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

    1st HY 2017

    1st 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.

    1st HY 2017

    1st 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

    1st HY 2017

    1st 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