Half-Year Report 2017

Notes to the half-year report

as at 30 June 2017

General principles

This unaudited, consolidated half-yearly financial statement of the Feintool Group is based on the individual financial statements of the Group companies as of June 30, 2017, which were prepared in accordance with uniform accounting policies, and released for publication by the Board of Directors on August 28, 2017.

The consolidated half-yearly financial statement was produced according to the same valuation policies as the Annual Financial Statement as of December 31, 2016, and meets the International Financial Reporting Standards (IFRS) in compliance with IAS 34 Interim Financial Reporting as well as the requirements of the SIX Swiss Exchange. This half-yearly report does not include all the information and disclosures that are disclosed in the annual report of the Feintool Group as of December 31, 2016, and for that reason should be read in conjunction with it.

The consolidated half-yearly financial statement is shown in Swiss francs (CHF), rounded to the nearest thousand. It is produced in German and English. The half-yearly financial statement in German is the authoritative version.

CHANGES TO THE ACCOUNTING PRINCIPLES

With the exception of newly issued or revised Standards and Interpretations, which are applicable or have been modified in the reporting year, essentially the same accounting policies were applied as in the previous year.

On 1 January 2017, Feintool introduced the following new Standards and Interpretations:

Amendments to IAS 7 – Disclosure Initiative

Amendments to IAS 12 – Recognition of Deferred Tax Assets for Unrealised Losses

Annual Improvements IFRS – 2014 to 2016 Cycle

Feintool is either unaffected by these changes, or the changes have no material effect on its financial position, results of operations or cash flows.

FUTURE CHANGES TO ACCOUNTING PRINCIPLES

Feintool constantly examines the effects of newly published accounting principles on the Group's financial position, results of operations or cash flows.

IFRS 15 – Revenue from Contracts with Customers (January 1, 2018)

The effects of this standard were analyzed extensively. Today, Feintool assumes that the new Standard will only have an insignificant impact on the Group’s financial position, results of operations and cash flows. Individual – relatively rarely occurring – business transactions may cause an increase in the volatility of business results, however. There were no such business transactions in the year under review as well as in the financial year 2016. Today, Feintool assumes that the preceding period will be adjusted accordingly when the standard is introduced.

IFRS 16 – Leases (January 1, 2019)

Feintool anticipates that this new Standard will have significant impacts on the Group’s financial position, results of operations and cash flows. In particular, the new standard will lead to an increase of the financial liabilities as well as total assets. The new rule is currently being analyzed and preparations made for its implementation. At the current point in time, however, it is not possible to gauge their impact definitively.

IFRS 9 – Financial Instruments (January 1, 2018)

Amendments to IFRS 2 – Classification and Measurement of Share-based Payment Transactions (January 1, 2018)

Amendments to IFRS 4 – Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts (January 1, 2018)

Amendments to IAS 40 – Transfers of Investment Property (January 1, 2018)

IFRIC 22 – Foreign Currency Transactions and Advance Consideration (January 1, 2018)

Annual Improvements IFRS – 2014 to 2016 Cycle, IFRS 1, IAS 28 (January 1, 2018)

IFRIC 23 – Uncertainty over Income Tax Treatments (January 1, 2019)

IFRS 17 – Insurance Contracts (Januar 1, 2021)

Feintool is assessing the impacts of the revised Standards and Interpretations. Based on its initial findings, Feintool does not foresee any significant impacts on its financial position, results of operations or cash flows.

Discretionary decisions AND ASSUMPTIONS

The preparation of the consolidated half-yearly financial statements requires that the management makes assessments and assumptions which influence the amounts of assets and liabilities, the statement of contingent receivables and liabilities, as well as income and expenditure. Areas in which estimates have a significant influence on the carrying amount include the calculation of provisions, the economic useful life of the fixed assets, the assumptions of the 'value in use' calculation for goodwill, the expected future cash flow from capitalized development costs, the valuation of long-term construction contracts, the assessment of expected and deferred taxes, and the actuarial assumptions in the calculation of pension obligations. These estimates may differ from the actual results and hence have a significant impact on the Group's financial position, results of operations or cash flows.

Management and Board of Directors believe that

CONTINGENT LIABILITIES / PURCHASE COMMITMENTS

The contingent liabilities arising from received funding, which has certain conditions attached, amount to CHF 3.9 million (previous year CHF 3.2 million).

Feintool has granted standard guarantees in connection with the sale of companies from the discontinued Automation segment. Management and Board of Directors anticipate no significant obligations for Feintool arising from these guarantees.

The Feintool Group has undertaken to purchase property, plant ant equipment amounting to CHF 23.3 million (previous year CHF 21.3 million).

BASIS OF CONSOLIDATION

The consolidated half-yearly financial statements encompass the half yearly financial statement of Feintool International Holding AG, Lyss (Switzerland), in addition to the half-yearly financial statements of all Group companies in which Feintool International Holding AG directly or indirectly owns more than 50 % of the voting rights or which it controls in any other way. A list of all the subsidiaries is contained in the Annual Financial Report of December 31, 2016, page 86.

The company Feintool Intellectual Property AG, Lyss was placed in liquidation on March 21, 2016, and removed from the commercial register on May 10, 2017.

n April 13, 2017, Feintool International Holding AG, Lyss, acquired Schuler (Tianjin) Metal Forming Technology Center Co., Ltd. in Tianjin (China). The name of the company was then changed to Feintool Automotive System Parts (Tianjin) Co., Ltd.

On October 12, 2016, Feintool International Holding AG, Lyss founded the subsidiary Feintool System Parts Most s.r.o. in the Czech Republic. It is part of the Feintool System Parts segment and its purpose is the production and sale of fineblanked and formed parts.

Retroactive as of January 1, 2016, HL Immobilien AG, Lyss, merged with Feintool System Parts Lyss AG.

FINANCIAL COVENANTS

On June 13, 2017, Feintool signed a CHF 90 million syndicated loan agreement in cash loans with six banks for a period of five years (up to June 2022) and has an option for renewal of one year. The syndicated loan defines a number of covenants, the principal one being:

Equity ratio > 30 %

Net Senior Debt / EBITDA < 3.0 x

As of June, 30 2017, CHF 10.9 million of the syndicated loan had been used.

On July 15, 2016, a promissory note was issued in the amount of EUR 65 million. The issuer, with a guarantee from Feintool International Holding AG, is Feintool Holding GmbH based in Germany. The loan is divided into three tranches with different maturities.

EUR 25 million, term of 5 years, fixed interest rate of 0.90 %;

EUR 25 million, term of 7 years, fixed interest rate of 1.10 %;

EUR 15 million, term of 10 years, fixed interest rate of 1.66 %.

Standard covenants are defined in the loan agreement. The only material covenant to be complied with is:

Equity ratio > 25 %

Credit agreements concluded on a bilateral basis with various banks also contain standard covenants. If the Group were unable to meet these covenants, the banks would have the right to terminate the loans at short notice.

As at June 30, 2017, all covenants had been met and Feintool has CHF 79.1 million (previous year CHF 73.5 million) in unused, confirmed creditlines at the bank.

Seasonality

The business segments of Feintool are subject to no significant seasonal fluctuations. The earnings arising from the long-term construction contracts are distributed over the period in question by means of the POC (percentage of completion) method.

The Feintool Group used the following exchange rates in the half-years:


		30.06.2017		30.06.2016
		Closing rate	Average rate	Closing rate	Average rate
Eurozone	EUR 1	1.0930	1.0784	1.0867	1.0974
USA	USD 1	0.9578	0.9852	0.9788	0.9832
Czech Republic	CZK 100	4.1722	4.0304	4.0054	4.0568
Japan	JPY 100	0.8556	0.8781	0.9528	0.8802
China	CNY 100	14.0914	14.3155	14.7005	14.9475

Segment information

Products and services 1st HY 2017 (unaudited) in CHF 1 000	Fineblanking Technology	System Parts	Total segments	Finance/Other	Eliminations	Total Group
Net sales	37 097	265 964	303 061	–	-6 256	296 805
- Intersegment income	-6 249	-7	-6 256	–	6 256	–
Total net sales - Group	30 848	265 957	296 805	–	–	296 805

Gross margin ¹⁾	15 223	105 171	120 394	–	-1 212	119 182

EBITDA	432	43 944	44 376	-3 871	-480	40 025
Depreciation and amortization	-893	-16 857	-17 750	-733	924	-17 559
Operating profit (EBIT)	-461	27 087	26 626	-4 604	444	22 466

Financial expenses						-5 590
Financial income						3 459
Income taxes						-6 323

Net income attributable to Feintool Holding shareholders						14 012

Assets	65 556	464 972	530 528	177 324	-150 920	556 932
Net working capital ²⁾	12 806	79 990	92 796	20 312	-32 519	80 589
Investments in property, plant and equipment/intangible assets (incl. leases)	961	29 130	30 091	1 201	-819	30 473
Number of employees	234	2 139	2 373	36	–	2 409

Geographical areas 1st HY 2017	Switzerland	Europe excl. Switzerland	America	Asia	Total
Total net sales – Group ³⁾	3 585	154 688	91 089	47 443	296 805
thereof Germany		107 357
thereof Japan				20 874
thereof China				21 216
Fixed and intangible assets	45 743	128 381	78 488	48 362	300 974

Products and services 1st HY 2016 (unaudited) in CHF 1 000	Fineblanking Technology	System Parts	Total segments	Finance/Other	Eliminations	Total Group
Net sales	44 400	242 082	286 482	–	-7 974	278 508
- Intersegment income	-7 972	-2	-7 974	–	7 974	–
Total net sales - Group	36 428	242 080	278 508	–	–	278 508

Gross margin ¹⁾	17 700	94 065	111 765	-27	-2 183	109 555

EBITDA	2 981	37 382	40 363	-2 786	-556	37 021
Depreciation and amortization	-832	-14 659	-15 491	-965	811	-15 645
Operating profit (EBIT)	2 149	22 723	24 872	-3 751	255	21 376

Financial expenses						-6 912
Financial income						5 609
Income taxes						-6 184

Net income attributable to Feintool Holding shareholders						13 889

Assets	68 454	363 027	431 481	133 735	-116 344	448 872
Net working capital ²⁾	10 030	72 575	82 605	38 249	-45 893	74 961
Investments in property, plant and equipment/intangible assets (incl. leases)	1 305	24 004	25 309	639	-558	25 390
Number of employees	236	1 961	2 197	28	–	2 225

Geographical areas 1st HY 2016	Switzerland	Europe excl. Switzerland	America	Asia	Total
Total net sales – Group ³⁾	4 772	141 318	88 168	44 250	278 508
thereof Germany		103 407
thereof Japan				20 588
thereof China				15 943
Fixed and intangible assets	35 016	91 065	71 358	27 871	225 310

The following footnotes are applicable to the 2017 and 2016 half-year periods.

1) The gross margin is calculated as net sales less material cost, the change in finished and semi-finished goods and work in progress, and direct personnel expenses.

2) Net working capital comprises trade receivables, inventories, net assets of construction contracts/work in progress and prepaid expenses and accrued income less trade payables, advance payments received from customers and accrued expenses and deferred income. The remaining receivables and liabilities will be included in the calculation for “Finances/Other” beginning in the second half of 2017. The calculation from the previous year was adjusted accordingly.

3) Net sales are allocated to countries based on the customer's domicile.

The Fineblanking Technology segment comprises the development, manufacture and sale of presses, tools, peripheral systems and all related services.

The System Parts segment develops, produces and sells high-precision system components and assemblies using fineblanking and forming technology.

The following notes are applicable to the 2017 and 2016 half-year periods.

"Finances/Other" essentially comprises the figures for Feintool International Holding AG, the German sub-holding company Feintool Holding GmbH and the real estate companies included in the sub-holding company HL Holding AG.

The operating profit/loss comprises all operating income and expenses directly attributable to the individual segments. This includes all cross-segment expenses, which are charged directly on an arm’s length basis. Feintool's financing is undertaken at Group level. Financial expenses and income, as well as taxes, are therefore reported at Group level only and do not appear in the segment reports.

There is no reconciliation of the data in management reports and data contained in the financial reports, as internal and external reporting are subject to the same valuation principles.

aquisition of Investments

On April 13, 2017, Feintool International Holding AG, Lyss, acquired Schuler (Tianjin) Metal Forming Technology Center Co., Ltd. in Tianjin (China). The name of the company was then changed to Feintool Automotive System Parts (Tianjin) Co., Ltd.

With the purchase of the Chinese forming plant, Feintool can now offer sophisticated forming applications in all of the important automotive markets and thus continue to expand its market position. The forming business was founded in Tianjin in 2014, employed 52 people at the time of acquisition and has a modern infrastructure that is currently being expanded.

In its first three months under the Feintool Group, Feintool Automotive System Parts (Tianjin) Co., Ltd. generated sales of CHF 1.5 million and an operating profit (EBIT) of CHF -0.5 million. Had the acquisition taken place on January 1, 2017, the consolidated sales of the Feintool Group would have totaled CHF 297.8 million and the operating result (EBIT) CHF 22.3 million. As Schuler (Tianjin) Metal Forming Technology Center Co. Ltd. did not apply IFRS accounting prior to the date of acquisition, these figures are estimates.

Consideration for the interests acquired	in CHF 1 000
Cash and cash equivalents	27 243
Total consideration	27 243

Identifiable assets and liabilities	in CHF 1 000
Cash and cash equivalents	2 520
Trade and other receivables	3 190
Inventories	2 629
Work in progress	5 534
Property, plant and equipment	15 459
Intangible assets ¹⁾	11 179
Financial liabilities	-12 727
Trade and other payables	-6 029
Provisions	-4 046
Deferred tax liabilities	-2 333
Net identifiable assets	15 377

¹⁾ In intangible assets is mainly the value of customer contracts and relationships, as well as land-use-rights contained.

Goodwill at the acquisition date	in CHF 1 000
Total consideration	27 243
Net identifiable assets	-15 377
Goodwill ¹⁾	11 866

¹⁾ Goodwill at historical rates on the acquisition date. Goodwill represents the figure that the Feintool Group would have had to pay in order to independently set up a profit-making operation for the production of chipless-formed parts on a "greenfield" basis. The acquisiton is intended to significantly advance the Feintool Group's forming capabilities, a process closely related to fineblanking, as well as boost the company's geographical market development in Asia. The costs incurred by the Feintool Group for the acquisition of Schuler (Tianjin) Metal Forming Technology Center Co. Ltd. amounted to around CHF 0.4 million. In particular, this includes the fees of external lawyers and advisers. The costs were recognized in other operating expenses.

financial result and and derivative financial instruments

	1^st HY 2017	1^st HY 2016
Financial expenses	in CHF 1 000	in CHF 1 000
Interest expense	1 237	1 296
Other finance costs ¹⁾	522	711
Foreign exchange losses	3 831	4 905
Total financial expenses	5 590	6 912

¹⁾ Besides bank charges, other financial expenses include lead syndication commissions, promissory note costs (annual amortization of establishing cost for the syndicated loan and the promissory note) and interest expenses for the provision from employee benefit obligations.

	1^st HY 2017	1^st HY 2016
Financial income	in CHF 1 000	in CHF 1 000
Interest income	36	60
Other financial income ¹⁾	362	137
Foreign exchange gains	3 061	5 412
Total financial income	3 459	5 609

¹⁾ Other financial income comprises valuation income from derivative transactions.

Fair value hierarchy

Feintool has measured financial instruments at fair value and uses the following hierarchy to determine fair value:

Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (as prices) or indirectly (derived from prices)

Level 3: Inputs for the asset or liability that are not based on observable market data (unobservable inputs).

Feintool holds only financial instruments in Level 2. These include currency forwards and interest rate swaps. Detailed information is disclosed in part "Derivative financial instruments outstanding".

		Fair values
Derivative financial instruments outstanding	in CHF 1 000	positive	negative	Contract volumes
Futures contracts		255	51	23 068
Currency instruments		255	51	23 068

Total derivative financial instruments as at 06/30/2017		255	51	23 068

Futures contracts		120	307	44 229
Currency instruments		120	307	44 229

Interest rate swaps		–	28	463
Interest rate instruments		–	28	463
Total derivative financial instruments as at 06/30/2016		120	335	44 692

Currency instruments primarily relate to the hedging of foreign-currency risks in euros. The life of the foreign exchange futures is a few months.

Fair Values

The carrying amounts of the financial assets and liabilities do not differ materially from their fair values.

equity

	1^st HY 2017	1^st HY 2016
Authorized capital	in CHF 1 000	in CHF 1 000
Start of period	6 000	–
Created¹⁾	–	6 000
Used	–	–
Expired	–	–
End of period	6 000	6 000

¹⁾ According to the decision of the Annual General Meeting of April 19, 2016, the Board of Directors is authorized to create capital up to a maximum amount of CHF 6 Mio. as required through the issue of up to 600 000 new shares, each having a nominal value of CHF 10. The new shares are to be paid up in full. The Board of Directors is authorized to restrict or exclude subscription rights under certain circumstances. The new shares can be issued in one or more stages. The approval is limited to a period of two years. The authorized capital will expire on April 19, 2018.

		30.06.2017		30.06.2016
Major shareholders	Date of notification	Number	Share of capital	Number	Share of capital
Artemis Beteiligungen I AG und Michael Pieper	30.09.2014	2 245 949	50.32 %	2 245 949	50.32 %
Muhr und Bender KG und Dr. Thomas Muhr ¹⁾	18.11.2014	616 500	13.81 %	616 500	13.81 %
Geocent AG	15.07.2013	400 285	8.97 %	400 285	8.97 %

¹⁾ Held by a subsidiary of Muhr und Bender KG and Dr. Thomas Muhr Beteiligungs AG.

dividend

On the occasion of the Annual General Meeting of Feintool International Holding AG on April 25, 2017, the shareholders approved the distribution of a dividend of CHF 2.00 (previous year CHF 1.50) per share for financial year 2016. This led to a dividend payout of kCHF 8 923 (previous year: kCHF 6 686).

Events after the balance sheet date

There were no significant events after the balance sheet date.

addresses of our operating companies

as at 30 June 2017

Company	Address	Phone/Fax	Mail
Switzerland
Feintool International Holding AG	Industriering 8 3250 Lyss Switzerland	Phone +41 32 387 51 11 Fax +41 32 387 57 81	feintool-fih@feintool.com
Feintool Technologie AG	Industriering 3 3250 Lyss Switzerland	Phone +41 32 387 51 11 Fax +41 32 387 57 80	feintool-ftl@feintool.com
Feintool Technologie AG	Grünfeldstrasse 25 8645 Jona Switzerland	Phone +41 55 225 21 11 Fax +41 55 225 24 04	feintool-ftl@feintool.com
Feintool System Parts Lyss AG	Industriering 53 3250 Lyss Switzerland	Phone +41 32 387 51 11 Fax +41 32 387 57 79	feintool-pbel@feintool.com
Europe
Feintool System Parts Ettlingen GmbH	Englerstrasse 18 76275 Ettlingen Germany	Phone +49 7243 320 20 Fax +49 7243 320 240	feintool-pbee@feintool.com
Feintool System Parts Jena GmbH	Löbstedter Strasse 85 07749 Jena Germany	Phone +49 3641 506 100 Fax +49 3641 506 300	feintool-pbej@feintool.com
Feintool System Parts Obertshausen GmbH	Ringstrasse 10 63179 Obertshausen Germany	Phone +49 6104 401 0 Fax +49 6104 401 204	feintool-pfef@feintool.com
Feintool System Parts Ohrdruf GmbH	Ringstrasse 13 99885 Ohrdruf Germany	Phone +49 3624 335 0 Fax +49 3624 335 200	feintool-pfeo@feintool.com
Feintool System Parts Oelsnitz GmbH	Hoffeldstrasse 2 09376 Oelsnitz Germany	Phone +49 3729 830 299 0 Fax +49 3729 830 299 111	feintool-pbeo@feintool.com

Company	Address	Phone/Fax	Mail
Americas
Feintool Equipment Corp.	6833 Creek Road Cincinnati, OH 45242, USA	Phone +1 513 791 00 66 Fax +1 513 791 15 89	feintool-ftu@feintool.com
Feintool Cincinnati, Inc.	11280 Cornell Park Drive Cincinnati, OH 45242, USA	Phone +1 513 247 01 10 Fax +1 513 247 00 60	feintool-pbuc@feintool.com
Feintool Tennessee, Inc.	2930 Old Franklin Road Antioch, TN 37013, USA	Phone +1 615 641 77 70 Fax +1 615 641 79 95	feintool-pfut@feintool.com
Asia
Feintool Japan Co., Ltd. (Equipment)	Atsugi Plant, 260-53, Hase, Atsugi City Kanagawa Prefecture, 243-0036 Japan	Phone +81 46 247 74 51 Fax +81 46 247 20 08	feintool-ftj@feintool.com
Feintool Japan Co., Ltd. (System Parts)	Atsugi Plant, 260-53, Hase, Atsugi City Kanagawa Prefecture, 243-0036 Japan	Phone +81 46 248 44 41 Fax +81 46 247 20 08	feintool-pbja@feintool.com
Feintool Japan Co., Ltd. (System Parts)	Tokoname Plant, 178 Ikeda, Aza Kume, Tokoname City Aichi Prefecture, 479-0002 Japan	Phone +81 569 44 04 00 Fax +81 569 44 04 35	feintool-pbjt@feintool.com
Feintool Automotive System Parts (Tianjin) Co., Ltd	No 216 Jingsi Road, Tianjin Kong Gang Economic Zone 300308 Tianjin, P. R. China	Phone +86 22 5926 58 38 Fax +86 22 5926 58 38	feintool-pfct@feintool.com
Feintool Precision System Parts (Taicang) Co., Ltd.	No 15 Qingdao East Road Taicang 215400, Jiangsu Province, P. R. China	Phone +86 512 5351 51 86 Fax +86 512 5351 54 32	feintool-pbct@feintool.com
Feintool Fineblanking Technology (Shanghai) Co., Ltd.	Bld. No. 27, No. 1525 Minqiang Road, Shentian High-Tech Park, Songjiang District 201612 Shanghai, P. R. China	Phone +86 21 6760 15 18 Fax +86 21 5778 66 56	feintool-ftc@feintool.com