Notes to the Consolidated Financial Statements

1. Basic information and principles of the report

2. Changes in Group structure

3. Summary of significant accounting policies

4. Risk assessment and management

5. Management of capital

6. Marketable securities

7. Trade accounts receivable

8. Other current assets and current financial assets

9. Inventories

10. Property, plant and equipment

11. Other non-current assets and non-current financial assets

12. Goodwill and intangible assets

13. Short-term debt

14. Other current provisions and liabilities

15. Long-term debt

16. Derivative financial instruments

17. Retirement benefit plans

18. Participation plans

19. Deferred tax assets and liabilities

20. Other non-current provisions and liabilities

21. Contingencies

22. Capital stock and treasury shares

23. Earnings per share

24. Other operating expenses, net

25. Financial result, net

26. Income tax expenses

27. Research and development expenditures

28. Cashflow figures

29. Segment reporting

30. Related party transactions

31. Foreign exchange rates

32. Subsequent events

Acquisition of Sanitec

On October 14, 2014, Geberit AG made an offer to the shareholders of Sanitec Oyj, Helsinki, Finland (Sanitec) to acquire all Sanitec shares at a price of SEK 97 per share in cash. With this transaction Geberit becomes the European market leader in the area of sanitary technology and bathroom ceramics, and also improves its access to the end users.

The Sanitec shares are listed on the NASDAQ Stockholm stock exchange. By the end of the extended offer deadline on February 2, 2015, 99.2% of the Sanitec shares were tendered and the transaction was successfully settled on February 10, 2015. The acceptance period was further extended until March 2, 2015 in order to give the remaining shareholders the possibility to tender their shares under the offer. Settlement for shares tendered during this additional acceptance period is expected to take place on or around March 5, 2015. As at March 2, 2015, a squeeze-out process for the residual shares will be initiated.

To finance the transaction, Geberit raised in total MCHF 1,170 new debt and used own funds of MCHF 247. Out of these resources MCHF 1,210 were and will be used to purchase 100% of the shares of Sanitec (of which MCHF 1,203 were used on February 10, 2015, to settle the 99.2% of total shares tendered as at February 2, 2015), MCHF 184 to repay the existing Sanitec debt and MCHF 23 to pay the transaction cost.

Of the total estimated transaction cost of MCHF 23, MCHF 10 are advisory fees (of which MCHF 3 were already included in 2014 and recorded under other operating expenses). The estimated financing related transaction cost amount to approx. MCHF 13 which will be amortized over the expected term of the underlying debt instruments using the effective interest rate method.

According to Sanitec’s audited financial report from 2014, the carrying amounts of the assets amounted to MEUR 438.5 and the liabilities amounted to MEUR 392.3 as of December 31, 2014. The company recorded revenue from sales of MEUR 689.4 and the EBIT was MEUR 78.9 which corresponds to a margin of 11.4%. The fair values of the identifiable assets and debt (purchase accounting) have not yet been determined as Geberit gained access to detailed financial information only after the transaction was executed on Feburary 10, 2015.

Fluctuations of currencies

The Swiss National Bank canceled the minimum limit for EUR against CHF of 1.20 on January 15, 2015. This decision resulted in fluctuations of currencies and the Swiss franc gaining in strength against all major currencies. As Geberit is exposed to foreign currencies on the asset and liability side and in sales and cost respectively, the impact of such currency fluctuations on the financial statements are mitigated (see Note 4 risk assessment and management). In the balance sheet a 15 percent devaluation of the EUR against CHF leads to an estimated negative translation impact on the consolidated equity of approx. MCHF 130 – 150 (7.6% to 8.7% of total consolidated equity as at December 31, 2014).

In the profit and loss statement a strengthening of the Swiss franc has a negative impact on sales and profitability. In terms of a sensitivity analysis, the following changes in the consolidated profit and loss statement can be assumed if the Swiss franc loses 10% or gains 10% in value against all other relevant currencies:

  • Sales: +/-8% to +/-10%
  • EBIT: +/-9% to +/-11%
  • EBIT margin: approximately +/-0.5 percentage points

This sensitivity analysis does not include potential FX-related selling price adjustments.

Approval for publication of the consolidated financial statements

The consolidated financial statements are subject to approval by the General Meeting and were released for publication by the Board of Directors on March 3, 2015.

33. Additional disclosures on financial instruments

34. Group companies as of December 31, 2014