(8.) Notes to the consolidated income statement

(8.1) Net sales

Net sales break down according to the following regions:


Net sales



2016 2015
EUR
thousand
% EUR
thousand
%

Europe 743,981 56.1 744,672 56.5
Asia Pacific 359,556 27.0 344,557 26.2
EMEA 187,821 14.2 190,165 14.4
Others 35,732 2.7 37,732 2.9
Total 1,327,090 100.0 1,317,126 100.0


Net sales include service income of EUR 83,693 thousand (previous year: EUR 68,020 thousand).

(8.2) Cost of sales

This item consists of costs of the products and merchandise sold.


Cost of sales

EUR thousand 2016 2015
Cost of materials -575,606 -574,196
Staff costs -143.376 -135,430
Depreciation and amortisation of intangible
assets and property, plant and equipment
-33,138 -33,422
Other staff costs including personnel leasing -14,623 -13,781
Purchased services -10,645 -11,131
Third-party maintenance -9,187 -9,243
Rental payments -5,231 -4,253
Travel and entertainment expenses -2,697 -2,716
Other -33,499 -30,932
Total -828,002 -815,104

 

(8.3) Selling expenses


Selling expenses

EUR thousand 2016 2015
Staff costs -133,615 -130,958
Outgoing freight -24,728 -24,664
Advertising costs -20,506 -21,706
Sales force costs -18,815 -19,140
Purchased services -10,275 -7,114
Rental payments -9,923 -10,475
Depreciation and amortisation of intangible assets
and property, plant and equipment
-6,169 -6,380
Other staff costs including personnel leasing -4,274 -3,895
Legal and consulting costs -3,523 -2,651
Write-downs on trade receivables (net) -2,680 -2,826
Communication costs -2,417 -2,470
Defaults -2,026 -2,255
Other -15,797 -17,425
Total -254,748 -251,959

(8.4) Administrative expenses


Administrative expenses

EUR thousand

2016

2015
Staff costs -54,181 -51,568
Legal and consulting costs -10,535 -8,194
Depreciation and amortisation of
intangible assets and property,
plant and equipment
-8,563 -7,623
Purchased services -6,597 -5,007
Rental payments -6,080 -5,185
Other staff costs including personnel leasing -3,867 -3,220
Travel and entertainment expenses -3,506 -2,932
Communication costs -2,294 -2,120
Other -4,601 -3,195
Total -100,224 -89,044

(8.5) Research and non-capitalised development costs


Research and non-capitalised development costs

EUR thousand 2016 2015
Staff costs -37,382 -37,222
Purchased services -7,186 -5,228
Depreciation and amortisation of intangible
assets and property, plant and equipment
-3,131 -2,876
Other staff costs including personnel leasing -2,104 -1,980
Third-party maintenance -1,366 -1,319
Legal and consulting costs -855 -896
Other -12,974 -12,921


Capitalised development costs

-64,998

17,220

-62,442

19,295
Total -47,778 -43,147

 

(8.6) Other operating income


Other operating income

EUR thousand 2016 2015
Foreign-currency gains from operating activities 10,504 12,544
Income from disposals of intangible assets and
property, plant and equipment
3,240 630
Government grants 2,382 2,372
Insurance compensation 244 152
Rental income 23 155
Other 5,154 5,830
Total 21,547 21,683

The foreign-currency gains from operating activities of EUR 10,504 thousand (previous year: EUR 12,544 thousand) mainly consist of gains due to exchange rate changes between the inception and settlement of foreign-currency receivables and liabilities, and foreign-currency gains resulting from measurement at the exchange rate as at the end of the reporting period. Foreign-currency losses of EUR 7,398 thousand (previous year: EUR 16,250 thousand) from these items are reported under other operating expenses (see note (8.7)). As subsidiaries mostly trade with customers and suppliers in local currency, these foreign-currency gains and losses mainly arise on intragroup transactions.

(8.7) Other operating expenses


Other operating expenses

EUR thousand 2016 2015
Foreign-currency losses from
operating activities
-7,398 -16,250
Losses on disposals of intangible assets and property, plant and equipment -1,273 -676
Other -2,126 -1,442
Total -10,797 -18,368

(8.8) Net finance costs

Net finance costs break down as follows:


Net finance costs

EUR thousand 2016 2015
Net interest costs -4,340 -6,726
Other net finance income 826 -1,266
Total -3,514 -7,992

Net interest costs consist of the following interest income and expenses:


Net interest costs

EUR thousand 2016 2015
Interest income on cash and on
loans granted
1,463 1,028
Settlement of derivative financial
instruments
114 229

Interest income 

Interest expenses on financial liabilities

1,577

-6,953

1,257

-8,396

Interest on finance leases -254 -262
Capitalised borrowing costs 1,290 675
Interest expenses -5,917 -7,983
Total -4,340 -6,726

Other net finance income break down as follows:


Other net finance income

EUR thousand 2016 2015
Gains on derivative financial
instruments
3,407 5,585
Foreign-currency gains from
financing activities
95 603
Other 30 0
Other financial income

Losses on derivative financial instruments

3,532

-754

6,188

-1,302
Foreign-currency losses
from financing activities
-508 -4,806
Interest rate effects from pensions,
non-current liabilities and receivables
-1,444 -1,345
Other 0 -1
Other financial expenses -2,706 -7,454
Total 826 -1,266

The foreign currency gains and losses from financing activities result from the translation of intragroup foreign-currency loans. In the previous year, the foreign currency losses from financing activities included a loss of EUR 3,815 thousand from the translation of a senior note of USD 40.0 million. The senior note was repaid on schedule in March 2016.

The cross-currency interest rate swap that hedged the senior note against currency risks therefore expired in March 2016. In the previous year, a gain on the remeasurement of this cross-currency interest rate swap of EUR 3,766 thousand was reported under gains on derivative financial instruments. In the current financial year, the gains and losses on derivative financial instruments resulted primarily from positive and negative utilisation and measurement effects of commodity derivatives used to hedge prices for commodities within the Wilo Group. In the 2016 financial year, the net utilisation and measurement of commodity derivatives increased net other financial income by EUR 2,667 thousand (previous year: EUR 22 thousand).

(8.9) Income taxes

The income tax expense contained in consolidated net income is composed as follows:


Income taxes

EUR thousand 2016 2015
Current tax expenses/ income    
  – reporting year -25,043 -25,707
  – adjustments for prior periods -1,101 -625
Current income taxes -26,144 -26,332
Deferred tax income/expense    
  – from unutilised loss carryforwards 7,498 -809
  – from changes in tax rates -13 19
  – from the creation and reversal of
    temporary differences
-8,331 -5,419
  – from write-downs and reversals of
    write-downs on deferred tax assets
8 -19
Deferred tax income/expense -838 -6,228
Income taxes -26,982 -32,560

 

The calculation of current income taxes in Germany for 2016 is based on a combined statutory tax rate of 15.8 percent for corporation tax and the solidarity surcharge plus trade tax approximating 15.0 percent as expected tax rates (previous year: combined tax rate of 30.8 percent). As in the previous year, foreign entities are subject to local income tax rates ranging from 10.0 percent to 40.0 percent.

Deferred taxes are also measured using the German combined tax rate of 30.8 percent (previous year: 30.8 percent) consisting of corporation tax, solidarity surcharge and trade tax

Deferred taxes by balance sheet item

Deferred tax assets and liabilities are recognised as follows in relation to measurement differences on individual items of the statement of financial position and tax loss carryforwards:


Deferred taxes by balance sheet item



Deferred tax assets Deferred tax liabilities
EUR thousand 2016 2015 2016 2015
Intangible assets 225 122 15,888 9,846
Property, plant and equipment 931 1,486 8,735 6,300
Inventories 4,415 4,498 290 276
Receivables and other assets 4,315 3,197 1,400 1,525


Financial liabilities

9,886

0

9,303

1,220

26,313

174

17,947

508
Trade payables 175 576 117 6
Pensions and similar obligations 15,608 12,842 0 0
Other provisions and liabilities 5,435 4,938 9,346 8,956
Tax loss carryforwards 8,011 514 0 0

 

Offsetting of deferred tax assets and liabilities

29,229

-304

20,090

-650

9,637

-304

9,470

-650
Carrying amount 38,811 28,743 35,646 26,767

The change in deferred tax assets and liabilities in the reporting year was as follows:


Change in deferred taxes




EUR thousand
Net amount of
deferred tax
assets/liabilities
as at 31
Dec. 2015
Recognised
in profit
or loss


Recognised in
other

comprehensive
income

Net amount of
deferred tax
assets/ liabilities
as at
31 Dec. 2016
Intangible assets -9,724 -5,940 0 -15,664
Property, plant and equipment -4,814 -2,709 -281 -7,804
Inventories 4,222 -47 -51 4,124
Receivables and other assets 1,672 1,256 -13 2,915
Financial liabilities 712 -886 0 -174
Trade payables 570 -540 27 57
Pensions and similar obligations 12,842 446 2,319 15,608
Other provisions and liabilities -4,018 84 26 -3,908
Tax loss carryforwards 514 7,498 0 8,011
Total 1,976 -838 2,027 3,165

The change in deferred tax assets and liabilities in the previous year was as follows:


Change in deferred taxes




EUR thousand
Net amount of
deferred tax
assets/ liabilities
as at
31 Dec. 2014
Recognised
in profit
or loss


Recognised
in other

comprehensive
income

Net amount of
deferred tax
assets/ liabilities
as at
31 Dec. 2015
Intangible assets -3,315 -6,409 0 -9,724
Property, plant and equipment -4,344 -470 0 -4,814
Inventories 4,114 108 0 4,222
Receivables and other assets 1,854 -182 0 1,672
Financial liabilities -554 1,266 0 712
Trade payables 440 130 0 570
Pensions and similar obligations 14,867 -9 -2,016 12,842
Other provisions and liabilities -4,165 147 0 -4,018
Tax loss carryforwards 1,323 -809 0 514
Total 10,220 -6,228 -2,016 1,976

EUR 2,319 thousand of the deferred tax expenses recognised in other comprehensive income relate to the actuarial changes of the present value of the pension obligations and the remeasurement of the related plan assets. Relevant deferred tax assets total EUR 13,206 thousand (previous year: EUR 10,887 thousand). The amount of EUR -292 thousand relates to currency differences. 

Unutilised tax loss carryforwards amounted to EUR 99,517 thousand (previous year: EUR 68,479 thousand) as at the end of the reporting period, EUR 34,823 thousand of which (previous year: EUR 7,428 thousand) can be carried forward indefinitely. The limited tax loss carryforwards amount to EUR 64,694 thousand (previous year: EUR 61,051 thousand) and can be carried forward between five and 20 years. 

Applying local income tax rates, the deferred tax assets on loss carryforwards would amount to EUR 33,803 thousand (previous year: EUR 24,195 thousand). EUR 25,792 thousand (previous year: EUR 23,681 thousand) of this total was not recognised as at the end of the reporting period as it was not sufficiently likely that they will be utilised in future.

As WILO SE is anticipating profit distributions from its consolidated subsidiaries next year, deferred tax liabilities of EUR 3,423 thousand (previous year: EUR 3,174 thousand) have been recognised on these distributions.

In addition, there were retained profits of EUR 138,832 thousand at subsidiaries as at 31 December 2016 (previous year: EUR 115,899 thousand) intended for long-term investment, for which no deferred tax liabilities were therefore recognised.

RECONCILIATION OF INCOME TAXES The combined statutory tax rate of 15.8 percent consisting of corporation tax and the solidarity surcharge plus the trade tax of approximately 15.0 percent (previous year’s total: 30.8 percent) was used to calculate deferred taxes in Germany for the 2016 financial year. The Wilo Group reported tax expenses of EUR 26,982 thousand (previous year: EUR 32,560 thousand) in its consolidated income statement for 2016. This is EUR 4,729 thousand lower (previous year: EUR 2,257 thousand lower) than the expected tax expense of EUR 31,711 thousand (previous year: EUR 34,817 thousand) that results from applying the domestic rate of 30.8 percent (previous year: 30.8 percent) at Group level.

The difference is attributable to the following causes:


Tax reconciliation

EUR thousand 2016 2015
Consolidated net income before taxes 102,958 113,041

Expected tax expense

-31,711

-34,817
Tax rate changes -13 19
Difference from foreign tax rates 6,995 5,019
Temporary differences arising on consolidation 407 -172
Other permanent differences -4,376 -3,508
Tax-free income 5,535 4,781
Change in unrecognised deferred taxes on loss carryforwards -1,975 -1,164
Withholding tax -1,482 -1,556
Prior-period taxes -1,293 -625
Other 931 -537
Current tax expense -26,982 -32,560

(8.10) Consolidated net income


Consolidated net income

EUR thousand 2016 2015
Earnings before interest and taxes (EBIT) 107,088 121,187
Net income from investments carried at equity -616 -154
Net finance costs -3,514 -7,992
Consolidated net income before taxes 102,958 113,041
Income taxes -26,982 -32,560
Consolidated net income 75,976 80,481

EBIT is reported before net income from investments carried at equity, net finance costs and income taxes. EBIT and consolidated net income are determined from the income and expense items in the consolidated income statement. Net interest income is included in the consolidated income statement in net finance costs.

(8.11) Earnings per share

Earnings per share are determined by dividing consolidated net income attributable to WILO SE shareholders by the weighted average number of shares outstanding in the financial year. Both basic and diluted earnings per ordinary share amount to EUR 7.88 (previous year: EUR 8.35), which was calculated after deducting income attributable to non-controlling interests. There are no outstanding preferred shares.


Earnings per share

  2016 2015
Consolidated net income in EUR thousand 75,976 80,481
   of which: attributable to non-controlling interests 5 4
   of which: attributable to shareholders of WILO SE 75,971 80,477

Number of ordinary shares as at 31 Dec.

9,808,760

9,640,000
Weighted average number of ordinary shares outstanding 9,645,157 9,640,000

Earnings per ordinary share (EUR)

7.88

8.35

Order report

WILO SE
Corporate Communications
Nortkirchenstraße 100
44263 Dortmund
T +49 231 4102-0
F +49 231 4102-7363

Contact

WILO SE
Corporate Communications
Nortkirchenstraße 100
44263 Dortmund
T +49 231 4102-0
F +49 231 4102-7363