Rücken 14, Annual Report 2016 Welcome to the Next 150 Years Annual Report 2016 Magazine Financial Statement Group _people Foreword 28 The Corporate Board of Management 32 _future Report of the Supervisory Board 34 _digitization The Supervisory Board 40 Group Management Report _resources 01 Background 42 _mobility 02 Business development and earnings position of the Group 52 _trends 03 Business development and earnings position of the Group Divisions 64 04 Net assets and financial position 71 05 Research and development 77 06 Sustainability 82 07 Employees 86 08 Subsequent events 93 09 Risks and opportunities 94 10 Forecast report 108 Consolidated Financial Statements Consolidated statement of income 114 Consolidated statement of comprehensive income 115 Consolidated balance sheet 116 Consolidated statement of changes in equity 118 Consolidated cash flow statement 120 Notes to the consolidated financial statements for the 2015/16 fiscal year 121 Notes to the consolidated statement of income 145 Notes to the consolidated balance sheet 154 Notes on segment reporting 184 Segment information by business segment 186 Segment information by region 188 Other notes 189 Responsibility statement 208 Imprint 210 Voith is a global technology group. With energy, oil & gas, paper, raw materials and transport & automotive, the broad portfolio The Group with its plants, products, services and digital applications Table of Contents serves five essential markets in all regions of the world. Voith’s operating business is bundled in four Group Divisions: Voith Hydro, Voith Paper, Voith Turbo and Voith Digital Solutions. A large proportion of the world’s paper production is manufac- tured on Voith paper machines. A quarter of the energy gener- ated worldwide from hydropower is produced with turbines and generators from Voith Hydro. Voith’s drive components are found in applications all over the world, both in industrial plants and in road and rail vehicles, as well as on the waters. And the applications provided by the Digital Solutions Group Division make Voith one of the pacemakers for digital change in the key global industries. Founded in 1867, Voith employs around 19,000 people, gen- erates €4.3 billion in sales, and operates in over 60 countries around the world. The Voith Group in Figures in € millions 2014/15 2015/16 Orders received1) 4,389 4,108 Sales1) 4,302 4,252 Profit from operations1) 2) 270 275 Return on sales in %1) 6.3 6.5 Result before taxes1) -23 140 Net result3) -93 29 Cash flow from operating 151 58 activities Total cash flow -357 203 Investments1) 80 121 Research and development1) 210 208 in % of sales1) 4.9 4.9 Equity 874 799 Equity ratio in % 16.0 14.9 Balance sheet total 5,451 5,359 Employees1) 4) 20,223 19,098 1) Excluding the discontinued Group Division Voith Industrial Services; previous year restated. 2) For more information, see section “Notes on segment reporting” in the notes to the financial statements. 3) The figure for the 2015/16 fiscal year contains non-recurring negative effects that primarily result from impairments disclosed on the face of the balance sheet come to a total of €-96 million. 4) Without apprentices. We admit it: we’re proud of ourselves. There aren’t many companies that have been around as long as we have. When you’ve endured 150 years of competition, it means you have done many things right. You have captured your customers’ enthusiasm again and again, over generations. You have recruited the right employees and retained them. You have always had the right ideas and the right instincts. With passion, commitment and the loyalty of our employees, we made an ascent no one could have dreamed of: from a small locksmith’s shop to an international technology group. Our past gives us strength. And yet we look to the future. The basis for our success has remained the same for 150 years: sus- tainable, long-term, value-oriented entrepreneurial thinking. It is with this attitude that we face new challenges today. Our independence Welcome to the Next 150 Years to the Next 150 Welcome is important to us. We are a family-owned business in it for the long haul, a reliable partner for our customers. And that is what we will continue to be. Voith brings 150 years of experience to the table – 150 years of confi- dence in our own strengths, in our employees and our technologies, and 150 years of commitment to give our best in everything we do. Our formula for success: the will to change, an international mindset, consistent customer focus and our strong values spanning many generations. In this way, we think of tomorrow without forgetting yesterday. Welcome to the Next 150 Years! 2 Chinese signs for “future” Voith Annual Report 2016 3 _people Heidenheim Kunshan São Paulo The Future of vocational training Over a century ago, we were already pioneers in training our workers. Today, modern training centers in Heidenheim and in Kunshan, China, prepare young people to become the future of Voith someday. Every morning, Shi Qian ru rides her bicy- cle the three kilometers from her boarding school to the Voith China Training Center in Kunshan. In bad weather the 22-year-old uses her cell phone to get a ride with an Uber driver. When she arrives at the impressive new building, she joins the throng of other trainees milling about the long hall- ways. They are graduates from universities or from advanced technical training schools from all over the country. In Kun- shan, they are trained with the needs of an industrial com- Shi Qian ru pany in mind. Adapted from the German dual-track training system, the training program in Kunshan follows a year of hands-on experience at one of 12 Voith locations in China. Shi Qian ru is being trained as a welder. “Yesterday our instructor put us into groups and told us to design a turbine. Each group was responsible for one component based on square meters. Everything is well lit and clean; the building the knowledge we have been given so far.” The lesson she feels more like an elegant conference center than a work- learned from this exciting experiment: “Even teamwork shop. depends on what each individual is capable of.” Erwin Krajewski is Head of Training at Voith in Heidenheim. No dividing walls In his opinion, this building for the Voithians of tomorrow – the opening ceremony was in 2014 – not only exudes style, At the training center in Heidenheim, Erwin Krajewski is on but also symbolism. “As we planned the new training center, his way to his office. The glass walls in the stairwell allow you we first thought about arranging the workshops as they had to see into the different floors of the big cube made of glass been in the old building. Then we realized that we also and steel. On the ground floor, modern engine lathes, needed to use the architecture to set the tone for the future. hydraulic guillotine plate shears and milling machines con- Dividing walls have no place in our future professional trolled by computer are installed in a space covering 2,400 worlds.” Voith Annual Report 2016 4 The entire structure is supported by the four striking corner pillars, which also connect to the individual floors. The “ Dividing walls have façade and the few partitions that do exist within the building no place in our future are made of glass, creating a perception of great transpar- ency. “It is with this openness and permeability that we orga- professional worlds.” nize the transfer of knowledge in our training programs,” explains Krajewski. There is room for interaction between Ernst Krajewski professions and areas of expertise and responsibility. We want intersections, not boundaries. And so each trainee gets experience in all specialist fields in their first three months. RFID chips,” says Krajewski. Moreover, Voith and other com- Administrative assistants work at cutting machines, industrial panies were able to get “production technologist” recognized mechanics deal with cost accounting and aspiring engineers as an official new trade for trainees to learn. Much in the process steel by even using a saw and a file sometimes. Why spirit of Industrie 4.0, this profession integrates processes so much variety? “To give young people a feel for the work across various divisions in virtual systems. others are doing, so that later on they will be able to assess the effects of their own activities on other areas and to A confident generation gauge where responsibilities overlap or can complement each other.” These digital programs on offer are also vital in terms of com- petition for the best minds. Krajewski says, “We are currently This flexibility is firmly established in the curricula of the new seeing a very confident generation that demands a great deal training programs, just as social skills and emotional intelli- and knows what it wants.” The digital component of their gence have also become central. “Thanks to the networked work is right at the top of their list of expectations. nature of how we work, success will not only be determined by specialist skills, but rather by how well we work together,” Moritz Lankes, for example, would like to work in the newly says Krajewski. established Digital Solutions division someday. The young Heidenheim native completed a dual-track degree program Indirectly this also speaks to that great driver of transforma- at Voith. This model envisions lecture series at the Duale tion with which all trainees will be confronted, regardless of Hochschule Baden-Württemberg (DHBW – Baden-Württem- the profession they pursue: digitization. Voith is responding berg Cooperative State University Heidenheim) and phases to this as part of its training program as well.