAUER Group 0 0

INCOME STATEMENT

in EUR ’000

SPANTEC Spann-

& Ankertechnik GmbH

BAUER Manufacturing LLC BAUER Deep Drilling GmbH

2014 2015 2014 2015 2014 2015

Sales revenues 0 5,854 0 511 0 245

Scheduled depreciation and amortization 0 -105 0 -51 0 -81

Operating result 0 1,825 0 -248 0 -283

Interest income 0 9 0 0 0 0

Interest expense 0 -25 0 -12 0 0

Income tax expense 0 -469 0 0 0 79

Net result for the period 0 1,340 0 -260 0 -204

Other comprehensive income 0 0 0 0 0 -68

Total comprehensive income 0 1,340 0 -260 0 -272

Dividends distributed to the

BAUER Group 0 0 0 0 0 0


Reconciliation to the summarized financial information on the immaterial joint ventures

The proportional carrying amount of the joint ventures can be offset and reconciled as follows:

Name Company's

activities

Headquarters Capital share

Wöhr + Bauer GmbH Project development Munich, Germany 33.33 %

NDH Entsorgungsbetreibergesellschaft mbH Waste disposal Bleicherode, Germany 25.00 %

TERRABAUER S. L. Specialist foundation engineering Madrid, Spain 30.00 %

BAUER Nimr LLCWater treatment and

soil remediation

Maskat, Al Mina,

Sultanate of Oman49.00 %

Name Company's

activities

Headquarters Capital share

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

Maskat, Al Mina,

Sultanate of Oman49.00 %

in EUR ’000 Dec. 31, 2014 Dec. 31, 2015

Net assets of joint ventures 8,467 118,135

Share in joint ventures according to investment quota 4,175 59,166

Goodwill and other adjustments 0 35,060

Carrying amount reported in the balance sheet 4,175 94,226

Market value of the material joint ventures:


in EUR ’000 Dec. 31, 2014 Dec. 31, 2015

SPANTEC Spann- & Ankertechnik GmbH 0 25,500

BAUER Manufacturing LLC 0 86,429

BAUER Deep Drilling GmbH 0 70,714

We did not state the fair value of our immaterial joint ventures as there is no listed market price.

The risk arising from the joint and several liability in the case of a shareholder defaulting is secured by mutual guarantees

issued within the joint venture. There are no other obligations or material restrictions.

b) Associated companies

The amounts stated in the financial information for associated companies are recognized in the annual financial statements

prepared in accordance with local financial reporting standards, corrected by any adjustments to IFRS.

These are the material associated companies:



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Summarized financial information for all associated companies (amounts before consolidation):

BALANCE SHEET

in EUR ’000

Wöhr + Bauer GmbH NDH Entsorgungsbe-

treibergesellschaft mbH

TERRABAUER S. L. BAUER Nimr LLC

Dec. 31, 2014 Dec. 31, 2015 Dec. 31, 2014 Dec. 31, 2015 Dec. 31, 2014 Dec. 31, 2015 Dec. 31, 2014 Dec. 31, 2015

Non-current assets 60,132 56,795 18,288 17,040 2,671 - 41,102 43,074

Current assets 48,073 101,161 26,857 28,532 11,407 - 13,187 11,660

(of which cash and

cash equivalents) 526 2,275 23,060 24,098 23 - 5,019 2,013

Total assets 108,205 157,956 45,145 45,572 14,078 - 54,289 54,734

Non-current debt 22,279 87,658 0 0 771 - 35,421 36,563

of which non-current

financial debt 21,897 36,125 0 0 90 - 34,968 22,146

Current debt 66,775 53,706 40,225 41,056 6,542 - 7,299 8,560

of which current

financial debt 0 35,980 3,225 2,833 575 - 2,327 2,845

Total debt 89,054 141,364 40,225 41,056 7,313 - 42,720 45,123

* Financial information was unavailable on the balance sheet date

INCOME STATEMENT

in EUR ’000

Wöhr + Bauer GmbH NDH Entsorgungsbe-

treibergesellschaft mbH

TERRABAUER S. L. BAUER Nimr LLC

2014 2015 2014 2015 2014 2015 * 2014 2015

Sales revenues 21,531 17,217 22,736 22,951 470 - 1,528 11,026

Scheduled depreciation

and amortization -1,774 -1,924 -2,956 -3,223 -589 - -367 -242

Operating result 2,550 -2,700 1,522 1,451 -695 - 281 5,725

Interest income 15 2 238 52 64 - 6 2,148

Interest expense -414 -927 -262 -271 -93 - -244 -3,209

Income tax expense -667 1,372 -509 -648 0 - 0 -699

Net result for the period 1,484 -2,322 989 584 -724 - 43 3,965

Net result for the period

in proportion to share 494 -774 247 146 0 - 21 1,943

Other comprehensive income 0 0 0 0 0 - 0 0

Total comprehensive income 1,484 -2,322 989 584 -724 - 43 3,965

Dividends distributed

to the BAUER Group 210 100 240 247 0 - 4,598 821

* Financial information was unavailable on the balance sheet date


Reconciliation to the summarized financial information on associated companies

The proportional carrying amount of the associated companies can be offset and reconciled as follows:

in EUR ’000 Dec. 31, 2014 Dec. 31, 2015

Net assets of associated companies 35,792 30,850

Share in associated companies according to investment quota 13,331 11,408

Goodwill and other adjustments 16,908 16,887

Cash value of concession arrangement 8,709 8,162

Currency adjustment -217 1,870

Carrying amount reported in the balance sheet 38,731 38,327

The other adjustments pertain to temporal differences in reporting.

The market value of BAUER Nimr LLC was EUR 75,862 thousand (previous year: EUR 63,447 thousand) on December 31, 2015.

The market values of the other material associated companies were unavailable on the balance sheet date.

There were no obligations and material restrictions or risks with regard to the shares in associated companies on the balance

sheet date.

Summarized financial information for associated companies, which are immaterial on their own (amounts before consolidation):

BALANCE SHEET

in EUR ’000


Dec. 31, 2014 Dec. 31, 2015

Non-current assets 67 51

Current assets 239 228

of which cash and cash equivalents 33 4

Total assets 306 279

Non-current debt 22 18

of which non-current financial liabilities 22 0

Current debt 132 130

of which current financial liabilities 0 0

Total debt 154 148

INCOME STATEMENT

in EUR ’000


Dec. 31, 2014 Dec. 31, 2015

Sales revenues 825 853

Scheduled depreciation and amortization -29 -24

Operating result -22 -9

Interest income 0 0

Interest expense -1 -2

Income tax expense 0 0

Net result for the period -23 7

Net result for the period in proportion to share -7 2

Dividends distributed to the BAUER Group 0 0


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in EUR ’000 Participations

Cost of purchase/cost of manufacturing 2014 2015

Jan. 1 4,429 4,429

Additions 0 0

Disposals 0 0

Profit/loss attributable 0 0

Dividend payments 0 0

Transfers 0 0

Currency adjustment 0 0

Dec. 31 4,429 4,429

in EUR ’000 Participations

Accumulated depreciation 2014 2015

Jan. 1 816 816

Additions 0 0

Disposals 0 0

Transfers 0 0


Dec. 31 816 816

Carrying amount Dec. 31 3,613 3,613

c) Participations

20. DEFERRED TAXES

Deferred tax assets and liabilities pertained to the following balance sheet items:

in EUR ’000 Dec. 31, 2014 Dec. 31, 2015 Dec. 31, 2014 Dec. 31, 2015

Deferred tax assets Deferred tax liabilities

Intangible assets 401 389 7,202 18,364

Property, plant and equipment 119 123 13,926 8,814

Inventories 3,763 876 2,498 2,229

Receivables and other assets 1,474 2,521 1,410 4,511

Provisions for pensions 19,652 18,340 208 562

Liabilities 10,201 7,027 4,800 2,711

Tax losses carried forward 12,559 13,617 0 0

Consolidation 3,999 5,366 4,274 4,542

Offsetting -21,195 -21,069 -21,195 -21,069

Net amount 30,973 27,190 13,123 20,664

In the table above, deferred tax assets in the amount of EUR 222 thousand (previous year: EUR 2,025 thousand) and deferred tax

liabilities in the amount of EUR 11 thousand (previous year: EUR 1,708 thousand) are included in liabilities, which is part of hedge-

accounting. Deferred tax assets in the amount of EUR 14,637 thousand (previous year: EUR 16,772 thousand) and deferred tax

liabilities in the amount of EUR 0 (previous year: EUR 4 thousand) are included in provisions for pensions for the actuarial gains and

losses recognized in equity.


The share of current deferred tax assets in respect of losses carried forward amounts to EUR 6,848 thousand (previous year:

EUR 10,039 thousand) and the share of deferred tax liabilities to EUR 8,267 thousand (previous year: 7,280 thousand).

The tax losses carried forward at the end of the year are as follows:

in EUR ’000 Dec. 31, 2014 Dec. 31, 2015

Domestic losses (corporation tax) 75,553 80,325

Foreign losses 46,953 120,225

Total 122,506 200,550

Of which losses carried forward deductible for limited periods 25,461 83,203

No deferred taxes were recognized for unusable losses carried forward in the amount of EUR 161,045 thousand (previous year:

EUR 78,059 thousand) due to the medium-term income tax target.

The share of current deferred tax assets in respect of losses carried forward amounted to EUR 1,339 thousand (previous year:

EUR 1,028 thousand) in the financial year.

Deferred tax liabilities arising from temporary differences in connection with investments in subsidiaries and associated

companies are only recognized if 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. This is not

presently the case.

There are temporary differences in the amount of EUR 1,767 thousand (previous year: EUR 1,170 thousand) in connection

with shares in subsidiaries, for which no deferred tax liabilities were recognized.

21. OTHER NON-CURRENT ASSETS

The other non-current assets comprise the following items:

in EUR ’000 Dec. 31, 2014 Dec. 31, 2015

Claims from backup insurance 4,787 4,550

Sundry other non-current assets 2,705 3,172

Total 7,492 7,722

The additional other non-current assets did not incur any interest in the financial and previous year.

They also include assets arising from continuing involvements totaling EUR 1,537 thousand (previous year: EUR 1,068 thousand).

As in the previous year, the other non-current assets were neither impaired nor overdue in the year under review.

Within BAUER Group, trade receivables and services in the amount of EUR 16,263 thousand (previous year:

EUR 18,425 thousand) were sold to third parties within the scope of receivables sales agreements. It comprises

the maximum amount of the remaining risk which the BAUER Group would have to pay to the buyer.

The corresponding liability amounts to EUR 1,691 thousand (previous year: EUR 1,175 thousand), 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:

Die Additional other non-current assets contain receivables from derivatives and other non-current financial assets.

The derivatives are presented in item 36 under “Other disclosures”. The item also contains a loan receivable from

BAUER Nimr LLC in the amount of EUR 10,550 thousand (previous year: EUR 9,446 thousand). 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 144,066 thousand (previous year: EUR 121,319 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 25,344 thousand (previous year: EUR 24,386 thousand).

They are divided up as follows:

in EUR ’000 Dec. 31, 2014 Dec. 31, 2015

Raw materials and supplies 155,334 155,718

Finished goods and work in progress and stock for trade 283,850 288,911

Total 439,184 444,629

in EUR ’000 Dec. 31, 2014 Dec. 31, 2015

Write-downs of inventories due to use 15,789 13,195

Impairment losses on inventories 8,597 12,149

Total 24,386 25,344

in EUR ’000 Remaining term 31.12.2014 Remaining term 31.12.2015

1 to 5 years over 5 years 1 to 5 years over 5 years

Sundry other non-current financial assets 18,974 9,446 4,805 10,550

Total 18,974 9,446 4,805 10,550

The rate of hire during the financial year was lower than in the previous year. Write-downs of used machinery due to use

therefore decreased from EUR 15,789 thousand to EUR 13,195 thousand. The number of leased machines increased again

at the end of the year.

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. The impairments were applied on the

basis of the recoverable amount. This regularly corresponded to the fair value less cost to sell. This method is part of level 1

of the fair value hierarchy stated in IFRS 13.

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 460 thousand (previous year: EUR 119

thousand) with terms up until the year 2016 were provided as security for loans. 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 Dec. 31, 2014 Dec. 31, 2015

Carrying amount of used machines 86,744 98,291

of which hired out 32,236 44,990

of which not hired out 54,508 53,301

in EUR ’000 Dec. 31, 2014 Dec. 31, 2015

Contract costs incurred (plus profits, less losses) for projects not yet completed 674,169 783,992

less down-payments 590,481 704,396

Balance 83,688 79,596

of which: Receivables from construction contracts (PoC) 132,159 129,478

of which: Liabilities from construction contracts (PoC) 48,471 49,882


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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 8,845 thousand (previous year:

EUR 10,504 thousand).

The following table presents the changes in valuation allowances to current receivables:

in EUR ’000 Dec. 31, 2014 Dec. 31, 2015

Receivables from construction contracts (PoC) 132,159 129,478

Trade receivables 311,417 343,933

Receivables from enterprises in which the company has participating interests 67 3,272

Payments on account 4,304 5,364

Other current assets 28,603 33,381

Other current financial assets 20,100 28,901

Total 496,650 544,329

in EUR ’000 Dec. 31, 2014 Dec. 31, 2015

Valuation allowance at start of financial year 59,938 53,976

Change in scope of consolidation 0 0


Allocation 20,568 28,476

Reversal 19,557 19,500

Consumption 7,815 2,075

Valuation allowance at end of financial year 53,976 61,276

The valuation allowance for foreseeably uncollectable trade receivables of EUR 61,276 thousand (previous year: EUR 53,976

thousand) was calculated taking into account individual risks and on the basis of past experience in relation to payment

default. Valuation allowance were applied in respect of individual claims as well as on a portfolio flat-rate basis. The individual

valuation allowances were translated into flat-rate percentages spread across the age structure of the receivables. Within the

individual valuation allowance, 100 percent of the claim receivable was usually adjusted. The determination of valuation allow-

ances for uncertain receivables primarily bases on estimates and evaluations of individual claims, incorporating considerations

of the creditworthiness and late-payment record of the customer concerned as well as current economic trends and historical

experience in relation to default.

No receivables from construction contracts were impaired in the financial year (previous year: EUR 3,993 thousand).


The following table presents an analysis of the due dates of gross carrying amounts of trade receivables:

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.

Other current assets were neither impaired nor overdue in the year under review. 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 83 thousand (previous year: EUR 6,846 thousand) monetary assets were deposited as collateral for potential

future warranties for construction activities. The current portion of the receivables from foreign exchange forward contracts

included in the current financial assets in the financial year totaled EUR 2,853 thousand (previous year: EUR 141 thousand).

In financial year 2015, total impairments amounted to EUR 32,068 thousand (previous year: EUR 20,568 thousand). Contained

in this are EUR 3,593 thousand (previous year: 411 thousand) of impairments for uncollectable receivables.

25. CASH AND CASH EQUIVALENTS

The cash and cash equivalents totaling EUR 47,406 thousand (previous year: EUR 41,835 thousand) include credit balances

at banks and petty cash stocks.

26. EQUITY

The shareholder structure of BAUER AG is as follows:

in EUR ’000 Carrying amount

Dec. 31, 2014

Carrying amount

Dec. 31, 2015

Trade receivables (gross carrying amount) 365,393 405,209

Valuation allowance in respect of trade receivables 53,976 61,276

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:

311,417

110,640

200,777

343,933

158,004

185,929

- less than 30 days 75,046 59,694

- between 30 and 60 days 13,599 21,248

- between 60 and 90 days 10,886 10,235

- more than 90 days 101,246 94,752

in EUR ’000 Dec. 31, 2014 Dec. 31, 2015

% 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


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Please refer to the Notes to the Financial Statements of BAUER AG (published in the Federal Gazette (Bundesanzeiger)) on

December 31, 2015 for reports on the participations in BAUER AG.

Composition of subscribed capital

The subscribed capital (share capital) of BAUER AG amounts to 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 pershare 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 percent 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 percent 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

Section 4, subsection 4 of the company’s Articles of Association authorizes the Management Board, 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 ordinary bearer shares against cash and/or non-cash contributions. 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 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 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 authorizations

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 transferred to third parties, provided this is done

for the purpose of acquiring companies, parts in companies or investments in companies or other assets or effecting company

mergers. The aforementioned shares may be withdrawn without need of a further resolution by the 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.

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 the financial year a dividend of EUR 0.15 (previous year: EUR 0.00) per share was paid to the shareholders.

in EUR ’000 Dec. 31, 2014 Dec. 31, 2015

I. Capital reserve 38,404 38,404

II. Other revenue reserves and unappropriated net profit 287,903 327,437

326,307 365,841

III. Non-controlling interests 19,617 12,368

Total 345,924 378,209


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in EUR ’000

Non-controlling interests

Dec. 31, 2014 Dec. 31, 2015

Group company

Share-

holding

in %

Share-

holding

in EUR '000

Profit/loss

attributable

(in EUR

'000)

Share-

holding

in %

Share-

holding

in EUR '000

Profit/loss

attributable

(in EUR

'000)

BAUER Maschinen GmbH, Schrobenhausen,

Deutschland

BAUER

Anteilspool GbR 1.00 1,837 122 1.00 1,498 122

BAUER EGYPT S.A.E, Cairo,

Egypt

Various

natural persons 44.25 11,268 939 44.25 13,068 2,584

BAUER-DE WET EQUIPMENT (PROPRIETARY)

LIMITED, Rasesa, Botswana

De Wet Drilling

(Pty.) Ltd. 49.00 47 -490 49.00 -957 -1,093

BAUER Casings Makina Sanayi ve Ticaret

Limited Sirketi, Ankara, Turkey

Emiroglu

Makina 40.00 1,185 184 40.00 1,278 303

PRAKLA Bohrtechnik GmbH, Peine,

Deutschland

Celler Brunnenbau

Holding GmbH 10.00 638 -262 10.00 469 -499

Site Group for Services and Well Drilling Ltd. Co.,

Amman, Jordan

Oweis

family 16.67 -183 104 16.67 -7,218 -2,376

Individual immaterial subsidiaries with

non-controlling interests 4,825 648 4,230 236

Total 19,617 1,245 12,368 -723

26.1 Non-controlling interests

a) Details on the not wholly owned%igen subsidiaries in which material non-controlling interests are held

These are the material non-controlling interests of BAUER Group:

The previous year's financial statements separately stated BAUER Nimr LLC with a share in earnings of EUR 939 thousand and

OOO BAUER Maschinen - Kurgan with a share in capital of EUR 841 thousand and a share in earnings of EUR -372 thousand.

Below is the summarized financial information for each Group company with material non-controlling interests corresponding

to the amounts before Group-internal elimination:

BALANCE SHEET

in EUR ’000

BAUER Maschinen GmbH BAUER EGYPT S.A.E. BAUER-DE WET

Dec. 31, 2014 Dec. 31, 2015 Dec. 31, 2014 Dec. 31, 2015 Dec. 31, 2014 Dec. 31, 2015

Non-current assets 154,631 162,198 4,339 8,431 2,615 1,715

Current assets 317,141 314,883 26,326 31,267 1,776 404

Non-current debt 198,527 187,219 0 136 165 169

Current debt 133,321 140,098 6,827 10,031 4,130 3,904

BALANCE SHEET

in EUR ’000

BAUER Casings PRAKLA Bohrtechnik Site Group


Non-current assets 579 578 4,511 3,565 38,003 21,502

Current assets 3,052 3,078 15,986 8,779 50,833 73,318

Non-current debt 4 59 260 282 0 0

Current debt 649 401 19,940 16,757 90,767 96,225


INCOME STATEMENT

in EUR ’000


2014 2015 2014 2015 2014 2015

Sales revenues 357,925 383,484 22,758 37,182 2,261 1,645

Operating result 23,788 38,655 3,064 7,291 -890 -1,724

Profit before tax 14,188 17,372 3,559 8,075 -1,155 1,740

Net result for the period 10,464 12,152 2,122 5,841 -1,001 -2,231

Profit/loss attributable to non-controlling interests 122 122 939 2,564 -490 -1,093

Profit/loss attributable to shareholders of BAUER AG 10,342 12,031 1,183 3,256 -510 -1,138

Dividends distributed to non-controlling interest -50 -40 -227 -446 0 0

CASH FLOW STATEMENT

in EUR ’000


2014 2015 2014 2015 2014 2015

Cash flow from operating activities 15,001 33,260 4,636 3,108 1,573 107

Cash flow from investing activities -16,205 -7,944 -2,929 -7,429 -17 -70

Cash flow from financing activities -1,631 -26,002 -19 -194 -1,537 -105

Influence of exchange rate movements on cash 0 0 1,117 387 2 -4

Changes in cash and cash equivalents with an effect

on liquidity -2.835 -686 2,805 -4,128 21 -72

INCOME STATEMENT

in EUR ’000


2014 2015 2014 2015 2014 2015

Sales revenues 3,687 4,264 11,696 6,990 11,224 10,377

Operating result 575 949 -1,872 -3,688 5,027 -9,162

Profit before tax 575 950 -2,537 -4,394 503 -14,465

Net result for the period 460 759 -2,623 -4,992 355 -14,664

Profit/loss attributable to non-controlling interests 184 303 -262 -499 104 -2,376

Profit/loss attributable to shareholders of BAUER AG 276 456 -2,361 -4,493 251 -12,288

Dividends distributed to non-controlling interest -146 -87 0 0 0 0

CASH FLOW STATEMENT

in EUR ’000


2014 2015 2014 2015 2014 2015

Cash flow from operating activities 537 394 7,870 -4,262 11,519 -25,176

Cash flow from investing activities -74 -155 -535 -565 -4,191 42,164

Cash flow from financing activities -375 -343 -7,533 4,819 -7,791 -16,170

Influence of exchange rate movements on cash 12 -27 0 0 516 42

Changes in cash and cash equivalents with an effect

on liquidity 100 -131 -198 -8 53 860


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b) Changes in shareholdings in the Group's subsidiaries

In financial year 2015, BAUER Maschinen GmbH acquired the remaining 10 % of the shares in MAT Mischanlagentechnik GmbH

at a purchase price of EUR 110 thousand. The share thus increased to 100 %.

Shares with a value of EUR -318 thousand (share in the carrying amount of the net assets of MAT Mischanlagentechnik GmbH)

were transferred to BAUER Maschinen GmbH in the process.

The transferred shares were recognized in revenue reserves.

After the transfer of the shares, MAT Mischanlagentechnik GmbH, the transferor entity, was merged with

BAUER Maschinen GmbH and thus discontinued. The company Immenstadt is continued under the name of

MAT Mischanlagentechnik, a branch office of BAUER Maschinen GmbH.

In financial year 2015, BAUER Resources GmbH acquired the remaining 10 % of the shares in Esau & Hueber GmbH

at a purchase price of EUR 500 thousand. The share thus increased to 100 %.

Shares with a value of EUR -119 thousand (share in the carrying amount of the net assets of Esau & Hueber GmbH)

were transferred to BAUER Resources GmbH in the process.

The transferred shares were recognized in revenue reserves.

26.2 Additional disclosures regarding capital management

The object of Bauer's capital management is to safeguard a strong financial profile. In particular, it aims to provide

shareholders with appropriate dividend payments and to safeguard servicing of capital on behalf of lenders. 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 Dec. 31, 2014 Dec. 31, 2015

Equity 418,925 451,210

Equity ratio 26.60 % 27.23 %


Net debt 645,679 664,988

Financial indebtedness 687,514 712,394

Liquid funds 41,835 47,406

Net debt / EBITDA 3.78 3.59

EBITDA / net interest coverage 4.49 4.99


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. In the year under review all externally imposed capital covenants were fulfilled.

NON-CURRENT DEBT

27. NON-CURRENT LIABILITIES

The non-current portions of the liabilities comprise the following:

in EUR ’000 Remaining term Dec. 31, 2014 Remaining term Dec. 31, 2015

1 to 5 years over 5 years 1 to 5 years over 5 years

Liabilities to banks 357,678 7,093 363,166 13,462

Liabilities from finance lease agreements 13,032 0 12,652 0

Other non-current liabilities 5,959 0 7,262 0

Other non-current financial liabilities 10,013 0 4,414 0

Total 386,682 7,093 387,494 13,462

in EUR ’000 Fair value Interest rate margin

Dec. 31, 2014 Dec. 31, 2015 Dec. 31, 2014 Dec. 31, 2015

Liabilities to banks 378,016 384,999 0.50 - 11.2 % 0.50 - 11.2 %

Liabilities from finance lease agreements 13,032 12,652 2.38 - 7.89 % 1.43 - 7.50 %

Other non-current financial liabilities 9,904 4,409 0.85 - 12.5 % 3.5 - 12.5 %

Total 400,952 402,060 - -

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 PENSIONS

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 percent of

the employee's pensionable earnings for each pensionable year of service, plus 0.075 percent 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, 0.375 percent plus 0.125 percent for each pensionable year

of service completed before January 1, 1999. In the case of scheme members who are not members of the Zusatzversorgungs-

kasse des Baugewerbes (construction industry ancillary benefits fund): For each pensionable year of service, 0.3 percent of


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the employee's pensionable earnings plus 0.1 percent 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 percent plus 0.1 percent for each year of service completed before January 1, 1999.

The widow's/widower's pension amounts to 50 percent of the attained entitlement. Benefits are also promised to surviving

dependent 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 % Dec. 31, 2014

Germany Indonesia Philippines Taiwan

Interest rate 2.00 8.00 7.80 2.00

Future salary increases 3.00 10.00 3.00 3.00

Future pension increases 2.00 - - -

in % Dec. 31, 2015

Germany Indonesia Philippines Taiwan

Interest rate 2.35 6.00 5.03 1.63

Future salary increases 3.00 10.00 5.00 3.00

Future pension increases 2.00 - - -

Defined benefit plans in Germany are calculated biometrically applying the 2005 G Graduated Life Tables compiled by Professor

Dr. Heubeck. The interest rate applied for discounting the future payment obligations is always determined on the basis of the

return on top company bonds.

Outside of Germany, the underlying biometric probability of death is based on published national statistics and empirical data.

The provision for pensions and similar obligations recognized in the balance sheet is calculated as follows:

in EUR ’000 Dec. 31, 2014 Dec. 31, 2015

Present value of commitments financed by a fund 3,801 3,930

Fair value of plan assets -657 -751

Plan deficit 3,144 3,179

Present value of commitments not financed by a fund 115,360 111,346

Total deficit of define benefit plan commitments 118,504 114,525

Effect of asset ceiling - -

Recognized provision 118,504 114,525


The defined benefit obligation and the plan assets developed as follows in the previous year:

in EUR ’000 Present value

of commitment

Fair value

of plan assets Total

Effect of

asset ceiling Total

Date: Jan 1, 2013 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:

Income from plan assets excluding amounts

contained in the above interest - 18 18 - 18

Actuarial gains and losses arising from adjustments

to demographic assumptions - - - - -


to financial assumptions 32,274 - 32,274 - 32,274

Empirical value-based adjustments -6 - -6 - -6

Changes in the effect of limitation of a defined

benefit plan on the asset ceiling, excluding amounts

contained 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 - - - - -

Date: Dec. 31, 2014 119,161 -657 118,504 - 118,504


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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

Date: Jan 1, 2015 119,161 -657 118,504 - 118,504

Current service costs 2,838 - 2,838 - 2,838

Interest expense/income 2,429 -37 2,392 - 2,392

Post-employment expenditure, gains and losses

from payment in lieu - - - - -

Total 124,428 -694 123,734 - 123,734

Revaluation:

Income from plan assets excluding amounts

contained in the above interest - 39 39 - 39


to demographic assumptions - - - - -


to financial assumptions -8,267 - -8,267 - -8,267

Empirical value-based adjustments 1,686 - 1,686 - 1,686

Changes in the effect of limitation of a defined

benefit plan on the asset ceiling, excluding amounts

contained in the interest - - - - -

Total -6,581 39 -6,542 - -6.542

Exchange rate movements 30 -6 24 - 24

Contributions:

Employer - -90 -90 - -90

Beneficiary employee - - - - -

Payments from the plan:

Ongoing payments - - - - -

Benefits (not fund-financed) -2,292 - -2,292 - -2,292

Other effects -309 - -309 - -309

Date: Dec. 31, 2015 115,276 -751 114,525 - 114,525


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 Dec. 31, 2014 Dec. 31, 2015

Qualifying insurance contracts 235 246

Money market fund and pension fund 390 466

Cash and cash equivalents 32 39

Total 657 751

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 commitment 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 commitments 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 commitment

Variation in

assumption

Increase in

assumption

Decrease in

assumption

Discount interest rate +/- 0.5 % 104,490 126,490

Future salary increases +/- 0.5 % 118,051 111,604

Future pension increase +/- 0.5 % 122,031 107,170

Increase

in assumption

by 1 year

Decrease

in assumption

by 1 year

Probability of death 120,424 110,018


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The defined benefit plan commitments and plan assets by country are as follows:

in EUR ’000 Dec. 31, 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 Dec. 31, 2015

Germany Indonesia Philippines Taiwan Total

Present value of commitments 113,724 1,079 269 204 115,276

Fair value of plan assets -246 -466 0 -39 -751

Total 113,478 -613 269 165 114,525

Effect of asset ceiling - - - - -

Total 113,478 -613 269 165 114,525

in EUR ’000 under

1 year

1 to 5 years 6 to 10 years Dec. 31, 2015

Total

Pension payments 2,518 12,189 20,536 35,243

in EUR ’000 Dec. 31, 2014 Dec. 31, 2015

Active scheme members 75,169 71,423

Deferred beneficiaries 6,522 6,365

Retired employees 37,470 37,488

Total 119,161 115,276

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 19.44 years.

Pension payment in financial year 2016 are expected to amount to EUR 2,518 thousand (previous year: EUR 2,314 thousand).

Of that total, EUR 2,518 thousand (previous year: EUR 2,314 thousand) is projected to be contributed by the employer.

Contributions to the external plan assets totaling EUR 90 thousand (previous year: EUR 89 thousand) are expected for 2016.

The following table provides an overview of the due dates of the undiscounted pension payments:


CURRENT DEBT

29. CURRENT LIABILITIES

The “Trade payables” balance sheet item includes long-term payables totalling EUR 791 thousand (previous year: EUR 979

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 0.5 to 11.20 percent (previous year:

0.75 to 11.20 percent).

30. OTHER PROVISIONS

The other provisions have developed as follows in the financial year:

in EUR ’000 Dec. 31, 2014 Dec. 31, 2015

Liabilities to banks 266,533 297,677

Liabilities from finance lease agreements 7,453 8,945

Advances received for orders 19,579 10,392

Liabilities from construction contracts (PoC) 48,471 49,882

Trade payables 168,974 184,991

Liabilities to enterprises in which the company has participating interests 205 1,017

Other current liabilities 68,632 71,503

Other current financial liabilities 25,712 12,078

Total 605,559 636,485

in EUR ’000 Dec. 31, 2014 Dec. 31, 2015

Date: Jan. 1 14,809 15,880

Change in scope of consolidation 0 0


Allocation 6,633 5,114

Reversal 3,432 3,127

Consumption 2,283 1,939

Date: Dec. 31 15,880 16,113

The other provisions comprise the following:

in EUR ’000 Dec. 31, 2014 Dec. 31, 2015

Risk from contract processing and warranties 14,670 14,763

Litigation 1,210 1,350

Total 15,880 16,113


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in EUR ’000 Dec. 31, 2014 Dec. 31, 2015

Liabilities from guarantees 5,112 112,035

in EUR ’000 Remaining term

under 1 year 1 to 5 years over 5 years


Minimum lease payments

from operating leases 9,663 9,784 22,048 12,636 77 303

Other financial obligations 6,715 13,385 3,677 7,225 6,749 6,435

The provisions for risk from contract processing and warranties include all risks arising from carrying out specialist foundation

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 provisions for risks arising from contract processing and warranties and material provisions for litigation are predicted to

be used up during 2016. The provisions for litigation in the amount of EUR 434 thousand (previous year: EUR 427 thousand)

are expected to be used during the course of 2017. The provisions for litigation relate for the most part to provisions for legal

disputes on supplementary receivables.

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.

The maturities of payments for liabilities were not stated for reasons of practicality.

32. OTHER FINANCIAL OBLIGATIONS

The operating leases relate mainly to mutual agreements about factory and office equipment, as well as to technical equipment

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 1,342 thousand (previous year: EUR 685 thousand). The other

financial obligations mainly include limited-term property rentals and leases.

33. DISCONTINUED OPERATIONS

There are 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, 2015.


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 controlled and executed 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 possible 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 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 on Dec. 31, 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 on Dec. 31, 2015 USD RUB CAD

Overall effect of +10 % on OCI 12,375 186 0

Overall effect of -10 % on OCI -15,123 -227 0

Overall effect of +10 % on income statement 2,632 0 -88

Overall effect of -10 % on income statement -3,373 0 107

in EUR ’000 Dec. 31, 2014 Dec. 31, 2015

Overall effect of +100 base points on OCI 732 558

Overall effect of -100 base points on OCI -393 -162

Overall effect of +100 base points on income statement -1,672 -82

Overall effect of -100 base points on income statement 2,278 -114

The sensitivity effects in 2015 primarily 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:

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 undiscounted interest payments and capital repayments in respect of

primary financial liabilities of the BAUER Group:


Dec. 31, 2014

Cash flow

2015

Cash flow

2016 to 2019

Cash flow

2020 et seqq.


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 (excluding 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


Dec. 31, 2015

Cash flow

2016

Cash flow

2017 to 2020

Cash flow

2021 et seqq.


Liabilities from finance lease agreements 21,597 9,570 13,165 0

Other liabilities 78,765 71,503 4,295 2,967

Other financial liabilities (excluding derivatives) 9,689 9,200 528 0

Liabilities from construction contracts (PoC) 49,882 49,882 0 0

Trade payables 184,991 184,200 791 0

Liabilities to enterprises in which the company has participating interests 1,017 1,017 0 0

There were no instances of defaulting on interest payments or capital repayments in the period under review. Furthermore, all

externally imposed capital covenants were fulfilled, see also page 133 “Additional disclosures regarding 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 on Dec. 31, 2014 Carrying amount 2015 2016 to 2019 as 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

Inflow of cash and cash equivalents - 0 0 0

in EUR '000 on Dec. 31, 2015 Carrying amount 2016 2017 to 2020 as from 2021

Liabilities from foreign exchange forward contracts 3,375 -2,654 -2,188 0

Outflow of cash and cash equivalents - -74,496 -37,330 0

Inflow of cash and cash equivalents - 71,842 35,142 0

Liabilities from interest rate swaps 3,428 -1,714 -2,766 -1,505

Outflow of cash and cash equivalents - -1,714 -2,766 -1,505

Inflow of cash and cash equivalents - 0 0 0

To calculate the cash inflows from interest rate swaps the conditions as per December 31, 2015 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 the highest

possible 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 150. The risk arising from primary financial instruments

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 the highest possible credit ratings, and the risk management system

sets limits for each party, the actual risk of default is negligible. No concentrations of risk exist.


Other disclosures relating to financial instruments

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 Dec. 31, 2014 Dec. 31, 2015

Loans and receivables 982 -9,986

Financial liabilities measured at amortized cost -39,075 -35,618

Available-for-sale financial assets -705 -162

Held for trading -7,875 -8,984

Total -46,673 -54,750

in EUR ’000 Nominal volume Fair value

Dec. 31, 2014 Dec. 31, 2015 Dec. 31, 2014 Dec. 31, 2015

Positive Negative Positive Negative

Interest rate swaps

of which in hedge accounting 64,571 27,214 0 -1,354 0 -336

of which not in hedge accounting 67,350 102,150 0 -3,822 0 -3,092

Foreign exchange forward contracts

of which in hedge accounting 119,546 144,156 988 -7,640 2,643 -1,633

of which not in hedge accounting 145,022 70,848 426 -5,286 809 -1,742

Cross currency swaps

of which in hedge accounting 1,419 0 69 0 0 0

of which not in hedge accounting 2,578 1,841 60 0 108 0

The net result of the “Loans and Receivables” category includes results from the creation and reversal of value adjustments

in respect of trade receivables, results from bank fees, impairments of uncollected receivables as well as interest income.

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.

Net available for sale financial assets contain amortization on 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.


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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 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 financial year 2015, changes in equity due to cash flow hedges in the amount of EUR 190 thousand (previous year:

EUR 1,174 thousand) before taxes and in the amount of EUR 137 thousand (previous year: EUR 1,120 thousand) after taxes

were recognized as hedge reserve in equity without any effect on profit and loss. An amount of EUR 834 thousand (previous

year: EUR -6,497 thousand) was recognized in profit and loss from the hedge reserve created with no effect on net income

in the shareholders' equity. Fair value changes resulting from the derivative financial instruments held on December 31, 2015

were recognized in equity (increase) in the amount of EUR 1,024 thousand (previous year: EUR -5,313 thousand). In addition,

the changes in deferred taxes in the amount of EUR -53 thousand (previous year: EUR 54 thousand) were recognized in eq-

uity without any effect on profit and loss. Future transactions in foreign currencies secured by hedging and 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, 2015 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,

which are not offset in the balance sheet

Gross financial

assets recognized

Gross financial

liabilities offset on

the balance sheet

Net amount of

financial assets

recognized on the

balance sheet

Financial

instruments

Cash securities

received Net amount

Date: Dec. 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

Date: Dec. 31, 2015

Derivative financial assets 3,560 0 3,560 -1,662 - 1,898

Cash and cash equivalents 47,406 0 47,406 -4,000 - 43,406

Total 50,966 0 50,966 -5,662 - 45,304


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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,

which are not offset in the balance sheet

Gross financial

liabilities recognized

Gross amount

of financial assets

offset on the

balance sheet

Net financial

liabilities recog-

nized on the bal-

ance sheet

Financial

instruments

Cash securities

paid Net amount

Date: Dec. 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

Date: Dec. 31, 2015

Derivative financial liabilities 6,803 0 6,803 -1,662 - 5,141

Current-account overdrafts 216,891 0 216,891 -4,000 - 212,891

Total 223,694 0 223,694 -5,662 218,032

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

was stated for current financial instruments and financial instruments recognized at cost in accordance with 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

Measurement benchmark Carrying amount Loans and receivables/

other financial liabilities

Dec. 31, 2014 Dec. 31, 2015 Dec. 31, 2014 Dec. 31, 2015

NON-CURRENT ASSETS

Participations 3,613 3,613 0 0

Other non-current financial assets 28,420 15,355

1,402 707 0 0

22,671 11,408 22,671 11,408

4,347 3,240 0 0

CURRENT ASSETS

Receivables from construction contracts 132,159 129,478 132,159 129,478

Trade receivables 311,417 343,933 311,417 343,933

Receivables from enterprises

in which the company has participating interests 67 3,272 67 3,272

Other current financial assets 20,100 28,901

141 2.853 0 0

19,959 26,048 19,959 26,048

Cash and cash equivalents 41,835 47,406 41,835 47,406

Total financial assets 537,611 571,958 528,108 561,545


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Balance sheet valuation as per IAS 39 Not allocated to any IAS 39 category

Measure-

ment level

in accor-

dance with

IFRS 13

Available

for Sale

Financial Assets and

Liabilities Held for Trading

Derivatives in Hedge

Accounting

Recognition in the

balance sheet in accordance

with IAS 17

Fair Value in accordance

with IFRS 7 and IFRS 13

Dec. 31, 2014 Dec. 31, 2015 Dec. 31, 2014 Dec. 31, 2015 Dec. 31, 2014 Dec. 31, 2015 Dec. 31, 2014 Dec. 31, 2015 Dec. 31, 2014 Dec. 31, 2015

3,613 3,613 0 0 0 0 0 0 n/a n/a n/a

0 0 349 108 1,053 599 0 0 1,402 707 2

0 0 0 0 0 0 0 0 22,224 9,960 2

4,347 3,240 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 0 310,972 343,404 2

0 0 0 0 0 0 0 0 n/a n/a n/a

0 0 136 809 5 2,044 0 0 141 2,853 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

7,960 6,853 485 917 1,058 2,643 0 0 334,739 356,924


in EUR ’000

Measurement benchmark Carrying amount Loans and receivables/

other financial liabilities

Dec. 31, 2014 Dec. 31, 2015 Dec. 31, 2014 Dec. 31, 2015

NON-CURRENT DEBT


Liabilities from finance lease agreements 13,032 12,652 0 0

Other non-current financial liabilities 10,013 4,414

4,371 3,925 0 0

5,642 489 5,642 489

CURRENT DEBT


Liabilities from finance lease agreements 7,453 8,945 0 0

Liabilities from construction contracts 48,471 49,882 48,471 49,882

Trade payables 168,974 184,991 168,974 184,991

Liabilities to enterprises

in which the company has participating interests 205 1,017 205 1,017

Other current financial liabilities 25,712 12,078

13,731 2,878 0 0

11,981 9,200 11,981 9,200

Total financial liabilities 905,164 948,284 866,577 919,884


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Balance sheet valuation as per IAS 39 Not allocated to any IAS 39 category

Measure-

ment level

in accor-

dance with

IFRS 13

Available

for Sale

Financial Assets and

Liabilities Held for Trading

Derivatives in Hedge

Accounting

Recognition in the

balance sheet in accordance

with IAS 17

Fair Value in accordance

with IFRS 7 and IFRS 13

Dec. 31, 2014 Dec. 31, 2015 Dec. 31, 2014 Dec. 31, 2015 Dec. 31, 2014 Dec. 31, 2015 Dec. 31, 2014 Dec. 31, 2015 Dec. 31, 2014 Dec. 31, 2015

0 0 0 0 0 0 0 0 378,016 384,999 2

0 0 0 0 0 0 13,032 12,652 13,032 12,652 n/a

0 0 3,648 2,470 723 1,455 0 0 4,371 3,925 2

0 0 0 0 0 0 0 0 5,533 484 2

0 0 0 0 0 0 0 0 n/a n/a n/a

0 0 0 0 0 0 7,453 8,945 7,453 8,945 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 5,460 2,364 8,271 514 0 0 13,731 2,878 2

0 0 0 0 0 0 0 0 n/a n/a n/a

0 0 9,108 4,834 8,994 1,969 20,485 21,597 422,136 413,883


37. EXECUTIVE BODIES

In the year under review the Supervisory Board comprised the following members:

Chairman

• Dr. Klaus Reinhardt, General a. D., 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, Zusatzversorgungskasse des Baugewerbes AG, Wiesbaden, member

Supervisory Board Zusatzversorgungskasse Gerüstbaugewerbe VVaG, Wiesbaden, Chairman (until June 30, 2015)


• Dr.-Ing. Johannes Bauer, Schrobenhausen

Construction engineer with BAUER Designware GmbH, Schrobenhausen

• Dipl.-Ing. (FH) Rainer Schuster, Freising

Retired civil engineer

• Dipl.-Ing. (FH) Elisabeth Teschemacher, née Bauer, Schrobenhausen

1. Chair of the management board of Caritasverband Neuburg-Schrobenhausen e.V., Neuburg

• Gerardus N. G. Wirken, Breda, Netherlands

Freelance consultant on strategy, controlling and accounting

Supervisory Board Vendor Beheer B.V., Tilburg, Netherlands, Chairman (until September 1, 2015)

Supervisory Board Winters Bouw- en Ontwikkeling B.V., Breda, Netherlands, Chairman

• Prof. Dr.-Ing. E.h. Manfred Nußbaumer M.Sc, Munich

Retired civil 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

Supervisory Board BAUER Maschinen GmbH, 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

pension provisions, was EUR 1,274 thousand (previous year: EUR 1,150 thousand). Of that total, EUR 1,124 thousand

(previous year: EUR 1,090 thousand) was not performance-related and EUR 150 thousand (previous year: EUR 60 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 155 thousand (previous year: EUR 159 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 Manage-

ment Board at the year-end was EUR 5,537 thousand (previous year: EUR 5,531 thousand). Former members of the manage-

ment 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 2015 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 significant

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. Members of the

Supervisory Board received pensions totaling EUR 55 thousand (previous year: EUR 55 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 483 thousand (previous year: EUR 468 thousand). Lease and service contracts and contracts

of employment (except for the remuneration 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 1,032 thousand

(previous year: EUR 879 thousand) was paid.

in EUR ’000 2014 2015

Chairman

Dr. Klaus Reinhardt 38 38

Deputy Chairman

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 18 18

Regina Andel 18 18

Dipl.-Ing. Gerold Schwab 20 20

Reinhard Irrenhauser 18 18

Total * 254 254

* rounded


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Loan commitments to the BAUER Foundation existed totaling EUR 1,000 thousand (previous year: EUR 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:

Project Company's activities Headquarters Shareholding

Bangaroo Project Specialist foundation engineering Sydney, Australia 60 %

Sebuku Island Specialist foundation engineering South Kalimantan, Indonesia 35 %

Deep-Bauer Foundation Inc. Specialist foundation engineering Calgary, Canada 44 %

Project Company's activities Headquarters Shareholding

Bangaroo Project Specialist foundation engineering Sydney, Australia 50 %

Deep-Bauer Foundation Inc. Specialist foundation engineering Calgary, Canada 44 %

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 material joint operations are listed below:



in EUR ’000 Associated companies Non-consolidated companies Joint ventures

2014 2015 2014 2015 2014 2015

Income 1,990 7,325 14,651 20,620 11,812 10,834

Purchased services 172 1,389 2,875 2,558 0 0

Receivables and other

assets (Dec. 31) 0 794 18,863 12,490 24,738 35,751

Liabilities (Dec. 31) 125 701 2,538 3,859 0 1,102

Impairment of receivables 0 0 891 1,927 16,790 22,887

Expenses for uncollectible

and doubtful debts 0 328 0 1,088 34 6,314


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 the Declaration of conformity prescribed by Paragraph

161 AktG on December 8, 2015 and made it permanently available for the shareholders on the website 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 13, 2016).

in EUR ’000 2014 2015

Fees for auditing services 668 723

Fees for other certification 5 14

Fees for tax advice 21 75

Fees for other services 45 79

Total 739 891

in EUR ’000 2014 2015

Auditing fees 37 39

Fees for other certification 0 2

Fees for tax advice 7 7

Fees for other services 0 0

Total 44 48

2014 2015

Salaried staff 3,948 4,050

Germany 1,984 2,001

International 1,964 2,049

Industrial & trades 6,209 6,443

Germany 1,926 1,920

International 4,283 4,523

Apprentices 248 245

Total number of employees 10,405 10,738


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44. PROPOSAL ON APPROPRIATION OF NET EARNINGS AVAILABLE FOR DISTRIBUTION

The Management Board and Supervisory Board of BAUER AG propose to resolve to distribute a dividend of EUR 0.15

per dividend-bearing share to the shareholders from unappropriated net profit in financial year 2015 in the amount of

EUR 5,615,809.55. At 17,131,000 dividend-bearing no-nominal-value shares, this corresponds to a dividend of EUR

2,569,650. The boards further propose to carry the remaining unappropriated net profit in the amount of EUR 3,046,159.55

forward to new account. Any partial amount relating to non-dividend-bearing no-nominal-value shares will also be carried

forward to new account.


The Management Board

Prof. Thomas Bauer Dipl.-Betriebswirt (FH) Hartmut Beutler Dipl.-Ing. Heinz Kaltenecker


160

Major participations of the BAUER Group at december 31, 2015

NAME AND REGISTERED OFFICE OF COMPANY Currency Capital share

in %

1. Fully consolidated companies

BAUER Aktiengesellschaft EUR

A. Germany

BAUER Spezialtiefbau GmbH, Schrobenhausen, Deutschland EUR 99.00

BAUER Maschinen GmbH, Schrobenhausen, Deutschland 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

WW Beteiligung GmbH, Schrobenhausen, Germany EUR 100.00

RTG Rammtechnik GmbH, Schrobenhausen, Germany EUR 100.00

PRAKLA Bohrtechnik GmbH, Peine, Germany EUR 90.00

Olbersdorfer Guß GmbH, Olbersdorf, Germany EUR 75.00

Schachtbau Nordhausen Bau GmbH, Nordhausen, Germany EUR 100.00

SCHACHTBAU NORDHAUSEN Stahlbau 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 100.00

hydesco24 GmbH, Hamburg, Germany EUR 60.00

B. EU excluding Germany

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, Great Britain GBP 100.00

BAUER RENEWABLES LIMITED, Beverley, Great Britain GBP 100.00

BAUER EQUIPMENT UK LIMITED, Rotherham, Great Britain GBP 100.00

BAUER Magyarország Speciális Mélyépítö Kft., Budapest, Hungary HUF 100.00


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in %

Continued: B. EU excluding Germany

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

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, Lodz, Poland PLN 100.00

BAUER RESOURCES SPAIN S.A., Leganes, Spain EUR 100.00

BAUER Resources UK Ltd., Beverley, 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 *

BAUER Resources GmbH / Jordan Ltd. Co., Amman, Jordan -

(sub-group consolidated financial statements) USD 100.00

Site Group for Services and Well Drilling Ltd. Co., Amman, Jordan USD 83.33

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

BAUER Equipment India Private Limited, Delhi, India INR 100.00

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in %

E. Asia-Pacific, Far East and Australia

BAUER (MALAYSIA) SDN. BHD. - (subsidiary consolidated financial statements), Petaling Jaya,

Malaysia MYR 100.00

BAUER Foundations Australia Pty Ltd, Brisbane, Australia AUD 100.00

P.T. BAUER Pratama Indonesia, Jakarta, Indonesia IDR 100.00

BAUER Services Singapore Pte Ltd, 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. - (subsidiary consolidated financial statements), 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 EUR 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

BAUER Equipment Australia Pty. Ltd., Baulkham Hills, Australia AUD 100.00

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 FOUNDATION CORP., Odessa, Florida, United States of America USD 100.00

BAUER Resources Chile Limitada - (subsidiary consolidated financial statements),

Santiago de Chile, Chile CLP 100.00

GWE Tubomin S.A., Santiago de Chile, Chile CLP 60.00

BAUER Machinery USA Inc., Conroe, United States of America USD 100.00

BAUER-Pileco Inc., Conroe, Texas, United States of America USD 100.00

G. Africa

BAUER EGYPT S.A.E. Specialised Foundation Contractors, Cairo, Egypt EGP 55.75

BAUER Technologies South Africa (PTY) Ltd. (subsidiary consolidated financial statements),

Cape Town, 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 Resources Maroc S.A.R.L., Kenitra, Morocco MAD 100.00

BAUER-DE WET EQUIPMENT (PROPRIETARY) LIMITED, Rasesa, Botswana BWP 51.00

BAUER Resources Senegal SARL, Dakar, Senegal XOF 100.00



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2. Associates and joint ventures

A. Germany

Wöhr + Bauer GmbH (subsidiary consolidated 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, Muncih, Germany EUR 100.00

WÖHR + BAUER Projekt A Verwaltungs GmbH, Munich, Germany EUR 100.00

WÖHR + BAUER Projekt A GmbH & Co. KG, Munich, Germany EUR 100.00

NDH Entsorgungsbetreibergesellschaft mbH, Bleicherode, Germany EUR 25.00

Grunau und Schröder Maschinentechnik GmbH, Drolshagen, Germany EUR 30.00

SPANTEC Spann- & Ankertechnik GmbH, Schrobenhausen, Germany EUR 40.00

BAUER Deep Drilling GmbH, Schrobenhausen, Germany EUR 51.00

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, Maskat - Al Mina, Sultanate of Oman OMR 49.00

BAUER Manufacturing LLC, Conroe, United States of America USD 51.00

TOO SCHACHTBAU Kasachstan, Almaty, Kazakhstan KZT 50.00

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 4.11

B. International

OAO Mostostrojindustria, Moscow, Russian Federation RUB 15.00

* Commercial ownership is 100 percent

164

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.


The Management Board

Prof. Thomas Bauer Dipl.-Betriebswirt (FH) Hartmut Beutler Dipl.-Ing. Heinz Kaltenecker


Assurance by the legal representatives

165

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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 for the financial

year from January 1 to December 31, 2015. The preparation of the consolidated financial statements and the Group manage-

ment 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 Group 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 Group 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 account-

ing-related internal control system and the evidence supporting the disclosures in the consolidated financial statements and

the Group 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 Group 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 Paragraph 315a, Sub-paragraph 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 Group 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, 2016

Udo Bäder Klaus Neubarth

Auditor Auditor

Audit opinion

166

A

ASSOCIATED COMPANIES | Material but not controlling

influence can be asserted over associated companies

The usual shareholding is between 20 5 and 50 %. These

companies are accounted for using the equity method.

C

CASH FLOW | This performance indicator shows the

amount of funds a company has generated with its own

resources and how many it can re-use. Key components

are profit, depreciation and amortization, and increases in

provisions.

CONSOLIDATED REVENUES | Consolidated revenues are

stated in the income statement and comprise the revenues of

the (consolidated) companies fully included in the consolidat-

ed financial statements.

D

DRILLING | This term describes the construction of shafts

or bore holes for the extraction of deposits or mining of

resources.

DEEP DRILLING RIG | This series was specially developed

for excavating particularly deep raw materials deposits by

way of drilling. The machines can drill more than 5,000

meters deep and are used for excavating oil, gas, water and

geothermal energy.

E

EBIT | Earnings before interest and taxes. EBIT is the result

from operations before interest and taxes.

EBITDA | Earnings before interest, taxes, depreciation

and amortization. EBITDA is the result of interest, taxes,

depreciation and amortization (on property, plant and

equipment and intangible assets).

EBIT MARGIN | The EBIT margin is a profitability indicator

and describes a Company's ratio between EBIT and sales

revenues.

EQUITY METHOD / AT EQUITY | The equity method is

used for recognizing shares in associated companies in the

consolidated financial statements. The carrying amounts

of the investments are amortized by the development of

proportional equity in the participating company.

F

FINANCIAL COVENANTS | Some credit agreements

contain clauses which stipulate specific thresholds for

specified financial performance indicators.

FINANCIAL INSTRUMENT | Any contract resulting in a

financial asset for one company and a financial liability (or

equity instrument) for another.

G

GROSS DOMESTIC PRODUCT (GDP) | the gross

domestic product corresponds to the total value of all goods

and services to end users produced and provided within an

economy during the course of a year. GDP is a benchmark

for an economy’s performance.

H

HGB FINANCIAL STATEMENTS | The German

Commercial Code (Handelsgesetzbuch; HGB) stipulates

the requirements for the preparation of annual financial

statements and financial reporting for German capital

corporations.

I

IFRS FINANCIAL STATEMENTS | The International

Financial Reporting Standards (IFRS) are accounting

policies for companies with a focus on the capital market.

The International Accounting Standards Board (IASB)

publishes the standards and aim to ensure that annual and

consolidated financial statements can be compared on

an international level. BAUER Group started preparing its

financial statements in accordance with IFRS in 2004.

Glossary

167

N

NET RESULT FOR THE PERIOD | The net result for the

period, also called earnings after taxes, shows the profit or

loss during a specified period.

O

ORDER BACKLOG | States a company’s order volume in

existence at the time the balance sheet is prepared.

ORDER INTAKE | Corresponds to the total of all orders

received during a specified reporting period. Order intake is

an indication of the future order volume.

P

PERCENTAGE OF COMPLETION METHOD (POC) |

This method is used for determining and recognizing the

profit realization according to the percentage of completion

on the basis of order costs and income (actual values and

forecasts) for long-term orders.

PREMIUMLINE | The PremiumLine comprises the

multi-function devices of the rotary drilling rig series (BG)

designed for diverse applications in specialist foundation

engineering. It is also possible to attach deep vibrators or

trench cutters.

R

ROTARY DRILLING RIG (BG) | BAUER Maschinen GmbH

specializes in the construction and development of rotary

drilling rigs. The machines are produced on two lines, the

PremiumLine and ValueLine. These devices can be used for

diverse applications in specialist foundation engineering.

REVENUE | The revenue comprises sales revenues, changes

in inventories, other capitalized goods and services for own

account and other operating income of the respective sub-

sidiary, associated company or joint venture.

S

SALES REVENUES | Unlike performance, for which all

goods manufactured are evaluated, sales revenues are all

services and goods finally invoiced and sold during a specific

period recognized in the income statement. The difference

between both values mainly relates to changes in semi-fin-

ished goods, warehouses and other income.

SEGMENTS | The segments are the operating units of the

Group – in our case these are Construction, Equipment and

Resources Each segment contains the holding company

and subsidiaries with equal product and/or service portfolios.

SCHACHTBAU NORDHAUSEN GmbH is the only Group

company to operate in all three segments.

STAKEHOLDER | This term describes persons or groups

with a justified interest in the performance of a company.

Various stakeholders can have very different interests.

T

TOTAL GROUP REVENUES | Total Group revenues

include revenues from the consolidated companies as well

as portions of revenues from associated companies and

revenues of non-consolidated subsidiaries and joint ventures.

V

VALUELINE | The ValueLine comprises rotary drilling rigs

(BG) optimized exclusively for the kelly drilling method.

VALUE CREATION | Value creation is a company’s

contribution to society. Value creation reflects how the

performance of a company is distributed across diverse

stakeholders.

W

WORKING CAPITAL | Working capital is the part of current

assets tied by the operative production process and the sale

of services (e.g. receivables).

GLOSSARY

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IMPRINT

Published by


BAUER-Strasse 1

86529 Schrobenhausen, Germany

www.bauer.de

Photos

BAUER Group

Press photo Roche

Erich Meyer aerial photo (p. 5)

Press photo Roche (p. 60)

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

Print

Hupfauf Druck,

Schrobenhausen

http://ir.bauer.de

http://www.youtube.com/

BAUER Group

This Annual Report is published

in German and English.

168

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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.

Consolidated statement of profit or loss

in EUR '000 12M/2014 12M/2015 Change

SALES REVENUES 1,375,679 1,378,991 0.24 %

Changes in inventories 26,622 28,994 8.91 %

Other capitalized goods and services for own account 14,696 22,748 54.79 %

Other income 89,022 157,213 76.60 %

CONSOLIDATED REVENUES 1,506,019 1,587,946 5.44 %

Cost of materials -749,247 -752,532 0.44 %

Staff costs -355,250 -376,118 5.87 %

Depreciation of fixed assets -78,781 -81,143 3.00 %

Write-downs of inventories due to use -15,789 -13,195 -16.43 %

Other operating expenses -230,526 -274,235 18.96 %

OPERATING RESULT 76,426 90,723 18.71 %

Financial income 7,096 4,972 -29.93 %

Financial expenses -45,149 -41,982 -7.01 %

Share of the profit or loss of associated companies

accounted for using the equity method -572 2,672 n/a

EARNINGS BEFORE TAX 37,801 56,385 49.16 %

Income tax expense -22,075 -27,393 24.09 %

NET RESULT FOR THE PERIOD 15,726 28,992 84.36 %

Consolidated balance sheet

ASSETS in EUR '000 31.12.2014 31.12.2015 Change

NON-CURRENT ASSETS

Intangible assets 34,440 27,455 -20.28 %

Property, plant and equipment and investment property 446,909 404,356 -9.52 %

Investments accounted for using the equity method 42,906 132,553 n/a

Participations 3,613 3,613 0.00 %

Deferred tax assets 30,973 27,190 -12.21 %

Other non-current assets 7,492 7,722 3.07 %

Other non-current financial assets 28,420 15,355 -45.97 %

594,753 618,244 3.95 %

CURRENT ASSETS

Inventories 439,184 444,629 1.24 %

Receivables and other assets 496,650 544,329 9.60 %

Effective income tax refund claims 2,661 2,300 -13.57 %

Cash and cash equivalents 41,835 47,406 13.32 %

980,330 1,038,664 5.95 %

1,575,083 1,656,908 5.19 %

EQUITY AND LIABILITIES in EUR '000 31.12.2014 31.12.2015 Change

EQUITY

Equity of BAUER AG shareholders 399,308 438,842 9.90 %

Non-controlling interests 19,617 12,368 -36.95 %

418,925 451,210 7.71 %

NON-CURRENT LIABILITIES

Provisions for pensions 116,358 112,284 -3.50 %

Financial liabilities 387,816 393,694 1.52 %

Other non-current liabilities 5,959 7,262 21.87 %

Deferred tax liabilities 13,123 20,664 57.46 %

523,256 533,904 2.03 %

CURRENT LIABILITIES

Financial liabilities 299,698 318,700 6.34 %

Other current liabilities 305,861 317,785 3.90 %

Effective income tax obligations 9,317 16,955 81.98 %

Provisions 18,026 18,354 1.82 %

632,902 671,794 6.15 %

1,575,083 1,656,908 5.19 %

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 18, 2016 Publication Annual Report 2015

Annual Press Conference

Analysts' Conference

May 13, 2016 Quarterly Statement Q1 2016

June 23, 2016 Annual General Meeting

August 12, 2016 Half-Year Interim Report to June 30, 2016

November 14, 2016 Quarterly Statement 9M/Q3 2016

Financial calendar 2016

BAUER AktiengesellschaftBAUER-Strasse 1

86529 Schrobenhausen, Germanywww.bauer.de

Documents

Annual Report 2015 - 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